THE SCO GROUP, INC.
Plaintiff/Counterclaim-Defendant
v.

INTERNATIONAL BUSINESS MACHINES CORPORATION,
Defendant/Counterclaim-Plaintiff

MEMORANDUM IN SUPPORT OF SCO'S MOTION TO COMPEL IBM TO PRODUCE SAMUEL J. PALMISANO FOR DEPOSITION

Case No. 2:03CV0294DAK
Honorable Dale A. Kimball
Magistrate Judge Brooke C. Wells

The SCO Group, Inc. ("SCO") respectfully submits this Memorandum in support of its Motion to Compel IBM to Produce Samuel J. Palmisano for Deposition.

PRELIMINARY STATEMENT
    On December 2, 2004, SCO duly noticed the deposition of Samuel J. Palmisano, who at the key times relevant to this suit was an IBM Vice-President in charge of the computer-server group, with responsibility for IBM's Linux strategy. SCO seeks to depose Mr. Palmisano because (1) this litigation concerns the nature and scope of all of IBM's "activities relating to Linux," including IBM's well-publicized "Linux strategy" (Exh. B at 1); and (2) before Mr. Palmisano became IBM's CEO, he was the senior IBM executive who "spearheaded" that strategy (Exh. J at 2); who "pushed most emphatically for the Linux initiative" (Exh. B at 2); who presented to IBM's then-CEO the "rigorous and exhaustive" report on how IBM should adapt to Linux (Exh. B at 2); who chose IBM's "Linux czar" to oversee IBM's strategy (Exh. B at 3); and who personally committed to make technologies at the heart of this case available to the open source community (Exh. N). Mr. Palmisano's involvement in Linux before his promotion to CEO was so substantial that IBM has described its Linux strategy as "Sam's bet." Exh. B at 2.

    IBM, however, has refused to produce Mr. Palmisano for deposition based on Mr. Palmisano's current position as IBM's Chief Executive Officer and Chairman of the Board. IBM incorrectly claims that Mr. Palmisano does not have "any knowledge" of aryl facts relevant to this litigation. Exh. C. at 1 (IBM has not even claimed undue burden.) SCO shows below that because Mr. Palmisano does have first-hand knowledge of substantial facts directly relevant to this litigation (and because there is no undue burden on him or IBM), the Court should order IBM to produce Mr. Palmisano for deposition.

BACKGROUND
    IBM's "Linux strategy" is directly at issue in this litigation, by virtue of both SCO's claims and IBM's counterclaims. Indeed, in refusing to produce Mr. Palmisano for deposition, IBM has not contended otherwise. To illustrate:

    -    SCO's core contract claims put IBM's Linux strategy at issue because that strategy explains IBM's strong financial motivation to use shortcuts in order to promote Linux's commercial appeal, including by contributing important UNIX technologies from the AIX and Dynix operating systems to Linux; and

    -    IBM's own Tenth Counterclaim puts IBM's Linux strategy at issue, because in that counterclaim IBM seeks a declaration that "IBM does not infringe, induce the infringement of, or contribue to the infringement of any SCO copyright through its Linux activities, including its use, reproduction and improvement of Linux." IBM's 2d Am. Counterel.  173.

    SCO has further demonstrated the extent of IBM's worldwide Linux-related activities and the concomitant need for significant discovery on those activities. See SCO's Mem. in Opp. to IBM's Motion for Partial Summary Judgment on its Tenth Counterclaim (July 9, 2004) at 76-78.

    Accordingly, using IBM's own documents and publicly available information, SCO briefly summarizes below the advent and evolution of IBM's Linux strategy. Mr. Palmisano has played a direct and critical role in formulating and fostering that strategy.

    A.The Origin and Goals of IBM's Linux Strategy

    In the late 1990s, IBM concluded that its UNIX-based operating system (AIX) would not successfully compete with products from Sun (Solaris, also based on UNIX) and Microsoft (Windows NT). Solaris was "rapidly becoming the de facto UNIX, and posed a significant threat to IBM servers" and also "disadvantaged IBM middleware." IBM's internal "Linux Strategy Update" (Exh. D) at 1710189072; see also id. at 1710189068 ("Sun and Microsoft continue to grow at an impressive rate. AIX continues to lag Solaris and NT in popularity, a situation unlikely to change with their broader application portfolio and skills pool."); see also A Mainstream Giant Goes Countercultural; I.B.M.'s Embrace of Linux Is a Bet That It Is the Software of the Future, The New York Times, Mar. 20, 2000, at 3 (Exh. B) ("I.B.M.'s version of Unix has become an also-ran behind Sun's more popular Solaris.").
    Accordingly, in order "to neutralize the Solaris and Windows control points in Unix servers and high volume platforms," in December 1999, IBM decided to "act quickly, decisively and with common purpose" to execute a broad and "disruptive" Linux strategy. Exh. D at 1710189068. IBM reasoned (given that Linux was available free of charge) that "Linux's low cost compared with that of rival Windows leaves customers who opt for the cheaper OS with more money to spend on IBM's related products and services." IBM: Linux is the `logical successor'," C/Net News.com, http:Ilnews.com (Jan. 29, 2003) (Exh. E); see also Exh. B at 3 ("I.B.M. would love to drive the profit out of the operating system business of its rivals - just as Microsoft did to Netscape, the browser pioneer, by giving browser software away free.").
    To execute this strategy, IBM made a series of multi-billion dollar investments intended to convert Linux from a hobbyist system controlled by "anti big business," "wild guys" and "geeks," IBM's Internal "Linux Community v. Linux Market" Memorandum (Exh. F), into an industrial-strength computing system capable of handling financial transactions and other complex tasks, see Exh. B at 4. To that end, IBM contributed substantial portions of the UNIX-based AIX and Dynix operating systems to Linux, and even announced it was "willing to open source any part of AIX that the Linux community considers valuable." Interview with Robert LeBlanc of IBM, Free OS.com, http:l/www.freeos.comlarticles (Dec. 20, 2000) (Exh. G). In other words, IBM was willing to "abandon" its UNIX-based products in order to "move its `enterprise strength' features into Linux," so that Linux would look like the "true" UNIX "in the mind of the customer." Notes of Internal IBM Meeting (Dec. 14-15, 1999), at 1910041459-60 (Exh. L); see also Exh. E (detailing IBM's long-term plan to replace UNIX/AIX with Linux).
    SCO will show that, if IBM considered its obligations under its software agreements with SCO at all in deciding whether and what contributions to make to Linux, IBM simply placed a higher priority on defeating Sun and other competitors than on compliance with those contractual obligations, just as it had done on previous occasions. As one IBM official then put it, if it is necessary to breach a licensing agreement to prevent a customer from choosing Sun over IBM, "I'm inclined to shoot first and answer questions later. It's easier to ask for forgiveness than to ask for permission." Exhibit H (IBM email 10/11/95) at 2 (emphasis added).

    B.Mr. Palmisano's Key Role in IBM's Linux Strategy, Before Becoming CEO

    Mr. Palmisano originated IBM's Linux strategy in 1999: "At the end of October, fresh from a global tour, Sam Palmisano, a senior vice president, reported that the Internet companies he spoke with told him that the preferred language of the young programmers they were hiring was Linux." Exh. B, at 1. Shortly after Mr. Palmisano returned from that trip, an eleven-person team of researchers, led by Nick Bowen, was given seven weeks to make a "rigorous and exhaustive" report on how IBM should adapt to Linux. Id. at 2. The report concluded that IBM should "push Linux as the operating system of choice for the Internet - more robust and reliable than Windows NT and eventually overtaking Solaris, Sun's flavor of Unix, as the industry standard for Unix." Id. To this end, the report urged Palmisano to "establish a Linux `division' with the following responsibilities:

• Provide IBM-wide Linux leadership (internal and external)
  
• Business Development
  
• Strategy
  
• Brand Management
  
• Standards, consortia, communities."

ARGUMENT
    As an initial matter, under Federal Rule of Civil Procedure 30(a), SCO may depose "any person, including a party." An officer of a party noticed for deposition must appear unless he moves for a protective order under Rule 26(c) and successfully bears the burden of proving that justice requires that the deposition be quashed or limited due to "annoyance, embarrassment, oppression, or undue burden or expense." Fed. R. Civ. P. 26(c); see, e.g., Speadmark, Inc. v. Federated Dep't Stores, 176 F.R.D. 116, 118 (S.D.N.Y. 1997). With respect to SCO's notice to depose Mr. Palmisano, IBM has neither sought a protective order nor invoked (in discussions with counsel for SCO) any of the Rule 26(c) factors. In light of the impending discovery cut-off date of February 11, 2005, however, SCO has brought the instant motion rather than waiting for IBM to move to quash at a later date.
    It is "most extraordinary relief" to preclude the deposition of a party's executive. Speadmark, 176 F.R.D. at 118; see, e.g., Pepsi-Cola Bottling Co. of Pittsburgh v. Pepsico, Civ. A. Case No. 01-2009-KHV, 2002 WL 922082, at *1 (D. Kan. May 2, 2002) (Exh. 0) (courts "disfavor barring a deposition" and, absent "extraordinary circumstances, courts rarely grant a protective order that totally prohibits a deposition"); see also Salter v. Upjohn Co., 593 F.2d 649, 651 (5th Cir. 1979) (it "is very unusual for a court to prohibit the taking of a deposition altogether and absent extraordinary circumstances, such an order would likely be in error").
    Indeed, IBM bears the burden of demonstrating that Mr. Palmisano "has nothing to contribute." Speadmark, 176 F.R.D. at 118 (allowing deposition of CEO). In considering whether to preclude a deposition altogether, the Court gives "considerable deference" to "counsel's good faith judgment as to the needs of his case" because a court should not "be in a position of second-guessing counsel's judgment except when counsel goes beyond the pale, so to speak, and seeks discovery for which there is no factual basis or which is taken in bad faith or for tactical advantage or solely for the purpose of harassment or oppression." Travelers Rental Co. v. Ford Motor Co,, 116 F.R.D. 140, 146-47 (D. Mass. 1987) (allowing depositions of Ford's president and other top executives).
    SCO respectfully submits that, for several reasons, IBM has no basis for precluding SCO from deposing Mr. Palmisano.
    First, the Court has in effect already determined that Mr. Palmisano is relevant to and "has something to say" about this litigation. In response to SCO's requests for the production of documents, IBM previously contended that Mr. Palmisano had no documents relevant to this dispute. Judge Wells rejected that argument and ordered IBM to produce documents from Mr. Palmisano's files. See Order dated March 3, 2004, at 4-5. IBM was "to provide documents and materials generated by, and in possession of employees that have been and that are currently involved in the Linux project. IBM is to include materials and documents from executives including inter alia, Sam Palmisano and Irving Wladawsky-Berger. Such materials and documents are to include any reports, materials or documents from IBM's `ambitious Linux Strategy'." After SCO raised the issue of the sufficiency of IBM's production in response to the March 3 Order, the Court directed IBM to provide affidavits from "the Board of Directors, Mr. Palmisano, and Mr. Wladawsky-Berger regarding production of all non-privileged documents pertaining to IBM's Linux strategy." Order dated Oct. 20, 2001, at 1. In specifically identifying Mr. Palmisano's files as discoverable by SCO, the Court has thus already recognized the relevance of the discovery that SCO seeks through Mr. Palmisano's deposition.[1]
    Second, independent of the Court's March 3 and October 20 Orders, and as the foregoing background demonstrates, Mr. Palmisano has unique and relevant testimony to give regarding a crucial aspect of this litigation - namely, IBM's "Linux strategy." It is well-settled that a company's CEO and other high-level executives are appropriately subject to deposition where their knowledge is even arguably relevant to the case - and that is true even if they claim by affidavit (or otherwise) to lack knowledge of specific facts pertaining to the case. See, e.g., Pepsi-Cola, 2002 WL 922082, at * 1-3 (Exh. 0) (allowing depositions of Pepsico's president and vice-chairman, despite their declarations that they had "no personal knowledge of the facts or issues" of the case); Simpson v. Home Depot, Inc., Civ. A. No. 00-2285-JAR, 2002 WL 485661, at * 1-2 (D. Kan. Mar. 7, 2002) (Exh. P) (allowing deposition of high-level Home Depot executive who claimed to have "no knowledge specifically related to Plaintiff's accident"); In re Bridgestone/Firestone, Inc., Tires Prods. Liability Litig., 205 F.R.D. 535, 536-37 (S.D. Ind. 2002) (Ford's chairman of the board could be deposed because "conduct and knowledge at Ford's highest corporate levels may well be relevant"); Six West Retail Acquisition v. Sony Theatre Mgmt. Corp., 203 F.R.D. 98, 105-07 (S.D.N.Y. 2001) (allowing depositions of SonyUSA's president and other executives because Sony's corporate policies were at issue); Rolscreen Co. v. Pella Prods. of St. Louis, 145 F.R.D. 92, 97-98 (S.D. Iowa 1992) (plaintiff entitled to depose defendant's president to "test" his professed lack of knowledge).
    In Tulip Computers International, B.V. v. Dell Computer Corp., 210 F.R.D. 100, 102 (D. Del. 2002), for example, the plaintiff claimed that Dell Computer ("Dell") had infringed its patents. The court permitted the plaintiff to depose Dell's CEO, Michel Dell, regarding (among other things) Dell's "method and strategy of developing the technology that is in issue in this case." SCO proposes to explore such issues with Mr. Palmisano. Given his role in spearheading and fostering IBM's Linux strategy, Mr. Palmisano has first-hand knowledge of and unique testimony to give regarding issues such as IBM's consideration of its software licensing agreements, and the scope of activities, in the development of the technology used in furtherance of the Linux strategy.[2]
    Third, SCO's request to take Mr. Palmisano''s deposition is made in good faith (and, at least to date, IBM has not suggested otherwise). The deference courts give to counsel' evaluation of testimony relevant to its claims (and, here, defenses) applies with particular force in the circumstances of this case, where the Court's Case Management Order limits the number of depositions each side is entitled to take. Counsel for both sides have special incentives not to "waste" depositions for any tactical advantage.
    In that vein, the deposition would not unduly burden Mr. Palmisano or IBM (and again, at least to date, IBM has not suggested otherwise). SCO proposes to depose Mr. Palmisano in Armonk, New York, where he has his office. Cf Gazaway v. Makita U.S.A., No. Civ. A. 97-2287-JWL, 1998 WL 219771, at *2-3 (D. Kan. Apr. 16, 1998) (Exh. Q) (executive residing in Japan would not be obliged to attend deposition in Kansas City, but he could be deposed if he returned to the United States). Further, under the Case Management Order, the deposition is limited to seven hours. Indeed, SCO has noticed the depositions of other IBM executives and employees with their own unique testimony regarding their participation in devising and executing IBM's Linux strategy; there can be no serious claim that SCO's notice of deposition for Mr. Palmisano is improperly intended for harassment purposes.[3]
    Finally, IBM has noticed, and SCO has not objected to producing, SCO's CEO and other top executives for depositions in this case. IBM should be required to produce Mr. Palmisano for deposition - particularly where, as here, his extensive Linux-related activities preceding his promotion to CEO are directly relevant to issues at the heart of this case.

CERTIFICATION OF COMPLIANCE WITH MEET AND CONFER OBLIGATIONS
    On December 2, 2004, SCO noticed Mr. Palmisano for a deposition to take place on January 24, 2005. Exh. A. On December 17, 2004, counsel for IBM objected to producing Mr. Palmisano "because we do not believe that he has any knowledge regarding any specific issues that are relevant to this lawsuit or any knowledge that cannot be obtained by deposing other individuals within IBM." Exh. C. Shortly thereafter, counsel met and conferred (by teleconference), during which SCO's counsel referenced the publicly available information concerning Mr. Palmisano's key role in formulating and promoting IBM's Linux strategy, but the parties were unable to reach agreement on Mr. Palmisano's deposition.

CONCLUSION
    For the reasons set forth above, SCO respectfully requests that the Court compel IBM to produce Samuel Palmisano for deposition.

Footnotes

[1] On December 22, 2004, SCO filed a renewed motion to compel, seeking the Court's assistance in securing IBM's full compliance with the Court's prior orders.
City, Utah 84101-1004

[2] In the unlikely event that Mr. Palmisano does testify to a lack of knowledge on such issues, that would itself be relevant: the claimed ignorance of "high executives may, in and of itself, be relevant evidence," because "a corporation, when engaging in potentially illegal activities, would act in such a way as to make it seem that top executives had no knowledge." Ford Motor, 116 F.R.D. at 144.