Free Motion in Limine - District Court of Federal Claims - federal

Case 1:05-cv-00231-EJD

Document 157-6

Filed 03/07/2008

Page 1 of 30

MELVIN JAGER

Page i
IN THE UNITED STATES DISTRICT COURT
IN RE:
* *

COBRA TAX SHELTERS LITIGATION

*
*

*
*

CARMEL PARTNERS, et al,

*

*

Plaintiffs,
VS.
UNITED STATES,

* *

* NO.: 1:06 cv 8001
* (S.D. Ind.)
* * *

Defendant. ----- - ------------------JS BUCKINGHAM INVESTMENTS, LLC, et al,

*

*

*

*
*
*

Plaintiffs,
Vs.
UNITED STATES,

*

i

* NO: 05-231 (Ct. Fed
* Claims)
*
* * *

Defendant.
MURFAM FARMS, LLC,

* * *
*

Plaintiff,
Vs.
USA, NO,
DEFENDANT.

*

* NO: 06-245T through * 06-247T (Ct. Fed * Claims.)
*
*

* ******* * **** ** ******** ********* *** ** *** ** ** ******** ** ** ORA DEPOSITION OF
MELVIN F. JAGER
AUGUST 2ND, 2007
* ** * * * * * ** ** * *** * * ** * ** ** * * * ** ** * * * * * *** ** *** ** ** * ** * * *

~GH"E~~E~T
i EXHIBIT

! 2
I

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Case 1:05-cv-00231-EJD

Document 157-6

Filed 03/07/2008

Page 2 of 30

MELVIN JAGER
Page 2

Page 4

i

2 3

ORAL DEPOSITION OF MELVIN F. JAGER, produced as the DEFENDANT, and duly sworn, was taen in the above-stled and numbered cause 4 on the 2nd of August, 2007, from 10:10 a.m. to 4:47 5 p.m., before Tammy Staggs, CSR in and for the State of 6 Texas, report by machine shortand, at the law offces 7 of Meadows Coller, LLP, 901 Main Street, Suite 3700, Civil 8 Dallas, Texas, pursuant to the Federal Rules of 9 Procedure and the prvisions stated on the record or
witness at the instace of

i
2

INDEX
PAGE Appearances.................................... 2 Exhibit List................................... 5

3
4

Stipulations.................................... 7
MELVIN F. JAGER: EXAMINATION BY MR. DONOHUE................ 7

5 6
7

8 9

Signature and Changes.......................... 208

10 11 12 13
14

attched hereto.

10 Reporter's Certificate.......................... 210 11 12 13 REQUESTED DOCUMENTS/INFORM nON

15

16
17

l5
16
17 18
CERTIFlED QUESTIONS (None)

14

(None)

l8
19 20 21 22 23 24 25
Page 3

19 20 21 22 23
24

25
Page 5
g

1 APPEARANCES
2 FOR TH PLAIIFS:
Lara L. Gavioli, Es.
3

1 EXIBITS
NO. DESRIPION

PAGE

l

Sar Q. Wirslc, Esq. MEADOWS COLLI, u.
90 I Mao Street Suite 3700
Dalas. Texas 75202 214.744.3700

i 55 COBRA action work plan (Revised 1l03/99) 107

4 COBRA docum.nl......................... 107
5 2368 SelofCOBRAslidenwnbers 14-15........ 49
6 2394 Mr. Jagei's exper report in the Buckingham case daled 6129107............ 7

2351 E.m.il by Brian Vaughn with .tt.ched

5
6

214.747.3732 -Fax

7

8 FOR TH DEFENDANT. UNTED S1 A TE GOVERNNT:
DeMis M. Doohue, Esq.
9
UNITED STATES DEPARTME Tax Diviion PO Box 403

2396 Mr. Jagci's expert report in the MUAM

8 Fans, LLC ca dated 6129/07........... 7
9 2398 Mr. Jagers report in the Gar Woods as

OF JUSTIC

10 11
12

10 Paers................................. 7
11 2417 Reprt of 12 2432 Reort of

Tax M.tt.r Paer of

Teso Drve

Wasingon, D.C. 20044

202.307.6492
202.307.250. - Fax

Dr. DaRos..................... 25 Dr. La..................... 25

13 2436 Expe wilness re of La Colb..... 26 14 2437 Indictent ofvaus fonner KPMG

Joe Pitznger, il, Es. 13 UN STATES DEPARTMNT OF JUSTICE Tax Divion 14 717 No Harood
Suite 400

employee in coecton wiil i1eir 15 design. mareting, an implemeniaon of

lax Slrtegi......................... 122
16
2438 Decision in a.cae called United State

15 Dallas, Tex 75201 214.880.9728
16 214.880.5741 - Fax

17 vs. The Glaxo Group..................... 203 18 2439 Indictment agins Rob Colan, Manin
Nissebaum, Richar Shapi an Brian

17 18

19 Vaugh, .... ........................... 65
20 2440 Decsion in a lawsuit by the Diversified Grop aganst Paul Daugerda and Jenks

19 20
21 22

21 & Gilchrst..................:........ 139
22 244 I Responses by the Uniled Staes 10 the

23
24

plainiiffs interatores send se in 23 the JZ Buckngham ca................... 71
24 2443 Eng.gementleer beteen E& Y and

25

Mr. Gar Woods........................... 105

25

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2 (Pages 2 to 5)

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Case 1:05-cv-00231-EJD

Document 157-6

Filed 03/07/2008

Page 3 of 30

MELVIN JAGER
Page
1 2447 COBRA document known as the steps of

6

Page

8 ~
~ a

COBRA................................. 47
2

i
2

A. Yes, they are. Q. Okay. Before we sta the questions regarding
any of

3 Sarah Q. Wir........................ 45
5

2452 Ler dated Marcb 19t. 200 signed by

3
4

your report, could you give me a brief

~

4 2453 E-mal chai by Brian V.ugh dad 10/2119................................ 113
2458 L.. to Mr. Rober Coplan fr Jenin

backgroun as -- first as to your educational

5 6
7 8

background.

6 il GilcIuL............................. 104
7 2463 Advisor Noodsclos AsreDt......... 102

A. Oka. I went to engineering school at the University of Ilinois and I have a BS degre in
mechancal engineering. And then I proceeded to law
school at the University of Ilinois. I have a JD in

a 2465 B.ckgr and issues rclaig to th
ta P...ntig of advi d.ted July 12th

9 2006................................... 80
10 2467 Notice 204, referce to ta .voida

9

using utially high bass, rele
11 in Augut of

2000..................... 165

12 2469 Tempi... of an Ernst /I Youg engigemenl

..tter................................. 179

13
2470 E-mail by Brian V.ug dated 10/22199.... 183
14
2472 EngigemClt Iclr ft Meadows Owens to

15 OccaTomointlOaiWoOOçae....... 21
16 2473 Eng.gement lellr frm Meadows Owens 10

Oc Tomo ii the JZ Buckingham c..e..... 21

17
2474 En84gemcnt letter from Meaws Owen to 18 Ocea Torno ii ti MURFAM Far. LLC ..e. 21 19 2475 Mr. Jager's bils for Manh I - March 3 I.

2007..................................... 23

20
2476 Mr. Jager's bils for Apnll . April 30.

21 207.................................. 30
22 2477 Mr. J.ger's bil. for M.y i - May 31. 2007.................................... 30

23

24 G.vinli..............:................ 17

2478 E-mail 10 Stephen Powag from Laur.

25 2479 Mr.J""er's bils ror Jwe i . Jwie 30

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Page 7

law. I grduated ther in 1962. And then I went to

work in Washington, D.C. as a -- with a law firm for
thee year and then retued to Chicago, my hometown,
an practiced law baically ever since in Chicago until

I retired from law in the beginning of2005. And then I at that time for two yeas went to work with -- an 'expert with this consulting --

, i

financial consulting firm called Ocean Torno, and I worked there for a couple of years. And they are principally the finanial aspects of intellectual propert law is what they deal with including expert witnessing and reaonable royalty and patent damages cases, that kid of thing. And then in 2006 I retired from there and now I'm just, so to speak, of counsel with Ocean Torno. I'm retired and an independent
contractor, if

.,

,
g 1

i
~

i

you wil.

Page
1 2

9

.' ~~

i
2 3
4 5

PROCEEDINGS
(Exhibits 2472 though 2479 marked.) MELVIN F. JAGER, Having been first duly sworn, testified as follows:

3
4

EXAINA nON
BY MR. DONOHU: Q. Mr. Jager, would you state your full name and

5
6

6
7
8

7
8
9

spell your last name for the cour reporter? 9 A. My name is Melvin F. Jager, J-A-G-E-R. 10 Q. And where do you reside? 11 A. My home is 2302 WulfertRoad, W-U-L-F-E-R-T,

12 Road, Sanibell, Florida. MR. DONOHU: I would like to state for . 13 14 the record that this deposition is being taen pursuat the paries as to time, place, and 15 to an agreemnt of 16 date. It is also being taen pursuant to the Federal 17 Rules of Civil Procedure. your educational background. 18 Q. (BY MR. DONAHE) Mr. Jager, I'm going to hani 18 me a brief description of 19 In fact, you gave me more than that. You gave me also a 19 you what has been marked as Exhibits 2394, 2396, and 20 brief description of your employment background. Is 20 2398. .2l there anyting more that your employment background that . 21 MR. DONOHU: What I wil do is give 22 -- besides the brief description that you've already 22 you-all copies. This is the second set. that you would like to ste? 23 given me and . 23 MS. WIRSKYE: Oh, I see. These are all 24 A. Well, I think I've shown in my CV thts 24 . just a duplicate. ~ 25 Q. (BY MR. DONAH) And are those your report?..~.., ,..;'.i"A.;,¡~il;t:~~ as an exhibit to these reports, I've also done 25 attached _~:i!'...,,~~' ;.;i',..¡, .....
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10 11 12 my bet to reword th question. 13 A. Certinly. 14 Q. And you also know that you and I caot speak 15 at th sae time, so you'll have to wait until I finish 16 the question. . Now, my first question to you was to give 17

Q. Okay. Have you had your deposition taken before? A. Yes, I have. Q. Do you know approximately how many times? A. Over the years about ten times. Q. Okay. A. The last couple of years, twice. Q. And you know the procedure. The procedure is there's a cour reporter here and she wil take down my you have any question quesions and your answers. If regarding my questions, please let me know and I' do

..

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l

3 (Pages 6 to 9)

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Case 1:05-cv-00231-EJD

Document 157-6

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Page 4 of 30

MELVIN JAGER
Page 10
1 a fair amount of teaching of law as an adjunct i
2 professor. I did that, so to speak, on the side. I 2
3 taught patent law and patent litigation strategies at 3
4 the University of

Page 12

perspective?

A. That would be true in most par, but the last couple oryear at Ocean Torno it got into more oftle
business aspe of intellectual propert law and how to

Illinois for about 12 year. Then I 4

5 taught for one yea or more at John Marhal Law School 5 monetize the intellectu propert, how to tu it into 6 trade secrets law in their master's level program. And 6 value either by licensing or by patent damages in a
having to pay daages or seIlng them at auction even. 9 Victoria and then 81. James College in Oxford in London 9 80 in that respect, that was kind of a non-law business aspect as well as a law aspect. 1 1 And then I've -- I've spoke on 1 1 Q. Where is Ocean Torno located? A. Their principle offce is in Chicago. 12 intellectual propert, licensing and litigation and 12 Q. And you mentioned previously what the general i 3 trade secrets and patents quite often in different 13 i 4 places in America than other places outside of America. 14 natue of the busines of Ocean Torno is. Could you be 15 Q. Could you look at what's been marked as 2398? 15 more specific as to what their business is? A. Well; they call themselves an intellectual 16 Now, am I correct that's your report in the -- your 16 that is to mean that they 17 title here is Gar Woods, as Tax Mattr Parer of 17 propert merchant bank, and provide whatever financial services you would seek
8 universities: University of Victoria Law School in 8

7 then I've been a guest lecter at a couple of other 7

patent lawsuit, for example, or getting daages or

1 a -- or in Oxford, England. lO

related to intellectual propert. Par of their 20 Q. And I'm going to refer to that report as your 20 business is expert witnessing. They have an expert 21 Tesoro report. Do you understand that? 2 1 witnessing deparent, which is what I was involved

18 Tesoro Drive Parers? 18

19 A. Thats correct. 19

22 . A. Yes. 22
25 . report. At the end of

with. I was a managing director in that deparment.
They have an IP valuation deparent. If

23 Q. Okay. Now, what I plan to do is to ask 23
Page 11

you have a I

24 questions initially about this report your Tesoro 24 patent or a group of patents, for example, that you want
those questions, I'm going to ask 25 to have some value placed on it, they wil work in that

1 you if your answers would be different if I asked the 1 area.
2 same questions with respect to the other two report. 2

There's a --' recently they have a patent

3 If you tell me they would be, then we'll spend the time 3 auction depaent. They have held four of the first 4 to go through those other reports. If you tell me no, 4 ever patent auctions open-quite auctions where your ~ 5 the answers would be the same, we wil be finished. Do 5 patent propert or copyright or trademark propert can

6 you understand that? 6

7 A. Yes, that's fine. If i may go back a bit, I 7

8 forgot to mention that I've also written a few books. 8 that's been fairly successfuL. It's kind of a new

10 A. That are avocations that I didn't add about 10
12 But I've written a trade secret treatise for West 12

9 Q. Okay. 9 concept l
be sold in an open auction. And they've held one in San

Francisco, Chicago, New York, and London now. And
They also have developed what's called

11 employment. I guess you would call that employment. 1 i the Ocean Torno 300 Index. They have - they have a
proprieta softar program that uses regression

13 Publishing called Trade Secrets Law, a very cleaver 13 analysis, I think they call it. I'm not a statistician,

i 4 name. Then I edited a thee-volume treatise called 14 so I don't fully understad it. They use this progr

15 Trade Secrets Law thoughout World. And then I wrote ~ 15 to value and rate the value of patents. And in using i 6 licensing law handbook for West, so I think thatsit. 16 that progam, they have identified the top 300 compaies . their perceived, not actual, but 17 Q. Okay. And those publications are referred to 17 of America in terms of l8 in your CV, am I correct? l8 perceived value of their intellectual propert as

21A. correct? 21 22 That's correct. 2 2
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20 Q. And your CV is attached to your reort, am I 20 factories.

19 A. Yes, they are. 19

compaed to other bricks in the mort and their
And those 300 compaies, valued strctly on the basis ofIP, form what they have identified as an
the idea is that people in the fmancial area can us

23 Q. Okay. Is it fair to say that your experience 2 3 Ocea Torno 300 Index. And now it's on the New York
24 with respect to patents, trademars, copy rights, and 2 4 Exchange much like the Standard and Poors Index. And

25 trade secrets are principally legal -- from a legal 25

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Case 1:05-cv-00231-EJD

Document 157-6

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Page 5 of 30

MELVIN JAGER
Page 14
1 that as a tool to determine the value of

Page 16

their -- their

2 investments. They haven't gotten off the ground yet,
3 but their - Ocean Torno is starting a hedge fud based

1 CASE 2 A. Yes.
3 Q. What was the subject matter of

your tesony

4 upon the OT -300 Index. It hasn't -- it hasn't gotten 5 off the ground.
6 I'm not a financial man, and I'm not
7 directly involved. I've worked with them in these areas

4 in that case?

5 A. That was a patent infrngement ca on an
6 offset center frame for a planter in a patent case.

8 in tenns of consulting and how it should be done and

9 things like that, but I'm not -- I'm not a hedge fund 1 0 man or anyting like that.
11 Q. You mentioned that you were manager of their
l2 expert witness program. In that capacity, what did you

7 Kinzebaw and Kinze had invented this offt planter and 8 had sued CASE IH for patent infringement And I the defendant CASE that there was 9 tetified on behalf of

10 no infringement. I mean, that was my position. I was 1 i testifYing as a patent expert. And that was tesimony 12 in Iowa -- the Nortern Distrct ofIowa before ajury

13 do?

13 tral.
1 4 Q. And just briefly, what was the bais of your
15 position that there was no infrngement?

14 A. Well, it's kind of a misnomer because I
15 basically managed lawsuits. I was an expert witness

16 working on cases, and I would manage myself and i 7 associates just like in a law firm working on those 18 various cass. So I didn't direct anybody. It was kind
i 9 of like a parer in a law fmn is what it amounts to.

16 A. Well, I had done -- as I had done many times
1 7 before - analyzed the patent, looked at what's called
18 the fie history of

the patent, looked at what's called

20 Q. And approximately how many times did you

21 appear as an expert witness in a cas?

i 9 the prior ar, and determined th if the claims of the 20 patent or the patent itslf was read properly, what CASE 21 was doing did not infrnge that patent. It was a lega
2 2 opinion.

22 A. In the las two yea I've testified and given
23 deposition twice -- the last four year twice. Over the
2 4 last 20 years I've appeared three or four times. And as

23 Q. It was24 A. I stated so at triaL.
25 Q. It was a legal opinion?
Page 17
1 A. It was an opinion that they - CASE as -- as a
2 manufacturer was not doing anyting that infringed

25 I've mentioned before, I've been deposed before about
Page 15
1 ten times.

2 Q. But under the Federal Rules of Civil Procedure

3 your report was supposed to provide us with the cases in 4 which you appeared as a witnesn in the last four years. 5 Do you know what the names oÎthose cases are?

6 A. Yes, I thin we have that to provide to you.
7 MS. GAVIOLl: Yes, i thin we've E-mailed 8 you that list, I believe.

3 their -- the other guy's patent. It was a combin- -- I 4 guess you would say it was a combination of applying my 5 mechanical engieering skils using their technology and 6 knowledge that they communicate to me and my knwledge 7 of the patent law, coming to the conclusion that there

8 was no infringement basd upon my experience as a patent
9 attorney.

9 MR. DONOHUE: I didn't receive it. 10 (Sotto voce discussion.)
11 A. We worked on several cases that never really
12 went anywhere, but these are the two that ended up in
13 depositions or testimony at triaL.

i 0 Q. Okay. So you wouldn't necessarly call tht,

11 would you, a legal opinion, but rather your analysis of

12 the patent and ultiately ariving at essentially an 13 opinion as an expert witness that ther was no
14 infringement?

14 Q. (BY MR. DONAHU) And the E-mail that was
15 given to me has been. marked as 2478. Do you have a copy
16 of that in frnt of

you?

15 A. That's the better way to say it, yes. 16 Q. You were, i asume, qualified as an expert
1 7 witness in that case to testify?

17 THE WITNSS: Do you want to mark that as

18 A. Yes. 18 2478? tht cas? 19 Q. And what was the outcoe of MS. GA VIOLl: Sure. 19 20 A. To my delight, the jur found no infrgement. 20 A. Yes, I have 2478. 21 Q. That's the best way. You win. 21 Q. (BY MR. DONAHU) Let's tae the lower case, Kinzebaw, K-I-N-Z-E-B-A-W. I'm sure I'm not pronouncin¡ 22 A. A very astute jury. ' 22 23 Q. Okay. Let's tae the case above it. And help 23 that correctly. 2 4 me, how do you pronounce that? Minehea (pronouncing). A. Kinebaw. 24 25 A. Minebea. 25 Q. Kinebaw and Kinze Manufacturig, Inc. vs.
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5 (Pages 14 to 17)

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Case 1:05-cv-00231-EJD

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Page 6 of 30

MELVIN JAGER
Page 18
1 Q. Minebea Company, Precision Motors Deutsch i
2 Minebea, and Nippon, N-I-P-P-O-N, vs. George Papst, 2

Page 20 I
the other side said the licenses were clear and needed ~ to be interpreted. The court - the bottom line is that afer the Daubert hearng of severa days involving many witnesss, in addition to myself, he sortd out what he
was going to do in terms of

3 P-A-P-S-T. 4 4 A. Yes. 3
8 manufacturer of had disk drive motors,

5 Q. What was the nature of your testimony in that 5

7 A. In that case Minebea was a Japanese 7

6 case? 6
the motors that 8
9 drive your computer, har disks. And Papst was a Genm ri 9

the tral testimony. And he

determined that in his mind, the Judge's mind, that the
licens agrements were not ambiguous. They were

unambiguous. So he could interpret them as a matter of

10 company that owned hundreds of patents on hard disk 10

law, and that he didn't need testimony from either side on what the agements would say. So he found that I was a patent expert i 1 drive motors. And the issue was whether the paricular 11 and licensing expert, but tht -- since it was a jury 12 license ageements -- and they had like 10 or is patent 12 l3 license agreements between the two compaies -- 1 3 trial, he was not going to let us testify on what he 14 permitted Minebea to make hard disk drive motors only 0 14 determined to be a question oflaw.

15 also make and sell hard disk drives that incorporated l5
16 the motors. That was the techncal patent issue. 16

Q. Okay.

17 And my intended role was to, as a 17
18 licensing expert - I've spent a lot of time in 18

19 licensing intellectual propert, as you wil see -- was 19 20 to review the situation and review their products, 2 0 21 review the licenses, and interpret the licenses and 2 1
22 state an opinion on what I think the licenses meant and 2 2 23 wheter they would - would or would not give Minel)ea, 23
24 the Japanese manufacturig company, the right to sell 24

A. Which made sense, I guess. Q. When were you first contacted by counsel for the plaintiff in these cases? Do you recall approximately when? A. Somewhere earlier this year, Februar or thereabouts. Q. Who were you contacted by?
A. Well, I was contacted by my associate or
friend or contact at Ocean Torno by the name of

Rick Conroy. He had been contacted -- I think he had been 25 these motors for their intended purpose of being used in 25 . Page 21 Page 19
1 2

had disk drives.

1

contated by somebody from Meadows Owens, and it was .

3
4

Does that make sense? I would be glad to explain it. It was a complex case. It went on for like
nine year. Q. We don't have that much tie here. A. No, than God. I don't have that much time
maybe period.

2 3

trade secret tye, intellectual propert type case. And

~ ¡ " l¡

,

5
6 7
8

that's why he called me and said would you like to help 4 us on this. Because I - the people at Ocean Torno are S 6 basically MBAs and accountats. I was the only patent 7 lawyer, so to speak, or IP lawyer. So when intellectual
8
propert cases came along, they called me. That's how I

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

~',":.'~;i.li~.i~i_~""-L~~~'

10 a bench triaL. I did not testify at tral. I tesified 11 by deposition and at a Daubert heag where every 12 witness in the cae was -- ha to attd a Daubert 13 hearing. 14 They were challenged as expert witnesses? Q. 15 A. They just made a blind -- every -- the Judge 16 in that case did an unusual thing and said I'm just 17 going to listen to everybody's discussions about the 18 patent expert on both sides. So they were all -- we all spent the day explaining what we were going to do if 19 20 permitted to do so. 21 MR DONOHUE: And Daubert is 22 D-A-U-B-E-R- T. 23 Q. (BY MR. DONAHUE) Did you -- were you 24 chalIenged though as an expert witness in that matter? 25 A. Well, not as -- yes and no in the sense that

jury trial? Q. And was that a bench trial or a A. It staed out as ajury trial and ended up as

9

got involved. Q. And did he mention to you who from Meadows Owens called him? A. He might have, but I latr leared it was these two ladies here, but i don't - i didn't remember at the time who it wa. Q. Okay. I'm going to hand you what's been marked as 2472.

¡

the reord. the reord.) Q. (BY MR. DONAH) Mr. Jager, you've been
MR. DONOHUE: This is off (Discussion held off

~l~lW

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haded what's been marked as 2472. Is this - I should ask you, what is this document? A. Well, this is an engagement letter from Meadows Owens to Ocea Torno formalizing what we evidently -- which we obviously agreed to do, and that is to help them in ths cae as an expert witness. 1I..."w...._
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MELVIN JAGER
Page 22
Page 24

2 A. That's that correct? 2 2007; is correct, yeah. 3 3

i Q. And you'll notice it's dated February 27th of i

Q. And when you say you're not shown as biling any time, ar you referrng to the third page where there's a reference to two other individuals who were 4 Q. Approximately how long before that do you 4 biling hour in the case? A. Yes. Rick Conroy is kind of the senior man 5 recall receiving any contact from someone at Meadows 5
7 A. Oh, a week or two before that, somewhere in 7

10 Owens? 10
9 Q. And who contacted you directly from Meadows 9

6that time frame.6 Owens? 8 8

above Steve, and then Steve. Steve is an asociate

assistat - I guess you would cali them asociates at

law firms.
Q. And - but did you during the month of

Mach

also have any communications or do any work in 11 A. I think it was -- I think it was Laura that I 1 1 connection with this matter?

i 2 talked tobelieve so, so... 13 directly. 12 13 MS. GA VIOLl: I

A. Yes, I did.

Q. SO they got a freebie? A. Yeah, that's my loss and their gain. We might 14 Q. (BY MR. DONAHUE) And for the record you're 14 need to correct that.

15 referrng to Laura Gavioli? 15

i 6Q.MS. GA VIOLl: Yes. 16 17 (BY MR. DONAHUE) G-A-V-I-O-L-I? 17

20 point in time? 20
19 Q. And what were you requested to do at that i 9

18 A. Yes. 18
Page 23
1 front I said I'm not a tax attorney, I'm not an

Q. Were you at any point in time, either prior to

the month or March or in March, provided with information regarding any of the positions or opinions

or conclusions oftlie Governent's exprt witnesses? A. Unless it was par and parcel of what they

21 A. Well, as I recall our initial conversation, is 2 i

were communicated to me orally, I did not see any 22 that we generally talked about what the situation was, 22 writen reports. Q. Did you ultimately at any time see any reports 23 the case that they were working on. They tried to 23 24 determine to what extent I could help thein, and then I 24 of the Governent's expert witnesses? A. I don't believe I have. 25 would have to -- then I determined that well -- right up 25
Page 25

1 Q. I'll show you their reports. They are, for
2 the record, Exhibits 2436, 2432, and these ar -- and

2 accountant, but I'm an intellectual propert expert, but
3 i can help you on this area in that field if

you would

3 24 i 7. This is 24 i 7 and this is the report of

4 like me to consult with you.

4 Dr. DaRosa. For the record have you seen that report
5 before? 6 A. There may be arguents or concepts or
7 positions taen out of

5 So we finally said that yes, I would -- i
necessar or if

they 6 would consult with them and then if 7 want me to be a testifying expert -- then we proceeded

this report that we talked abut

8 to go though the facts and develop the more detailed
9 analysis that I wanted to go through.

8 with the counsel, but I have not seen this report

9 before.

iO Q. But you didn't do that, I assume, that first 11 conversion, am I correct? 12 A. No, I didn't. It was an evolving opinion.
13 Q. Let me show you what's been provided to me as
14 your bils for Marh of2007. It's been marked as

10 Q. And when you say there may have been arumen

11 or positions, do you know what arguments or positions?

12 A. No, I don't. We just -- we realy taked in
13 terms of concepts and positions. I have not seen this
14 report before.
15 Q. Let me show you what's been maked as

15 Government Exhibit 2475. That indicates your services 16 that were rendered in March of2007. Is that when you
i 7 first began to do work on your analysis of any issues in

1'8 this matter?
i 9 A. Well, this -- I noticed that I'm not listed as

i 6 Governent Exhibit 2436. Let me first show you what's 17 been marked as Governent Exhibit 2432. This is the 18 report of Dr. Lare, and have you seen that report
19 before?

20 biling any time. That's one of my unfortnate

20 A. No, i have not. I'm su I would have
21 remembered. That's a big one. 22 Q. And finalJy, let's see ifI can find 2436.
23 It's hiding in the box.
24 . MS. GA VIOLl: We don't do any light
2 5 reading around here.

2 i situations afer I retired. I lose some time when I
22 don't record it very well. But, yes, this is the time
23 frame within which Rick and Steve and I and Laura
2 4 stared talking about the strategies and the questions

2 5 that are presented in this case.

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ME L VIN JAGER

Document 157-6

Filed 03/07/2008

Page 8 of 30

Page 26
1

Page 28
1

2 3
4

TH WITNESS: No. Q. (BY MR. DONAHUE) This is the expert witness

report of Lar Colby. Have you seen that report

2 3

5

before? A. No, I have not. 6 Q. Do you -- as you sit here today, do you have
any knowledge as to what ar the opinions and

7 8

basically. So once I took a look at all those documents and had further discussions I felt like, okay, this is -- you know, the concepts we were talking about is 4 something that I agree with in terms of intellectual 5 propert l,aw. 6 So we went forward. And then I studied 7 the materials more and then we stared -- at one point
8

1

,1

conclusions oftlie Governent's expert witnesses?
A.
Well, I canot tell you what anyone of these

in time, I don't remember, we stared drafting up what

9

9

10 report say because I didn't read them, but my 11 assignent was more in terms of principals or 12 contingents, if you wil, instead of specifically testimony or point 13 responding to any paricular line of l4 of testimony. 15 My -- the assignent that I understood is 16 what I addressed in the report is to look at the -- the

10 11 12 13 14

ended up being these opinion letters. Q. And just briefly describe that process. You said you don't know when you began to -- the writing process, but do you have a rough idea? A. Well, I don't remember when these were fied.
They were fied June -

,

'i

MS. WIRSKYE: June 29th. 17 A. June 29th, oh. Well, the process.. they l7 parcular ta strategy from an intellectul propert 18 stadpoint. And what exactly the Meadows people were 18 obviously stared sometime in Februar and ended up in 19 June. We would -- we would talk by phone. We would 19 going to do with that opinion aferwards, whether it's a 20 tak among ourelves, Rick and Steve and i by phone 20 rebuttl report or not, is somethg that i .. that's 2l again. I would do some reseach. They would help me. you wil. 21 not my jurisdiction, if 22 I don't have a staff at home, so i couldn't do a lot of the 22 Q. Okay. Well, do you know whether any of 23 Governent's expert witnesses opined on whether or not 23 the mechancs of this or some of the research. The 24 offce in Chicago has those tools available to them, so 24 the ta strategy at issue in this litigation was or was 25 they would do some things at my request. 25 not patentable or eligible for trade secret protection?
Page 27

l5 l6

THE WITNSS: Is that it?
Î

~

Page 29 i
I would look at some cases. We would
read something. I would have some questions from an Ii

2 it -- wheter or not it was. And i wasn't told 2

1 A. Not directly. I was just asked to opine that 1

3 specifically that somebody was saying that it wasn't. 3

4 This is not a patent case as i understad it. I would 4

5 understd it more if you would turn it into a patent 5 that than I was because I'm an engineer and a lawyer and

7 Q. Could you briefly desribe what the proess 7

6 case. 6
9 these cases? 9

economic stadpoint that I didn't quite fully
understand, and Rick and Steve were bettr equipped at

not an economist. And then just slowly but surely the

8 was in terms of how you got your assignment in .- in 8

structue of our report came in place. And then we

drafted it, reviewing it, and then finalizing it, and

10 A. Well, we taked at length by phone with the i 0 that's where we are.

Q. (BY MR. DONAHUE) And who was the princip 12 lengt together. And then we staed thnkg abut our 12 author of the report?
11 attorneys, and then Rick and Steve and I taked at 11

13 approach and what we could do to asist Meaows Owen .13

A. Oh, everyhing Was done under my supervision,

14 And then at one point in time I got a 14
17 first that I was a consulting expert and they didn't 17

but Steve and Rick helped me. It was kind of a joint us. But I had the final say and 15 batch of documents, three or four binders of documents l5 effort by the the of 1 6 to read through. As I recall we had taen a position at 1 6 there isn't a word in here that I haven't looked at
severa times and many times. But I don't have, as I
18 know whether I was going to be a testifying expert or l8

1 9 not. So I re through all this matenal an wanted to i 9

20 see what we were dealing with. 20
21 And my genera approach over the years 21

22 when. I was asked to consider being an expert is to 22 23 determine whether or not I ca agree with the position 23 24 of the people asking me to be a witness. And I can't 24 25 fully finally agree unti I've seen wha the facts ar 25
;lÓ."U""

said, the facilties to generate documents ver much anymore at home. Q. Would it be fair to say that the draf initially were generated by Rick or Steve and submitted to you for your review? A. That's the general approach, yes. And then I would write sections and talk to them by phone and say no, we can't do that. i don't agree with that, add

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MELVIN JAGER
Page 30
1 this, and I would give them some directions on where to 1

Page 32 speak. I think he's a managing director at Ocean Torno

2 look. Like, here's some cases, take those cass and, 2
3 you know, put this quote in here, put that quote in 3

in the evaluation deparent. And Steve Powaga is one of his associates tht does his go-to work for him, if
you wil.

4 there, and that kind of thing. It was an evolving 4
5 process, so it's ~- it was like most reports, truly a 5

7 Q. And at some point did you submit your draft 7

6 joint effort. 6
8 to Meadows Owens for their review? 8

10 Q. And do you \mow when that process i 0

11 approximately began? 11

Q. And do you know when you were provided that report? A. Let's see if it's reflected in the bills. i 2 A. Wen, that would have been kid of late in the 12
(Sott voc discusion.) 13 process. It probably would be -- I would say beginning i 3 A. Db. yes, here we ar. The May -- the May time 14 in May, May, mid-May. The records should show, mayb 14 15 the biling records would show when that happened. 15 reflected in 2477 says inital review of Gruer report,

9 A. Yes. 9

Q. You mentioned in your - I'm sorr. Have you read Dr. Gninets expert witnes report? A. Yes, I think I say so in my report.
Q. You do? A. Yes.

16 Q. I'm going to hand you your bils and -- 16

so that occurd sometime in May. And then the final ~

review ofthe Gruner report occurred sometime in June. It was not done -- it was not in final form until June, 18 Q. I'm going to hand you what's been marked as i 8 you can tell me 19 so that's when I reviewed it. 19 Exhibit 2476, 2477, and 2479, and see if

17 A. They're prett cryptic, the bils are. 17

2 0 based on your review of the bils as to approximately 20
2 I when you began to submit your drafts to Meadows Owen .21

Q. (BY MR. OONAHl) And to what extent in yo

fonning your conclusions did you either consider or rely Y.

22 A. Do we have an April? Oh, this is the April's. 22 upon Dr. Grunets report? A. Well, we work basically in parlleL. My 23 Yeah, in -- on the May report 2476, which reflected time 23
25 spending a substantial amountoftime. And if

24 spent in April I believe, it shows that by then I was 24 report in many respects and most respects is independent
you look 25
of what he has to ~ay, but I wanted to make sure tht he i

Page 31
1 at the very cryptic details of professional time, we had
2 the preparation of

Page 33

the report and telecommunication

1 wasn't in disagrement with me or vice versa. So it 2 turns out that after we reviewed it, his general report,
3 as I understad it, was addressing the question of can

3 conferences with counsel, so that would be -- certnly

4 during April is when we startd sharing our ideas an
5 the nature of our report with còunsel.

4 ths kind of stategy have intellectual propert
5 characteristics such as patent or trade secrets. And he

6 Q. Do you know whether you're -- when llltimately
7 you completed the report?

6 -- he said -- he agreed that they did, and I agrd with
7 that position. So we could - at least we were not
8 inconsistent with each other.

8 A. The final report was prett much mid-June,

9 towards the -- we -- I remember that I was kind of 10 rushing it because I had a trip to Zurich to get ready

9 Q. Did you -- after reviewing his report, did you
i 0 make any changes in your report?

11 for in June, and I wanted to finish it before that.

12 THE WITNSS: Is that right? Yeah.

i i A. I'm sure we made chages in the report but I 12 don't recall making any chages based upon the Gniner

13 A. So we -- we finalized it the first couple of
14 weeks in June for sure. 15 Q. (BY MR. DONAHUE) I noticed in your biling 16 report for June 1 st through the 30th, which has been
17 marked as 2479, that you have timed -- or you're shown
i 8 time consultation with Melvin Jager. Do you see where

i 3 report directly. I kind of did my own analysis and my
14 own reseach.

15 Q. You mentioned that you wer supplied a stack 16 of materials.
i 7 A. Vb-huh.
18 Q. Tur to Exhibit B of

the Tesoro report, which

19 I'm referrng? I don't -- I'm sorr -- not Melvin
2 0 Jager. Strike that.

20 A. Yes.
21 Q. And ar those the materials that - or could
22 you describe what in Exhibit B were materials that were 23 provided to you by Meadows Owens?
24 A. This is pre much those materials. i can't

19 is 239.8.

21 That's your time correct, that 13 hours?

22 A. Yes.

23 Q. And Conway -- con- - Conroy, that time is-24 who is Mr. Conway (sic 1 again?
25 A. Conroy is the second guy in command, so to
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9 (Pages 30 to 33)

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MELVIN JAGER
Page 34

Page

36 ~
L~

I

Q. At some point after you reviewed the i that stack of materials. I might have not relied upon i 2 some, but certnly this is what -- is the guts of what 2 information they provided to you, did you ask to see

3 I was presented. 3

~
"

8 materials? 8 1 i ta A. Yeah. 12 12 patent materials. 11
9 A. Where are you talking about? 9
15 Q. Yes. Yes. That's under tht section. 1S

other materials in the record? A. Other than the Gruner report I can't remember 4 Q. And when you say this -- for example, I asume 4 asking to see anyting else. I did insist on seeing the 5 you don't mean, however, the ta patent materials, which 5 Exhibit B. I asswne that you 6 Gruner report before I finalized anyting I was going to 6 are on the first page of 7 don't mean they - Meadows Owens provided you with tho ¡e 7 say because I wanted to make sure tht we were in sync
with each other. And if not, I couldn't say in my

;¡ ~

t.

reports that i read his report and agrd with it. Q. But other than the Gruner report, do you 10 Q. Take a look at the first page in the heading 10 recall if afer reviewing the materials they provided you, you asked as to whether or not there were other 13 Q. Did they provide you with those materials? 13 materials in the record that you would like to review? A. I don't recall asking for other materials. 14 A. The materials that's underneah here? i 4
1 6 A. There was a whole stack of testimony before i 6 materials under the heading ta patent materials in

17 Congress, house hearings that I remember reviewing. 17 Exhibit B. 1 8 TH WISS: Is that what this refers 18 A. Yes, i did.

20 MS.GAVIOLI: Yes. Ican--allofthose 20 from Meadows Owens had you, yourself, had seen any of

19 to? 19
Page 35
2 Do you recall if

Q. You mentioned that they provided you with the

Q. Did you -- prior to receiving these materials
those

21 were provided by us, so... 21
22 A. Yea, so I would not have -- 22
23 MR. DONOHUE: Let me make a statement. 23

those paricular documents or read any of

parcular documents before?

24 I'm sorr to interrpt, but counsel caot unfortately 24

25 help the witness with his responses. 25

A. No, I had not. Q. How familar were you with the issue of whether ta strategies could be patented before you
Page 37
i
with the law and the
I

i Q. (BY MR. DONAHUE) Mr. Jager, my question is: 1 received those materials? A. i was very familar you were provided those documents by 2
3 Meadows Owens or whethr those are documents that eithe 3
4 your own team provided to YOll or you, yourself, 4

;/

business methods. j That was related -- a very important development from i ~ the patent law standpoint in the last i 5 years, and so you couldn't practice law without being aware of that. 6 A. Under the heading ta patent materials in 6 7 Exhibit B, I wa provided with those materials by 7 Business methods, financial methods, I know the first M couple of cases that came down with this were financial

5 obtained? 5

concepts relating to the patenting of

10 that are on this document, Exhibit B, were supplied to 10 remember the exact cae, but the theory of business

8Q. Okay. So in other words, all the materials8 Meadows Owens. 9 9

method patents, some kind of mutal fud, I don't

i 1 you by Meadows Owens? 11

methods being patntable came out of a financial patent

12 A. Well, let me check. Yes, as fa as I can 12 that was fied and allowed. So I was very familar with
13 determine with a review of it, all of thos were l3 that concept.

i 4 provided by Meaows Owens. 14

I did not specifically -- I was not

15 Q. Firt, do you know, did you ask them to 15 specifically focused on whether or not a ta strategy,

i 6 provide you with certn materials or did you simply 16 per se, would be a business method that would be
17 wind up receiving maerials that they provided to you? 17 patentable before this case came up. I never ha a i 8 A. Well, I asked in general ter. I said I 18 rean to consider it. I hope I never do again. . your analysis of 19 can't reach any opinions until I know what the facts i 9 Q. SO is it fair to say, then, whether or not a ta strategy could be patented was based on the materials that were under the section of 22 A. So pleas provide me whatever you have that 22 Exhibit B called tax patent materials?

20Q. Okay.20 21 are. 21
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A. Well, it bega there. I wanted to see what

2 4 are. And then in general terms I asked for that, and 24 other people were saying. I was paricularly interested

2 5 then they provided me with this information. 25
10 (Pages 34 to 37)

in the staement by the general counsel for the patent
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MELVIN JAGER
Page 38
1 office, James Toupin. just to see the - the approach

Page 40
i and numerous other documents, were prvided by the

2 to -- to the patenting of ta strategies. And when I --

2 Deutsche Ban, Jenkins & Gilchrist, and varous other
3 third paries, were you aware of that?

3 you know, when I saw there were 41 patents that had
4 issued in that area and 60 or so pending, it became

4 A. I think you have to assume that there was an

5 clea to me that there's not an issue about the 6 patentabilty of it, at leat imder the current law. 7 And that would have been the conclusion I would have
8 come to independently. 9 When I firt staed praticing law,

5 awful lot of E-mails that flew around in this case, but
6 I did not see any E-mails, that I can recall, from

7 Deutsche Ban or the placs that you just mentioned.

8 Q. Tur to in Exhibit 2398 page 10.
9 A. Okay. 10 Q. And on the secondhullet, the last sentence,
11 you make reference to a -- your belief is based on my
12 review of the available documentaon.
13 . Do you see that reference? It's the

10 there was the old cliche that methods of doing business
11 aren't patentable, but that changed with that Alapatt
12 case or something like that 20 year ago. So

they ar

13 patentable now and they have always been conceptually

14 something you could keep as a trade secret, business 15 methods, that is. you look at in Exhibit 2398, footnote 20, I 16 Q. If 17 notice you cite the Robert Hanson deposition, page 7.

14 second bullet, las sentence.

15 A. Yes, I see it.
16 Q. And

what did you mean by

available

17 documentation?

18 A. Yes.

18 A. Well, I meant that the documentation that I
19 had available to me an that I reviewed fonned the basis

19 Q. And I didn't see that listed in the materials
20 relied on, unless I missed it, which is possible. Am I
21 corrct, you did rely on at leas some porton of the

2 0 for my belief. I did not fonn a belief based on the
2 1 stuff that I didn't see.

22 deposition testimony Mr. Hanon, am I correct?
23 A. I've read excerpts of

22 Q. Okay. And did anyone tell you, for exaple,
23 that there's well over a milion pages of discovery

his deposition, yes. If

24 it's not in that list, it probably should have been.

24 documents that have been generated in connection with
2 5 this matter?

25 Q. IS there anything else, to your knowledge,
Page 39

Page 41

1 that you relied on that's not listd in Exhibit B? 1
2 A. I can't think of anything else. I f there is, 2

A. No, and I'm glad they didn't.
Q. I wish I had known.

3 then we could certainly corrct the record. 3 4 Q. For example, any other depositions, do you 4 5 recall reviewing any other depositions? 5
8 a deposition of

Now, you mentioned you had discusions

6 A. Aftr this report was fied, I reember 6

with counsel at varous points in the preparation of your report. Did you at any point meet with counsel? A. With -- yes, we met yestey her in this
offce to discuss the deposition today with counseL.

7 reviewing some documents and -- like a cour packet and 7

10 Q. Daugerda, yes. 10
11 . A. Daugerda. But I didn't have that in front of 11
12 me at the time I prepared the report and that would not i 2

9 pronounce it? 9

Mr. Daugerdas -- Daugerdas -- how do yo 8 That was the first time I met these lovely ladies.

Q. And prior to that time you had - you had no face-to-face meetings?

A. That's corrct.
Q. All your communications were done by

13Was there anything in that depsition which 14 be listd here. 13 14 Q. 16 Itin the report? no. 17 16 17 A. does not change my opinion,
15 had an affect on any of

telephone? A. That's correct.
Q. And approximately how may telephone

conversations did you have with counsel? A. Oh, betwn five and ten. I don't know exacly how many. There might have been communicatiol1 18 Q. Were you infonned as to the fact that various 18 with Rick that I was not -- paricipated in. See, I wa 19 third parties have produced numerous documents in 19 down in Sanibell tring to enjoy the sun while a lot of 20 discovery in this cae, were you infonned of that? 2 0 this wa going on. your report. Q. Turn back to page 10 of

your opinions that you rendered 15

21 A. No, I wasn't. 21

22 Q. Okay. Are you aware -- for example, your own 22

23 report cites, for exaple, E-mails, an Ernst & Young 23
24 E-mail to take the one example. Were you aware, for 24

A. Yes.

25 example, numerous E-mails, not only from Ernst & Youn 25

Q. You make reference to the second -- and, again, in the second bullet -- to the COBRA Investent

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MELVIN JAGER
Page 42
Page 44 ~

I and Tax Strategy. Do you see where I'm referring in the
2 heading?

1 A. No, I don't.
2 Q. Do you know the approximate term of

the

3 A. Yes.
4 Q. Where you say (as read): Ernst & Young is the

3 options?

4 A. No, I do not.
5 Q. Do you know why the strte has as a step the

5 only company providing the COBRA investment ta
6 strategy.

7 Could you, as you sit here today, give me

the options to a parership? 6 assignment of 7 MS. GA VIOLl: Objection. Form.
8 A. Those ar ta and economic questions that i

8 your understading of what the COBRA strategy is?
9 A. Probably not It has been explained to me and

9 canlt answer. Tht was not my specific assignnt.

10 I've been told to assume things, which I as an engineer

i 0 Q. (BY MR. DONAHE) Do you know what the
i i business purpse is of

i 1 and a noneconomic person did, in fact, assume. It had
12 something to do - and I think I mentioned it briefly in 13 the asignent or the background in the report. It ha 14 something to do with a purchase of options and then the 15 sae of options or puts and calls and then the

the paership to which the

12 options ar assigned?
i 3 MS. GA VIOLl: Objection. Form.
I 4 A. No, I do not.

I5 Q. (BY MR. DONAHU Do you know what the purps :
16 is for the formation of a subchapter S Corporaion in 1 7 connection with the strategy?
I8 A. What the purpse is? Well, I've over the
19 years myself had

i 6 conversion of those to a paership and then to an S
I 7 Corporation and then the generation of potential income

18 profit and then potential ta savings. That's in 19 general terms my understanding of it.

an S Corporation, and I understand the
~
I'

20 Q. But can you - as you sit here today, can you
2 i give me a rather specific explanation of each of the
22 separate steps of

20 general puroses of an S Corpration based upon that

2 i experience. But specifically in this cae, I don't
22 understand why they would do it. I did it so that I
23 would limit my liabilty and have the benefit of

the COBRA strtegy?

23 A. No, I can not.

having

~

~

24 MS. GA VIOLl: Objection. I would like to
25 just have a runing objection to the term "steps" ofthe
Page 43

24 the expenses be personal and the income be personaL.

25 The typical S Corporation approach.
Page 45

2 MR. DONOHUE: I believe your objection is 2 3 to form. There are no speaking objections. 3

i transaction. i
4 Q. (BY MR. DONAHUE) Mr. Jager, without lookin" 4
5 at any documents, ca you go

7 A. No, I could not except what I just generally 7 said in my report I've assumed that there were economic :
profit potential benefits an ta saving potential .

6 the COBRA strategy?

though and describe to me 5

11 A. Yes. 11 13 those options were? l3
i 0 Do you recall that? 10
9 Q. For example, you mentioned offsetting options. 9

8 described. 8

purpose." . 6

Q. Do you know what the business purpse was for the S Corpration? MS. GA VIOLl: Objection. Form. I would
like to state a running objection to the term "business
A. Well, I understand in general terms -- like I J

benefits for this venture, and that's how I stared out "
with my opinion. That was my asswnption. I was told to .~ assume tht Now, you're dealing with the detils of that aswnption, and I sted with the assumpton. your asswnptio Q. (BY MR. DONAHUE) Okay. If
turns out to be incorrect, how would that afect your

12 Q. Do you -- can you describe what the nature of 12

i 4 A. It has been explained to me in general terms, i 4
1 6 times, I'm not a ta man or an economic expert so - 1 6

15 but I can't describe them to you. As I've said many 15 opinion?

i 7 I'm just a patent lawyer. 17
22 Q. Do you know, what is the position of

A. Well, ifmy asumptions are incorrect, I would ,
have to review the whole thing and star - maybe not

20 and short options in the strategy? 2 0

21 A. No, I do not. 21 the 22
25 parership? 2 5
~'\_ - ~::~ ~;¡'..w:

i 8 Q. Do you know, for example, the strike prices 18 start over again, but I would have to determine and i 9 and the difference in the stke prices between the long 19 confirm whether that change in my aswnption is
suffcient to chage my opinion. But this is all at this point speculation.
Q. I'm going to show you what's been marked as

23 taxpayer regarding the basis in the short option when 2 3 Governent Exhibit 2452. For the record, this is a
24 the short option and long options are assigned to a 2 4 letter dated Marh 19u, 2007. It's addressed to you and it is signed by Sarah Q. Wirskye-~i~-"l:;..l~
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12 (Pages 42 to 45)

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MELVIN JAGER
Page 46

Page 48 .
A. Vh-huh.

1 MS. GA VIOLl: Wirskye. i
2 Q. (BY MR DONAHUE) -- Wyrskie, W-Y-R-S-K-I-E. 2

3 Did you reeive this letter? 3 4 A. I recall receiving it. I think I refer to 4

5 that in my opinion, don't I? 5
6 Q. You 8 description of

9 A. And -- 9 10. Q. Yes, it wa. 10
the COBRA strtegy to me, as I remember. 8

7 A. Okay. Yes. This wa -- this was the 7

do. 6
the factual 23
Page 47

Q. Did you make an attempt to reiew -- the steps go on. But did you make an attmpt to actually
understad what those steps were?

of

A. Not in any depth. And this is -- this is kind where we come out with the assumptions because I mad it clear to Meadows Owens' people tht I'm not a ta attorney. I'm not a ta expert. I'm not an accountat a lawyer and an engineer. of any sort. I'm, as I said, this as So I could not speak to the detailed aspects of

11 Q. Did you request this descnption or was it 11 an expert. So I said I'm just going to have to assume that this is as stated. And I did not mae any

12 just provided to you? 12
13 A. I franly don't recall, but it's certinly 13
15 understading of

14 something that I would like to have a basic 14

independent examination of this - this document. I did see this document. just going to have to Q. But when you said I am before I stared. So somehow this -- 15

16 either they gave it to me or I requested knowledge of 16 asume that this is as stted, what are you referrg to 17 this because it's kind of -- it's one thing to describe l7 "this is"?
18 something on the phone. It's another thing to put it i 8 19 down on paper and understad it where you can refer to i 9

A. Well, that the COBRA stategy is as stated, like it is on this letter of2452.
Exhibit 2447, you stll -- for purses of

2 0 it. So this is - they provided this to me for 2 0

Q. SO in other words, even though you did review

2 1 background information 2 1
23 you make any attempt to verify any of

22 Q. And to what extent after you received this did 22

2 4 aIlegations in this document? 2 4
1

rendering your opinion, you relied upon the factual presentation that's in Exhibit 2452?

A. I did. Thats a fair statement.
Q. Okay. Let's turn again to your Tesoro rèport Page 49

25 A. I did not make any independent examination of 25

this. I relied upon this document.
Q. SO in other words, is it fair to say you assumed the facts in this document were tre?

2 3
4

1 at page 3. You make reference there to your assignent. 2 And in the second sentence you make reference to the
3 fact that you've been asked to provide analysis and

A. That's tre.
A. Yes.

4 possible testimony regarding the intellectual propert

5

Q. For example, the firs sentence refers to 6 COBRA as an investment strtegy. Do you see that?
9

5 value of certin investment trsations, which you
6 referred to as the Investment and Tax Strtegy
7 associated with this case.

7 8

Q. And did you assume that COBRA was an investment strategy?

8 Is the term "investment" and "ta
9 strategy" something you saw in Exhibit 2452?

10 11 12 13 14 15 16 17
1S

A. Yes, I did. Q. For exaple, in the second sentence there's a
reference to the fac that the short and long options

lOA. I don't -- I don't recall whether those words
11 are specificaly here, but that's what we -- we at Ocea

19 20 21 22 Q. Okay. Do you -- other than review it, did you 23 attmpt to undersand the various steps that are the document. Do you 24 referred to staing on page 3 of 25 see where it says, step one option contrct?

were at different strke prices. Did you make any attempt to determine, for example, what the difference in the strke prices were? A. No, I did not. Q. Okay. I'm going to hand you what's ben marked as Governent Exhibit 2447. Do you recognize this document? the A. I've seen this before, yes. It's par of materials that I reviewed, yes.

12 Torno gave as a name for ths strtegy. Instead of 13 caling it genericaly COBRA. It was generically an
14 Investment and Tax Strate.

15 Q. Invesent ta sttegy taes into account, am
1 6 I corrt, both the invesent aspects of the strategy

1 7 and the tax aspect, am I correct?

18 A. That's what I think it was meant to convey.
19 Yes, it has two prongs.
20 Q. Did you make any anlysis as to which would be

21 and which were the principal focus of the stategy, the

22 investment side or the ta side?

23 A. No, I did not.

24 Q. I'm going to give you what's been marked as

25 Governent Exhibit 2368. lts probably 2268. Let me

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13 (Pages 46 to 49)

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Page 14 of 30

MELVIN JAGER
Page 50
Page 52 ·

1 tae a look. I think I'm looking -- that's -- yes,
2 you're absolutely right. I saw an E-maiL.

1 A. Excuse me a minute.

2 Q. Sure.
3 A. Would you please repeat the question?
4 Q. Yes. The question is if you turn to page 3 of 5 your report, which has been marked as 2398, I'll ask as

3 MR. DONOHUE: Off the record.
4 (Discussion held off

the record.)

5 Q. (BY MR. DONAHUE) Take a look at 2368.
6 A. One of the milions of documents. Wow, what

6 to whether or not your report addresses two separate

7 is this?
8 Q. Now, if 9 of you -- if you tur to the second page 2368, you'll see what that is is simply another set

7 questions.

8 A. That's correct.
9 Q. And the first question is whether the
i 0 Investment and Tax Strategy can be categorized as

10 of COBRA slides. Do you see that?
11 A. The second page?
12 Q. Yes, of

11 intellectua propert. Am I right?

Exhibit 2368.

12 A. That's correct.
13 Q. Now, on that -- your first opinion, am I right
14 that there's two pars to that opinion, from reading
l5 your report? That the first par deas with what are

13 A. Yes, I was just comparing it to 2447. It
14 looks similar to what I saw before.
15 Q. Take a look at the second last page of

the

16 document. It's Bates stap No. 3766.

17 A. Yes.

16 the legal characterisics of, for example, a trde
1 7 secret and the second par is whether or not the ta

18 Q. You'll notice that there is -a table there of

l8 strategy -- tax and investent strategy has such

19 the varous consequences of - and an ordinai loss of 20 $50 milion. Do you see that? 21 A. Well, this is -- yes, I see it now, but I have
22 not studied it. Yes, I see it.

19 characteristics?
the 2 1 report that what's a fair way -- a tyical way of
20 A. And well, then there's a third par of

23 Q. It is somewhat similar to, for example, a
24 table which is in the back of the set of slides, which 25 is Governent Exhibit 2447, that you did review.
Page 51

22 evaluating or placing a value on intellectual propert, 23 that's point two here.

24 Q. Right. But I haven't gotten to the point two 25 yet. I'm just -Page 531.
i A. I'm sorr.

i A. Okay.
2 Q. You'll notioe that there is similar slides -3 or similar tables in the last two pages?

2 Q. -- tring to understad point one. And is
3 point one really divided into two part based on your

4 A. Yes.
5 Q. SO if

4 report? Is it one par dealing with what are the legal

you look at, for example, 24--

5 characteristics of a trade secret and two, whether or

6 Exhibit 2368, you'll notice that under the firs column

6 not the COBRA strategy had such characteristics?

7 Win Betlin Tax percent retu after fees, do you see
8 the number 31.58 percent?

7 A. Well, I analyzed it a little broader. It was
8 intellectl propert, whether or not this strategy had
10 secrets is one form of

9 A. Uh-huh. -

10 Q. In other words, a retu of 3 I -- roughly 11 about 32 percent. Do you see that?

9 the characteristics of intellectual propert. Trade intellectual propert, for

12 A. Yes, I do.
16 A. Yes, I do.

i i example. As we went though this, we looked at it
l2 quickly from the patent stadpoint, from the copyrght
13 stadpoint, the trademark stadpoint, and the trade

13 Q. And then below that it gives an after ta
14 return. And do you notice that the afer ta return is
l5 roughly about 513 perent. Do you see that?

14 secret stadpoint. And those ar the four basic
15 components of intellectual propert, if

you wilL.

1 6 I'm not aware of any copyrights. I'm not

17 Q. Did you in any of your analysis mak any
18 effort to determine as to -- for this trtion, as to

17 aware of any trademarks in this cas. I'm not aware of

18 any patent that has issued on this strategy. So it came
19 down with a question: Does this qualify in my judgment

19 which was the predominant feature of the stategy, the 20 investent feature or the tax feature?

21 A. No, I didn't. I assumed that it had both 22 aspects.
23 Q. Okay. Let's turn back to your report and, 24 agin, on page 3. And am I correct that you on page 3 25 make reference to addressing two sepate quesions?

20 as a trade secret or would it have the characteristics 21 of a trade secret? Characteristics - you know, the 22 atibutes of a trade secret and that's where I
23 addrssed. So yes, that was the scenario.

2 4 First, is it the type of information that
25 could be intellectual propert. And then secondly, of

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14 (Pages 50 to 53)

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Case 1:05-cv-00231-EJD

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Page 15 of 30

MELVIN JAGER
Page 54
i those four components of intellectual propert, where

Page 56 ~

1 unlear the law, so I was also testifYing par and ~l
2 parel of my opinon based upon the facts of my
3 knowledge of the law. So it's a mixed bag, if

2 does it fall? It's not a trademark. It's not a

3 copyright. It wasn't patentable. So it falls in the 4 category of a trade secret - potential trde secret. 5 Q. All right. But my question really deals with,
6 in making that analysis it appear that your report

you wil.'

4 Q. Turn to page 6 of Governent Exhibit 2398, the

5 Section 5.2. i in the third paagrh. Do you see the 6 first sentence of the third paragaph staing with the
7 word "additionally"?

7 first lays out what are the legal characteristics of the
8 varous intel1ectual propert that you referred to in
9 your report: the patents, the trdemarks, the

8 A. Yes, I do.

9 Q. Could you read tht sentence?
10 A. Oh, I mean, out loud? Do you want me to read

10 copyrights, and trade secrets. Am i correct that that's

1 1 the first par --

11 it out loud?

12 A. That's the -13 Q. -- is the layout with the legal
i 4 characteristics on it?

12 Q. Unless you don't want to.

13 A. No, thats fine. I didn't know whether you
i 4 wanted me to read it to myself or read it out loud.

15 A. That's the generl approach, yes.
16 Q. And then after you've laid out the legal
i 7 characteristics, then you opined on whether or not the

15 (As read): Additionally, legal ta

1 6 statgies need not be pateted to ensure protection.

17 They can be kept as trade secrets. i 8 strtegy -- the COBRA strategy had such characteristics? l8 Q. And the word