Free Statement - District Court of Arizona - Arizona

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UNITED STATES INTERNATIONAL TRADE COMMISSION WASHINGTON, D.C. Before the Honorable Charles E. Bullock Administrative Law Judge

5 In the Matter of

) ) 6 Certain Point of Sale )Inv. No. 337-TA-524 Terminals and Components ) 7 Thereof ) ____________________________) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Job No. 59186A Reported by: Lisa A. Blanks, RPR, CRR Certified Court Reporter No. 50599 DEPOSITION OF DOUGLAS J. REICH Phoenix, Arizona January 13, 2005 - 9:35 a.m.

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1 2 EXAMINATION:

I N D E X PAGE 5

3 By Ms. Pham 4 5 EXHIBITS: 6 Reich No. 1 7 8 9 Reich No. 2 10 11 12 13 Reich No. 3 14 15 16 17 Reich No. 4 18 , 19 20 21 22 23 24 25 Document entitled, "Hypercom Confidential Business Information" Document entitled, Respondent Hypercom Corporation's Second Set of Document Requests to Complainant Verve, L.L.C." Document entitled, "Notice of Verve's Second Set of Requests for Production of Documents and Things to Respondent Hypercom Corporation" Document entitled, "Verve's Notice of Deposition of Respondent Hypercom Corporation"

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1 2 3 4 5 6 7 8 9 10 11 12 THE DEPOSITION OF DOUGLAS REICH, held on January 13, 2005 9:35 a.m.

13 January 13, 2005, at 9:35 a.m., at 400 E. Van Buren, 14 Phoenix, Arizona, before Lisa A. Blanks, a Certified 15 Court Reporter, Certificate No. 50599, for the State 16 of Arizona, pursuant to the Rules of Civil Procedure. 17 18 19 20 21 22 23 24 25

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1

A P P E A R A N C E S:

2 SNELL & WILMER BY: JAMES R. CONDO, ESQ. 3 BY: DAVID O. CAPLAN, ESQ. One Arizona Center 4 400 E. Van Buren Phoenix, Arizona 85004-0001 5 602-382-6000 appeared on behalf of Hypercom Corporation 6 7 DEWEY BALLANTINE LLP BY: HIEU PHAM, ESQ. 8 1950 University Avenue Suite 500 9 East Palo Alto, CA 94303 650-845-7143 10 appeared telephonically on behalf of Verve 11 OFFICE OF UNFAIR IMPORT INVESTIGATIONS U.S. INTERNATIONAL TRADE COMMISSION 12 BY: STEVEN PEDERSON, ESQ. Commission Investigative Attorney 13 500 E Street, S.W., Room 401 Washington, D.C. 20436 14 202-205-2781 (appeared telephonically) 15 16 AMIE D. ROONEY, ESQ. SULLIVAN & CROMWELL LLP 17 1870 Embarcadero Road Palo Alto, CA 94303 18 650-461-5600 appeared telephonically on behalf of Verve, L.L.C. 19 20 ALSO PRESENT: 21 Tracy Shiroma 22 23 24 25

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1

DOUGLAS J. REICH,

2 having been first duly sworn to tell the truth, the 3 whole truth, and nothing but the truth, was examined 4 and testified as follows: 5 MR. CONDO: The witness has been sworn. Hieu,

6 you may proceed, if you like. 7 8 9 10 11 Q. BY MS. PHAM: Mr. Reich, my name is Hieu Pham. EXAMINATION MS. PHAM: Great. Thank you.

12 I represent Verve, the complainant in this 13 investigation. 14 for the record. 15 A. Yes. My name is Douglas, D-O-U-G-L-A-S, Can you please state and spell your name

16 middle initial J as in Joseph, last name Reich, 17 R-E-I-C-H. 18 19 Q. A. Mr. Reich, what is your business address? 2851 West Kathleen Road, Phoenix, Arizona,

20 85053. 21 Q. Okay. This is a deposition. I'm here to ask Do you

22 you questions and you are here to answer them. 23 understand that? 24 25 A. Q. Yes, I do.

Your attorney may make periodic objections,

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1 but you should answer unless your attorney gives you a 2 specific instruction not to. 3 4 A. Q. Yes, I do. If you don't understand a question, let me If you Do you understand that?

5 know and I will repeat it or rephrase it. 6 answer, I'll assume you understand. 7 8 A. Q. Yes.

Is that okay?

Please wait for me to finish asking a That way two people aren't speaking at the

9 question.

10 same time and that makes life easier for the court 11 reporter, is that okay? 12 13 A. Q. Absolutely. Please tell me if you need a break, but not

14 while a question is pending, and we can go take a break 15 after the question is complete. 16 17 A. Q. Yes. Please answer yes or no instead of shaking Do you understand that?

18 your head or nodding so that the transcript is clear. 19 Do you understand that? 20 21 A. Q. Yes. Okay. Are you currently taking any

22 medications or drugs of any kind that would make it 23 difficult for you to understand any of my questions 24 today? 25 A. No.

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1 2 3 4

Q. A. Q. A.

Have you ever been deposed before? Yes. How many times? I think a couple of times. I'm not totally

5 certain.

What complicates it is that I'm also a lawyer,

6 and when I was in practice, I both gave depositions and 7 took depositions, so I don't have an accurate 8 recollection, but at least once. 9 Q. How many times have you been deposed on behalf

10 of Hypercom or have been a witness on behalf of 11 Hypercom? 12 13 A. Q. This is the first time. Okay. So this is the first time you've ever

14 been deposed on behalf of Hypercom, is that correct? 15 16 A. Q. That's correct. In the other times that you were deposed can

17 you generally describe the circumstances under which you 18 were deposed? 19 A. Was it a litigation?

Yes, I believe it was a litigation matter

20 involving a client. 21 Q. Okay. Did the cases that you were deposed in

22 go to trial? 23 24 A. Q. No. Have you ever been a party or a witness in a

25 lawsuit, basically -- not on behalf of Hypercom but on

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1 your own? 2 3 4 A. Q. A. Yes. And when was that? I think it was in the mid-'80s. I don't

5 recall the exact date. 6 7 8 Q. A. Q. And were you a party or were you a witness? I was a party. Can you generally describe the nature of that

9 litigation? 10 A. It was litigation involving a professional

11 practice. 12 13 14 Q. A. Q. What do you mean by professional practice? Representation of a client. Okay. Do you have the notice of deposition,

15 the First Notice of Deposition of Respondent Hypercom in 16 front of you? 17 MS. PHAM: Court Reporter, I'd like to mark

18 that as Exhibit 1. 19 20 21 22 Q. (Reich Exhibit 1 was marked for identification.) THE WITNESS: BY MS. PHAM: Yes, I do. Can you turn to the schedule A

23 that is on page 3? 24 25 A. Q. Yes. Do you understand that Hypercom has designated

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1 you as the person to testify as the court representative 2 on topics 7 and 9 through 13 in this notice? 3 4 A. Q. Yes, I do. Do you understand that that means that your

5 testimony is on behalf of Hypercom as a whole 6 corporation? 7 8 9 10 A. Q. A. Q. Do you understand that?

Yes. Are you prepared to testify on these topics? Yes. What did you do to prepare to testify on these

11 topics? 12 A. I reviewed the notice of deposition, including

13 Schedule A, and I also reviewed certain of the pleadings 14 in this matter and also consulted with our outside 15 counsel. 16 Q. You said you met with your outside counsel.

17 When was that? 18 19 20 A. Q. A. Yesterday. Any other time before that? Yes, and also -- well, I didn't meet with

21 them, but I facilitated meetings of last Friday and 22 Monday with regard to this matter. 23 Q. When you say "facilitated meetings," what do

24 you mean by that? 25 A. Facilitated the meetings in terms of

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1 scheduling meetings between outside counsel and other 2 representatives of Hypercom. 3 Q. Were you -- did you actually attend the

4 meetings or did you only set them up? 5 6 7 8 A. Q. A. Q. I set them up. Excuse me. Can you repeat that?

I set them up. Yesterday's meeting with your outside counsel,

9 how long was that, would you say? 10 A. I think I was there for approximately two Maybe slightly more than that. Did you review any documents with your

11 hours. 12 Q.

13 counsel? 14 15 16 A. Q. A. Yes. And which ones were those again? The notice of deposition and certain of the

17 pleadings, documents that are part of the litigation. 18 Q. Do you specifically remember which pleadings

19 you reviewed? 20 A. I'm not sure if they were pleadings or if they

21 were in connection with discovery activities, requests 22 for production, and responses thereto. 23 Q. Okay. Besides with your outside counsel, did

24 you meet with any other Hypercom personnel in 25 preparation for this deposition?

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A. Q.

Not in connection with this deposition. So you didn't meet with any other Hypercom

3 personnel regarding -4 A. Well, let me clarify that. There were two

5 additional Hypercom persons who were present during the 6 time that I was meeting with outside counsel yesterday. 7 8 9 10 11 12 Q. A. Q. A. Q. A. And who were they? Tracy Shiroma and Steve Coatney. Can you spell Steve's last name? C-O-A-T-N-E-Y. And what are their titles? Tracy's title I think has been entered into

13 the record and -14 MR. CONDO: Hieu, this is Jim Condo. Steve

15 will be the witness appearing at 11:00 a.m., and his 16 title is vice president of operations administration, 17 manufacturing, and product development. 18 MS. PHAM: Thanks, Jim. I'll probably ask him

19 that again when he gets -20 MR. CONDO: I would expect that you would and

21 that's acceptable. 22 The court reporter just told us that she

23 didn't take down when what I said at the beginning when 24 I introduced everyone who was present here. 25 title has not been entered into the record. So Tracy's All of us

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1 thought that it had been, but the court reporter just 2 tells us that that's not the case. 3 Tracy's title is -- and you are obviously

4 welcome to ask her this to establish it on the record 5 through her, please -- is vice president, information 6 development global marketing communications. 7 8 Q. MS. PHAM: Thank you. Mr. Reich, was your outside

BY MS. PHAM:

9 counsel present when you met with Tracy Shiroma and 10 Steve Coatney? 11 12 A. Q. Yes. And aside from anything that may be

13 privileged, what did you discuss? 14 A. We discussed the deposition and what we

15 expected the questions would be and documents that might 16 be entered into the record as exhibits. 17 Q. Did you bring any documents with you today,

18 Mr. Reich? 19 20 A. Q. No. Were you asked by anyone at Hypercom or by

21 Hypercom's counsel to search your files for documents 22 relevant to this case? 23 A. I consulted with our outside counsel in my

24 role as inside general counsel in organizing the 25 response to the various discovery requests and in

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1 connection with the notice of deposition. 2 Q. Did you actually search any of your home files

3 for relevant documents? 4 A. I may have. I don't recall that we had

5 anything that was responsive, but I probably did search 6 my own records to see if there were. But most of the

7 records that were called for were kept by persons and 8 organizations outside of the legal department. 9 Q. Mr. Reich, starting with college, can you

10 describe your educational background. 11 A. I have a bachelor of science and economics I

12 degree from the University of Wisconsin at Madison. 13 have a juris doctor degree from the University of 14 Wisconsin in Madison. 15 16 Q. A. What years did you get those degrees? The first degree, the bachelor of science

17 degree, in 1965; the juris doctor degree in 1967. 18 Q. And what is your current position at

19 Hypercom -- I'm sorry, can you repeat that again? 20 A. Sure. I'm senior vice president, general

21 counsel, chief compliance officer, and corporate 22 secretary of Hypercom Corporation. 23 I also hold various positions either as a

24 director or officer of certain subsidiaries of Hypercom 25 Corporation.

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Q. A.

Do you know what subsidiaries those are? We have about 20 or 25 of them. I'm not sure

3 that -- I don't recall all of them off the top of my 4 head. 5 Q. Do you recall the ones that you are an officer

6 or director of? 7 A. I am generally corporate secretary of all of

8 them.

In certain instances, I may be a director of

9 various international subsidiaries. 10 Q. And what are your responsibilities in your

11 position as senior VP and general counsel, compliance 12 officer and so forth? 13 A. I'm the chief legal officer of Hypercom

14 Corporation. 15 Q. Can you generally describe what your

16 responsibilities are as chief legal officer. 17 A. I provide advice and consultation to the board

18 of directors and management of Hypercom Corporation with 19 regard to legal matters, ranging from corporate law, 20 securities law, contracts. I manage litigation, manage

21 the engagement of outside counsel and just about 22 anything else that comes into our door that is relevant 23 to the business activities of Hypercom Corporation of a 24 legal nature. 25 Q. Do you report to anyone at Hypercom?

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A.

I report to John W. Smolak, S-M-O-L-A-K.

He

2 is executive vice president, chief financial officer, 3 and chief administrative officer of Hypercom 4 Corporation. 5 6 you? 7 8 9 A. Q. A. Yes. And who are they and what do they do? Michael Rafford, R-A-F-F-O-R-D, is an attorney George Ivezaj, I-V-E-Z-A-J, is Q. Are there people at Hypercom who report to

10 in the legal department.

11 another attorney in the Hypercom legal department, and 12 Sandra McCarthy, M-C-C-A-R-T-H-Y, who is our contracts 13 administrator. 14 to me. 15 16 17 Q. A. Q. When did you begin working at Hypercom? October 31, 2001. What was your job title when you joined Those are the three people that report

18 Hypercom? 19 A. Vice president, general counsel, and corporate

20 secretary. 21 Q. Were your job responsibilities then different

22 than they are now? 23 A. I was promoted to senior vice president, I

24 believe, effective in January of 2004, and I acquired 25 the title of chief compliance officer, I believe,

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1 sometime during 2003. 2 Q. So when you started, can you tell us how your

3 responsibilities were different than they are now? 4 A. They really aren't that much different. The I

5 pretty much have done the same things.

6 responsibility for corporate compliance matters has 7 become more transparent in that I am more active in that 8 role with regard to our organization. 9 But otherwise, I still am the head of the

10 corporate legal department and my functions really 11 haven't changed in any material way. 12 Q. And in October, when you started at Hypercom,

13 who did you report to at that time? 14 A. At that time I reported to Jonathan Killmer,

15 K-I-L-L-M-E-R, who at that time was executive vice 16 president and chief financial officer of Hypercom 17 Corporation. 18 19 20 21 Q. A. Q. A. At that time did anyone report to you? Yes. And who are they? At that time Kelly -- I'm trying to think of

22 her last name -- was a lawyer employed in the legal 23 department. She resigned her position several months I'm sorry, I don't

24 after I had assumed my position. 25 recall her last name.

And then there was another

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1 individual, Lynn Martin, M-A-R-T-I-N.

She was a lawyer

2 as well in that department, and Sandra McCarthy has also 3 remained as the contracts administrator. 4 5 woman. I have just recalled the name of the first Kelly Gilling, I believe the name was,

6 G-I-L-L-I-N-G. 7 Q. You mentioned that you were promoted in 2004, What position were you promoted to

8 January of 2004. 9 again? 10 11 A. Q.

Senior vice president. When you were promoted, were you reporting to

12 someone different than you had before? 13 14 A. Q. No. You also mentioned that you were promoted to

15 compliance officer sometime in 2003, is that correct? 16 17 A. Q. I believe it was in 2003. And did you report to anyone else once that

18 position changed? 19 20 A. Q. No. Did you work anywhere before you began working

21 at Hypercom, Mr. Reich? 22 23 A. Q. Yes, I did. Can you tell us, I guess, starting -- you can

24 chronologically do it any way you want, but can you tell 25 us where you started from, I guess in 1967, after you

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1 graduated law school? 2 A. In 1967, I was an attorney for the Securities I held that position in I left in the position

3 & Exchange Commission.

4 increasing roles for six years. 5 of senior trial attorney. 6 7 8 Q. A.

I'm sorry, what year did you leave? 1973. Thereafter I practiced law in the Denver law

9 firm of Hopper & Kanouff, H-O-P-P-E-R, K-A-N-O-U-F-F, 10 for approximately two years. In 1975, I became director

11 of Regulation & Compliance for the Pacific Stock 12 Exchange in Los Angeles. 1976, I returned to Denver and

13 practiced law with the law firm of Nelson, N-E-L-S-O-N, 14 & Harding, H-A-R-D-I-N-G. 15 1981. 16 1981, joined the law firm of Schmidt, Was with them, I think, until

17 S-C-H-M-I-D-T, Elrod, E-L-R-O-D, and Wills, W-I-L-L-S. 18 Was with them, I think, until 1984. Joined the law firm

19 of Pryor, P-R-Y-O-R, Carney, C-A-R-N-E-Y, and Johnson, 20 J-O-H-N-S-O-N, also in the Denver area. 21 1986, I joined some former colleagues in the

22 law firm of Krys, K-R-Y-S, Boyle, B-O-Y-L-E, Golz, 23 G-O-L-Z, Reich and Friedman, F-R-I-E-D-M-A-N, and I was 24 a partner in that firm until 1996, when I moved to 25 Phoenix and became vice president and general counsel of

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1 a company that was at that time known as Wave Phore, 2 W-A-V-E, P-H-O-R-E. Subsequently changed its name to And that's my full

3 Wavo, W-A-V-O, Corporation.

4 employment history prior to joining Hypercom. 5 Q. So you were at Wave Phore or Wavo Corporation

6 until October 31st, 2001? 7 8 A. Q. No. Actually, I left them in early 2001.

Do you remember approximately what time that

9 was, what month? 10 11 A. Q. I believe it was January of 2001. And what did you do between January and

12 October 31st, when you joined Hypercom? 13 14 A. Q. I was unemployed; semi-retired. Mr. Reich, do you have a copy of the Notice of

15 Verve's Second Set of Requests for Production of 16 Documents and Things to Hypercom? 17 18 A. Yes, I do. MS. PHAM: Reporter, I'd like to mark that as

19 Exhibit 2. 20 21 22 Q. (Reich Exhibit 2 was marked for identification.) BY MS. PHAM: Are you familiar with these

23 requests? 24 25 A. Q. Yes. And did you have the primary responsibilities

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1 for assisting outside counsel in responding to each of 2 these requests? 3 4 A. Q. I'm sorry, I didn't understand the question. I'm sorry. Did you have primary

5 responsibility for assisting outside counsel in 6 responding to these requests? 7 A. I had responsibility along with a number of

8 other people within Hypercom for working with our 9 outside counsel and responding to the request. 10 11 Q. A. Can you tell me who those other people are? Tracy Shiroma, Steve Coatney, Rob Martin, I don't recall

12 Chris Henry, and there may be others. 13 off the top of my head. 14 15 Q. A.

What does Mr. Martin do at Hypercom? He's an officer in charge of software

16 development. 17 18 Q. A. And what does Mr. Henry do? He is an officer in charge of hardware

19 development. 20 Q. Do you also have a copy of Hypercom's

21 Responses to Verve's Second Set of Requests? 22 23 A. Yes, I do. MS. PHAM: Court reporter, I'd like to mark

24 that as Exhibit 3. 25

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1 2 3 Q.

(Reich Exhibit 3 was marked for identification.) BY MR. CONDO: Hieu, would you state the title They

4 of the document that you want to be Exhibit 3?

5 came premarked and I'm not sure what you just told us is 6 what we've already marked as Exhibit 3. 7 MS. PHAM: Exhibit 3 is Hypercom's Responses

8 to Verve's Second Set of Requests for Production of 9 Documents and Things. 10 MR. CONDO: What we have as Exhibit 3 is

11 Hypercom's Second Set of Document Requests to Verve. 12 MS. PHAM: I have that as Exhibit 4. I should

13 have sent five different exhibits. 14 five? 15 16 five. 17 MR. CONDO:

Did you not receive

The court reporter did not receive

Let me tell you the fourth number, and we can The

18 obviously renumber these as you would prefer.

19 fourth one is the inventory, the single sheet inventory, 20 and we do not have what you would like to be Exhibit 3. 21 MS. PHAM: It's probably not really all that I'll

22 important.

So why don't we just exclude that.

23 just stick with Exhibit 2 as being Verve's Second Set of 24 Requests to Hypercom. 25 MR. CONDO: We'll clear up the record with

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1 respect to the exhibits for the court reporter's benefit 2 at the end of the deposition. 3 4 Q. MS. PHAM: Okay. Thank you.

BY MS. PHAM:

Mr. Reich, earlier you said that

5 you and other people at Hypercom were responsible for 6 assisting your outside counsel in responding to Verve's 7 Second Set of Requests for Production of Documents. 8 Did you have a general procedure for

9 responding to these document requests? 10 A. I reviewed the document request with outside

11 counsel and then suggested the appropriate parties 12 within the Hypercom organization to assist outside 13 counsel in preparing the response. 14 Q. Were you the person who determined this

15 procedure for responding to the request? 16 17 A. Q. I did it in consultation with outside counsel. Was there anyone else involved in determining

18 the procedure for responding? 19 20 A. Q. No. Aside from you, do you know who else conducted

21 a search for responsive documents? 22 23 A. Q. The people that I mentioned earlier. That would be Tracy Shiroma, Steve Coatney, I

24 believe it's Rob Martin and Chris Henry? 25 A. I believe that's correct.

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Q.

Can you recall any other people who might have

2 done a search for responsive documents? 3 4 5 6 now. 7 8 Q. A. What is Mr. Jones' position at Hypercom? I believe he's a vice president in the sales A. Q. A. Clint Jones. Anyone else? I don't recall off the top of my head right

9 and operations area. 10 Q. How did you go about deciding that certain

11 people would search for responsive documents? 12 MR. CONDO: I would caution the witness that

13 if you can answer the question without disclosing either 14 your mental thoughts or impressions or privileged 15 communications with counsel, that you are free to answer 16 the question. 17 But please do not disclose any privileged

18 communications or your mental thoughts or impressions or 19 those of your counsel. 20 THE WITNESS: I determined the persons that

21 would likely have information to the extent that it 22 existed that was responsive to the discovery request and 23 put them in contact with outside counsel. 24 Q. BY MS. PHAM: Did you supervise any of the

25 searches for document requests?

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A. Q.

Not directly, no. Who determined which files at Hypercom were to

3 be searched? 4 A. I would -- I can only speculate, because I put

5 the responsive parties in contact with outside counsel, 6 and they subsequently had their own discussions with 7 outside counsel with respect to the types of documents 8 that might be responsive and within their areas of 9 responsibility. 10 that question. 11 Q. I don't know directly how to answer I don't have that personal knowledge.

So would it be correct to say that each of the

12 individuals that you put in touch with outside counsel, 13 such as Mrs. Shiroma or Mr. Henry, they decided which 14 files to search within their own department? 15 MR. CONDO: Object to the form of the

16 question, calls for speculation. 17 Q. BY MS. PHAM: Can you answer the question,

18 Mr. Reich? 19 20 21 22 A. Q. A. Q. I don't know. Mr. Reich, can you answer that question? I said I don't know. Do you know if the individual in each of their

23 own separate departments decided which of their own 24 files to search? 25 MR. CONDO: Object to the form of the

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1 question.

I believe that's either the same or

2 substantially similar to the question you just asked and 3 I believe that the witness has testified he doesn't 4 know. 5 But go ahead and answer the question, if you

6 can answer it differently. 7 8 THE WITNESS: MR. CONDO: I don't know.

Since at least two of the

9 individuals, Mr. Coatney and Ms. Shiroma, are going to 10 be available to be deposed, it might be a more efficient 11 use of the time to just ask them what they did in 12 response to their document collection efforts. 13 Q. BY MS. PHAM: Mr. Reich, with respect to files

14 that you yourself searched in your legal department, how 15 did you make the determination of which files to search? 16 A. You know, I don't recall that I had any

17 documents within our files that were responsive to the 18 discovery requests. Therefore, I don't believe that

19 there was anything that I personally searched that would 20 have been responsive to the discovery request. 21 And as I previously testified, I put the

22 parties within Hypercom that I believed would have that 23 information in contact with outside counsel to engage in 24 that process. 25 Q. Mr. Reich, does Hypercom have a central area

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1 in which it keeps all of its records? 2 3 A. Q. No. Does Hypercom send any of its records off

4 site? 5 6 7 A. Q. A. I don't know. Do you know who would know? The persons that maintain those records, We have locations around the world and I don't

8 perhaps.

9 know what the practices are in each of those locations. 10 Therefore, I can't answer the question. 11 Q. Do you know if records in the Phoenix office

12 or your central location are kept off site? 13 A. We have more than one location in the Phoenix

14 area, and I know that certain records are kept probably 15 in all locations, but to my knowledge, there aren't any 16 records stored within organizations -- or locations 17 other than Hypercom locations in the Phoenix area, and 18 that's to the best of my knowledge. 19 Q. You testified or you stated earlier that Would

20 Hypercom doesn't have a central filing system.

21 that be with respect to paper documents or electronic 22 files? 23 A. Both. We do have an IT department that runs I would imagine

24 our information technology systems.

25 that to the degree that there's information on servers

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1 within that department, that there's information stored 2 in a central location within that department, but that's 3 not my area of responsibility and I have no direct 4 knowledge about it. 5 Q. Do you know if there are backup tapes of your

6 server that are created? 7 A. I have no personal knowledge of that. I

8 believe that that may be the case, but again, I have no 9 personal knowledge of it. 10 responsibility. 11 Q. Do you know a person in the IT department that It's not within my area of

12 would know whether backup tapes of your servers are 13 created? 14 A. Yes. The director of that department is Jorge

15 Morales. 16 Q.

That's J-O-R-G-E, Morales, M-O-R-A-L-E-S. Mr. Reich, did Hypercom make any efforts to

17 search files belonging to former employees? 18 A. I have no personal knowledge of that. We

19 wouldn't necessarily have files in the possession of 20 former employees. 21 Q. So there were no paper files that were still

22 at Hypercom or electronic files that belonged to former 23 employees? 24 MR. CONDO: I think the witness interpreted I think the witness

25 your question differently.

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1 interpreted your last question to be did we ask former 2 employees to return to Hypercom files that they may have 3 had in their possession. 4 So perhaps you and the witness are

5 miscommunicating. 6 MS. PHAM: Okay, I'll try to rephrase my

7 question and make it a little bit clearer. 8 Q. BY MS. PHAM: Did you make any efforts to

9 search files still at Hypercom that belonged to former 10 employees? 11 A. We searched appropriate files within Hypercom.

12 I don't know that they necessarily belonged to former 13 employees. They may have related to former employees'

14 activities but they were Hypercom files within our 15 organization. 16 Q. Did you actually speak to any former employees

17 regarding responsive documents? 18 A. I don't recall that I spoke with any former

19 employees with regard to responsive documents. 20 Q. Did you speak with former employees regarding

21 this litigation? 22 MR. CONDO: I'm going to object to the form of

23 the question and instruct the witness not to answer to 24 the extent that it clearly asks the witness to talk 25 about his activities in defending this litigation on

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1 behalf of the company. 2 appropriate question.

I don't think that's an That impinges upon the mental

3 thoughts, processes, and opinions of trial strategy of 4 counsel. 5 Q. BY MS. PHAM: Without giving any kind of

6 privileged information, Mr. Reich, what did you speak to 7 former employees about? 8 MR. CONDO: Well, that presumes that there There is no foundation for that.

9 were such discussions.

10 I object to the form of the question, and I'm not going 11 to let you do through the back door what you can't do 12 through the front door, and would again instruct the 13 witness not to answer. 14 Q. BY MS. PHAM: Mr. Reich, did you speak to

15 former employees at all? 16 17 or no. 18 THE WITNESS: Yes. Have you spoken with former Have I ever spoken to former MR. CONDO: You can answer that question yes

19 employees? 20 Q.

BY MS. PHAM:

21 employees since this litigation began? 22 23 A. Q. Yes. Were any of your conversations about

24 collection of documents? 25 MR. CONDO: I'm going to object to the form of

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1 the question.

I'm going to instruct the witness not to I think he has already told you

2 answer that question.

3 that they did not and he did not reach out to former 4 employees to attempt to retrieve documents that they may 5 have in their possession, if any, in response to the 6 document request. 7 Q. BY MS. PHAM: Was what your attorney just

8 stated correct, Mr. Reich? 9 10 A. Q. Yes. Mr. Reich, can you look at Respondent Hypercom

11 Corporation's Second Set of Document Requests to 12 Complainant Verve? 13 14 MR. CONDO: That has been marked as Exhibit 3. I have it in front of me. I

THE WITNESS:

15 have Exhibit 3 in front of me, Respondent Hypercom 16 Corporation's Second Set of Document Requests to 17 Complainant Verve. 18 MS. PHAM: Court reporter, I just want to make

19 sure that we have the right exhibit number so that 20 should be Exhibit 3. 21 Q. BY MS. PHAM: Have you seen this document

22 before? 23 24 25 A. Q. A. Yes. Did you assist in preparing this document? Pardon me?

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1 2

Q. A.

Did you assist in preparing this document? I probably was furnished the document by

3 outside counsel for my review prior to its completion. 4 5 Q. So you were asked to review and approve it? MR. CONDO: I'm going to object to the form of

6 the question.

You're again beginning to invade the

7 attorney-client privilege as well as the work-product 8 privilege when you start asking him what he was asked to 9 do with respect to the document or what he may have done 10 with the document. 11 Q. BY MS. PHAM: Did you review this document,

12 Mr. Reich? 13 14 15 is? 16 17 A. Q. Yes. Can you turn to request number 8, I believe it

It's on page 6. A. Q. Okay. Did you have a quick chance to read that

18 request? 19 20 A. Q. I will do that right now. Okay.

Does Hypercom have a basis for believing that

21 Verve has threatened to continue filing patent 22 infringement actions against Hypercom? 23 24 25 A. Q. A. Yes. And what is the basis for that belief? Statements made by representatives of Verve to

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1 outside counsel for Hypercom in a telephone conversation 2 that I was on but not a participant in. 3 4 Q. A. And who was on that call? I believe Mr. Galasso and I'm not sure of the And on behalf of

5 other gentleman on behalf of Verve.

6 Hypercom, David Caplan and Michael Kelly, our outside 7 counsel at Snell & Wilmer. 8 9 Q. A. When was this call made? It was in November of 2003. I believe it was I'm not

10 November 17th, approximately -- 17th or 13th. 11 totally certain. 12 Q.

What statements were made by Verve that led

13 Hypercom to believe this? 14 A. Verve made statements that indicated that they

15 had a portfolio of patents that they believe applied to 16 various products of Hypercom, and that if we -- that is, 17 if Hypercom did not pay money to Verve, that Verve would 18 continue filing additional lawsuits against Hypercom, 19 based on the alleged infringement of the patents, the 20 identity of which Verve refused to share with Hypercom 21 and its counsel. 22 Thereafter, Verve filed an additional lawsuit

23 in the Federal District Court for the Western District 24 of Texas against Hypercom, alleging infringement of an 25 additional patent, and thereafter filed an action in the

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1 federal court in California, alleging infringement of 2 the same patent, which is the subject of the ITC 3 investigation. 4 Q. Other than the phone call in November of 2003

5 and the two district court actions, does Hypercom have 6 any other basis for believing that Verve has threatened 7 to continue filing suits? 8 A. That is the information of which I have

9 personal knowledge. 10 Q. Do you have any documentation, maybe meeting

11 minutes or telephone notes, that would support your 12 belief? 13 14 A. Q. I don't believe so. Can you also briefly take a look at request

15 number 9. 16 17 A. Q. Yes. Does Hypercom have a basis for believing that

18 Verve has a strategy of filing multiple infringements 19 actions against Hypercom? 20 21 22 A. Q. A. Yes. What is the basis for Hypercom's belief? It would be essentially the answers that I

23 just provided to you with regard to request number 8. 24 They indicated that they would continue to file actions 25 against Hypercom alleging patent infringement until such

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1 time as Hypercom agreed to pay money to Verve. 2 Q. And you don't have any documentation that

3 supports your belief? 4 A. No, other than my recollection of being on

5 that telephone call. 6 Q. I'm sorry, did you say that you were or were

7 not on that telephone call? 8 A. I was on the telephone call. I did not

9 participate in the discussion but I listened as an 10 observer. 11 Q. Was the first time that Mr. Galasso contacted

12 Hypercom on that call? 13 14 contact? MR. CONDO: In what sense are you asking about

Are you talking about written communications

15 or personal communications? 16 17 Q. MS. PHAM: I'm sorry, let me clarify. The first time that Verve

BY MS. PHAM:

18 contacted Hypercom, was it during that November 2003 19 call with respect to any kind of communications? 20 A. My recollection is that Hypercom received a

21 written communication from Verve in approximately 22 September of 2003. The letter indicated that Verve had

23 filed a patent infringement lawsuit against Hypercom in 24 Federal District Court in Michigan and that they would 25 be in contact with us in that regard.

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1 2 3 was.

Q. A.

And when was the next communication? I'm not certain what the next communication

I know that we involved outside counsel at that

4 point and outside counsel may have had further 5 communications with Verve and its counsel. 6 I do recall the telephone conference that I

7 previously mentioned, and after that, we got another 8 letter from Verve indicating that they had filed a 9 lawsuit in the District of Texas against Hypercom, and 10 then thereafter got a letter from them or was served a 11 complaint in the action that was filed by Verve against 12 Hypercom in Federal District Court in California; 13 Northern District, I believe. 14 Q. And when were you served in the California

15 action, do you recall? 16 A. I believe we were officially served relatively It has been Verve's practice to file actions

17 recently.

18 and not necessarily serve them on the parties 19 immediately, but rather furnish a copy of the complaint 20 along with a letter, indicating that it's been filed. 21 Q. Do you recall when you were served, when

22 Hypercom was served with notice of the California 23 action? 24 A. I believe it was in December of 2004. I'm not

25 totally certain.

But it was relatively recently.

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1

Q.

Can you take a look at request number 10

2 briefly. 3 4 5 6 A. Q. A. Q. I'm reading it now. Please let me know when you are done. Okay, I've read it. Does Hypercom have a basis for believing that

7 obtaining discovery from Omron has been made difficult 8 by assigning the 077 patent, or any other Omron patent, 9 to Verve and having Verve bring enforcement actions, 10 litigation, or this proceeding in Verve's name rather 11 than naming Omron as the real party in interest? 12 13 14 A. Q. A. Yes. What is the basis for this belief? Well, we understand, after having obtained the

15 copies of the relevant patents, that the patents were 16 originally issued in the name of Omron, which is a 17 Japanese corporation, and they were purportedly 18 thereafter assigned to Verve and Verve has been the 19 party that has brought the enforcement or the patent 20 infringement actions against Hypercom. 21 But without having Omron in these matters,

22 it's made discovery difficult. 23 The patents were, as I understand, were

24 initially issued to Omron a number of years prior to 25 their assignment to Verve.

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1

Q.

So other than what you just told me about the

2 patents being issued to Omron initially and then being 3 assigned to Verve, does Hypercom have any other basis 4 for believing that discovery in this litigation or any 5 other action has been made difficult as a result of the 6 assignment? 7 8 A. Q. I'm not aware of anything at this point. Do you have any other documentation or do you

9 have any documentation that supports Hypercom's belief? 10 11 12 11. 13 14 A. Q. Yes. Does Hypercom have a basis for believing that A. Q. Not that I'm aware of. Can you briefly take a look at request number

15 Verve has plans, schemes, or strategies, or tactics that 16 involve harassment of Hypercom? 17 18 19 A. Q. A. Yes. And what is the basis for your belief? The statements that I previously testified to

20 involving the actions of Verve in filing multiple patent 21 infringement lawsuits against Hypercom in a variety of 22 federal district courts that are inconvenient to 23 Hypercom, have required Hypercom to retain counsel in 24 those locations, and to attempt to have those actions 25 dismissed or otherwise defended.

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1

Q.

Other than what you just stated, does Hypercom

2 have any other basis for believing that Verve had 3 strategies or tactics involving harassment of Hypercom? 4 5 A. Q. Not that I can recall. Does Hypercom have any documentation that

6 would support its beliefs? 7 8 A. Not that I'm aware of. MS. PHAM: At this time I'd like to just take I think I may be done

9 a quick break to review my notes. 10 with this witness. 11 MR. CONDO:

That would be fine, and if you

12 are, what we'll do is clean up the record when you get 13 back as to the identity of the four exhibits that have 14 been marked so that there is no miscommunication or 15 misunderstanding. 16 17 18 19 MS. PHAM: MR. CONDO: Okay, that sounds good. Thank you.

(Recess was taken.) MS. PHAM: We're back on the record. After

20 reviewing my notes, I'm done with Mr. Reich as a 21 witness. 22 23 24 Do any of the respondents have any questions? MS. ROONEY: No questions from Verifone. This is Steve Pederson. I do

MR. PEDERSON:

25 not have any questions.

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1

MS. PHAM:

Mr. Reich, thank you for your time.

2 I think that will complete your deposition. 3 4 THE WITNESS: MR. CONDO: Thank you.

We will read and sign the

5 transcript.

And let me just state for the record what

6 the court reporter has marked as Exhibits 1, 2, and 3, 7 so that there is no confusion on the part of anyone who 8 may be on the phone in other offices. 9 Exhibit 1 is titled, "Verve's Notice of

10 Deposition of Respondent Hypercom Corporation." 11 Exhibit 2 is titled, "Notice of Verve's Second

12 Set of Requests for Production of Documents and Things 13 to Respondent Hypercom Corporation." 14 And Exhibit 3 is titled, "Respondent Hypercom

15 Corporation's Second Set of Document Requests to 16 Complainant Verve, L.L.C." 17 18 19 (Reich Exhibit 4 was marked for identification.) MR. CONDO: We have also marked, but it was

20 not referred to by the witness in the deposition, 21 Exhibit 4. Exhibit 4 bears the designation, "Hypercom

22 Confidential Business Information," and it is single 23 piece of paper that I believe one of the subsequent 24 witnesses, Mr. Coatney, prepared and will be prepared to 25 testify about.

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1

And that concludes all of the questions and The court reporter told

2 the statements on the record.

3 me at the break that she needs about a minute to close 4 out one file and open another file, and we'll start 5 immediately, if that's convenient to all, with 6 Ms. Shiroma, or if folks would like a little longer 7 break, we can accommodate that, too. 8 9 What is the preference of those on the phone? MS. PHAM: This is Hieu Pham. Whenever you

10 guys are ready, I'm ready to go. 11 12 13 fine. 14 15 16 17 18 19 20 21 22 23 24 25 ________________________ DOUGLAS J. REICH MR. CONDO: Great. MR. PEDERSON: MS. ROONEY: Same for me.

This is Amie and that sounds

(Concluded at approximately 10:40 a.m.)

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) )ss: 2 COUNTY OF MARICOPA ) 3 BE IT KNOWN that the foregoing deposition was

1 STATE OF ARIZONA

4 taken by me pursuant to notice of deposition; that I 5 was then and there a Certified Court Reporter for the 6 State of Arizona and by virtue thereof authorized to 7 administer an oath; that the witness before testifying 8 was duly sworn by me to testify to the whole truth; 9 that the questions propounded by counsel and the 10 answers of the witness thereto were taken down by me in 11 shorthand and thereafter transcribed into typewriting 12 under my direction; that the foregoing 40 pages are a 13 full, true and accurate transcript of all proceedings 14 and testimony had and adduced upon the taking of said 15 deposition, all to the best of my skill and ability. 16 I FURTHER CERTIFY that I am in no way related

17 to nor employed by any of the parties hereto, nor am I 18 in any way interested in the outcome hereof. 19 DATED at Phoenix, Arizona, this 24th day of

20 January, 2005. 21 22 23 24 25 _________________________________ LISA A. BLANKS Certified Court Reporter, No. 50599

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