Free Statement - District Court of Arizona - Arizona

EXHIBIT 24

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1 UNITED STATES DISTRICT COURT 2 FOR THE DISTRICT OF ARIZONA 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ) ) Plaintiff, ) ) -vs) ) Verve L.L.C., and ) Omron Corporation, ) ) Defendants. ) ________________________________) Hypercom Corporation,

Cause No. CV04-0400 PHX PGR

VIDEOTAPE DEPOSITION OF DOUGLAS J. REICH, HYPERCOM CORPORATION Phoenix, Arizona March 23, 2005 9:12 A.M.

REPORTED BY: SHARRON L. MCPARTLIN AZ CCR #50496 CA CSR #8740
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1 2 3 4 5 6 7 8 9 10 11 12 No. 1 Description Examination: BY MR. HENNING

I N D E X

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E X H I B I T S Page 138

Copy of Verve Point-Of-Sale Portfolio Assessment and Market Analysis

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 * * * THE VIDEOTAPE DEPOSITION OF DOUGLAS J. REICH, taken at 9:12 a.m. on March 23, 2005, at the law offices of Fennemore Craig, P.C., 3003 North Central Avenue, Suite 2600, Phoenix, Arizona, before SHARRON L. MCPARTLIN, a Certified Court Reporter #50496 in and for the State of Arizona, pursuant to the Federal Rules of Civil Procedure. The plaintiff was represented by its attorneys, Snell & Wilmer, L.L.P., by Sid Leach, Esq. The defendant, OMRON CORPORATION, was represented by its attorneys, Baker & Daniels, by John K. Henning, Esq. Also present was Mr. Bill Marinakis, certified legal video specialist.

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1 2 Phoenix, Arizona March 23, 2004 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 23rd, 2005. MR. MARINAKIS: Today is Wednesday, March 9:12 A.M.

The time is approximately 9:12 a.m. which This is the 30(b)(6)

is indicated on the video screen.

videotape deposition of Hypercom Corporation represented by Douglas Joseph Reich noticed by counsel for the defendant in the matter of Hypercom Corporation versus Verve L.L.C. and Omron Corporation. This matter is being held in the United States District Court for the District of Arizona, case No. CV 04-0400. Our location is the law offices of

Fennemore Craig located at 3003 North Central Avenue, Suite 2600, Phoenix, Arizona 85012. The court reporter is Sharron McPartlin of Brown & Toleu, Limited, court reporters, located at 4500 South Lakeshore Drive, Suite 280, Tempe, Arizona 85282. My name is William Marinakis. I am a

certified legal video specialist for the firm of VideoDep, Incorporated located at 2111 East Baseline Road, Suite A-1, Tempe, Arizona 85283. Counsel, please identify yourself for the record at this time starting with plaintiff's counsel,

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please. MR. LEACH: I am Sid Leach, and I am

representing Hypercom Corporation. MR. HENNING: Corporation. MR. MARINAKIS: Thank you, counsel. The John Henning on behalf of Omron

witness may be sworn in at this time, please.

DOUGLAS J. REICH, called as a witness herein, having been first duly sworn, was examined and testified as follows:

EXAMINATION BY MR. HENNING: Q. Good morning, sir. Could you please state

your name for the record. A. Q. Yes. Douglas Joseph Reich, R-E-I-C-H.

And how old are you, Mr. Reich? MR. LEACH: Let me -- let me just do I noticed that there is no one They do

something real quick.

appearing today for defendant, Verve L.L.C. have notice of this; correct? MR. HENNING: MR. LEACH: to know.

They do have notice of this. All right. That's all I needed

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 age? A. Q. before? A. Q. A. Q.

MR. HENNING:

They have been invited to come,

and they actually advised me that they probably would not be attending. MR. LEACH: That's fine. Could you please state your

BY MR. HENNING:

Sixty-one. Okay. Mr. Reich, have you ever been deposed

Yes. How many times? Oh, probably two or three times, most

recently by the Verve people in connection with the International Trade Commission proceeding. Q. A. Okay. When approximately was that? I am

I believe it was last fall sometime.

not certain of the exact date. Q. A. Q. A. Q. Okay. And you are an attorney; correct? That's correct.

That's yes.

How long have you been practicing? I have been an attorney since 1967. Okay. MR. LEACH: One thing that would be helpful

at this point is to know whether you're doing him individually at the moment or whether you're deposing

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him as a 30(b)(6) witness because his answers will be different obviously. He will only answer as to his

personal knowledge on his personal deposition, but on a 30(b)(6), we have done our best to educate him as best we can about the facts. MR. HENNING: Okay. We are going to do this

as a 30(b)(6) deposition, and the court reporter has -I think may have made a notation to that in the introduction on the record there, but just to clarify, we will be doing this as a 30(b)(6) deposition. At the end of that to the extent that any of your answers are different as an individual witness, we will clarify those answers at that point in time. Maybe

that will save us a little bit of time, and that was the way I suggest proceeding so that maybe we are not here for two days. Maybe we can get done with this in a day

and maybe in less than a full day. MR. LEACH: For the most part on his personal

deposition, he is not going to have personal knowledge of a lot of this information. MR. HENNING: the end. Q. BY MR. HENNING: You have been involved in a Okay. I can clarify that at

number of depositions other than as a testifying witness then?

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A. Q.

Yes. Okay.

Uh-huh. The reason I ask you these questions I

am assuming you understand the deposition process; correct? A. Q. Yes, I do. Okay. To that extent, I am going to dispense

with some of the rules that we normally go through with the witness because you have been through this process before. The only thing that I would ask is if you will

extend me the opportunity to finish my questions before you begin your answer, I will try to do the same with respect to your answer before I begin my next question; is that okay? A. Q. Agreed. All right. That saves the court reporter a

little bit of time and headaches. Now, just to clarify, you understand that you are testifying as an agent of Hypercom Corporation in response to a Rule 30(b)(6) notice of deposition; correct? A. Q. Yes. Okay. You understand that your answers

during this deposition as an agent will be binding upon Hypercom Corporation? A. Yes.

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Q.

Okay.

And to clarify again, you understand

that in responding to the questions during the 30(b)(6) deposition today, you are responding on behalf of Hypercom, and your answers are actually the answers of Hypercom Corporation? A. Q. Yes. Okay. MR. LEACH: Let me say something about the As I discussed with

nature of the topics at this point.

you a little bit before we started, a lot of the topics appear to be more in the nature of contentions because a lot of the information you want to know here is facts really as to the activities of your client that we believe give rise to some of the allegations and so forth in the complaint, and it's probably more appropriate to do this by virtue of interrogatory. So this only comes up as to the completeness of his responses. We have done our best to educate him

and get him prepared to give you whatever information the company has available, but I think it's appropriate at this point to say something about the completeness of the response so we can probably give you more complete responses if you had gone about this by interrogatory. MR. HENNING: Okay. Well, I will go ahead

and ask him the questions that I have today for the

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30(b)(6) deposition.

To the extent that the witness

doesn't have complete knowledge in response to a particular question, I will allow the witness to state that on the record, as is his right to do so under sworn deposition testimony. Q. BY MR. HENNING: Just to get a little

background information from you, Mr. Reich, where did you get your undergraduate degree? A. I got a bachelor of science degree in

economics from the University of Wisconsin in Madison 1965. Q. Okay. What about your postgraduate

education, when did you go to law school? A. I went to law school from 1964 to 1967,

graduated from the University of Wisconsin, Madison Law School. Q. A. Q. Okay. No. Okay. How many jobs would you say you have Any other postgraduate degrees?

had as an attorney since law school ball-park? A. Q. A. Q. Perhaps eight. Okay. Just guessing. Let's just start with your current job.

Maybe I will work back a little bit to get some of your

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other previous experiences.

I am not sure we need to go When did you start

through all eight of your positions. working with Hypercom Corporation? A. Q. began? A. October 31, 2001. Okay.

What was your job title when you

I was vice president, general counsel, and

corporate secretary. Q. A. Is that still your current title today? My current title is senior vice president,

general counsel, chief compliance officer, and corporate secretary. Q. Okay. What were your duties when you started

as a vice president and general counsel in 2001? A. I am the principal legal officer of the

corporation, and I manage the legal affairs of Hypercom Corporation including the Legal Department and its legal affairs literally around the world. Q. And are your duties any different now with

your current position or your current title? A. The senior vice president position is mainly

a promotion reflecting my position in the company. Chief compliance officer is more of a formalization of my responsibilities with regard to compliance throughout the entity and subsidiaries.

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Q.

Okay.

So you pretty much are doing the same

work, the same job duties? A. Q. Yes. What experience do you have with patent

enforcement or patent litigation at Hypercom? A. The experience that I have had is with regard

to these matters involving Verve L.L.C. and Omron Corporation. I don't believe I have been involved in

any other patent litigation. Q. Have you been involved in any other patent

enforcement or patent litigation actions in other jobs previous to this one at Hypercom? A. Q. Don't believe so. And where were you working before you began

at Hypercom? A. I was with Wavo Corporation. That's spelled

W-A-V-O, in Phoenix, Arizona.

I was senior vice

president, general counsel and corporate secretary. Q. roughly? A. Q. From July 1 of 1996 through early 2001. What were your general duties at Wavo Okay. How long were you at that position

Corporation? A. I was the chief legal officer of the

corporation and managed the legal affairs of the

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business. Q. And just generally again, what kind of

business does Wavo Corporation do? A. Wavo is no longer in business, but it was a

digital services provider. Q. Can you expand on that a little bit? What is

a digital services provider? A. business. Well, there were several aspects of that It included the licensing and distribution of

content, that is information, to subscribers via satellite, FM broadcast, microwave, and through the internet. Q. content? A. Wire. Q. A. time. Q. A. Q. A. Okay. Okay. What about prior to Wavo Corporation? I was partner in a law firm of Krys, that's I won't press you too much on that. Okay. And that's my recollection at the present Some of the major names Reuters, AP, PR News Okay. Any specific providers or any specific

K-R-Y-S, Boyle, B-O-Y-L-E, Golz, G-O-L-Z, Ryke & Freedman, F-R-E-E-D-M-A-N, in Denver, Colorado.

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Q. A. Q.

Give me the general time ranges. Approximately 1984 to 1996. What did your practice consist of at that law

A.

Corporate and securities work, transactions,

public and private offerings of securities, broker-dealer representation. covers it. Q. More of a transaction nature then as opposed I think that pretty well

to litigation? A. Q. A. Yes. Have you done much litigation as an attorney? Earlier in my career, my first six years out

of law school, I was with the Securities & Exchange Commission, and when I left there, my position was senior trial attorney. I was involved in civil actions

and administrative proceedings enforcing the federal securities laws on behalf of the Securities & Exchange Commission. I also worked with various U.S. attorneys

in criminal matters as well. Q. Okay. Let me ask you a few follow-up What does Hypercom do?

questions about Hypercom itself. A.

Hypercom manufactures and sells point of sale

transaction terminals that are utilized for purposes of capturing transactions involving credit cards and debit

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cards. Q. Okay. So these are essentially I guess in

somewhat layman's terms but the debit card or credit card readers that you have in your department stores or grocery stores? A. Q. A. the 1980's. Correct. Okay. And when was Hypercom formed?

Hypercom originated in Australia in I believe I would defer to our official filings with Sometime

regard to the exact years and dates.

thereafter it, the business, was moved to the United States, specifically to Phoenix, Arizona, and it was reincorporated as a Delaware corporation. Q. Okay. Can you give me an idea as to the

customers to whom Hypercom sells the POS terminals? A. We sell to a variety of customers depending

upon what location around the world we are selling these terminals. Within the United States, we sell them

typically to entities such as First Data Corporation, Visa. We sell them to various banking organizations.

In the United States, we don't directly deal with the banks typically, but we do in foreign locations where the terminals are sold to the banks who then provide them to the merchants. We also sell through independent sales

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organizations who then redistribute the products to merchants who utilize the product. Q. A. Q. Who is your biggest customer, if you can say? First Data Corporation. What are your annual sales approximately to

First Data Corporation? A. Yes. I don't know that we disclose that. I

think they are in excess of 10 percent of our annual revenue, and I would refer you to our latest Form 10-K annual report that would have more accurate information on that. Q. Okay. Can you give me an idea, again

ball-park figure, as to Hypercom's total sales from let's just say 2004? A. From 2004, I believe they were in the range

of 260 million dollars, and again, I would defer to our latest Form 10-K filing for the exact number. Q. A. Q. A. Q. What about 2003, again just an estimation? I think slightly under that. Two forty, two fifty, somewhere in there? Somewhere in that range, yes. Okay. Did you review any documents in

preparation for your deposition today? A. I looked at some of the pleadings and other

documents on file in this litigation.

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Q.

Okay.

Did you review any documents that are

not on file in this particular litigation here in Arizona? A. I looked at a chronology of material dates

involving this matter. Q. attorney? A. Q. A. Q. A. minutes. Q. Okay. How many times would you say you met Yes. And when did you review these documents? Yesterday afternoon. Okay. About how long? Is that something that was prepared by your

Maybe an hour and a half, an hour and 45

with your attorneys to prepare for today's deposition? A. Yesterday afternoon was the only occasion

Q. A. Q.

For that same hour and a half? -- for this specific purpose, yes. I apologize. I interrupted you. Other than

the chronology you mentioned that had been prepared by your attorneys, did you review any other documents that are not either pleadings or other documents that have been filed with respect to this case? A. I don't believe so.

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Q.

Now, the initial lawsuit filed in Arizona,

and actually let me see if we can make a stipulation that will make this a little bit easier, there is the lawsuit in which Hypercom is a plaintiff here in Arizona. There is a lawsuit in Michigan -- or was a There

lawsuit in Michigan involving Hypercom and Verve.

is another lawsuit in Texas, and then I believe there was the ITC proceeding in California. Just to make this a little bit easier, can we stipulate that when I refer to the Michigan action, I am referring to the Michigan lawsuit? When I refer to the

Texas action, I am referring to the lawsuit in Texas in which Hypercom was a defendant? I will refer to this

lawsuit that we are here deposing you about today the Arizona lawsuit as the Arizona action, and then I will refer to the California case as the ITC action; is that okay? I am not trying to confuse you. I just want to

make this a little easier. A. That's my only comment would be that the ITC

action as we commonly know it is the proceeding before the International Trade Commission in Washington, D.C. whereas the lawsuit in California is a civil action by Verve involving one of the same patents that was before the ITC. MR. LEACH: Yeah. There are actually two

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different actions, and I am not sure how up to date you were on the status of all of this. MR. HENNING: in the ITC. MR. LEACH: transferred to Arizona. MR. HENNING: MR. LEACH: Yes. Yes. The Michigan case actually got I am aware of what is happening

But we are referring to it as the

Michigan case, and it's been dismissed. MR. HENNING: MR. LEACH: Yes. Just --

And the Texas case has been

transferred to Arizona, but we will refer to that as the Texas case even though now it's in Arizona. MR. HENNING: like to do. MR. LEACH: MR. HENNING: Sure. Just to make sure. It's just a Exactly. That's what I would

little easier with my questions. THE WITNESS: MR. LEACH: I understand, and I agree. You appreciate the California

case has been dismissed? MR. HENNING: That's the ITC proceeding in

California or the separate California case? MR. LEACH: has been dismissed. No. The California civil action

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MR. HENNING: MR. LEACH:

Okay. And then the ITC action is the

proceeding before the International Trade Commission in Washington. MR. HENNING: In Washington. I apologize. I

was a little confused there with the ITC proceeding. Q. BY MR. HENNING: Well, I don't know that I

necessarily have any questions specific to the California case, but if I do, I will refer to that as the California action. A. Q. Fine. The ITC action we will presume or stipulate

is the action in Washington, D.C. before the International Trade Commission; that's okay? A. Q. That's agreeable with me. Okay. In the Arizona action, you initially

only named Verve as a defendant; correct? A. Q. That's correct. Okay. Why was Omron not named as a defendant

in the original complaint? A. It was -MR. LEACH: I am going to instruct you not to Unfortunately this

answer as to your mental processes.

is really beyond the scope of the 30(b)(6) topics, and to some extent, might call for privileged

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communications. Q. BY MR. HENNING: I don't want you to testify

as to any conversations that you had with your attorneys in this particular case, but I would like to know if there generally is any information that you had in your role as general counsel at Hypercom as to why Omron was not named, initially named as a defendant in the Arizona action? A. Well, let me say that Verve at first sued us

and claimed to be the owner of the patents that it was alleging we were infringing. So our suit was initially

aimed to deal with the situation involving Verve. Q. Okay. Was there a time approximately when

you learned of other facts or evidence that gave you in your role as general counsel of Hypercom information that led you to believe you needed to add Omron Corporation as a defendant? A. Q. A. Yes. And when was that? Don't recall exactly. I would say it was I don't recall

probably sometime in 2004 or late 2003. exactly. Q. Okay.

What information or facts did you

learn that led you to add Omron as a defendant? A. Well, we learned that there was an agreement

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between Omron and Verve with regard to the patents that were being alleged that Hypercom had infringed, and it appeared that there was a relationship between Omron and Verve involving making claims against Hypercom based on those patents. And we understand that the patents were

initially issued in Japan to Omron Corporation or to the parties that assign the patents to Omron Corporation. They subsequently were brought to the United States by Omron. Q. Okay. Did Hypercom perform any investigation

to follow up on this assignment agreement before it filed the amended complaint? A. I don't recall. I do know that we had a

conversation with the representatives of Omron including their counsel, and they had indicated that they had the ability to terminate the legal proceedings that Verve had brought against Hypercom, and we then started to learn more of the nature of the relationship between Omron and Verve. MR. LEACH: Also there is something I should

probably point out at this point that's really relevant to the nature of what you are asking him. In the

International Trade Commission, a lot of information was produced and was designated as confidential business information by Verve, and under the terms of the

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protective order in that case, we were not allowed to disclose it to Mr. Reich or anyone at Hypercom. just the way they do their protective orders. To the extent that you are trying to seek information upon which some of the pleadings were based, unfortunately there is no way that he can answer that because at the time, he would not have been given access to it although his counsel would have known about it. Q. BY MR. HENNING: Okay. Based on what That's

Mr. Leach is saying then, at some point, you did learn of some information that led you to believe that there was an agreement between Omron and Verve such that Omron should be added as a defendant to the amended complaint; correct? A. Q. Yes. Okay. You had mentioned something about a Is that -- I don't know if

conversation with Hypercom.

I am referring to this appropriately, but was that the settlement conference between Hypercom and attorneys for Verve I guess sometime last summer of 2004? A. Q. I am not aware of such a meeting. You mentioned that you had had conversations

with Hypercom in which they led you to believe they had the ability to terminate the lawsuits against Hypercom. When did that conversation take place?

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MR. LEACH:

I object to the form of the

I think you should have the court reporter

read that back because I think there is a flaw in it that you don't perceive. MR. HENNING: I will just -- I mean, if he

understands the question, I will -THE WITNESS: Well, your question has

Hypercom as in two different roles which isn't correct, I don't believe. Q. BY MR. HENNING: Okay. Just clarify why what

I did say was not correct, and I will try to re-ask the question. A. Okay. I think you started out asking about a

conversation that we -- or I might have had with Hypercom, and of course, I represent Hypercom, and I am an officer of Hypercom Corporation. Q. Okay. Were there conversations then that

Hypercom had with attorneys for Omron or representatives of Omron that led you to believe that Omron had the ability to terminate these lawsuits against Hypercom? A. Q. Yes. Okay. When did those conversations take

Again, I don't know the exact date.

It could

have been sometime in the latter part of 2003 or during

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2004.

I just don't recall now.

It was at our counsel's

office at Snell & Wilmer. Q. Are those the only conversations that

Hypercom has had with representatives of Omron? A. That was the only conversation that I have I think

had or participated in with regard to Omron.

our counsel has had obviously discussions with counsel for Omron as well as counsel for Verve in these various actions and court appearances. Q. Okay. Just maybe we can clarify this In a pleading that was

somewhat a little more easily.

filed by Hypercom entitled Hypercom's Motion to Shorten Time for Verve to Respond to Hypercom's Second Set of Request for Production of Documents and Things to Defendant, Verve L.L.C., Hypercom refers to on page four, and I will just quote it, and then we can -- just to make sure, I think this is the conversation that you are referring to quote, "Months ago Hypercom met with Omron representatives, and Omron indicated that it had the power to settle all of the patent infringement lawsuits filed against Hypercom by Verve. Hypercom

showed the Omron representatives evidence of why Hypercom does not infringe the Omron patents that Verve has asserted against Hypercom in the Michigan action," et cetera, et cetera. Is that the -- is that the

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conversation that you are referring to? A. Q. me. Yes, it is. And just I didn't bring copies of this with

If you would like to review this to clarify that I

read it accurately or -MR. LEACH: it. MR. HENNING: Q. conference. Okay. You attended that settlement Well, we will take your word for

BY MR. HENNING:

I don't know if I can refer to it as a If you have a different way that

settlement conference. might make it easier. MR. LEACH:

Well, it's a good question.

Why

don't we just call it the meeting at between Hypercom and Omron. MR. HENNING: MR. LEACH: MR. HENNING: MR. LEACH: Okay. In Phoenix. That's fine. That's probably -- that way we

don't necessarily mischaracterize it. Q. BY MR. HENNING: Mr. Reich, you attended that

settlement conference; correct? A. Q. Yes. Okay. You said you thought it was in the

latter part of 2003 or in 2004 somewhere in there;

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correct? A. Q. Yes. Okay. That's my recollection. Do you recall if it was before or

after the amended complaint was filed? A. Q. I think it was before, but I am not certain. I think you may have said that also in your You said the

earlier testimony, but I am not positive. conference was held at Mr. Leach's office? A. Q. That's correct.

Okay, or just to be clear, at Snell &

Wilmer's office here in Phoenix, Arizona? A. Q. was held? A. It was in one of their conference rooms on Yes. Can you describe the conference room where it

the 19th floor I believe it is and a large table. Probably had about 10 or 12 chairs around it. sure what else I can tell you that's relevant. Q. A. Q. Nice view of the city maybe? Excellent. Were all of the parties that were present in I am not

one room together during the entire conversation? A. same time. I don't know that we were altogether at the I think perhaps I had discussions outside

the room with my counsel or Hypercom's counsel, and the

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representative of Omron, Mr. Nakano, may have had discussions outside the room with his counsel. Q. A. Q. Okay. Or within the room while we were not there. There may have been separate rooms set up for

the parties to discuss things with their respective attorneys; correct? A. It's possible, or we might have just done it

outside the room. Q. A. Do you recall how long the meeting lasted? My recollection is that it was probably at

least two hours, maybe longer. Q. A. Q. A. Q. Was it in the morning or in the afternoon? I don't recall. Was there a mediator present? No. As specifically as you can as you can recall,

who attended the conference on behalf of Hypercom? A. Kaplin. Q. Okay. And on behalf of Omron, who attended Myself and our counsel, Mr. Leach, and David

the conference? A. Mr. Nakano, and I unfortunately don't recall It's a Japanese name, and his counsel,

his first name.

Herb Kerner, of Baker & Daniels in Washington, D.C.

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Q.

All right.

I had a long flight so I might be Mr. Nakano was the

a little confused, a little tired.

only Japanese representative there from Omron? A. Q. That's correct. Okay. And you just didn't remember his first

A. Q.

That's correct. Anyone else there from Omron to the best of

your recollection? A. Q. A. Q. Not to my knowledge. Was anyone from Verve present? I don't believe so. Was anyone else present other than the five

people that you have listed here? A. Q. A. Q. That's all that I recall right now. Did you take any notes of the meeting? I may have. If there were any additional people present

at the meeting, would you have noted that in your notes? A. Q. Possibly. Okay. The reason I ask is I just want to

clarify to the best of your recollection whether or not someone from Verve was present at the meeting? A. I don't believe that anybody was there from

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Q.

Okay.

If we did want to clarify later, we

could maybe review your notes to the extent that they don't contain any privileged information? A. Q. Yeah. Okay. Yes. Sorry. I just didn't hear you. Who

arranged for the conference or for the meeting between Hypercom and Omron? A. Well, it was probably conversations between

our counsel, that is Hypercom's counsel, and Omron's counsel, and they would have let me know that there was a meeting that was going to be scheduled and discussed potentially the agenda and the time and place. Q. Okay. Do you recall whether or not it was

your attorney who initiated the phone call to set up this meeting, or if it was the other way around? A. Q. I don't recall. Did you speak with anyone other than your

attorney in attempting to set up this particular meeting? A. Q. Not to my knowledge. Okay. I asked that because I want to make

sure that you didn't actually contact anyone o Omron Corporation to help set up this meeting. A. Correct?

I don't believe that I was a participant in Whether I had spoken with

setting up the meeting.

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Mr. Kerner on another occasion or on the phone, I just don't recall, but it wasn't for the purpose of setting up the meeting, I don't believe. Q. Okay. Understanding that you may not have

been present for the phone calls to set up this particular conference, but do you have any knowledge as to what was discussed by Mr. Leach or whoever it was that set up this or had the conversations to set up this meeting? Do you have any idea as to what was discussed? MR. LEACH: And here you are asking

discussions between Mr. Leach and Omron; right? MR. HENNING: Q. And Omron, exactly. To the extent that I ask any

BY MR. HENNING:

question that may have attorney-client privilege information, I am sure that your counsel will object, and I am not here to get into that. A. So --

I probably had conversations with Mr. Leach

and Mr. Kaplin about the status of the various Verve matters and the potential involvement of Omron, and those discussions probably involved my seeking advice on behalf of Hypercom from them as to litigation strategy and related confidential attorney-client matters. Q. Okay. During the meeting, did you at any

point tell Mr. Nakano or Mr. Kerner why you had requested to meet with them?

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A.

We indicated to them that we were very

concerned and upset by the pattern of action by Verve in bringing various patent litigation actions against Hypercom in diverse areas of the United States in an effort to harass us, and we inquired of Omron as to their ability to make these various actions go away and prevent any further actions being filed against Hypercom. Q. When the meeting was being set up, do you

know whether it was represented to Omron that you wanted to have this particular meeting to discuss settlement opportunities? A. I think we were discussing the various

patents that were being raised against Hypercom, and we had presented information as well as set up terminal, POS terminal, displays to show why we were not infringing those patents, and why these actions by Verve were we believe harassment of Hypercom, and we wanted to bring these things to a conclusion that was going to be satisfactory to us, and that would involve dismissing these lawsuits. Q. Now, these are conversations that you were

involved with with Mr. Nakano and Mr. Kerner; correct? A. Q. That's correct. Okay. What did Omron say in response?

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A.

Omron indicated that they had the ability to That was implicit that they

make these actions go away.

had some control over Verve such that they would be able to facilitate a resolution of the various patent litigation matters. Q. Okay. Who specifically made that

representation, Mr. Kerner or Mr. Nakano? A. I believe Mr. Kerner did, and Mr. Nakano may I just don't

have indicated his agreement with that. recall specifically.

I might state that Mr. Nakano is a Japanese -- of Japanese nationality, and although he speaks English fairly well, there were some problems from time to time in communication -- or I shouldn't say problems, but, you know, difficulty when someone's primary language is not English. Q. Would it be safe to say that most of the

conversations with Omron took place through Mr. Kerner then? A. Q. That's correct. Were all of the parties that you listed

before, all of the people that you listed before as attendees of this meeting present during those statements made by Mr. Nakano and more so by Mr. Kerner? A. I believe so.

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Q.

Okay.

Now, I want to clarify this just to

make sure, but it's your testimony as a representative of Hypercom under oath that an Omron representative, Mr. Kerner or Mr. Nakano, told Hypercom during this meeting that Omron could settle all of -- could either settle or help settle all of the infringement suits filed against Hypercom by Verve? A. Q. That's correct. Now, one of the statements that was made in

the motion that I referred to earlier, the Hypercom's motion to shorten time, is that Omron at this settlement conference demanded large sums of money from Hypercom. Is that a correct statement? A. Q. Yes. Okay. That's correct. Do you recall who specifically made

any settlement demands or any demands of money on Hypercom? A. Q. I think it was probably Mr. Kerner. As best as you can remember, what exactly did

he say in making this demand? A. There was a reference to the significant

number of patents that Omron had with regard to -- or potential application to Hypercom's business, and they noted the volume of business that Hypercom had done and spoke, I believe, of a percentage of those revenues as a

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royalty or licensing fee.

And although I don't recall a

specific figure, it was probably tens of millions of dollars after the calculation was done. Q. A. Who did a calculation? As I recall, Mr. Kerner put the information

on the table referencing, as I indicated, Hypercom's volume of business and a royalty percentage and what that would equate to. Q. A. Q. Okay. No. Okay. You said something about tens of Were there any specific figures Was this in a written form?

millions of dollars.

thrown out on the table? A. I don't recall a specific figure, but I know

that it was more than $10,000,000, and it may have been a multiple of that. Q. thrown out? A. Q. Yes. Would your notes from that meeting possibly But you do recall that specific numbers were

document any numbers or any figures that were offered by Omron? A. I haven't looked at those notes for a I don't know whether they

considerable period of time. would or not.

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Q.

If we were to ask you to review those notes

and then supplement the deposition in some way or just send it to us, a copy of it, in a letter, would you be agreeable to that? MR. LEACH: In terms of asking us to do

additional stuff, we will certainly consider that, and as I told you before this deposition, it might make sense for both of us to exchange some additional information. So but I always hesitate to have a witness

try to take a commitment, you know, at the deposition, but we will definitely work with you. Q. BY MR. HENNING: I just want to make sure

that if there are any other sources of information that would provide more specific answers especially to questions in which you don't recall a particular detail, if we can reach an agreement at some point after the deposition, if you as you sit here today would have any problems necessarily with that? A. I wouldn't have a problem with it, but of

course, I would take my counsel's advice as to how to respond to the matter. Q. Fair enough. The statements made by

Mr. Kerner regarding monetary amounts to settle the patent infringement suits I take it that Mr. Leach and Mr. Kaplin were also present during that conversation?

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A.

I know Mr. Leach was, and I think Mr. Kaplin I can't recall whether Mr. Kaplin had left

was as well.

the meeting at any particular time, but I know that Mr. Leach was present throughout. Q. Now, also according to this motion, but you

can tell me if this is what happened, you said that you had samples of Hypercom products to demonstrate why these products did not infringe on -A. Q. Correct. -- any of the patents that Verve was suing

on; is that correct? A. Q. That's correct. Okay. What evidence did you show to

Mr. Kerner and Mr. Nakano? A. We demonstrated the operation of the

terminals and how they would handle a credit transaction versus a debit transaction, and we had one of our people who was familiar with the setting up of the terminals set them up so that they were actually operational in terms of being able to show the process. They weren't,

of course, connected live to a processor but were nonetheless able to show how those respective transactions would be handled as a consumer percent of either a debit or a credit card. Q. Do you recall specifically which products of

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Hypercom's that you showed to -A. terminals. Q. They were probably a half dozen of our I don't recall the specific ones. And what patents were alleged to have been

breached by the terminals that you showed to them? A. Well, it was the patents that were raised in

the Michigan action and the Texas action and the ITC action. Q. Okay. There are a number of other patents

that are named in a catchall provision of the amended complaint and declaratory judgment action. Did you show

any terminals that would allegedly be covered by the other patents? A. I don't know whether we had sufficient

information at that point to determine whether there were any alleged claims that would affect our terminals and their operation. We had been informed by Mr. Kerner

and Mr. Nakano that they had a considerable number of patents, and some of which we weren't aware of. And I

think one of the things that came out of the meeting was we asked them to provide further information to us as to the identity of the other patents that they thought might apply to our terminals. Q. Do you recall what Omron's response was to

the presentation of the terminals and the evidence?

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A.

My recollection was that they did not believe

that there was infringement by our terminals of the patents that at that time were alleged against Hypercom. Q. So they agreed with you that there was no

infringement of the patents? A. Well, it wasn't obvious that there was

infringement. Q. Okay. Clarify that a little bit. What led

you to believe that they were making or taking that position? A. Q. I don't recall specifically. Was there a statement by Mr. Kerner or

Mr. Nakano that regarding non-infringement? A. Oh, I don't recall at the time. You know,

they may have reserved their evaluation of it, but we clearly demonstrated why we believed they didn't infringe the patents that were at that time being asserted against us. I am not sure that there was much

conversation about the actual infringement because we didn't really go into that much detail about the claims in the patents. I think there was some conversation about it, and we attempted to go through maybe one or more of the patents, but it became obvious that that was going to be a very lengthy process. And then we got down to more of

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a discussion about well, how can we resolve this matter between us and Verve. Q. Okay. Is that when Herb, or Mr. Kerner, or

Mr. Nakano made some sort of demand of money or -A. Q. A. Q. Yes. -- some amount to settle the lawsuit? Yes. And what was your reaction, or what was

Hypercom's reaction to Herb's -- I'm sorry, I keep saying Herb, to Mr. Kerner's statements? A. We certainly didn't believe that we infringed

the patents that were being asserted against us, and we weren't inclined to pay anything for a license or other right to utilize patents that we weren't infringing. Q. Okay. So you weren't there to offer any

counteroffers of money to license the patents or to get rid of these lawsuits; correct? A. We did not make any offers to pay licensing

fees or royalties to Omron or Verve in that meeting. Q. Okay. So was the purpose of the meeting then

really to try to convince Omron that Hypercom was not infringing these particular patents? A. I would say that was one of the purposes of

the meeting. Q. Okay. What were the other purposes?

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A.

To learn more about the patent portfolio that

had been referenced by Omron and my Verve and to get a better understanding of the relationship between Omron and Verve. Q. A. Q. Okay. Was Verve invited to the meeting?

I don't recall. Would there have been a reason that Hypercom

would not have invited Verve to this meeting? A. If there were, it was probably a subject of

conversation between Hypercom's counsel and myself, but I don't specifically recall. Q. Okay. After you had shown Hypercom's

evidence of why its products did not infringe any of the patents in any of the various lawsuits that had been filed around the country, and Omron then discussed settlement figures essentially, what was Hypercom's response to any of the numbers that were being thrown out? A. Well, I think I previously indicated that we

weren't inclined to pay any money to Verve or to Omron for alleged infringement or to get a license with regard to the patents that we knew we didn't infringe. Q. Okay. Were you a little surprised at Omron's

response after seeing the evidence that Hypercom had shown was to demand large sums of money?

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A.

Yes, we were.

It was -- but although that

was consistent with what Verve's position had been previously as well. Q. What cases was Omron offering to settle for

the -- during this meeting? A. All of the pending actions that had been

brought against Hypercom by Verve. Q. Did you have any discussions about other

lawsuits that had not been filed but that might be filed in the future against Hypercom? A. We indicated that we didn't want to receive

any further lawsuits over these patents or any other patents that Omron or Verve might claim we infringed. Q. Would it surprise you if Omron denied ever

having made any statements with respect to specific figures or any demand of money from Hypercom? A. Q. A. Yes. Why is that? Well, because either Mr. Kerner or Mr. Nakano

recited that they had a large portfolio of patents that they believed that we infringed some or all of them and wanted to receive a considerable amount of money from Hypercom to make the lawsuits and any potential lawsuits go away. Q. Okay. But you don't recall if a specific

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monetary amount was made? A. Q. As we sit here, I don't recall. Okay. MR. LEACH: break? MR. HENNING: MR. MARINAKIS: Sure. Absolutely. Are we at a point where to take a

We are going off the record.

The time is approximately 10:11 a.m. (Brief recess taken from 10:11 a.m. to 10:26 a.m.) MR. MARINAKIS: We are back on the record.

The time is approximately 10:26 a.m. Q. BY MR. HENNING: Mr. Reich, I just want to

ask a few follow-up questions, and just I think I can move onto other issues. Did Mr. Nakano or Mr. Kerner make any statements that led you to believe they had any control over where the lawsuits had been filed against Hypercom? A. I don't know that they made any statements

with regard to the locations of the lawsuits at that time, no. Q. And again to the extent that your notes may

have reflected that, we can have this discussion after the deposition to determine whether or not there is anything on that issue; is that okay?

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A. Q.

Sure. Do you recall with any specificity exactly

what Mr. Kerner said when he indicated to you that Omron had some power to help settle these lawsuits? A. There wasn't a -- there wasn't a clear

statement as to the means of control, but it was a rather clear statement that they had the ability to make the lawsuits go away including the Verve actions. Q. Okay. What statements led you -- lead you to

that conclusion? A. There were discussions with regard to, of

course, the pending lawsuits, and Mr. Kerner indicated that Omron had several additional patents that it was about to assign to Verve, and we said that we needed to get information with regard to those patents so that we could determine whether we had any potential exposure so that we could intelligently discuss what was going on. And they really weren't very clear as to how many patents or what they covered other than the fact that they were about to assign a number of additional patents to Verve. And our concern was that we don't want to be facing additional Verve lawsuits in the future over a variety of patents that may come to light or be asserted against us in the future, and therefore, we wanted to --

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our preference would be to have, if you will, a global resolution of these matters. And Mr. Kerner indicated

that Omron was in a position to make that happen. Q. How did he indicate that Omron was in a

position to make that happen? A. I don't think it was very clear. I think it

was more of a statement largely as I described it that yes, for purposes of any further discussions, they would be able to resolve the matters on a global basis. Q. You don't recall any specific statements

directly to that effect? A. No. No. Essentially to that effect, but I

-- unfortunately I don't have a recollection of something more specific than that, but we clearly indicated that we were only interested if we are talking about global settlement of the patents that had been raised in the Verve lawsuits and any other patents that Omron might be in the process of assigning or in the future assign to Verve. Q. Okay. So you indicated -- or Hypercom

indicated to Omron that any resolution of these three or four lawsuits that were currently pending, any settlement to those Hypercom wanted a global resolution of all of those lawsuits? A. Yes. Right.

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Q.

Okay.

Do you recall with any more

specificity what Omron's response to that was? A. They indicated that they were in a position

to make that happen. Q. A. But you don't recall them saying that? Well, they may have said it in those words.

I don't recall specifically, but that was clearly the statement from Omron or from Mr. Kerner that they were in a position to accomplish a global settlement if the parties agreed. Q. Okay. You sound pretty sure. You say

clearly Omron was in a position.

What I need to know is

why was it so clear that Omron was in such a position, and that Omron was saying that it was in such a position? A. I don't know what the basis of their They didn't indicate to us any basis for

statement was.

it other than to make the conclusory statement that yes, they were in a position to make that happen. Q. But again, you don't recall them actually

saying that? A. Q. A. Q. Well, they did say that, yes. Okay. What did they say?

I just told you what they said. In a general sense, you got the feeling

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then -A. No. No. It was I think there was a specific

question from Mr. Leach or Mr. Kaplin or myself in which we said we want to have a global resolution of this matter if we can, and that would have to include Verve. And Mr. Kerner, Mr. Nakano indicated that they were in a position to make a settlement happen if the parties -you know, if it was acceptable to Hypercom, but Omron could clearly resolve it including Verve. They did not indicate what the relationship or what their power was over Verve, but they clearly indicated that if Omron decided that the matters ought to be resolved, that Verve would settle as well. Q. Did Mr. Nakano or Mr. Kerner make any

statements to the effect that Omron did not have control over whether Verve would settle these particular lawsuits? A. Q. A. Q. No. Nothing like that? No. Now, you said that Hypercom requested

information with respect to other patents that Mr. Kerner discussed that were going to be assigned to Verve. You requested information on those patents; is

that correct?

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A. Q.

That's correct. Do you recall what Omron's response to that

A.

My recollection is that they had agreed at

that time to provide additional information through Omron's counsel to our counsel. I think one of the

preliminary discussions, as I understood it, prior to the actual meeting was that we expected Omron to come to the meeting with full information as to any and all patents that they thought that we, our products, might potentially infringe so that we could discuss them, and they didn't. Q. Okay. Was it your understanding then that at

that time, that Omron had some role in deciding which patents it was going to enforce against Hypercom? A. I have no knowledge of what was discussed

between Omron and Verve, but there was a clear indication that Omron was involved in the decisions that were being made with regard to litigation. Q. A. Why was that so clear? I don't recall specifically, but, you know,

when someone says that they have got the ability to cause another party to agree to a resolution, and they refused or didn't tell us what the basis of that authority or power was, so we could only draw our own

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conclusions as to what the relationship was. Q. Okay. And it's your testimony that

Mr. Kerner made statements to that effect that he could help settle these lawsuits or that Omron could help settle these lawsuits brought my Verve? A. Well, not just help settle them, but in

effect, could resolve them. Q. Other than what you have testified to thus

far though, you don't recall with any more specificity as to specifically what Mr. Kerner said that led you to that conclusion? A. It was probably essentially in the same words

that I have already relayed. Q. Now, in your employment experience, I think

we went through the last maybe two jobs before Hypercom? A. Q. Uh-huh. You were a partner at a law firm. What state

was that in again? A. Q. In Denver, Colorado. In Denver. Were you an attorney in Wisconsin

at some point? A. That was my state of initial license. I

never really practiced as a lawyer in Wisconsin, although I was licensed there. Q. Okay.

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A.

I no longer have an active license there.

I

am also licensed in Illinois -- or I should say I was admitted to practice there, but I no longer have an active license there. Q. Okay. So you have never actually practiced

law in Wisconsin? A. Q. That's correct. You know, just to help me while I get to the

next point here, why don't you tell me what position you held before I guess just previous to your partnership with the law firm in Denver. A. I was with another law firm in the Denver

area by the name of I think it was Pryor, Carney, Johnson, and there might have been some other names with it as well. Q. A. Q. A. Okay. And how long were you there?

Approximately two years. What kind of law did you practice generally? The same type of law that I described earlier

in the law firm of Krys, Boyle, Golz, Ryke & Freedman. Q. Okay. I won't make you repeat that then.

One of Hypercom's allegations in the amended complaint I believe it's at paragraph six of the amended complaint is that Omron's, open quote, "conduct was intentionally and expressly aimed at Hypercom in Arizona," close

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quote.

Can you just tell me what evidence Hypercom had

before filing its amended complaint that Omron had directed any conduct at Hypercom in Arizona? A. Well, Hypercom is our headquarters. This is

where the worldwide operations are located -- or I should say governed, and this is where our principal office is, principal location. We have a considerable