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Microsoft's Motion for Stay of Deposition Order to Appeals Court.
Re: Microsoft v. USA, Case No. 98-5399.

Date: August 12, 1998.
Source: Clerk, U.S. Court of Appeals for the District of Columbia.  This document was created by TLJ by scanning a paper copy, and converting it to HTML.  The original contains a date stamp (Aug 12 1998) which is not reproduced here.


IN THE
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

No 98-5399

MICROSOFT CORPORATION,
Appellant-Defendant,

v.

UNITED STATES OF AMERICA
Plaintiff.

MICROSOFT CORPORATION,
Appellant-Defendant-Counterclaim Plaintiff,

v.

STATE OF NEW YORK, ex rel.
Attorney General DENNIS C. VACCO, et al.,

Plaintiffs-Counterclaim Defendants.

THE NEW YORK TIMES COMPANY, ZDTV, L.L.C., ZDNET and THE SEATTLE TIMES,

Apellees-Intervenors.

MOTION OF APPELLANT MICROSOFT CORPORATION FOR A STAY PENDING APPEAL OF THE AUGUST 11, 1998 ORDER PERMITTING MEMBERS OF THE PUBLIC TO ATTEND ALL PRETRIAL DEPOSITIONS

1. Pursuant to Rule 8 of the Federal Rules of Appellate Procedure, appellant Microsoft Corporation ("Microsoft") respectfully moves the Court for a stay [begin page 2] pending appeal of the district court's August 11, 1998 order (the "Order") permitting the public to attend all pretrial discovery depositions conducted in this litigation. (A copy of the Order is annexed hereto as Exhibit A.) Microsoft filed a similar motion for a stay pending appeal of the Order with the district court, which was denied on August 12, 1998. Microsoft also filed a Notice of Appeal with the district court on August 12, 1998.

2. The district court issued the Order in response to an "Emergency Motion" filed on August 10, 1998 by The New York Times Company, ZDTV, L.L.C., ZDNET and The Seattle Times (collectively the "intervenors"). By their motion, the intervenors sought, inter alia, an order requiring the parties to admit the public (including reporters from their respective news agencies) to all discovery depositions being conducted in this highly expedited antitrust action on the authority of the Publicity in Taking Evidence Act of 1913, 15 U.S.C. § 30. The Order granted that motion, providing that the "intervenors and all other members of the general public shall be admitted to all depositions to be taken in this action, including the deposition of William Gates III to the extent space is reasonably available to accommodate them consistent with public safety and order."

STATEMENT OF FACTS

1 On August 10, 1998, Microsoft filed a motion for summary judgment as to all claims in the complaints, relying extensively on this Court's decision in United States v. Microsoft Corp., Nos. 97-5343 and 98-5012, 1998 WL 327855 (D.C. Cir. June 23, 1998).

3. On May 18,1998, the Antitrust Division of the U.S. Department of Justice (the "DOJ"') and 20 States and the District of Columbia (the "States") commenced these two related actions alleging multiple violations of Sections 1 and 2 of the Sherman Act and of the States' respective antitrust statutes. The DOJ's complaint consists of 141 paragraphs spread over 53 pages, and an amended complaint filed by the States on July 17, 1998 contains the same number of paragraphs and is 36 pages long. Notwithstanding the breadth of the plaintiffs' allegations and the sweeping nature of the relief they seek, the district court [begin page 3] scheduled the trial of this case to commence on September 8, 1998--less than four months after the filing of the complaints. The parties are currently engaged in highly expedited discovery necessary to prepare for trial.1

4. From the very outset of the case, it was clear that pretrial discovery would involve numerous depositions of Microsoft officers and employees as well as nonparty witnesses, including witnesses from Netscape Communications Corporation ("Netscape") and from other vendors of operating system software. For example, in Microsoft's initial motion for entry of a scheduling order, filed on May 21, 1998, Microsoft requested that the district court provide for a 120-day period for deposition discovery. Similarly, Sections C(4) and K of the Stipulation and Protective Order entered by the district court on May 27, 1998 (the "Protective Order") set out explicit procedures to facilitate expedited deposition discovery in this case. (A copy of the Protective Order is annexed hereto as Exhibit B.) And following a hearing in open court on June 9, 1998, the district court entered Pretrial No. 1, which provides, among other things, that the parties may take depositions in this case on ten days' notice.

5. Following entry of Pretrial Order No.1, the parties immediately began noticing depositions. The parties have since deposed at least sixteen non-party witnesses. Substantial portions of those deposition transcripts have been designated by the non-party deponents as "Highly Confidential" under the Protective Order, and thus cannot be seen even by the Microsoft in-house lawyers who are involved in the preparation of this case. In addition, plaintiffs have noticed the depositions of seventeen Microsoft officers and [begin page 4] employees, and those depositions are just beginning. In all, there remain more than 25 noticed depositions to be taken in this case before the start of trial, and many more depositions are likely to be noticed, including the depositions of the parties' expert witnesses. It is probable that much of the information elicited at those depositions will involve the development and marketing of existing and future software products--information that the companies involved regard as extremely valuable proprietary information.

6. Even though the fact that there would be many depositions in this case was evident from filing of the complaints in May, the intervenors waited until August 10, 1998--two days before Mr. Gates' deposition was scheduled to begin--to file their so-called "emergency motion" for an order providing public access to all depositions in this case. (A copy of the intervenors' motion is annexed hereto as Exhibit C.) In other words, the purported "emergency" to which intervenors refer in their papers is entirely of their own making. The intervenors requested that the Court require the parties to (i) admit the public to all depositions taken in this action, "including, particularly, the deposition of Mr. Gates"; (ii) provide reasonable notice to the intervenors and the public of the time, date and location of each deposition to be taken in this action; and (iii) make available to the public transcripts of those depositions already taken in this action.

7. Microsoft filed its opposition to the intervenors' motion on the same day. (A copy of Microsoft's opposition is annexed hereto as Exhibit D.) The district court held oral argument on the intervenors' motion in the morning of August 11, 1998 and, later that day, entered the Order that is the subject of this appeal. (A copy of the transcript of the August 11, 1998 oral argument before the district court ("8/11/98 Tr.") is annexed hereto as Exhibit E.) At oral argument, the district court stated that it viewed the intervenors' motion [begin page 5] with "minimal enthusiasm" (8/11/98 Tr. at 2), remarking to the intervenors that: "I hope you realize the effect you may have on these proceedings." (Id. at 3.) In addition, the district court expressly disagreed the DOJ's assertion that the intervenors' request will result in "minimal disruption of the proceedings." (Id. at 13.)

8. The district court nevertheless granted the intervenors' motion in view of what it perceived to be "the plain language of 15 U.S.C. § 30." The district court also stated that the Order is appropriate for interlocutory appeal pursuant to 28 U.S.C. § 1292(b), and it stayed all depositions in this action "pending presentation by intervenors and the parties, for entry by the Court, of an agreed form of order establishing a protocol affording access for intervenors and other members of the public to pretrial depositions which comports with 15 U.S.C. § 30, but which also protects the interests of the parties and of third-party deponents in preventing unnecessary disclosure of trade secrets or other confidential information."

JURISDICTION

9. This Court has jurisdiction over this appeal under 28 U.S.C. § 1291 pursuant to the "collateral order" doctrine of Cohen v. Beneficial Loan Corp., 337 U.S. 541 (1949). The "collateral order" doctrine applies here because the Order (i) "conclusively determines" the public's right of access to pretrial depositions in this case, (ii) resolves an important issue totally separate from and collateral to the merits of the case, and (iii) will not be "effectively reviewable" after final judgment given that the issue raised by this appeal will become moot once the depositions take place. See In re Rafferty, 864 F.2d 151, 153-55 (D.C. Cir. 1988); In re Grand Jury Investigation of Ocean Transp., 604 F.2d 672, 673-74 (D.C. Cir. [begin page 6] 1979); see also Smith v. Bic Corp., 869 F.2d 194, 198-99 (3d Cir. 1989); United States v. Columbia Broad Sys., Inc., 666 F.2d 364, 369 (9th Cir. 1982).

2 Although at least one circuit has concluded that in antitrust actions brought by the United States interlocutory appeals under 28 U.S.C. § 1292(b) are precluded by the Expediting Act, 15 U.S.C. § 29, see Kaufman v. Edelstein, 539 F.2d 8 11, 813-16 (2d Cir. 1976), this Court has not addressed that issue, and in any event, Microsoft's interlocutory appeal will expedite, rather than hinder, the resolution of this litigation, thus fulfilling the purpose of the Expediting Act.

10. In the alternative, this Court should grant Microsoft permission to appeal pursuant to 28 U.S.C. § 1292(b).2  The instant appeal involves a controlling question of law--to wit, whether 15 U.S.C. § 30, an obscure statute enacted in 1913, entitles members of the general public to attend all pretrial discovery depositions in all civil antitrust actions brought by the United States. A substantial basis exists for a difference of opinion on that question, as the district court states in the Order. Although 15 U.S.C. § 30 uses the term "deposition," the relevant legislative history suggests, and leading commentators have agreed, that when Congress enacted the statute, it did not intend to ensure public access to discovery depositions as that term is used in Rule 30 of the Federal Rules of Civil Procedure--such depositions not being generally available in 1913. Rather, the statute was aimed at hearings conducted before roving examiners, at which evidence was actually taken in a case to be decided by a court of equity. The scope of 15 U.S.C. § 30, however, remains unresolved because no court has squarely addressed it to date.

3 If the Court determines that the Order is not appealable under either 28 U.S.C. § 1291 or 28 U.S.C. § 1292(b), Microsoft respectfully requests that the Court review the Order on petition for writ of mandamus. See 28 U.S.C. § 1651.

11. Moreover, as the district court stated in the Order, "an immediate appeal from this Order may materially advance the ultimate termination of the litigation." Specifically, an immediate appeal may relieve the parties of the onerous burdens of having to accommodate attendance by members of the press and general public at the more than 25 remaining depositions in this case to be held in the next three weeks, and having to resort [begin page 7] constantly to the district court on issues of exclusion when confidential information is sought by deposition questions--burdens that are certain to delay the ultimate termination of this litigation.3

SUMMARY OF ARGUMENT

12. The sole basis for the intervenors' position is a 1913 statute enacted to allow public attendance at the taking of trial evidence. That statute was not addressed to pretrial discovery under the Federal Rules of Civil Procedure. The statute's use of the term "deposition" refers to the creation of a trial record by testimony before examiners who, after travelling around the country creating the record through such "depositions," presented it to a court of equity which then ruled on basis of the written record. That was the trial. In this case, if there is a trial, it will be held in public before an Article III judge. The statute simply has no application, and its use of the word "deposition" is insufficient to overturn normal practice, as reviewed in Seattle Times Co. v. Rhinehart, 467 U.S. 20 (1984). A stay will permit the prompt resumption of expedited discovery, which had been proceeding relatively smoothly until disrupted by the intervenors' "emergency" application.

ARGUMENT

13. The factors to be considered in determining whether a stay is warranted are (i) the likelihood that the moving party will prevail on the merits, (ii) the likelihood that the moving party will be irreparably injured absent a stay, (iii) the prospect that other parties interested in the proceeding will be harmed if the court grants the stay, and (iv) the public interest in granting the stay. See Hilton v. Braunskill, 481 U.S. 770, 776 (1987); see also D.C. [begin page 8] CIR. R. 8(a)(1). Taken together, those four factors strongly favor issuance of a stay in the present circumstances. Moreover, the issuance of the stay will permit the parties to take depositions in this case, and thus conclude discovery on a timely basis, while the issue raised by the intervenors' motion is resolved on appeal.

I.  Likelihood of Success on the Merits

14. The Supreme Court has made clear that the public does. not have a First Amendment right to access to pretrial discovery material. See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984) ("pretrial depositions and interrogatories are not public components of a civil trial"); see also Tavoulareas v. Washington Post Co., 737 F.2d 1170, 1172 (D.C. Cir. 1984).

15. In support of their claim that the public should be permitted to attend all discovery depositions in this action, the intervenors rely solely on the Publicity in Taking Evidence Act of 1913, 15 U.S.C. § 30. This little-known statute provides that "depositions" in antitrust suits brought by the United States "shall be open to the public as freely as are trials in open court." Notwithstanding its use of the term "deposition," 15 U.S.C. § 30 was intended to apply, as its title suggests, only to the taking of "evidence" by masters or examiners in equity as a substitute for trial testimony, not to discovery depositions under the Federal Rules of Civil Procedure, which (i) are not part of the trial record and (ii) frequently involve inquiries regarding matters that turn out to have no relevance. Thus, contrary to the intervenors' assertion, the statute does not create an absolute statutory right for members of the public to attend all pretrial depositions in this case. To the extent those depositions lead to the discovery of evidence relevant to this action--and if this action cannot be disposed of by [begin page 9] the granting of Microsoft's pending motion for summary judgment--that evidence will be presented at trial, which the public is free to attend.

16. When 15 U.S.C. § 30 was enacted in 1913, the term "deposition" did not refer to the discovery depositions that occur today under the Federal Rules of Civil Procedure, which did not then exist. Rather, a "deposition" referred to the taking of testimony before an examiner for submission in written form to a court of equity, which--decided cases on a written record. See EQUITY R. 67, 210 U.S. 508, 530-33 (1907). Those "depositions" were, in essence, the trial of the case, and they bore little, if any, resemblance to modem discovery depositions. See Richard L. Marcus, Myth and Reality in Protective Order Litigation, 69 CORNELL L. REV. 1, 39 (1984) (noting that in 1913 "depositions were permitted only in unusual circumstances as a substitute for live testimony at trial").

17. Indeed, the origin of 15 U.S.C. § 30 undercuts the intervenors' argument that the statute creates an unfettered and absolute right of public access to pretrial depositions under the Federal Rules of Civil Procedure, not enacted until 1937--24 years after 15 U.S.C. § 30 was enacted. The statute was prompted by a 1912 decision in a case in which the public and press had been denied access to hearings before an examiner at which testimony was taken for use at trial. See United States v. United Shoe Co., 198 F. 870 (D. Mass. 1912). The House Report in support of the statute noted that, in such circumstances, "the master is, in effect, a travelling court." H.R. REP. No. 62-13 56, at I (1913), reprinted in 8 THE LEGISLATIVE HISTORY OF THE FEDERAL ANTITRUST LAWS AND RELATED STATUTES 6395 (Earl W. Kintner ed., 1984).

18. Although no court has addressed this issue, commentators have stated that it is highly doubtful that 15 U.S.C. §30 was designed, as the intervenors suggest, to [begin page 10] ensure public access to pretrial discovery depositions, which (i) do not involve the admission of evidence in a legal proceeding and (ii) precede trials (at which evidence is admitted) conducted in "open court." Professor Richard Marcus, in an article published in the Cornell Law Review, concluded after reviewing the relevant legislative history that "the statute was not designed to ensure public access to genuine discovery depositions, which were not generally available in 1913." Marcus, supra, 69 CORNELL L. REV. at 39. The Supreme Court cited Professor Marcus' article with approval in Seattle Times, although the Court did not have occasion there to address this particular issue. See 467 U.S. at 33. (Copies of the relevant pages of Professor Marcus's article are annexed hereto as Exhibit F.)

19. Similarly, Professors Wright and Miller in their leading treatise on federal practice and procedure, of which Professor Marcus is now himself a co-author, have noted that 15 U.S.C. § 30 may have been "superseded" in part by Rule 26(c)(5) of the Federal Rules of Civil Procedure and by the Rules Enabling Act, 28 U.S.C. § 2072. See 8 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE P 204 1, at 539 (1994). Professors Wright and Miller further concluded that, notwithstanding the statute's use of the term deposition, "it is not so clear that the statute was addressing circumstances like those in modern discovery." Id. (A copy of the relevant section of Professors Wright's and Miller's treatise is annexed hereto as Exhibit G.)

4 That the DOJ took the position it did is itself remarkable. The DOJ is a signatory of the Protective Order, to which the parties agreed before submitting it to the district court. As explained below in Paragraph 20, the Protective Order, by classifying all depositions as "Confidential" until five days after delivery of the transcript to the deponent, clearly barred public attendance. The DOJ delivered the Protective Order to numerous third parties so as to enable them to avail themselves of its protection prior to submitting to discovery. The DOJ was fully aware of 15 U.S.C. §30, and yet it advised neither the district court to which it, jointly with the other parties, proffered the Protective Order nor the non-parties whose reliance on the Protective Order it solicited that the Protective Order was, in the DOJ's view and insofar as it dealt with depositions, statutorily invalid. Microsoft respectfully submits that the only plausible explanation for this behavior is the desire to protect Netscape (whose interest the DOJ is advancing and whose officers' and employees' depositions are largely complete) from the glare of publicity, while seeking to subject Microsoft (whose officers' and employees' depositions are just now beginning) to maximum media attention.

20. The DOJ supported the intervenors' position at oral argument in the district court on the sole expressed ground that by exempting from 15 U.S.C. § 30 the investigatory (and ex parte) depositions taken prior to the filing of an action pursuant to the Antitrust Civil Process Act, 15 U.S.C. §§ 1311-14, Congress implicitly acknowledged the applicability of 15 U.S.C. § 30 to modern pretrial discovery depositions. This is but an ipse [begin page 11] dixit, without any apparent support, and ignores the fact that such "CID" depositions are not subject to the comprehensive regime of the Federal Rules of Civil Procedure and therefore are not clearly exempted for that reason from the strictures of 15 U.S.C. § 30. Moreover, the House Judiciary Committee report "stresse[d] that nothing in this bill in any way alters the postcomplaint procedures established by the Federal Rules." H.R. REP. No. 94-1343, at 15 n.40 (1976), reprinted in 1976 U.S.C.C.A.N. 2596, 2610 n.40. Thus, Congress's exemptive action, if at all relevant, supports Microsoft's position that 15 U.S.C. § 30 applies only to the receipt of evidence at trial.4

5  The Supreme Court's decision in United States v. Procter & Gamble Co., 3 56 U.S. 677 (195 8), on which the intervenors rely, in no way addresses whether the public may attend a deposition. That case addresses the completely different question of whether government lawyers may use grand jury testimony to prepare a civil antitrust case for trial without providing the civil defendants with a copy of that testimony. See id at 678-79. It is only in this context that the Supreme Court stated that the government's use of "criminal procedures to elicit evidence in a civil case ... would be flouting the policy of the law." To the extent Procter & Gamble has any relevance to the present situation, it counsels against allowing public access to depositions. The Supreme Court held that the government was not obligated to disclose grand jury testimony to the defendants in that case, much less to the public, even though the government could use the testimony to prepare its civil case. See id at 684.

21. In any event, even if 15 U.S.C. § 30 applies to discovery depositions--a highly doubtful proposition--there is no dispute that courts have the power to enter protective orders to provide appropriate safeguards for confidential information that may be disclosed during discovery. Indeed, the cases cited by the intervenors in their papers expressly recognize the courts' power to enter and enforce such protective orders, notwithstanding the existence of 15 U. S. C. § 30. See, e.g., United States v. United Fruit Co., 410 F.2d 533, 555-56 (5th Cir. 1969) ("We agree that Congress [in enacting 15 U.S.C. § 30] did not intend to preclude entry of protective orders where necessary to effectuate a court's judgment."); United States v. IBM, 82 F.R.D. 183, 185 (S.D.N.Y. 1979) (recognizing need to [begin page 12] "balance the mandate of... 15 U.S.C. § 30 ... with the legitimate needs of a witness and a party to protect confidential information").5  Notwithstanding the above authority, the district court appears to have erroneously concluded that it lacks authority to prevent the public from attending discovery depositions despite the fact that much of the questioning will inevitably call for disclosure of trade secrets and other confidential information.

22. There is already a protective order in place in this case that bars public attendance at depositions. In particular, Section C(4) of the Protective Order provides for the automatic treatment of all depositions as "Confidential" at least until five days after the deponent's receipt of a transcript (in order to permit the orderly designation of Confidential and Highly Confidential material under the Protective Order). That provision is necessary to protect the confidentiality of trade secrets and other commercially sensitive information that, given the nature of this action, has been and will be disclosed throughout the depositions. In fact, the Protective Order has been employed by Netscape and other Microsoft competitors to prevent the disclosure of large amounts of deposition testimony (even to Microsoft's in-house counsel working on the case) they regard as confidential. That provision of the Protective Order was a reasonable exercise of the district court's discretion, especially in view of the [begin page 13] highly expedited nature of this case, and should and could have been enforced by the district court to preclude the intervenors' application.

23. Furthermore, the relief the intervenors seek is simply impractical. The intervenors apparently envision that members of the press and general public should be permitted to parade in and out of depositions, depending on whether or not the answer to a given question is likely to contain confidential information. In some instances, answers will have to be interrupted in mid-sentence to usher the public out of the room. The intervenors also suggest that the district court should be required to engage in question-by-question oversight of depositions to ensure that the public is not improperly excluded from any portions of depositions, a prospect that the district court stated it did not relish. (See 8/11/98 Tr. at 13-14.) Such procedures threaten to turn discovery in this action into an endless circus and to cause the parties' good faith efforts to comply with the unusually expedited pretrial schedule to grind to a halt--a situation this Court should not tolerate.

II. Other Relevant Factors

24. The other three factors of the test for determining whether to grant a stay also counsel decidedly in favor of the relief requested here. First, Microsoft is likely to be irreparably injured absent a stay. It is inevitable that Microsoft' trade secrets and other confidential information, including Microsoft's current and future business plans and strategies, will be disclosed during the depositions of its officers and employees, especially Mr. Gates and Microsoft's president, Steven Ballmer. In many instances, it will be impossible for the lawyers defending the depositions to anticipate whether a particular question will elicit such information.

[begin page 14]

25. Moreover, as the district court stated at oral argument on August 11, 1998, the relief requested by the intervenors will seriously disrupt these important proceedings. (See 8/11/98 Tr. at 2, 3, 13-14, 20.) At the very least, providing the public with access to depositions will occupy large amounts of lawyer time dealing with disputes over what information is and is not available to the public, seriously hindering Microsoft's ability to prepare for trial in the few remaining weeks before trial in an action immensely important to Microsoft's future business. In contrast, staying the district court's order will permit the parties to continue with depositions in this case (which, if the parties are to adhere to the current schedule, will eventually have to be double tracked) in the normal professional manner while this important legal issue is resolved.

26. Second, no other parties interested in the proceeding will be harmed if the Court grants the stay. Although the DOJ has taken the position that 15 U.S.C. § 30 applies to discovery depositions in this case, plaintiffs have not claimed (nor could they plausibly claim) that they would be harmed in any respect if the intervenors' application were denied. On the contrary, a stay would, if anything, facilitate plaintiffs' ability to complete discovery and prepare for trial in the short time remaining.

27. Third, granting the stay will not harm the intervenors or public interest. All of the depositions in this case are being videotaped. If the stay is granted, and the Court ultimately determines that the public has a right to view all, or portions of, pretrial depositions in this case--which is all the intervenors are seeking--then the appropriately edited videotapes and transcripts of those depositions can be made available to the public to the extent they do not contain confidential information. Because there is no First Amendment right to pretrial discovery material, no cognizable harm would result from the minimal delay in the [begin page 15] public's access to such material while the Court resolves this important issue of first impression. Moreover, the trial of this action--if the case is not resolved on summary judgment--will be held promptly. The public will be able to attend that trial in "open court" subject to the normal rules and procedures applicable to trials.

28. Lastly, should this motion be granted, Microsoft is prepared to proceed on such an expedited basis as the Court may find appropriate to its informed hearing and decision of the appeal. Microsoft notes only that the "emergency" contrived by the intervenors should not dictate the pace of the judicial process.

CONCLUSION

29. For the foregoing reasons, Microsoft respectfully requests that this Court stay the Order pending Microsoft's appeal. Such a stay will permit the parties to continue with depositions in a normal professional manner while the Court resolves the important issue of first impression presented by this appeal.

Dated: New York, New York
August 12, 1998

Respectfully submitted,

_______________________
John L. Warden
Richard J. Urowsky
Steven L. Holley
Richard C. Pepperman, II
SULLIVAN & CROMWELL
125 Broad Street
New York, New York 10004
(212) 558-4000

[begin page 16]

James R. Weiss
PRESTON GATES ELLIS &
ROUVELAS MEEDS
1735 New York Avenue, N.W.
Washington, D.C, 20006
(202) 628-1700

William H. Neukom
Thomas W. Burt
David A. Heiner, Jr.
Steven J. Aeschbacher
MICROSOFT CORPORATION
One Microsoft Way
Redmond, Washington 98052
(425) 936-8080

Counsel for Appellant
Microsoft Corporation

 


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