Tuesday, August 4, 2015

Atari Depositions - Part 8

I have been on vacation and haven't had time to post in a while.

Today is another of Nolan Bushnell's depositions for the Magnavox case. This one was taken on June 28, 1978 at Atari's 1165 Borregas Avenue building.
I think it will be a bit more interesting than the last one, since it discusses some details of the deals to buyout Ted Dabney. I may post some annotations about it later.

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NOLAN BUSHNELL, having been first duly sworn by the Notary Public to tell the truth, the whole truth, and nothing but the truth, was thereupon examined and testified as follows:

MR. McGRANE: We are going to be referring to the patent application and a patent which has got the number 379383, which is the subject of this litigation.

Counsel, I'd like to stipulate at the beginning of the deposition that any reference that I make to the patent unless otherwise noted is to that patent.

MR. MUNRO: That's fine.

EXAMINATION BY MR. McGRANE

MR. McGRANE: Q. Mr. Bushnell, do you recall when Atari, Inc. was incorporated?

THE WITNESS: A. Yes.

Q. When was that?

A. June 22nd, 1972.

Q. Okay. Now, did you contribute personally anything to the capital account of Atari, Inc. when it was incorporated?

A. Only insomuch as there were certain assets of a company called Syzygy that was rolled into that corporation.

Q.You say a company called Syzygy. Was Syzygy corporation or a partnership?

A That was a partnership.

Q. It wasn't a corporation?

A. No

Q. Who, if anyone, was or were your partners in Syzygy Company at the time certain assets were attributed to the capital account of Atari, Inc.?

A. Myself and Fred Dabney.

Q. Do you recall what percentage of the partnership each of you had?

A. It was either 50/50 or 60/40. I don't remember which.

Q. Was there a written partnership agreement in existence at the time that the assets or certain assets of the Syzyqy partnership were attributed to the capital account of Atari, Inc.?

A. I think so. I don't remember for sure.

Q. You don't remember one way or the other riqht now?

A. No.

Q. Was there ever at any time, to your recollection, a written partnership agreement as opposed to an oral partnership agreement between yourself and Mr. Dabney?

A. I don't remember.

MR. MCGRANE: Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. Now, was there any written record made of the assets which were contributed to Atari, Inc.?

THE WITNESS: A. Yes. I believe in order for the transfer to be tax-free, I think the assets were assigned certain values. As I remember, the initial capitalization was like $5,000 of the corporation.

Q. Go ahead.

A. That represented some growth from the time we had started Syzygy Company.

O. Okay. Let me show you a document, which is a court document, that was filed in another lawsuit by your company, Atari, Inc., in response to an interrogatory from the plaintiff named Fun Games, Inc., which asks among other things: "What was the initial capitalization of Atari, Inc.'s predecessor corporation?" The answer to which is: "The initial capitalization was the assets of Syzygy Company from which $5,000 was designated as a contribution to capital." If you are saying the same thing in answer to my questions that is essentially contained in that answer to

interrogatory --

MR. MUNRO: I am going to object to the form of that question. You can ask him what his recollection is.

MR. McGRANE: Okay.

MR. MUNRO: Are these interrogatories directed to him or are they directed to Atari?

MR. McGRANE: Atari, Inc. and Nolan K. Bushnell. They are both defendants in the antitrust case.

Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. Mr. Bushnell, to the best of your present recollection, isn't the answer given to that question in that interrogatory true and correct?

THE WITNESS: A. Yes.

Q. Now -- MR. MUNRO: This probably will help you, Bill. I have come across something.

MR. McGRANE: Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Would you :mark this?

(Whereupon, the two-page document entitled "Assignment and Bill

of Sale" is marked by the Reporter as Plaintiff's Exhibit 1 for identification.)

MR. McGRANE: Q. All right. Mr. Bushnell, you've

just handed me a document which I have had marked as

Plaintiff's Exhibit 1. Do you recollect that the copy I have is unsigned? Do you recollect that you and Mr. Dabney, in fact, signed the document?

THE WITNESS: A. I don't know.

Q. You don't know?

MR. MUNRO: He wouldn't know. I don't know either.

MR. MCGRANE: All right.

MR. MUNROz That's a copy.

MR. McGRANE: Q. Do you recollect that the balance sheet of June 30, 1972, which is shown as an attachment to the assignment and the bill of sale, which is marked as Plaintiff 's 1, was, in fact, the correct asset inventory?

THE WITNESS: A. That's so long ago. It almost seems to me there should be a statutory bar on stuff that long ago.

MR. MUNRO: Nolan, he is asking for your actual recollection.

THE WITNESS: I don't know.

MR. MUNRO: I don't know how he could possibly recollect.

MR. McGRANE: Q. Mr. Bushnell, look at this balance sheet and tell me -- see if you can answer this question for me: Do you recollect whether or not the patent application, which later resulted in the issuance of a patent to you, was included anywhere in that balance sheet of an asset of Syzygy Company, a partnership?

THE WITNESS: A. It's definitely not a line item.

Q. Let me show you another document in effort to assist your recollection.

MR. McGRAHE: Mark this as 2 to this deposition.

(Whereupon, the six-page document entitled "Agreement to Sell" is

marked by the Reporter as Plaintiff 's Exhibit 2 for

identification.)

MR. MCGRANE: Q. Mr. Bushnell, did you look at what's been marked as Plaintiff's Exhibit 2?

THE WITNESS: A. Yes.

Q. Okay. Can I have it back?

A. Sure.

Q. The question I asked you was -- you were looking at Plaintiff's 1, which is the Assignment and Bill of Sale which had attached to it the balance sheet. The question I asked you was whether looking at the balance sheet you could remember whether or not the asset -- whether you had valued the patent application and treated it as an asset of Syzygy Company on the balance sheet and consequently as a result of the bill of sale transferred the same to Atari as an asset of Atari in June of 1972. •

MR. MUHRO: Is that a question?

MR. MCGRANE: No. It's background.

Q. This document states in paragraph 3: "On July 1st, 1972, Atari, Inc., Buyer, was formed and certain assets were transferred to Buyer with the exception of said invention, which was retained by the Seller and Bushnell, individually. "The question is: With all that background have you looked at the documents and looked at that document, do you remember whether or not the patent application was treated as an asset of Syzygy Company and transferred to Atari, Inc. as a part of the assignment of certain assets of Syzygy Company in June, 1972?

MR. MUNRO: I am going to ask for a clarification that question. When you say "was treated"-

MR. MCGRANE: Was it --

MR. MUNRO: What do you mean? Treated by whom? How did he consider it or Atari or somebody else?

MR. MCGRANE: I'll do it over again.

THE WITNESS: I'll make it very simple. I don't remember.

MR. McGRANE:· Q. Well, do you remember whether or not the statement that's made in paragraph 3 of Plaintiff's 2is a true statement or a false statement?

THE WITNESS: A. I just don't remember what was going on back in those days. It's a situation which in the application -- I just don't remember.

Q. All right. MR. McGRANE: Would you mark this next in order, please?

(Whereupon, the three-page document entitled "Agreement to Redeem Stock" is marked by the Reporter as Plaintiff's Exhibit 3 for identification.)

MR. McGRANE: Let's also mark this document as 4.

(Whereupon, the three-page document entitled "Assignment" is marked by the Reporter as Plaintiff's Exhibit 4 for identification.)

MR. McGRANE: Q. Mr. Bushnell, looking at Plaintiff 'a 2, which is the Dabney agreement, do you recollect that in 1973, Atari entered into an agreement with Mr. Dabney to pay him a quarter of a million dollars in exchange for his interest in a patent application, which at that time had the number 309268?

MR. MUNRO; I am going to object to the form of that question. The document speaks for itself as to what the agreement is. You are asking what his recollection of the agreement is. I will object to the form of that question. What the agreement is is specified in the agreement.

MR. McGRANE: That's not what I asked him, I don't think. If you interpret it that way, I apologize for the lack of clarity in the question and will rephrase the question. Q. Do you remember that in 1973 Atari, Inc., of

which you were then president, agreed to pay D bney a

quarter of a million dollars in exchange for his interest

in a patent application, which at that time had the number

309268?

THE WITNESS: A. No.

Q. You don't remember that?

A. Well, I remember that that -- I don't think we did that.

Q. I see. Do you remember that you agre d to pay him a quarter of a million dollars for something?

A. Yes.

Q. Okay. Do you remember agreeing to pay him any money in addition to a quarter of a million dollars for anything else?

A. Not to my knowledge.

Q. Mr. Bushnell, I'd like you to take a look at what's now marked as Plaintiff's 3.

A. Okay.

Q. Does Plaintiff's 3 refresh your recollection that on or about March 1st, 1973, Atari, Inc. agreed to redeem Fred Dabney's stock in Atari at book value and to pay him $86,000 for it?

A. Yes, I guess that's part of --

MR. MUNRO: Well, I really ask you not to guess. He's asking for your actual recollection, if you have one and not to guess based on what the document is. Again, I want you to rely only on your actual recollection in responding to this question. If something refreshes an actual recollection, that's fine.

THE WITNESS: I don't remember the exact form of the deal.

MR. McGRANE = Q. Do you remember that you agreed to pay him -- do you remember you agreed to pay him $86,000 for stock?

MR. MUNRO: Counsel, I am going to object to the form of that question.

THE WITNESS t No.

MR. MUNRO: I am going to object to the form of the question anyway because the agreement speaks for itself.

MR. McGRANE: I am not asking about the agreement. I am asking if he remembers paying $86,000 for stock.

MR. MUNRO: You just asked him if he remembers if he agreed to do something. The agreement --

MR. McGRANF.: How do I know this was the only agreement, Counsel? I don't know that. I have a right to ask a question that's based entirely on recollection.

MR. MUNRO: That's true.

MR. McGRANE: Then let me do it.

MR. MUNRO: You didn't ask him that.

MR. McGRANE: I did ask him that.

MR. MUNRO: Go ahead

MR. McGRANE: Q. Do you remember that you agreed pay Dabney, by you I mean Atari, Inc., $86,000 for his stock interest in Atari?

THE WITNESS: A. I don't remember that.

Q. Do you remember that you agreed to pay him -- all right. Let's start over from the beginning. Do you remember in 1973 that you made the personal decision to have Atari buy Dabney out of the company?

A. It was more than a personal decision. But, yes.

Q. Were there any other shareholders of Atari besides yourself and Fred Dabney ·in February, 1973?

A. I don't remember for sure. Al Corn may have been, A-l C-o-r-n.

Q. Do you remember how many shares of Atari stock you held in 1973?

A. No, I don't.

Q. Do you remember how many shares of stock of Atari that you got when you incorporated Atari?

A. No, I don't.

Q. Okay. A. Just a second. It might have been three thousand.

MR. MUNRO: Again, Nolan, when you start guessing on what it might have been, you are asking for trouble.

THE WITNESS: Okay.

MR. McGRANE: Q.Now, do you recall, Mr. Bushnell, that no shares of stock were issued in Atari for a period of time after you incorporated?

THE WITNESS: A. I don't remember.

Q. Take a look at paragraph 1, which is the recital. It's Plaintiff's 3.

A. What is it that you want me to look at?

Q. The recital section which recites in part that the stock in the company was initially

issued as of July 1st, 1972 in February 1973.

MR. MUNRO; That's a statement. What's the question to the witness?

MR. McGRANE: I want him to read it first, and then I will ask him the question.

MR. MUNRO: He's read it.

MR. McGRANE: Q. Have you read it?

THE WITNESS: A. Yes.

Q. Do you remember that that's a true statement today, that, in fact, the stock was not issued until February, 1973? A. No, I don't remember.

Q. Okay. You don't have any recollection one way or the other as to whether the effect of the buy-out of Dabney or the redemption by Atari of Dabney's stock was to leave you the sole shareholder of Atari in 1973?

A. No. I know I wasn't the only one.

Q. Was there ever a time, at any time that you can remember, where you were the sole shareholder of Atari? order?

A. No.

Q. You're sure of that?

A. No, I am not sure. I don't think there was.

MR. MCGRANE: Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Could I have this marked as the next in

(Whereupon, the two-page document entitled "The Board of Directors," is marked by the Reporter as Plaintiff's Exhibit 5 for identification.)

MR. McGRANE: Q. Mr. Bushnell, do you have any recollection at all today of this document, which is Plaintiff's 2, which has as its subject matter the sale to Atari of Dabney's recited interest in a patent application?

THE WITNESS: A. Yes.

Q. Would you tell me what that recollection and the circumstances surrounding that agreement by Atari were?

A. That was the document that was put together in satisfaction of Dabney's request that his attorney be able to structure this deal for maximum tax benefit.

Q. Did Mr. Dabney say that to you?

A. Well, in the negotiations.

Q. Were you represented by counsel during these negotiations? Physically present listening to what was said between yourself and Mr. Dabney at any time.

A. No. I think after work one night we sat down and said: Hey. Things aren't going the way they should. We've got to make a change.

Q. Were you the one who suggested to Mr. Dabney that things weren't going the way they should?

A. Yes.

Q. Did you make a proposal to Mr. Dabney?

A. No. I think I asked how much he wanted.

Q Did you understand in your own mind at that time that Mr. Dabney had an independent interest in a patent application as opposed to interest in his shares of stock in Atari?

A. No.

Q. You didn't understand that?

A. (The witness shakes his head in the negative.)

Q. You've got to say something.

A. No.

MR. MUNRO: He said no.

MR. McGRANE: There was a nod as well in there in response to a second question. I asked the witness to try and speak up.

Q. Who did you think owned the patent application that was pending in the U.S. Patent Office at the time that you had your discussions about buying Mr. Dabney out of Atari?

THE WITNESS: A. I did.

Q. By yourself?

A. I mean it was my invention.

Q. Did you have any understanding at that time that it's possible for an inventor to be the inventor but for some other person for some other reason to have a fee title or title to an invention invented by another even in terms of the patent application?

A. I don't know what I knew then.

Q. Fine. Did you have any thought at all that the patent application, which was then pending before the U.S. Patent Office, belonged to Mr. Dabney in any way on any basis?

MR. McGRANE: Let the record reflect the conference between Counsel and Mr. Bushnell at this point.

THE WITNESS: Well, I had always considered that it was sort of part of the assets of Syzygy. It was one of those things -- there was the company. We broke our heads together.

MR. McGRANE: Q. "We" being you and Mr. Dabney?

THE WITNESS: A. (The witness nods his head in the affirmative.)

Q. Say something.

A. Yes.

Q. Do you remember whether after Atari was formed Syzygy, in your own mind, continued to exist as an independent entity?

A. We kept the name and called our game route Syzygy, but it didn't really exist separately but more as an· appendage of the Atari Corporation.

Q. Did you think of it as just a name you were doing business under, or did you think of it as a different entity with assets and liabilities other than those of the corporation?

A. I thought of it as part of the corporation, a dba.

Q. Fine. Now, when you incorporated Atari, I take virtually all, if not all, of the physical assets of Syzygy Company -- did you consider the patent application to have become the property of Atari, Inc. at that time?

A. Yes.

Q. You did. Did you think that Mr. Dabney had any interest in the patent application which was separate and apart from his interest in the company as a result of his shares of stock in the company?

MR. MUNRO: I don't think your question is clear there.

MR. McGRANE: Could you read it back? Let's listen to it.

MR. MUNRO: I think I know the question you were trying to ask. I don't think you asked it.

MR. MCGRANE: You ask it, Bruce.

MR. MUNRO: The question is: Did you understand that Dabney had any interest in the patent other than through his ownership in Atari?

THE WITNESS: I don't think I even thought about it.

MR. McGRANE: Q. That's fine. Now, I believe you testified that you and Dabney had approximately either a 50/50 or a 60/40 partnership. I am going to show you some other documents. These are a series of financial statements, one for the year ending June 30, 1971.

MR. McGRANE: Mark this next in order.

(Whereupon, the six-page document entitled "Syzygy Company Financial Statements, Year Ended 1971" is marked by the Reporter as Plaintiff's Exhibit 6 for identification.)

MR. McGRANE: Q. The next is for the year ending December 31st, 1973. This is for the six months ending June 30, 1972. There are financial statements which Atari and yourself produced in connection with other litigation.

(Whereupon, the seven-page document entitled "Syzygy Company Financial Statements Six Months ended June 30, 1972" is marked by the Reporter as Plaintiff's Exhibit 7 for identification.)

MR. McGRANE: Q. The two documents that. I have shown you reflect in the footnotes an initial 50/50 partnership which was later changed to another arrangement, which I believe --

MR. MUNRO: 60/40.

MR. MCGRANE: Q. I don't think it was a 60/40 partnership basis. It was 60/40 on profits. Would you just read that?

THE WITNESS: A. Sixty percent of revenues, expenses, assets and liabilities: Forty percent of revenue expenses, assets and liabilities.

Q. Do you remember when you incorporated Atari that your relative position with Mr. Dabney in terms of ownership of the corporation remained about the same as it was before you incorporated?

A. Yes.

Q. Do you remember now, Mr. Bushnell --

MR. MUNRO: Have we got that one copied?

MR. McGRANE: Let' do it at the end.

Q. Do you.. remember that when you got your stock in this company that you had three shares to every two shares Mr. Dabney had approximately?

THE WITNESS: A. That seems all right, yes.

MR. MCGRANE: Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. After Atari made the agreement with Mr. Dabney to pay him what is recited in the agreement

MR. MUNRO: Let's just say after they made the agreement, Bill, whatever the agreement is, all right, so we don't have to get into argument about what the agreement is. As soon as you ask a question in which you say the agreement to do this or that, you get into trouble.

MR. McGRANE: Do you disagree with the proposition that this agreement says that it's going to pay Dabney a quarter of a million dollars for a patent application?

MR. MUNRO: That document says what it says.

MR. McGRANE: That's what it says.

MR. MUNRO: It says a lot of things.

MR. McGRANE: It says that they are going to pay him a quarter of a million dollars for his interest in the Pong invention.

MR. MUNRO: I agree that that's what it says.

MR. MCGRANE: I want to ask him question about that. Let's not get off in Never-Never Land, Bruce. The document says that. I want to ask him a question about it.

MR. MUNRO: Go ahead. Ask him the question.

THE WITNESS: Go ahead.

MR. McGRANE: Q. Do you remember after Atari made the agreement, which is Exhibit 2, to pay Dabney this two hundred forty-six thousand

MR. MUNRO: We know what it says, Bill. In your question you don't have to tell us what it says. That's what I am trying to say. We can read as well as you can. Go ahead.

MR. McGRANE: Q. Mr. Bushnell, after Atari made the agreement to pay Mr. Dabney approximately a quarter of a million dollars in exchange for his interest in the patent application, do you recall at what value Atari carried the patent application on its books of accounting?

THE WITNESS: I don't have the foggiest.

Q. Have you ever known at what value Atari has carried the patent application or the patent after issuance on its books?

A. No.

Q. Now, in 1976 you sold your company -- you personally sold your stock in Atari Company to Warner Connnunications; that's true, isn't it?

A. Correct.

Q. Do you know whether Atari, Inc., a California corporation, was merged into another company which was Atari, Inc., a Delaware corporation, the shares of which were initially owned by Warner Communications, Inc.?

A. Yes.

Q. And do you know whether any of the assets of Atari, Inc., whether it's the patent application or the patent or the machinery or anything else, received a stepped up basis following conclusion of the merger of Atari, Inc., a California corporation, into Atari, Inc., a Delaware corporation?

A. Yes. I think some of the assets were.

MR. MUNRO: I am going to make the objection just so that we don't get too far. I am not going to let you qet into the details of the sale to Warner Communications, Bill. As I have told you, that is irrelevant and off limits, off the record.

(Whereupon, a discussion was held off the record.)

MR. MCGRANE: Counsel, the next question I am going to ask is going to ask Mr. Bushnell whether this patent application -- whether the patent received a stepped-up basis and was given a higher valuation on the books of the Warner subsidiary of Atari, Inc., a Delaware corporation. If your position is that that's irrelevant, I'd be entitled to take you before the Judge on that issue.

Q. Mr. Bushnell, do you know at what value the patent number 373498 which is the subject of this litigation, is presently carried on the books of account of Atari, Inc., a Delaware corporation, of which you are an executive?

THE WITNESS:

A. No.

Q. You don't know?

THE WITNESS: A. (The witness shakes his head in the negative. )

Q. Do you know generally whether that patent received an increase in basis as a result of the merger of Atari, Inc., a California corporation, into Atari, Inc., a Delaware corporation?

MR. MUNRO: For that question I am going to require you to define what you mean by an increase in basis.

MR. McGRANE: Q. Was the stated value of the patent increased over what it was carried at the books of account on Atari, Inc., a California corporation over what it was at Atari, Inc., a Delaware corporation?

THE WITNESS: A. I don't know.

Q. You don't know. Are there any documents which you would look at in order to refresh your recollection as to what the present basis of Atari, Inc., a Delaware corporation, is in the patent No. 3793483? What would you look at?

A. I don't know. I've asked one of my people.

Q. Who would you ask?

A. The treasurer.

Q. Who is that?

A. The vice-president of finance.

Q. Who is that?

A. Dick Groth.

Q. Is he a former partner at the RPM Company?

A. Yes.

Q. Who is your present outside auditor?

A. Arthur Hue.

Q. Mr. Groth is an employee?

A. Correct.

Q. He's no longer associated for a vice-president of the company?

A. Correct.

Q. can you give me an explanation for why Atari, Inc. agreed to pay Dabney approximately $50,000 for his interest in the patent application and roughly a year later you gave Atari your interest in the patent application, pursuant to Plaintiff's Exhibit 4, for $1?

MR. MUNRO: I am going to object to the form of that question. Mr. Bushnell has not testified that Atari, Inc. agreed to pay $245,000 for Mr. Dabney's interest in the patent application. In fact, you have already heard Mr. Bushnell tell you as far as he is concerned Mr. Dabney didn't have any interest in the patent application as such, other than as a partner in the Syzygy Company. So, I will continue to object to the form of that question if you ask it in that manner. We know what the piece of paper says. You are asking him his subjective understanding of the agreement, which is obviously not the same as what the piece o! paper says. That's why you are running into trouble with that question.

MR. McGRANE: Q. Do you recall how many shares of stock you had in Atari from a percentage basis, not numbers of shares, which you made the formal assignment of your ownership of the patent itself -- I guess it was still a patent application in June, 1974.

MR. MUNRO: That's Plaintiff's Exhibit 4?

MR. MCGRANE: Yes, sir.

THE WITNESS: No, I don't

MR. McGRANE: Q. Did you own most of the stock of the company at that time, sir?

THE WITNESS: A. I don't think so. Well, I had over half. I don't remember who else. I think I granted some of the shares.

Q. Did you ever tell anybody who was either -- did you ever tell anybody, who was thinking of buying shares in Atari or was an employee who was getting shares in Atari in exchange for services or for any other reason

MR. MUNRO: That assumes there was such a person, Bill. He hasn't said that. I don't know that that's the case. Why don't you just ask him if that's the case.

MR. McGRANE: I have a list of shareholders. We got some from the corporation commissioners. It's got a list of shareholders about ten miles long. I suppose that you'd know that.

MR. MUNRO: You are making assumptions that you can't necessarily make.

MR. McGRANE: I disagree with the fact I can't make them because they are correct. I think everybody knows it.

MR. MUNRO: You don't know that this witness is making the same assumption you are making.

MR. MCGRANE: I understand.

MR. MUNRO: You have to ask this witness the direct question.

MR. MCGRANE: to speed things up. I understand the rules. I am just trying If you want me to do it the hard way, we'll do it the hard way.

MR. MUNRO: I don't want you to do it the hard way.

MR. McGRANE: You leave me very little choice.

THE WITNESS: What is it you want to know?

MR. MUNRO: Yes. What do you want to know?

MR. .MCGRANE: You didn't let me finish the question because you made an objection. You don't know what I was going to ask because you didn't give me a chance to finish the question.

MR. MUNRO: Go ahead. Ask your question.

MR. McGRANE: Thank you. Q. Mr. Bushnell, did you ever tell anybody, who was either a buyer or an employee who was receiving shares for one reason or another, that the patent application and/or the patent -- let's leave it at a patent application, because you made an assignment after January, 1974. The patent application prior to January, 1974, that the patent application belonged to Atari, Inc. and not to you?

THE WITNESS: A. I don't remember.

Q. You don't remember one way or the other?

A. No. I really think at that time I had forgotten about the patent.

Q. Okay. We have a request for production of documents, which asks for your financial statements which counsel has objected to. I don't have that information and really can't question you too closely about what your balance sheet looks like at the period of time. The Agreement to Redeem Stock, which is Plaintiff's Exhibit 3, recites that the book value of the shares held by Dabney, which I think we've agreed, were approximately 40 percent of the corporation, amounted to $86,500. Do you remember how much money Atari made between July 1st, 1973, and February 28th, 1973?

A. No.

Q. Did you have any new money or investors come into the company during that period of time, other than yourself and Mr. Dabney as the founders?

A. I think there were some employees. There aren't any investments per se.

Q. Did any of the employees contribute money as opposed to services to the company?

A.. I think they had options. I don't remember.

Q. Okay. Did you have an opinion as to what fair market value of Mr. Dabney's shares of stock in Atari was in February, 1973, March, 1973?

A. No.

Q. None?

MR. MUNRO: He answered the question.

MR. MCGRANE: Q. Was there any particular reason why it was agreed pursuant to Exhibit 3 to buy Dabney out at book value pursuant to the March 1st, 1973, agreement?

THE WITNESS: A. It's between Dabney and his attorney. I don't know why that was decided.

Q. I see. Did you think there was any tax advantage to Atari, Inc. in structuring the repurchase of Mr. Dabney's interest in Atari as an partial purchase of technology and partial purchase of stock?

A. I wasn't even concerned about it. I just wanted Dabney out.

Q. Did you have any thought that if the agreement were structured in such a way as to reflect an essentially untrue state of affairs for Dabney's tax benefit that that would result in a loss of revenue to the Treasury of the United States?

MR. MUNRO: Counsel, that's irrelevant.

MR. McGRANE: Q. Go ahead.

THE WITNESS: I felt that Dabney's attorney would be very careful. Dabney really wanted to have the whole thing done his way.

Q. But didn't you understand that doing it his way amounted to making statements and written documents which would not reflect the true state of affairs and mislead somebody auditing Dabney's tax returns?

MR. MUNRO: I am going to object to that question as irrelevant and compound.

MCGRANE : Q. Go ahead.

THE WITNESS: I am not going to answer it just on principles.

Q. Your lawyer hasn't instructed you not to answer, Mr. Bushnell.

MR. MUNRO: Would you read the question back to me?

(Whereupon, the preceding question was read by· the Reporter.)

THE WITNESS: Yes, I didn't think anything about it. I was willing to do it Dabney's way. MR. McGRANE: Q. Even though you understood that what was being recited in these documents was completely untrue?

MR. MUNRO: Counsel, that's argumentative. I am going to advise the witness not to answer that question. That is clearly an argumentative question and has been asked and answered.

Q. Take a look at Plaintiff's Exhibit 2.

MR. MUNRO: Counsel, we know what Exhibit 2 says. We know what he's testified. .What you are trying to do is argue with him.

MR. MCGRANE: That's not true.

MR. MUNRO: Yes, you are.

MR. McGRANE: That's not true.

MR. MUNRO: You are saying: "Look, Bushnell, this is what the understanding was, and this is what the agreement says." And you look at it and say that it's inconsistent, and we understand that. Now, you are arguing with him because it's inconsistent.

MR. McGRANE: It's not inconsistent. What I am trying to get the witness to say on the record is that he knew that Dabney was lying to the tax authorities; that he cooperated in that and he is accusing Dabney of tax fraud.

MR. MUNRO: He is not accusing Mr. Dabney of anything. You are asking questions and he is trying to give you answers. The problem is you keep asking the same question over and over again. He is not accusing Mr. Dabney as to anything with regard to his tax return. He is telling you what he recollects the facts to be, and then you are arguing with him.

MR. McGRANE: Fine. I am supposed to ask questions, and he is supposed to answer them. I don't think we ought to argue with each other. I am going to continue to ask questions along this line. I think I should ask the questions, and you make objections as called for.

Q. Mr. Bushnell, paragraph 2 of the agreement to sell, which is marked as Plaintiff's 2 in this deposition, reads in part: "Whereas Seller and Nolan Bushnell, hereinafter called Bushnell, hereinafter called Bushnell, through their joint physical, mental and financial effort, developed an invention commonly known as the game called "Pong." Is that a true statement or a false statement?

A. It's true.

Q. It's true. "Whereas on July 1st, 1972, Atari, Inc., Buyer, was formed and certain assets were transferred to Buyer with the exception of said invention, which was retained by the Seller and Bushnell, individually." Is that true?

A. I don't remember.

Q. You don't remember one way or the other?

MR. MUNRO: He's answered the question.

MR. McGRANE: "Whereas on November 24, 1972, a patent application was filed for the invention of Pong and said application was given application No. 309,268." Is that true?

THE WITNESS: A. I guess.

MR. MUNRO: Well, he is guessing.

MR. MCGRANE: You can't object. If he gives an answer, I don't know what to do.

THE WITNESS: I don't remember what the patent number is and the exact date.

MR. McGRANE: Q. The next statement in the agreement reads as follows: "Seller agrees to sell all interest, individual, partnership, or otherwise, in the invention Ponq to buyer for $246,418." Was that true?

MR. MUNRO: Who is Seller?

MR. MCGRANE: Seller is Dabney.

THE WITNESS: I guess.

MR. McGRANE: Q. In other words, Dabney agreed to sell his interest in the invention for that money to Atari?

THE WITNESS: A. I think that's a safe thing to do. He was --

MR. MUNRO: You are asking this witness what Dabney was doing.

MR. McGRANE: This witness signed this document as pre !dent of Atari, acknowledging the fact that this is what was going on. The document recites a transaction. If the transaction didn't occur, it would be a false statement. You know that.

MR. MUNRO: Mr. McGrane, the problem is, as I said, the document speaks for itself.

MR. McGRANE: I am asking this witness his independent recollection of the truthfulness of the recitations made in the document which is a perfectly roper form of examination as you know.

MR. MUNRO: You are asking him as to a recitation a to what Mr. Dabney was doing?

MR. MCGRANE: Right. This witness signed a document which contained a recitation that Dabney was doing something. I am asking him whether, of his own knowledge, he knew that Dabney was doing that.

MR. MUNRO: Okay. That's a different question.

MR. McGRANE: I don't agree.

MR. MUNRO: You are asking what the document says?

MR. McGRANE: I said the document says this is true, Mr. Bushnell? That's off the wall. Sorry. t's do it again.

Q. Mr. Bushnell, the document says, "Seller agrees to sell all interest, individual, partnership, or otherwise, in the invention Pong to Buyer for $246,418." Is that really what happened?

MR. MUNRO: And I object to that question as being argumentative. The document speaks for itself.

MR. MCGRANE: Q. Go ahead.

THE WITNESS: A. I don't know.

Q. You don't know whether that's really what happened?

MR. MUNRO: That's what he answered. The question has been asked and answered. He did not know.

MR. McGRANE: I get a different answer every time I ask this question.

MR. MUNRO: Then stop asking it over and over again.

MR. McGRANE: That's ridiculous. I am entitled to one consistent answer.

THE WITNESS: Isn't that what you want?

MR. MUNRO: You're doing fine. You are harassing the witness. You ask him a question.

MR. MoGRANE: Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. Mr. Bushnell, did Atari agree with Mr. Dabney that Atari would buy Mr. Dabney's interest in a patent for a quarter of a million dollars in 1973?

A. I don't believe that's what it said.

MR. MUNRO: He is asking now for your recollection. If that's your recollection that you bought out Dabney's interest in the patent.

THE WITNESS: I don't remember, no.

MR. McGRANE: Q. Is it your recollection that you did not do that?

THE WITNESS: A. I am recollecting that we did this agreement that had the nature of being tax-effective for Mr. Dabney. If we threw in technology for some reason that was going to be good. Since Dabney did help develop Pong that sounded reasonable. There was a cabinet design patent that I think we had filed on the thing, which was a design patent. There was a lot of other things. To say that Dabney didn't help develop Pong is not true, because he did. There is another serious question about his real contribution to the patent.

Q. Are you saying that the way the deal was structured in your opinion was a reasonable reflection of the true facts?

MR. MUNRO: He didn't say that.

MR. McGRANE: I am asking it as a question. I am not sure whether he said it or not.

MR. MUNRO: That calls for a conclusion. The document again speaks for itself.

MR. McGRANE: I am not asking about the document, sir. I am asking about the transaction, whether it is his present recollection that the way the transaction was structured, i.e., paying eighty-six thousand for the shares and a quarter of a million for his interest in the tent application as it's recited in the contemporaneous documents, whether you remember today that that was a reasonable way to do it in light of the true facts.

THE WITNESS: I think that was fair, yes.

MR. McGRANE: Q. Fine. Do you remember, Mr. Bushnell, whether you had any concern in 1973 at the time, on behalf of Atari, you executed Plaintiff's Exhibit 2 that any patent issued pursuant to the patent application that you had made, based on the computer space game, might be invalid on account of the on sale bar?

A. Would you repeat the question?

MR. MCGRANE: Read it back.

(Whereupon, the preceding question was read by the Reporter.)

THE WITNESS: At that time?

MR. MUNRO: First of all, I am going to object to the form of the question. It assumes that the witness· made a patent application on the basis of the ,computer apace game. He hasn't said that.

MR. McGRANE: Q. Mr. Bushnell, isn't it true that the patent application that you made in November 24, 1972, was in part at least based on research and development work done during the course of development work on the computer pace game?

THE WITNESS: A. No.

Q. That's not true?

A. You say at least on part?

Q. Isn't it true that the first commercial application of the Modulus Counting System was employed in the computer space game?

A. Yes.

Q. Isn't it true that at least part of the development of that counting system occurred during the course of your work at Nutting Associates on the development of the computer space game?

A. I don't remember.

Q. You don't remember?

A. No.

Q. Okay. This is beyond the scope of the deposition, Bruce.

MR. MUNRO: I understand that. Go ahead.

MR. McGRANE: If you want me to pursue that line, I'll be happy to.

MR. MUNRO: If you just ask him the patent instead of going through a lot of other rigmarole, you won't get in trouble. Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. Mr. Bushnell, do you remember whether in 1973, you were concerned that if a patent were issued on the patent application that you had made that you would have some potential difficulty with the on sale bar?

THE WITNESS: A. No.

Q. Do you remember that you didn't have that concern

A. Not at that present time. I wasn't thinking about anything but trying to build as many Pong games as I could. The nature of successful business is to --

MR. MUNRO: Don' t. I am sorry. Go ahead. Ask a question.

MR. MCGRANE: Thank you.

Q. Did you have any opinion yourself as to what the potential value of a patent, of a kind for which you had applied, was in March of 1973?

A. No.

Q. If somebody had offered to sell you the patent, what would you have paid them for it?

A. I didn't believe in licensing at that time.

MR. MUNRO: I am going to object to that question, Bill, as being hypothetical.

MR. McGRANE: I will withdraw it then. That's fine.

Q. Mr. Bushnell, in your last deposition we went over briefly the licensing agreement that Atari, Inc. entered into with Midway Manufacturing, relative to VP-I, which was a game similar to Pong. I want to ask you a question which relates to what the method was that was used to calculate the royalties that were paid you by Midway on account of their license of the Pong game from Atari. Do you remember how the figures, the monies that were paid you, were calculated?

A. It was a percentage of gross sales.

Q. Gross sales?

A. Yes.

Q. Okay. That was for all games employing the technology which you made available to Midway to manufacture the Pong game?

MR. MUNRO: I am going to object to that. It was for whatever the agreement says it was for. Asking this witness to recollect what is in that agreement is unfair. You have that information readily available to you. Off the record.

(Whereupon, a discussion wa held off the record.)

MR. MCGRANE: Q. Look at page 2.

THE WITNESS: A. Paragraph 2 or page 2?

Q. There is something about $31. Page 2.

MR. MUNRO: Are we looking at the Midway agreement?

THE WITNESS: I don't remember.

MR. MUNRO: The agreement says $31. What is the question? MR. McGMNE: Q. Do you recall that that $31 was calculated on the basis of figuring in percentage of what you expected the gross sales price of each unit to be?

THE WITNESS: A. I think we talked about it. I don't remember this $31.

Q. How much were Pong games selling for initially when you first started making them?

A. Nine hundred and twenty-five dollars, I think.

Q. Do you recall that you approached Gremlin Industries, Gremlin Corporation, about licensing a game called Blockade?

A. I don't think I did, no.

Q. Do you recall somebody in your com any did that?

A. May have.

Q. Do you know anything at all about the percentages that were talked about in terms of licensing royalties?

A. No.

Q. Do you recall what percentages you discussed with Midway?

A. No, I don't.

Q. Do you recall whether it was ten percent or less than ten percent?

A. It would be under five.

Q. Under five?

A. Yes.

Q. Would it be three percent, sir?

MR. MUNRO: He has told you he doesn't recall.

MR. MCGRANE: I am trying to refresh his recollection.

MR. MUNRO: You can't refresh his recollection by throwing out numbers.

MR. McGRANE: Q. Do you recall if it was three percent?

THE WITNESS: A. No, I don't.

Q. But any royalty would have been under five percent; that's true?

A. I don't know of anything that has been higher than that.

Q. Do you know of any that have been lower than five percent?

A. Yes.

Q. Who? Where?

A. I don't remember.

Q. You sent a series of letters out to competing manufacturers who were making video games, and you suggested that they license the Modulus Counting System, Atari?

A. Yes.

Q. Do you recall what you had in mind to charge those people on a percentage basis if they chose to license from you? get.

A. As much as I possibly could

Q. Do you recall that you had set some target figure, sir?

MR. MUNRO: You have asked these questions in the previous deposition.

MR. McGRANE: I've been through the testimony last night, and I don't believe that I have.

THE WITNESS: No. We didn't have any real target.

MR. McGRANE: Q. Did you intend to charge more than five percent?

THE WITNESS: A. If I could possibly get away with it.

Q. Did you have any expectation you could get away with more than five percent?

MR. MUNRO: I am going to object. You are asking him for speculation.

MR. McGRANE: That's not speculation.

MR. MUNRO: He told you what he was going to charge, which was as much as he could get, as much as somebody else would agree to pay.

MR. McGRANE: Generally, Mr. Munro, when you make an offer to somebody, you don't counteroffer on those terms. What I am asking this witness is what he had in mind as an asking price.

MR. MUNRO: He didn't make any offers.

MR. McGRANE: Well, my question is: Does he remember - what it was he had in mind back then?

THE WITNESS: No, I don't.

MR. McGRANE: Q. Is there anybody who was involved - with you? Did you talk to your patent lawyers about how much - you should charge, what was a reasonable rate? -

THE WITNESS: A. I just think that's a negotiated - item. I always felt I was as good at negotiating as anybody.

Q. Did you intend to charge each manufacturer a - different rate?

A. I don't remember everything about it.

Q. I see. Do you remember that you were sued by - the Magnavox Company for patent infringement for infringing - their patents?

A. Yes.

Q. Do you recall what license rates they sought to extract from you for using their patented devices?

A. Not specifically. I can remember it was a - sliding scale that went down with manufacturing.

Q. Again, it was calculated on a gross sales basis?

A. Yes.

Q. Okay. I am going to show you an article that - appeared in TIME magazine. I have taken the liberty of - underlining a part of it.

A. Yes.

Q. Okay. Were you interviewed by TIME magazine?

A. I don't remember. I've been interviewed by a lot of people.

MR. MCGRANE: Off the record.

(Whereupon, a discussion was held off the record.)

(Whereupon, the one-page article from TIME magazine dated April 1, 1974, is marked by the Reporter as Plaintiff'sExhibit 8 for identification.)

MR. McGRANE: Q. Now, the statements that's made in the TIME article says: "Atari, whose Pong machines were the first to show up in penny arcades, has secured a

patent on the electronic circuitry that makes the games possible. Its management contends that other manufacturers should therefore be paying Atari a royalty on each gamethey produce."

MR. MUNRO: That's what the TIME article says. I want to make that clear for the record.

MR. MCGRANE: I said it and you said it.

MR. MUNRO: Okay.

MR. McGRANE: I think it's pretty clear.

MR. MUNRO: What is the question?

MR. MCGRANE: A. The question is: Is it true that Atari management has ever contended that other manufacturers should be paying Atari a royalty on each game they produce?

THE WITNESS: A. That is what the TIME article says.

Q. Is it true?

A. What is true?

Q. Is it true that the Atari management is taking a position contending that other manufacturers of video games, Pong and other games, should be paying royalties to Atari - each time they made a game?

A. If they infringed any patents that we have, yes.

Q. Did you ever make an investigation to determine - whether the electronic circuitry employed by other manufacturers - infringed the patent which you were granted after you - were granted it?

MR. MUNRO: At this point, I am going to counsel the - witness that in terms of any investigation, vis-a-vis infringement rights involved, consultations were involved, and the attorney-client privilege.

MR. McGRANE: I am not asking what his lawyer told him.

MR. MUNRO: I am not asking what he told his lawyer - either.

MR. McGRANE: I am asking what the company concluded - in terms of what other people were doing, whether their games --

MR. MUNRO: To the extent that that conclusion is based - upon advice of patent counsel, I am going to advise him that he is not obliged to answer. If you want to ask him if Atari went out and looked inside other people's games to - see how they were being made, that's one thing. Your question is not clear in that regard. If you are asking him what legal conclusion they drew as to whether somebody else was or was not infringing on their patent, that is privileged.

MR. McGRANE: I am not asking him to tell me anything - he told his lawyers or his lawyers told him.

Q. Can you tell me whether you concluded, independent of reciting to me what your lawyers told you or what you told your lawyers, that there were companies out there making games which infringed your patents?

THE WITNESS: A. We looked at schematics and tried to ascertain whether or not there were some equivalent. -

MR. McGRANE: Would you mark these next two documents - in order?

(Whereupon, the eight-page document entitled "Patent - Infringers (United States)" - is marked by the Reporter - as Plaintiff's Exhibit 9 - for identification.)

*Whereupon, the two-page document entitled "Foreign Patent Infringers" is marked - by the Reporter as Plaintiff's Exhibit 10 for identification.)

MR. McGRANE: Q. Mr. Bushnell, would you look at - Exhibits 9 and 10? I will represent to you that those - were produced by your company in other unrelated litigation.

MR. MUNRO: Other unrelated litigation?

MR. MCGRANE: Yes.

MR. MUNRO: What other litigation?

MR. MCGRANE: Fun Games.

MR. MUNRO: I wouldn't necessarily say that's - unrelated.

MR. MCGRANE: A different court with a different judge and different issues.

MR. MUNRO: Fine. Go ahead. What is the question?

MR. McGRANE: Q. Have you ever seen any of these documents before, sir?

THE WITNESS: A. I don't think so.

MR. MUNRO: You don't think so?

THE WITNESS: Yes.

MR. McGRANE: Q. But you do recollect that the company made an investigation of schematics that were being used by other companies?

THE WITNESS: A. Correct.

Q. Do you know whether anybody was instructed to prepare a list of infringers?

A. Obviously someone was. I don't remember.

Q. Okay. Do you remember whether it was concluded - by the company that there was widespread infringement of - the patent?

MR. MUNRO: I am going to object to the form of the - question that it was concluded by the company. I don't - know what that means. The company is made up of a bunch of - individuals.

MR. McGRANE: I understand that.

MR. MUNRO: You are asking him what his conclusion - was, what Mr. Keenan's conclusion was or somebody else?

THE WITNESS: I felt there were a lot of infringers. - K-e-e-n-a-n.

MR. McGRANE: Q. Is it also true that you thought that - the patent had widespread application throughout the - industry?

THE WITNESS: A. Yes.

Q. Okay. Now, you were making video games during - the years 1971, '72, '73, '74, '75, '76 and up to the present?

A. And '71.

Q. Well, for somebody else?

A. No. For Syzygy. You have forgotten all about that thing, haven't you?

Q. You were making video games during the years - strike that.

MR. MUNRO: You personally, you Atari? Who is "you"?

MR. McGRANE: The Syzygy Company and Atari as a - successor and Atari, Inc., a Delaware corporation, a - successor, an .interest of Atari, Inc., a California - corporation, have all made video games over the last five years?

THE WITNESS: A. Correct.

Q. And have any of those games not employed the Modulus Counting System?

A. Yes.

Q. Can you tell me which games, or if it's shorter - just list which games haven't.

A. No, I can't. I think most of the microprocessor - games do not.

Q. How recently has Atari, Inc., whether a Delaware - or a California corporation, been making microprocessor - games?

A. A couple of years. Two years.

Q. Can you name the first microprocessor game that was made?

A. No.

MR. MUNRO: Don't guess.

THE WITNESS: No, I can't.

MR. MoGRANE: Q. Does the present Atari home qame employ a microprocessor? This is the cartridge deal.

THE WITNESS: A. Yes.

Q. Okay. Does it employ the Modulus Counting - System?

A. I don't think so.

Q. Did the Pong and Super Pong units, which were the predecessor products to the present Atari cartridge home game, employ the Modulus counting System?

A. I think they did.

Q. Have all of Atari games in the last two years - been microprocessor rather than Modulus Counting System - games?

A. No. I think there have - been a couple of exceptions.

Q. And have the exceptions uniformly used the - Modulus Counting System to your knowledge?

A. I believe so.

Q. Either it's a microprocessor a or a Modulus Counting System?

A. Given that it's a video game?

Q. Yes, sir.

A. Yes.

Q. Do you have any idea what the gross sales of devices by Atari using the Modulus Counting System have - been from incorporation to the present?

A. No.

Q. Is it in excess of $10 million, sir?

A. Yes.

Q. Is it in excess of $100 million?

A. I don't know.

Q. Is it in excess of fifty million?

A. I don't know.

Q. Is it in excess of twenty-five million?

A. I don't know.

Q. You don't know at all?

A. I think it's over ten million.

Q. Do you recall that in the year 1976, you had - gross sales of $39 million?

A. Yes.

Q. Do you know of those gross sales what percentage - were of devices employing the Modulus Counting System?

A. No, I don't.

Q. Isn't it true that all of the games that were made during that year employed the Modulus Counting System?

A. May have

MR. MUNRO: What year?

MR. McGRANE: Fiscal 1976 prior to the sale to Warner. -

THE WITNESS: No. I will take that back. I don't know.

MR. McGRANE: Q. You don't think what?

THE WITNESS: A. I don't think that they all employed the Modulus Counting System. MR. MCGRANE: I'd like to mark this. Mr. Bushnell, I am going to show you one other - document. I'd like to have it marked as a continuation of Plaintiff's 9, if I may, Bruce, sine it's document 177.

Q. Do you recollect that Control Sales, Inc. of Des Plaines, Illinois, was making a home video game in 1975?

THE WITNESS: A. Yes.

Q. Do you recall concluding that they had employed your Modulus Counting System to accomplish that purpose?

A. - I don't remember that.

Q. You don't remember one way or the other?

A. No.

MR. MUNRO: Off the record.

MR. McGRANE: I'd like to have this marked as 11

(Whereupon, the one-page article - from Business Week magazine - dated November 10, 1973, is - marked by the Reporter as - Plaintiff's Exhibit 11 for - identification.)

MR. McGRANE: Q. This article in part reads -- Mr. Bushnell, the article that has been marked as Plaintiff's - Exhibit 11 reads in part: "But Atari has just been granted a patent on some of the basic techniques for generating moving symbols on a display screen, and Bushnell intends to use it. 'People won't be able to copy our circuit boards again, he insists." Do you recall being interviewed by Business Week in 1973?

THE WITNESS: A. Yes.

Q. Do you remember making that statement that's attributed to you in this article?

A. No.

Q. Do you recall that you did not make such a statement and were misquoted?

A. - No. I don't remember either.

Q. Is it a true statement that the patent, which is the subject of this litigation, is "a patent on some of the basic techniques for generating moving symbols on a display screen"? A. Yes. - That's true? (The witness nods his head in the affirmative.)

Q. You have to say something.

A. Yes. - MR. MUNRO: Off the record.

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. Do you have any opinion, Mr. Bushnell, as to whether or not the use of the patented device and the advertisement of the patented device by putting the number on the games that you made had any - effect in preventing the copying by others of any Atari games?

THE WITNESS: A. You handed me a page a few minutes ago of five hundred copiers. You have the gall to ask me that question.

MR. MUNRO: He's just asking you if you have an opinion. Okay. All right. I see.

THE WITNESS: I would hate to have seen what would have happened had those had any effect.

MR. McGRANE: I didn't understand. What do you mean you would hate to have seen?

THE WITNESS: A. I just believe that -- I don't believe that it had any significant effect on stopping anyone.

Q. Were there some Atari games that were not, in fact, copied by anyone?

A. Well, the bad ones. Ones that were not marketable.

Q. Did anyone copy the Trak 10?

A. Yes. I think there were some guys who did it in Italy.

Q. Did anybody do it in this country?

A. No?

Q. Were there any other games that were not copied, like Trak 10, that you can think of?

A. There were some games that represented some - difficult-to-copy technology. Once we incorporated hybrid circuits that are basically a six-month kind of lead time thing. That slowed them down.

Q. Can you give me an illustration of the games which were not copied which employed the Modulus Counting device?

A. I can't think of any. I think most of them were. At least overseas.

Q. Let's just limit the question then to the ones that were not copied on the domestic market.

A. I don't think Gran Trak was copied. G-r-a-n - T-r-a-k. I don't believe that Gotcha was copied. I'd say that's about it.

Q. Was Tank copied by anybody employing a Modulus Counting device?

A. I don't know.

Q. You know of no instance where it was copied employing a Modulus Counting device?

A. It's a very, very complex game.

Q. The question is: Do you know of any instance where Tank was copied by a copier using the Modulus Counting device?

A. Domestically?

Q. Domestically.

A. It seems like there was one. I don't remember where it was.

MR. MUNRO: Where is your list?

MR. MoGRANE: The list is before that. This list is 1975. I will show it to you.

Q. What's the answer to the question?

THE WITNESS: A. I can't think of any.

Q. Are there any other games that you can think of - that were not copied that also employed the Modulus Counting - System that were not copied domestically?

A. No.

Q. Is there some advantage to a manufacturer having a game not be copied?

A. Sure.

Q. What's the advantage?

A. - Don't have to bump against the marketplace.

Q. Does it tend to increase profits?

A. If you play it right you can. The antitrust laws were actually written so that

Q. Go ahead.

MR. MUNRO: It's on the record.

MR. McGRANE: Mark this next in order, please.

(Whereupon, the letter dated - March 31, 1976, is marked by - the Reporter as Plaintiff's - Exhibit 12 for identification.)

MR. MoGRANE: Q. I am referring to the last part of the letter. Are the statements that's made in the last paragraph about the utility of the patented device true?

THE WITNESS: A. The patented device is worthwhile.

Q. Following the buy-out of Mr. Dabney pursuant to the two exhibits, which have been marked as Exhibits in this deposition, do you recall that on October 26, 1975 there was another agreement entered into between Atari, Inc. and Dabney?

A. Yes.

MR. McGRANE: Let the Reporter mark that.

(Whereupon, the six-page document entitled "Purchase Agreement" is marked by the Reporter as Plaintiff's Exhibit 13 for - identification.)

MR. McGRANE: Q. I show you a document which has been marked as Plaintiff's Exhibit 13 and ask you to look at it and tell me if that's the agreement to which you had reference in your answer.

THE WITNESS: A. I don't know. I think so.

Q. You think so?

A. Yes.

Q. Do you recall that after October, 1973, that you personally entered into another agreement with Mr. Dabney to buy some equipment and operating rights from him?

A. Did you say subsequently to?

Q. Subsequent to October 26, 1973.

A. Yes.

Q. Okay. And that as a part of that deal you got Atari to release Dabney from certain obligations which he had to Atari as a part of the October 26, 1973, deal?

A. Yes.

Q. I am going to show you two documents, one of which is a letter of intent, I guess, and the other one is an actual agreement. I ask you if those are the documents that reflect the transaction.

A. I believe they are.

MR. MCGRANE: Mark these next in order, please.

(Whereupon, the one-page letter of intent is marked by the Reporter as Plaintiff's Exhibit 14 for identification.)

(Whereupon, the three-page document - entitled "Agreement of Purchase" dated May 15, 1974, is marked by the Reporter as Plaintiff's Exhibit 15 for identification.)

MR. MCGRANE: Q. You have reviewed the documents. Are those the documents?

THE WITNESS: A. Yes.

MR. MCGRANE: Off the record .

(Whereupon, a discussion was held off the record.)

MR. McGRANE: Q. This next document which I have shown you, does that have anything to do with the transaction with Dabney, which is the subject of the last two documents?

THE WITNESS: A. Yes.

Q. Can you explain what it is?

A. Atari defaulted on a note payment to Dabney. Dabney sued us. Those three documents -- part of the thing is that he had taken some Syzygy assets and was running that company into the ground and wanted to get out from under it. That was one of the conditions that he of an out-of-court settlement with us.

A. What was it that he required? I have read the documents.

Q. I think he accelerated the payments. He wanted the acceleration of the notes due and for us to take over the game company, buy the game company back from him.

MR. McGRANE: Mark this document next in order, please.

(Whereupon, the one-page document - entitled "Bill of Sale and HOLD HARMLESS AGREEMENT" is marked by the Reporter as Plaintiff 'a Exhibit 16 for identification.)

MR. MUNRO: When Mr. Bushnell was referring to the - game company, he meant the street operations of Syzygy.

MR. McGRANE : Okay. Q. Mr. Bushnell, what is reflected on the document - which has been marked as Plaintiff's Exhibit 16 is a bill of sale from Nolan Bushnell transferring certain assets of Syzygy Company to -who was the recipient of the bill of sale? Who is this bill of sale to?

THE WITNESS: A. It must have been to Ted Olson, who was the ultimate buyer of Syzygy Game Company.

Q. Okay. It recites that the bill of sale is to Syzygy Game Company, a California corporation. Who were the partners of Syzygy Game Company, a California - partnership?

A. I think it was Ted Olson.

Q. And who else?

A. I think he had a couple of guys.

Q. Were you a partner?

A. I think I started out to be, and then I wasn't.

Q. Okay.

A. I basically wanted to get out of it, but I just wanted to be a conduit in getting this thing cleaned up between Atari and Dabney.

Q. So, Atari promised to pay Dabney a quarter of a million dollars and give him a note and then defaulted - in its payments?

A. Yes.

Q. Is it a fair statement that a quarter of a million dollars was a lot of money to Atari in 1973?

A. It was a huge amount.

MR. MUNRO: I am going to object to the relevance of - that question.

MR. MCGRANE: I think it has relevance when you are trying to assess the underlying value of the patent, Counsel. .

Q. Did Atari have a net worth of a quarter of a million dollars in 1973?

THE WITNESS: A. Yes.

Q. Did it have a net worth much in excess of a quarter of a million dollars in 1973?

A. Yes.

Q. In March of 1973?

A. Uh-huh.

Q. But from a cash flow standpoint, if nothing else, it was a very significant sum of money to oblige the company to pay at this time?

A. When you say oblige the company, debts? Cash is always dear.

Q. The terms of the note provided for ten payments of twenty-four some odd thousand dollars?

A. Yes.

Q. Was $24,000 on the payment schedule, which was set forth in the note, a significant amount of money from a cash standpoint to Atari at that time?

A. Twenty-four thousand is twenty-four thousand.

MR. MUNRO: I am going to object to the question. That's ambiguous. A given amount of money is significant. It's an ambiguous question, and it's irrelevant.

MR. MCGRANE: Okay.

MR. MUNRO: Mr. McGrane, do you have any more questions for Mr. Bushnell?

MR. MCGRANE: Not at this time.

MR. MUNRO: Let me say that this is the second time Mr. Bushnell has been deposed in this action. I have discussed that we have produced Mr. Bushnell voluntarily on short notice.

MR. MCGRANE: That's true.

MR. MUNRO: Without any notice being filed. I told you that if we did that, we would object to any further depositions of Mr. Bushnell in this case. You said you understood that.

MR. MCGRANE: That's true. I said that.

MR. MUNRO: So, I want to go on the record now, that as far as I am concerned, this is Mr. Bushnell's final deposition in this case. We will object to any further requests from you for any further deposition from Mr. Bushnell.

MR. McGRANE: The only thing I would say in response to that is that the only thing I can see that would require Mr. Bushnell's testimony before trial at this time relates to the contents of the financial statements of Atari which may be the subject of a motion to compel. Until I review those, I really can't respond, although I appreciate counsel's courtesy in making Mr. Bushnell available. I sincerely hope there won't be any occasion to bother him any more.

MR. MUNRO: Good.

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