we No.02 C4721 Page3

Johnson & Co. v. Abbott Labs., 201 F.3d 883, 888 (7" Cir. 2000). Defendants claim to have
generated revenues of $5.0 million in 2002 and $7.2 million in 2003 from licenses of Quest
Central for DB2 and seek a bond of $10 million. In a press release following our June 24, 2004
order, Quest indicated that the product represents only 3% to 4% cent of total revenues and
has not been profitable. Computer Associates therefore argues that the profit generated by
Quest Central could not have been more than $860,000 and offers a bond of $1 million.

Even if the product amounts to only 3% to 4% of Quest’s licensing revenue, that is still
a substantial amount of money (approximately $5.3 million to $7.2 million in 2003). Enjoining
the distribution and licensing of such a product is an extraordinary remedy and care should
be taken to avoid unnecessary harm to defendants. We also recognize that Computer
Associates will likely be able to post a significant bond without risk of serious harm. For those
reasons, we believe that a bond of $5 million ($5,000,000.00) is appropriate.

The parties are directed to present an appropriate order to be entered by the court on

Tuesday, August 3, 2004 at 9:00 AM.

JAMES B. MORAN
Senior Judge, U. S. District Court

st 30 __, 2004,


‘Miauute Odes Fort (06/97)

United States District Court, Northern District of Illinois

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CASE NUMBER 02 C 4721 DATE 7130/2004

CASE COMPUTER ASSOCIATES INTERNATIONAL vs. QUEST SOFTWARE, INC.

TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
MEMORANDUM OPINION AND ORDER

DOCKET ENTRY:
(1) Qo Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
(3) Q Answer brief to motion due___. Reply to answer brief due. .
(4) Oo Ruling/Hearing on setfor_____at
(5) Oo Status hearing{held/continued to] [set for/re-set for] on setfor at
(©) 0 Pretrial conference[held/continued to} [set for/re-set for]on__setfor___—sat__.
(7) oO Trial[set for/re-set for]on__ at
(8) Oo [Bench/Jury trial} [Hearing] held/continued to__at
(9) Qo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

ao [Other docket entry] Enter Memorandum Opinion And Order. The parties are directed to present
an appropriate order re bond to be entered by the court on Tuesday, August 3, 2004 at 9:00 a.m.

No notices required, advised in open court.
No notices required,
Notices mailed by judge’s staff.
Notified counsel by telephone. A
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

COMPUTER ASSOCIATES
INTERNATIONAL, a Delaware corporation,

Plaintiff,

vs. No. 02 C 4721
QUEST SOFTWARE, INC., a California
corporation, MICHAEL J. FRIEL, an Illinois
resident, DEBRA JENSON, an Illinois resident,
ROBERT M. MACKOWIAK, an Illinois
resident, ELIZABETH W. WAHLGREN, an
Illinois resident, and FRANK L. BISOTTI,

a Wisconsin resident,

DOCKETED

AUG 2 2004

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Defendants,

MEMORANDUM OPINION AND ORDER

On June 24, 2004, we issued an order granting plaintiff’s motion for a preliminary
injunction upon the approval of an appropriate order and bond. The parties have failed to
reach an agreement on certain issues, leaving us to resolve them.

We first note that the purpose of the preliminary injunction is to preserve the status
quo until the merits of the dispute are resolved. Indiana Civil Liberties Union y. O’Bannon,
259 F.3d 766, 770 (7 Cir. 2001). We also take special care to avoid causing any harm to
innocent third parties.

The third parties at issue are approximately 460 customers who own licenses for Quest

Central for DB2. In order to avoid harming those customers the parties agree that Quest must

be able to provide technical support, but disagree as to the extent of that support. Computer

Associates argues that Level I and Level II support (essentially, telephone help desks) Lo


No. 02 C 4721 Page2

acceptable, but that Quest should be prohibited from offering Level ITI and Level IV support,
at which point Quest employees may need to access and possibly modify the source code.
Quest claims that such a line would harm the customers and that we should instead draw the
line between “bug fixes,” in which a problem is repaired and “enhancements,” in which some
new functionality is added to the source code.

In order to properly protect the rights of third parties, we agree with defendants that
the order should only prevent enhancements to the software. We also note, however, that
Quest Central for DB2 is currently in its fourth version and that Quest has certainly had the
opportunity to correct major bugs in the program. We expect that Level [III and Level IV
support will not be frequently necessary. For that reason, Quest must notify Computer
Associates when its employees actually access the code.

Defendants have also recently brought to our attention the fact that various term-based.
licensees have the option of converting to perpetual licenses for a fee. We agree with
defendants that the injunction should recognize this and respect the contractual rights of those
customers. The injunction should certainly try to avoid a situation where Quest consumers
find themselves suddenly unable to use their database administration software. However,
allowing third parties to purchase a permanent license may cause substantial problems
depending on the outcome of this litigation. For that reason, we believe that the best solution
is to allow current Quest customers to extend their licenses for a reasonable time but to
prevent them from converting to perpetual licenses.

Finally, we turn to the issue of the security bond to be posted by plaintiffs. Because the
bond generally limits the amount of recovery available to defendants, should it be determined

that the injunction was improvidently granted, we should err on the high side. See Mead