Here's day one, April 29th, of the Novell v. SCO trial, as text, with line numbers. Our thanks to papafox and another volunteer for the text and HTML on this version. I finally have time to show you a few things that stand out to me from the trial. By far the most significant new piece of information brought out this day of the trial, as I see it, is that Sun apparently knew before it open sourced Solaris what Novell's position was about the APA.
Day 1 Begins:
The day begins by the Judge, the Honorable Dale Kimball, asking if either side wishes to invoke witness exclusion, and SCO's attorney, Stuart Singer, says SCO does wish to. That means everyone who will be testifying has to leave, except for one lawyer each side, called a client representative. The purpose of witness exclusion is so folks testify without being influenced by what they hear other witnesses say. Personally, I'd always ask for it.
The parties had agreed to limit their time to ensure that everything would be done within the number of days anticipated for trial. So next the judge asks who will keep track of the time, and they tell him that they've got that all allocated and agreed upon, to which the judge says, "It's one thing to work out an allocation. It's another to abide by it." Ah. The voice of experience. So both sides keep track. "We have a number of people here with watches," Singer says. And with that Novell's opening statement begins, with Michael Jacobs doing the talking.
Novell's Michael Jacobs' Opening Statement:
Opening statements are where you tell the judge (or the jury if there were one) what you plan to prove at the trial.
Novell opens by saying it wants damages in an amount of $19+ million, based on the SCOsource licenses, including the Microsoft and Sun agreements. SCOsource, Jacobs says, was all about SVRX. Back when it was active, it was never about SCO-written code or Santa Cruz written code or UnixWare written after the APA. It was about the code that the Utah court already decided belongs to Novell, code SCO claimed it had gotten from Novell, but which the court has ruled it did not. This is the first time we hear this dollar figure. It tells us that Novell has decided to figure out the math. Secondly, the SCOsource licenses convey substantial SVRX rights, Jacobs says. Third, SCO's argument that their licensing practice was to include older SVRX rights free when it licensed UnixWare, thus being SCO's definition of incidental, will be disproven. Novell will show the court, he says, what a really incidental SVRX license looks like. And they don't look like SCOsource licenses. Legally, Novell will argue that SCO hasn't offered any apportionment. It presents nothing to say how much it thinks it owes Novell. That is, after all, what the trial is about. And SCO was Novell's fiduciary, so legally it has the obligation to offer an apportionment. Because SCO didn't offer any apportionment, Novell claims 100 percent.
Here's what Novell will prove at trial, Jacobs tells the court: that back then, when SCOsource was active, SCO was all about SVRX. Now, after they have lost the argument over who owns SVRX, SCO seems to want to rewrite history, claiming now that SCOsource was all about UnixWare, despite what it said over and over back then, that it was about the old AT&T code base it claimed back then it had obtained under the 1995 APA.
Back in late 2002 and early 2003, new management at Caldera changed the name to SCO after concluding that revenue from UnixWare and OpenServer was inadequate for a viable business strategy. It was a declining revenue base. So SCO decided to mine the trunk of the tree, so to speak, and that's SVRX. That's the metaphor SCO used at the time, that SVRX was the base of the tree, and the limbs were AIX, HPUX, UnixWare, Sequent, Solaris, etc., all branches of the tree, the various flavors of Unix. Jacobs is showing the court the graphic SCO used in presentations, I gather, the one showing SVRX as the tree trunk and the branches as based on the trunk, and since the branch, UnixWare, wasn't bringing in the money, SCO would mine the trunk, the legacy code. Now, Jacobs says, SCO argues all the value is in the branches. The trunk has no value at all. But at the time, it told the world the value was in the IP in the trunk. When SCO sent letters to the Fortune 1000, that's what it claimed, that Unix source code had found its way into Linux through the various derivatives, like Sequent and AIX. At no time did SCO argue that there was also some SCO-written UnixWare code in Linux, some code that Caldera, now SCO, had written.
Now, years and millions of dollars in legal fees later in the IBM litigation, when SCO was finally forced to cough up its proof, what was there? Jacobs shows the court a "demonstrative", meaning a show and tell item, so to speak, in this case one showing what SCO's expert in that case had listed. "With all the incentive in the world to show that there was something in SCO UnixWare that had found its way into Linux, Mr. Cargill found only UNIX System V, Release 4 code as infringing Linux," Jacobs says. That doesn't mean anyone necessarily agrees with Cargill's list, by the way, only that there isn't any UnixWare code on his list. Jacobs reminds the court that this case, SCO v. Novell, began as a slander of title case, with SCO claiming that Novell had interfered with its SCOsource licensing campaign by claiming that Novell owned the legacy Unix System V code base copyrights. SCO claimed it had been damaged thereby to the tune of millions. Now suddenly that code is worth nothing? It's "incidental"? Which is true? SCO never said to SCOsource licensees, don't worry about Novell's claim. We are licensing UnixWare, which we own, not Novell. Rather, it claimed in public that Novell's assertion that it, and not SCO, owned SVRX crushed SCOsource.
Significantly, Jacobs continues, in the SUSE arbitration in Europe, SCO, after the Utah court ruling in August, told the arbitration panel that there was no need to continue, that all of SCO's Linux claims were addressed. It didn't articulate a UnixWare theory. Why not? Because SCOsource really was all about SVRX, System V Release X, the releases listed as an exhibit to the Asset Purchase Agreement. And Novell intends to show that SCOsource licenses attempted to convey significant SVRX rights. The Microsoft agreement had three parts. One was purportedly about UnixWare, so Novell makes no claim on that part, although it probably could, but the other two, in light of what SCOsource was about, it claims as attempting to convey rights to SCO IP, and SCOsource was about SVRX, the trunk, which is what SCO claimed to own and that's what it claimed had value. There are listed as exhibits to the Microsoft agreement at least 28 versions of SVRX licensed to Microsoft, along with some non-APA SVRX releases. Section 4 has some UnixWare, but it's mostly SVRX, and since SCO failed to apportion, there's no way to break it down, so Novell claims it.
Now, the Sun agreement is a bit different. Sun had a 1994 buyout agreement with Novell, and Solaris is a branch of the tree. It's a flavor of Unix System V, a proprietary derivative, and so the buyout was one regarding Sun's royalty obligations under the traditional Unix licensing model, not UnixWare.
But while it was a buyout, there were other obligations left intact. For example, Sun remained under a confidentiality obligation. But in 2003, the SCOsource license, which purports to be amending the 1994 agreement, which makes it one that SCO had to get Novell's agreement to amend, is also a buyout, in the sense that it was a one time payment. But what did Sun get? Extraordinary rights to license "under any licensing model now known or developed hereafter" and the confidentiality obligation was thereby lifted. Sun could do whatever it wanted with the code. And what it wanted to do was open source Solaris. SCO contends that's incidental, nothing at all. But it was an extraordinary change, one none of the other branches of the tree had the right to do. Now, Jacobs tells the judge while showing him an exhibit, just download Solaris from the internet and what do you see? AT&T copyrights from 1984 through 1989. And that means it is SVRX. The last SVRX release under the APA is System V Release 4.2 MP. After the APA, SCO took over and they started releasing UnixWare. Prior to the APA, when AT&T set up USL, which was later bought by Novell, it was Novell doing UnixWare and licensing it. And they were licensing to OEMs, who needed the legacy licenses because they were in turn licensing to customers who in some cases were still using the old stuff.
He shows an example, a supplement to the NCR agreement on SCO's exhibit list. The practice was you'd have an agreement defining the basic rights, and then you'd have a supplement that would tell you the fees and the exact releases of software being licensed under the agreement. The NCR supplement was signed by Santa Cruz in 1997, and it includes a license to UnixWare 2.1 along with all the prior products, all the SVRX releases that predated it. SCO argues that this is an incidental licensing of SVRX. That's what incidental licensing of SVRX meant, according to SCO.
However, Jacobs points out that the NCR supplement is numbered 112, so over time NCR executed 111 prior to this one, each time paying for the refresh $250,000 for that SVRX code. So NCR had already paid for each release by the time it arrived at supplement 112. That's why it was a list of by-then free releases. They'd already paid for them. It wasn't that the SVRX code had no value. It was that NCR had already paid for it in earlier agreements and supplements. So, in supplement 112 it didn't have to pay again. The basic agreement remained the same, with supplements paying for each new release. Novell is perfectly comfortable with describing that as incidental. But that isn't what the Microsoft and Sun agreements were like. Microsoft wasn't signing on for a supplement. It was a first-time purchase of SVRX rights, not yet paid for at all. And Sun got *new* rights. That wouldn't be in a supplement, in the company practice. That would be in the basic agreement setting forth rights, and you see new SVRX releases specifically listed Sun hadn't paid for before 2003. You also see broad new rights that can hardly be called incidental. The court has already ruled that SCO is in breach of its fiduciary duties to Novell. One of those duties it to avoid what has happened here, to avoid commingling Novell's money with SCO's. "And so we start out with a heavy
thumb on the side of the scale of Novell in looking at
these revenues that SCO has retained from the SCOsource licenses," Jacobs says. Novell did its best to apportion, but SCO hasn't done a thing to try to straighten out this mess it should have avoided in the first place. The tech may be complicated, but the situation isn't. He uses an analogy. Suppose SCO was a real estate agent for Novell, and SCO sold a property whereby Novell had the rights to the land but SCO had rights to the house it built on top, and SCO sold both and put all the money in the same pot. Novell asks SCO for its revenue for the land part of the deal. SCO makes no effort to pay it or to even tell how much it got for the land and how much for the house. It does no appraisal to figure out the value of the land. It doesn't bring in the buyer to testify as to his understanding of the value of the land and the value of the house. Nothing. How hard is it to figure out who is right and who is wrong in that scenario?
SCO did nothing. The land here is SVRX, the trunk of the tree. SCO claims it has no value at all. All the value is in the house, in the SCOsource license, and so it owes Novell nothing. But the land was sold. So Novell wants its $19 million.
SCO's Stuart Singer's Opening Statement
Next, SCO's lawyer, Stuart Singer, does his opening statement. It is SCO's position that the SVRX code has de minimis value, and SCO owes no royalties to Novell at all. It's not true that SCOsource had nothing to do with UnixWare. Look at the December 2002 press release. It talked about UnixWare and OpenServer shared libraries. The January 2003 announcement talks about them too. Ditto a February 2003 sales guide. The July 2003 press release says SCO was offering a UnixWare license. From its beginning to end, Singer says, SCOsource was about technology in UnixWare and OpenServer. Novell tries to separate SVRX and UnixWare as if they were two different universes. But the tech is the same, he claims. "UnixWare is System V technology", he says. There's no difference to SCO. That of course isn't true, and you can logically see that, since he then goes on to try to figure out how to value SVRX as opposed to UnixWare. That would indeed be hard if there is no difference between them. And the APA made a distinction. Royalties would be paid for one and not the other. Right there, SCO's theory bites the dust for me. If there were no difference, and SCO just threw in SVRX for free, then the APA requirement to pay Novell for SVRX would have no meaning at all. As for Mr. Cargill, Singer continues, he was just showing how far back the chain of development went, but he'll testify that what is in SVRX is also in UnixWare. (May I just point out that this isn't the same as saying they are identical or the same thing. The SVRX kernel can be in UnixWare, for instance, along with Netware, FOSS apps, etc.) Here's SCO's description of the Microsoft agreement: Part 2, Singer claims, has nothing to do with Linux. It's about Microsoft products. It's a release of "SCO's claims" regarding those products, not "Novell's copyrights or technology". We'll see as we follow along what he means by "SCO claims". It is a central SCO point. Only section 3 of the Microsoft license, Singer claims, is up for grabs. It does list some SVRX releases, and 8.25 million is at issue. On the Sun agreement, only a minor part is about SVRX. It's mostly about UnixWare and some drivers that will be talked about and explained at trial. Again, he claims only SCO's claims are released, not Novell's. The SVRX releases in the Sun agreement "have no significant independent value". If you licensed a release, you got all the early ones free. That's what happened, he claims, with Microsoft and Sun. Freebies. No one licenses them. After UnixWare, the old code is outdated and no one wants to license it. So they get tacked on. There is a tree trunk, he says, a trunk to Unix "and UnixWare is the living trunk". No one would pay for the older versions. And after the APA, Novell didn't ask for a portion of licenses where such prior products were thrown in, as in the example of Unisys.
Open Server, Singer says, represents two thirds of SCO's annual revenue, and so that is what Microsoft got, UnixWare and OpenServer. And Novell never had any rights at all to OpenServer. SCO developed that itself. There was an amendment to the Microsoft agreement, in which Microsoft expressed concern that components in SCO's UnixWare 7 might be present in Windows. Because the older code was thrown in, SCO views it as having only incidental value. Same with the Sun license. It was UnixWare that mattered. That is what permitted Sun to develop "compatibility for Solaris using the latest release of System V, the UnixWare release, which was out there on the market."
I know. It makes no sense, this part. But I'm just telling you what he said. Then there are the drivers "that allowed Sun to use UnixWare for various actual purposes, to run applications". They didn't get that in the 1994 agreement, only in the 2003 one. Under the 1993 buyout, Sun paid $80 million, and Novell got it. In 2003, the $10 million was just for the latest UnixWare rights, the Open Server drivers, and the change in confidentiality requirements, which latter SCO values at essentially nothing.
As for the other SCOsource licenses, are they even SVRX licenses? The court didn't so rule in the August 10th ruling, Singer points out. If so, what value does that SVRX contain? Here he explains the "SCO claims" stuff: Under the APA, SCO owns "claims against any parties relating to any right, property or asset included in the business". SCOsource only released those SCO claims, which it had under the APA. If, due to the August 10th ruling, it turns out SCO has less to release, that means the buyer got less. It doesn't mean it was releasing something Novell controlled. He sums up: Now, we believe that the release of claims by
SCO, which owns the UnixWare systems and has the rights
to license UnixWare are fully broad enough to give
protection to those people because UnixWare contained
this earlier technology, and the right to use the UNIX
technology in UnixWare included the right to use the
older SV -- System V technology that carried through to
UnixWare, and there won't be any showing in this case, by
Novell, that there was any System V technology that
didn't go forward into UnixWare, which somehow was
important to the outside world and is something which only Novell could give these people. As for whether SCO had to ask Novell for permission, if the rights were incidental, then SCO did have the right without seeking Novell's OK. And SCO denies that the Sun 2003 agreement was a buyout. Amendment 2 to the APA says Novell can't prevent SCO from exercising its rights with respect to SVRX source code. And the Sun agreement is about rights to source code. The B5 exclusion in Amendment 2 means SCO didn't need to go to Novell. And with that the opening statements ended. Each has told the court what its theory of the case is and what each intends to prove. Next, the witnesses begin.
The Witnesses
Joseph La Sala
Jacobs begins asking questions of Joseph LaSala, Jr., the first witness, who used to be general counsel at Novell, from 2001 to January of 2008. That would place him at the legal helm when SCOsource began. The first piece of evidence is a letter from LaSala to Darl McBride in June of 2003, after Novell had noticed in SCO's SEC filing that it had signed two SCOsource licenses, one with Microsoft and one with an unnamed entity who later turned out to be Sun. Novell asked for a copy of those two licenses, because it suspected that Novell's rights under the APA were implicated, and it was concerned about SCO's activities in the prior six months. It asked SCO not to enter into any new SVRX licenses or to amend the two SCOsource ones. And Novell also reminded SCO in the letter of its obligations under the APA with respect to buyouts of a licensee's royalties.
The next exhibit, #220, is a July 11, 2003 letter from Mike Bready to Robert Bench, then CFO at SCO telling him that it was then more than six months since Novell had received any royalty payments. (You can find all the correspondence here.) They were to be made quarterly, according to the APA. And Novell told SCO it intended to do an audit to see about what it was owed under the terms of the APA. Between the two letters, there had been no response from McBride to LaSala's June letter. But Bench responded to Bready in six days. He told Bready that SCO was withholding payments while it reviewed Novell's conduct regarding SCO's announcements about Linux and that SCO was "evaluating the scope of Novell's Linux-related activities for compliance." And further, Bench wrote that it might withhold in the future too if it believed Novell was violating any of its obligations under the APA. What was LaSala's reaction when he read the letter? "Well, somewhere between furious and bemused," he answers. Furious because SCO was Novell's fiduciary and so had no right to withhold or offset payments due to Novell for any reason. So that was "absurd on its face", LaSala says. Hence the amusing part. He means by that it was so off the wall, so totally unlikely to stand up in any court, it made him laugh and he was amazed at the boldness and ridiculousness of the excuse.
So LaSala wrote to Darl again in August, basically giving Novell's reaction to Bench's letter. Still no response from McBride to his first letter. The next exhibit is a November 2003 letter from Bready to Bench again. Novell's request is for more information for the audit. Again, he asks for copies of the two SCOsource licenses they knew about and any others SCO might have entered into that were similar, and Novell asked SCO to identify any potential buyouts. Finally Novell asked for a copy of any licenses SCO might have entered into under the new license, the SCO Intellectual Property License for Linux. A reminder letter was sent in December, this time setting a January 12, 2004 deadline for Novell to get a response. Another letter after that one, in February, I think, saying the same things is also entered into evidence.
SCO has claimed in its opening statement that Novell never asked for SVRX royalties. Here, Novell is showing that it certainly did connect the dots regarding Microsoft and Sun, SCOsource and SVRX, and it immediately and repeatedly asked for its money under the APA, asking for the audit to make a determination. In February, on the 5th, one day after the last Novell letter, Ryan Tibbitts, SCO's general counsel, sends LaSala a letter. Tibbitts told him that SCO felt Novell was asking for more than it had a right to audit. Any rights Novell has under the APA, he claims, don't apply to the Sun or Microsoft agreements. He says both are new, Sun's a new contract and Microsoft a new agreement not covered by the APA. He also claims the IP License for Linux had nothing to do with SVRX. What about the Microsoft and Sun agreements, Jacobs asks. Did SCO say ever that those two were not subject to the APA arrangement because they only "incidentally" licensed SVRX? No, LaSala answers. So LaSala wrote back to Tibbitts, letting him know that the "blindingly obvious" issue is whether or not the Microsoft and Sun agreements are SVRX agreements. Novell had by then reviewed the SCO IP License it had put on its website, and Novell concluded licenses under that agreement would be SVRX licenses, because of the definition of "SCO IP". Novell expected the same would be true for Sun and Microsoft, but it couldn't be sure without reading them, and again Novell asked for copies immediately. I think you can see from the opening statements that Novell is showing that it asked for info, and had SCO properly responded, it would have been possible to sort out the proper apportionment at the time, instead of trying to separate out from commingled funds, funds that should never have been commingled and particularly not after Novell timely raised all the above issues. So, no answer from SCO, so in April, La Sala wrote again. This time, he put in the letter that if Novell didn't hear from SCO shortly, it would infer that SCO had nothing to say in response. He doesn't elaborate, but my understanding is that it was saying that SCO was wrong and had no good excuse.
Finally, in November of 2004, he wrote to Tibbitts again pointing out that it believed it had a right to see the two license agreements. And the letter tells Tibbitts that Novell sees that Sun had confirmed its intention to open source Solaris. Novell knew Sun had no such right under the 1994 agreement, so Novell told Tibbitts that SCO had no right to amend the Sun license without Novell's OK. He asked for both agreements again, this time particularly the Sun agreement, requesting receipt by December 3rd, with a cc of the letter going to the Senior VP and General Counsel at Sun. Now, here's an intriguing bit. LaSala testifies that Novell also wrote to Sun, asking Sun to provide a copy of the agreement. So Sun knew since at least 2004 what Novell's position was, and it did not provide a copy of the agreement. If I were Sun, I'd be worried about that, now that the Utah court has made clear that Novell kept the relevant copyrights. Why did LaSala write to Sun? LaSala: We wanted to to make sure that Sun was aware of
what Novell's rights were with respect to the Asset
Purchase Agreement and our view that SCO lacked the
authority to enter into an amendment to the buyout
agreement, and we thought it was important, since Sun had
undertaken this initiative to open source its Solaris
operating system that they be aware of Novell's
position. Man. I'd be very nervous if I were Sun. This is telling us that since 2004, before it open sourced Solaris, it knew that Novell's position was that SCO had no right to enter into the license that purported to allow Sun to open source Solaris. I'm not saying Novell would sue Sun, but I'm just saying if I were Sun, I'd figure that they could if they wanted to. And what would Sun say? They just did it anyway? And without providing Novell with a copy of the license, so the dispute could be resolved? Knowing Novell didn't like what was happening and would never have agreed? Without so much as responding to the letter? What was Sun thinking? It wasn't until 2006, in discovery, that Novell finally got to read the two agreements. SCO never complied with Novell's requests in the letters. And at no point did SCO ever say to Novell that the licenses were merely incidentally SVRX, so it owed Novell nothing.
SCO Cross Examines LaSala
Mr. Singer then does cross examination of Mr. LaSala. He asks if it isn't true that Novell knew about SCOsource as far back as 2002? No, LaSala says. He doesn't think so. Certainly not by the name SCOsource. OK, not by that name, but didn't Novell know that SCO wanted to license Unix technology for use in Linux? Yes. There were conversations about it. And, Singer asks, did Novell at any point from 2002 through June of 2003 tell SCO it could not engage in SCOsource licensing? LaSala says no, because Novell was not sure exactly what SCOsource was. It was trying to find out. Did Novell ever tell Sun that it repudiated the 2003 agreement? Not like that maybe, although he's not sure, La Sala says, but the letter did put Sun on notice of Novell's rights. Novell has not to date sent a letter saying it repudiates the agreement or the Microsoft agreement. Next, Singer begins to ask about the UnixWare terms under the APA, and Jacobs objects as "beyond the scope of the direct". He means that on cross, you can't introduce new material. You can only ask about whatever was brought out in direct. But here, the court agrees with Singer, who says that rather than call the witness again later, it's more convenient to just ask him now. Plus it does relate to the issue of the audits. So the questioning continues.
LaSala is a lawyer, and he answers like one:
Q. Did you ever seek any royalties from SCO with
1 respect to the UnixWare royalty provisions of the APA?
A. I don't know.
Q. You had audits of SCO which would reflect that
it was receiving royalties on UnixWare, correct?
A. I don't know.
Q. You don't know that SCO was generating revenue
by licensing UnixWare to the public?
A. I don't think that's what you asked me.
Q. Well, let me rephrase the question. Are you
aware of the fact that SCO was in the business of
licensing UnixWare for money?
A. Yes.
Q. Did you ever tell SCO that Novell had an
interest in receiving part of that money?
A. I just don't know at this point in time. I'm
sorry.
Q. You're not aware of that happening, though, are
you?
A. I'm not.
Q. Now, are you aware of, at any time during the
audits which were conducted of SCO, whether any issue was
ever raised that SCO had to remit a part of the UnixWare
royalty to Novell because some of the prior products that
were listed in those licenses were products that were
referenced in the APA as System V products in which
Novell retained the royalty right?
A. So, just to be clear, are you talking about the
most recent audit or audits done prior to that?
Q. Earlier audits.
A. Earlier audits? I'm not familiar with the
results of the earlier audits.
Q. Now, you've mentioned that you did not receive,
until the litigation, copies of the Sun and Microsoft and
SCOsource agreements. You now have those, correct?
A. Yes.
Q. And since the litigation has begun, has Novell
taken any further steps to continue the audit process
outside of the litigation?
A. Well, I'm not aware that it has. And my
recollection is that, at the time shortly after this last
letter exchanged between myself and Mr. Tibbitts, my
recollection is that the litigation itself began to get
more active, and I can't tell you today what the ultimate
outcome of the audit was, although it's my view, my
belief, that it has not been completed.
I've told you in the past that I think Singer is a mighty fine litigator, and here you can see an example of why I feel that way, even though overall SCO's position is pitiful. Despite LaSala forcing him to rephrase his question, he hammers on the one area of weakness, as I see it anyway, on Novell's side. LaSala, being an attorney also, is careful to answer without offering anything particularly helpful, but there is a bit of a blank there. Why doesn't he know what happened? Fairness compels me to say that I am pretty sure, if Novell thought it would help, he'd have refreshed his memory before sitting down in the witness chair.
It doesn't overturn the situation for Novell, because it is only about how much money SCO owes, and the major win already happened in August of 2007, but I agree with SCO that it's an area of weakness, and Singer doesn't miss it. He goes on to establish that Novell didn't do depositions of Sun and Microsoft. Presumably, and I'm really just guessing here, it's because Novell decided to ask for 100% under its theory of the case, based on SCO not apportioning, and because it's really up to *SCO* to present them as supporting witnesses, which it oddly never did. That is a lot more peculiar than Novell not doing so, frankly, from my perspective. Finally, Singer scores a big point, by phrasing his question about whether Novell was harmed by the delay in getting a look at the agreements in a way calculated to be helpful to his side: Q. Well, in terms of calculating the amount of the
royalty received in 2003 by SCO, you're not prejudiced in
any way now in your ability to argue what part of that
belongs to Novell, correct?
A. I think that's probably correct.
MR. SINGER: Nothing further, Your Honor. LaSala had to answer the question honestly, and Novell isn't damaged in terms of *arguing* what part belongs to Novell, but unasked and equally true is that SCO spent all the money in the meantime, so Novell has surely been prejudiced in getting any of the money.
Jacobs' Redirect of LaSala
Jacobs then does redirect examination of LaSala. This is where he gets to fix any problems he sees that Singer brought out. He asks if the Sun agreement is about Sun written code or about SVRX, and LaSala says it's the latter. Then he fixes the Singer win about damages: Q. In the intervening years between your letter of
July, 2003 and this trial, what is your understanding of
what has happened to SCO's financial condition?
A. My understanding is that SCO's financial
condition has deteriorated precipitously since that
time.
Q. And had you had access to the Sun and Microsoft
agreements in 2003, what would have been different about
your potential ability to recover from SCO?
A. Well, they would more likely have -- they would
have more money than they do today.
MR. JACOBS: No further questions. See what I mean about the law being like chess, but with people? One side moves a pawn up, and the other then has to counter.
Next up is Chris Sontag, but I will comment on that separately, because this is getting too long. You can find the three PDFs that make up this transcript here. And on request, here's a link to the end of the transcript.
***********************
1 IN THE UNITED
STATES DISTRICT COURT 2 FOR THE
DISTRICT OF UTAH, CENTRAL DIVISION 3 4
________________________________ THE SCO GROUP,
INC., a Delaware ) 5 corporation,
6
Plaintiff and Counterclaim-
7 Defendant,
8
vs.
9
NOVELL, INC., a Delaware
10 corporation,
11 Defendant and Counterclaim-
Plaintiff.
12 ________________________________
13
14 15 16 BEFORE
THE HONORABLE DALE A. KIMBALL
17
DATE: APRIL 29, 2008
18 REPORTER'S TRANSCRIPT
OF PROCEEDINGS 19
TRIAL TRANSCRIPT 20 21 22 23
24
Reporter: REBECCA JANKE, CSR, RMR 25
KELLY BROWN HICKEN, CSR,RMR
1
1
APPEARANCES 2 3 FOR NOVELL: MORRISON &
FOERSTER LLP 4
BY: MICHAEL A. JACOBS, ESQ. 5
EIRC M. ACKER,
ESQ. 6
DAVID E. MELAUGH, ESQ. 7
[address] 8
[address] 9 10 11 12 FOR SCO:
BOIES, SCHILLER & FLEXNER LLP 13
BY: STUART H. SINGER,
ESQ. 14
EDWARD J. NORMAND, ESQ. 15
JASON
CYRULNIK, ESQ. 16 [address]
17
[address] 18 19
HATCH, JAMES & DODGE, P.C. 20
BY: BRENT O.
HATCH, ESQ. 21 [address]
22 [address]
23 24
25
2
1 2 3
INDEX 4 5 WITNESSES
EXAMINATION
PAGE 6 7
JOSEPH LA SALA Direct by
Jacobs 45
Cross by Singer
64 8
Redirect by Jacobs
75 9 10
CHRISTOPHER SONGAG Direct by Acker
77 11
Cross
by Normand 151 12
13 14
EXHIBITS 15 NOVELL'S
RECEIVED 16
215
47
220
50 17 234
53 280
55 18
293
56
297
59 19 303
60 317
64 20
27
126
30
126 21 22 SCO'S 23
189
193 24 25
NN
3
1 APRIL 29, 2008
SALT LAKE CITY, UTAH
2
PROCEEDINGS 3
*** 4
THE COURT: Good morning.
I'm advised that we 5 had a few calls about lap tops.
The court policy is that 6 you can't have them
here. You can have your cell phones, 7 but they need
to be off. 8 We're here
for the trial of the issues 9 remaining in SCO Group vs. Novell,
2:04-CV-139. 10 SCO is
represented by Stuart Singer. 11
MR. SINGER: Good morning, Your Honor. 12
THE COURT: Good Morning.
Mr. Ted Normand. 13
MR. NORMAND: Good morning, Your Honor. 14
the court: Mr. Brent Hatch.
15 MR. HATCH:
Good morning, Your Honor. 16
THE COURT: And Mr. Jason Cyrulnik. 17
MR. SINGER: He will be here shortly,
Your 18 Honor. 19 THE
COURT: All right. 20
And defendant Novell by Mr. Michael Jacobs. 21
MR. JACOBS: Good morning, Your
Honor. 22 THE COURT:
Good morning. 23
Mr. Eric Acker. 24 MR.
AKCER: Good morning, Your Honor. 25
THE COURT: Good morning.
4
1 And Mr. David
Melaugh. 2 MR. MELAUGH:
Good morning, Your Honor. 3
THE COURT: I received a joint statement and 4 then
an amended one. I was going to say you people ought 5
to teach everyone else how to conduct a trial with that 6 one
statement. But I haven't had a chance to read the 7
amendment. How is it different, the amended joint 8
statement? 9 MR.
NORMAND: Your Honor, that is one exhibit 10 that
Novell had not addressed in the original 11 stipulation. 12
THE COURT: All right.
13 MR. NORMAND:
But to which we had reached an 14 agreement as to the
admissibility. 15 THE
COURT: Very good. Is it the last one? 16
MR. NORMAND: Yes,
sir. It's 411, I believe. 17
THE COURT: 411? Is that
right? And does 18 either party want to invoke the
witness exclusion? 19 MR.
SINGER: We do, Your Honor. 20
MR. JACOBS: I'm afraid so, Your Honor. 21
THE COURT: All right.
So, is there anyone 22 sitting back there who is going to
testify who is not one 23 of your client -- who is not a client
representative? 24 They have to leave until their testimony is
complete. 25 MR. JACOBS:
Each side may have one client
5
1 representative, correct? 2
THE COURT: Yes. Each of you
has a client 3 representative, of course.
They can stay, even if 4 they're going to be a witness. 5
Now, will part of the trial have to
be sealed? 6 Some of the material is proprietary.
Talk to me about 7 that for a moment. 8
MR. SINGER: We believe we have worked that
out 9 and that it will not be necessary to close the courtroom
10 or take any extraordinary efforts in that regard. 11
THE COURT: Thank you.
12 MR. JACOBS:
That's our understanding as well, 13 Your Honor. 14
THE COURT: All right.
Who's going to make the 15 opening statement for Novell. 16
MR. JACOBS: I will,
Your Honor. 17 THE
COURT: Mr. Jacobs, go ahead. 18
MR. JACOBS: Well, here we are, Your
Honor. 19 THE COURT:
Who's going to -- who do you 20 propose, by the way,
counsel, keeps the time limits 21 you've set on yourselves? 22
MR. JACOBS: Yes.
I think we worked that out, 23 the time limits. 24
MR. ACKER: We have
agreed between SCO and 25 Novell, but we are prepared to keep
track of time.
6
1 MR. SINGER:
We have worked out, as this Court 2 is aware, an
allocation of time so that we will 3 definitely finish in the
time allotted by the Court, and 4 everything, including opening,
will count against our 5 respective time. 6
THE COURT: It's one thing to work
out an 7 allocation. It's another to abide buy it.
8 MR. SINGER:
We have a number of people here 9 with watches. 10
THE COURT: All right, go
ahead, Mr. Jacobs. 11 MR.
JACOBS: Your Honor, in this bench trial, 12 we seek
a recovery of exactly $19,979,561 from SCO, based 13 on the
Court's earlier findings of breach of fiduciary 14 duty,
conversion, unjust enrichment. This is an amount 15
we seek from SCO based on its licenses to Sun, Microsoft 16 and
what we're referring to as the SCOsource licenses. 17 And we'll
be going through those in the course of both my 18 opening
statement and this trial. 19
In view of the Court's earlier findings, our 20 case rests on
four basic points, and the evidence will, 21 over the course of
this trial, Your Honor, prove these 22 points. 23
First. Contrary to what SCO
would have the 24 Court believe in this trial, when it was
active, 25 SCOsource was all about SVRX. It was not
about
7
1 SCO-written code or Santa Cruz-written code.
It was not 2 about UnixWare, in the sense that it was not about
the 3 code that Santa Cruz contributed to the code base that 4
evolved over time and became UnixWare. 5
It was, rather, all about SVRX, the rights that 6
SCO claimed to have acquired from Novell but the Court 7 has
found that it did not. 8
Second. The SCOsource licenses convey 9 substantial
SVRX rights; not merely trivial SVRX rights, 10 not merely
unimportant SVRX rights, but, in fact, 11 substantial SVRX
rights. And, in a sense, I think, in 12 this trial,
we will be eliding or finessing the question 13 of incidentalness
that was raised in the wake of the 14 Court's summary judgment
ruling. We will prove that 15 these licenses were
not incidental we will be proving 16 that they were substantial
SVRX rights, and in a sense, 17 our claim to this amount of
recovery turns to that 18 finding, that the SVRX rights granted
in these SCOsource 19 licenses were substantial. 20
Third. Contrary to SCO's
review of the history 21 of UNIX licensing, the practice of UNIX
licensing over 22 time does not help it. We will
show that, in fact, you 23 can learn from the history of UNIX
licensing what an 24 incidental or unimportant or not very much
value SVRX 25 license looks like, and we will show that these --
that
8
1 that isn't what these licenses look like.
That isn't 2 what the SCOsource licenses look like. 3
And then, finally, a mix of a legal
and a 4 factual point. The factual point is:
SCO has not 5 offered any apportionment. We actually
have, as you will 6 see when we go through the Microsoft license,
we have 7 done our best to work with that agreement and come up
8 with an apportionment. SCO has not.
That's factually 9 indisputable. The legal point on
which our claim to this 10 entire amount rests is that as our
fiduciary, having met 11 our initial burden, it was their burden
to develop an 12 apportionment and approve that apportionment if
there was 13 any deduction from the amounts they recovered on
account 14 of these SVRX SCOsource licenses. 15
With that in mind, let's proceed to what
the 16 evidence will show at trial. First.
The focus of 17 SCOsource was SVRX. Reading SCO's
trial brief, it 18 appears that SCO will try to rewrite history.
It will 19 try to argue that, contrary to what it
said over and over 20 again about the importance of the SVRX code
base that it 21 believed it had acquired through this chain of
22 transactions, including the Asset Purchase Agreement, SCO 23
is now arguing: No, no, no, that wasn't what was so 24
important. What was important was UnixWare, and what 25
these licenses are all about is UnixWare and not the SVRX
9
1 code base. 2
As I have foreshadowed, that was not what SCO 3 said at the
time. So let's set the stage. It's the 4
second half of -- or the last quarter of 2002, early 5 2003.
By this time, Caldera has bought the UNIX business 6 from Santa
Cruz, that Santa Cruz had acquired from Novell 7 pursuant to the
Asset Purchase Agreement, acquiring no 8 more than Santa Cruz had
acquired from Novell. 9
New management has come into Caldera. The 10 company
is renaming itself SCO, and it's developing its 11 business
strategy, and it has concluded that the 12 licensing revenue from
UnixWare and from OpenServer, the 13 two flagship products of
Santa Cruz and then Caldera SCO, 14 those two products did not
generate enough licensing 15 revenue for a viable business
strategy. In fact, it was 16 a declining revenue
base. 17 So, instead,
SCO decided to set out to, mixing 18 the metaphor a bit, to mine
the trunk of the tree. And 19 this metaphor that SCO
used to describe its strategy, 20 which we will introduce as
Novell Exhibit 421, is a 21 powerful metaphor, and it really
tells us a lot about 22 what was going on at the time. 23
What SCO was
saying is that there are 24 these various branches representing
various flavors of 25 UNIX, and some of these the Court has
become quite
10
1 familiar with from earlier rulings. So
there's IBM AIX 2 over on the upper left. That's
IBM's flavor of UNIX. 3 That was the subject of SCO's claims
against IBM. There 4 is Sequent.
You'll remember there was also a Sequent 5 dispute between the
parties. And then up at the top is 6 Sun Solaris,
another flavor of UNIX. And then, down at 7 the
bottom on the lower right-hand corner, there is SCO 8 UnixWare.
These are all branches SCO explained, based on 9 the
trunk, which was the UNIX core System V code base. 10
All those branches were based on
that code 11 base, and what SCO's strategy -- since SCO's
strategy of 12 licensing branches, SCO OpenServer and SCO
UnixWare was 13 not a viable business strategy, SCO was going to
develop 14 revenue from the trunk. And that trunk,
SCO made clear, 15 was the legacy code base that SCO had acquired
from Santa 16 Cruz and, in turn, from Novell, it contended, by
virtue 17 of the Asset Purchase Agreement. 18
Now SCO would like to claim that it's all
in 19 the branches, that the value in these SCOsource licenses
20 was in the branches. But, at the time, SCO said:
No. 21 The value was in the intellectual property in the
trunk. 22 And SCO, the strategy was explained, was going to mine
23 the trunk. 24
One of the key moments in the history of 25 SCOsource was the May
12, 2003 letter to Fortune 1,000
11
1 companies that SCO sent out seeking to mine the trunk,
2 seeking to frighten, scare the many users of Linux into 3
signing SCOsource intellectual property licenses. And 4
there was a very simple contention that SCO advanced. 5 That
contention was that UNIX source code distributed by 6 AT&T
has found its way into Linux. 7
Remember, the basic proposition that SCO was 8 advancing during
this the time was that this UNIX code 9 base in the trunk had
proliferated through these various 10 derivatives such as IBM's
AIX. And through the wide 11 access to these
derivatives and, SCO claimed, the 12 carelessness of the
developer community, the code from 13 the trunk had leaked out
through the derivatives and, in 14 fact, had leaked out into
Linux. 15 Now, at no time
in the ramp up of SCOsource, 16 did SCO claim: Oh, by
the by, there is also some SCO 17 UnixWare code in Linux.
There is some code that we wrote 18 that's in Linux. 19
And, as we'll see, at no time that
has SCO 20 articulated a theory of the case that rests on 21
SCO-written, SCO-copyrighted code. And SCO -- in this 22
connection, I am using SCO and Santa Cruz interchangably. 23
After years of litigation and the
investment of 24 tens of millions of dollars, in the IBM case,
SCO was put 25 to its proof and that that proof that SCO was put
to was:
12
1 All right, this is it. After all these
rulings that I 2 have issued and that my magistrate judge has
issued, I'm 3 telling you, SCO, you have really got to lay it out
for 4 us. What exactly are you contending was
misappropriated 5 in Linux? 6
And this is -- this demonstrative reflects the 7
final expert report from Mr. Cargill, SCO's expert, who 8
undertook to lay all that out. With all the incentive in
9 the world to show that there was something in SCO 10
UnixWare that had found its way into Linux, Mr. Cargill 11 found
only UNIX System V, Release 4 code as infringing 12 Linux.
And, of course, UNIX System V, Release 4 releases 13 are SVRX
under the Asset Purchase Agreement. 14
At Novell, we know very well what SCOsource was
15 all about because, of course, we got in the middle of it, 16
I think it's fair to say, when we said: No, SCO, you 17
don't own the UNIX System V code base copyrights. We own
18 those. 19
And so, of course, SCO sued Novell for slander 20 of title and
claimed that that contention by Novell had 21 caused hundreds of
millions of damage to SCO and, more 22 particularly, frustrated
it's SCOsource licensing 23 campaign. Now, at no
time in that whole process, did SCO 24 say to the SCOsource
licensees or potential licensees: 25 Oh, don't mind the Novell
claim to own the SVRX
13
1 copyrights. Pay no attention.
We have a theory. We 2 have a claim. We
have value in SCO UnixWare. We have 3 value in the
branch of the tree. 4
They never said that, and they claimed that our 5 contention to
own the UNIX System V copyrights had 6 crushed SCOsource. 7
The Court's summary judgment order
left open 8 the possibility that maybe there was a copyright
claim in 9 SCO UnixWare and SCO- or Santa Cruz-written code and
the 10 copyrights that had not transferred -- in the copyrights
11 as to which Novell's claim of ownership was immaterial; 12
that is, copyrights that, indisputably, SCO owned by 13 virtue of
its acquisition of the UNIX business from Santa 14 Cruz.
The Court's summary judgment ruling left that 15 possibility
open. 16 At no time has
SCO articulated a theory under 17 that opening. And,
in particular, in the SUSE 18 arbitration, which is still stayed
pending the 19 bankruptcy, when SCO was arguing to the bankruptcy
20 panel -- I'm sorry -- arguing to the arbitral panel: 21
Don't go forward with this arbitration. There is no 22
need. The Court -- the District Court in Utah, Judge 23
Kimball, has already ruled on all the important issues 24 here.
25 SCO said it was
pointless for the arbitration
14
1 to continue because the ownership decisions that the
2 Court made here addressed all of SCO's claims relating to 3
Linux. So, having been given the opportunity to 4
articulate a claim, an opportunity very evident on the 5 Court's
summary judgment ruling, a claim based on SCO 6 UnixWare, SCO has
failed to do so. 7 So,
what's the point of all this? We're 8 looking at
litigation pleadings. We're looking at 9 letters
that SCO sent out. You will hear much more in 10 the
scope of the trial. The point of all this is that 11
SCOsource was about System V, Release X. It was about
12 the releases on the exhibit to the Asset Purchase 13
Agreement. The whole SCOsource campaign was premised on
14 mining the trunk. And the trunk was not what SCO
was 15 saying -- is now saying where the value lies, the trunk
16 was the UNIX System V code base. 17
Point number 2. When you look at the
SCOsource 18 licenses, particularly in light of the SCOsource 19
campaign, the SCOsource licenses convey substantial SVRX 20
rights, or at least attempt to convey. Our proposition,
21 of course, is that SCO had no power to convey that, but 22
the licenses on their face and the licenses in the wake 23 of
SCOsource indicate the party's intentions; that is, 24 that
substantial SVRX rights would be conveyed by the 25 SCOsource
licenses.
15
1 Let's
briefly -- let me briefly walk the Court 2 through the Microsoft
and the Sun agreements. We'll 3 leave the other
SCOsource licenses to the proceedings at 4 trial.
I'll just briefly refer to them. As the court is 5
probably by now aware from the pretrial briefing, there 6 are
three relevant sections of the Microsoft/SCOsource 7 agreement,
and we are seeking a recovery of what SCO 8 received from
Sections 2 and Section 4, and we're leaving 9 Section 3 out of
our claim. We have apportioned, Your 10 Honor,
because that, as you'll see, Section 3 appears to 11 relate
specifically to UnixWare. 12
Now, Section 2 and its two subsections grant 13 Microsoft broad
licenses and releases to SCO intellectual 14 property.
Our view is that in light of the SCOsource 15 campaign and in
light of the intellectual property that 16 SCO claimed to own,
this release -- the value in this 17 release lies in SVRX.
And we will introduce testimony in 18 the course of the
trial that confirms that that was SCO's 19 view, that while there
may be some value from this 20 release in UnixWare, there is
substantial SVRX value. 21 And there's no way, looking at Section
2, to pars the 22 SVRX value from anything else. And
so our contention is, 23 we're entitled to the Section 2 amounts.
24 Section 3 is
the section that, as I indicated, 25 we are apportioning to SCO.
Section 3 is explicitly an
16
1 option to purchase a UnixWare license and a UnixWare
2 license only. And it's $7 million the amount that
SCO 3 received. 4
Now, if we had wanted to, it seems we could 5 have taken a run at
this in two ways. We could have 6 said:
Well, this is all artificial. It can't be that 7
there's $7 million worth of UnixWare value here.
The 8 other thing we could have pointed out is that this 9
option, this Section 3 amount is a gateway to Section 4. 10
Microsoft had to exercise its option under Section 3 in 11 order
to receive the Section 4 grants, and as you'll see, 12 the
Section 4 grants are heavily laden with SVRX. 13
But we're asking for, on Section 2 and
Section 14 4, for the uncertainties to go our way, and so while
15 there is arguably uncertainty about Section 3 and how the 16
total value of that might fall, we're allocating that, 17 we're
apportioning that to SCO. 18
It looks like the copy that I handed the Court 19 may be missing
some slides, so we will get those to Your 20 Honor. 21
So, this is Section 4.
And Section 4, when you 22 look at it, compared to the exhibits
of the Microsoft 23 license, there are at least 28 versions of
SVRX that are 24 licensed to Microsoft in Section 4.
There are some 25 non-APA SVRX releases as well that are
the subject of
17
1 Section 4, but the grant of rights is really
tremendous. 2 In Section 4, it's a fire sale. SCO,
for $8 million, 3 gave Microsoft virtually unlimited rights to
SVRX and to 4 use it in a wide variety of ways. Yes,
there is some 5 UnixWare -- there are some UnixWare rights in
there, but 6 because there is so much SVRX in Section 4, we
believe we 7 are entitled to the entire 8.25 million of Section 4
8 revenue. 9 Well,
that's Microsoft. As you can see from 10 the face of
the Microsoft agreement, it actually was 11 possible to do an
apportionment because SCO broke out a 12 portion that was
particular to UnixWare. And, again, 13 while there
are some uncertainties about that 14 apportionment, and we are
asking for the uncertainties to 15 go our way on Section 2 and
Section 4, we are leaving the 16 uncertainties associated with
Section 3 with SCO. 17
Let's look at the Sun agreement. And to 18 understand
the Sun agreement, which of course is a 2003 19 agreement, we
need to first look at the 1994 Novell/Sun 20 agreement.
Now, you will recall from the tree metaphor 21 that Sun Solaris
is a flavor of UNIX System V. It is a 22 variant and
derivative of UNIX System V.. 23
And the 1994 Novell/Sun agreement was an 24 agreement by
which Sun bought out its obligations to pay 25 ongoing revenues
to then Novell for -- in effect for the
18
1 distribution of the Solaris proprietary Sun operating
2 system. So, it was a buyout of its royalty
obligations 3 under the traditional UNIX licensing model that Sun
had 4 inherited up to that time. 5
Now, importantly, all it really did is buy out 6
the royalty obligation. It left the confidentiality 7
obligations largely intact. And all that the 1994 8
agreement did was allow Sun to distribute Solaris, a 9 non-Open
source, proprietary operating system and not pay 10 ongoing
per-unit royalties. They bought out the royalty 11
obligation. But there was nothing -- in terms of the 12
structure of the license, other than the royalty buyout, 13 there
is nothing extraordinary about the Novell/Sun 14 agreement form
1994. 15 Now let's look
at the 2003 SCO/Sun agreement. 16 Now, as we pointed out to the
Court, on its face this 17 agreement purports to amend the 1994
agreement and, in 18 doing so runs flat into the language of
Section 4.16B 19 which says to SCO: Thou shalt not
amend an SVRX license 20 without Novell's approval. 21
And, of course, again on its face,
it relates 22 to a buyout agreement, and it is, itself, a buyout
in the 23 sense that there is a one-time payment rather than 24
ongoing payments to SCO that are contemplated by this 25
agreement. So, that's our amendment number 2 argument.
19
1 The parties agreed on a program for buy-outs for 2
agreements relating to buy-outs, agreements relating to 3
buyouts, and that's exactly what the 2003 agreement is. 4
But the real significance of the 2003
agreement 5 between SCO and Sun was that it relaxed the licensing
6 restrictions that had been imposed over time by the AT&T 7
licensing model on Sun and that were carried forward 8 largely in
tact the 1994 agreement. The license grant in 9 the
2003 SCO/Sun agreement is, once again, 10 extraordinarily broad,
imposing virtually no limitations 11 on Sun's ability to license
the licensed products. 12
And, in particular, and this is quite 13 remarkable language, in
Section 8.1 in which Sun is 14 allowed, if it reproduced,
distributes, etc., the 15 technology, which is the licensed code,
under any 16 licensing model now known or developed hereafter in
Sun's 17 sole discretion, pursuant to the license granted by SCO
18 herein, then the technology is not confidential 19
information. 20 So, this
is a clause that essentially says to 21 Sun: Not only
are your payments -- do you not have any 22 pavement obligations;
those have been taken care of by 23 the 1994 agreement, and we
are not imposing any per unit 24 royalties under the 2003
agreement, but now you can do 25 virtually whatever you want with
the code that's licensed
20
1 under the 2003 agreement. You can -- you
can use any 2 licensing model now known or developed hereafter in
Sun's 3 sole discretion. That's what the 2003
agreement allows 4 Sun to do. And, once that happens,
it's not 5 confidential. 6
So, in a variety of different ways, this 7 agreement
allowed Sun to do something that it couldn't 8 have done under
the 1994 agreement. Most importantly, it 9 allowed
it to open source Solaris. Solaris, earlier a 10
proprietary derivative, another branch of the tree, just 11 like
the rest of them, could now be open sourced and made 12 available
pursuant to open source licenses. 13
Is this really de minimus, trivial, unimportant 14 SVRX
licensing? Well, if you look at the exhibit, you'll 15
see -- to the Sun agreement, you'll see all the SVRX 16 releases
listed there. But really the core point is 17
this. And it's essentially undisputed. Many
of -- much 18 of what we will be pointing out to the Court in the
19 course of this trial would be, to people in the 20
technology community, proof of the stunningly obvious, 21 and one
of the elements of our proof is that open Solaris 22 is in fact
derived from a System V release code base. 23
And this is an example -- on the left-hand 24
side, you can see -- you can see the so-called CDDL 25 header.
CDDL is the name of the open source license
21
1 under which open source under which OpenSolaris is 2
licensed. You have heard about the GPL in the course of
3 the case today. This is a different license, the
CDDL. 4 And you will see in OpenSolaris, if you just download the
5 code over the internet, it's littered with AT&T copyright
6 notices from '84 to '89. That is System V.
That is 7 System V, Release X. That is SVRX within
the meaning of 8 the asset purchase agreement. 9
So, again, what the 2003 agreement
allowed Sun 10 to do is illustrated precisely by this
demonstrative. 11 Any one of us can now go to the Sun web site,
download 12 OpenSolaris and look at OpenSolaris code, which
happens 13 to be AT&T code, SVRX code, Novell's code, the
code that 14 SCO was restricted from licensing, restricted from
15 amending licenses to in the Asset Purchase Agreement 16
The other SCOsource
licenses, as we will see, 17 they purport to license SVRX and
UnixWare. They purport 18 to license System V
and UnixWare. The other SCOsource 19 licensees, of
course, the people who received the Fortune 20 1000 letter or who
heard about the Fortune 1000 letter 21 and, trying to mitigate
the legal threat from SCO, 22 decided to take the SCO
intellectual property license for 23 Linux. And,
again, that was all driven by SCO's claim 24 that System V code
was in Linux, not UnixWare, not SCO 25 UnixWare code.
22
1 UNIX licensing
practices. The practices over 2 time do not help SCO
in this case. SCO apparently has 3 concluded, from
its review of the history of UNIX 4 licensing, that it knows what
incidental is, number 1, 5 what incidental licensing is; and,
number 2, that those 6 examples or the practice of incidental
SVRX licensing is 7 exactly what happened in the SCOsource
licenses. 8 And,
essentially, what their point is, is this: 9 Look, we can look at
some of the licenses that the 10 parties entered into over time,
whether it was AT&T or 11 AT&T/USL or Novell or Santa
Cruz in which, if you look at 12 the attachments, there's SVRX
code licensed pursuant to 13 an attachment or a supplement, but
the main license, if 14 you will, is to UnixWare. And
they say that's incidental 15 SVRX licensing. And,
so, look, look, look. Look at the 16 Microsoft
agreement. There's UnixWare and then there's a 17
list of SVRX. It must mean that that SVRX is incidental,
18 too. 19 We will
show the Court that the analogy part of 20 this fails, but we
actually kind of agree with SCO about 21 the first part of this;
that is, that you can see 22 examples of incidental SVRX
licensing through the UNIX 23 licenses or the UnixWare licenses
that were entered into 24 and that are on their exhibit list.
25 So, to get into this a
little bit, let's just
23
1 review the timeline here and try and standardize, at
2 least on our side, the vocabulary that we're going to try 3
to use to keep things clear. So, right in the middle of
4 this timeline is the APA, the last SVRX release, System 5
V, Release 4.2 MP that is under Novell's auspices, is 6 also the
last SVRX release that's on the Asset Purchase 7 Agreement or
attachment. 8 And then
SCO takes over, and they start 9 releasing UnixWare releases, and
you can see the history 10 of UnixWare up through the latest -- I
believe the latest 11 release. Now, recall that
pre-1995, first AT&T is the 12 owner of UNIX.
Then they set it up in the sub, USL, and 13 then USL is bought by
Novell, and so Novell is doing 14 these licenses.
And, indeed, the practice was that a 15 customer would get the
latest release. 16 But
recall that what's going on here is that 17 the customer is
licensed in turn. These are OEM's. 18 These are
computer companies that are, in turn, licensing 19 UNIX out to
their end users. And so they need to retain 20 the
rights to the previous versions because they have end 21 users
who are still using the previous versions, who 22 still haven't
updated to the latest release. So the 23 practice in
UNIX licensing was to execute a supplement 24 for the latest
release and then have on the supplement 25 all the previous
releases as well.
24
1 So let's take
a look at one of the -- so this 2 is the NCR supplement on SCO's
exhibit list. And recall 3 the basic structure
from our earlier briefing leading up 4 to the summary judgment
motion. There would be a 5 software agreement
that would define the basic rights of 6 the parties and
obligations, and then there would be the 7 supplements that would
provide the fee and the exact 8 software being licensed pursuant
to the software 9 agreement. 10
So this is a supplement. It's a supplement to 11
NCR. It's from Santa Cruz. You can see that
it was 12 executed by the Santa Cruz operation in 1997.
And it 13 includes a license to UnixWare 2.1 Source at an
extended 14 price of $250,000. And then, if you go to
the next 15 slide, you'll see all the prior products are
licensed. 16 So, here are all the SVRX releases, for example,
that 17 predated this UnixWare release, and you can see 4.2 MP on
18 there as an SVRX release. 19
And SCO says: Look, incidental licensing. 20
You've got a UnixWare license and you've got all this 21 SVRX
code being licensed as well. That is what 22
incidental licensing meant. And I think we've
actually 23 got a pretty good example of incidental licensing
here 24 because note what supplement number this is.
This is 25 supplement number 112. Over this
timeline, NCR executed
25
1 112 supplements, each time adding a new release or a
new 2 variant of a release to the licensed code that it had, 3
and each time, just as in this case, paying $250,000 4 for the
latest refresh, if you will; each time, paying 5 the amount for
that SVRX code. And so each of these 6 listed
releases, if you go back through the history of 7 NCR's
licensing, was the subject of its own supplements 8 by which the
licensee, in this case NCR, paid the owner 9 of its UNIX business
the amount for that licensed code. 10
Why is this incidental? Why this is
an example 11 of incidental licensing of SVRX?
Because the licensee, 12 NCR, had already paid for each of these
releases. It 13 already had the rights to
each of these releases. In 14 fact, its
rights to those releases were not in any way 15 expanded because
software agreement -- remember, that's 16 the stable document
through all on this -- and the 17 software agreement is what
defines the rights and 18 obligations of the parties as to each
of these releases. 19
So, I think we're comfortable with this being 20 an example of
incidental licensing; software you've 21 already paid for as to
which you get no expanded rights. 22 But, as you've seen from
Microsoft and Sun, that's 23 exactly not what happened in those
two cases, and it's 24 certainly not what happened in the other
SCOsource 25 licenses. In the case of Microsoft, to
the best of our
26
1 knowledge, no previous UNIX license at all.
This was the 2 license that gave them all the rights to SVRX that
they 3 ever got and greatly -- and wide rights, broad rights, 4
expansive rights. 5
And, in the case of Sun, while it's true that 6 they had
previously paid for SVRX releases, their new 7 SVRX releases on
the 2003 Sun agreement, new and still on 8 the asset purchase
exhibit, and then these incredibly 9 broad rights to take a
proprietary operating system and 10 make it open source, the
opposite of incidental; 11 substantial, significant, major,
predominant. 12
SCO, Novell's fiduciary, has failed to 13 apportion.
So I haven't harped on this, but let me just 14 spend a moment on
it. The Court has already found that 15 SCO is in
breach. They breached fiduciary duties. 16 Fiduciary
duties are duties to place the interests here 17 of Novell above
SCO's interests. They are the duty to 18 avoid
precisely this situation in which the amounts of 19 money are
commingled. And so we start out with a heavy 20
thumb on the side of the scale of Novell in looking at 21 these
revenues that SCO has retained from the SCOsource 22 licenses.
23 We have done
our best, looking at the face of 24 the licenses themselves, to
apportion by allocating a 25 substantial portion of the Microsoft
agreement to SCO.
27
1 SCO has not done anything like that. They
have not come 2 forward with an apportionment. 3
Now, the software aspect of this can add
a 4 technology overlay to what, in some senses, is a very 5
straightforward and simple dispute. So, let's take a 6
real property analogy. Let's imagine that SCO was a real
7 estate agent for Novell and that they sold a property 8
that Novell had the right -- as to the land, Novell had 9 the
rights to get the revenues, and as to the house, 10 maybe SCO
built the house and SCO gets the rights to the 11 revenues of the
house. But they sell the property for a 12 single
amount, and they commingle, if you will, the value 13 of the land
and the value of the house. 14
And Novell, the principal, goes to SCO and 15 says:
Wait a minute. We are entitled to the revenues, 16
and you commingled them, and there is no separate -- 17 there is
no way to separate them out. And SCO doesn't 18 come
forward with what you'd expect it to come forward 19 with.
You'd expect it to do an appraisal. You'd expect 20
it to appraise the value of the land. You'd expect it to
21 appraise the value of the house, and do its best, 22
notwithstanding the heavy burden it bears, as a 23 fiduciary, to
apportion the amounts that it retained. 24
Maybe it would even bring in the buyer to 25
testify before the Court and say that that apportionment
28
1 actually makes sense to me because I went out and I
got 2 valuations of land, and I got valuations of the house.
I 3 knew what I was doing, and the valuation that
SCO has 4 presented to the Court is consistent with my, the 5
buyer's, personal view of the value of the respective 6
components of this acquisition. 7
SCO has done nothing like that. They would 8
like the Court to believe that the land here, SVRX, the 9 trunk
of the tree, is valueless in the SCOsource 10 licenses, that all
the value is in the house that SCO 11 built, that nothing should
be awarded to Novell and that 12 it cannot and should not be
acquired to apportion. 13
In the face of the overwhelming evidence about 14 what SCOsource
was all about, the documents themselves, 15 the agreements
themselves and their substantial licensing 16 of SVRX, the
history of UNIX licensing, which we think 17 favors us, not SCO,
and that the legal duties imposed on 18 SCO, as Novell's
fiduciary, we think there really 19 can't -- there can be no
other outcome here than to award 20 Novell the amount Novell
seeks; again, a little over $19 21 million. 22
Thank you very much, Your Honor. 23
THE COURT: Thank you, Mr.
Jacobs. 24 Mr. Singer,
you may make your opening 25 statement.
29
1 MR.
SINGER: Thank you, Your Honor. If I might 2
approach? 3 THE
COURT: Yes. 4
MR. SINGER: The book. Good morning, Your 5
Honor. 6 THE
COURT: Good morning. 7
MR. SINGER: I'd like to start with three 8
observations based on what Mr. Jacobs has said.
The 9 first thing he said this morning was that the amount of 10
damages that they will be looking for is exactly 11 $19,979,561,
which I thought was an interesting 12 development since, just
that few days ago, in their trial 13 brief, Novell stated that,
as the Court may have surmised 14 from the motion in limine
briefing, neither Novell nor 15 SCO intends to come into the
Court and argue, e.g., the 16 evidence definitely establishes
Novell is entitled to 17 precisely 98 percent of this license's
revenue, 88 18 percent from this license, etc. 19
It seems now they have a to a
dollar figure 20 which they believe the evidence will sustain.
It is our 21 position in this case that there
is a de minimus value to 22 the SVRX rights, and I'm using that
term in the sense in 23 which the Court used it in the summary
judgment order 24 with respect to meaning just those amounts
which, under 25 that order, Novell is entitled to as a royalty.
30
1 The
second point I'd like to turn to, which, if 2 we turn to slide 19
in the binder of materials -- and 3 hopefully we'll put it on the
screen momentarily here. 4 And it is a follow-up of a statement
Mr. Jacobs made here 5 today, where he said the focus of
SCOsource is SVRX. And 6 that's really similar
to a statement which was filed in 7 Novell's memorandum in
support of its motion for summary 8 judgment on its fourth claim,
which is, from start to 9 finish, Novell said, SCO never claimed
SCOsource had 10 anything to do with SCO's UNIX derivative rights
and any 11 attempt by SCO to recast SCOsource now should fail.
12 So they are
feeling the Court in its papers and 13 now in open court, that
SCOsource had nothing to do with 14 UnixWare. That
is simply not so. If one turns to what 15 the
documents the Court will see during this week of 16 trial will
show, and the very next slide -- it's the 17 December 2002 press
release. SCO's shared libraries -- 18 and it talks
about UnixWare and OpenServer licensing 19 agreements did not
allow those UNIX libraries to be 20 separated from the operating
systems. 21 The
January 2003 announcement, which talks 22 about SCO's UnixWare
and OpenServer license agreements, 23 the February 2003 sales
guide, which says precisely that 24 with respect to the shared
library, the document 25 repeatedly refers to SCO's concern that
UnixWare and
31
1 OpenServer technology have been improperly used in
Linux. 2 In the July 2003 press release, where it says the
company 3 also announced it will offer UnixWare licenses to
support 4 one-time binary use of Linux for all commercial users
of 5 Linux based upon certain terms. 6
So the evidence will show that in fact 7
SCOsource, at its inception and throughout remained 8 concerned
with technology that was in UnixWare and 9 OpenServer. 10
And the third point I'd like
to observe comes 11 off of a chart which Mr. Jacobs used which
tries to draw 12 this distinction. It's the chart
that was the timeline 13 where on the left-hand side you had SVRX
and, on the 14 right-hand side, you had SCO UnixWare.
And it suggests 15 that these are two different universes, that
SVRX and SCO 16 UnixWare are somehow distinct and, if you're
referring to 17 SVRX, you're not including UnixWare, and
vice-versa. 18 The
reality is, is that there is not a 19 dichotomy in terms of the
technology between UnixWare and 20 System V.
UnixWare is System V technology. It is the 21 latest
evolution of that. It is UnixWare -- UNIX System 22
V, 4.2 MP. And this dichotomy that Novell seeks to draw
23 between UnixWare and System V, with respect to the 24
technology, is simply not the case. And that's shown,
25 for example, by documents such as Novell's own sales
32
1 binders for UnixWare, which says that this is the
latest 2 implementation of UNIX System V, Release 4.2 MP 3
technology and repeats that many times as being the 4 latest
generation of that use, that this is powerful, 5 scalable,
reliable UNIX System V, Release 5. 6
Thus, when we talk about our UnixWare rights, 7 when
we talk about the System V license in the context of 8 SCOsource,
that doesn't mean something other than 9 UnixWare, that includes
UnixWare. And that will be 10 important as we look at
the fact that UnixWare has within 11 it the critical System V
technology, and SCO obtained the 12 right to license that
technology and do other things with 13 that technology with third
parties through the Sun 14 agreement, the Microsoft agreement and
the SCOsource 15 agreement. 16
The question is valuation of -- for the 17 purposes of the APA,
what is the value on the SVRX 18 rights, as defined in the APA,
for that portion on which 19 that has to flow through to Novell.
20 Now, if I can put that
-- and let me, before 21 leaving that issue, refer to a couple of
the documents 22 that Mr. Jacobs referred to. He
refers to a letter that 23 was sent out to a lot of people with
respect to SCOsource 24 licensing and it talked about are UNIX
System V, but that 25 does not exclude UnixWare, which is part of
System V
33
1 technology. It refers to the IBM
disclosures and expert 2 reports in that case, and it was
important in the IBM 3 case to link back those technology
disclosures as early 4 as possible in the chain of development to
show how it 5 was in breach of those contract rights. 6
Nothing in either Mr.
Cargill's report -- 7 Mr. Cargill will testify this week -- or in
the 8 disclosures submitted to the court in the IBM case 9
indicates that those technologies are not also in 10 UnixWare.
They may have originated in earlier versions 11 of System
V, but they were carried forth into UnixWare. 12
Now, with respect to the issues before the
13 Court, we don't think there is any strong disagreement -- 14
we don't think there's any disagreement on what the three 15
issues are that the Court has to decide this week. 16
First. Which
components of the Microsoft and 17 Sun agreements are SVRX
licenses and what value to 18 attribute to them. 19
Second. Whether parts
of the SCOsource 20 agreements are SVRX licenses and, if so, what
value to 21 attribute to them because when they moved for summary
22 judgment, they didn't even move that the SCOsource 23
licenses, outside of Microsoft and Sun, were SVRX 24 licenses
within the meaning of the APA. 25
And, third, whether SCO had the authority to
34
1 enter into the Microsoft, Sun and SCOsource
agreements. 2 And tomorrow there's a summary judgment argument on
the 3 inconsistencies between the first two issues, which is a 4
royalty that Novell wants to collect, and the third issue 5 where
they are seeking to say that the agreements are 6 unauthorized.
7 Now, if we turn to,
first of all, the 8 Microsoft agreement, Section 2 of the
Microsoft agreement 9 is a release of claims not having anything
to do with 10 Linux, because this is Microsoft, but claims
regarding 11 Microsoft's products. There is nothing
in the record 12 which shows Microsoft had the concerns with
respect to 13 the SCOsource program and Linux that Mr. Jacobs is
14 talking about, but, in any event, that release only 15
releases SCO's claims, not, by its terms, Novell's 16 claims.
17 So a release that only
releases SCO's claims 18 cannot, we submit, be viewed as a
license of Novell's 19 copyrights or technology. At
most, it may mean that 20 Microsoft did not get as much
protection as it otherwise 21 would have gotten. It
only releases the claims that SCO 22 has. 23
Section 3 was a UnixWare license.
Now, 24 Mr. Jacobs makes a great deal this morning about saying
25 that, well, this is what we have apportioned to SCO.
35
1 Well, I submit to Your Honor that if there was any 2
credible basis that Novell could have held out for that 3
revenue, they would have been arguing for it here today. 4 It has
not been apportioned to SCO. There was nothing to 5
apportion. The only thing in that section of the 6
agreement is a UnixWare license, so it clearly belongs to 7 us,
and there is no issue concerning it. 8
Section 4 is where the issue arises. When
they 9 moved for summary judgment, Your Honor, that part of the
10 Microsoft agreement was an SVRX license, it was because 11
you had a list of older SVRX technology in Section 4, 12 along
with licenses to UnixWare and OpenServer source 13 code.
That's really the only section that is implicated 14 in the
issues this week, and it is that section where you 15 had
basically 8.25 million dollars at issue. 16
Now, on the Sun agreement, also only a minor 17
part of that agreement is an SVRX license within the 18 meaning
of this Court's ruling. Section 4 was the 19 license
that's at issue, and the Sun agreement, that's a 20 license to
UnixWare and previous releases of System V and 21 to a number of
drivers which allow these UnixWare and 22 OpenServer products to
operate on different platforms. 23 You will hear testimony this
week about the importance of 24 those drivers. 25
Only a minor part of Section 4
constitutes an
36
1 SVRX license. The other parts of the Sun
agreement 2 do not. Section 10 is an indemnification
of Sun's 3 activities by SCO. No implication of
Novell. Section 12 4 is a release of claims by SCO.
Doesn't implicate Novell. 5 In section 13 is basically a
most favorable nation 6 clause. They won't give more
favorable rights of 7 redistribution to anyone that SCO has given
to anyone 8 else, and that's never been granted to anyone and is
not 9 applicable. Now, the key thing which supports
our 10 position, Your Honor, is that the System V prior products
11 licensed with UnixWare have no significant independent 12
value. 13 Mr.
Jacobs said that they agree that the 14 licensing of prior
products is what incidental licensing 15 means. We'd
like to you hold Mr. Jacobs and Novell to 16 that statement
because we believe the testimony will 17 show, this week, that
that licensing of prior products 18 supports SCO's position, that
you had a single price paid 19 for the most recent release, and
there was no incremental 20 amount charged to customers for the
prior product 21 releases that were built in. And
that was true when 22 Novell ran this product. It
was true when Santa Cruz ran 23 this product, and it was true
when SCO licensed this 24 product with respect to Microsoft and
Sun. 25 Now, this
is reflected in the history of
37
1 licensing of these older versions. You
have a series of 2 versions, pre-System V, Release 1, 2, 3,
System V release 3 4, UnixWare. And, as you can see,
when there is the 4 announcement of a new release, you have a
precipitous 5 decline in the sales or licenses for value of the
older 6 releases, and within a few years, that older release 7
drops away to nothing at all, nothing at all. 8
So, when you get out here to the UnixWare 9
licensing, in the period in which you had the Microsoft 10 and
Sun agreements, these older versions have no 11 commercial value
whatsoever. They haven't been licensed 12 for years,
and there's no way to believe that anyone 13 would pay more for
them being tacked on to a license 14 agreement for current
version UnixWare, which we agree, 15 there is a trunk to UNIX,
and UnixWare is the living 16 trunk. That is the most
recent version. And if there is 17 source code in
that trunk, it continues all the way up 18 here to UnixWare.
You're getting that source code in 19 UnixWare, and no one is
going to pay more for the older 20 versions they have a right
to. And that is true not only 21 from looking at the
historical licensing, but looking at 22 certain agreements. 23
For example. If the
Court looks at licenses to 24 his UNISYS, you'll see that there
was an amount of 25 $375,000, and you had prior products that
were all
38
1 included. That $375,000 is the same
amount when you had 2 a source code right-to-use fee for ALFs,
where you didn't 3 have any prior products listed.
There wasn't anything 4 extra charged to UNISYS because you got
the prior 5 outdated products along with it.
We think the evidence 6 will show that Novell's own practices
showed that they 7 recognized there was no value to be
apportioned out of 8 the UnixWare licenses due to these prior
products. 9 There
was a period of time, and the Court will 10 hear testimony about
this, where Novell granted its 11 licenses to UNISYS.
It audited those books. They knew 12 UNISYS paid
millions in binary royalties, and they never 13 asked for any of
those payments to be apportioned with 14 part of it going to
these earlier releases. And, in 15
fact, beyond UNISYS, the testimony will show that for 16 years,
after the sale of the APA, when Novell looked at 17 the royalties
being remitted by Santa Cruz, they knew 18 there was all these
UnixWare licenses out there that had 19 these prior products
listed, and never once did Novell 20 come in and say:
You owe us some percentage on those 21 royalties because you have
these prior products and those 22 prior products have a value.
23 Not once.
And that is the strongest evidence 24 that Novell knew there was
no separate value to the older 25 products that went along with
the current version of
39
1 UnixWare. 2
So, what does that mean in the context of the 3 Microsoft and Sun
agreements where the Court has found 4 there is some element of
SVRX? We submit it means that 5 there is no value
beyond a de minimus amount for that 6 SVRX prior products
licensing. In the UnixWare Section 7 -- in Section 4
of the Microsoft agreement it is the 8 UnixWare and OpenServer
rights which are the current 9 products that are very valuable.
10 And OpenServer,
by the way, is a product which 11 Novell has no rights to
whatsoever. It was developed by 12 Santa Cruz, and
that's part of these products. We think 13 that
that, in itself, was a strong basis for the 14 licensing value
that Microsoft got because that is 15 two-thirds of SCO's annual
revenue, and it was the first 16 time that SCO had offered a
source code license to the 17 OpenServer source code. 18
That's what happened in the
Microsoft agreement 19 in 2003. In fact, in that
agreement itself, in an 20 amendment, paragraph B reflected that
Microsoft was 21 concerned that components in SCO's UnixWare 7, a
UnixWare 22 release, might be present in Windows.
So, because the 23 UnixWare license gave Microsoft the right to
use the 24 prior products and there was no significant value to
25 those, we think that there's only a de minimus royalty or
40
1 an amount which -- of the Microsoft rights which are
2 under Section 4 which should be apportioned to Novell. 3
Now, with respect to Sun, again, it
is the 4 UnixWare license that is valuable because that permitted
5 Sun to develop compatibility for Solaris using the latest 6
release of System V, the UnixWare release which was out 7 there
on the market. As I mentioned, there's these 8
drivers that allowed Sun to use UnixWare for various 9 actual
purposes, to run applications, and they got that 10 in the 2003
agreement, not the '94 agreement. 11
Your Honor, I would also note, because Novell 12 did
not do so, in the '94 agreement, where they got these 13 binary
rights for what was System V binary products, that 14 was over
$80,000,000, and Novell got that $80,000,000. 15 That is where
Novell got and kept the value, the economic 16 value for the
older technology, in the '94 agreement, and 17 it was over
$80,000,000. The $10,000,000 here for the 18 latest
UnixWare rights, the UNIX OpenServer drivers, and 19 we believe
that the changes with respect to the 20 confidentiality
provisions are a very minor, de minimus 21 aspect of that
because, under the earlier agreement, Sun 22 had the right to
license to any number of distributors 23 and subdistributors,
this code. 24 So, we
don't think there's any significant 25 value that can be shown
for the changes with respect to
41
1 that in 2003. 2
Now, we then turn to the second issue, the 3
SCOsource licenses with other parties. Are they even 4
SVRX agreements in the meaning of the APA? Remember 5
that's not an issue the Court determined in summary 6 judgment.
And, if so, what value does that aspect of the 7 SVRX
contain? I'd like to start with the fact that in 8
the APA, SCO owns claims. For example, among the assets
9 Novell transferred to Santa Cruz are all of seller's 10
claims arising after the closing date against any parties 11
relating to any right, property or asset included in the 12
business. 13 The
SCOsource agreements only release the 14 claims that SCO has.
Therefore, if SCO, because of UNIX 15 copyrights being
owned by Novell, has less to release, 16 that means the buyer got
less. It doesn't mean that SCO 17 was releasing
something that Novell controlled because it 18 didn't have the
right to do that. That's the meaning of 19 the
Court's ruling that the UNIX copyrights, the older 20 UNIX
copyrights, remains with Novell. Those releases 21
released only claims that SCO had the right to release. 22
Now, we believe that the
release of claims by 23 SCO, which owns the UnixWare systems and
has the rights 24 to license UnixWare are fully broad enough to
give 25 protection to those people because UnixWare contained
42
1 this earlier technology, and the right to use the UNIX
2 technology in UnixWare included the right to use the 3
older SV -- System V technology that carried through to 4
UnixWare, and there won't be any showing in this case, by 5
Novell, that there was any System V technology that 6 didn't go
forward into UnixWare, which somehow was 7 important to the
outside world and is something which 8 only Novell could give
these people. 9 The last
issue is the issue of whether SCO 10 exceeded its authority to
execute SVRX licenses. The 11 Court did not term, in
its ruling last year, that there 12 was any exceeding of
authority. That was not a motion 13 which was brought
by Novell at that time. They have 14 subsequently
brought a summary judgment motion on that, 15 which is to be
argued tomorrow. Novell recognizes that 16 if these
agreements involve only incidental licensing of 17 SVRX in the
meaning of the APA, those products, that that 18 was something
SCO was authorized to do, even without 19 Novell's permission.
20 And we believe, under
the dictionary 21 definitions of the word "incidentally,"
as well as the 22 custom and practice of how Novell and its
successors 23 operated the licensing of prior products, that this
is 24 the very meaning of why you had that incidental licensing
25 language in the APA, to allow for the licensing of these
43
1 earlier, prior products. 2
Now, there's one more argument that Novell has 3
raised. They have said that, with respect to the Sun 4
agreement, that also was unauthorized because of 5 amendment
number 2, to the APA, because that was a 6 buyout. We
believe that the testimony will show that the 7 '94 agreement,
which bought out all of the binary 8 licenses that were out there
was a buyout. That's what 9 gave rise, in fact, to
this type of issue. That buyout 10 is not what
happened in 2003. The fact that the 2003 11
agreement references the '94 agreement does not make the 12 2004
agreement a buyout. 13
Moreover, there's a paragraph in amendment 14 number 2 that says
that Novell may not prevent SCO from 15 exercising its rights
with respect to SVRX source code as 16 a result of that
amendment. And, overwhelmingly, what 17 we're
talking about in the 2003 Sun agreement are rights 18 to source
code. So, even if amendment number 2 applied, 19 the
B5 exclusion would mean that, with respect to the 20 2003
amendments dealing with source code, we didn't have 21 to go to
Novell. 22 Your Honor,
the testimony in this case, I 23 believe, will show that these
agreements included prior 24 products because that was the custom
and practice of 25 UnixWare licensing, but there was nothing
extra charged
44
1 for those products, therefore Novell is entitled only
to 2 a de minimus royalty with respect to its residual rights.
3 THE COURT:
Thank you, Mr. Singer. 4
You may call your first witness. 5
MR. JACOBS: We do, Your Honor. We call 6
Mr. Joe LaSala. 7 THE
COURT: Come forward and be sworn, please 8 right up
here in front of the clerk of the Court. 9
JOSEPH LA
SALA, 10 the witness
hereinbefore named, being first 11 duly cautioned and sworn or
affirmed to tell the truth, 12 the whole truth, and nothing but
the truth, was examined 13 and testified as follows: 14
THE CLERK: Please
state your name and spell it 15 for the record. 16
THE WITNESS: My name is
Joseph A. LaSala, Jr. 17 My last name is spelled L-a, capital
S-a-l-a. 18 THE CLERK:
Thank you. 19 THE
COURT: Go ahead, Mr. Jacobs. 20
DIRECT
EXAMINATION 21 BY MR. JACOBS: 22 Q.
Good morning, Mr. LaSala. Could you briefly 23
introduce yourself and your background to the Court. 24
A. Yes. Good morning. My
name is Joe LaSala. I 25 was the general counsel at
Novell from July of 2001
45
1 through mid-January, 2008. Today I am, and
since that 2 time, I have been the general counsel of Discovery
3 Communications. 4 Q. Were
you involved in the dispute and the 5 relationship between SCO
and Novell as the SCOsource 6 campaign unfolded? 7
A. Yes, I was. 8 Q.
Can you characterize the level of your 9 involvement, please?
10 A. Well, as general counsel of
the company, I was 11 made aware of virtually all of the
important activities 12 in connection with the litigation and in
connection with 13 SCO's launch of the SCOsource campaign, our
company's 14 reaction to that, the various public and private 15
communications that occurred between the companies at the 16 time
and the engagement of counsel and overall the 17 strategy with
respect to our company's response to those 18 activities. 19
Q. Could you look at the first exhibit in
your 20 binder, please, Novell Exhibit 215? 21
A. Yes. 22 Q. What is
that? 23 A. This is a June 24,
2003 letter from me to 24 Mr. McBride, and I think it constitutes
one of the first 25 letters that Novell sent to SCO, and the
principal
46
1 purpose of this letter was to request that SCO provide
us 2 with copies of two SCOsource licenses that it had 3
recently announced that it had entered into; one with 4 Microsoft
and one with an unnamed party. 5
MR. JACOBS: Your Honor, offer Exhibit 215
into 6 evidence. 7
THE COURT: I thought we were going to put all 8
these in by stipulation. 9
MR. JACOBS: This one, I believe SCO has 10 objected
to, Your Honor. 11
MR. SINGER: We have no objection, Your 12 Honor.
13 THE COURT:
215 is received. 14
(Novell Exhibit 215 received in evidence.) 15
Q. Mr. LaSala, could you explain to the Court, 16
please, what led up to the sending of -- or to the 17 transmittal
of this letter? 18 A.
Well, the precipitating event was a securities 19 filing SCO had
recently made just prior to this letter 20 being sent, parts of
which are quoted in this letter, 21 where it became apparent to
us that SCO had entered into 22 these two SCOsource licenses.
23 But, really,
the letter was a combination of 24 events of the past or previous
six months or so, where we 25 had come to a -- we had concerns
that what SCO was doing
47
1 with its SCOsource campaign may implicate rights that
2 Novell had under the Asset Purchase Agreement, and 3
through their public statements, their press releases, 4 their
securities filings, some private communication, a 5 May 12 letter
that they had sent to, I think, the Fortune 6 1000 companies in
the United States, all of those things 7 led us to believe that
things that SCO was doing with the 8 SCOsource campaign may
implicate certain rights that 9 Novell had under the Asset
Purchase Agreement. 10 Q.
Could you look at the bottom of page 2 of the 11 letter, the
second half of page 2, please? 12 A.
Yes. 13 Q. And what,
exactly, was Novell asking SCO to do? 14 A.
Well, here Novell was specifically asking SCO 15 to
provide it with copies of the two agreements in 16 question and
any other agreements that SCO may have 17 entered into which
purported to amend any SVRX 18 licenses. 19
Q. And in paragraph B? 20
A. In paragraph B, we were asking SCO that they
21 not enter into any further agreements in which SCO 22
purports to amend these licenses or to enter into any new 23 SVRX
licenses. 24 Q. And in
paragraph C? 25 A. In
paragraph C, we were requesting that SCO
48
1 comply with its obligations under amendment number 2
to 2 the Asset Purchase Agreement with respect to the 3
management of potential buyouts of a licensee's royalty 4
obligation. 5 Q. Could you please
turn to Novell Exhibit 220, 6 the second tab in your binder? 7
A. Yes. 8 Q.
What is Novell Exhibit 220? 9 A.
Well, Novell Exhibit 220 is a letter dated July 10 11, 2003, from
Mr. Mike Brady, who is an employee at 11 Novell who, at the time,
ran the contract management 12 group, to the CFO of SCO, Mr.
Robert Bench, advising 13 Mr. Bench of two things.
First, that it had been more 14 than six months since Novell had
received its -- any 15 royalty reports or royalty payments from
SCO and that we 16 were demanding that we receive those payments
and reports 17 in a manner consistent with the Asset Purchase
Agreement 18 which, I think, required that they be provided
quarterly. 19 And the
second thing that the letter does is it 20 notifies SCO that
Novell intended to conduct an audit of 21 SCO concerning the
royalties and other payments due under 22 the SVRX licenses and
the Asset Purchase Agreement. 23
So the letters served those two purposes. 24
Q. Did you work with with Mr. Brady on the 25
transmittal of this letter?
49
1 A. I don't
recall specifically, but I'm quite sure 2 that I did. 3
MR. JACOBS:
Your Honor, we offer Novell 4 Exhibit 220 in evidence. 5
MR. SINGER: No
objection. 6 THE
COURT: 220 is received. 7
(Novell Exhibit 220 received in evidence.) 8
Q. Now 220, Mr. LaSala, is dated July 11, 2003.
9 A. Yes. 10
Q. And 215 is dated June 24, 2003.
Between the 11 June 24 letter and the July 11 letter, had you
received a 12 response to 215, your letter to Darl McBride? 13
A. No. 14
Q. And why did Novell decide to audit SCO's 15
compliance with the the Asset Purchase Agreement? 16
A. Well, again, Novell had concerns that
SCO's 17 activity with respect to its SCOsource campaign may be
18 resulting in monies being paid to SCO that rightfully 19
belonged to Novell. So the right to audit is very
clear 20 in the Asset Purchase Agreement, and we thought, given
21 this body of evidence that had been accumulating over the 22
previous six months or so, we thought the wise course of 23
action would be to notify SCO of our intention to conduct 24 an
audit. 25 Q. Would you
turn to the next tab, please, Novell
50
1 Exhibit 222? 2 A.
Yes. 3 Q. 222 is a letter dated
July 17, from Mr. Bench 4 at SCO to Mr. Bready at Novell? 5
A. Yes, it is. 6
Q. And what did you understand Mr. Bench to be 7
responding to? 8 A. Well, Mr.
Bench, in his letter, notes that he's 9 responding to Mr.
Bready's July 11 letter, where we made 10 the request -- the
demand for an audit, and in this 11 letter, he notifies Novell
that payment, current payment 12 due to Novell, has been or is
being made. He references 13 that Novell was
withholding its payments to -- or excuse 14 me -- SCO was
withholding payments to Novell based upon a 15 review that SCO
was conducting on Novell's activities 16 with respect to our
Linux announcements and that they 17 were evaluating the scope of
Novell's Linux-related 18 activities for compliance. 19
And they also notified -- the
letter also 20 notifies Mr. Bready that SCO reserves the right to
21 further withhold royalty payments owed to Novell in its 22
discretion if it believes that Novell is violating its 23
obligations under the Asset Purchase Agreement. 24
Q. What was your reaction when you read this 25
letter?
51
1 A. Well, somewhere
between furious and bemused. I 2 guess I
would say it that way. 3 Q. Why?
4 A. Well, furious because, in
our view, SCO was a 5 fiduciary to Novell and had a duty and an
obligation to 6 collect those royalty payments and to pass them
through 7 to Novell. Plain and simple. It
didn't have any right 8 in the an Asset Purchase Agreement or
anywhere else, 9 under any rule or law that I'm familiar with, to
offset 10 or withhold payments due to Novell, for any reason, and
11 so the assertion that SCO was withholding payments, 12
pending its review of Novell's Linux-related activities 13 was
absurd on its face, as far as we were concerned. 14
And it was somewhat frustrating but, as I
say 15 somewhat amusing as well because we thought it was 16
totally without foundation. 17 Q.
Could you turn to the next exhibit, 234? 18
A. Yes. 19 Q. What is
Novell Exhibit 234? 20 A. This is
a letter from me to Mr. McBride dated 21 August 7, 2003, where I
essentially conveyed to 22 Mr. McBride, Novell's position with
regard to Mr. Bench's 23 assertion in the previous letter, those
that I just 24 outlined for you, and pointed out to Mr. McBride
that, 25 you know, SCO was without any right or foundation to
52
1 withhold any royalty obligations that were owed to 2
Novell. 3 MR.
JACOBS: We offer 234 into evidence, Your 4 Honor.
5 MR. SINGER:
No objection, Your Honor. 6
THE COURT: 234 is received. 7
(Novell Exhibit 234 received in evidence.) 8
Q. Now, this letter is dated August
7, 2003, this 9 being 234. And your initial letter
to SCO about the 10 Microsoft and unnamed third-party license,
the other 11 license, is dated June 24. By
this time have you 12 received a response to your June 24 letter?
13 A. No. No,
we have not. 14 Q. Could
you turn, please, to Novell Exhibit 267? 15
A. Yes. 16 Q.
What is 267? 17 A. Well,
267 is a November 21, 2003 letter from 18 Mr. Bready to Mr.
Bench, again, and pretty much most of 19 the fall has passed by
this time. And, in this letter, 20 Mr. Bready
points out to Mr. Bench that there are certain 21 requests that
Novell has made with respect to the audit 22 that have not been
fulfilled, and he lays out in some 23 detail the basis of those
requests and asks, again, 24 specifically for copies of the two
agreements in 25 question.
53
1 Q. So, had the audit
been conducted by this time? 2 A.
Well, I'm really not clear -- the audit 3 certainly had not been
conducted and completed. Whether 4 or not it had
commenced, I think it had, and Mr. Bready 5 references in his
letter that, you know, the purpose of 6 the letter is to request
further information and 7 information that had previously been
requested to assist 8 Novell with the conduct of the audit. 9
Q. If you look at paragraph 1.4 or 1.5 of
this 10 letter, what, exactly, are -- was Novell requesting of
11 SCO in this letter? 12 A.
Well, again, quite specifically, Novell was 13 requesting that
SCO provide Novell with copies of the 14 Sun -- by this time we
knew that this second agreement 15 was the Sun agreement --
copies of the Sun and Microsoft 16 agreements to verify SCO's
compliance with 4.16B of the 17 Asset Purchase Agreement.
In addition, Novell was 18 requesting copies of any similar
agreements that SCO may 19 have entered into. Of
course, we had not known whether 20 they had or not. 21
And, finally, Novell was requesting
that SCO 22 identify any potential buyout transactions that it
might 23 be aware of, so that Novell could be properly put on 24
notice if any such types of transactions existed. 25
Q. If you look at paragraph 2.2 and 2.3?
54
1 A. Yes. 2
Q. What was Novell asking for there?
3 A. In 2.2 and 2.3,
Novell references a new license 4 called SCO Intellectual
Property License for Linux and 5 requested copies of any licenses
for Linux that SCO may 6 have entered into under that new license
regime that it 7 had established. 8
MR. JACOBS: Your Honor, offer 267
into 9 evidence. 10
MR. SINGER: No objection. 11
THE COURT: 267 is received. 12
(Novell Exhibit received 267 in evidence.) 13
Q. Let's turn to the next tab, Mr.
LaSala, of 14 Exhibit 280, Novell Exhibit 280.
What is 280? 15 A. 280 is
a December 29, 2003 letter from 16 Mr. Bready to Mr. Bench,
essentially reminding Mr. Bench 17 of Novell's repeated requests
for the information that 18 Novell needed to conduct its audit
and expressing a view 19 that it would like to have a response no
later than 20 January 12, 2004. 21
MR. JACOBS: Your Honor, offer Novell
Exhibit 22 280 into evidence, Your Honor. 23
MR. SINGER: No objection.
24 THE COURT:
280 is received. 25 (Novell
Exhibit 280 received in evidence.)
55
1 Q. Let's turn to the
next tab, 293. What is 293? 2
A. 293 is yet another letter from Mr. Bready to 3 Mr.
Bench which reiterates or references the November 21 4 letter for
information that Novell thought it needed to 5 conduct its audit
and reiterates the request for the 6 information contained in
that November 21 letter. And 7 again, it --
and in the second paragraph of that letter, 8 it makes note that,
you know, Novell had sent you the 9 November 21 letter and sent
you a second letter on 10 December 29 asking that you comply with
the request. 11 Q. Let's turn to
294. 12 A. Okay. 13
Q. Novell Exhibit 294, which has been 14
pre-admitted. 15 THE
COURT: Are you going to offer 293? 16
MR. JACOBS: I'm sorry.
Thank you, Your Honor. 17 Offer 293 into evidence. 18
THE COURT: Are you going
object? 19 MR. SINGER:
No. 20 THE COURT:
293 is received. 21
MR. JACOBS: Thank you, Your Honor. 22
(Novell Exhibit 293 received in evidence.) 23
Q. Let's look at 294, Mr. LaSala. 24
A. Yes. 25 Q.
294, now, is the letter from Mr. Tibbitts at
56
1 the general counsel of SCO to you? 2
A. Yes, it is. It's dated February 5,
the next 3 day after the February 4 letter from Mr. Bready.
And 4 this letter outlines various -- makes several points to 5
Novell from SCO. The first was that it expresses SCO's 6
view that many of the questions that were asked in the 7 November
21 letter were outside the scope of Novell's 8 audit rights.
It asserts that the scope of the other 9 points and questions
raised in the body of the November 10 21 letter were the result
of cooperation that we 11 allegedly had entered into with IBM in
the course of this 12 litigation with SCO and then proceeds to
respond, with 13 some specificity, to a couple of the points that
were 14 raised in Mr. Bready's November 21 letter. 15
Essentially, Mr. Tibbitts is telling us
that 16 whatever rights Novell may have under Section 4.16 of the
17 Asset Purchase Agreement, with respect to the revenue 18
stream from the SVRX licenses that were in existence at 19 the
time of the APA, those rights do not extend, he says, 20 to
either the Sun or the Microsoft agreements. And he 21
calls the Sun agreement a new contract, and he calls the 22
Microsoft agreement a new agreement not covered by the 23 APA in
this letter. 24 Q. And then, what
was his response on intellectual 25 property licenses for Linux?
57
1 A. With respect
to our request that SCO identify 2 potential intellectual
property licenses entered into 3 under the new SCO IP license for
Linux, he says that -- 4 he says that that was not a new SVRX
license. 5 Q. Did -- at
any point, in your back and forth 6 with SCO leading up to this
letter, did SCO ever, first 7 of all, give you copies of the
Microsoft and Sun 8 agreements? 9
A. No. 10 Q.
And did SCO ever say to you that those 11 agreements are not the
subject of your rights under the 12 Asset Purchase Agreement
because they only incidentally 13 license SVRX? 14
A. No. 15
Q. Let's turn to 297. What is 297, Novell
Exhibit 16 297? 17 A.
297 is a March 1, 2004 letter from me to 18 Mr. Tibbitts where I
write, in response to the February 5 19 letter that we just
talked about, and I point out what I 20 think is the blindingly
-- I make the blindingly obvious 21 point that it appears that
the question at issue here is 22 whether or not the Sun and
Microsoft agreements are SVRX 23 licenses. 24
And I refer Mr. Tibbitts to the fact that
25 Novell has reviewed SCO's intellectual property license
58
1 from its web site and made a conclusion that licenses
2 taken under that agreement would be SVRX licenses because 3
of the definition of SCO IP that's included in that 4 license,
and then I make the point that we would expect 5 the same to be
true for the Sun and Microsoft agreements 6 but, of course, we
could not be sure of that because they 7 hadn't yet been shown to
us, and I reiterate Novell's 8 desire that SCO provide those
agreements and any other 9 intellectual property licenses for
Linux agreements that 10 SCO may have entered into. 11
Q. And did you -- and what kind of time
frame did 12 you put on that request? 13
A. Well, I asked that they be provided 14
immediately. 15 MR.
JACOBS: I offer 297 into evidence. 16
THE COURT: Any objection? 17
MR. SINGER: No
objection. 18 THE COURT:
297 is received. 19 (Novell
Exhibit 297 received in evidence.) 20 Q.
Let's turn to the next tab in the binder, 21 Mr. LaSala, Novell
Exhibit 303. 22 A. Yes.
Novell Exhibit 303 is another letter from 23 me to Mr. Tibbitts,
this one dated April 2 or roughly 24 about one month later, and
in it I simply point out to 25 Mr. Tibbitts that Novell has
received no response to the
59
1 March 1 letter regarding the agreements which SCO has
2 entered into and express to him the view that Novell 3
believes that we are deserving of a response and we would 4 urge
that he provide one promptly. 5 Q.
And then, at the end of the letter, you say: 6 If we do not hear
from you shortly, we will infer that 7 SCO has nothing to say in
response. 8 Do you see
that? 9 A. I do. 10
Q. What were you inferring at that point from 11
SCO's non-response about whether the Sun and Microsoft 12
agreements represented SVRX licenses under the Asset 13 Purchase
Agreement? 14 A. Well, we were
beginning to try, in an 15 appropriate way, to put SCO on notice
that, you know, we 16 were of the firm conclusion -- that we were
trying to 17 verify that these licenses were SVRX licenses, and
we 18 were essentially saying that, if you're not going to 19
respond, you know, further, you don't really have 20 anything to
say about that. 21 MR.
JACOBS: I offer 303 into evidence. 22
THE COURT: 303 is received. 23
MR. SINGER: No
objection. 24 (Novell Exhibit 303
received in evidence.) 25 Q.
Let's turn to the last exhibit in your binder,
60
1 Mr. LaSala, Novell Exhibit 317. 2
A. Yes. 3 Q. What is
317? 4 A. So, 317 is a November
17, 2004 letter to 5 Mr. Tibbitts from me. By this
time, many months have 6 gone by, and I point out to Mr. Tibbitts
that we have had 7 numerous communications with SCO regarding
their handling 8 of UNIX licenses and point out that we think
that our 9 audit rights under the Asset Purchase Agreement
entitle 10 us to these agreements and remind him that we sent him
11 letters about this. 12
And I point out to him, really for the first 13 time, that we had
noted recently that Sun had confirmed 14 its plans to open source
its Solaris operating system, 15 and we knew, of course, that its
Sun Solaris operating 16 system was based on SVRX, the code, and
we took note of 17 the fact of Sun's announcement to open source
its Solaris 18 operating system. 19
And we outlined for Mr. Tibbitts, again, the 20
rights that we believed that we had with respect to UNIX 21
licenses in Section 4.16 and that, you know, SCO had no 22
authority to amend the license that existed with Sun, 23 which
was a 1994, I believe it was, buyout of Sun's 24 royalty
obligations to Novell at the time. And we wanted 25
to make SCO aware of that.
61
1 And then,
finally, we asked, yet again, that 2 SCO provide us with copies
of any of the agreements, 3 particularly the Sun agreement in
this case, and somewhat 4 fruitlessly, I included a deadline of
Friday, December 3, 5 2004. 6 Q.
Now, in this letter you also cc'd the Senior 7 Vice President and
General Counsel at Sun Microsystems? 8 A.
I did. And in the last paragraph of the 9 letter, I
notified Mr. Tibbitts that we would be doing 10 that, and, of
course, on its face, we have done that. 11 And we also separately
corresponded with Sun, advising 12 them of our point of view on
these matters and requesting 13 that Sun might be able to
cooperate with us and provide 14 us a copy of the Sun/SCO
agreement. 15 Q. And then, in the
last paragraph of this letter, 16 you say -- you refer to putting
Sun on notice of 17 potential issues? 18
A. Yes. 19 Q. What
were you driving at? 20 A. We
wanted to to make sure that Sun was aware of 21 what Novell's
rights were with respect to the Asset 22 Purchase Agreement and
our view that SCO lacked the 23 authority to enter into an
amendment to the buyout 24 agreement, and we thought it was
important, since Sun had 25 undertaken this initiative to open
source its Solaris
62
1 operating system that they be aware of Novell's 2
position. 3 Q. Did you
have -- aside from the legal concerns 4 that you have referred
to, did Novell have a business 5 concern about Sun's open
sourcing plans? 6 A. Very
much so. By this time, Novell's 7 intentions to enter
into the Linux marketplace were well 8 known, and Novell's
business was up and running, and we 9 had completed a major
acquisition of an open source 10 company. We had
established ourselves, we think, in the 11 marketplace as one of
the leading providers of Linux and 12 open source technology.
13 And the fact
that Sun would take upon itself to 14 open source its Solaris
operating system caused us some 15 business concerns, sure. 16
Q. Did you ever receive a response
to your 17 November 17, 2004 letter to Novell, Exhibit 317? 18
A. No. 19
Q. So, over the -- and then, at some point, the
20 Sun and Microsoft agreements are produced in discovery. 21
That happens. I'll just set the chronology.
That 22 happens in the winter of 2006. So, up
until that point, 23 did SCO ever comply with your request under
these letters 24 that it supply Novell with the Sun and Microsoft
25 agreements?
63
1 A. No. 2
Q. Did it ever comply with the request pursuant to
3 the audit provisions of the Asset Purchase Agreement that 4
Novell be allowed to audit SCO's compliance with the 5 Asset
Purchase Agreement as it related to the Sun and 6 Microsoft
agreements? 7 A. No. 8
Q. Did SCO ever tell you in any
communications 9 outside litigation pleadings in the last year
and a half 10 or so, that its theory was: These
agreements were not 11 SVRX licenses as to which it owed you a
payment 12 obligation because the SVRX was only incidental? 13
A. No. 14
MR. JACOBS: Thank you very much, Mr. LaSala. 15
THE COURT: Are you
going to offer 317? 16
MR. JACOBS: Yes, Your Honor, 317, please. 17
THE COURT: Any objection?
18 MR. SINGER:
No, Your Honor. 19 THE
COURT: 317 is received. 20
(Plaintiff's Exhbit 317 received in evidence.) 21
THE COURT: Thank you. 22
Mr. Singer, you may cross examine. 23
CROSS
EXAMINATION 24 BY MR. SINGER: 25 Q.
Good morning, Mr. LaSala.
64
1 A. Good
morning,. 2 Q. You had
testified about the June 24, 2007 3 letter that you wrote Mr.
McBride which has been 4 introduced as Exhibit 215, the first
exhibit you were 5 asked about this morning.
Do you recall that? 6 A.
Yes. 7 Q. Is it true,
though, that you were aware of 8 SCO's plans to engage in what we
have referred to as 9 SCOsource licensing going back into late
2002? 10 A. I don't think
my awareness went back quite that 11 far. Certainly
not by the name of SCOsource. 12 Q.
Well, maybe not by the name of SCOsource, but 13 do you recall
that, in late 2002, there were 14 conversations between
representatives of SCO and 15 representatives of Novell that --
where SCO indicated its 16 interest in licensing UNIX technology
for use in Linux? 17 A.
Yes. I'm aware of those conversations. 18
Q. Okay. And, at any time
between those 19 conversations and late 2002, and June 24, 2003,
did you, 20 as general counsel, ever directly or by directing
others, 21 tell SCO that it could not engage in SCOsource 22
licensing? 23 A. No.
I don't believe we did because we weren't 24 sure exactly
what the nature of the the SCOsource 25 licensing program was,
and we were trying to get a
65
1 complete understanding of it before we would make such
a 2 request. 3 Q.
There were public announcements in the early 4 part of 2003 about
SCOsource licensing, was there not? 5
A. I think there was one in January of 2003. 6
Q. Now, at any time prior to and
even as of June 7 24, 2003, did you demand -- well, let me
rephrase that 8 question. Prior to June 24, 2003,
did you ever tell SCO 9 that Novell would be asking for the
revenue that SCO 10 obtained through those SCOsource licenses?
11 A. I don't believe we
did. 12 Q. You testified
in the latter part of your direct 13 examination about Sun.
Are you aware of whether Sun open 14 sourced Solaris
under what's referred to as the GPL, the 15 general public
license? 16 A. I'm not
aware that they have. 17 Q.
That is the license under which Linux operates, 18 correct? 19
A. It's one of them. 20
Q. One of them. Now, have you
ever told Sun that 21 its agreement, its 2003 agreement with SCO,
is 22 unauthorized by Novell and Novell will seek to repudiate
23 it? 24 A. I sent a
letter to the general counsel of Sun, 25 subsequent to the last
letter that we referred to in the
66
1 back and forth with myself and Mr. Tibbitts, and I
can't 2 recall in that letter whether I used the words that you
3 used, but I think essentially what I did in that letter 4
was have Novell put Sun on notice of the rights that 5 Novell had
with respect to the agreement that SCO and Sun 6 had entered
into. 7 Q. But did you tell Sun
that you are repudiating 8 that agreement as unauthorized? 9
A. I don't believe we did, but I can't
recall 10 precisely whether or not we did. 11
Q. So, as of today, you have never told Sun that 12
Novell repudiates that agreement; is that correct? 13
A. I think that's correct. 14
Q. And would the same be true of the agreement in 15
2003 between SCO and Microsoft? 16 A.
Yes. 17 Q. Now, with respect to
the aspect of the letter 18 that you were asked about on direct
examination of the 19 agreement with Sun releasing
confidentiality rights, do 20 you recall giving a declaration in
the IBM case on behalf 21 of IBM? 22 A.
I recall that. 23 Q. Do you
recall saying in that declaration that 24 Novell understands that
neither AT&T nor USL intended to 25 assert ownership or
control over licensee's own
67
1 modifications to and derivative works of UNIX software
2 exclusive of any UNIX software included in those 3
modifications or derivative works? 4 A.
I don't recall that, but I'm sure that's what 5 the
declaration says because I suspect you're reading 6 from it. 7
Q. I am. 8 A.
Yes. 9 Q. And you
acknowledge that Solaris is a 10 derivative work of UNIX
software? 11 A. Yes. 12
Q. So the position that you took in the
13 declaration in the IBM case was that there were no rights 14
to restrict what a licensee did with its derivative works 15 that
it might create, correct? 16 A.
If that's what the declaration says, I think 17 that's correct.
18 Q. Now, with respect to the
audits that were 19 conducted at Novell -- and you were general
counsel 20 through -- was it November of 2007? 21
A. Mid-January of 2008. 22
Q. Mid-January of 2008. Are you aware that
there 23 was a separate provision of the Asset Purchase Agreement
24 which provided for UnixWare royalty? 25
A. Generally, yes.
68
1 Q. And that was a
royalty which would only be 2 triggered if the sales of UnixWare
reached a certain 3 threshold, correct? 4
A. I'm -- I can't verify that right now as we sit 5
here. 6 Q. Does that -- it's not
something which you took 7 any particular interest in? 8
A. I really can't recall at this point in
time. 9 I'm sorry. 10 Q.
Okay. Do you recall whether you -- 11
MR. JACOBS: Your Honor, I object to
this line 12 of questioning as beyond the scope of the direct.
13 THE COURT:
Mr. Singer? 14 MR.
SINGER: Your Honor, we think it's -- first 15 of
all, we think that with respect to witnesses being 16 called,
rather than having to recall the witness in our 17 case for this,
we should be allowed to exceed the scope, 18 but that this does
relate to the issue of the audits and 19 what they were looking
at in the audits. 20 THE
COURT: I agree with you on both counts. 21 It would
be better to get the witness done, even if you 22 have to exceed
the scope of direct. And, arguably, it 23 does
relate to the audit, so the objection is overruled, 24 and you
may continue. 25 Q. Did you ever
seek any royalties from SCO with
69
1 respect to the UnixWare royalty provisions of the APA?
2 A. I don't know. 3
Q. You had audits of SCO which would
reflect that 4 it was receiving royalties on UnixWare, correct?
5 A. I don't know. 6
Q. You don't know that SCO was
generating revenue 7 by licensing UnixWare to the public? 8
A. I don't think that's what you
asked me. 9 Q. Well, let
me rephrase the question. Are you 10 aware of the
fact that SCO was in the business of 11 licensing UnixWare for
money? 12 A. Yes. 13
Q. Did you ever tell SCO that Novell
had an 14 interest in receiving part of that money? 15
A. I just don't know at this point
in time. I'm 16 sorry. 17
Q. You're not aware of that happening, though, are 18
you? 19 A. I'm not. 20
Q. Now, are you aware of, at any
time during the 21 audits which were conducted of SCO, whether
any issue was 22 ever raised that SCO had to remit a part of the
UnixWare 23 royalty to Novell because some of the prior products
that 24 were listed in those licenses were products that were 25
referenced in the APA as System V products in which
70
1 Novell retained the royalty right? 2
A. So, just to be clear, are you talking about the
3 most recent audit or audits done prior to that? 4
Q. Earlier audits. 5 A.
Earlier audits? I'm not familiar with the 6 results
of the earlier audits. 7 Q. Now,
you've mentioned that you did not receive, 8 until the
litigation, copies of the Sun and Microsoft and 9 SCOsource
agreements. You now have those, correct? 10
A. Yes. 11 Q.
And since the litigation has begun, has Novell 12 taken any
further steps to continue the audit process 13 outside of the
litigation? 14 A. Well, I'm not
aware that it has. And my 15 recollection is that,
at the time shortly after this last 16 letter exchanged between
myself and Mr. Tibbitts, my 17 recollection is that the
litigation itself began to get 18 more active, and I can't tell
you today what the ultimate 19 outcome of the audit was, although
it's my view, my 20 belief, that it has not been completed. 21
Q. Well, Novell didn't take any steps to
continue 22 the audit after the litigation began, correct? 23
A. I don't know that that's -- I don't
know. 24 Q. Well, do you recall
in your deposition -- and 25 this is as a 30(b)(6) witness.
It's at page 169 in your
71
1 deposition that was taken May 16, 2007, page 169, line
5. 2 Has Novell --
3 THE COURT:
You want the deposition published, 4 then, right, the
deposition of the witness published? 5
MR. SINGER: I was going to ask
the witness if 6 he gave testimony and publish his question and
answer. 7 THE
COURT: Well, to do that, we need to 8 publish it
first. The deposition of the witness is 9
published. And now you can ask him whatever you want 10
about it. 11 MR.
SINGER: Yes. 12 Q.
Mr. LaSala, do you recall being asked at line 13 5:
14 Has Novell
undertaken to continue the audit at 15 any time since the
litigation began or whenever it was 16 that the audit petered
out, in your view? 17
Answer: No. 18
Did you give that testimony? 19 A.
I don't recall that I did, but I'm certain 20 those are my words,
since they were from the deposition 21 transcript. 22
MR. SINGER: Now,
through the discovery 23 process. 24
MR. JACOBS: Could the witness
have a copy 25 of his transcript if he's going to be asked about
it?
72
1 THE COURT:
Sure. 2 Do you
have one for him? Mr. Singer, go ahead 3 and hand
him at least that part. Are you going to ask 4 him
more about the deposition? 5
MR. SINGER: That's the part, a discrete 6 question
and answer. That's the only part. 7
MR. JACOBS: I withdraw my
objection. Sorry. 8
MR. SINGER: It was just the part that was 9 being
used for that purpose. 10 Q.
During the litigation process you have 11 acknowledged, Mr.
LaSala, that Novell has received copies 12 of the Novell
agreements -- excuse me -- the Microsoft 13 agreement, the Sun
agreement and the other SCOsource 14 agreements, correct? 15
A. Yes. 16 Q.
And you have received information as to 17 whatever amounts were
paid by Microsoft and Sun for other 18 SCOsource licensees under
those agreements, correct? 19 A.
Yes. 20 Q. If Novell had wanted
to do so, it would have 21 had the right to take deposition
discovery of Sun and 22 Microsoft itself, correct? 23
A. I presume that's correct. 24
Q. Which is a right that you wouldn't even have in 25
connection with an audit, but you would have in
73
1 litigation? 2 A.
That makes sense. 3 Q. So, as we
sit here today, trying to figure out 4 how much of a royalty
Novell should receive with respect 5 to those agreements, can you
point to any way in which 6 Novell has been prejudiced, at the
present time, by not 7 receiving the agreements until discovery
has occurred? 8 A. Well, had
Novell -- I mean, it's all somewhat 9 speculative, because had we
received them in a timely 10 fashion consistent with the requests
that were being 11 made, presumably we would have known their
contents at an 12 earlier point in time, and I don't know what
course of 13 action that may have led to, but it may have changed
our 14 course of behavior had we been able to get our eyes on 15
those agreements when they were requested. 16
Q. Well, in terms of calculating the amount of the 17
royalty received in 2003 by SCO, you're not prejudiced in 18 any
way now in your ability to argue what part of that 19 belongs to
Novell, correct? 20 A. I think
that's probably correct. 21
MR. SINGER: Nothing further, Your Honor. 22
THE COURT: Thank you. 23
Any redirect, Mr. Jacobs? 24
25
74
1
REDIRECT EXAMINATION 2 BY MR. JACOBS: 3
Q. Mr. LaSala, Mr. Singer asked you about a 4
declaration you supplied in the IBM case, and to 5 paraphrase
what he asked you about, he asked you about 6 the -- he asked you
about testimony you gave in that 7 declaration about whether AT&T
and its successors had the 8 rights over code that IBM had
written and added to the 9 IBM code base. Do you
recall that question? 10 A. Yes.
11 Q. What's the issue with
respect to the Sun 12 agreement? Is it with respect
to code that Sun wrote or 13 code that Sun has in Solaris that is
SVRX code? 14 A. It's the
latter. It's code that Sun has in 15 Solaris with
respect to the SVRX license. 16 Q.
In the intervening years between your letter of 17 July, 2003 and
this trial, what is your understanding of 18 what has happened to
SCO's financial condition? 19 A.
My understanding is that SCO's financial 20 condition has
deteriorated precipitously since that 21 time. 22
Q. And had you had access to the Sun and Microsoft
23 agreements in 2003, what would have been different about 24
your potential ability to recover from SCO? 25
A. Well, they would more likely have -- they would
75
1 have more money than they do today. 2
MR. JACOBS: No further
questions. 3 THE COURT:
Thank you. 4 Any
recross, Mr. Singer? 5
MR. SINGER: No, Your Honor. 6
THE COURT: You may step down, Mr. LaSala.
7 I assume that this
witness may be excused? 8
MR. JACOBS: Yes. 9
MR. SINGER: We have nothing further for him. 10
THE COURT: You may be
excused. 11 Let's take our first break. We'll
be in recess for 15 12 minutes. Thank you. 13 14
15 16 17 18 19 20 21 22 23 24
25
(Short break)
76
1
THE COURT: You may call your next witness. 2
MR. ACKER:
Thank you, Your Honor. Novell 3 will
call Chris Sontag. 4
For the Court's convenience, there are exhibits 5
that I may refer to in binders that I left with your clerk 6
there. 7
THE COURT: Okay. 8
THE CLERK: And you're the witness.
Okay. Please 9 raise right hand.
10
CHRISTOPHER S. SONTAG, 11
called as a witness at the request of
Novell, 12 having
been first duly sworn, was examined 13
and testified
as follows: 14
THE WITNESS: I do. 15
THE CLERK: Thank you.
Please take the witness 16 stand. 17
Please state your name and
spell it for the record. 18
THE WITNESS: Christopher S. Sontag. 19
C-H-R-I-S-T-O-P-H-E-R. Sontag, S-O-N-T-A-G. 20
DIRECT EXAMINATION 21 BY MR.
ACKER: 22 Q. Good
morning, Mr. Sontag. 23 A.
Good morning. 24 Q.
You were formally employed at SCO; right? 25
A. That is correct.
77
1 Q. And
you joined SCO in 2002; right? 2
A. That's correct. 3
Q. Now, when you joined the company in 2002, the 4
company was not profitable; is that right? 5
A. No, it was not. 6
Q. In fact, SCO had a net loss for the
fiscal year 7 ending October 31, 2002, of more than
$24 million; is that 8 right? 9
A. Sounds about right. 10
Q. And the company told the investing public
at the 11 end of fiscal -- of that year ending
October 31st, 2002, that 12 if SCO did not achieve
positive cash flow from operation it 13 would not be
able to implement its business plan without 14
additional funding; isn't that true? 15
A. I suspect that's the case. 16
Q. And the SCOsource program was just
getting started 17 when you joined; right? 18
A. I don't know if it really
had been started. I 19 think some initial
thoughts of looking at all the assets 20 across SCO
were being considered. Among them were the UNIX 21
assets the company had. But anything and any form related
to 22 a SCOsource program had not been initiated when
I started. 23 Q.
That review was being done about the time you 24
started; is that right? 25 A.
It was just started.
78
1 Q. And
after you joined the company in October of 2 2002,
you were placed at the head of what was then called 3
SCO Tech; correct? 4 A.
Yes. 5 Q. And SCO
Tech eventually became SCOsource; right? 6
A. I had a number of roles that I was responsible for.
7 I mean, I was responsible as the senior
vice-president over 8 the operating system division,
and I also had responsibility 9 for some elements of
strategy as well as looking at what could 10 be done
with the UNIX assets within the company. 11
Q. But you were ahead of SCOsource from its
inception; 12 right? 13
A. Yes. 14 Q.
And you and others hoped that the SCOsource 15
campaign would become an important revenue generator for the 16
company; correct? 17 A.
Of course. 18 Q. In
fact, you thought it would generate billions; 19
right? 20 A. We
viewed the UNIX assets held by SCO to be a very 21
valuable asset and had potential to generate significant 22
revenues. 23 Q.
That included billions; right? 24
A. Potentially, yes. 25
Q. Now, let me show you what we have marked as and has
79
1 been admitted as Exhibit 147. 2
If I may approach, Your
Honor? 3 THE
COURT: You may. 4
MR. ACKER: Bring that up, please. 5
Q. BY MR. ACKER: I'm
going to hand you what we've 6 marked, Mr. Sontag, as
Exhibit 147. 7
Have you had a chance to look at that, sir? 8
A. I have. 9
Q. And Exhibit 147 is a draft press release prepared
10 on or about October 22nd of 2002 regarding what
was then 11 referred to as the SCO Tech program;
correct? 12 A. Yes.
13 Q. And you're
quoted in the press release; right? 14
A. Yes. 15 Q.
And you had a chance to read that quote just now? 16
A. Yes. 17
Q. Is it accurate? 18
A. Yes. 19 Q.
Okay. And what you said back in October of 2002 20
about SCO Tech was, this is your quote: 21
As one of the earlier developers of the UNIX
22 operating system, SCO owns
several patents, 23 copyrights
and much of the intellectual property 24
around UNIX including the SVR4 and OSR5 software 25
libraries.
80
1
Correct? 2 A. Yes.
3 Q. So the only --
in this quote when you're talking 4 about SCO Tech in
October of 2002, the only version of SVRX 5 you
referred to was Version 4; right? 6
A. Well, UnixWare is an SVR4 version of the UNIX 7
operating system. 8 Q.
But it's not a version created by SCO; right? 9
A. That would be a hard thing to pars.
The creation 10 of UnixWare was derived out of
previous versions of UNIX. And 11
so, you know, it's a constant development process that's 12
occurred. 13 Q. But
SVR4 Version 4 was in existence before the APA; 14
correct? 15 A. I
think 4.0 was in existence before the APA. 16 4.2 was
the basis of UnixWare 1. 17 Q.
And was in existence before the APA; correct? 18
A. I don't know the exact time
frame. All I know is, 19 I remember the
first version of UnixWare was based on 20 SVR4.2.
21 Q. And isn't it
true that both Version 4.0 and 4.2 are 22 listed in
the assets for which royalties have to flow back to 23
Novell in the APA? 24 A.
I don't know that I can characterize it that way 25
because a significant portion of UnixWare is based on, you
81
1 know, SVR4 and predecessors.
And it is a significant basis 2 for what was licensed
with UnixWare going forward in the 3 future. 4
Q. And my question was very
simple. 5 Isn't
it true that SVR4.0 and SVR4.2 are listed in 6 the
assets in the APA for which royalties must flow back to 7
Novell? 8 A. That's
not exactly my understanding. My 9
understanding was there was royalties for specific licensees 10
called the SVRX licensees that needed to be paid to Novell. 11
MR. ACKER: Can
we bring up Exhibit 1, please. 12
Q. BY MR. ACKER: Let me hand you a copy of
that, 13 Mr. Sontag. Let me hand you a
copy of the APA, Mr. Sontag. 14 And I want to direct
your attention to Schedule 1.1(a) 15 Section VI.
If you would bring that up. It's SCO 85952. 16
A. 952? 17
Q. Yes. If we could highlight
the section of the 18 bottom, please. 19
A. Schedule 1.1(a)? 20
Q. Yes, sir. 21
A. Okay. 22
Q. Do you have that? 23
A. I do. 24 Q.
And you understand, don't you, that Schedule 1.1(a) 25
in the APA lists:
82
1 All
contracts relating to SVRX licenses 2
listed below for which royalties must flow back 3
to the Novell in the APA. 4
Correct? 5
A. These are listed in the contracts that are part of
6 the assets that are transferred to SCO. 7
Q. Well, you know, don't you,
that this Court has 8 determined that all royalties
flowing from these contracts 9 flow back to Novell?
You know that; correct? 10 A.
My understanding is that the contracts specified by 11
the agreement the royalties went back to SCO. I don't
know if 12 it's necessarily this listing or if it's
another listing that 13 specifies the SVRX contracts
specifically have royalties that 14 flow back to
Novell. But we honored those obligations. 15
Q. But you see in Schedule 1.1(a)VI
that UNIX System 16 Release 4.2 MP is listed;
correct? 17 A. As an
asset that was transferred. 18
Q. And System 4.2 MP International Edition was also 19
listed; correct? 20 A.
Again, as an asset transferred to SCO. 21
Q. And also 4.1; correct? 22
A. Again, yes. 23
Q. And if you turn to the next page, you see the 24
UNIX System V Release 4.0 also listed; correct? 25
A. You're on Page 4 now?
83
1 Q. The
following page. 2 A.
Yes. 3 Q. And you
see on the following page of 4 Schedule 1.1(a) of the
APA, UNIX System V Release 4.0 is 5 listed; correct?
6 A. Again, as an
asset that was transferred to SCO. 7
Q. And that was the release that you are referring to
8 that is SVR4 when you drafted your press release in
October of 9 2002; correct? 10
A. Again, going back to that press
release, it was a 11 draft press release.
And we often use different labels to 12 mean
the same thing. We'd often use System V to refer
to all 13 of our UNIX intellectual property.
We would use SVR4 to 14 describe UnixWare in
some cases. I mean, we were considering 15
renaming UnixWare and renaming it System V or possibly 16
System VI. 17
And so at different times different labels apply to 18
things in draft documents or in press releases that were put 19
out. But in the end, what we were talking about is SCO's
UNIX 20 intellectual property assets. 21
MR. ACKER: Go
back to 147, Mr. Sontag's quote. 22
Q. BY MR. ACKER: You say it's a draft press
release. 23 Do you now think that the press release
was inaccurate or 24 something is inaccurate in it?
25 A. No.
All I'm saying is that I don't know if this is
84
1 the press release that was released or if
we actually ended up 2 releasing this press release.
3 Q. When you
prepared it in October of 2002, you were 4 talking
about the SCO Tech program; correct? 5
A. We were talking about the SCO Tech program that we
6 actually changed the name of or just barely
starting to 7 initiate at this time frame. 8
Q. And when you were talking
about the SCO Tech 9 program, you were talking about
the SVRX releases you were 10 planning to release
under the SCO Tech program; correct? 11
A. To me, SVR4 could be easily replaced with UnixWare,
12 and it means the same thing to me. 13
Q. But you didn't say UnixWare;
right? 14 A. It
means the same thing. 15 Q.
And you didn't say SVR5; correct? 16
A. No. In this case, we said SVR4. 17
Q. Okay. Let me
show you what has been admitted as 18 Exhibit 143.
If you could take a look at that, sir. 19
A. Okay. 20 Q.
Exhibit 143 is an analyst briefing that was 21
prepared for Mr. McBride on or about October 22nd, 2002; 22
correct? 23 A. Yes.
24 Q. And it was an
analyst briefing regarding the 25 announcement of the
SCO Tech program; correct?
85
1 A. Yes.
2 Q. If we could
take a look at the third page in. It 3
announces you, Chris Sontag, joins the executive team; 4
correct? 5 A. Yes.
6 Q. It announces
that you will be the senior VP of 7 operating systems
with responsibilities for operating systems, 8 SCO
Tech and corporate marketing; correct? 9
A. Yes. 10 Q.
And that was all true; right? 11
A. Yes. 12 Q.
You go to the next page, I believe it's 4. On the
13 bottom of that page, there's a slide "Why SCO
Tech?" Correct? 14
A. Yes. 15 Q.
And what SCO said back in October of 2002 when 16
SCO Tech was starting is: 17
Partners and customers wish to license our 18
technology. 19
Correct? 20
A. Yes. 21
Q. And then you referred to specific
technology; 22 right? 23
A. Yes. 24 Q.
And the only release of SVRX that you referred to 25
was SVR4?
86
1 A.
Again, this is the same thing as saying UnixWare. 2
UnixWare was basically SVR4 operating system. 3
Q. SVR4 was not UnixWare that was created
by SCO; 4 correct? 5
A. You have dot releases. It basically would
be 6 considered SVR4.3 or 4. -- I mean 4.3 or 4.4 or
4.5. I mean, 7 it was an SVR4-based
operating system. It is the latest 8
version of UNIX System V. 9
Q. SVR 4 -- 10 A.
It is the referenced version that has had many 11
precedents. 12 Q.
And SVR4, that version of UnixWare was created 13
before the APA; correct? 14
A. The first version of SVR4 was created before the 15
APA. Subsequent versions of SVR4 including UnixWare 1, 2,
you 16 know, up to 7.1.4 are all versions of SVR4.
17 Q. But each of
those versions of UnixWare created 18 after the APA
don't carry the SVRX Version 4 monitor; correct? 19
A. No. A lot of times
we've used SVR4 to refer to the 20 UnixWare code.
21 Q. Let me show
you what we've marked as Exhibit 159. 22 Bring up
159. 23
This has also been admitted, Your Honor. 24
THE COURT: Yes. 25
Q. BY MR. ACKER: This is
another draft press release
87
1 that was prepared regarding SCOsource on
December 11th, 2002; 2 correct? 3
A. Yes. 4
Q. And if we could bring up the next highlight. 5
Down at the bottom, there's
a description of what 6 SCOsource is; correct? 7
A. Yes. 8
Q. And what SCO wrote in December of 2002
was that: 9 SCO's
patents, copyrights and core technology 10
date back to 1969 when Bell Laboratories created 11
the original UNIX source code. 12
Correct? 13
A. Yes. 14
Q. SCOsource, a new division within SCO,
will 15 address the licensing of
this software technology. 16
Correct? 17 A.
Yes. Now, a couple things I would say on this. 18
SCO had a number of patents that are referred to in this that 19
could be licensed by SCOsource that were not related to the 20
core UNIX technology. 21 Q.
Well, when you said, this software technology that 22
you're going to license under SCOsource, you were talking 23
about technology that dated back to 1969 when 24 Bell
Laboratories created the original source code; correct? 25
A. That was part of the UNIX
tree that SCO had
88
1 purchased and acquired and was responsible
for continuing and 2 continuing to license and to
enforce the contracts with the 3 licensees. 4
Q. And this UNIX tree
that SCO had purchased, that was 5 what SCOsource
sought to license; correct? 6
A. In part. 7
Q. And that tree dated back to technology back to
8 Bell Laboratories; right? 9
A. Yes. 10
Q. Let me show you what we've marked and has been
11 admitted as 173. 12
Mr. Sontag, let me show you what we've
marked and 13 had been admitted as Exhibit 173.
If you could read that, 14 please. 15
A. I don't know if you
want me to read the whole 16 thing. 17
Q. Well, I'm going to direct
you to a certain portion. 18 I'm sure you're familiar
with this document; correct? 19
A. Most likely. Okay. 20
Q. And this is the
announcement in January of 2002 of 21 the SCO, you've
written the first portion or first version of 22 SCO
Tech; correct? 23 A.
I think we made some level of an announcement that 24
we're further announcing, you know, what we're doing with 25
SCOsource program in January of 2003.
89
1 Q. And
unlike the prior releases, this press release, 2
Exhibit 173, was actually released to the public; right? 3
A. I don't recall if the
previous one had also been 4 released or not.
I know we briefed analysts and so on about 5 the
concepts in the previous release, but I know that this 6
press release was released. 7
Q. And we can take a look at the highlighted portion 8
in the middle under the highlighted SCOsource. 9
Again, when SCO announced the SCOsource
program to 10 the public in January of 2002, you
again told the public what 11 it was; right? 12
A. January of 2003? 13
Q. Excuse me.
January 2003. You told the public what 14
it was; right? 15 A.
Yes. 16 Q. And what
you said was, again: 17
SCO's patents, copyrights and core technology 18
date back to 1969 when Bell Laboratories created
19 the original UNIX source
code. SCOsource 20
will manage the licensing of this software 21
technology. 22
Correct? 23
A. Yes. And basically we're saying we're
providing 24 licenses of SCO's intellectual property
including our UNIX 25 intellectual property as well
as other patents that SCO had
90
1 related to other technologies within the
company. 2 Q. And
that technology dates back to Bell Laboratories 3 in
1969; correct? 4 A.
Not all of the technology. 5
Q. But some of it does; correct? 6
A. Yes. 7
Q. And that was with SCOsource? 8
A. Yes. 9
Q. And that's what SCOsource sought to license in 10
SCOsource program; correct? 11
A. Well, in general we were licensing the most recent
12 versions of SCO's intellectual property mostly in
the form of 13 UnixWare licenses, source code
UnixWare licenses as well as 14 developing an
intellectual property licensing program related 15 to
customers who were concerned about intellectual property 16
issues with their use of Linux, such as the runtime libraries 17
and OpenServer UNIX. 18 Q.
But you wanted to mine this entire body of 19
intellectual property; right? That was the plan. 20
A. That was my understanding
of the intellectual 21 property body that we had
rights to license. 22 Q.
Going back to 1969; right? 23
A. Correct. 24 Q.
And this was what you hoped you would make millions 25
of dollars licensing; correct?
91
1 A. Well,
mostly around the latest versions of the 2
intellectual property. But the whole body
at work is part of 3 the buildup and legacy of that
intellectual property and 4 library. 5
Q. Now, if you take a look -- let me
go back, I'm 6 sorry, to Exhibit 173. 7
Take a look down at the
bottom, if you would, sir, 8 173. Under
the SCO System V for Linux. Do you see that? 9
A. Yes. 10
Q. And we have it up on the screen now.
11 SCO told
the public you were announcing this in 12 January of
2003: 13 In
the past SCO's UnixWare and OpenServer 14
license agreements did not allow these UNIX 15
libraries to be used outside of SCO's operating
16 systems. 17
Correct? 18 A. Yes.
19 Q. With this
announcement, customers can now run 20
these libraries from SCO for use with Linux without 21
having to license the entire SCO
operating system. 22
Correct? 23 A. Yes.
24 Q. So that means
you get access to this core UNIX 25 technology that
SCO believed it owned without having to
92
1 license the latest version in the entire
operating system; 2 correct? 3
A. Let me say that a different way. 4
Q. Well, could you answer that
question? Isn't that 5 right? 6
A. Well, to best answer your
question I can't just 7 answer yes or no.
We were licensing the libraries to the 8 latest
versions of OpenServer and UnixWare to these customers 9
who wanted to apply them to a version of Linux to allow them 10
to run OpenServer or UnixWare applications on top of Linux. 11
That is what we were licensing. 12
Q. But as you said in your press release in 2003, it
13 didn't require the licensee to license the entire
operating 14 system; correct? 15
A. Right. They were licensing a
portion of the 16 operating system, which were the
runtime libraries. 17 Q.
And that was the core UNIX technology that was a 18
part of the SCOsource program; correct? 19
A. I wouldn't call that the core. I would
call it a 20 part of the UNIX operating system
technology. The libraries 21 are just one
piece of an entire operating system. 22
Q. But in the SCOsource program, like if they didn't
23 have to license the entire operating system, they
could simply 24 license the libraries; right? 25
A. If they needed to be able
to run UnixWare or
93
1 OpenServer application on top of Linux,
they would need to be 2 able to gain access to the
runtime libraries to install them 3 into their Linux
product to allow them to run those 4 applications.
5 Part of
that license was also a license to all of 6 SCO's
intellectual property or a release from issues within 7
any of SCO's overall IP rights. So we were giving
them rights 8 to any IP that SCO had ownership of.
And if they needed the 9 runtime
libraries, they could obtain those, as well. That
was 10 the basis for the SCOsource, you know,
licensing program at 11 this time. 12
Q. Any IP that SCO had or
believed it owned dating 13 back to AT&T; right?
14 A. Any of
SCO's intellectual property was provided to 15 any of
those customers in a release or in a license. 16
Q. That was SCOsource; right? 17
A. That was
SCOsource. The runtime or right to use 18
license that was part of SCOsource. 19
Q. Now, after the initial announcement of these
20 library licenses under SCO Tech or SCOsource,
there was a 21 second phase to the program; correct?
22 A. No.
It was continuously evolving. It was -- the 23
names were even changing as we, you know, continued with the 24
program. 25 Q.
And the second phase or the evolvement or the
94
1 evolution of this program was this right
to license or right 2 to use program that you just
mentioned; correct? 3 A.
Could you repeat the question? 4
Q. Sure. Let me show you
an exhibit. Exhibit 194. 5
Let me show you what's been marked and
admitted as 6 Exhibit 194. If you could
take a look at that, Mr. Sontag. 7
A. Okay. 8
Q. And Exhibit 194 is a letter that Mr. McBride
sent 9 on May 12th, 2003, to the Fortune 1000
companies regarding 10 this SCOsource program;
correct? 11 A.
Yes. 12 Q.
And if we could take a look at the first sentence 13
of the letter that Mr. McBride wrote, he wrote: 14
SCO holds the rights to the UNIX
operating 15 system originally
licensed by AT&T to 16
approximately 6,000 companies and institutions 17
worldwide, the UNIX licensees. 18
Correct? 19
A. Yes. 20
Q. And that was the core
technology that was at the 21 heart of SCOsource;
right? 22 A.
No. That was just a portion of what was under 23
SCOsource. Those licenses were contracts for which we
had the 24 responsibility of enforcing.
In addition to that, there was 25 all the
source code and the latest versions of source code for
95
1 UnixWare and OpenServer and other SCO
products. 2 Q. And
it's your testimony that all of that was the 3 core
technology that SCO sought to monetize in the SCOsource 4
program? 5 A. Yes.
Any intellectual property inside of the SCO 6 was
potentially licensable IP within the SCOsource program. 7
Q. And if we could take a look at
Paragraph 5 of the 8 letter Mr. McBride wrote: 9
Many Linux contributors
were originally UNIX 10
developers who had access to UNIX source code 11
distributed to AT&T and were subject to 12
confidentiality agreements, including 13
confidentiality of the methods and
concepts 14 involved in software
design. 15
Correct? 16 A.
Yes. 17 Q. And what
SCO says is: 18
We have evidence that portions of UNIX 19
System V software code have been copied into 20
Linux. 21
Right? 22 A.
We claimed that we had, you know, different 23
intellectual property violations that we felt had been applied 24
into Linux, some in the form of, you know, literally 25
copyrighted code; others in the form of methods and concepts;
96
1 others in the form of derivative works;
and other IP issues 2 that we felt may be at issue
with Linux. 3 Q.
But in the letter that Mr. McBride wrote on 4 May
12th of 2003, he's talking about software IP that dates 5
back to AT&T and the developers of AT&T; correct? 6
A. I think he was -- you
know, we're not trying to be 7 specific about every
last area of intellectual property or 8 methods of
intellectual property from patents to copyrights to 9
contracts to derivative works and otherwise. It was
simply us 10 just trying to say that we have a broad
base of intellectual 11 property that we believe is
valuable that we are making 12 available and
licensing. The specifics of -- you know, if we 13
say, UNIX System V and not also saying OpenServer or UnixWare, 14
it doesn't mean when we say UNIX System V or we are talking 15
about UNIX, we're not also referring to them. 16
It's just like, I'll give an
analogy to ice cream. 17 I may say ice cream to my
kids. Would you like some ice 18 cream?
I don't have to be specific every time and say, would 19
you like chocolate ice cream or vanilla ice cream? I
might 20 just ask them first, would you like ice
cream? And I'm 21 referring to any
possible choice that might reside under that. 22
Q. What Mr. McBride referred to
specifically in his 23 letter in May of 2003 was
source code distributed by AT&T; 24 right? 25
A. Again, I believe what is
really being referred to
97
1 in this letter is SCO's broad intellectual
property portfolio, 2 not just specific versions of
early UNIX originally developed 3 by AT&T.
But I view that as part of that portfolio. 4
Q. The only specific
reference that Mr. McBride makes 5 in the letter is
to source code distributed by AT&T; correct? 6
A. In this particular paragraph,
that's what he is 7 referring to.
But, again, the intent was to talk about the 8 entire
portfolio of SCO's intellectual property. 9
Q. And Mr. McBride sent this letter to
1,000 different 10 companies asking them to take a
license under the SCOsource 11 program; correct? 12
A. Yes. Or
at least consider it, get themselves 13 educated,
find out if they should have concerns or issues or 14
not. 15 Q.
Take a look at the first paragraph on the next 16
page. 17
Mr. McBride also wrote: 18
We believe that Linux infringes our UNIX 19
intellectual property and other
rights. We intend 20
to aggressively protect and enforce these rights. 21
Consistent with this effort, on March 7,
we 22 initiated legal
action against IBM for alleged 23
unfair competition and breach of contract with 24
respect to our UNIX rights. 25
Correct?
98
1 A. Yes.
2 Q. And you
understood, didn't you, that the basis for 3 this
letter going out to these 1,0000 different companies 4
across the United States was the same basis for which SCO 5
brought action against IBM; correct? 6
A. And again, when we're talking about SCO's UNIX 7
rights, I view that we're referring to all of SCO's 8
intellectual property portfolio related to UNIX. 9
Q. All of it from time to memorial; correct?
10 A. All that is
under the purview of SCO, yes. Why 11
would you only enforce a portion of your rights if you have a 12
broader portfolio of rights? 13
Q. But it was the same basis that there was some 14
portion of SCO's intellectual property that was in Linux that 15
caused Mr. McBride to write this letter. It was also for
the 16 basis for the action against IBM; correct?
17 A. We believe in
part some of the actions that we 18 undertook against
IBM were a significant portion of the IP 19 that we
were concerned about within Linux. 20
Q. Okay. And it's true, isn't it, that the
only UNIX 21 code that SCO's experts in the IBM case
found in IBM's version 22 of Linux was UNIX System V
Version 4.2? Isn't that true? 23
A. I couldn't characterize what specifically
was found 24 by our experts. That would
have to be presented by them. 25
Q. Let me show you what we've marked as Exhibit 428.
99
1 A.
I assume you don't want me to read all of this 2
right now. 3 Q.
No, I don't. 4
If you could take a look at -- first of all, 5
Exhibit 428 is a report of Dr. Thomas Cargill of The 6
Infringement of Unix System V Release 4 Operating System By 7
the Linux Operating System. 8
Do you see that title? 9
A. Right. And I believe this is just
one of many 10 reports. 11
Q. Well, I'm going to ask you about that.
But take a 12 look at Page 3, if you would, the
summary of opinions. 13
You see in Paragraph A, summary of opinions, 14
Dr. Cargill wrote: 15
It is my opinion that Linux 2.4 and Linux 2.6 16
are substantially similar to the UNIX System V
17 Release 4 operating system in
satisfaction of that 18 element
of copyright infringement. 19
Do you see that? 20
A. Okay. 21
Q. And then if you go down, you see,
he wrote: 22
Overall, Linux is a substantial copy of the 23
UNIX System V Version 4 operating system. 24
Do you see
that? 25 A.
Yes.
100
1 Q. And
if you take a look at the next page -- 2
A. For which I would view UnixWare is the latest 3
version of that. 4 Q.
I understand that's your position. But take a look 5
at the next page. You'll see the last part of Dr.
Cargill's 6 opinion. He writes: 7
Instead, it is my
opinion that significant 8
design choices and code incorporated in Linux were 9
copied from UNIX System V Version 4. 10
Correct? 11
A. Yes. 12
Q. And it's true, isn't it, that no other
expert in 13 the IBM case ever came to the conclusion
that anything else 14 other than SVR4 was allegedly
in IBM's version of Linux? 15 Isn't that true? 16
A. I can't characterize
specifically what the rest of 17 the expert testimony
and reports -- I don't -- I did not read 18 them, so
I can't characterize that one way or another. 19
Q. Are you ware -- are you aware of any
expert in the 20 IBM case retained by SCO finding any
code in IBM's version of 21 the Linux other than
System V Version 4? 22 A.
Again, since I did not read any of the expert 23
reports I couldn't characterize it one way or another. 24
Q. Well, you made some public
disclosures with respect 25 to what code SCO believed
was in IBM's version of Linux;
101
1 correct? 2
A. Yes. 3 Q.
And you made those disclosures both publicly and 4
under nondisclosure agreements; correct? 5
A. Yes. 6 Q.
And let me show you what we've marked as 7 Exhibit --
SCO Exhibit 379. 8
Now, SCO Exhibit 379 is a PowerPoint presentation 9
that you gave at a SCO forum in 2003; correct? 10
A. Yes. 11
Q. And you gave it along with your lawyers; right? 12
A. Yes. 13
Q. And the purpose of it was to tell the
public what 14 portions of SCO's core intellectual
property SCO believed was 15 in IBM's version of
Linux; right? 16 A.
I don't know if I characterize it that way. I
17 viewed it as a presentation intended to provide a
high-level 18 education as to SCO's position. 19
Q. And if you could take a
look at Novell document -- 20 Novell Bate Number
12733, this is part of the presentation 21 where you
and your lawyers actually laid out what you believed 22
was the infringing code; correct? 23
A. No. Not laid out the infringing code.
We laid out 24 one example, one very small example.
25 Q. And this
example is the Malloc example; right?
102
1 A. I
don't have a file name on here, so I can't be 2 sure
if this happens to be the Malloc code. But certainly 3
that was one example that we did show. 4
Q. And it's true, isn't it, that this forum when you 5
told the public what it is that you believe was in IBM's 6
version of Linux that infringed your core IP, all of the 7
examples you gave and the only examples you provided were for 8
System V Release 4; correct? 9
A. No. The most important point that I tried
to 10 stress in this presentation would be actually
the slide on 11 Page 8, which would be Novell
12731. And this is the slide 12 where I
would present -- show that there's different forms of 13
intellectual property protection. Literal copying;
literal 14 copyright infringement, which is word by
word the same, being 15 copied by somebody;
nonliteral, which would be some amount of 16 munging
and changing the code or obfuscating the code; 17
derivative works, which the point I was trying to make was the 18
most important area, which was to contractually protect any 19
areas specifically around derivative works code being 20
contributed into Linux from UNIX by companies such as IBM. 21
That was the most important
point. And if you had 22 been sitting in
on this presentation, that was the big point 23 that
I tried to make of this whole presentation was that right 24
there. 25 Q. But the
only examples of literal copying that you
103
1 showed was of System V Version 4; correct?
2 A. I could have
put up a version showing an example of 3 UnixWare
7.1.3 in the Malloc code versus Linux, you know, the 4
latest release of Linux, and you would receive substantially 5
the same copied code, because that same code in Malloc was 6
substantially similar between UnixWare 7.1.3 and previous 7
versions of UNIX, such as UNIX, you know, 4.2 DS. 8
Q. But the only versions of the
literal copying that 9 you showed at the SCOsource --
or SCO forum of 2003 was the 10 Malloc example;
correct? 11 A. It
was the only example that we intended to show. 12
Q. And that example was a System V Release 4
code; 13 correct? 14
A. I believe it was System V Release 4.2 DS. 15
Q. And isn't it true that you
are not aware of any 16 other expert at any point
ever coming to the determination 17 that there was
literal copying of any code beyond System V 18
Version 4.2; correct? 19 A.
Again, I have not read any of the expert reports, 20
so I'm not aware of if there are examples or not. 21
Q. Let me show you what we marked as
Exhibit 274. 22
Exhibit 274 is a letter written to the chairman of 23
Lehman Brothers by general counsel SCO Mr. Ryan Tibbits on 24
December 19, 2003; correct? 25
A. Yes.
104
1 Q. And in
it he is essentially accusing 2 Lehman Brothers of
violating SCO's core intellectual property; 3
correct? 4 A. I
don't know if I would characterize it that way. 5
Q. Well, in the first sentence he wrote: 6
In May 2003, SCO warned
about enterprise use 7 of the
Linux operating system in violation of its 8
intellectual property rights in UNIX technology. 9
Without exhausting or explaining all
potential 10 claims, this letter
addresses one specific area in 11
which certain versions of Linux violate SCO's 12
rights in UNIX. 13
Right? 14
A. Yes. 15 Q.
And in the second page of the letter, he gives, 16
provides Mr. Fuld with a list of code; correct? 17
A. Yes. 18
Q. And down below that Mr. Tibbits wrote: 19
The only code identified -- the
code 20 identified above was
also part of a settlement 21
agreement entered between the University of 22
California at Berkeley and Berkeley Systems 23
Development, collectively BSDI, regarding
alleged 24 violations by BSDI
and USL's right to UNIX system 25
technology.
105
1
Right? 2 A.
Yes. 3 Q.
And it's true that that settlement was reached 4
between Berkeley and BSDI in February in 1994; right? 5
A. Yes. 6
Q. And so the code that we're talking
about here is 7 code that existed long before the
APA; correct? 8 A.
The one example that is given here. Again, I'd go 9
back to the first paragraph, though, as one of potentially 10
many is this example. 11 Q.
Isn't it true, Mr. Sontag, that neither you or 12
anyone at SCO ever said that there has been taking of code 13
from UnixWare intellectual property by Linux users?
Isn't 14 that right? 15
A. Again, I think we also referred to SCO's 16
intellectual property which is all inclusive of all of SCO's 17
intellectual property portfolio including UnixWare, including 18
OpenServer, including preceding versions of UNIX, as well. 19
Q. Isn't it true that
neither you or anyone at SCO 20 ever said that there
has been a taking of code from UnixWare 21
intellectual property by Linux users? Isn't that an
accurate 22 statement? 23
A. Again, I think it's a mischaracterization. 24
Q. You testified under
oath in deposition on 25 March 17th -- excuse me --
April 30th of 2007; correct?
106
1 A.
I had several depositions. 2
MR. ACKER: And, counsel, this is at Line 45
-- 3 Page 45 Line 21, Page 46 Line 9.
If we could play that clip, 4 please. 5
THE COURT: You
want that deposition published, I 6 believe. 7
MR. ACKER:
Yes, sir. 8
THE COURT: The deposition is published. 9
(A portion of the
deposition was played.) 10 Q.
BY MR. ACKER: So it's true, isn't it, sir,
that 11 either you or as far as you know anyone at
SCO has never said 12 that there has been a taking of
code from UnixWare 13 intellectual property by Linux
users; right? 14 A.
Again, whenever we're referring to UNIX 15
intellectual property, as far as when I was saying that, I was 16
speaking of all of SCO's UNIX intellectual property, UnixWare, 17
OpenServer and otherwise. So specifically
mentioning UnixWare 18 or OpenServer I didn't feel
was necessary if I was talking 19 about SCO's UNIX
intellectual property because those were 20 included
as part of that. 21 Q.
But neither you nor anyone at SCO has ever said to 22
a Linux user, you're infringing UnixWare; right? 23
A. Simply because -- I think
you're splitting semantic 24 hairs.
We're saying, you've been, you know, violating SCO's 25
UNIX intellectual property rights which include UnixWare and
107
1 OpenServer. We didn't
necessarily have to list out all of our 2 products
every time we were talking to somebody. 3
Q. But never at any point have you listed out
UnixWare 4 and said, Linux user, you're violating
UnixWare; right? 5 A.
Again, if we were saying SCO's intellectual 6
property rights, that includes UnixWare, that includes 7
OpenServer, that includes all of SCO's intellectual property 8
rights. 9 Q.
But you never told the Linux community, you're 10
violating UnixWare; right? 11
A. Don't know why that would be necessary if we're
12 saying, you're violating our UNIX intellectual
property 13 rights. That includes all of
our UNIX intellectual property 14 rights. 15
Q. But we can agree,
can't we, that you or no one at 16 SCO has said that,
that you, Linux user, are violating 17 UnixWare;
right? 18 A.
I'm not aware that I specifically said UnixWare. I 19
know I often said UNIX intellectual property rights. 20
Q. And you're not aware of
anyone at SCO saying, Linux 21 users, you're
violating UnixWare; right? 22
A. I'm not aware one way or the other. 23
Q. Let me show you the
Sun license agreement what's 24 been admitted as
Exhibit 187. 25
You're familiar with that document, I assume, sir?
108
1 A. Yes,
I am. 2 Q. And
Exhibit 187 is the license that was entered 3 into
between SCO and Sun on February 25th of 2003; correct? 4
A. Yes. 5
Q. You were one of the principal negotiators for SCO;
6 is that right? 7
A. Yes. 8 Q.
You actually signed this document for SCO? 9
A. Yes. 10
Q. And you would agree that the Sun license
is a 11 SCOsource license; correct? 12
A. It's a SCO intellectual property
license executed 13 by the SCOsource division. 14
Q. Part of the SCOsource
program; correct? 15 A.
The overall SCOsource program. 16
Q. And if we take a look at the first three clauses,
17 the "whereas" clauses of the document,
please. 18
The recitals of the document are accurate; correct? 19
A. I'm not an attorney, but I assume
those are 20 accurate. 21
Q. And what those say is that: 22
Whereas, Sun and UNIX System
Laboratories or 23 Novell are
parties to a software license and 24
distribution agreement dated January 1st, 1994, 25
the original agreement.
109
1
And then, whereas, Novell has transferred 2
and assigned the original agreement to SCO. 3
And,
whereas, Sun and SCO desire to amend 4
and restate the original agreement by the 5
execution of this agreement. 6
Correct? 7
A. That's what it says. 8
Q. And that was what
this agreement did, is it amended 9 and restated the
original 1994 agreement between Novell and 10 Sun;
correct? 11 A.
Well, I don't know if I necessarily characterize it 12
that way. I view that the majority of the document was
13 dealing with a UnixWare license. It
was only portions that 14 dealt with I think anything
related to the older agreement. 15
Q. But you would agree, wouldn't you, that the
16 statement is accurate, that this agreement, 187,
the 2003 Sun 17 agreement, amended and restated the
earlier agreement between 18 Novell and Sun? 19
A. In part. 20
Q. No doubt about that;
right? 21 A.
Again, in part. 22 Q.
Let me show you Exhibit 5, which was the original 23
agreement. Novell Exhibit 5, which has been admitted
into 24 evidence, is the original 1994 agreement
between Novell and 25 Sun; correct?
110
1 A.
Yes, I believe so. 2 Q.
And you're familiar with this document; correct? 3
A. To a certain extent. 4
Q. And in the original
agreement Sun paid 82.5 million 5 in order to obtain
a license that included UNIX System 5 6 software;
right? 7 A.
Yes. 8 Q. And
Attachment 1 of the original agreement lists 9 that
UNIX System V software that Sun licensed in 1994; 10
correct? 11 A.
Yes. 12 Q.
And we have that up on the screen. Do you see 13
that? 14 A. I
do. 15 Q. And
then if we go back to 187, Attachment 1 of the 16
2003 Sun license lists the software licensed to Sun in the 17
amended and restated 2003 license; correct? 18
A. Did it have a listing? 19
Q. Sure.
It's SCO 1287218. It's the Attachment 1 to 20
the 2003 agreement. 21
A. Okay. 22
Q. Now, if we take a look at Attachment 1 to the 1994
23 agreement here on the left and we compare it to
the first page 24 of Attachment 1 -- there we go, and
we compare it to the first 25 page of Attachment 1 of
the later agreement, you'd agree with
111
1 me that those listing of 30 items of
software, 30 pieces of 2 code are identical. 3
A. They appear to be
very similar. I would take much 4 longer
to be able to say that definitively they were 5
identical. But they look very similar. 6
Q. So other than this asterisk
and "not currently 7 licensed by Sun but
considered to be by the parties as a 8 licensed
product," other than that language they are 9
photocopies, aren't they? 10 A.
Again, they are substantially similar. 11
Q. They're identical, aren't
they? 12 A.
If you want me to look letter by letter to say 13
they're absolutely identical, I can do that. 14
Q. Well, you negotiated the 2003
deal; right? 15 A.
Yes. 16 Q.
And you know what happened was in the 2003 deal for 17
the first page of Attachment 1, you simply took the old 18
Attachment 1 from the earlier deal and made a copy of it; 19
right? 20 A.
I suspect that's the case. I wasn't involved in 21
drafting that page of the contract. 22
Q. And what's on the left is a list of what was
23 licensed in 1994 by Novell to Sun; correct? 24
A. Yes. 25
Q. And what is on the right,
with an exception that
112
1 we're going to get to on the second page
of this attachment in 2 a second, is what was
licensed to Sun by SCO in 2003; right? 3
A. Well, it's a listing of technologies much of which
4 Sun had already licensed. So I view
that as belt and 5 suspenders. 6
Q. You view that as belt and suspenders.
7 Now, the
2003 Sun license also granted license to 8 seven
additional versions of software; correct? 9
A. Yes. I believe that to be
the case. 10 Q.
This is Page 2 of the attachment to the 2003 Sun 11
license. This is what in addition to the 30 identical
pieces 12 of software that had been part of the
earlier agreement, these 13 seven pieces of software
that we have on the board now are 14 what the
additional software was that Sun got in the later 15
agreement in 2003; correct? 16
A. Yes. 17 Q.
And of those seven pieces of software, five of them 18
are System V Release 4.2 or earlier; correct? 19
A. Yes. 20
Q. And the only two pieces of software that came into
21 existence after the APA that were licensed to Sun
in 2003 are 22 these last two, System V Release 5 and
Open UNIX 8; correct? 23 A.
Yes. And the primary license product was the 24
UnixWare 7.1.3 product. 25 Q.
So just to be clear for the Court, if we drew a
113
1 line right here above System V Release 5,
that's -- from a 2 time standpoint, that's when the
APA was executed; right? 3 A.
I believe that to be the case. 4
Q. And these UNIX 4, the UNIX 4.1
grant that SCO 5 provided to Sun in 2003, that was
expressly omitted from the 6 earlier license to Sun;
correct? 7 A.
Well, my understanding was those weren't yet in 8
existence at the time of the prior Sun agreement. 9
Q. Why don't we take a look at
the earlier agreement, 10 Exhibit 5. If
we could go to Attachment 2. 11
System V -- are you there, sir? 12
A. Attachment 2? 13
Q. Yes. 14
A. Yes. 15
Q. So you see there's a section there
in the early 16 agreement that refers to deliberately
omitted software; right? 17 A.
Yes. 18 Q.
So back in 1994 when Novell and Sun entered into an 19
agreement, Novell expressly did not license to Sun 20
System V Release 4.1; right? 21
A. Yes. 22
Q. But SCO granted a license to that software to
Sun 23 in 2003; correct? 24
A. Yes. For the purpose
of them having a complete set 25 of all the
versions. And again, that was primarily -- those
114
1 prior versions were all intended to just
be used for source 2 comparison. The
latest version we provided to them, 3 UnixWare 7.1.3,
was the version that was primarily intended 4 and
licensed to them for development. 5
Q. Now, Section 3 of the original Sun license of 6
Exhibit 5 sets out what rights were granted to Sun in 1994 for 7
the technology; correct? If you turn to Section 3 of the
8 earlier license. 9
A. Section 3? 10
Q. Yes. 11 A.
Okay. 12 Q. And it
was a worldwide, royalty-free, paid-up 13 license to
the UNIX System V software in the Attachment 1 that 14
we looked at; right? 15 A.
Yes. 16 Q. And what
those rights granted in the original 1994 17
agreement do not grant to Sun the right to publicly display 18
the source code and object code of the license UNIX 5 19
software; right? 20 A.
Where are you reading that? 21
Q. Well, you know, don't you, that the early agreement
22 did not allow Sun to publicly display the software
that was 23 licensed in 1993? 24
A. I know that they had -- the whole
agreement allowed 25 them to broadly distribute the
source code to their licensees
115
1 who in turn could distribute the, you
know, Solaris source 2 code to sublicensees.
So Sun had very broad rights with this, 3 you know,
'94 agreement to effectively license the source code 4
extremely broadly to a large customer base. 5
Q. Isn't it true that they couldn't open
source that, 6 Sun could not open source that
software code under the early 7 agreement? 8
A. It depends on what your
definition of open source 9 is. 10
Q. Well, why don't we take a look at 11
paragraph 3.2 (A)(b) of the earlier license. 12
A. 3.2? 13
Q. Yes, sir. Do you see that?
And what that required 14 was: 15
The Sun source sublicensees will
protect the 16 licensed
products contained in their derivative 17
works, and Novell's trade secrets and other 18
intellectual property embodied in such licensed
19 products, to at least the
degree to which Sun 20 protect
its own most valuable proprietary source 21
code. 22
Correct? 23 A.
Yes. 24 Q.
And if we take a look at 3.2(B), this was another 25
requirement in the earlier license.
116
1
In the event that Sun becomes aware, whether 2
through notification by Novell or otherwise, that 3
a Sun source sublicensee is not complying
with its 4 obligations under the
applicable Sun source code 5
license agreement, including obligations to 6
protect the confidentiality of the source code of 7
licensed products, to the extent that such
8 obligation impacts licensed
products contained in 9
derivative works, Sun agrees to take appropriate 10
steps to rectify such noncompliance. 11
Correct? 12 A.
Yes. 13 Q.
And Sun made it clear during the negotiations that 14
they wanted a broader license so Sun could open source 15
Solaris; correct? 16 A.
Actually, Sun believed that they had almost all the 17
rights they needed or had all the rights they needed.
Now, 18 that was their posturing and positioning
going into the 19 negotiations, that they did not
need anymore rights to be able 20 to do a form of
open sourcing and be in compliance with this 21
agreement. Now, that was their position coming into the
22 negotiations. 23
Q. Isn't it true that Sun made it clear during
24 negotiations that they wanted a broader license so
Sun could 25 open source Solaris? Isn't
that accurate?
117
1 A. I
don't know that I necessarily would say that it 2 was
-- you know, it was a part of what they asked for.
But 3 the most important thing they were asking for
was the ability 4 to quickly take the Solaris product
and make it available on 5 an Intel compatible
platform, which they would be able to do 6 with the
UnixWare 7.1.3 source code license and the software 7
drivers for UnixWare. 8 Q.
Now, you gave a number of depositions in this case 9
and in the IBM litigation including a deposition on 10
December 21st, 2005; correct? 11
A. Yes. 12
MR. ACKER: And, counsel, I'm going to publish 13
Page 144 Lines 13 to 22 from that testimony. 14
Q. BY MR. ACKER: It's true, sir,
that when you 15 testified on December 21st of 2005,
you wrote: 16
When did SCO become aware of the facts that 17
Sun had open sourced -- or the Solaris system. 18
As part of
the negotiations related to the 19
latest IP license from -- we entered into with 20
Sun, one of their desires of that license was the 21
ability to have a broader IP license where
they 22 could to an extent open
source Solaris with 23
restrictions that it could not be open sourced 24
into Linux or other open source licenses that did 25
not protect copyright ownership.
118
1
Is the testimony accurate? 2
A. Yes. I would also add to that
they basically had 3 the rights necessary to do that,
anyways. 4 Q.
But that's what they wanted in the negotiations, 5
broader confidentiality provisions; correct? 6
A. Yes. I don't believe
that was an important part to 7 them. 8
Q. But it's part of what they
wanted and part of what 9 they paid for; correct?
10 A. Yes.
11 Q. And Sun
Solaris operating system is a derivative 12 work of
UNIX System V; right? 13
A. Yes. 14
Q. Why don't we take a look at Exhibit 187. 15
But it's also true,
isn't it, that it's SCO's 16 position that Sun was
entitled to open source Solaris as a 17 result of the
2003 agreement with SCO? Correct? 18
A. I would view that -- well,
open source as in -- 19 with the limitations set
forth in the agreement. 20
Q. So you would agree with me that as a result of the
21 2003 agreement, Sun was able to open source open
Solaris? 22 A.
Again, with the caveat that I just mentioned. 23
Q. Yes. They were able to
do that as a result of the 24 agreement? 25
A. Yes.
119
1 Q. Now,
if we could take a look at Exhibit 187 and 2
specifically Paragraph 3.1. 3
Now, in addition to being able to having broader 4
confidentiality rights with respect to that software, you 5
actually delivered copies of the software to Sun; right? 6
A. Yes. Primarily
UnixWare 7.1.3. 7 Q.
But you didn't just deliver that version. You 8
delivered all of it; right? 9
A. We delivered at least a number of other source 10
takes or previous versions. But the primary one that was
of 11 importance to Sun was the 7.1.3 source and the
source for the 12 hardware drivers for UnixWare. 13
Q. But Sun didn't say to you,
we're not interested in 14 that other code.
Don't bother delivering it to us. Just give 15
us the latest version and the drivers; right? Sun didn't
say 16 that to you? 17
A. No, I don't believe they did; nor did we ask them.
18 We were just delivering on our obligations under
the contract. 19 Q.
And the obligations under the contract were to 20
provide copies of all of the software; right? 21
A. Yes. 22
Q. And that's what SCO did; correct? 23
A. Yes. 24
Q. And SCO was paid just under $10 million by Sun for
25 this license; right?
120
1 A. Yes.
2 Q. And not a
single penny of that was paid to Novell; 3 correct?
4 A. No. 5
Q. And before entering into
the 2003 Sun license, SCO 6 did not obtain permission
from Novell to do the deal; right? 7
A. We did not believe we needed their permission. 8
Q. In fact, you didn't even
inform them about the deal 9 before it was done;
correct? 10 A. No.
Again, this was primarily a UnixWare license. 11
Q. But it's true, isn't it, that SCO
understood that 12 the APA requires prior written
approval from Novell for all 13 new agreements or
changes to current agreements relating to 14 UNIX
System V? Correct? 15
A. Again, this agreement was primarily about -- and
16 the value of this agreement was primarily about
UnixWare. And 17 since Sun already
had a buyout to, you know, the previous 18 System V
technologies, there was no need to have Novell 19
involved in a primarily UnixWare license. 20
Q. But isn't it true that SCO understood
that the APA 21 requires prior written approval from
Novell for any new 22 agreements or changes to
current agreements relating to UNIX 23 System V that
you understood that at the time you did the deal 24
with Sun? 25 A.
Yes. And again this was not a System V license.
121
1 This was a UnixWare license. 2
Q. There's over 35 versions of System
V software that 3 was licensed to Sun; correct? 4
A. Those were ancillary
products. The primary product 5 being
licensed was UnixWare. 6 Q.
Is there anywhere in the APA that says you only 7
have to obtain permission for licensing the primary product 8
and not the other 38 UNIX System V versions that you give -- 9
you license? 10 A.
Since Sun had a buyout of any royalty obligations, 11
I would not believe that would be necessary because there was 12
no revenue impact for Novell. 13
Q. So that was just a unilateral decision that Sun 14
made that, because we believe that the primary portion of this 15
agreement is the latest version of the software even though it 16
includes the earlier versions, we're not going to ask for 17
Sun Novell's permission? 18 A.
We did not believe we needed Novell's permission. 19
Q. Let me show you what we've marked
as Exhibit 27. 20
I show you Exhibit 27. 21 A.
Okay. 22 Q. Exhibit
27 is a letter from senior contracts 23 manager or
John Luehs of SCO to Miss Cynthia Lamont of Novell 24
dated May 20th, 1996; do you see that? 25
A. Yes.
122
1 Q. In the
first paragraph of that letter, Mr. Luehs 2 wrote to
Novell on behalf of SCO: 3
The agreement between the Santa Cruz 4
Operations, SCO, and Novell, Inc., Novell, 5
requires prior written approval from Novell for
6 all new agreements or changes
to current 7 agreements relating
to UNIX System V. 8
Correct? 9
A. Yes. 10 Q.
And you would agree with me, wouldn't you, that Sun 11
2003 is an agreement relating to UNIX System V?
Wouldn't you? 12 A.
Yes and no. Yes, that UNIX System V was a portion
13 of that and that UnixWare in my view, we would
describe under 14 UNIX System V. But --
15 Q. Because --
16 A. But the
primary -- primarily that agreement was 17 related to
a UnixWare source code license. 18
Q. And because the 2003 agreement with Sun was an 19
agreement relating to UNIX System V, SCO needed Novell's 20
approval before they did the deal; isn't that true? 21
A. I do not agree with that
statement. 22 Q. So
you disagree with the senior contracts manager, 23
what a senior contracts manager of SCO wrote in 1996; is that 24
right? 25 A. If it
was a SVRX older license, that's how I would
123
1 view that. This was a
UnixWare license primarily with Sun, 2 which is
different. 3 Q.
Let me show you what we've marked as Exhibit 30. 4
(Time lapse.) 5
Have you had a chance to read
Exhibit 30, sir? 6 A.
I scanned it. 7 Q.
Exhibit 30 is a letter from the management, law and 8
corporate affairs, Mr. Broderick of SCO on May 26, 1996, to 9
Novell; correct? 10 A.
Yes. 11 Q.
And you know who Mr. Broderick is; correct? 12
A. Yes, I do. 13
Q. What his current position at SCO?
14 A. Very
similar position. He's in the -- 15
Q. Management, law and corporate
affairs -- 16 A.
Yes. 17 Q. --
currently of the company? 18 A.
Yes. 19 Q.
And going to testify in this trial? 20
A. Yes. 21
Q. And let's take a look at what Mr. Broderick
wrote 22 on May 26, 1996, to Novell.
Take a look at that first 23 sentence.
Again, he wrote: 24
The agreement between Santa Cruz Operations, 25
Inc., SCO, and Novell, Inc., Novell, require
prior
124
1 written approval from
Novell for all new 2 agreements
or changes to current agreements 3
relating to UNIX System V. 4
Correct? 5
A. Yes. 6 Q.
And you don't have any reason to doubt 7 Mr.
Broderick's understanding of the APA; correct? 8
A. No. 9
Q. And you have no reason to doubt the statement that
10 Mr. Broderick made back in May of 1996; correct?
11 A. No.
And I would add that -- 12 Q.
Let me ask -- 13 A.
-- Mr. Broderick would view that UNIX System V in 14
this context is referring to older System V licenses and 15
source codes. And if we were doing a UnixWare code
license, 16 there was no permission required from
Novell. 17 Q. And
I'm sure Mr. Broderick can speak for himself, 18 and
I'm sure he will. 19 A.
All right. 20 Q. Let
me show you what we marked as Exhibit 189. 21
THE COURT: You didn't offer
27 or 30. 22 MR.
ACKER: Yes. I move for their admission. 23
THE COURT: I
don't know if they object. 24
MR. NORMAND: No objection, Your Honor. 25
THE COURT: 27
and 30 are received.
125
1 MR.
ACKER: Thank you, Your Honor. 2
(Whereupon, Novel Exhibits 27 and 30 were received.) 3
Q. BY MR. ACKER: I
show you what's been marked and 4 admitted as Exhibit
189. 5 A. All right.
6 Q. Now, Exhibit
189 is the Microsoft license entered 7 into between
SCO and Microsoft in April of 2003; right? 8
A. Yes. 9
Q. And you were the principal or one of the 10
negotiators in this agreement, as well? 11
A. Yes. 12 Q.
And prior to the execution of the agreement, there 13
were term sheets that were exchanged; correct? 14
A. Yes. 15
Q. And let me show you what we have marked and has 16
been admitted at Exhibit 171. 17
Exhibit 171, you'll see there's an e-mail chain at
18 the top where an e-mail was sent to you from a
Mike Anderer on 19 January 15th, 2003; correct? 20
A. Yes. 21
Q. And he wrote: 22
Mike, here is the first cut at the TS to
MS. 23 Feel free to mark up.
And we will see you in 24
Lindon tomorrow afternoon. Regards, Chris. 25
Do you see
that?
126
1 A. Yes.
2 Q. And down below
is a proposed term sheet of the 3 Microsoft deal with
SCO; right? 4 A.
Yes. 5 Q. And in
Paragraph 3 of that, you set out what the 6 license
code would be; correct? 7 A.
I view this as a kind of an al a carte list of 8
various areas and things that we could discuss with Microsoft. 9
Q. And on the top of the list
is UNIX System V; right? 10
A. Yes. 11 Q.
And in January of 2003 when you're going into these 12
negotiations, you understood that UNIX System V was part of 13
what was going to be licensed to Microsoft if the deal 14
happens; right? 15 A.
It was an area that could be licensed. Again, I'm 16
almost being redundant in saying UNIX System V and UnixWare. 17
But in order to have more items on the list to potentially 18
discuss, that was -- those were all items placed on the list. 19
Q. Well, you separately
culled it out here, didn't 20 you? 21
A. Yes. But in a lot of
cases, we're referring to the 22 same thing.
If they're taking a UNIX or a license they're 23
gaining access to a majority of the System V source code that 24
preceded it. 25 Q.
But in the same OU, you didn't just say UnixWare
127
1 and OpenServer; right? 2
A. No. We're trying to
provide as many possible areas 3 of discussion for
deal points as we can. 4 Q.
And one of those areas of discussions and deal 5
points was UNIX System V; correct? 6
A. Yes. 7 Q.
Take a look at the next page. Paragraph 5. 8
It's written: 9
SCO will recognize a retroactive license
in 10 favor of Microsoft against
any present or previous 11
violations of SCO's UNIX IP rights, as follows. 12
Correct? 13
A. Yes. 14 Q.
And this is eventually what matured into Section 2 15
of the Microsoft deal; right? 16
A. To an extent, that release. 17
Q. And that release is what you call the
retroactive 18 license in favor of Microsoft includes
other System V UNIX 19 technologies. 20
Right? 21
A. Yes. And to me in this case,
that would refer to 22 UnixWare, potentially
OpenServer and prior releases. 23
Q. And prior releases; correct? 24
A. Yes. 25
Q. And so Microsoft was concerned that there might be
128
1 some of SCO's intellectual property in
their products; right? 2 A.
Yes, potentially. 3 Q.
So in Section 2, they wanted a release that 4
included releases for all of SCO's IP and all of Microsoft's 5
products; right? 6 A.
Yes. 7 Q. And during
negotiations, they expressed concern 8 that they may
have inadvertently used SCO's IP in their 9 products,
including SVRX code; right? 10
A. Potentially yes. 11
Q. And Microsoft's concerns about having SCO's IP in
12 its product would not have been assuaged if the
license in 13 Section 2 had granted rights merely to
the current UnixWare 14 technology; right? 15
A. I don't know if I would
characterize it that way. 16 This ended up not being
an area that we discussed. But the 17
vast majority of the active and important code, you know, 18
significant percentage was available in the UnixWare product. 19
Q. Okay. You
testified on March 14th, 2007, at your 20 deposition
-- 21 And,
counsel, this is Lines 162-24 to 163-5. 22
-- you were asked the following questions and
gave 23 the following answers. 24
(A portion of the deposition was played.)
25 Q. BY MR.
ACKER: But Microsoft's --
129
1
MR. NORMAND: Your Honor, to complete this, I would 2
like to publish the remaining testimony from that portion of 3
the deposition. 4
MR. ACKER: Well, he certainly will have that 5
opportunity. 6
MR. NORMAND: I'm not sure of Your Honor's 7
practice. On occasion to save time, we play it at the
time of 8 the playing of the deposition. 9
THE COURT:
You prefer that he do it when he does 10 his
examination? 11
MR. ACKER: Yes. Absolutely. 12
MR. NORMAND:
Thank you, Your Honor. 13
THE COURT: You can do it then. 14
Q. BY MR. ACKER:
But Microsoft's concerns about 15 having SCO's IP in
its products wouldn't have been taken care 16 of,
wouldn't have been assuaged in Section 2 had they only 17
gotten rights to UnixWare; right? 18
A. That's a hypothetical because we never had that 19
discussion. 20 Q.
All right. Why don't we play your deposition at 21
Page 163 Lines 16 to 20. 22
(A portion of the deposition was played.) 23
Q. BY MR. ACKER: So
that was true; right? 24 A.
I don't know. I mean, possibly not.
But I think 25 if that had been an issue, we could
have likely convinced
130
1 Microsoft that the, you know, the vast
preponderance of the 2 code of UnixWare was all they
needed to provide the IP 3 protection they needed.
But we didn't at that time consider 4
that an issue in view that we had the rights to license them 5
the entire portfolio. 6
Q. But wasn't it your understanding that Microsoft 7
also needed the rights to the older UNIX technology to address 8
its concerns? 9 A.
Again, we never specifically had a discussion of 10
this. It was our standard practice and SCO's
predecessor's 11 when licensing UNIX technology to
also always license the 12 preceding versions of the
UNIX code, as well. That's what we 13
were doing in this case. 14
Q. Why don't we take a look at your deposition on 15
March 14, 2007, at Page 64 Lines 10 to 14. 16
(A portion of the deposition was
played.) 17 Q.
BY MR. ACKER: That testimony was accurate, wasn't 18
it? 19 A.
Again, I don't view that in conflict with what I'm 20
saying right now. 21 Q.
So part of what Microsoft wanted in negotiation 22
around Section 2 was a license that protected them against 23
potential claims relating both to UnixWare and to older SVRX 24
technology; right? 25
A. That was the license that was provided to them.
131
1 Q.
So the license that was provided to them included 2
both protection against violation of UnixWare and also older 3
UnixWare technology; right? 4
A. Older UnixWare technology, yes. 5
Q. And for this release in
license, Microsoft paid 6 $1 1/2 million; right? 7
A. Yes. 8
Q. And none of that money was
provided to Novell; 9 correct? 10
A. No, it was not. 11
Q. And you never sought
Novell's permission before 12 entering into that
portion of the deal; correct? 13
A. No. Again, this was a UnixWare
license. And the 14 standard matter of
course was to provide a license to all 15 preceding
versions of UNIX. That was, you know, the standard
16 practice that had always been performed. 17
Q. Let me turn to
Section 4 of the Microsoft 18 agreement. 19
Now, in order to be
entitled to take the license in 20 Section 4 of the
agreement, Microsoft first had to pay 21 $7 million
for the license in Section 3; correct? 22
A. Correct. 23
Q. And Section 3 of the Microsoft agreement is
titled, 24 if we could bring that up, "Option to
Purchase UnixWare 25 License."
Correct?
132
1 A. Yes.
2 Q. So they have
paid $7 million in this section, 3 Section 3 in order
to both take an option to get the UnixWare 4 license
and to actually get the license; correct? 5
A. That option for that UnixWare license had
6 significant limitations to it. 7
Q. And the Section 3 provides for licenses
of software 8 in Exhibits A and B of the agreement;
right? 9 A. Yes.
10 Q. And the
license in Section 4 licensed the software 11 listed
in Exhibits A, B and C; right? 12
A. Now, the primary component of Section 4 was an 13
expansion of that UnixWare license. 14
Q. I didn't ask you that. What I asked you
was, in 15 Section 4, isn't it true that the license
that was granted was 16 to Exhibits A, B and C of the
agreement? 17 A.
Yes. 18 Q. And
Exhibit C of the agreement contains UNIX 19 System V
Versions 1 through 4.2; correct? 20
A. Yes. 21 Q.
So if we look up on the screen, here's Exhibit C. 22
Everything that is highlighted that was granted as part of the 23
Section 4 license is UNIX System V Version 4.2 or earlier 24
software; right? 25 A.
Yes.
133
1 Q. And
not only did Microsoft purchase a license to 2 all of
this software, that is, the versions that we've 3
highlighted, but you also delivered actual copies of the code 4
to Microsoft; right? 5 A.
As many as we possibly could. 6
Q. So they not only got a license to use it, but they
7 also got physical possession of the software? 8
A. Yes. And those
older versions, by the way, were, 9 the sole intent
for them was for a source analysis repository. 10
Q. And before this license was signed, the
2003 deal 11 with Microsoft, Microsoft did not have a
preexisting license 12 for any of this code that
we've highlighted that is UNIX 13 System V code
Versions 1 to 4.2; right? 14
A. They at a previous time had a license, but I think
15 that license had been revoked or discontinued.
So at this 16 time, they did not have a
license. 17 Q. So
at this time when they entered in 2003, they 18
didn't have a license to any of this code; correct? 19
A. Correct. 20
Q. And you gave them a license to this
code; correct? 21 A.
As part of a broader UnixWare source code license, 22
yes. 23 Q. And that
code includes UNIX System V Versions 1 to 24 4.2;
right? 25 A. Yes.
134
1 Q. And in
order to obtain this license in Section 4, 2
Microsoft paid, initially paid an option amount of $250,000; 3
right? 4 A. Yes. 5
Q. And then they paid another
$8 million; right? 6 A.
Yes. 7 Q. So this
license in Section 4 cost Microsoft 8 $8 1/4 million?
9 A. Yes.
Now, again, the majority of the value of that 10 $8
million was for an expansion of the UnixWare distribution 11
lines. 12 Q. And
they already paid $7 million in Section 3 for 13
UnixWare license; right? 14 A.
For UnixWare source code license that was limited 15
to a very limited set of Microsoft products called Services 16
for UNIX and Connectix. And with the Section 4, they
were 17 allowed to use the UnixWare source code
across their entire 18 product line, which is a
significant increase in their rights. 19 And that was
where the value was. 20 Q.
Do you know of Microsoft ever distributing copies 21
of UnixWare with their products? 22
A. I don't know if they have or not. 23
Q. You don't know if they've ever
done that; right? 24 A.
(Witness indicates by shaking head side to side.) 25
Q. You have to answer yes or no.
135
1 A. I do
not know. 2 Q. Let
me show you a chart of -- a list of SCOsource 3
revenue licenses. It's Exhibit 383. 4
What I've handed to you and what's been
admitted 5 into evidence is Exhibit 383, which is,
SCO's Supplemental 6 Responses and Objections to
Novell's Second and Third Set of 7 Interrogatories.
And I want to direct your attention to a 8
chart that's at NOVTR, and the page is 4238. 9
A. All right. 10
Q. And can you make out that chart on your screen? 11
A. I'll look at it on the
screen as opposed to 12 potentially having a big mess
with a loose set of papers. 13
Q. Now, this is a listing, is it not, provided by your
14 lawyers of all of the licenses that were entered
in the 15 SCOsource program? Correct?
16 A. Yes. 17
Q. And the total amount that
Novell -- or SCO 18 collected as a result of the
SCOsource program and these 19 licenses was
$26,956,260.14; correct? 20 A.
Yes. 21 Q. And the
largest portions of that were the Microsoft 22 deal
at $16,680,000; correct? 23 A.
Yes. 24 Q. And then
the Sun deal at $9,143,450.63; correct? 25
A. Yes.
136
1 Q. And if
my math is correct, what we have left is a 2 series
of licenses to smaller entities for 1.1 million -- or
3 $1,132,809.51; correct? 4
A. Yes. 5
Q. And those licenses that you entered into, those 6
other licenses Sun and Microsoft that you entered into as part 7
of the SCOsource program were done in a variety of ways; fair? 8
A. They were intended to be
effectively the same 9 license, but the license I
think evolved over time. 10 Q.
And sometimes the licenses were done by what was 11
called a click-through on the SCO website; right? 12
A. Yes. 13
Q. Let me show you what we've marked as Exhibit 422. 14
Again, this has been
admitted, Your Honor. 15
(Time lapse.) 16
THE WITNESS: Okay. 17
Q. BY MR. ACKER: Exhibit 422, the second
page that 18 we'll bring up on the screen is a screen
shot of the SCO 19 website regarding this SCO
intellectual property license; 20 correct? 21
A. Yes. 22
Q. And if you take a look, there's
definitions that 23 are provided on the SCO website
as to what is being licensed 24 if one comes on line
and enters into one of these agreements 25 with SCO;
right?
137
1 A. Yes.
2 Q. And the first
line says: 3 The
agreement is the agreement between you and 4
the SCO Group, Inc., relating to rights acquired 5
by you. 6
Correct? 7
A. Yes. 8
Q. And then there's a definition of SCO IP.
It says: 9 SCO IP
shall mean the SCO intellectual 10
property included in its UNIX based code in object 11
code format licensed by SCO under SCO's standard
12 commercial license. 13
Correct? 14 A. Yes.
15 Q. And then you
define for potential licensees what 16 UNIX based
code shall mean; right? 17 A.
Yes. 18 Q. And you
define it by saying: 19
It is both UNIX System V and UnixWare. 20
Correct? 21
A. It says UNIX System V or UnixWare. 22
Q. It's both of those things;
correct? 23 A. Yes.
24 Q. So when
someone comes on line and clicks through 25 and gets
one of these license, they're obtaining a license to
138
1 UnixWare System V and UnixWare; right? 2
A. Yes. 3
Q. You know how many of these
licenses you entered 4 into, the online click method?
5 A. A
handful. Less than 20 or 30. 6
Q. Let me show you -- I'm going to show you a
series 7 of documents. 8
(Time lapse.) 9
I'll hand you these as a group.
But I'm going to 10 hand you -- I'll put them upside
down so you can flip them 11 back over.
But Exhibit 257, which has been admitted; 12 Exhibit
237, also been admitted; Exhibit 426, also been 13
admitted; Exhibit 301, which has also been admitted; 14
Exhibit 310, which has also been admitted; Exhibit 312, which 15
has also been admitted; Exhibit 322, also been admitted; 16
Exhibit 286, also been admitted; Exhibit 423, which has also 17
been admitted. 18
If we could start with Exhibit 257, sir. 19
A. Okay. 20
Q. Exhibit 257, if you could bring
that up, if we 21 could go to the next page, the
invoice. 22
You see there on the second page of Exhibit 257 23
there's an invoice where an entity CDM purchased one of these 24
SCO source licenses and paid SCO a total of $9,865.45; 25
correct?
139
1 A. Yes.
2 Q. And this was
done as part of the SCOsource 3 licensing program?
4 A. Yes. 5
Q. The click-through program;
right? 6 A. Yes. 7
Q. And you didn't ask
permission of Novell before 8 entering into that
agreement; correct? 9 A.
No. 10 Q. And you
didn't remit any of those -- any of that 11 $9,865 to
Novell; correct? 12 A.
No. 13 Q. Take a
look at Exhibit 237. 14
Exhibit 237 is a license agreement between Computer 15
Associates International, Inc., and the SCO Group; correct? 16
A. Yes. 17
Q. And this one is a written agreement;
correct? 18 A. Yes.
19 Q. Signed by you?
20 A. I believe so.
21 Q. And if you
take a look at the definition section, 22 Paragraph
1.11, you define that you're granting a license to 23
software products commonly known as UNIX System V and/or, 24
and/or UnixWare; right? 25 A.
Yes.
140
1 Q. That
was the license that you were granting to 2 Computer
Associates; right? 3 A.
Yes. 4 Q. And for
that license, Computer Associates paid 5 you -- paid
SCO $20,000; right? 6 A.
Yes. 7 Q. And you
didn't ask Novell's permission before 8 entering into
this license; correct? 9 A.
No. 10 Q. And didn't
remit any of those funds to Novell; 11 correct? 12
A. No. 13
Q. Take a look at Exhibit 426.
This is another 14 written agreement that was entered
into between SCO and an 15 entity referred to as
Cymphonix; correct? 16 A.
Yes. 17 Q. And
again, we have a written agreement; right? 18
A. Yes. 19
Q. And it looks like there was as part of a 20
development agreement between Cymphonix and SCO, Cymphonix 21
also entered into one of the SCO intellectual property 22
agreements; right? 23 A.
I believe that to be the case. 24
Q. And if you take a look at that Exhibit A of this 25
license, which is the intellectual property agreement --
141
1 A. Yes.
2 Q. -- and
specifically the next page and look at the 3
definitions, what was licensed to SCO under the -- license to 4
Cymphonix under the intellectual property agreement was 5
SCO UNIX based code; right? 6
A. Yes. 7 Q.
And the definition of SCO UNIX based code was 8 UNIX
System V or UnixWare; right? 9
A. Yes. 10 Q.
And Cymphonix paid Novell $8,112 for this license; 11
right? 12 A. I
believe that would be the case. 13
Q. And none of that money -- paid SCO $8,112; correct?
14 A. Yes. 15
Q. And none of that money went
to Novell; right? 16 A.
I believe that to be the case. 17
Q. And you didn't ask Novell's permission before 18
entering into that agreement; correct? 19
A. No. 20 Q.
Take a look at Exhibit 301. 21
301 is another intellectual property license under
22 the SCOsource program between SCO and an entity
called 23 Everyones Internet; right? 24
A. Yes. 25
Q. And again, you signed the agreement on behalf of
142
1 SCO? 2
A. Yes. 3 Q.
And if we go to the definitions, we can again see 4
what it was that was licensed; correct? 5
A. Yes. 6
Q. And what was licensed was SCO UNIX based code; 7
correct? 8 A. Well,
UNIX System V or UnixWare. 9
Q. Okay. Well, SCO UNIX based code is the
definition 10 of what the license is being granted
for, but the definition 11 of UNIX based code is UNIX
System V or UnixWare; correct? 12
A. Yes. 13 Q.
And for getting this license, Everyones Internet 14
paid SCO $534,444; correct? 15
A. Yes. 16 Q.
None of that money went to Novell; right? 17
A. No. 18
Q. And you didn't ask permission of Novell before 19
entering into that agreement; correct? 20
A. No. 21
Q. Why don't we take a look at Exhibit 310. 22
Exhibit 310 is
another intellectual property 23 agreement that you
signed on behalf of SCO with an entity 24 called HEB
or HEB. HEB Grocery Company LP; right? 25
A. Yes.
143
1 Q. And
this is a similar license. If we take a look 2
at the definitions -- well, what was licensed was something 3
called SCO IP; right? 4 A.
Yes. 5 Q. And the
definition of SCO IP is SCO UNIX based 6 code; right?
7 A. Yes. 8
Q. And that means UNIX System
V or UnixWare; right? 9 A.
Yes. 10 Q. And HEB
paid SCO a half million dollars, $500,000 11 for this
license; correct? 12 A.
Yes. 13 Q. And none
of that money went to Novell? 14
A. No. 15 Q.
And you didn't ask Novell's permission before 16
entering that that agreement; correct? 17
A. No. 18 Q.
Why don't we take a look at Exhibit 312. 19
THE COURT: Unless you're about done
with this 20 witness, let's take our second break.
21 MR. ACKER:
Very well, Your Honor. 22
THE COURT: Are you about done? 23
MR. ACKER: 15 minutes.
24 THE COURT:
Let's take our second break. 25 15 minutes.
144
1
(Short recess) 2
THE COURT: You may proceed. 3
MR. ACKER: Thank you,
Your Honor. 4 Q. Mr. Sontag,
before the break, I believe we left 5 off with Exhibit 312.
If you would look at that, please. 6 This is another
intellectual property agreement between 7 the SCO Group and Lane
Furniture, correct? 8 A. Yes.
9 Q. And, again, if you take a
look at the 10 definitions -- if you would go to the next one,
please -- 11 what's being licensed here is SCO IP, and, again,
the 12 definition is SCO UNIX-based code in Section -- in 13
paragraph 1.7, and then the definition of what that is is 14 UNIX
System V or UnixWare, correct? 15 A.
Yes. 16 Q. Did Lane Furniture
pay SCO any money for this 17 license? 18
A. I believe so. 19 Q.
Do you know how much? 20 A. I do
not. 21 Q. Were any of those
funds remitted to Novell? 22 A.
No. 23 Q. Did you ask permission
before entering into 24 this agreement with Lane Furniture? 25
A. No.
145
1 Q. Would you take a
look at Exhibit 332. This is 2 another SCOsource IP
license, this time between OCE 3 printing and SCO, correct? 4
A. Yes. 5 Q.
And if you would take a look at the 6 definitions, if you
go to the second page, please, again, 7 it's the same
definition. SCO IP means SCO UNIX-based 8 code,
correct? 9 A. Yes. 10
Q. And the definition of what that is, SCO
11 UNIX-based code, is UNIX SCO System V or UnixWare, 12
correct? 13 A. Yes. 14
Q. And you were paid -- or SCO was paid
$49,500 15 actually by Siemens for this license, correct?
Does that 16 sound right? 17
A. I believe that to be the case. 18
Q. And, again, none of that money was remitted to 19
Novell, correct? 20 A. No. 21
Q. And you didn't seek permission before
entering 22 into this agreement, correct? 23
A. No. 24 Q. Take a
look at the Exhibit 286. This is 25 another SCO group
intellectual property license, correct?
146
1 A. Yes. 2
Q. And this time it's entered into with Questar,
3 correct? 4 A. Yes. 5
Q. And why don't we take a look at the
definition 6 section of this agreement. Here the
definition was a 7 little different as to what SCO IP rights
were, correct? 8 A. Yes. 9
Q. And what was licensed to Questar was
SCO IP 10 rights, which shall mean SCO's intellectual property
11 rights in any and all past, current or future versions 12
of -- or portions of SCO's software products commonly 13 known as
UNIX System V and/or UnixWare correct? 14 A.
Yes. 15 Q. That's what
the license grant was, correct? 16 A.
Yes. 17 Q. And if you take a
look at paragraph 114 -- I'm 18 sorry, 2.1 -- well, let's go back
to -- if we could 19 highlight 114. 20
And, again, the definition of UNIX-based code 21
there includes both UNIX System V or UnixWare, right? 22
A. Yes. 23 Q.
And Questar paid SCO $19,125 for this license, 24 correct? 25
A. Yes.
147
1 Q. And none of that
money was remitted to Novell, 2 correct? 3
A. No. 4 Q. And you
didn't seek Novell's permission before 5 entering into that
license, right? 6 A. No. 7
Q. One last exhibit to show you.
Let me show you 8 what we've marked as Exhibit 227, Novell 227.
And, 9 Mr. Sontag, please feel free to look at any
part of the 10 exhibit, but I'm going to ask you about the e-mail
on the 11 second page in the middle of the page. 12
A. Okay. Just a moment. 13
Q. Sure. 14 A.
Okay. 15 Q. Now, if you
could take a look at that e-mail on 16 the second page, in the
middle of the page, it's an 17 e-mail from Jeff Hunsaker at SCO
to yourself, Mr. McBride 18 and others at SCO. And
it's sent on July 31, 2003, 19 correct? 20
A. Yes. 21 Q. And
what was Mr. Hunsaker's position -- his 22 position at SCO was
Senior Vice President of Worldwide 23 Sales and Marketing, right?
24 A. I believe that to be the
case. 25 Q. And Mr. Hunsaker
currently is the president and
148
1 CEO of SCO, right? 2 A.
I think at least the president of SCO 3 Operations or
something like that. I'm not sure what his 4 exact
title is now. 5 Q. And what he
said in the middle of 2003, this 6 e-mail followed a conference
call about this SCOsource 7 licensing program, right? 8
A. Yes. 9 Q.
And the subject line there is: SCOsource 10
issues and buyoff, correct? 11 A.
Yes. 12 Q. And he wrote Darl,
Chris, Kim and Kevin, 13 correct? 14 A.
Yes. 15 Q. And then he
wrote: 16 During our
SCOsource con call today, we 17 discussed and would like to
propose the following. The 18 official name
of this program will be the SCO UNIX IP 19 Compliance License
Program. 20 Correct?
21 A. Yes. 22
Q. And that's the name that was eventually used 23
for this program of these contracts that we have 24 just been
through, right? 25 A. Yes, at
least for a period of time.
149
1 Q. And then he
wrote: 2 This is
not a Unixware 7.13 SKU, right? 3 A.
Yes. 4 Q. And then he
wrote: 5 The
license is called a SCO UNIX IP license for 6 Linux.
The only rights that this license provide is for 7 Linux binary
runtime copies. When we are ready to issue 8
a similar license for AIX, it will be called the SCO UNIX 9
license for AIX. 10
Correct? 11 A. Yes. 12
Q. Then he followed up with these
words: 13 There is
no connection between UnixWare, 14 OpenServer and the SCO UNIX IP
license whatsoever. 15
Right? 16 A. Well, I
wouldn't agree with that 17 characterization.
These licenses are based on the same 18 underlying IP that is in
UnixWare and OpenServer. 19 Q.
He is the current president of SCO, 20 Mr. Hunsaker, right? 21
A. Yes. 22
Q. And what he wrote, at the time this program was
23 taking off, in July of 2003, is: 24
There is no connection between UnixWare, 25
OpenServer and the SCO UNIX IP license whatsoever.
150
1 Right? 2
A. I disagree with that characterization.
3 Q. And then he continued: 4
They are independent. 5
Correct? 6 A.
Yes. That's what he put. 7 Q.
And in 2003, that's what the Senior V.P. of 8 Worldwide Sales and
Marketing of SCO, how he 9 characterized the SCOsource program,
right? 10 A. They are not the
same product, but they are -- 11 the SCOsource license is IP
based upon the UnixWare and 12 OpenServer products. 13
MR. JACOBS: I don't
have anything further, 14 Your Honor. 15
THE COURT: Thank you. 16
Mr. Normand, you may examine. 17
MR. NORMAND: Thank
you, Your Honor. 18
CROSS EXAMINATION 19 BY MR.
NORMAND: 20 Q. Good afternoon,
Mr. Sontag. 21 A. Good afternoon.
22 Q. Is it fair to say that,
during your tenure at 23 SCO, you used the terms UnixWare and
System V 24 interchangeably from time to time? 25
A. Yes.
151
1 Q. Why did you do
that? 2 A. One of the primary
reasons is that we were 3 thinking about possibly renaming
UnixWare to be System V, 4 and that was under serious
consideration until we 5 determined there would be a lot of
certification and a 6 substantial amount of costs in renaming
UnixWare, and so 7 we determined that that was not possible.
But, in terms 8 of describing UnixWare, OpenServer, all of
that, we would 9 often use UNIX System V as the overall umbrella
name for 10 all of SCO's UNIX technologies. 11
Q. What was the point of using the phrase System V 12
as an umbrella or a short name for all that technology? 13
A. It was just short for saying UNIX
System V. 14 Q. Were you always
careful to draw distinctions 15 between the UnixWare trade name
for the latest release 16 and other uses of System V? 17
A. No. 18 Q.
I want to start, Mr. Sontag, where Mr. Acker 19 started,
with Novell Exhibit 147. This was a document 20 that
referred to SVR 4 software libraries. Do you recall 21
looking at that document? 22 A.
Yes. 23 Q. This was the draft
press release that you went 24 through. Do you recall
that? 25 A. Yes.
152
1 Q. Now, do you know
what libraries are? 2 A.
Libraries are a portion of an operating system 3 that are used
for applications to communicate with 4 operating system. 5
Q. Do you know whether there are SVR 4
libraries 6 in UnixWare? 7 A.
I suspect that may be very well what those 8 libraries are
called. I don't specifically remember, but 9 those
libraries are referring to the UnixWare runtime 10 libraries.
11 Q. Are libraries the same as
releases of a 12 software product? 13 A.
No. Libraries are just a portion of an 14
operating system release. 15 Q.
OSR 5 libraries you refer to in this document 16 as well.
Do you know what that's a reference to? 17
A. I believe that's referring to the OpenServer 18
Version 5 runtime libraries. 19 Q.
And what was OpenServer? 20 A.
OpenServer was a version of UNIX developed by 21 Santa Cruz that
was based on UNIX System V, Release 3. 22 Q.
Let me take a step back, Mr. Sontag. When did 23
you join SCO? 24 A. October of
2002. 25 Q. And with whom did
you deal in acquiring an
153
1 understanding of the subject matter that has been 2
discussed? 3 A. Of a lot
of individuals inside of SCO, Bill 4 Broderick, John Maciaszek,
the attorneys, Jeff Hunsaker, 5 a whole host of people. 6
Q. Had you worked at Novell
previously? 7 A. Yes, I
have. 8 Q. Turn to Novell
159. 9 THE
COURT: What number? 10
MR. NORMAND: 159. 11
Q. This is the document, Mr. Sontag, in which SCO
12 makes the statement that it is the developer and owner of 13
SCO UnixWare and SCO OpenServer, both based on UNIX 14 System V
technology. Do you recall reading the 15
document? 16 A. Yes. 17
Q. And do you recall Mr. Acker
referring to the 18 tree of a software system? 19
A. Yes. 20 Q.
And what did you understand him to mean? 21
A. Well, what I understand it to mean is:
When 22 software is developed, you build a version.
You build a 23 release and then usually, if you're going to
create a 24 subsequent release of that software, you create a new
25 branch of software, start again, and make modifications
154
1 to that version of software and so on and so on, just
2 like when you're developing a document, a legal document, 3
maybe, in a legal environment with a number of 4 colleagues, you
may create a first version of a document, 5 circulate that, make
modifications, you know, get the 6 responses back, publish a new
revision of that document 7 and so on and so on. 8
Q. Now, you testified earlier about your 9
understanding of the relationship between SVR 4 and UNIX 10
System V, Release 4 and Unixware. Do you recall that 11
testimony? 12 A. UnixWare is
based on SVR 4. It's developed out 13 of SVR 4 and
actually the first version of UnixWare is 14 based on SVR, I
think, 4.1. 15 Q. Mr. Sontag,
this is attachment 1 to the Sun 16 agreement. Do you
recall viewing this earlier today? 17 A.
Yes. 18 Q. And do you see Section
2, a description of 19 technology, additional technology? 20
A. Yes. 21 Q.
And do you see the fourth line there, System V, 22 Release 4.2
and products? 23 A. Yes. 24
Q. And then do you see the parenthetical
there? 25 A. Yes.
UnixWare 1, UnixWare 1.1, UnixWare
155
1 1.1.1. 2 Q. You
took part in negotiating this agreement, 3 correct? 4
A. Correct. 5 Q.
What did you understand that reference in 6 attachment 1 to mean,
that parenthetical reference? 7 A.
Well, that was previous releases of UnixWare. 8
Q. What is your understanding of when UnixWare was 9
developed? 10 A. UnixWare was
developed in the early '90's, 11 primarily when Novell was -- had
ownership for the UNIX 12 intellectual property. 13
Q. And do you see the next line in this 14
attachment, System V, Release 4.2 MP and products? 15
A. Yes. 16 Q.
I take it your intent was the same, by using 17 that
parenthetical? 18 A. Yes. 19
Q. Okay. 20
Will you pull up Novell Exhibit 173, and at the 21
bottom of the third page. 22
This is the document, Mr. Sontag, that the 23 first paragraph at
the top in the blowup, it says: 24
In the past SCO's UnixWare and OpenServer 25 license
agreements did not allow these UNIX libraries to
156
1 be used outside of SCO's operating systems. 2
Do you see that language?
3 A. Yes, I do. 4
Q. Do you know whether a Unixware
license relates 5 to technology that goes back to the days of
AT&T? 6 A. Yes. 7
Q. Do you know whether SCO ever paid
Novell any 8 money for the technology going back to AT&T that
was part 9 of the UnixWare license? 10
A. No, I don't believe they did. 11
Q. Do you have a view as to whether the
UnixWare 12 license allowed the licensee to use the SVR 4 13
libraries? 14 A. I believe
they would. 15 Q. And
what's the basis for that understanding? 16
A. That was the libraries that were included with
17 UnixWare. 18 Q.
Now, at the time of the SCOsource agreements 19 that you reviewed
in some detail, were you concerned 20 about the use of UnixWare
and OpenServer technology with 21 Linux? 22
A. Yes. 23 Q.
In what way? 24 A. That
any of that IP had been misappropriated in 25 any form or fashion
into Linux.
157
1 Q. Okay. 2
Will you pull up SCO Exhibit
402. 3 Mr. Sontag,
SCO Exhibit 402 is SCO System V for 4 Linux sales guide, internal
use only. Are you roughly 5 familiar with this
document? 6 A. Yes. 7
Q. Could we go to the first page.
And this is the 8 executive summary of the document.
I take it you've seen 9 this before? 10
A. Yes. 11 Q.
Who is Jay Peterson? 12 A.
Jay Peterson was an employee of the SCOsource 13 division.
He worked for me. 14 Q.
Do you see in the middle of the paragraph, it 15 says: 16
The first product is called
SCO System V for 17 Linux Release 1.0, SCO UNIX runtime
libraries. 18 A. Yes. 19
Q. And the next sentence: 20
It licenses the SCO
OpenServer COFF static 21 shared libraries. 22
Do you see that? 23
A. Yes. 24 Q.
What was your understanding of what that 25 meant?
158
1 A. That the
primary product of that first release 2 of the SCOsource runtime
library was the OpenServer COFF 3 runtime libraries. 4
Q. And what is your basis for that
understanding? 5 A.
Because that's what I understood it to be at 6 the time. 7
MR. NORMAND:
Would you go to page 8 and blow 8 up the top part of that. 9
Q. This paragraph, the first one in
the section 10 called SCO UNIX Applications, has the following
sentence: 11 ELF
is the newer and current System V format 12 and is used in
UnixWare. 13 A. Yes. 14
Q. What does that reference mean?
15 A. That's referring to
that the primary runtime 16 libraries in UnixWare are also called
ELF. 17 Q. Now, if you
look at page 11, the bottom 18 paragraph. 19
If you would pull that up. 20
The following language appears:
21 Some of our
existing OpenServer UnixWare 22 customers may be considering a
migration to Linux. If 23 they are, the SSVL
product may be attractive to them, 24 since it can enable them to
run existing OpenServer or 25 UnixWare applications on Linux.
159
1 What does that
language signify? 2 A. It's just
saying, you know, that kind of a 3 basis for actually starting
this program was that we had 4 some of our existing customers
that came to us and said: 5 Hey, we would like to be able to run
our UNIX 6 applications either for OpenServer or UnixWare on
Linux. 7 Can you help us, you know, come up with a method to be
8 able to do that? 9
And that was the basis for starting SCOsource. 10 And the first
product that was released was intended to 11 provide that
solution for those customers. 12 Q.
One more snippet from this document. The next 13
page, second full paragraph, contains the following 14 statement:
15 In some cases we
believe they may be using our 16 libraries already to run
OpenServer or UnixWare 17 applications. 18
Do you see that language? 19
A. Yes. 20 Q. Is this
reflective of a view that at the 21 beginning of the SCOsource
program, you were concerned 22 about the use of OpenServer in
UnixWare technology? 23 A. Well,
we had customers that came to us and said 24 that they were doing
this very thing. They were using 25 the runtime
libraries on Linux, and their review of the
160
1 end user license agreement for OpenServer or UnixWare
2 made them come to, I believe, the correct conclusion that 3
that was not appropriate. They wanted to be able to 4
accomplish that in an appropriate manner, and so they 5 came to
SCO asking for us to provide a method for them to 6 license those
libraries to use with Linux. 7 Q.
And the date of this document is February, 8 2003, right? 9
A. I believe so, yes. 10
Q. Is it fairly early in the SCO program
process? 11 A. Yes, it is.
12 Q. Novell Exhibit
194. This is a document you 13 were asked about
earlier, a letter to Fortune 1000 14 companies? 15
A. Yes. 16 Q.
Do you recall going over this document?
And 17 this document contains a statement that there had been,
18 in SCO's view, System V code copied into Linux.
Do you 19 recall that? 20 A.
Yes. 21 Q. Was it your
view, at the time, that the System 22 V code that had been copied
into Linux was part of 23 UnixWare? 24
A. It very well could be. I mean, the
vast 25 majority of the code is, you know, identical to what is
161
1 in UnixWare, that we had concerns with. 2
Q. We have in the second paragraph from the 3
bottom, the statement that we have evidence that portions 4 of
UNIX System V software code have been copied into 5 Linux and
that additional other portions of UNIX System V 6 software code
have been modified and copied into Linux. 7
Do you see that statement? 8
A. Yes. 9 Q. Are
there methods and concepts, in your view, 10 that were developed
by AT&T that are in UnixWare? 11 A.
Yes. 12 Q. In your view, is there
code developed by AT&T 13 that is in UnixWare? 14
A. Yes. 15 Q.
And, in your view, did you have the right to 16 license that
material to customers without submitting any 17 payment for those
rights to Novell? 18 A. Yes. 19
Q. Next page, top. You say:
20 Consistent with this
effort, on March 7 we 21 initiated legal action against IBM for
alleged unfair 22 competition and breach of contract with respect
to our 23 UNIX rights. 24
Do you see that sentence? 25 A.
Yes.
162
1 Q. In your
agreements with Microsoft, Sun 2 SCOsource agreements, did you
ever purport to license 3 anything other than SCO's IP rights?
4 A. No. 5
Q. You were asked about Mr.
-- or Dr. Cargill's 6 expert report. Do you
recall that? 7 A. Yes. 8
Q. 428, page 3. 9
And if you would blow up that bottom
paragraph. 10 Dr.
Cargill states in this report: 11
Overall, Linux is a substantial copy of the 12 UNIX
SVR 4 operating system. 13
Do you see that language? 14 A.
Yes. 15 MR.
NORMAND: And can you side-by-side that 16 with page
12 of the Sun agreement? 17 Q.
We went over, Mr. Sontag, this language in the 18 bottom of the
divided documents. System V, Release 4.2 19
and products, and then the parenthetical in UnixWare? 20
A. Yes. 21 Q.
And Dr. Cargill is concluding that Linux is a 22
substantial copy of the SVR 4 operating system.
Do you 23 see that? 24 A.
Yes. 25 Q. You were told
in your examination that
163
1 Dr. Cargill had concluded that Linux is substantially
2 similar to SVR 4. Do you recall that? 3
A. Yes. 4
Q. Is it fair to say that one could equally 5
accurately say that Linux is substantially similar to 6 UnixWare?
7 A. Yes. 8
Q. Had you had occasion to read this report
-- 9 A. I had not. 10
Q. -- before it was presented or
given to you 11 today? 12 A.
No, I had not. 13 Q.
You're familiar with Malloc code? 14 A.
Yes, I am. 15 Q.
And how did your -- or SCO's reliance on Malloc 16 code come to
unfold? 17 A. I think it
was in February or March or April of 18 2003, that we became
aware of the Malloc code example 19 of -- you know, kind of some
fairly obvious and 20 easy-to-see literal copyright infringement
that had 21 occurred, was code that was in a Silicon Graphics set
of 22 open source software that was part of Linux that was 23
substantially the same as the UNIX System V, Release 4.2 24 ES
code that it had licensed to Silicon Graphics. 25
And it was very plain and apparent to see
that
164
1 there was a substantial amount of direct, literal
copying 2 that had occurred, which was actually surprising to me
3 that it would be so obvious and not munged up more than 4
it was. 5 Q. The Malloc code is
from UNIX System V, Release 6 3, is that correct? 7
A. The Malloc code is in many previous releases of
8 UNIX and small modifications or additions made to that 9
code with each additional release, but it's been 10 substantially
similar for many UNIX releases, and the 11 code is substantially
similar between UnixWare and many 12 previous, you know,
releases, at least through the last 13 10 or 20 years and. 14
Q. And in your view, when you were with
SCO, did a 15 license to UnixWare permit the licensee to use the
Malloc 16 code? 17 A. Yes.
18 Q. Novell 274. You
were shown this letter from 19 Mr. McBride to Lehman Brothers.
Do you recall briefly 20 reviewing this document? 21
A. Yes. 22 Q.
And in the document, Mr. McBride makes 23 reference to, quote,
SCO's rights in UNIX. 24
Do you recall that? 25 A. Yes.
165
1 Q. Again, in
all these agreements we are talking 2 about, did SCO purport to
release or license any 3 technology other than the ones that it
thought it had 4 rights to? 5 A.
No. 6 Q. Page 2, towards
the bottom. Do you recall 7 looking at that long list
of files and going through this 8 language? 9
A. Yes. 10 Q.
Is there ABI code in UnixWare? 11 A.
Yes, there is. 12 Q. How
do you know that? 13 A. I
have been made aware of that through the 14 course of our
investigations, and so I was aware that 15 there was ABI code in
UnixWare. 16 Q. Let's look
at Novell 57. Maybe SCO 57. 17
Do you recall going over the Sun agreement with
18 Mr. Acker? 19 A.
Yes, I do. 20 Q. Can you
take a step back and tell me how it 21 came to be that there was
a 2003 Sun agreement? 22 A.
Back in the late fall of 2002, we had a 23 business and
engineering meeting with Sun; some of Sun's 24 executives, some
of SCO's executives, some our engineers, 25 their engineers,
trying to determine if there was, you
166
1 know, business opportunities working together, and I
2 think at that time, we had told them that we had, you 3
know, additional SCO intellectual property that we would 4 be
willing to discuss with them and license; that we were 5 also
interested in potential joint marketing 6 opportunities and
otherwise. 7 And
in early 2003, we started having 8 discussions with Sun about
licensing UnixWare into their 9 products. Sun was --
had a substantial UNIX business in 10 the form of Solaris that,
at the time, only ran on a 11 specialized version of a processor
called a spark 12 processor. They had a desire to be
able to run their 13 Solaris operating system software on a more
general 14 PC-type, Intel-compatible processors, which is the 15
primary capability of SCO's UnixWare releases and all of 16 the
software drivers that we had available with UnixWare. 17
So they became interested in taking
a license 18 for the UnixWare source code and the drivers in
order to 19 develop an Intel-compatible version of Solaris, and
that 20 was the primary motivation for the discussions and the
21 ultimate license agreement that was entered into in 2003. 22
Q. You referred to drivers.
What are drivers? 23 A.
Drivers are additional pieces of code that 24 allow peripherals,
a network card, a keyboard, different 25 components or portions
of the computer hardware to be
167
1 able to interact and operate with the operating
system. 2 They are an important piece that if you don't have a 3
broad array of software drivers available, that operating 4
system will not work with a wide variety of hardware 5 that's
available out there, limiting your potential 6 customer base. 7
Q. And did Sun get drivers? 8
A. Yes, they did. 9 Q.
In the 2003 agreement? 10 A.
Yeah. It was very important for them. 11
Q. Drivers for what? 12
A. For UnixWare. 13 Q.
Did they get drivers for the older System V 14 technology? 15
A. No, they did not. 16
Q. Do you think they could use the older System V 17
releases as a stand-alone product without the drivers for 18
them? 19 MR. ACKER:
Objection. Calls for 20 speculation. 21
THE COURT: I'll let him
testify as to his 22 understanding of that. 23
THE WITNESS: It wouldn't make
sense. If 24 you're developing a software product,
you want to use the 25 latest version of the source code of that
software to
168
1 develop that product because it would have the latest
bug 2 fixes and features and capabilities. Same with
being 3 necessarily compatible with the hardware drivers that 4
would be associated with that operating system product. 5
Q. You went through a couple of attachments to
the 6 1994 Sun agreement and then the 2003 Sun agreement. 7
Could we pull those up
side-by-side? It's 8 Novell 187 and Novell 5.
And at 187, go to page 11, and 9 in 5, would you pull up page 19.
10 Do you recall
going through these attachments, 11 Mr. Sontag? 12
A. Yes, I do. 13 Q.
And I think, although you haven't had time to 14 pore over
it, these are the same list of products, 15 correct? 16
A. Yes. They appear to be
basically the same. 17 Q. Now,
as of 2003, Sun already had rights to all 18 of these products,
correct? 19 A. Yes.
I believe so. 20 Q. And this
will be a little bit redundant to what 21 you've testified to,
but in general, what did you 22 understand those rights to be as
of 2003? 23 A. As of 2003, Sun
had the most substantial rights 24 of any UNIX licensee.
They had source code for, you 25 know -- they had source
sublicensing rights, very broad
169
1 source sublicensing rights that no other UNIX licensee
2 had, which is why they had paid a substantial amount of 3
money because they had the ability, without any 4 involvement of
Novell or SCO or whoever was in control of 5 the UNIX contracts,
to be able to license the Solaris 6 source code to their
customers who, in turn, could also 7 sublicense the software.
That was a substantial right. 8 Q.
Sun had paid 82 1/2 million dollars for those 9 rights, correct?
10 A. Correct. 11
Q. Could Sun, under that 1994 agreement, 12
distribute its Solaris product to as many as a hundred 13
licensees? 14 A. Yes. 15
Q. A thousand? 16
A. A thousand. A million. They,
in turn, could 17 sublicense that source code to their customers,
so, it 18 could -- Solaris could be very broadly distributed very
19 easily, with the rights that Sun had in the 1994 20
agreement. 21 Q. Now, what do you
recall discussing with Sun 22 about whether there were
confidentiality restrictions in 23 the 1994 agreement? 24
A. I had raised that there were
confidentiality 25 provisions. They, as part of the
negotiating, tit for
170
1 tat, kind of strongly stated that they believed that
most 2 of those confidentiality provisions had been undermined 3
or waived by disclosures of the UNIX code over the years. 4 They
gave examples of the Lion's Book and some other 5 examples to
make their point. I, in doing my job, tried 6 to
press back and emphasize that I thought it was 7 important that
they, you know, had confidentiality 8 provisions. 9
Their position was that, with their broad
10 licensing rights and what they were intending to do, they 11
felt that they had the right to basically, in a, you 12 know,
Sun's sort of style, release an open source version 13 of Solaris
with the rights they had in 1994. 14 Q.
And do you think that position by Sun bore on 15 the price that
was negotiated for the agreement? 16 A.
For the 1994 agreement? 17 Q. The
2003. 18 MR. ACKER:
Objection. That calls for 19 speculation.
He can't possibly know what's in Sun's 20 mind. 21
MR. NORMAND: Mr. Sontag
negotiated the 22 agreement. He can recall parts of
negotiations, 23 inferences, and can make conclusions from what
Sun was 24 telling them how much they might be willing to pay.
25 THE COURT:
Overruled. Go ahead.
171
1 THE WITNESS:
Certainly Sun felt like they 2 already had substantial
rights and they had already paid 3 a substantial amount of money
for their -- you know, the 4 UNIX rights that they already had in
the 1994 agreement. 5 Their primary interest was in being able to
enable a 6 Solaris-on-Intel version, and their primary interest
was 7 then the UnixWare rights that we would be licensing to 8
them. And that was, I believe, where they viewed the 9
preponderance of the value to lie. 10 Q.
Would it be fair to say that, as of the 2003 11 agreement,
Sun was already in the business of 12 commercially licensing its
derivative work, Solaris? 13 A.
Yes. 14 Q. And the SVRX material
therein? 15 A. Yes. 16
Q. Now, you mentioned, in response to one
of 17 Mr. Acker's questions, that there was an important 18
restriction on what was described to you as open source 19 rights
in the 2003 agreement. Can you expand on that a
20 little? 21 A. Well, this
was one area that they wanted to be 22 able to make sure they --
you know, that the open 23 sourcing that they intended to do,
which they believed 24 they already had rights to do, that they
had complete 25 coverage for. So this is
another kind of
172
1 belt-and-suspenders sort of addition they wanted in
the 2 agreement was to broaden the confidentiality provision to
3 allow them to, you know, under a -- you know, a specific 4
version of an open source license that was not Linux, 5 that
valued the software, they could, you know, with the 6 addition of
the 2003 agreement, open source in a manner 7 that was, you know,
defined by the 2004 agreement. 8 Q.
This is the for-value language that you're 9 talking about? 10
A. The for-value language, that it was
intended 11 that they could not release Solaris under the Linux
GPL 12 open source license that would not pass muster with the
13 for-value provision in the 2004 agreement. 14
Q. And, again, a little redundant, but why did 15
that matter to you, that restriction? 16 A.
Well, we wanted to make sure that Solaris was 17 not just,
wholesale, dumped into Linux, that that would 18 be a problem,
but we felt that Sun had substantial rights 19 and that if they
were doing another version of open 20 source that met with the
requirements in the agreement, 21 that they had the rights to do
so. 22 MR. NORMAND:
Would you pull up Novell Exhibit 23 5 at page 20 -- let's do
Novell 187. 24 Q. This is, when
we get to it, the second page of 25 the attachment to the Sun
agreement that goes over the
173
1 technology that was licensed to them. 2
Do you recall going over that? 3
A. Yes. 4 Q.
And there were various SVR 4.1 and 4.2 releases 5 listed on that
second page. Do you recall that? 6
A. Yes. 7 Q. And do
you recall being asked about releases 8 identified in a schedule
to the APA? 9 A. Yes. 10
Q. I take it you had occasion to review the
APA 11 during your tenure at SCO? 12 A.
I did review it a number of times. 13 Q.
And you were asked about the schedule that 14 identified what you
called products. Do you recall that? 15
A. Yes. 16 Q.
And I wanted to ask you some questions about 17 the similarity
between that list of products and this 18 list of products in
attachment 2, page 2 of the Sun 19 agreement. Page 2
of the Sun agreement -- I'll just read 20 to you until we get
this up -- lists the following two 21 products as -- may I
approach, Your Honor? 22
THE COURT: You may. 23 Q.
As the most recent two new releases to which 24 Sun gained rights
under the 2003 agreement. Do you see 25 that?
174
1 A. Yes. 2
Q. And could you read what those two releases are?
3 A. Open UNIX 8, also known as
UnixWare 7.1.2, and 4 System V, Release 5 and, parenthetically,
UnixWare 7.0, 5 7.01, 7.1, 7.11, 7.1.1 plus LKP. 6
Q. At the top of the page are there SVR releases
7 listed? 8 A. Yes. 9
Q. And what are those releases? 10
A. System V, Release 4.1 ES, 3B2; System V,
11 Release 4.1 C2, 3B2; System V, Release 4.1 ES; System V, 12
Release 4.2 and products; UnixWare 1.0, 1.1 and 1.1.1; 13 and
System V, Release 4.2 MP and products; UnixWare 2.0, 14 2.1 and
2.12. 15 Q. And what is the MP?
16 A. Multiprocessor. 17
Q. And what can you tell me about how that
release 18 of System V came about? 19
A. Different versions of UnixWare were released, 20
some that would support a single computer processor, 21 other
versions that allowed for the software to be run 22 across
multiple processors at the same time, to allow 23 more work to be
accomplished at the same time, allowing 24 the processing to
occur more quickly. 25
MR. NORMAND: May I approach, Your Honor?
175
1 THE
COURT: You may. 2 Q.
I'm handing you, Mr. Sontag, a copy of the APA. 3 Turn to the
schedule that you were asked about earlier. 4
A. Schedule 1.1A? 5
Q. Yes. 6 A.
Assets? 7 Q. Yes. 8
And if you would blow up the
bottom line, item 9 66. 10
Now, with reference to attachment 1 to the Sun 11
agreement that we were looking at earlier -- 12
A. Yes. 13 Q.
-- the most recent releases of System V that 14 were included in
the attachment to the Sun agreement, 15 System V 4.1 ES/3B2, is
that product included in the list 16 in the APA? 17
A. Yes, it is. 18
Q. 4.1 C2/3B2, is that included in the list in the 19
APA? 20 A. Yes. 21
Q. Do you see an ES/3B2 product
listed? 22 A. I'm assuming
that's it right there, but maybe 23 I'm reading it wrong. 24
Q. Does that say ES/3B2? 25
A. No, it does not.
176
1 Q. Does it say
ES/C23B2? 2 A. No. 3
Q. So those two most recent System V
releases in 4 the Sun agreement aren't listed in the APA as
products, 5 are they? 6 A.
No. 7 Q. What have you
understood the term "open source" 8 to mean during your
tenure at SCO? 9 A. Well,
it varies. There's different open source 10 licenses,
but, in general, the high level, it is making 11 the source code
available to various parties, your 12 customers or others, that
they can then view or modify 13 that source code. In
some cases, there are requirements 14 on returning the
modifications back or making the 15 modifications available to
others. 16 Q. And your
understanding of the 2003 Sun 17 agreement is that such rights,
at least in full, were not 18 given to Sun; is that correct? 19
A. Prior to the 2003 agreement? 20
Q. In the 2003 agreement. 21
A. The 2003 agreement gave them
limited open 22 source rights. There were
restrictions to what they 23 could do in terms of open sourcing
in the 2003 24 agreement. 25 Q.
You were asked, Mr. Sontag, whether you knew
177
1 why two System V releases in the 1994 Sun agreement
had 2 been described as deliberately omitted. Do you
recall 3 those questions? 4 A.
Yes. 5 Q. And do you recall what
your answer was? 6 A. I do not.
7 Q. Do you know whether Sun had
already had a 8 license to those releases of System V before the
1994 9 agreement? 10 A. I do
not know. 11 Q. Do you know
whether they had already had a 12 license and terminated the
license? 13 A. Sun? 14
Q. Yes. 15 A.
I do not know. 16 Q. Who, at SCO,
might know the answer to that? 17 A.
I suspect Bill Broderick, John Maciaszek would 18 be the ones
that most likely would know that answer. 19
Q. Now, to state the obvious, at the time of the 20
2003 Sun agreement, Sun was an existing licensee of UNIX; 21 is
that right? 22 A. Yes. 23
Q. And I think you testified earlier that
part of 24 what Sun obtained under the 2003 agreement was the
right 25 to obtain copies of the older versions of System V; is
178
1 that right? 2 A.
Yes. 3 Q. This is from amendment
number 1 to the APA. I 4 take it you had occasion to
review that amendment during 5 your tenure at SCO? 6
A. Yes. 7 Q.
This amends part of the APA to state as 8 follows, paraphrasing
of course: Buyer, Santa Cruz, 9 shall be entitled to
retain 100 percent of the following 10 categories of SVRX
royalties. And Rule 2 says that 11 source code
right-to-use fees under existing SVRX 12 licenses and the
licensing of additional CPU's, and from 13 the distribution by
buyer of additional source code 14 copies. 15
Do you see that language? 16
A. Yes. 17 Q. As of
the 2003 agreement, Sun already had 18 source code copies to all
of the System V releases that 19 were listed in the 1994
agreement, correct? 20 A. Yes.
21 Q. And when you were shown
earlier, by Mr. Acker 22 and by myself, the similarity of System
V releases 23 between the 2003 agreement and the 1994 agreement,
what 24 Sun is obtaining is additional copies of those same 25
releases, correct?
179
1 A. Yes. 2
Q. You were asked by Mr. Acker, paraphrasing, 3
whether, to your understanding, SCO had the right to 4 license
the prior System V products with the UnixWare 5 license.
Do you recall that question? 6 A.
Yes. 7 Q. Mr. Sontag, I want to
show you language from, 8 again, amendment 1 to the APA, which
provides as follows: 9
Buyer, Santa Cruz, shall have the right to 10 enter into
amendments of the SVRX licenses as may be 11 incidentally
involved through its rights to sell and 12 license UnixWare
software. 13 Do you see
that? 14 A. Yes. 15
Q. And then, at the bottom, it says: 16
Buyer shall not enter into new
SVRX licenses 17 except in the situation specified in little "i."
18 Do you recall
reviewing this language during 19 your tenure at SCO? 20
A. Yes. 21 Q.
Do you recall forming a view as to what it 22 meant for
SCO to have the right to license SVRX material 23 incidentally to
licensing UnixWare? 24 A. That
was the basis of my belief that SCO had 25 that right.
180
1 Q. You were shown
this language earlier, 2 Mr. Sontag -- well, the first paragraph,
the letter in 3 which Mr. Luehs, I think it is, says that the
agreement 4 between Santa Cruz and Novell requires prior written
5 approval from Novell for all new agreements or changes to 6
current agreements relating to System V. 7
Do you see that language? 8 A.
Yes. 9 Q. Is it your
understanding that if Santa Cruz was 10 executing a Unixware
license that it didn't need to get 11 Novell's approval to
license SVRX material with that 12 UnixWare license? 13
A. That was my understanding. 14
Q. Now, this document is dated May 20,
1996, 15 correct? 16 A. Yes.
17 Q. This is a letter from
Novell three days later, 18 May 23, 1996, in which Novell says
that it has 19 transferred to SCO Novell's existing ownership
interest 20 in UNIX system-based offerings and related
products. Do 21 you see that language? 22
A. Yes. 23 Q.
Was it your understanding, during your tenure 24 at SCO, that SCO
could license UnixWare however it 25 wanted?
181
1 A. Yes.
That was my understanding. 2 Q.
And was it your understanding that SCO could 3 license System V
products with UnixWare? Was that your 4
understanding? 5 A. Yes.
6 Q. You were asked about
the Microsoft agreement. 7 Do you recall that? 8
A. Yes. 9 Q.
And, again, in summary, can you tell me how it 10
came to be that you ended up in negotiations with 11 Microsoft
regarding that agreement? 12 A.
In early 2003, we came in contact with 13 Microsoft
representatives who were interested in pursuing 14 a possible
license to UnixWare technologies to use in 15 some of their, what
they called UNIX-compatibility 16 products within Microsoft
Windows. It started a set of 17 negotiations
that occurred through the early part of 2003 18 culminating in
the UnixWare license agreement with 19 Microsoft. 20
Q. Now, in the time leading up to the
beginning of 21 those negotiations, had SCO made any public
statements or 22 assertions that there was any SCO IP in any
Microsoft 23 products? 24 A.
I believe there had been some, you know, broad 25 discussion that
there might be IP issues, and not only in
182
1 Linux but other operating systems, including possibly
2 Windows. 3 Q. And
was that a focus of your discussions with 4 Microsoft or was it
more collateral? 5 A. It
certainly was a portion of the discussion 6 because they
certainly wanted to have, you know, 7 appropriate IP coverage for
their products. 8 Q. Now,
in Section 2 of the Microsoft agreement, 9 SCO releases any
claims it might have against Microsoft; 10 is that right? 11
A. Yes. 12
Q. In that agreement, Section 2, did SCO purport
13 to release any of Novell's claims that it might have 14
against Microsoft? 15 A.
No. 16 Q. Did SCO claim to
have the right to release 17 claims for IP that it didn't own?
18 A. No. 19
Q. Section 2.2 of the Microsoft agreement
which 20 you spoke about earlier is a license for Microsoft 21
products. 22 A. Yes. 23
Q. Does that section pertain to any
particular 24 technology? 25 A.
It pertains to UnixWare.
183
1 Q. Did you purport to
license to Microsoft any 2 intellectual property that you didn't
have rights in? 3 A. No. 4
Q. This is the term sheet that was shown
to you 5 earlier. Can you tell me a little bit about
how this 6 came to be created? 7 A.
I think there was a desire to -- that Microsoft 8 wanted
to know what we could possibly have available to 9 license to
them. They had, you know, certain things that 10
they were interested in. And I, you know, with the help
11 of others, put together a list of possible topic areas 12
that could be of interest to Microsoft that was the basis 13 for
starting a discussion. 14 Q. Is
that list of products in paragraph 3 in any 15 particular order?
16 A. No, they are not. 17
Q. The System V term that you assumed
Microsoft 18 would be familiar with? 19
A. I think they would be. 20 Q.
Perhaps even more so than UnixWare? 21
A. Yes. 22 Q.
Section 3 of the Microsoft agreement was a 23 Unixware license,
correct? 24 A. Yes, it was. 25
Q. Was it a full UnixWare license?
184
1 A. It was a
limited UnixWare license to only a 2 limited set of Microsoft
products. 3 Q. Your
understanding of this Court's August '07 4 order is that Novell
owns the SVRX copyrights that are in 5 UnixWare. Is
that fair to say? 6 A. I
do understand that. 7 Q.
So, when you licensed Microsoft UnixWare, you 8 were licensing
the right to use Novell copyrighted 9 material under the Court's
order; is that right? 10 A.
That would be a determination that you could 11 come to. 12
Q. Did you pay Novell any money for
that Section 3 13 UnixWare license? 14
A. No, we did not. 15 Q.
Do you know if Novell is seeking any money from 16
that Section 3 license? 17 A.
I don't believe they are. 18 Q.
Section 4 of the Microsoft agreement. Could 19 you
describe your discussions with Microsoft regarding 20 that
section. 21 A. Microsoft
was interested in having a couple of 22 options when they
undertook the source code license for 23 UnixWare.
They wanted to be able to first evaluate the 24 source code and
determine if it would be useful to them. 25 So that was provided
to them under the initial agreement.
185
1 They wanted to have the option to be able to use the
2 technology in a set of products, which was the first 3
option or Section 3 of the agreement. And then they also
4 wanted to have the rights to use the UnixWare source code 5
and derivative products in all of their products, broadly 6
across all of Microsoft products. And that was the 7
primary component of Section 4. So that was a second 8
option that they could obtain. 9 Q.
In your discussions with Microsoft regarding 10 this agreement,
what did you say to them about the 11 subject matter of the
expanding UnixWare license in 12 Section 4? What do
you recall discussing with them? 13 A.
That it was a significant expansion of their 14 rights for how
they could utilize that UnixWare source 15 code, that it wasn't
just a limited set of products that 16 had a fairly small, you
know, distribution footprint, but 17 it was all of Microsoft's
products and millions and 18 millions of products.
And that was a substantial 19 expansion in how they could use
that UnixWare 20 technology. 21 Q.
Now, in Section 4 you also licensed Microsoft 22 OpenServer
source code; is that right? 23 A.
Yes. 24 Q. What do you recall
discussing with Microsoft 25 about the utility of that license?
186
1 A. That allowed
Microsoft to also have the ability 2 to have compatibility with
a, you know, broad range of 3 OpenServer applications that were
out there for which it 4 was a large installed base and large
customer base of 5 OpenServer so that it was another very big and
6 substantial part of that, you know, Section 4 agreement 7
was an OpenServer source code agreement. 8
I do not believe there is anybody else that has
9 ever been able to license the OpenServer source code. 10
Q. SCO had never licensed the
OpenServer source 11 code? 12 A.
No. It was contemplated, I think, with a few 13
possible customers but was never executed with any 14 licensee.
So OpenServer had never been licensed in 15 source code
before. 16 Q. OpenServer
was the more profitable of the two 17 main products at SCO,
correct? 18 A. It was 2/3
of the business. 19 Q.
Openserver had a larger installed base than 20 UnixWare did,
correct? 21 A. That's
correct. 22 MR.
ACKER: Objection. Leading. 23
THE COURT: Sustained.
It is leading. 24 Q. When
you were negotiating the 2003 Microsoft 25 agreement, did you
have a view as to the value of the
187
1 OpenServer license relative to the value of the
expanded 2 UnixWare license in Section 4? 3
A. I would view them both as, you know, 4 substantial
portions of the value of Section 4. How I 5 would
split between them, I'm not sure. I mean, the 6
expansion of UnixWare distribution was significant.
The 7 source code, you know, license for OpenServer on its own 8
was significant. 9 Q. And, in
your view at the time, why was it 10 relevant to Microsoft's
business, for us lay people, that 11 there was a large installed
base of OpenServer users? 12 A.
It provided Microsoft with potential 13 opportunities to sell
products to that large installed 14 base of OpenServer customers,
and so, in some cases, for 15 the first time Microsoft
Windows-based products to a set 16 of customers that they may
have never dealt with 17 before. 18 Q.
Now, having exercised the options in Section 3 19 and Section 4,
and with the Section 4 license, Microsoft 20 now had a full
UnixWare license, correct? 21 A.
That is correct. 22 Q. And
Section 4 is also a license to older System 23 V releases; is
that right? 24 MR.
ACKER: Your Honor, it's still leading, the 25 last
two questions. Every question ends with "correct"
188
1 or "is that right?" It's
his witness. 2 MR.
NORMAND: This is a cross examination, but 3 if we
want to do a hard and fast rule, I'll ask only 4 open-ended
questions. 5 THE COURT:
It sort of is and sort of isn't. 6
MR. ACKER: I understand that, but, given
the 7 relationship between counsel and the witness, I think 8
it's appropriate to be a non-leading question. 9
THE COURT: Try not to lead.
I'll sustain the 10 objection. Where are you? 11
MR. SONTAG: You're
asking where I am with the 12 witness? 13
THE COURT: No, just on this last
series of 14 questions. 15
MR. SONTAG: As to the Microsoft agreement? 16
Probably five minutes. 17
THE COURT: Just the last couple of questions. 18
MR. SONTAG: Do you
want me to start over? 19
THE COURT: Just the last couple of questions. 20 I
don't know that he answered them. We got a
leading 21 objection. 22
MR. SONTAG: I'm sorry. I understand. 23
Q. By Mr. Sontag: I guess the
question was: Why 24 were you willing to enter into
a license to prior 25 releases of System V in Section 4 of the
Microsoft
189
1 agreement? 2 A.
Well, it was typical with a, you know, UnixWare 3 and preceeding
UNIX source code licenses, to provide a 4 license to the prior
products. The fact we broke it up 5 and put it into
the second release was just, in some ways 6 a convenient place to
put it. But it was not 7 something -- the prior
products was not something that 8 Microsoft was viewing as highly
valuable. I mean, we did 9 not provide all the
versions that -- of prior product. 10
And we had told them that we may not be able to 11
provide them all because they are very old, you know, 12 source
tapes that, in some cases, had turned to dust. 13 But there was
no objection on the part of Microsoft that 14 they didn't receive
all the versions that were listed on 15 that schedule.
We provided them with the ones that we 16 were able to get, and
that was sufficient for them, and 17 there was no desire or need
on Microsoft's part to alter 18 the value of, you know, that
agreement based on that. 19 Q.
Did you have any understanding, at the time of 20 the execution
of the agreement, as to whether Microsoft 21 was going to use
those prior releases of System V as 22 stand-alone products? 23
A. No. We had no
expectation that they would use 24 it. If you are
developing a software product, again, as 25 I've said a number of
times previously today, you would
190
1 want to utilize the latest version of the source code
for 2 the development of a new product. And
especially with a 3 UNIX-based operating system product that has
built into 4 it a high degree of backward compatibility, you
would 5 want to use the latest to take advantage of all the new
6 features and bug fixes, and you would still have that 7
backward compatibility. There is no need to go to a 8
prior release. 9 Q. Do you recall
entering into an amendment 3 to 10 the Microsoft agreement? 11
A. Yes. 12 Q.
And can you recall -- 13
Actually, can you bring it up? And blow up 14 that
paragraph B. 15 Do you
recall discussing and negotiating this 16 paragraph in the
agreement? 17 A. Yes. 18
Q. It says, and I understand it's hard to
read: 19 The parties
recognize that, A, parts of the 20 software, excluding material
portions of the kernel, 21 may be distributed by Microsoft by
default in the 22 majority of the editions. 23
This is in section 3, right? 24
A. yes. 25 Q.
Section 3 is a license for UnixWare, correct?
191
1 A. Yes. 2
MR. ACKER: Same
objection, Your Honor. 3 Leading. 4
MR. NORMAND: We are talking about
the text of 5 an agreement. We can take five
minutes and walk through 6 it. 7
THE COURT: You can answer that, which you
did. 8 THE
WITNESS: Yes. 9 Q.
What is your understanding as to what rights 10 Microsoft gained
in this paragraph B of amendment 3? 11
A. That they would be able to license the UnixWare 12
software into a majority of their, you know, Windows 13 products.
14 Q. Did you have any
view, at the time of the 15 execution of the agreement or its
amendments, as to 16 whether Microsoft had any intention to use
the older 17 System V releases in its Windows products? 18
A. My understanding is they had no
intention of 19 using the older UNIX versions for anything other
than a 20 source analysis project that they were contemplating.
21 Q. Now, I asked you a
similar question earlier as 22 about Sun, as to whether you had a
view as to whether 23 they intended to use the older System V
releases as a 24 stand-alone product. Do you
recall my asking you that 25 question?
192
1 A. I kind of
recall that. 2 Q. We
discussed drivers. Do you recall that? 3
A. Yes. 4 Q.
Did there come a time when you entered into a 5
clarification agreement as to the Sun 2003 agreement 6 regarding
the subject matter of drivers? 7 A.
Yes. There was an amendment to the agreement 8 that
was related to the drivers, binary and source code 9 drivers for
UnixWare. 10 Q. This is
SCO Exhibit 189. I think you might 11 have
objected to it. Let me ask one foundational 12
question. Were the drivers sent? 13
A. The drivers were -- 14
Q. The drivers addressed in this agreement, were
15 they sent to Sun? 16 A.
Yes, they were. 17
MR. NORMAND: I would like to move the document 18
into evidence, Your Honor. 19
MR. ACKER: No objection. 20
THE COURT: SCO 189 is
received. 21 (SCO Exhibit
189 received in evidence.) 22 Q.
And can you quickly summarize for me how this 23 came about? 24
A. I don't recall the specifics, but
I think it 25 was very important to Sun that they receive all the
193
1 drivers that they possibly could to UnixWare that --
for 2 which there were not restrictions that we could not 3
provide them to them, and this amendment was just for 4 them to
ensure that they were receiving all of the 5 drivers for UnixWare
that we could provide them. And we 6 did, in
turn, provide those UnixWare drivers to them. 7
Q. Do you know whether Sun received the rights to
8 OpenServer drivers? 9 A.
I believe we provided those drivers to them as 10 well. 11
Q. Do you know whether Sun received
any rights 12 under this clarification to drivers to older System
V 13 releases? 14 A.
No. I believe they did not. 15
MR. NORMAND: Novell 422, if you
could blow 16 that up. 17 Q.
Do you recall reviewing this document, 18 Mr. Sontag, with Mr.
Acker? 19 A. Yes, I do.
20 Q. And do you recall a
reference -- I think it's 21 on page 2. This is a
reference to SCO IP. Do you see 22 that reference?
23 A. Yes. 24
Q. And do you see, in the second line in
the top 25 paragraph, SCO's intellectual property ownership or
194
1 rights? 2 A. Yes,
I do. 3 Q. In this agreement, did
you purport to release 4 or license anything other than SCO's
intellectual 5 property rights? 6 A.
No, we not. 7 Q. Did you pruport
to release or license any of 8 Novell's rights? 9
A. No, we did not. 10 Q.
There's a reference, I believe, in that 11 agreement to
UNIX-based code. Do you recall that? 12
A. Yes. 13 Q.
Is UnixWare UNIX-based code? 14 A.
Yes, it is. 15 Q. Is OpenServer
UNIX-based code? 16 A. Yes, it
is. 17 Q. To the best of your
knowledge, did you ever pay 18 Novell anything for the System V
code or old SVRX code in 19 any release of UnixWare or
OpenServer? 20 A. No, we did not.
21 Q. There is a reference in
Novell Exhibit 422 to, 22 quote, SCO's standard commercial
license. Do you recall 23 that phrase? 24
A. Yes. 25 Q.
Do you have an understanding as to whether,
195
1 under its standard commercial license for UnixWare, 2
whether SCO licensed prior System V products? 3
A. I know that in the UnixWare source code 4
agreement that was provided, up until the most recent 5 versions
of the UnixWare source code agreement, that the 6 prior versions
were specifically listed. In the most 7 recent
version of the UnixWare license, that was omitted 8 only for the
purpose of reducing the size of the 9 agreement, but my
understanding is that it was still 10 provided to a customer if
they requested it, and it was 11 implicitly included. 12
Q. Do you have an understanding as
to why that 13 was? 14 A.
Because that was the standard practice of SCO 15 and its
predecessors in terms of licensing the UNIX 16 software, that
source code licensees of different 17 versions could interact
with each other or share code in 18 certain cases, if they were
of a similar licensing level, 19 and that was enabled by the fact
that they would be 20 licensed to all prior versions, depending
on the version 21 they licensed at that point. 22
So, that was a standard practice
that had been 23 used by SCO, by Novell, by AT&T, USL and
part of the 24 licensing of the UNIX code, and it continued with
25 UnixWare.
196
1 Q. You were
shown a series of agreements towards 2 the end of Mr. Acker's
questions, and I think we can 3 safely lump those together and
call them SCOsource 4 agreements. Do you recall
doing that? 5 A. Yes. 6
Q. How did you come about arriving
at a price for 7 these SCOsource agreements? 8
A. I -- we determined that we wanted to price it
9 basically at the same price as UnixWare, so a comparable 10
capability of UnixWare, if it was a 1-CPU system, was 11 priced
at, you know, $1400, which was the same price for 12 UnixWare.
13 Q. And who did you
speak with on that issue? 14 A.
Oh, I had gotten input from John Maciaszek and 15 also from Jeff
Hunsaker, who were more familiar with the 16 UnixWare price list
than I was. 17 Q. Now, was
there any source code given to a 18 licensee under a SCOsource
license? 19 A. No, there
was not. 20 Q. Could you
describe, to the best of your view, 21 what the license was in
the SCOsource license? 22 A.
It was primarily a release, aspects of a 23 covenant not to sue
and a Unixware license and SCO IP 24 license. 25
Q. Now, you were shown the phrase in
several of
197
1 the agreements, quote, SCO's IP rights.
Do you recall 2 that? 3 A.
Yes. 4 Q. In these SCOsource
agreements, did SCO purport 5 to release anything other than its
rights? 6 A. No, we did not. 7
Q. Did SCO purport to license anything
other than 8 its rights? 9 A.
No. 10 Q. You were shown Novell
Exhibit 227. This is the 11 Jeff Hunsaker e-mail.
Do you recall that? 12 A.
Yes. 13 Q. And in that e-mail,
Mr. Hunsaker's says that 14 this is not a Unixware 7.13 SKU.
Do you recall that? 15 A.
Yes. 16 Q. Do you know what SKU
is? 17 A. Stock-keeping unit or
-- a box of UnixWare 18 software, in this case. 19
Q. Were these SCOsource agreements simply UnixWare
20 licenses for purposes of stock keeping? 21
A. No. They were a separate package and
agreement 22 and separate SKU. 23 Q.
Now, you were asked further about 24 Mr. Hunsaker's statement
that -- 25 If we could
pull it up.
198
1 Mr. Hunsaker's
says: 2 There is no
connection between a UnixWare 3 OpenServer and the SCO UNIX IPC
license whatsoever. 4 Do
you see that statement? 5 A. Yes.
6 Q. Now, taking it alone, just
pulled out of that 7 document, do you agree with it? 8
A. There is no similarity of the license?
Yes. 9 The licenses are not the same. 10
Q. Now, did Mr. Hunsaker negotiate these 11
agreements, by the way? 12 A. No,
he not. 13 Q. Who did? 14
A. I was involved in that, along with our
15 attorneys. 16 Q. What was
Mr. Hunsaker's position at the time 17 that he made this
statement? 18 A. I believe he was
over worldwide sales for the 19 UNIX business. He did
not have responsibility for 20 primary sales for
SCOsource-related products. That was 21 done by me
through my own sales group. 22 Q.
Did you ever speak with Mr. Hunsaker in 23 conjunction with your
negotiation of the SCOsource 24 agreements? 25
A. No.
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1 Q. Did you have
discussions, Mr. Sontag, with 2 Novell in late 2002? 3
A. Yes, we did. 4
Q. Can you describe the nature of those 5
discussions? 6 A. We had a number
of back and forth discussions 7 between representatives from
Novell and myself and, in 8 some cases, with Darl McBride.
In our case, we were 9 interested in clarifying the language of
the Asset 10 Purchase Agreement related to excluded assets.
In the 11 case of Novell, they were interested in finding
out or 12 interested in SCO's involvement with United Linux.
That 13 was the overall nature of the conversations in
late 14 2002. 15 Q. Can you
recall who you had discussions with? 16 A.
I had a number of conversations with Gregg 17 Jones and at least
one conversation with another 18 gentleman from Novell, whom I
can't remember his name at 19 this moment. 20
Q. And did you have occasion to speak with 21 Mr.
McBride about his discussions with Novell? 22
A. I did. 23 Q. And
what was the general nature of those 24 discussions? 25
MR. ACKER: Objection.
Hearsay, Your Honor, if
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1 he's going to relate what Mr. McBride told him. 2
MR. NORMAND: This goes
to state of mind, but 3 we can cut it short if there are
concerns, Your Honor. 4
THE COURT: He can answer the question asked, 5 the
general nature, without saying what somebody else 6 said.
So, talk about the general nature. 7
THE WITNESS: His discussions, as I understood 8
it from Mr. McBride, were very similar to my discussions 9 that I
had primarily with Gregg Jones. 10 Q.
Did you, in your discussions with Novell, ever 11 ask Novell to
partner in the SCOsource program that you 12 were contemplating?
13 A. No, I did not. 14
Q. Did you, when you were speaking with
Novell, 15 ever ask Novell to participate in the SCOsource 16
program? 17 A. No, I did not.
18 Q. Did you have a view, at
the time of these 19 discussions, as to whether Novell would have
any right to 20 any monies you might receive under the SCOsource
21 program? 22 A. No.
I did not believe they would have any 23 rights. 24
Q. Did anyone from Novell suggest to you that
they 25 thought they had some right to the monies you might
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1 receive under this program? 2
A. No. 3 Q. Did you
have a view, at the time of these 4 discussions, as to whether
SCO had the authority to 5 execute the SCOsource agreements it
was contemplating? 6 A. I
believed we had those rights. 7 Q.
Did anyone, in your discussions with Novell, 8 ever suggest to
you that they thought they could limit 9 your authority to
execute these agreements that you were 10 contemplating? 11
A. No. 12 Q.
Did you ever have discussions with Novell 13 about -- before the
execution of the agreement -- your 14 authority to excute the
2003 Sun agreement? 15 A. No, we
did not. 16 Q. Did you have any
trepidation about whether SCO 17 had the authority to execute
that agreement? 18 A. No.
I had no concern. 19 Q. Now, the
1994 Sun agreement, that concerned a 20 buyout; is that right?
21 A. Yes, it did. 22
Q. In what sense? 23 A.
It was a buyout for Sun of their binary 24 distribution of
Solaris, so they would not have to make 25 payment for every copy
of Solaris that they sold.
202
1 Q. Do you know
whether, at the time of the 1994 2 agreement, Sun was paying
binary royalties? 3 A. Prior to
the 1994 -- 4 Q. Yes. 5
A. -- time frame? I believe
they likely were 6 making royalty payments. 7
Q. Do you know whether, as of the 2003 agreement, 8
Sun was paying any binary royalties? 9 A.
No. They would not be. 10 Q.
How come? 11 A. Because they
already had a buyout in the 1994 12 agreement. 13
Q. In the 2003 agreement, did you amend or change
14 that 1994 buyout? 15 A.
No, we did not. 16 Q. Can you
explain what you mean? 17 A. The
buyout related to -- you know, to Solaris 18 for SVR code binary
distribution and was taken care of by 19 the '94 agreement. 20
Q. And did you have any understanding, as
of the 21 2003 agreement, as to whether Sun was intending to use
22 the UnixWare technology and license? 23
A. It was my understanding they were intending to 24
use the UnixWare technology. 25 Q.
Did you have an understanding, at the time of
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1 that 2003 agreement, as to whether any of the code
that 2 was in Solaris was also in UnixWare? 3
A. There would be substantial portions that would 4
be very much the same because Solaris was, you know, 5 based on,
you know, a previous version of UNIX System V, 6 similar to
UnixWare. 7 Q. Did you have a
view, as of the time of the 2003 8 agreement, as to whether Sun
would have paid UnixWare 9 royalties for its distribution of
Solaris if not for the 10 terms of the 2003 agreement? 11
MR. ACKER: It calls for
speculation and 12 hearsay, Your Honor. 13
MR. NORMAND: It does call for
speculation. I 14 don't know that that's
necessarily a basis for precluding 15 him from answering. 16
THE COURT: I'll let him
answer. 17 Go ahead. 18
THE WITNESS: No.
I don't believe Sun would 19 have to be paying a UnixWare royalty
for what they were 20 doing with Solaris prior to the 2003
agreement. 21 Q. Now, what about
what they would do with Solaris 22 after the 2003, if all they
had gotten was a Unixware 23 license and if there was code in
UnixWare that was also 24 in Solaris? What kind of
royalties would Sun be 25 paying?
204
1 A. Similar to the
royalties that we would have 2 other UnixWare source code
licensees pay. 3 Q. And can you
explain what kind of royalties 4 those were? 5
A. It would vary, but it would be on the order of 6
tens to hundreds of dollars per unit shipped on an 7 ongoing
royalty basis. 8 Q. Now, at the
time of the execution of the 9 Microsoft agreement, what was your
view as to the 10 relative value of the SVRX component of that
agreement? 11 A.
Insignificant. It was licensed as a matter of 12
course. I don't believe that Sun -- or Microsoft was 13
valuing it at all. What they were valuing was the 14
UnixWare source code, the UnixWare binary distribution 15 rights
and broad binary distribution rights and 16 OpenServer source
code distribution rights. 17 Q.
And at the time of the 2003 Sun agreement, what 18 was your view
as to the relative value of the new 19 SVRX-related rights that
Sun had acquired? 20 A. They had
almost all of those rights already. 21 What they acquired were
new rights to UnixWare, which is 22 what they needed to develop
their, you know, 23 Solaris-on-Intel product offerings. 24
MR. NORMAND: No
further questions, Your 25 Honor.
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1 THE COURT:
Thank you. I assume your redirect 2 will be more
than three to five minutes? 3
MR. ACKER: Yes. That's a good assumption, 4
Your Honor. 5 THE
COURT: My hearing starts at 2:30 so we 6 will take up
again at 8:30 in the morning. If you want 7
to leave stuff here, if you just push it aside a little, 8 nobody
is going steal it. I don't think they would want
9 it. We'll see you at 8:30 in the morning. 10
And you get to come back, Mr.
Sontag. 11 MR.
NORMAND: Thank you, Your Honor. 12 13 14 15
16 17 18 19 20 21 22 23 24 25
(Whereupon the proceedings were
concluded.)
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1 2
REPORTER'S CERTIFICATE 3 STATE OF UTAH
) 4
) ss. 5 COUNTY OF SALT LAKE ) 6 7
I, REBECCA JANKE, do hereby certify
that I am a 8 Certified Court Reporter for the State of Utah; 9
That as such Reporter I attended
the hearing of 10 the foregoing matter on April 29, 2008, and
thereat 11 reported in Stenotype all of the testimony and 12
proceedings had, and caused said notes to be transcribed 13 into
typewriting, and the foregoing pages constitute a 14 full, true
and correct record of the proceedings 15 transcribed; 16
That I am not of kin to any of the
parties and 17 have no interets in the outcome of the matter;
18 And hereby set my hand
and seal this 29th day 19 of April, 2008. 20 21 22
23 24
_______________________________
25
REBECCA JANKE, CSR, RPR, RMR
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