This is the transcript of day three of the SCO v. Novell
trial, Wednesday, March 10, as text. The trial began that Monday, March 8, 2010 with jury selection, and it would run for 15 days, Monday
through Friday, for three weeks, with the Hon. Ted Stewart presiding.
So this is still early, and SCO, who put its first witness, Robert Frankenberg, on the stand the day before, presents two more today. Today's witnesses for SCO will be R. Duff
Thompson and Ed Chatlos. Here is Groklaw's eyewitness report from
the trial for that day.
The day's transcript as PDF is in three parts: Part 1,
Part 2, and Part 3. If you wish to jump to a different day
of the trial, you can click on the
date that interests you in the calendar, below, and it will take you to a transcript as text, but with the line numbers that appear in the PDFs:
We've got some other ways to navigate. You can jump to the transcript's start, part 2, or part 3. And in the index at the beginning of the transcript, we have placed links to the beginning of the testimony of each witness, on direct examination, cross examination, and redirect. Lawyers for the day are Stuart Singer and Ted Normand of Boies Schiller for SCO and Eric Acker and Michael Jacobs of Morrison & Foerster for Novell. We also have links to where in the day exhibits were accepted or referenced, but that is for context only, since we do not know what the exhibits are, unless they are mentioned during the testimony, which in many cases, they are.
But let's take a look at the highlights of the day. Before the jury comes in, there is discussion about what to do about Jack Messman's deposition testimony. The debate is a concern about hearsay and in one instance hearsay within hearsay, and then SCO tries to get the Wall Street Journal article it couldn't use in opening statement used in direct examination of Thompson. In the end, the judge says two of the disputed materials can be shown, but not the hearsay on hearsay, because Messman is going to be testifying in person, so each side will have its chance to question him live. So SCO gets to use the article, and Novell can use a statement about what was said at the board meeting, but Novell isn't allowed to show the part of the deposition where Messman mentioned that Chris Stone and others told him that SCO was contacting them asking for the copyrights.
Singer says that there is case law that if there is an article published and no one in a company tries to correct it, then it is admissible evidence. Jacobs says, "I have not seen that case law and it is a little peculiar." Just think of all the Groklaw articles that would be admissible evidence, then, since SCO never attempted to clarify them. They attacked me and Groklaw in general terms, but they never rebutted the research. I'd be delighted if they would.
However, if Stuart Singer makes a statement that Michael Jacobs says is so much Silly Putty, personally, I'm putting my money on Jacobs being right.
Speaking of Mr. Singer, he brings up again his concern, expressed repeatedly yesterday, about Novell's Sterling Brennan's questioning of Frankenberg on Tuesday about the APA. He wants a jury instruction about what he calls the "integration clause", meaning pushing again the SCO position that once Amendment 2 was signed, it wiped away the exclusion section's wording of the APA. Novell's position is that no jury instruction is required, that SCO is trying to flip the topic away from what the agreement said toward what the parties were thinking by cherry picking from the Tenth Circuit's opinion. But there is a court order on motions in limine that no one is to refer to the Tenth Circuit or the previous appeal. So SCO loses on that point, and there will be no jury instruction, unless Novell oversteps a boundary in questioning witnesses going forward.
Next SCO wants to be able to elicit testimony from Thompson regarding Amendment 2. He wasn't involved with it, so earlier the court ruled he can't testify about it, but SCO points out he was on the board at the time, so he should at least be able to mention that, although Singer admits he can't recall if he voted for it or abstained. The judge rules if he can lay the foundation properly and doesn't stray from the narrow point he wishes to make, he'll probably allow it. Then the jury comes in. Again the judge asks them if they've obeyed his instructions to them? And again they "passed the test," the judge says, and so Mr. Duff Thompson is called to the stand.
Thompson is a lawyer, used to be general counsel for WordPerfect, then joined Novell in 1994 when WordPerfect got bought, is on the SCO board, chairman of the litigation committee, and it was he who signed Amendment 1 to the APA on behalf of Novell in December of 1995. Both Ty Mattingly, who will testify later in the trial, and Ed Chatlos worked for Thompson, and he reported to Frankenberg. It was Intel and HP who suggested to Novell that Santa Cruz would be a good candidate to buy the UNIX business, mainly because they didn't sell their own hardware. So he was tasked to negotiate. He mentions that there was more than one aspect to the deal, and one part was about NetWare: The final aspect was that there would be some kind of
a, quote, white box, which basically was that SCO would sell
Novell's software through its channel.
I should be very clear. White box was their way of
referring to the NetWare product. Novell referred to all
their product as the red box, because their Novell Netware
came in a red shrinkwrapped box. When they negotiated with
other parties, such as previous to that time in the spring
we had negotiated with IBM on some issues, we had talked
about IBM selling a blue box, basically IBM's color, blue,
and that they would sell NetWare through their channel.
Finally, in this instance it was the white box, which
was SCO selling the NetWare software.
I don't believe that is accurate. The APA [PDF] references the definition of White Box used in the Operating Agreement [PDF], and if you look there, on page 6 of the PDF, it says this about White Box:e. Given the strategic importance of a unified set of APIs between the Merged Product and the 64-bit UNIX System product being developed by Hewlett Packard (the "White Box Product"), through the Hewlett Packard White Box Organization ("WBO"), SCO will work with Hewlett Packard ("HP"), and Novell will use commercially reasonable efforts to facilitate such interaction, to set up a process to ensure the definition of common interfaces between the Merged Product and the White Box Product as well as identification of compatibility interfaces required in the White Box Product. Does that sound like NetWare to you? Me neither. I don't know why Thompson got that wrong, but he seems to have at a minimum misremembered. But how strange it is that I remember that and he doesn't. And if you read the transcript for day 2, you may recall that Frankenberg was asked if Novell wanted to retain some UNIX and UnixWare so as to pursue other UNIX deals, specifically one with HP, and Frankenberg denied it. So both SCO witnesses demonstrate why it's not a good idea to get into memories of what people thought a contract meant 15 years after the fact instead of relying on the words themselves.And I'd be interested in how Mr. Singer could not know what White Box was, in that he's a lawyer and one who no doubt read both the APA and the Operating Agreement. Why didn't he refresh the witness's memory, I wonder? Odder still, Thompson, an attorney too, testifies that the deal was to sell Santa Cruz everything, lock, stock and barrel. "I assumed and I understood
that we were giving them the copyrights as well," he says, and then says he never heard anyone ever talk about not transferring the copyrights. Further, when shown the excluded assets section of the APA, he claims with a straight face that it means NetWare copyrights. I find that hilarious, in that NetWare wasn't sold, not part of the sale at all. Thompson's story is that there might be snippets of NetWare code interspersed in the product, and they wanted to make clear that even if that was so, the copyrights were not transferring. Here's why, as a paralegal, that doesn't sound right to me. NetWare was not being sold, but neither was Tuxedo, and they didn't list those copyrights as excluded from the assets. I am positive if they meant only certain copyrights were excluded from the sale but the others were to go to Santa Cruz, they would have listed them all with specificity, Tuxedo too, because otherwise there could be an inference that the Tuxedo copyrights did transfer, even though they didn't. If they failed to provide such specificity, and failed to say NetWare and Tuxedo copyrights didn't transfer but others did, then a blanket statement that copyrights don't transfer doesn't mean NetWare. All means all. So if they are being sincere in this story, and we are, after all, talking about SCO, then they should sue their lawyers, not Novell, I'd think. Of course, the lawyers will appear later, and they don't support this tale of SCO woe, as you will see. And that isn't the most twisted. Here is what Thompson says the Technology License Agreement means: Q. Would you read out loud, Mr. Thompson, what it says
with respect to ownership of the licensed technology.
A. As between Novell and SCO, sub one, ownership of
licensed technology shall reside in SCO.
Q. Sub two.
A. Ownership of any modifications made to licensed
technology pursuant to licenses specified in section two
above shall reside in Novell.
Q. So if Novell used this license to improve their own
product, would they own those modifications?
A. That is correct.
Q. But the licensed technology itself that you were
getting at the time of the sale, that Santa Cruz was
getting, would that be what is referred to in item one that
the ownership shall reside in SCO?
A. That was the intent and meaning of that provision. That isn't what I get out of it. I'm not a lawyer, but what I read says that SCO was getting under the APA "licensed technology". That isn't the same as "purchased technology", now, is it? So the subparagraphs to me mean that SCO was getting some licensed technology under the APA, in that the copyrights were to stay with Novell, but they would own the physical stuff and any modifications. Novell could also improve the licensed technology, and it would own that. The reason this makes sense is that we know that Novell did continue to code, even after the APA. We see that in the copyrights' dates. And Novell's position is that what SCO got was a license, although not named that way in the APA. I think everyone at the time knew that was what it was, though, and the TLA reflects that. In fact, in Judge Stewart's eventual ruling and findings of fact, he noted that "licensed technology" is defined in the APA and it is "all of the technology included in the Assets and . . . all derivatives of the technology included in the Assets." So, there you are, ladies and gentlemen, it was licensed, just as Novell said it was. We get to know what the Wall Street Journal article said that Stuart Singer was so crazy wild to show the jury, because he asks Thompson about it: Q. The next paragraph, could you read that out loud,
please.
A. The deal includes the purchase by Santa Cruz Operation
of most trademarks and intellectual property associated with
the UNIX software. One person familiar with the situation
said he expects SCO to pay about $140 million, some of which
will be shares of SCO, a Santa Cruz, California company that
sells its own version of UNIX.
Q. When you read this, did you understand intellectual
product to include the copyrights in UNIX?
A. I did.
Q. Did anyone, after this was published in The Wall Street
Journal, at Novell come to you and say this is wrong, that
we held back the copyrights? Now, these are two lawyers. They have to know this is not evidence that proves anything at all. First, it's an article based on leaked info from an unnamed souce who is described only as "one person familiar with the situation", but who gets the financials wrong. The payment wasn't for $140 million, and it was not part shares. It was all shares, no cash at all. So how much did this alleged insider really know? Maybe there was no such person and the journalist just made it up. Such things have been known to occur, after all. Talk about hearsay within hearsay. But look at what it says about IP: that the deal includes "most trademarks". Most isn't all, and SCO is in court alleging that they got everything, lock, stock and barrel. Isn't that so? Plus, no one could get the trademark on UNIX, in that it went to X/Open. SCO argues that if no one corrected this inaccurate info, then it must be true info. But it is patently obvious that it is not accurate in several details. So how can it support anything?
It's pitiful to think that Singer fought for this piece of nothing, and it tells me how little he had to work with. And it's odd in another way, too. Did you notice that the article says this so-called knowledgeable person expects that the deal will be $140 million? That implies that the article was prior to the actual facts becoming known. And in fact, the date of the article is September 20th, 1995. After all, according to SCO, there was a joint press release on the day after the deal, right? That's September 20th also. Here's the press release [PDF], Exhibit 8 in the collection, if you'd like to confirm what I'm saying. Why wouldn't that press release be the answer to this Wall St. Journal's inaccuracies, if it were a joint release? See how internally inconsistent SCO's story is? As it happens, the judge eventually ruled that it was not a joint release, just a Santa Cruz document, since there is only a SCO logo on it. But if in fact it had been a joint release, that's Novell's answer to the inaccuracies right there, in that it corrects the payment for the deal, which by the way doesn't mention anything but stock and it mentions a royalty stream from UnixWare, but not the 95% on SVRx, which SCO now is claiming was part of the payment. I'm surprised that the judge allowed this article to be shown to the jury, then, frankly, particularly on an unargued and unproven theory that the case law is that if you don't respond to an inaccurate article, it's evidence. Novell said that it was not aware of any such cases, and that should have meant SCO at least had to present cases, but we don't see that in the record. The internal inconsistencies on the SCO side should have blocked it, though, in my view. You may notice that it mentions that the "UNIX IP" would transfer. Aside from the fact that this doesn't match the Wall St. Journal's account that only some trademarks would transfer, I think there is a fairly simple explanation. This is a SCO press release, not a Novell one. This press release would have been in the works for a while, because it includes statements by executives, who would have to have approved the quotations, if not the entire release. And the deal originally was to include the IP. It was only on September 19th that this changed to only some. I assume the PR department didn't get the memo in time to change this, or no one noticed or thought of it so it went out unchanged. Or, since the release mentions the deal wouldn't close until December, they may have thought it didn't matter, since there would be three months where both sides would be reviewing the terms, making this release a kind of interim announcement. And notice what Singer elicits next: Q. When you read this, did you understand intellectual product to include the copyrights in UNIX?
A. I did.
Q. Did anyone, after this was published in The Wall Street Journal, at Novell come to you and say this is wrong, that we held back the copyrights?
A. No. No one commented on that at all. Did either the Wall St. Journal article or the press release mention copyrights? Neither does. They talk about intellectual property, and as Richard Stallman keeps pounding into our heads, that can be trademarks, patents, copyrights. And we know some trademarks were listed as transferred, or at least the money stream, if any. That's intellectual property. So on what basis would Novell have a duty to correct the Wall Street Journal article mentioning intellectual property, particularly when though here says when he read the article, he read it as *meaning* copyrights? See what I mean about internal inconsistencies? And these are lawyers. If I am noticing all this, I'm sure they could think of these things too. And how odd is this next interchange? Q. At the time of amendment one had any issue arisen requiring clarification in amendment number one regarding the ownership of the copyrights in UNIX?
A. Not to me. No one had mentioned anything to me about a change.
Q. Was there any request made at the time of amendment number one to clarify any language that appeared in the asset purchase agreement regarding the ownership of the UNIX and UnixWare copyrights?
A. No. How in the world does that help SCO? The language that appeared in the APA was that copyrights would be excluded totally. So you'd think it would help SCO if someone had asked that this be changed, if it was a lawyer mistake. I mean, SCO is arguing that the Wall St. Journal article means something, in that Novell didn't seek to correct it. But what does it mean that the APA said copyrights should be excluded, and no one from Santa Cruz asked that the language be corrected even though there was a three-month review period? Here's Amendment 1, by the way, which is what they are discussing. This is the Amendment to the APA [PDF; text] after the three-month review period.
We learn from Thompson that he and Alok Mohan joined the Caldera board after the Santa Cruz to Caldera sale, and they got options, which he exercised, paying about $12,000 for shares that he figured are now worth $90,000 or so. Of course if SCO had won the trial, the value likely would have shot up. But anyway, this is at least a partial explanation of how Mohan got his shares. And it means both Thompson and Mohan would have had and still have a financial interest in pursuing the SCO litigation. During the testimony, they discuss three Novell press releases, so here they are, May 28, 2003, June 6, 2003, and December 22, 2003. Thompson is also asked about a letter [PDF] from Jack Messman to Darl McBride.
And with that, we come to the end of Stuart Singer's direct examination of Thompson, and Novell's Eric Acker stands up to begin cross examination. Almost immediately, he brings out that Thompson stands to gain from the litigation:
Q And you have a financial interest in the outcome of this case; correct?
A Yes.
Q And you want SCO to win, don't you?
A Repeat your name again.
Q Eric Acker.
A Mr. Acker, I want the truth to be told.
Q You want SCO to win, don't you?
A I want the truth to be told. The transaction that I conducted in 1995 with my team, I want that transaction to be understood.
Q All right. And we'll go through that.
A That's what I want.
Q We'll go through that. But in addition to your hundred thousand shares of stock that gives you a financial obligation
in this case, you're part of a partnership, aren't you? E-S Net? ES-Net?
A ES-Net, Yes.
Q And isn't it true that your partner is a man by the name of Dan Campbell?
A Yes.
Q And hasn't Dan Campbell recently invested $100,000 in order to fund this litigation for SCO?
A Well, I'm aware that he has done that, yes. But that's Dan Campbell. That's not my partnership.
Q But Dan Campbell, your partner in your venture group; right?
A Dan Campbell, a former director of SCO, like me, already has shares in SCO. He exercised his options the same way I exercised my options. As an individual I do not control his investments. I do not benefit from his investments. His investments are his alone.
Q And he put $100,000 in in order to fund this case; right?
A I actually don't know how much money he put in. He didn't consult with me when he made the investment, and I don't know what the number is. So, that's a nice ring around the rosy. SCO awards Dan Campbell options, which he exercises, and then he loans it back to SCO to continue to pursue the litigation. That would, of course, be the famous
Yarro loan, with Dan Campbell chipping in $100,000, whereby on a default by SCO, all the assets go to those loaning the money. I assume by all assets, that would include all the desks and computers Darl didn't get with his purchase, including any and all evidence of wrongdoing should any exist in those drawers and cabinets and computers. Speaking of rings on rings. It's complicated, like Ezekiel's wheels, unless you think very, very simply. I gather Mr. Acker can do that, and Novell seems to bring him in whenever they expect a witness to hedge skillfully. He's a former federal prosecutor. He and Michael Jacobs are co-chairs of the Morrison & Foerster Intellectual Property Practice Group, and you can see why they would be when you see them at work.
Let me show you an example. Duff Thompson is a lawyer too, so when Acker is cross examining him, he knows that unlike most witnesses, this witness will know not only what the question is on its face, but also what it will be used for later legally. That makes it a lot harder to examine lawyers. Here in this exchange, for example, Acker wants Thompson to testify that Tor Braham of Wilson Sansini, who was the guy who drafted the APA, did it right. He knows, of course, that this is the last thing Thompson would like to admit, since SCO's theory of the case is that the lawyers went rogue and/or messed up the part about copyrights. So the dance goes like this, beginning with Thompson trying to indicate that Tor wasn't a key player: Q That's who represented Novell in the transaction was the outside counsel?
A Yes.
Q And Tor Braham was the lead lawyer for that team; correct?
A Tor Braham was a participant. There were a number of other parties that were draftsmen in that process.
Q And because you were not acting as a lawyer at Novell in this period of time, you relied on Novell's outside counsel at Wilson Sonsini to do the detailed drafting of the APA agreement; correct?
A Wilson Sonsini was the principal outside firm, yes.
Q And you had confidence in the Wilson lawyers, including
Mr. Braham; correct?
A They were our lawyers.
Q And you had confidence in them; correct?
A They were our lawyers. I mean were they perfect? No. And it was -- listen. Are you asking me were they absolutely dead-on on everything they ever did? I would say they were better than average.
Q So you had confidence in them; correct?
A I had confidence in them. You can see that in the end Acker won. He got Thompson, despite all his hedging, to finally admit that he had confidence in those lawyers, by drawing him in, one small question at a time, so that he ends up where he does not want to be. Thompson was and is a lawyer, so who would know better than another lawyer who is good and who is not in that field? Of course, Thompson is between a rock and hard place, in that as a board member, if he thought they were no good, he would have had the responsibility to get new lawyers. And notice how Acker then makes mincemeat of SCO's claim that part of the payment was the SVRx license royalties: Q And so what Novell got was a little over 6,000,000 shares of Santa Cruz stock; correct?
A Right.
Q And then another portion of this deal was this SVRX license, which we're talking about 4.16(a) of the APA; correct?
A Yes, the royalties.
Q Now, those were royalties that before the deal, AP -- that Novell was collecting; correct?
A Yes.
Q And you said it was about 47 -- or 47 to $50,000,000 a year that Novell was collecting?
A I didn't say 47, but my recollection was that at or around the time that we were making the deal, our estimates in our mind it was around $50,000,000 a year.
Q And then after the transaction, the way it was structured, is instead of Novell collecting that money directly from licensees, Santa Cruz would collect the money and remit 95 percent of it to Novell; correct?
A Well, that's exactly what happened, is that when Novell -- when we did the transaction, Novell, which had been the licensor under those licenses, transferred those licenses to SCO, SCO became the licensor and now began to collect those royalties.
Q And so what happened between -- before the APA and after the APA is the amount of money that Novell was collecting from those licenses decreased by five percent; correct?
A Correct.
Q And so to take a round number, for instance, if Novell had been collecting $100 for the APA for those licenses, then after the APA it would -- it would get a hundred dollars for the APA, but it had to give five bucks back to Santa Cruz?
A That's correct.
Q That was the second part. We had stock, and then we had this 4.16 SVRX license component to the deal?
A Actually, just to be precise, SCO would receive that money. SCO would collect it, all of the royalties. SCO was the party that was in touch with the clients. And SCO on a periodic basis, and it seems to me that there were a particular number of days after the collection of some of the royalties that they were to remit those royalties back to Novell.
Q But regardless of how the mechanics worked, the hundred bucks came to Santa Cruz and 95 bucks went to Novell;
correct?
A Yes. You see how nonsensical that sounds? Can you imagine negotiating such a deal? Santa Cruz to Novell: "We want UNIX, and we'll pay you the royalties you are already getting, minus 5%. OK?" Novell: "Why would we do that?" Of course, SCO now would say it was a fine deal, in that otherwise 100% of the royalties would be theirs, along with the copyrights, if they'd had the cash to pay for it all. But they didn't have $300 million in cash, so there you are. If they had ham, they could have ham and eggs, if they had the eggs. So in effect, SCO is arguing that they paid for the copyrights with money that Novell already had, minus a portion. How stupid would Novell have to be to go along with that? Talk about shareholder lawsuits. Here's my favorite moment in cross. As Acker has been asking Thompson about the deal, Thompson keeps adding material to his answer beyond what Acker has asked about. That's not what a witness is supposed to do, volunteer opinions on broader issues than just the question. If you are asked, "Is this the agreement you signed?" you are supposed to answer, "Yes" of "No", not "Yes, but actually the words don't match what I was thinking, which was that I thought it would be a better deal with the copyrights included, and I thought that is what we'd agreed on." Thompson doesn't use those exact words, but you catch the drift. Now, Thompson is a lawyer, so he must know that he's supposed to just answer the questions and let Mr. Singer later draw out all the details he'd like, but he keeps doing it anyway. Finally the court, without being asked, says this to Acker: THE COURT: Mr. Acker, do you want me to instruct the witness to answer your question without proffering additional testimony?
MR. ACKER: No, Your Honor. We're doing fine, but I appreciate the offer. We're doing fine. That made me smile, because he knows also that Thompson is doing what he should not be doing, but I gather in Mr. Acker's opinion, the more Thompson says, the worse it gets for him, and I'd have to agree. Ed Chatlos takes the stand here. He testifies exactly as SCO would want him to, that the excluded assets list was talking about NetWare. He negotiated the deal for Novell, and he's positive Novell intended to sell the whole business.
He makes an interesting slip of the tongue, which I will highlight in red: Q Do you recall whether Novell intended to agree to any restrictions on the extent to which they could use this UNIX and UnixWare technology in selling products?
A There are restrictions in this document.
Q Why?
A We didn't -- excuse me -- SCO didn't want Novell to use the technology they are getting back from SCO to create competitive offer. So the restrictions, if I remember correctly, were the source code could be used in the labs and they could create derivative works. And then the binary versions of those could be used in their NetWare product or other products, but only in a very minor way. It couldn't be considered a primary component of the developing product. He seems to have trouble recalling which team he's supposed to be on. And as his time on the stand continues, we learn that his wife works for SCO currently. She owns a couple hundred shares of SCO stock and about 8,000 options, and he tries to indicate that's no big deal, even if SCO should win, but when Mr. Acker makes him focus in a more fine-tuned way, he admits they'd make some money. His testimony in a nutshell is essentially that the contract means what it doesn't actually say in words, that the intent they all had trumps the words used. You could sum up his testimony in this exchange with Acker:Q So, again, the contract doesn't expressly say that, but you are relying on your memory of a deal you did 15 years ago?
A Without a doubt. Over and over. It's embarrassing for him. And he repeatedly insists that they sold the entire business, including the copyrights. Yet, he is read that the excluded assets list says no patents transferred. It doesn't register. And of course he wasn't there for Amendment 2, since he worked for Novell from
1993 through January of 1996. This is the guy the Appeals Court thought should have an opportunity to be heard from. They mentioned him by name. What were they thinking? All that extra expense for testimony like this? As he is about to be excused, the judge asks him not to talk to others about his testimony: THE COURT: Mr. Chatlos, thank you. That means you do not need to worry about being re-called in this case. You may go about your business. I will advice you to please not discuss your testimony with any other witness in this case or in the presence of any other witness or communicate your testimony to any individual who may report that, okay? Later, when Ty Mattingly takes the stand, he knows that Chatlos has already testified, claiming that a friend of his, Lee Johnson, told him.
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200
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH
CENTRAL DIVISION
| THE SCO GROUP, INC., a | ) | |
| Delaware corporation, | ) | |
| Plaintiff, | ) | |
| vs. | ) | CASE NO. 2:04-CV-139TS |
| NOVELL, INC., a Delaware | ) | |
| corporation, | ) | |
| Defendant. | ) | |
| _______________________________ | ) | |
| AND RELATED COUNTERCLAIMS. | ) | |
| _______________________________ | ) | |
BEFORE THE HONORABLE TED STEWART
--------------------------------
March 10, 2010
Jury Trial
Volume II
201
A P P E A R A N C E S
For Plaintiff: BRENT HATCH
[Address]
Salt Lake City, Utah
STUART SINGER
[Address]
Fort Lauderdale, Florida
EDWARD NORMAND
JASON CYRULNIK
[Address]
Armonk, New York
For Defendant: STERLING BRENNAN
[Address]
Salt Lake City, Utah
ERIC ACKER
MICHAEL JACOBS
[Address]
San Francisco, California
Court Reporters Ed Young
Ray Fenlon
Patti Walker
U.S. Courthouse
[Address]
Salt Lake City, Utah
[Phone]
202
I N D E X
| Witness | Examination By | Page |
| Robert Duff Thompson | Mr. Singer (Direct) | 220 |
| Robert Duff Thompson | Mr. Acker (Cross) | 277 |
| Robert Duff Thompson | Mr. Singer (Redirect) | 336 |
| Robert Duff Thompson | Mr. Acker (Recross) | 344 |
| Edward Chatlos | Mr. Normand (Direct) | 346 |
| Edward Chatlos | Mr. Acker (Cross) | 374 |
| Edward Chatlos | Mr. Normand (Redirect) | 385 |
|
| Exhibit | | Received |
|
| Plaintiff's Exhibit 133 | | 252 |
| Plaintiff's Exhibit 90 | | 256 |
| Plaintiff's Exhibit 669 | | 268 |
| Plaintiff's Exhibit 254 | | 270 |
| Plaintiff's Exhibit 97 | | 272 |
| Plaintiff's Exhibit 571 | | 274 |
| Defendant's Exhibit A1 | | 290 |
| Defendant's Exhibit V5 | | 310 |
| Defendant's Exhibit O-10 | | 315 |
| Defendant's Exhibit G12 | | 324 |
| Defendant's Exhibit Q22 | | 329 |
203
March 10, 2010 8:30 a.m.
P R O C E E D I N G S
THE COURT: Good morning.
MR. ACKER: Good morning.
MR. SINGER: Good morning.
THE COURT: Counsel, let me deal with a couple of
things, and then I know you have some things as well.
Did we get ahold of Mr. Hunsaker yesterday to
determine whether or not he was familiar with or related to
Thomas Hunsaker, juror number nine?
MR. HATCH: Your Honor, I did notice on the list
that I read, that Mr. Hunsaker's name was on the list,
although I have not been able to check the transcript to see
if it was there. We did talk to Mr. Hunsaker, our witness,
not the juror, and he indicated that he has no knowledge
that this person is related to him in any way or does he
know him, the Hunsaker that is the juror.
THE COURT: In light of that, Counsel, do you see
any reason to pursue it, Mr. Acker?
MR. ACKER: No, Your Honor.
THE COURT: Thank you.
We had yesterday talked about the plaintiffs
submitting their amended jury instructions to the Court
tomorrow. I understand, Mr. Hatch, that you have requested
204
until Friday. The Court will give you until Friday, but I'm
going to ask that the parties meet one more time between now
and Friday to see if you cannot work out more of these
instructions. The reason why is because it appears you're
coming closer together, and I think a face-to-face meeting
would probably be more helpful.
If that is not productive, then you go ahead and
submit your jury instructions by Friday, but the Court will
then not request anything further from the defendants, but
rather we'll put together a package and give it to you next
week and allow you both to respond to it, and then by the
third week we will be able to give you a further revised
package.
MR. HATCH: Thank you, Your Honor. That will be
fine.
THE COURT: Okay.
I'm curious. We do have to deal with the
opposition, not the opposition but the concerns with
Mr. Messman's deposition. Any there other objections with
any other deposition witnesses or are we down to Mr. Messman
and --
MR. NORMAND: Your Honor, we have been handling
these on sort of a rolling basis, and I think we are through
six or seven.
THE COURT: Okay.
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MR. NORMAND: What we are trying to do is take
them day to day and get them to Your Honor two days in
advance, at least a day and a half in advance, and take it
from there.
THE COURT: Thank you. I was just hoping that the
answer was, oh, we are done, but obviously my optimism is
without foundation. I do appreciate what you're doing, Mr.
Normand, and whoever is working on the defendant's side, and
it is very helpful. I didn't want to seem ungrateful.
Do you want to argue the objection to
Mr. Messman's deposition portions now, counsel? Do you want
the Court simply to rule on it?
MR. NORMAND: Your Honor, we did, and you probably
saw, we sent in a letter on the issue in which we summarized
our objections. I am not sure there is much more to say,
unless there is room for argument about whether the material
that we regard as hearsay is coming in for some other
purpose.
THE COURT: That is the Court's concern.
Who represents Novell on this?
MR. JACOBS: I will handle this topic, Your Honor.
THE COURT: Mr. Jacobs, let's deal with this
quickly, if we could.
First of all, let's deal with the issue of the
statement that Mr. Messman would testify to regarding the
206
David Bradley representation in a board meeting about what
was and wasn't being conveyed by the original agreement. It
would seem to me, Mr. Jacobs, that it would clearly be
hearsay. It is certainly not a statement by a party
opponent, so what would be the justification for allowing
that portion of Mr. Messman's video deposition to be heard?
MR. JACOBS: Mr. Messman's state of mind, Your
Honor. The plaintiff has placed the state of mind at issue
and what did he know when Novell was issuing the statements
that they challenge about ownership of the copyrights.
Mr. Messman's recollection of what happened in the board
meeting relates to that and to his state of mind.
THE COURT: So it is not being offered for the
truth that Mr. Bradford represented that the copyrights were
not being conveyed?
MR. JACOBS: That is correct.
THE COURT: Mr. Normand, do you wish to respond to
that?
MR. NORMAND: Your Honor, we are fine with that so
long as the jury is so instructed.
THE COURT: How do we make that instruction? Do
we interrupt the video?
MR. NORMAND: I think there will be other points
in other videos where we are interrupting to explain either
a document that is coming in or for purposes of trying to
207
get an exhibit that is coming in admitted, so I don't think
it is going to be unnatural to be stopping the video from
time to time. We would propose to do that.
THE COURT: All right.
MR. JACOBS: This is a little peculiar, Your
Honor, in that the jury has already seen minutes of this
board meeting that account for the various statements that
were made. I think if they got an instruction now, in the
wake of Mr. Messman's testimony that this is not for the
truth, but rather for his state of mind, I think that they
could be quite confused.
On this particular issue, because of the record of
what happened at the board meeting, I think an instruction
would be overdoing the issue of the distinction between
state of mind and what happened. There may be other cases
in which the jury should be told you're going to hear about
a lot of statements that were made out of court, and they
are being offered for the following purposes.
THE COURT: Mr. Normand, go ahead.
MR. NORMAND: Well, Your Honor, there is the
potential for confusion because of the cumulativeness or
redundancy and --
THE COURT: Well, hold that point for just a
minute, because I think that if I decide this on
Mr. Bradford then I probably have to decide something
208
similar on another witness. Let's not decide that right
now.
Let's go on. The next one would be the
conversations with Mr. Messman with some SCO employees about
this issue. What is the intent of that being offered? It
is something that is clearly hearsay within hearsay.
MR. JACOBS: Actually, I believe what Mr. Messman
is testifying to in the relevant passage is what he was
told about the conversations his subordinates in the company
had with SCO representatives, and so I think your
characterization is correct.
Once, again, SCO is placing into question what did
Mr. Messman know and what did he do before Novell released
the statements it released over his name? So the fact that
he was informed by his subordinates that SCO representatives
were contacting Novell about the copyrights is directly
relevant to his state of mind.
MR. NORMAND: Your Honor, built into this
testimony is actually double hearsay. I suggest we would
need a double instruction and there is a real potential for
confusion here. The testimony is I think Chris Stone
mentioned to me that Darl had approached him several times
with regard to transferring the copyrights. In effect he is
testifying that Chris Stone told me that Darl told him that
he wanted the copyrights. It is double hearsay and it is
209
confusing.
THE COURT: I would agree. I will not allow it to
be viewed by the jury. Okay.
The third one has to do, and now this is the
plaintiffs trying to get in the Wall Street Journal article,
which Mr. Messman apparently may have or may not have seen,
and the question would be whether or not the plaintiffs
should allow it to be heard by the jury, even though
arguably we have the same issue here of whether it is being
offered for the truth.
MR. NORMAND: Your Honor, Mr. Singer will speak to
this.
THE COURT: Go ahead.
MR. SINGER: Your Honor, this issue is actually
going to come up first with Mr. Thompson and I was going to
raise it in advance of his testimony. This is being offered
under the principle that the Wall Street Journal came out
with an article after the deal was announced, which we think
reports it in a way consistent with SCO's position, and that
no one reacted and said that was wrong.
There is case law which indicates that when a
party is aware of a published article but took no action to
clarify it, then that is admissible evidence. Not for the
truth of the matter, but their lack of reaction being put on
notice that this is how the deal was being considered.
210
THE COURT: Mr. Jacobs.
MR. JACOBS: I have not seen that case law and it
is a little peculiar. We have a newspaper article, and the
issue right now is Mr. Messman's deposition, unless we want
to convert it over to Duff Thompson.
THE COURT: Let's focus just on Mr. Messman's
deposition.
MR. JACOBS: In Mr. Messman's deposition he is
asked did you see the article? It was, what, 14 years
before. He says I don't remember. Did Novell take any
action? He says I don't know. To put in an article through
a witness who says I don't remember and I don't know, that
is hearsay, and it is irrelevant and lacks probative value.
THE COURT: Mr. Jacobs, I would have to
respectfully disagree. I do believe it is relevant and
relevant to the point that there was apparently no reaction
to that article. As you just characterized, whether or not
he saw it is not clear from his deposition testimony.
What I'm going to do is I'm going to permit both
of those disputed portions to come in. It is not my
intention right now to give an instruction to the jury,
because I do not want to draw undue attention to this. Part
of the reason for this, Counsel, is that Mr. Messman is
going to be testifying, as I understand it, later. To the
extent there has to be rehabilitation you're going to be
211
given the opportunity, both of you, to do it. I think it is
better to let both of those disputed portions to come in,
but with nothing special to draw attention to it. I will
not allow the hearsay on hearsay portion. All right.
MR. JACOBS: Yes, Your Honor.
I would note that their basic theory of
Mr. Messman's failure here, as evidenced in their opening
statement, is the failure to investigate on his part. We're
going to be addressing that as a matter of law through the
jury instruction process, but before Mr. Messman's testimony
and as this process has unfolded a little bit, I think we
would like to talk to you again about whether he can
describe the various steps that led him to his view that
Novell retained ownership of the copyrights even if they
represent in some sense hearsay.
THE COURT: Okay. You'll obviously bring that to
my attention when you think the time is right?
MR. JACOBS: You bet, Your Honor.
THE COURT: Thank you, Mr. Jacobs.
One last thing, Counsel, from me. The court
reporters have expressed concern with being able to follow
the video depositions. There are occasions certainly in
this courtroom in the past where that has been very
difficult. However, Ms. Walker was given a demonstration of
the deposition and she thinks it will not be difficult for
212
them to make a record from that.
If, however, that doesn't prove to be true, we may
have to ask that you submit to the court reporters the
written transcript of the video depositions so that they can
use it to help correct what they may take.
MR. JACOBS: Yes, Your Honor.
Just to be clear on that point, we had a
discussion about what the record would reflect with respect
to deposition testimony, and it is our view that deposition
testimony played in court is testimony, and I think the
intent of Your Honor's comments is that the reporters will
actually take it down word for word, and if they need to
correct it based on a submission of the transcript, they
would do so.
Is that correct?
THE COURT: That is correct.
MR. SINGER: That is fine.
THE COURT: It is not the intention, and let me
make this clear, that we provide to the jury copies of
either the written or video depositions.
Mr. Singer, do you have something?
MR. SINGER: Yes, Your Honor.
Overnight, of course, we got the daily transcript,
and I have to say I was even more concerned about the whole
line of questioning about Section 9.5, the integration
213
clause in connection with the matter of the jury
instruction, which Novell has not agreed with.
If I might approach?
THE COURT: Yes.
MR. SINGER: I will submit what we proposed to
Novell.
THE COURT: This is a jury instruction to be given
immediately?
MR. SINGER: Yes, Your Honor.
THE COURT: All right.
MR. SINGER: Your Honor, our concern is that the
reference to 9.5 has no relevance here other than to tell
the jury that they shouldn't pay attention to exactly what
they should pay attention to, the intent of the transaction.
That has the risk of this jury now not paying attention to
what is going to be very substantial amounts of testimony
over the next days and weeks about what the parties said to
each other about the intent of this deal, exactly what the
Tenth Circuit said this trial is supposed to be about. That
shouldn't have happened. 9.5 should not have been used to
try to suggest to the jury that that type of evidence in
this case is not relevant.
THE COURT: Mr. Jacobs.
MR. JACOBS: Yes, Your Honor.
Number one, we don't need an instruction now. At
214
best the jury should be told you're going to hear a lot of
evidence and I will instruct you on the law to be applied to
that evidence at the end of the trial. Keep an open mind.
Number two, is the cherry picking from the Tenth
Circuit opinion, and proposing an instruction that would
actually flip this whole topic away from the written
agreement into what the parties were thinking.
The third point is the questioning was entirely
appropriate. The questioning was about what this witness
understood at the time, what Mr. Frankenberg understood the
purpose of the written agreement was in documenting the
parties intent. It was not questioning that went to ten
years later do you think this Court and jury should be
hearing -- 15 years later -- what you thought at the time.
I think we are overdoing the objection to the testimony.
I would note, moreover, that Mr. Brennan backed
away from further questioning under the Court's suggestion
that if he proceeded we might be in an area that Novell --
THE COURT: Mr. Singer, I am concerned, and
Mr. Jacobs has pointed out something that the Court has had
concern with, and that is that if I were to do what you
suggest, that would in effect undermine the Court's previous
rulings on motions in limine, precluding the defendants from
referring specifically to the Tenth Circuit's decision.
I believe Mr. Brennan came very close, however,
215
yesterday to raising it to the level where perhaps I may
have to do what you have suggested, but I think he backed
away.
I just have to caution the defendants that if they
continue to pursue questioning of additional witnesses to
the point where the Court believes that it is
misrepresenting what ultimately the jury has to consider,
then at that time I will revisit the issue, but I am not
going to give this instruction now.
MR. SINGER: Thank you.
Your Honor, we do have one more issue that perhaps
is appropriate to raise now before Mr. Thompson is on the
stand.
THE COURT: All right.
MR. SINGER: That is while we don't propose to get
into the interpretation of amendment number two with Mr.
Thompson, since he didn't negotiate it, we do intend to get
into the fact that he was on the SCO board of directors at
the time when this was approved. He approved it. He has
sufficient knowledge then for us to at least elicit that and
have that provision read to the jury which is in evidence,
that he was on the board at the time that that was approved.
He has personal knowledge of that and we don't believe that
that is in any way inconsistent with the Court's earlier
ruling on the motion in limine.
216
We don't propose to get into how he would
interpret the language or the negotiations because he did
not participate in that part.
MR. ACKER: Your Honor's ruling on the motion in
limine number 16 is clear that Mr. Thompson can't testify
about amendment number two. Now, if they knew at the time
that they wanted to put this testimony in, they should have
raised that in the motion in limine, and the motion in
limine lay out what Mr. Thompson knew or did not know about
amendment number two, but the Court has ruled.
MR. SINGER: We did note in our opposition to the
motion in limine that he had knowledge of the circumstances
of amendment number two's passage. There were about eight
or nine of these dealt with in one order, and I don't think
that perhaps this specific part of his testimony was treated
in that order.
THE COURT: If you're confining it to did he vote
for -- that is what you are saying?
MR. SINGER: He was on the board.
THE COURT: He was on the board.
MR. SINGER: He does not recall whether he voted
for or abstained, but he was on the board when this was
considered.
MR. ACKER: It does not sound like he has much
recollection about it at all, Your Honor.
217
THE COURT: I think I'm going to have to wait and
see what foundation you lay. If you lay a proper foundation
I will allow him to answer that very narrow question, but
the Court will not allow you to ask anything that may lead
him to be discussing what the amendment meant or anything to
the merits of the amendment.
MR. SINGER: Yes.
The amendment is already in evidence and I would
just intend, when laying the proper foundation, to have him
read that section and ask if this is what came before you on
the board at that time, which was an amendment to the A.P.A.
THE COURT: There is going to have to be some
foundation that he remembers that.
MR. SINGER: Yes.
MR. ACKER: Just on one other point, the point
that Mr. Singer raised yesterday, SCO Exhibit Number 1 is
the A.P.A. with amendment one and amendment two attached.
I'm going to use today Novell Exhibit 1 which is just the
A.P.A. without one and two, because I want it to be very
clear in response to Mr. Singer's objections yesterday what
exhibit we're talking about and what the witness's testimony
is about that specific document. I just want to make that
clear that I am going to do that with Mr. Thompon today.
THE COURT: All right. The only concern I have is
it is more paper for the jury to have.
218
MR. ACKER: I understand, Your Honor, but I think
that it --
THE COURT: If you have to do it, you have to do
it.
MR. ACKER: I think it is important because we are
slicing it thin here.
THE COURT: I am speaking generally and I worry
about us sending so much paper back there that the jury
never makes its way through it.
MR. SINGER: May I be heard on that issue very
briefly?
THE COURT: Go ahead.
MR. SINGER: The concern we have is not the extra
paper, it is the concern that somehow this will be used with
the jury to suggest that the real A.P.A. is this one without
the amendment, Novell Number 1, rather than SCO Exhibit 1
which has the amendments. That is a concern which has come
about through a number of things that have already occurred
in the trial.
THE COURT: Let's see how it plays out today and
then objections can be made, Mr. Singer, if you think they
need to be.
MR. SINGER: Thank you.
THE COURT: Anything else?
MR. ACKER: No, Your Honor. Thank you.
219
THE COURT: Ms. Malley, please get the jury.
Is Mr. Thompson in the courtroom? Will you be
sending someone for him so that we can move quickly?
MR. SINGER: Yes, we will.
(WHEREUPON, the jury enters the proceedings.)
THE COURT: Good morning, ladies and gentlemen of
the jury. I want to apologize to you. As I indicated in
one of the preliminary instructions, on occasion you may
find yourselves waiting in the jury room while we deal with
matters that we have to. We will try to keep those delays
at a minimum, but it will happen from time to time during
the course of the trial.
Again, I have to ask you, ladies and gentlemen,
whether or not any of you violated the very specific
instruction that you have been given in reference to your
conduct, particularly that conduct outside of the
courthouse?
All right. Once again, you passed the test.
Mr. Singer, would you like to call your next
witness?
MR. SINGER: Thank you, Your Honor.
We would, and our next witness is Mr. Duff
Thompson.
ROBERT DUFF THOMPSON
Having been duly sworn, was examined
220
and testified as follows:
THE WITNESS: Robert Duff, D-u-f-f, Thompson.
DIRECT EXAMINATION
BY MR. SINGER
Q. Mr. Thompon, do you generally respond to the name Duff?
A. Yes.
Q. If there are references to Duff that is generally
referring to you?
A. Yes.
Q. Briefly summarize your educational background.
A. Undergraduate degree in economics, master's of business
administration and a J.D.
Q. What institution?
A. Brigham Young University.
Q. All three?
A. Yes.
Q. Would you please summarize your employment after
school.
A. I worked in the law firm of Moyle & Draper for a few
years. I went to the firm of Callister Nebeker &
McCullough. It was originally Greene Callister & Nebeker.
I worked there for a number of years. Then I was hired as
general counsel for Word Perfect Corporation.
Q. For how long were you at Word Perfect?
A. From 1986 until 1994.
221
Q. In 1994 was Word Perfect sold to Novell?
A. Yes.
Q. Did you move over at that time to become employed by
Novell?
A. Yes.
Q. What were your responsibilities at Novell?
A. I was senior vice president of corporate development
and strategic relations.
Q. What did that mean? What type of work did you do at
the company?
A. It had to do principally with all of the transaction
work that was going on in the company, dealing with various
partners in the industry to make sure that Novell was doing
that which they needed done, and that they were doing that
which Novell needed them to do.
Q. Who did you report to?
A. Bob Frankenberg.
Q. Did there come a time when Mr. Frankenberg indicated
that he wanted to sell the UNIX business?
A. Yes.
Q. Approximately when did that occur?
A. That happened, to the best of my recollection,
somewhere in the April or May time frame of 1995.
Q. Did he indicate whether he wanted to sell part of the
UNIX business or all of the business?
222
A. The indication to me was that he wanted to sell all of
the UNIX business.
Q. What was your understanding of the reason that Novell
wanted to sell UNIX?
A. Well, there were a number of reasons, but Novell had
purchased UNIX in 1993, two years before, and they had been
working on a product they called SuperNos, which was a
combination of UNIX and NetWare. It was a very difficult
process and it was a very expensive process. The cost just
simply didn't justify continuing.
There were 400 people located on this out in New Jersey
working on this project, and a number of people at Novell
working on this project, and my understanding was that the
revenue that they were generating just was not sufficient to
justify all of the expense.
Q. Do you recall how much Novell had paid AT&T for the
UNIX business?
A. I was not there at the time they purchased it, but I
became aware that they had paid something in the
neighborhood of $300 million.
Q. Did you anticipate getting as much in selling the UNIX
business in 1995?
A. The price really was not an issue. At least my
understanding from Mr. Frankenberg was that the price wasn't
the issue. The determination had been to get rid of this
223
cost center, the 400 people, and so when I received my
instructions they did not indicate to me any kind of a price
threshold that had to be met in order to sell it.
Q. What role were you given by Mr. Frankenberg in
connection with selling the UNIX business?
A. I was assigned to conduct the negotiations. My group
was assigned to conduct the negotiations. It was not just
me. It was a gentleman by the name of Ed Chatlos that
worked for me, a gentleman by the name of Ty Mattingly that
worked for me, and there were a number of other people that
were a part of that team.
Q. Did you seek to identify an appropriate buyer for the
business?
A. We did. This was over the course of a couple of months
and we met with a number of industry players, specifically
including Intel and Hewlett-Packard to get their input on
who might be a good candidate for this.
Q. How did SCO come to your attention, Santa Cruz
Operation?
A. I didn't know them prior to this time. I was
introduced to them through the discussions we had with Intel
and Hewlett-Packard.
Q. Who at Intel?
A. Well, the meetings there I remember fairly clearly. It
was the only time I ever met Andy Grove, one of founders of
224
Intel. I met him and another gentleman by the name of -- I
believe David House. We had meetings with them and with
Hewlett-Packard, and over the course of time -- by the way,
Ty Mattingly participated in these meetings and Bob
Frankenberg participated in those meetings. It was
suggested to us that SCO was a good candidate.
Q. What was your understanding of why SCO was a good
candidate to buy the UNIX business?
MR. ACKER: I object. It is hearsay coming from
H.P. and Intel if he doesn't have an understanding from
another source. I would object. I think he needs to lay a
foundation of where that understanding came from.
THE COURT: More foundation is required,
Mr. Singer.
BY MR. SINGER
Q. You obtained information from a number of sources with
respect to potential buyers; is that correct?
A. Yes.
Q. Did there come a point in time when you and the other
Novell executives made a decision to approach SCO?
A. Yes.
Q. Why did you do that?
A. Well, there were a number of reasons. One of the
reasons that they made a lot of sense, other than the fact
that they were an acceptable party to Intel and
225
Hewlett-Packard and some of our other UNIX partners -- let
me back up.
SCO had a worldwide channel of distribution. That was
important in this discussion. It was important to find a
company that had significant assets and significant sales
reach, and this was a company that was roughly a $200
million a year company. It was a company that had 1,000 or
1,100 employees. They had an international channel of
distribution. They were working in the UNIX area already.
They were a good candidate in terms of the kind of product
we were talking about.
Also, we had talked to a number of our other UNIX
partners about this idea of creating a UNIX --
Q. Before you go on, Mr. Thompson, just so the record is
clear, the company you were just describing with the number
of employees and the worldwide distribution, you're
referring to Santa Cruz Operation?
A. Yes.
Q. Please continue as to why you believed Santa Cruz was
an appropriate candidate as a buyer.
A. The strategy that was articulated in the discussions
internally, Bob Frankenberg, Ty Mattingly and myself and
others in the company, was to find a candidate that was
capable of putting together a Switzerland type version of
UNIX.
226
You see, most of the UNIX partners that Novell had,
especially the large hardware manufacturers like H.P. and
IBM and Sun and others, had their own version of UNIX. The
reason they had their own version of UNIX is it was built
specifically for their type of hardware, and we were looking
for someone that didn't have hardware, kind of a legacy set
of hardware that they were trying to sell the product for.
That is why H.P. was not a good candidate. They already had
their own operating system, or their version of the UNIX
operating system called Hewlett-Packard H.P.U.X.
No one would have trusted H.P. to take this because
they were interested in selling their own hardware. We were
looking for someone that would be acceptable in the industry
that could design a form of UNIX on the Intel chip that then
could be sold to any user and not specifically tied to any
kind of hardware.
Q. So was it important to find a buyer that was not itself
in the computer hardware business?
A. That was one of the criteria that became part of the
decision to use SCO.
Q. Were there other buyers interested in purchasing the
UNIX business other than Santa Cruz?
A. I can't answer the question as to whether anyone was
interested. We couldn't find anyone that was interested in
talking to us that was acceptable. There could have been
227
many parties that were interested, but they all had some
specific agenda. IBM had its own operating system. H.P.
had its own hardware and UNIX operating system. Sun had its
own hardware and operating system, version of the UNIX
operating system. None of them would have been good
candidates for the rest of the industry. No one would have
trusted them to be the seller of UNIX.
Q. During this summer of 1995 when you were negotiating
this deal, did any other party come forward as another buyer
to compete for the transaction?
A. Not to my knowledge.
Q. Going back now to the discussions with Santa Cruz
Operation, did you personally have discussions with the
executives of Santa Cruz?
A. Yes.
Q. Which individuals do you recall having those
discussions with?
A. They had a team of people. A gentleman by the name of
Alok Mohan was their C.E.O. A gentleman by the name of Jim
Wilt was their head of corporate development and was my
counterpart. A gentleman by the name of Jeff Seabrook
participated in the discussions. Steve Sabbath was their
general counsel and he participated in the discussions.
There were others. There were technology people,
licensing people, people on both sides, but that is the core
228
team from SCO that I worked with.
Q. Over what length of time did those discussions occur?
A. Well, the negotiations -- sort of the beauty contest to
decide who was a good candidate started in that May time
frame. By June we had actually decided to now begin the
discussions in earnest with SCO.
Q. At any time during the discussions with Santa Cruz
Operation, did you on behalf of Novell say you were going to
hold back the copyrights?
A. No.
Q. Would it have made any sense to you to sell a software
business without the copyrights?
A. No. My instruction from Bob Frankenberg was to sell
the whole business, the whole UNIX business.
Q. Did you participate then in negotiating the business
deal through the summer of 1995?
A. Yes.
Q. What was the general nature of the proposed transaction
that you came up with?
A. Well, there were several aspects to the transaction.
The first was to transfer to them the UNIX business that was
existing, the existing UNIX business. The second was to
discuss with them a merged product, which was a merger of
the product that SCO had been working on and the product
that Novell had been working on, which was the UNIX version.
229
That was the second aspect.
The final aspect was that there would be some kind of
a, quote, white box, which basically was that SCO would sell
Novell's software through its channel.
I should be very clear. White box was their way of
referring to the NetWare product. Novell referred to all
their product as the red box, because their Novell Netware
came in a red shrinkwrapped box. When they negotiated with
other parties, such as previous to that time in the spring
we had negotiated with IBM on some issues, we had talked
about IBM selling a blue box, basically IBM's color, blue,
and that they would sell NetWare through their channel.
Finally, in this instance it was the white box, which
was SCO selling the NetWare software.
Q. Was this an important part of the deal to Novell?
A. To sell the white box?
Q. Yes.
A. Well, Novell had a sales model which was a leveraged
model, meaning that if they could have any one party selling
lots and lots of product through their channel, that was a
good thing. Rather than develop their own sales channel of
millions and millions of resellers, they wanted to use this
leveraged model, and so the idea of having SCO sell product
was a great idea.
Q. Now, was there a meeting in Palo Alto in the summer of
230
2005 with Santa Cruz representatives about the transaction?
A. Did you say 2005?
Q. I did. I meant 1995.
A. There were a series, a lot of meetings in the summer of
1995 between Novell and SCO in Palo Alto, Los Gatos, San
Jose, all over the place in the bay area.
Q. Do you recall a meeting in Palo Alto with the Santa
Cruz executives where you discussed what would Novell be
selling to Santa Cruz?
A. Yes. I have in my mind a specific instance at the SCO
counsel's offices. SCO was represented by a firm by the
name Brobeck, and I remember meeting on the terrace of their
offices with Alok Mohan and Jim Wilt and other members of
our team to talk about the deal.
Q. At that time do you recall what you said regarding how
much of the UNIX business was going to be sold to Santa
Cruz?
A. Well, my recollection is exactly the same as I have
given, that we're selling you all of the business, lock,
stock and barrel, the whole thing.
Q. By the whole business, did that include both UNIX and
UnixWare?
A. Yes.
Q. What was your understanding as to whether the
copyrights were also being sold?
231
A. Well, it was the whole business. We were giving them
source code, all of the manuals, the customer lists, we were
giving them the whole business. I assumed and I understood
that we were giving them the copyrights as well.
Q. Would holding back the copyrights have been consistent
with your instructions from Mr. Frankenberg, the CEO?
A. I received no instructions from Bob Frankenberg to hold
back the copyrights. Indeed, I never heard anyone in the
course of those negotiations for several months talk about
holding back the copyrights.
Q. Did you in turn ever instruct anyone on the deal to
hold back the copyrights?
A. I did not.
Q. What was Mr. Ed Chatlos' role in the transaction?
A. Well, Ed was the primary negotiator. Ed actually lived
back in New Jersey. He had worked with AT&T back in
the '80s and had worked with USL, when it became USL, and
then moved over to Novell when Novell purchased USL. Ed had
been part of the AT&T and USL and Novell world for years and
years and years.
It turns out, when I was given my assignment as the
head of corporate development, Ed was part of my staff
located in New Jersey. Ed was the natural individual to be
the chief negotiator for this transaction. By chief
negotiator, I mean I expected Ed to be on that case every
232
day. That was his project. He had no other assignments
during that period of time other than to work with this
deal.
Q. He reported to you?
A. Yes.
Q. What was Mr. Bradford's, the general counsel of Novell,
responsibility in connection with this deal?
A. Well, he was the general counsel of the company. As
general counsel he would have had the responsibility to
review and to manage all of the legal team and all of the
issues that came up through the legal team.
Q. Did he have the responsibility to negotiate the deal?
A. Well, he didn't negotiate the deal. He was not in the
meetings negotiating with SCO.
Q. Did you ever ask Mr. Bradford or anyone who was working
in the legal department for Mr. Bradford, or any outside
counsel who was working with Mr. Bradford, to recut any
parts of the deal with you and Mr. Chatlos on behalf of
Novell, negotiated with Santa Cruz?
A. To recut any elements of the deal?
Q. Yes.
A. All the time. Every time there was a negotiation
session we would come back with notes and issues that had
been worked out in the business sessions. We would come
back and deliver that set of new data to the legal team.
233
Q. Let me be more precise.
Did you ever ask Mr. Bradford to change the deal so
that the copyrights wouldn't be going over to Santa Cruz?
A. No.
Q. What was the role of outside counsel from Wilson &
Sonsini, including MR. Tor Braham on the transaction?
A. Well, Wilson Sonsini was outside counsel to Novell in
that deal and in many others, and they had a team who were
working with their counterparts at Brobeck to represent our
interests, the Novell interests.
Q. Were they given the responsibility to change elements
of the deal that you and Mr. Chatlos had negotiated with the
Santa Cruz representatives?
A. Well, they were given the responsibility to document
the deal that we negotiated.
Q. Were they given the responsibility or would it be
within their authority to have gone out and withdrawn the
copyrights as one of the assets that Santa Cruz was buying?
A. Well, I don't think it was in their job description to
change the deal that we had negotiated without at least
telling us that they were changing the deal that we had
negotiated so that we could communicate that to the parties
with whom we dealing at SCO.
Q. Did that ever happen with respect to the copyrights?
A. Not with respect to the copyrights. There were a lot
234
of issues, and we got feedback all the time from the
lawyers. They would come back and say we have to do this
with respect to tax. We have to do this with respect to the
registration of the securities. We have to do this with
respect to the human resources issues. There was a lot of
interplay between the legal team and the business team, and
we bounced things backs and forth all the time, but there
was never an instance that I'm aware of that they would make
a change and simply not talk to us about that.
Q. Specifically, did anyone on the Novell side ever tell
you that they had negotiated to hold back the copyrights?
A. No.
Q. Did anyone tell you from the Novell side that they were
going to put in language to hold back the copyrights and
simply not tell Santa Cruz about it?
A. No.
Q. Was there an issue with Santa Cruz having enough cash
money to pay for the business?
A. We knew going in, and as a part of the baiting of SCO
as a potential candidate, we were aware of the fact that
they were a $200 million company and not a $200 billion
company. That would have been nice if they were a $200
billion a year company, but they weren't. They were a $200
million a year company. So we understood what they could do
and what they couldn't do in terms of a cash purchase.
235
Q. How did that lead to the payment terms which you
understood were to be the compensation to Novell for selling
the business?
A. Well, we just had to come up with a different way to
pay for the deal.
Q. What did you come up with?
A. Well, in the initial days there was some discussion
about taking a larger percentage of stock from SCO. The CFO
at Novell was a gentleman named Jim Tolonen. Jim Tolonen
and his team were clear with us that they did not want to
own anymore than, I believe, 19 percent of the company.
Because if they owned more than 19 percent of SCO, took more
than 19 percent of their stock, they would actually have to
do some kind of an accounting procedure called consolidated
statements, which would change the way that Novell reported
its activities. They didn't want to do that.
We were instructed to take no more than 19 percent of
the company as part of this transaction, which is what we
did. Six million and 100 some odd thousand shares
represented something south of 19 percent of stock of the
company and that was the stock element of the deal.
The second element of the deal was that this new merged
product, this new product that SCO would go out and develop
and then sell, Novell had a participation right in the
revenues that came from that. There were certain targets
236
and limits and so forth, and they wouldn't participate until
SCO reached a certain number of units sold, and then they
participated at a certain rate. If they sold more than
that, they participated at a higher rate, et cetera, et
cetera. So they had participation in this new product.
The final element was that we would keep the revenues
from the existing licenses, the UNIX SVRX licenses, that
Novell would keep that revenue as part of the money coming
back. I mean, Novell had spent 300 and some odd million
dollars buying this, and selling this business now for a
smaller number would be perceived as being a big mistake.
Novell didn't want it put out in the press that they bought
something for 300 million in '93 and sold it for 50 million
in '95. We had a way of showing that we had gotten
reasonable value out of the sale of the business.
Q. Now, that value would be money which would come in over
a period of years?
A. The royalties would, yes.
Well, actually the stock value was set at six million
and 100 something thousand shares. The participation
revenue would only come at the time the sales started to
occur, and the royalty revenue would just be coming in every
quarter.
Q. Could you protect the right to that royalty income as a
source of payment while still selling the copyrights?
237
A. Sure. I mean, that was the purpose of the A.P.A.
Q. Was Santa Cruz --
A. The A.P.A. is the asset purchase agreement. We began
to refer to it as the A.P.A.
Q. Was Santa Cruz to receive the entire UNIX business
except the royalties on these licenses -- that was not well
phrased.
When you decided on this payment mechanism, did that
change the fact that you were going to sell the entire UNIX
business to Santa Cruz?
A. When we decided on the payment system?
Q. Yes.
A. No. The transaction never changed. Sell the business
was the order of the day. That was our instruction, sell
the business. We were just trying to figure out how to pay
Novell and its shareholders a reasonable value for the sale
of this business.
Q. Now, were you personally involved in the transaction up
to the date that the A.P.A. was signed?
A. Yes.
Q. In fact, beyond that, to the date it was closed in
December --
A. Yes.
Q. -- of 1995?
A. Yes.
238
Q. I would like to give you a book of exhibits.
Mr. Thompson, Exhibit 1 which is already in evidence is
the asset purchase agreement, the so-called A.P.A. Just so
that we have some identification of what is in Exhibit 1, do
you see on the first page you have the asset purchase
agreement that is before you?
A. Yes.
Q. Then if we go to page 49, do you see Mr. Mohan's
signature on behalf of Santa Cruz Operation and the
signature of Bob Frankenberg on behalf of Novell?
A. Yes.
Q. Then after that there are certain schedules of assets.
Do you see that?
A. Yes.
Q. Then after that --
A. Yes, lots of schedules, actually.
Q. After that there are two amendments to the back of the
agreement.
Do you see that?
A. There is amendment one.
Q. At the very end, the last couple of pages, there will
be amendment number two.
A. Okay. Yes, there is amendment two.
Q. Going back to the A.P.A., you are familiar with this
document as the person in charge of selling the company?
239
A. Yes.
Q. Would you turn to the list of the assets being sold on
Schedule 1.1A.
A. Yes.
Q. If we blow up that schedule on the screen here so that
it is a little more visible, do you understand this to be,
subject to the exclusions which we will talk about in a
moment, the assets which were being sold as a part of the
transaction?
A. Did you say that they were subject to the exclusions?
Q. Well, we'll turn to the schedule separately of the
excluded assets, but did you understand that this schedule
of 1.1A were the assets that were being sold?
A. Yes. These are all the included assets, yes.
Q. Did you understand this to represent the entire UNIX
and UnixWare business?
A. I did.
Q. Was it your understanding that the copyrights were
included in this sale of the UNIX and UnixWare business?
A. I understood that ownership of UNIX was the ownership
of the code, the ownership of UNIX, ownership of the
business, ownership of the clients, ownership of the
accounts, all of those things were what we were transferring
to SCO.
Q. That pertained both to the current UnixWare, the source
240
code as well as the older products of UNIX?
A. We called out UNIX and UnixWare. Paragraph one, UNIX
and UnixWare.
Q. Could we now turn to Section 1.1B.
Were there certain assets which you understood Novell
was intent on retaining from the transaction --
A. Yes.
Q. -- and not selling?
A. Yes.
Q. What was your understanding of what those were supposed
to be?
A. The NetWare and other related Novell technologies.
NetWare was the crown jewel of Novell. In this transaction
we wanted to make sure that it was clear that even if there
were some bits and pieces of the NetWare code that were
going over as a part of the new merged product or any of
those sorts of things, there was absolutely no question but
that Novell was retaining the rights to the ownership of
that. They were keeping that and reserving that back in
this deal.
Q. If we look at the items on the first page of this
schedule, do most of those concern NetWare?
A. Well, yes, all with the exception of Tuxedo were
NetWare items.
Q. Was Tuxedo also not being sold?
241
A. Tuxedo was not being sold. That was a Novell item.
Q. On the next page of this list of excluded assets,
referring now to the old language on Section 5A before it
was changed, where it says all copyrights and trademarks,
was it consistent with your understanding of the deal that
the UNIX copyrights would be excluded?
A. No. My understanding of the use of this phrase here
was the NetWare copyrights and trademarks.
Q. That is based on the deal which you negotiated?
A. Yes.
Q. And what the other people that reported to you
negotiated?
A. Yes.
Q. At the time that this was drafted, did any of the
lawyers come to you and say, Mr. Thompson, we have decided
to put in language in this schedule to hold back the UNIX
copyrights?
A. No. That did not happen.
Q. Without the UNIX copyrights would Santa Cruz be able to
operate the software business that they were buying?
MR. ACKER: Objection, calls for a legal
conclusion, Your Honor.
THE COURT: I'll overrule the objection.
THE WITNESS: It is hard for me to imagine any
instance in which we are selling them the entire business,
242
to go forward with this business in the future, without
giving them the underlying intellectual property rights that
they needed to do so.
BY MR. SINGER
Q. I would like you to tell me, if you recall, if there
was any license to Santa Cruz that was negotiated as a part
of the A.P.A., so that instead of owning the copyrights they
would just be given a license through this agreement to make
use of them?
A. To the UNIX products?
Q. Yes.
A. There was no such license. This was a sale. We
referred to it as an acquisition, not a license. There was
to be a license back for the NetWare technology, but not for
the UNIX technology.
Let me be clear. There was to be a license back from
Novell to SCO to be able to use the NetWare technology in
the future, but there was no such license for the UNIX
software and copyrights to SCO. It was a sale. We were
selling it to SCO.
Q. Was there a license back from Santa Cruz to Novell so
that Novell would have certain rights to use the UNIX assets
that were being sold to Santa Cruz?
A. Yes. We contemplated at the time the sale took place,
we contemplated that there would be a need inside Novell --
243
and, by the way, this is just good practice, that when
you're selling something to make sure that you retain some
internal license to keep it and use it.
We knew, we, being Novell, knew that we might need to
use that to develop some of our products, and we had used it
to develop products. So we understood and contemplated in
the A.P.A. that there would be a technology license
agreement back from SCO. Once we had made this sale, that
we would have this technology license agreement back from
SCO back to Novell, to use those rights for internal
purposes and for some other limited purposes.
Q. Could we look at Section 1.6 of the asset purchase
agreement which appears on page 5.
MR. SINGER: Mr. Calvin, blow up Section 1.6 to
make it a little easier.
BY MR. SINGER
Q. Is this the provision that you're referring to where
SCO would license back the technology that it was buying,
back to Novell so Novell could use it after the transaction?
A. Yes. That is the provision in the A.P.A. that makes
reference to that at the time of the closing we would sign a
license back to Novell. Rather, that SCO would sign a
license back to Novell.
Q. Did this provision make sense to you if the UNIX
copyrights were being retained by Novell?
244
A. No.
Q. I would like now to look at the next document in your
book which is SCO Exhibit 162, the technology licensing
agreement which is in evidence.
Is this the technology licensing agreement that was
called for by that provision of the contract?
A. Yes.
Q. Does this, in fact, have your signature on it on behalf
of Novell?
A. Yes.
Q. Turn to page 3 of that document.
MR. SINGER: Mr. Calvin, blow up the section,
ownership.
BY MR. SINGER
Q. Would you read out loud, Mr. Thompson, what it says
with respect to ownership of the licensed technology.
A. As between Novell and SCO, sub one, ownership of
licensed technology shall reside in SCO.
Q. Sub two.
A. Ownership of any modifications made to licensed
technology pursuant to licenses specified in section two
above shall reside in Novell.
Q. So if Novell used this license to improve their own
product, would they own those modifications?
A. That is correct.
245
Q. But the licensed technology itself that you were
getting at the time of the sale, that Santa Cruz was
getting, would that be what is referred to in item one that
the ownership shall reside in SCO?
A. That was the intent and meaning of that provision.
Q. I would like to talk now about Section 4.16 of the
asset purchase agreement.
Now, do you understand this provision deals with
something called SVRX licenses?
A. Yes.
Q. Do you have an understanding of what was meant by SVRX
royalties, which are referred to in Section 4.16A?
A. Yes, I do.
Q. Can you tell the jury what that understanding is?
A. Well, over the years many, many, many licenses had been
entered into on many, many, many different UNIX products,
product versions. That occurred over the space of 20 years,
15 or 20 years. As a result, all of these royalty
agreements existed, or all these royalty schedules had been
entered into that provided multiple millions of dollars a
year in royalties for this UNIX software.
Part of our transaction was that we would transfer the
business, this business to SCO, to manage the clients and to
manage all of these things, but Novell was going to keep
those royalty revenues. That relates to all kinds of
246
versions of UNIX. SVRX. S is the system. V is version,
revision is the R, and then X just means which version it
was. The versions went all the way from -- 2.0 was the
earliest one I ever say, and all the way up to 4.2 is the
last one I think I ever saw. There were royalties attached
to each one of those things.
Q. Did this include the current UnixWare product offering?
A. Well, no. Well, let's see. No, I don't think so.
This provision relates to the items identified in Schedule
1.1A. There are actually a number of products listed there
that are all UNIX system releases, SVRX version licenses.
Q. You're referring to the language which says as listed
in detail under item six of Schedule 1.1A?
A. Right.
Q. Can we turn to that provision?
A. Yes. That is what I am looking at. There are 15, 20,
25 different products identified there. There are royalty
schedules that apply to different companies, lots of
different companies. Remember, there were a lot of these
people, and it had been going on for years and years and
years, and they had licensed these technologies over time
and they were paying royalties on these various items.
Q. We're looking now at this item six that is in the
schedule of included assets that was referred to in Section
4.16.
247
A. Yes.
Q. Are these licenses that are listed here or are these
products?
A. Those are actually products. See, the UNIX licenses
were made up of multiple parts. There was what you would
refer to as the master software agreement, and then there
were the sublicensing agreements which included these little
product schedules for every product that they happen to
license. You would have a master software agreement as a
customer of AT&T or USL or Novell, and then you would have,
depending on which versions that you had licensed, you would
have all these separate schedules. You might have 2.0, 3.0,
3.2, 4.0, and you would have this list of schedules, and you
would have your own separate revenue schedule coming in for
each one of those.
Q. What were those called?
A. What were what called?
I think they were called product schedules that were
part of the sublicense agreements.
Q. Were these the royalties which Novell was going to get
as a part of the transaction?
A. Yes.
Q. Now, if we turn back to Section 4.16B, can you explain
what your understanding was of the purpose of this language
with respect to the buyer not amending any rights regarding
248
these SVRX licenses without prior consent of the seller, and
then the seller's actions as set forth in that provision?
A. Well, it is pretty clear. Novell was interested in
making sure that it got those royalties. It did not want
SCO to go out and do anything to disrupt that royalty
stream. I don't have the exact numbers in my mind, but my
recollection is it was something like $50 million a year in
royalties. It wasn't just, you know, a couple hundred
thousand dollars. It was $50 million a year of royalties.
Novell did not want them disrupting any of this royalty
income.
So they wanted to make sure that SCO, even though we
had transferred the business to SCO, the restriction was to
say, listen, we're relying on this revenue stream as a part
of this transaction. Don't do anything to upset this
royalty stream. In fact, we're going to restrict you so
that you can't do anything to undo or limit or disrupt this
royalty stream. That is at least my understanding of what
4.16B was for.
Q. Could you turn now back to the schedule of assets that
we were looking at, the assets that were being sold.
Is one of the items, item two, Roman numeral two?
A. Right. Yes, that is right. All of seller's claims
arising after the closing date against any parties relating
to any right, property or asset included in the business.
249
Q. Was this part of the assets being sold to Santa Cruz?
A. Yes.
Q. Claims, would that include legal claims?
A. Yes.
Q. Arising after the closing date, and that refers to the
date when the UNIX business is going over to Santa Cruz?
A. Yes. That was my understanding.
Q. So all of those claims would be going over with the
business; is that correct?
A. Yes.
MR. ACKER: Objection, leading. A question that
ends with is that correct is usually a leading question.
THE COURT: I will sustain the objection.
BY MR. SINGER
Q. Was one of the assets that the seller was getting --
let me rephrase that.
Did Santa Cruz's purchase include legal claims that it
would have against parties that were connected with the
business?
A. It was the intent of the parties as part of the
negotiations that post-closing, once the closing had
occurred, that all of these claims would now be SCO's
claims.
Q. Look at Roman numeral three.
A. Okay.
250
Q. Was this also part of the assets being sold to Santa
Cruz, all of sellers rights pertaining to UNIX and UnixWare
under any software development contract, licenses and other
contracts to which seller is a party, or by which it is
bound and which pertain to the business, to the extent such
contracts are assignable, including without limitation --
then there are a number of things that are listed underneath
that.
A. That is right. Our intent in that particular provision
was to try to enumerate all of the things that we were
trying to sell them as part of the business.
Q. Are you aware that there were agreements for software
development with companies that went back all the way to the
AT&T days, that had gone from AT&T to Novell and now from
Novell to SCO?
A. I was aware of that.
Q. Are you aware that one of those were agreements that
allowed IBM to have access to the UNIX source code for its
development work?
A. I was aware of that.
Q. Do you have an understanding as to whether or not that
agreement would be one of the ones under this section, Roman
numeral three?
A. Yes, that would be one of the agreements. It was one
of the -- I mean, if you want to look specifically, and if
251
you look down at item L, under paragraph three look down at
item L, it specifically refers to software and sublicensing
agreements, including source code sublicensing agreements
seller has with its OEMs.
Q. OEM means?
A. Original equipment manufacturers. I don't know why
they use that phrase, but that is how they refer to them.
Q. Was it your understanding that Novell retained the
right after the closing to stop Santa Cruz from pursuing
litigation, if they thought it justified, against IBM under
its authority under this Section 4.16 that we looked at
before?
A. No. The restriction on bringing an action relates to
the royalty stream -- upsetting the IBM royalty stream, not
the master software license.
Q. Now, after the transaction was -- I would like to
actually look at Exhibit 133, which is the next document in
your book.
This is not yet admitted into evidence. I would like
to ask --
MR. ACKER: Then it shouldn't be displayed.
MR. SINGER: I don't think it is displayed yet.
THE CLERK: The jury can't see it.
MR. ACKER: Okay.
BY MR. SINGER
252
Q. Do you have this Wall Street Journal article before
you?
A. I do.
Q. Are you familiar with this as an article that appeared
in the Wall Street Journal, September 20th, 1995, the day
after the asset purchase agreement was signed?
A. Yes. I remember seeing it at the time.
Q. Do you recall anyone after this was published on
September 20th, 1995 at Novell ever saying the Wall Street
journal got it wrong?
THE COURT: Mr. Singer, it is either going to be
admitted or not admitted before you are allowed to ask
questions regarding it.
MR. SINGER: I move the admission of Exhibit 133.
MR. ACKER: No objection given the Court's prior
ruling.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 133 was
received into evidence.)
BY MR. SINGER
Q. Mr. Thompon, would you please take a look at Exhibit
133. This is the Wall Street Journal article at the time
when the sale was announced; is that correct?
A. Yes.
Q. Could you read it out loud, and hopefully we will be
253
able to get a little better picture up on the screen. There
we go.
Mr. Thompon, can you read the first paragraph?
A. Novell, Inc. today is expected to announce plans to
relinquish control of the widely used UNIX operating system
to Santa Cruz Operation and Hewlett-Packard.
Q. Can you tell us what part or what aspect of control was
going to Hewlett-Packard?
A. Well, yes. That is a good point. That negotiation had
been going on at the same time we were negotiating with SCO.
The idea there was that the parties had worked together,
Novell, SCO and Hewlett-Packard, in developing a -- I will
use a technical term here -- a 64-bit version of UNIX on the
Intel processor.
Now, 64-bit is just a way to refer to the new, higher
powered Intel chips that were going to be coming out over
the next couple of years. The idea was that
Hewlett-Packard, who had a tremendous development team in
the UNIX world, highly respected -- in fact, at the time of
the transaction there were a number of employees that
formerly worked for Novell that went to work for
Hewlett-Packard to help work on this. The rest of the
employees, to my knowledge, then went to SCO to help work on
the SCO side.
They were working on a 64-bit version of UNIX, which
254
they could then sell as a network operating system, or as a
UNIX operating system in a shrinkwrapped box that just goes
out and works on people's P.C.s.
At that time Microsoft pretty much owned the market for
P.C. operating system software, and this was an attempt to
compete with them.
Q. Was this happening at the same time?
A. Same time.
Q. The next paragraph, could you read that out loud,
please.
A. The deal includes the purchase by Santa Cruz Operation
of most trademarks and intellectual property associated with
the UNIX software. One person familiar with the situation
said he expects SCO to pay about $140 million, some of which
will be shares of SCO, a Santa Cruz, California company that
sells its own version of UNIX.
Q. When you read this, did you understand intellectual
product to include the copyrights in UNIX?
A. I did.
Q. Did anyone, after this was published in The Wall Street
Journal, at Novell come to you and say this is wrong, that
we held back the copyrights?
A. No. No one commented on that at all.
Q. I would like to turn back to the asset purchase
agreement and turn to amendment number one which is in
255
evidence. It appears on the screen. It is near the end of
the documents in your book.
Turn to the signature page of amendment number one.
A. Okay.
Q. Is this your signature on behalf of Novell on December
6, 1995?
A. Yes.
Q. At the time of amendment one had any issue arisen
requiring clarification in amendment number one regarding
the ownership of the copyrights in UNIX?
A. Not to me. No one had mentioned anything to me about a
change.
Q. Was there any request made at the time of amendment
number one to clarify any language that appeared in the
asset purchase agreement regarding the ownership of the UNIX
and UnixWare copyrights?
A. No.
Q. Now, also on December 6, 1995, was there a bill of sale
which was prepared as a part of the closing?
A. Yes, I believe so.
Q. Is that typical in a transaction?
A. It is typical when you are transferring assets,
tangible and intangible assets, to have a bill of sale.
Q. I am referring to SCO Exhibit 90.
MR. SINGER: I would like to move this into
256
evidence. I don't recall if this has been --
THE CLERK: No.
MR. ACKER: No objection.
THE COURT: Exhibit 90 will be admitted.
(Plaintiff's Exhibit 90 was
received into evidence.)
BY MR. SINGER
Q. Did you sign the bill of sale on behalf of Novell on
this same day, December 6, 1995?
A. Yes.
Q. When you signed the bill of sale, was it your
understanding that you were on behalf of Novell conveying
the UNIX and UnixWare copyrights to Santa Cruz along with
the rest of the business?
A. That was my understanding.
Q. This does not have a separate list of assets, this
references back to the asset in the purchase agreement?
A. 1.1A.
Q. Now, after the sale closed in December of 1995, did you
became a member of the Santa Cruz Operation board of
directors?
A. Yes. One of the provisions in the A.P.A. was that
Novell could appoint, as a result of its stock ownership in
SCO, had the right to appoint a director to their board of
directors. I was selected to be the individual to be the
257
director.
Q. Would it be fair to consider you as the Novell
representative on the board?
A. Yes.
Q. Did your employment with Novell change at some point in
1996?
A. Yes. I left Novell in 1996.
Q. Did you leave Novell voluntarily?
A. Yes.
Q. Had you announced earlier in 1995 as to whether you
would leave Novell?
A. Yes.
Q. Did Novell want you to stay?
A. Well, my announcement was to Bob Frankenberg. I had
indicated to him early in 1995 that as a result of some of
the decisions that were being made that I felt it was best
if I left. I am referring specifically to the fact that
they had decided to sell the Word perfect applications
division, which was the entity that I worked for before.
They had decided to sell that.
Given the fact that this was only a year after we had
done the merger, and now within basically ten or 11 months
of making the acquisition the company had made the decision,
Bob had made the decision that it was time to get rid of the
applications division, I thought it was probably time for me
258
to leave. This was not the Novell that I had signed up for,
essentially.
Q. In 1996 did you became a consultant for Novell after
you formally stopped --
A. Yes. For a period of time after I left my employment I
was a consultant to Bob.
Q. While on the Santa Cruz board of directors in 1996, did
you become familiar with the dispute involving Novell's
attempt to do a buy out of these royalties with IBM?
A. Yes, I did.
Q. What is your understanding of that dispute?
MR. ACKER: I object without more foundation, Your
Honor.
BY MR. SINGER
Q. Did you gain an understanding of that dispute from
serving on the board of directors of Santa Cruz Operation?
A. Yes.
Q. Did you see correspondence relating to that dispute?
A. Well, actually it was not correspondence. Actually
Alok Mohan just simply confronted me at a board meeting and
said what is going on? They had just discovered that Novell
had --
Q. Pause for a moment. When you say he confronted you,
was he confronting you in the sense that you were still a
Novell representative, that you were a consultant or
259
employed with Novell?
A. I think it was his view that he understood that somehow
I had some connections to Novell and, as a result, I had
knowledge that this buy out had taken place.
Q. Can you now explain your understanding of what the
issue was that arose at that point where you were being
asked to get involved?
A. I understand that the OEM group, the licensing group of
Novell had gone to IBM to get a buy out of their royalty
payment on these licenses that we talked about earlier.
Q. Explain how a buy out operates and what that means in
the context of a stream of royalties.
A. It is instead of paying the royalty payment for the
next umpteen years, we'll just simply give you a one-time
payment. Here you go. Here is one check. Now I don't have
to make those payments anymore.
Q. What was your understanding of what caused the dispute
between Santa Cruz and Novell over that issue?
A. Alok was angry because no one from Novell had talked to
him about this prior to Novell doing it.
Q. Now, did you become actively involved in seeking to
resolve that dispute?
A. Alok asked me to contact Bob Frankenberg and find out
what was going on. It was clear to me that this was
something that Alok had to talk to Bob about. I called Bob.
260
I don't remember if I spoke to him directly on that occasion
or left a message for him, but I am aware that the two of
them started to talk and have a dialogue on this issue.
Q. What was your next involvement, if any, with the issue?
A. My next involvement, as I recall, is at a subsequent
board meeting where there were letters that were discussed
that had been sent back and forth, and I think finally at
another board meeting, SCO board meeting, where they had
entered into an amendment to the A.P.A.
Q. Are you referring to what is called amendment number
two?
A. Yes.
Q. Were you present for the board meeting at which that
was considered?
A. Yes.
Q. Do you recall how you voted on that particular
amendment?
A. They didn't permit me to vote.
Q. But you were present during the consideration?
A. Well, what I should say is, I was aware of the
amendment and I saw it. I saw that it had Jim Tolonen's
signature on it, which is frankly the reason I remember it,
because I thought it was odd that it was Jim Tolonen's
signature as the C.F.O. not some other businessperson in the
company.
261
I was actually asked to step out while the board
discussed all of the issues and took the vote. I was not an
impartial director and they understood that, and so I was
asked to step out while that was voted upon.
Q. Because you still had an association with Novell?
A. That is right. And Novell still had its stock in SCO.
Q. You reviewed amendment number two, though, in
connection with that?
A. Yes. It had been shown to me. That is right.
Q. Take a look at what is in evidence as part of SCO
Exhibit 1, amendment number two.
Is this the document which you saw at that time?
A. Yes, it is.
Q. Do you know whether after you returned to the board
meeting, after stepping out, whether this had been approved?
A. It had been approved.
Q. There are several parts of this amendment; is that
correct?
A. Yes. I see four separate paragraphs.
MR. SINGER: If we could blow this up on the
screen.
BY MR. SINGER
Q. Just read point A --
MR. ACKER: I object to further questioning of
this witness on this amendment given his testimony to date.
262
THE COURT: I'll sustain the objection.
BY MR. SINGER
Q. After this amendment was -- well, let me ask this.
During the time of this dispute, and I am not talking about
this amendment, but did anyone ever suggest in your presence
that Novell had retained the copyrights to the UNIX and
UnixWare operating system?
A. No. I wasn't aware of any assertion by Novell of that
position.
Q. Are you aware of any requests being made by Santa Cruz
to Novell in connection with this dispute that they now at
this point wanted a transfer of the copyrights to them?
A. No.
Q. Are you aware after this amendment being passed, did
Novell ever seek to unilaterally deal with IBM again on
revisions to a UNIX license?
MR. ACKER: Objection, calls for speculation. He
was not at Novell any longer.
THE COURT: I'm sorry?
MR. ACKER: He was not at Novell. He is going to
have to speculate to answer that question.
MR. SINGER: He was at Santa Cruz.
MR. ACKER: You asked him about Novell.
THE COURT: Ask the question again.
BY MR. SINGER
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Q. As a member of the board of directors of Santa Cruz,
did you ever became aware of any activity by Novell to deal
unilaterally with IBM up until the events of 2003?
MR. ACKER: Same objection.
THE COURT: Overruled.
THE WITNESS: The IBM incident was the only one
that I was ever informed of and the only one of which I'm
aware.
BY MR. SINGER
Q. Did Novell, either at the time you were at Novell or at
Santa Cruz, ever to your knowledge assert the right to use
any provision of the asset purchase agreement, including
this Section 4.16 that we have looked at earlier, to say
that it had the right to control what Santa Cruz did with
respect to IBM?
A. What period of time are you referring to?
Q. Up until March of 2003.
A. Well, they didn't ever assert that while I was at
Novell. To my knowledge, other than the situation with IBM,
I am not aware that they ever asserted that right, as a
member of the SCO board. I was never informed that they
ever asserted that right again.
THE COURT: How long did you remain on the SCO
board?
THE WITNESS: I was on the SCO board until the
264
sale to Sun, just prior to the sale to Sun, which was 2003
or four. 2002 or three, something like that.
MR. ACKER: Your Honor, I don't want to interrupt
the questioning, but there may be some confusion with the
jury, and Mr. Singer can clear that up.
BY MR. SINGER
Q. Did there come a time in 2001 when the UNIX business
that Santa Cruz had was sold to a company called Caldera?
A. Yes.
Q. Did Caldera subsequently change its name to the SCO
Group, Inc.?
A. Yes.
Q. That is the plaintiff in this lawsuit?
A. Yes.
Q. Did you also became a member of Caldera's board of
directors?
A. Yes. It was a similar situation, the --
THE COURT: Mr. Thompson, there is no question
posed. I want you to just answer the question that is
asked. Thank you.
THE WITNESS: Yes.
BY MR. SINGER
Q. Explain how you became a member of the Caldera board.
A. Yes. The original Santa Cruz Operations company was
located in Santa Cruz, California, and ultimately changed
265
its name to Tarantella, and decided to sell the UNIX
business. The strategy that they had entered into in 1995
with Novell had not panned out as they had planned. They
decided to sell that business and sold it to actually a Utah
company, a company located here in Utah called Caldera.
As a part of that sale, it was kind of a similar deal,
they had the right to appoint two directors to the Caldera
board, the Tarantella board. Alok Mohan, who was the
president of Tarantella, the old Santa Cruz Operation, and I
were appointed to the board of Caldera.
Q. Caldera is what is now known as the SCO Group, Inc.?
A. That is right.
Q. That was the name change?
A. Yes.
Q. Did you also serve for a while until 2002 or 2023 on
the Tarantella board?
A. Yes. Well, I continued to serve on that board after
the transaction with Caldera, that is right.
Q. Now, from 1996 to 2003, did you ever hear Novell assert
any ownership of the copyrights in UNIX or UnixWare?
A. I did hear in 2003, but prior to that time I hadn't
heard that.
Q. When you joined the board of directors of Caldera,
which became SCO, did you also became a shareholder of SCO?
A. Of Caldera?
266
Q. Of Caldera.
A. Well, I was on their board and we received stock option
grants from time to time as members of the board.
Q. As you sit here today, have you exercised certain
options on stock of the SCO Group, Inc?
A. Yes.
Q. How much did you spend to exercise those options?
A. I spend roughly 12,000 and some odd dollars to exercise
110,000 options.
Q. Do you know as of today approximately how much those
110,000 shares of SCO Group, Inc. stock are worth?
A. I think they are worth somewhere in the neighborhood of
eighty to $90,000.
Q. Is this the same as the options that were made
available to other directors on the SCO board?
A. Yes.
Q. Have you been on the board of SCO, from that time when
the assets were sold and you were appointed to Caldera which
became SCO, to the present?
A. Well, that is two different boards.
Q. Okay. Can you explain that.
A. I was on the Santa Cruz Operation board from 1996
until -- I am not sure if the appointment was in 1995 or
1996, but after the transaction closed with SCO, I was
appointed to their board either late that year or early the
267
next year. I was on that board, including through its name
change to Tarantella until 2002 or three. I don't have that
date clear in my mind.
Q. I am not asking anymore about that board. That was the
Tarantella business?
A. In 2000 or 2001, and I forget which year, I think it
was 2001, the sale of the UNIX business to Caldera occurred.
I joined that board and have served on that board since I
think it was around June or July of 2001.
Q. You serve on that board today; is that correct?
A. Not today.
Q. Up until recently?
A. Yes, up until recently.
Q. Can you tell me whether there was a time during which
you were on the board in May of 2003 that you became aware
of a press release that Novell issued on that date of May
28, 2003?
A. Yes, I did became aware of a press release.
Q. I would like you to turn to Exhibit 669.
This is in the form of a letter from Mr. Messman at
Novell to Mr. McBride at the SCO Group.
Are you familiar with this?
A. Yes.
Q. Are you aware of whether this was also issued as a
press release?
268
A. I don't know if the whole letter was issued as a press
release. I'm aware that there was a press release at the
same time.
MR. SINGER: I would move the admission of Exhibit
669.
MR. ACKER: No objection.
THE COURT: And the objection?
MR. ACKER: No objection.
BY MR. SINGER
Q. Did you become aware of --
THE COURT: One second. Let me do my formality
here. 669 will be admitted.
(Plaintiff's Exhibit 669 was
received into evidence.)
MR. SINGER: Thank you, Your Honor.
BY MR. SINGER
Q. Now, this is a letter from Jack Messman to Darl
McBride, Jack Messman being the CEO of Novell and
Mr. McBride being the president and CEO of the SCO Group; is
that correct?
A. Yes.
Q. How was this letter brought to your attention?
A. I actually received an e-mail from Doug Michaels who
was one of the people at the old Santa Cruz Operation, and
he became aware of this through some of his press friends.
269
He e-mailed a group of us, not just me, a group of us and
said you're not going to believe what Novell is claiming,
and I didn't.
Q. When you are referring to what Novell is claiming, what
are you talking about?
A. That they owned the copyrights.
Q. Would you turn to the last paragraph on the second page
of the letter.
A. Okay.
Q. Take a moment and read that to yourself.
Is this statement that SCO is not the owner of the UNIX
copyrights what you're referring to?
A. Yes.
Q. Is it your understanding this was put out in a press
release?
A. Yes.
Q. What was your reaction to hearing this from
Mr. Michaels and seeing the letter and the press release?
A. Twofold. I was shocked and upset.
Q. Why were you shocked and upset?
A. Well, I was shocked because this was not my
understanding of the transaction that I had participated in
in 1995. I was upset because if that were true it means
that I essentially misled SCO in the negotiations.
Q. Did you believe this to be true?
270
A. I did not.
Q. Eight days later did you become aware of another press
released by Novell on June 6th, 2003?
A. I became aware of the fact that Novell had been given
some information and that they were now retracting this
letter.
Q. Before we turn to that, is May 28, 2003, the date that
SCO group issued an earnings release?
A. I don't know if it was exactly that day. If it wasn't
that day it was very close to that day.
Q. Could you turn to Exhibit 254.
Do you recognize this to be a press release by SCO on
May 28, 2003?
A. Yes.
MR. SINGER: I would like to move the admission of
SCO Exhibit 254.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 254 was
received into evidence.)
MR. SINGER: Can we blow up the first part of this
document?
BY MR. SINGER
Q. First of all, does this refresh your recollection that
May 28, 2003 was the date of SCO's earnings release for the
271
quarter?
A. Yes. I see the date on the top.
Q. You have been a member of the board of directors of SCO
Group, the public company?
A. Yes.
Q. Can you explain the importance of earnings releases for
a public company such as the SCO Group?
A. Well, you're always concerned about being able to show
value to your shareholders, and if you have good earnings
the stock price usually goes up. If you have good news
about what is going on in the company the public views it as
a reason to buy the stock and usually the stock price will
go up.
Q. Do you recall whether on May 28, 2003 SCO had good news
to report?
A. It had good news.
Q. Is that reflected in this press release?
A. Yes.
Q. The net income was $4.5 million for that quarter on
revenue of $21.4 million and a reversal from a loss in prior
periods?
A. That is correct.
Q. Was this the same day that Mr. Messman's letter and the
Novell press release occurred?
A. Yes, it appears to be the same day.
272
Q. Now, eight days later are you aware of Novell issuing
another press release?
A. Yes.
Q. I would like you to refer to Exhibit 97.
Is this that press release?
A. Yes.
MR. SINGER: I move Exhibit 97 into evidence.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 97 was
received into evidence.)
MR. SINGER: Can we blow up this first part of
this document?
BY MR. SINGER
Q. I am going to read this out loud.
In a May 28th letter to SCO, Novell challenged SCO's
claim that the UNIX patent and copyright ownership and
demanded that SCO substantiate its allegations that Linux
infringes SCO's intellectual property rights. Amendment
number two to the 1995 SCO Novell asset purchase agreement
was sent to Novell last night by SCO. To Novell's
knowledge, this amendment is not present in Novell's files.
The amendment appears to support SCO's claim that ownership
of certain copyrights for UNIX did transfer to SCO in 1996.
The amendment does not address ownership of patents,
273
however, which clearly remain with Novell.
Did you read that?
A. Yes.
Q. Just so we are complete, there is a line in the press
release that is not in the box here, and it says Novell
reiterates its request to SCO to address its fundamental
issue Novell raised in its May 28 letter of SCO's still
unsubstantiated claims against the Linux community.
That is the entirety of the press release other than
some promotional information about Novell, correct?
A. Correct.
Q. What was your reaction to this press release?
A. Okay. Great. They understand what I understood.
THE COURT: Mr. Singer, how much more do you have?
MR. SINGER: Very little. I would say five
minutes or so.
THE COURT: All right.
BY MR. SINGER
Q. Did you ever learn that Novell went back to reasserting
claims of ownership to the UNIX copyrights after this June
6, 2003 press release?
A. I understand that they essentially retracted that
statement and indicated that, no, they decided again that
they did own the copyrights.
Q. Could you look at the last document in your book,
274
Exhibit 517.
MR. SINGER: I move the admission of Exhibit 517.
THE COURT: Let him identify it.
BY MR. SINGER
Q. Tell us what this is.
A. This is a Novell press release dated December 22nd,
2003.
Q. Did you see this press release at the time it was
issued?
A. I don't know if I saw it at exactly the time it was
issued, but close to the time it was issued.
MR. SINGER: I move the admission of Exhibit 517.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 571 was
received into evidence.)
BY MR. SINGER
Q. Can you read for the jury what this press release by
Novell on December 22nd says?
A. Novell believes it owns the copyrights in UNIX, and has
applied for and received` copyright registrations pertaining
to UNIX consistent with that position. Novell detailed the
basis for its ownership position in correspondence with SCO.
Copies of our correspondence and SCO's reply are available
here. Contrary to SCO's public statements, as demonstrated
275
by this correspondence, SCO has been well aware that Novell
continues to assert ownership of the UNIX copyrights.
Q. Mr. Thompson, are you aware of whether December 22nd,
2003 also was a date on which SCO was announcing its
earnings, this time for the period ending in December?
A. I don't remember the exact date, but it was in or near
this date.
Q. Are you aware of continued assertions of ownership to
UNIX copyrights by Novell to this very day?
A. Yes.
Q. Now, were you the person in charge of the sale of UNIX
to Santa Cruz?
A. Yes. I was given that charge by Bob Frankenberg.
Q. Based on your knowledge of that transaction, Mr.
Thompson, was the statement by Novell in May of 2003 that
they owned the UNIX copyrights true or false?
A. It is false. It is not consistent with the transaction
that we conducted.
Q. Based on your knowledge of that transaction, was the
statement by Novell on December 22nd, 2003 continuing to
assert ownership of the UNIX copyrights, was that true or
false?
A. I believe it is false.
MR. SINGER: Thank you.
That concludes my direct examination.
276
THE COURT: Thank you, Mr. Singer.
We'll take a break and come back for the
cross-examination.
Ms. Malley.
THE CLERK: All rise for the jury.
(WHEREUPON, the jury leaves the proceedings.)
THE COURT: We'll take 15 minutes, counsel.
(Recess)
***** Part 2: *****
(10:30 a.m.)
The COURT: Anything, counsel, before we bring the
jury in?
MR. ACKER: Not on behalf of Novell, Your Honor.
MR. SINGER: Not on behalf of SCO, Your Honor.
THE COURT: Thank you.
(jury present)
THE COURT: Go ahead, Mr. Acker.
MR. ACKER: Thank you, Your Honor.
CROSS-EXAMINATION
BY MR. ACKER:
Q Good morning, Mr. Thompson. We haven't had a chance to
meet. I'm Eric Acker and I represent Novell. I want to take
a step back so the jury truly understands your position in
this litigation. When you testified about being at Novell,
the time that you were at Novell was just in 1994 to 1996. Do
I have that right?
A That's correct.
Q And you were an employee at Novell during that period of
time; correct?
A Yes.
Q And you had come to Novell as a result of Novell
acquiring the company that you used to work for, WordPerfect;
right?
A That's correct.
277
Q And when Novell decided in late 2000 -- or 1995 to sell
that division, you decided to leave Novell; correct? When
they decided to sell WordPerfect, you decided to leave Novell?
A Yeah. You said late '95. Actually I think the decision
was reached fairly early in the year.
Q And You made your decision to leave early in the year in
'95?
A That's when I announced to Bob or had a discussion with
Bob that it would probably be best for me to leave the
company.
Q Because you didn't want to be at Novell any longer; is
that right?
A Yeah, I really didn't.
Q And what time -- what time frame was that that you told
Mr. Frankenberg that you no longer wanted to work for his
company?
A To the best of my recollection it would have been the
April, May time frame.
Q Okay. So before the negotiation and actual signing of
the APA, you had already decided you were going to leave
Novell?
A I had discussed with Bob that I would leave Novell.
Q And that's what you ultimately did; correct?
A Bob asked me to stay to conduct this transaction and a
couple of others, and I did.
278
Q Would It be fair to say that at the time of the APA, the
negotiations leading up to it, and the time after the signing
of the APA in September of 1995 until the end of the year, you
were pretty much checked out from Novell? Isn't that
accurate?
A I don't know what you refer to by checked out.
Q Well, mentally you'd already made the decision to leave;
right?
A If that's what you're referring to is that I had made a
decision that I would be leaving the company, then that is
correct.
Q Now, after you left Novell as an employee, and after the
APA transaction, you joined the board of Santa Cruz, the other
side of -- the company on the other side of the APA;
correct?
A I think I actually was made a member of the board of
Santa Cruz while I was still an employee of Novell.
Q And then subsequently after Santa Cruz, or Tarantella at
that point, transferred the assets that it acquired in the APA
to Caldera, you became a board member of Caldera in 2001;
right?
A Correct.
Q And since May of 2001, you have been a board member until
just recently of Caldera and subsequently the new SCO;
correct?
279
A That is correct.
Q And it's the new SCO that is the plaintiff in this case
that's suing Novell; correct?
A That is correct.
Q So fair to say for the last nine years you have been a
board member for the company that is accusing Novell of
slander of title; right?
A I was a member of SCO -- SCO's board, that's right.
Q And it's that board, SCO's board, that made the decision
to sue Novell and accuse it of slander of title; correct?
A Yes.
Q And so in 2004 you were actually head of the litigation
committee that made the decision to sue the company you used
to work for; right?
A Well, could you repeat that question? I was a member of
the board in 2004? Yes, I was a member of the board in 2004.
Is that your question?
Q My question was were you the member of the board that
decided to sue your old company in 2004?
A Was I the member of the board that made the decision?
Q Were you on the board that made the decision?
A I was on the board that made the decision.
Q Did you vote in favor of it?
A Yes.
Q And as a board member of SCO, you have an allegiance to
280
SCO; correct?
A Sure. I have obligations and duties that relate to being
a board member.
Q In fact you have a fiduciary obligation that requires you
to act in the best interests of SCO at all times; correct?
A That is correct.
Q As a board member of that company; correct?
A For the period up -- for the total duration of the time
that I was a board member of SCO, that's right.
Q Including the time the decision was made to sue your old
company Novell; right?
A Yes.
Q And in addition to having a fiduciary obligation to
protect SCO, you also have a financial interest in SCO;
correct?
A Well, I didn't at that time, but I do now.
Q And I think you told Mr. Singer you have 100,000 shares
of stock?
A I think the actual number is 110,000 shares.
Q And you also have additional stock options on top of
that; correct?
A I may have. I may not. The problem with that question
is whether or not those other options have expired.
Q Well, let me ask you about the stock. Now, you told
Mr. Singer that that 110,000 shares of stock was only worth
281
about 80 or $90,000; correct?
A I was informed today that the stock price is 70 something
cents, and so I guess that's the amount.
Q But if SCO succeeds in this litigation and its stock
price goes up, you stand to gain financially; correct?
A Sure.
Q So you have a financial interest in this case?
A Okay, fair to say.
Q Is that true?
A It is fair to say that I have stock in SCO.
Q And you have a financial interest in the outcome of this
case; correct?
A Yes.
Q And you want SCO to win, don't you?
A Repeat your name again.
Q Eric Acker.
A Mr. Acker, I want the truth to be told.
Q You want SCO to win, don't you?
A I want the truth to be told. The transaction that I
conducted in 1995 with my team, I want that transaction to be
understood.
Q All right. And we'll go through that.
A That's what I want.
Q We'll go through that. But in addition to your hundred
thousand shares of stock that gives you a financial obligation
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in this case, you're part of a partnership, aren't you?
E-S Net? ES-Net?
A ES-Net, Yes.
Q And isn't it true that your partner is a man by the name
of Dan Campbell?
A Yes.
Q And hasn't Dan Campbell recently invested $100,000 in
order to fund this litigation for SCO?
A Well, I'm aware that he has done that, yes. But that's
Dan Campbell. That's not my partnership.
Q But Dan Campbell, your partner in your venture group;
right?
A Dan Campbell, a former director of SCO, like me, already
has shares in SCO. He exercised his options the same way I
exercised my options. As an individual I do not control his
investments. I do not benefit from his investments. His
investments are his alone.
Q And he put $100,000 in in order to fund this case;
right?
A I actually don't know how much money he put in. He
didn't consult with me when he made the investment, and I
don't know what the number is.
Q In addition to having a fiduciary obligation to protect
SCO in order to have a -- in addition to having a financial
interest in the outcome of this case, in order -- in addition
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to being on the board that voted to bring this case, you also
were on the litigation committee at SCO for a number of years
and actually oversaw the running of this case; correct?
A Well, I didn't oversee the running of the case. The
general counsel of the company oversaw the running of the
Case. I interfaced between the lawyers and the rest of the
board. That was my assignment.
Q And when you say the lawyers, you're talking about the
lawyers that are running the SCO litigation on behalf of SCO
and the board of directors of SCO?
A And the general counsel of SCO, and the board of
directors.
Q That was also your role. Fair to say that of the board
members of SCO, since you were on the litigation committee,
that you were the person on the board that was most
knowledgeable about this litigation over the last four or five
years on the SCO board?
A No, I don't think that's fair. I think there are a
couple of other members of the litigation committee that were
just as knowledgeable.
Q Let's go back to 1995. I'm going to give you another
exhibit, Exhibit A1. Now, Mr. Singer asked you some
questions -- and I want this to be clear. And he used the
document that was marked the SCO exhibit 1 in your binder
there. And that's the APA that included both Amendment 1 and
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Amendment 2. Do you remember that series of questions from
Mr. Singer this morning?
A Yes.
Q Now, what I've handed you, Novell Exhibit A1, is an APA
that does not include either Amendment 1 or Amendment 2;
correct?
A I'm thumbing through it right now.
Q Take your time.
A It appears to be just the APA agreement. Is that right?
Q I'm going to represent that to you, but if you don't
trust me, please take a look.
A I think that's what it is. I think it's just the APA
agreement.
Q Okay. So we get the chronology straight, the APA itself
was signed and approved by the board of directors of Novell in
September of 1995; got that right?
A That's correct, Mr. Acker.
Q And you weren't on the board; correct?
A I was not.
Q And it was the board of Novell that had to approve that
deal; right?
A That is correct.
Q And the transaction, although it was approved in
September of 1995, actually didn't get closed, and the bill of
sale was not actually signed until December of 1995; is that
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right?
A That's correct.
Q And at the signing in December of 1995 there was an
Amendment 1 that was prepared during the several months
between September of '95 and December of '95; right?
A Yes. We had the technology licensing agreement, the bill
of sale and the Amendment 1 that were all signed in December
of 1995.
Q And you signed the Amendment No. 1; right?
A Yes.
Q And you signed the bill of sale?
A Yes.
Q And you signed the technology licensing agreement;
correct?
A That's correct.
Q And just so the chronology is set, September of '95 APA
is signed and approved by the board; December of 1995
Amendment No. 1 is done; correct?
A Yes.
Q And then you -- you're out of the process. You leave the
company; right?
A Well, not right then, but within a couple of months I was
gone.
Q But in terms of dealing with the APA, your last dealing
with the APA until you were at Santa Cruz and seeing issues
286
arise was in December of '95; fair?
A I think that's a fair statement, yes.
Q And fair to say that actually after the deal was signed
in September of '95, you sort of became much less involved in
the process because you began working on the sale of
WordPerfect by Novell; correct?
A That's correct.
Q So really your real involvement in the negotiations
leading up to the APA occurred sometime before September of
'95. Is that fair?
A Well, by the real involvement, do you mean the majority
of the time that I spent on this was prior to the signing of
the APA, I would agree with that. I spent some time after the
signing of the APA in continuing discussions with the team, Ed
Chatlos and others, who were continuing to work on this matter
to get it closed. But my time, the time in California, the
time meeting with AP -- with SCO and with Alok Mohan and the
others, was primarily prior to this time.
Q And can you place a time around when it was or how far in
advance of September of 1995 this meeting in Palo Alto you
referred to was?
A Well, there were a number of meetings. I don't mean to
suggest there was a single meeting in Palo Alto. The
reference I had before was to a particular meeting on the
terrace of the law firm of Brobeck in which I was talking to
287
Alok Mohan and Jim Wilt and Jeff Seabrook from their company,
and I was there with Ty Mattingly and Ed Chatlos.
Q Can you put a date on it?
A I don't have a date. It was sometime in the Summer or
late Summer, either July or August of 1995.
Q So it was --
A Could have been early September even.
Q So it was at least several weeks before the APA was
completed?
A Best of my recollection, it was prior -- it was sometime
in the Summer of 1995.
Q And you weren't involved in the day to day face-to-face
negotiations in the APA; correct?
A Well, yeah. Occasionally I was there on a day to day
basis. I'd be there for two or three days, and then I would
go on to other things.
Q But Ed Chatlos --
A Ed Chatlos was there every day as far as I knew. If
there was a negotiation session going on with the team, Ed
Chatlos was there.
Q And you hired lawyers to assist you in this process;
correct?
A Yes. We had outside counsel and inside counsel working
on this project.
Q And inside counsel was Mr. Bradford; correct?
288
A No. No. Actually it wasn't Dave. It was someone on his
staff and someone from New Jersey, whose name I can't
remember. But there was a gentleman from New Jersey that came
out with Mike DeFazio, who was the executive vice-president
over the Unix Group within Novell, and then there were other
lawyers of the team with Novell. Dave Bradford really wasn't
there very much.
Q And when you were -- when the detailed negotiations were
taking place, you hired Wilson Sonsini to act as your outside
counsel; correct?
A Dave Bradford -- Dave Bradford hired Wilson Sonsini.
That wasn't my role. That was David's --
Q That's who represented Novell in the transaction was the
outside counsel?
A Yes.
Q And Tor Braham was the lead lawyer for that team;
correct?
A Tor Braham was a participant. There were a number of
other parties that were draftsmen in that process.
Q And because you were not acting as a lawyer at Novell in
this period of time, you relied on Novell's outside counsel at
Wilson Sonsini to do the detailed drafting of the APA
agreement; correct?
A Wilson Sonsini was the principal outside firm, yes.
Q And you had confidence in the Wilson lawyers, including
289
Mr. Braham; correct?
A They were our lawyers.
Q And you had confidence in them; correct?
A They were our lawyers. I mean were they perfect? No.
And it was -- listen. Are you asking me were they absolutely
dead-on on everything they ever did? I would say they were
better than average.
Q So you had confidence in them; correct?
A I had confidence in them.
Q Now, let's take a look at the APA. And let's back up.
You testified --
THE COURT: Going to offer it as an amendment --
excuse me -- as an exhibit, your A1?
MR. ACKER: Yeah. I would move to have A1 admitted,
Your Honor. It is A1, yes.
THE COURT: Mr. Singer?
MR. SINGER: Our only objection is that it's already
in evidence as part of SCO Exhibit 1.
THE COURT: The Court will admit Exhibit A1.
(Defendant's Exhibit A1 received in evidence)
Q (BY MR. ACKER) Now, when you were describing the strategy
leading up to the decision to select Santa Cruz, not SCO
that's the Plaintiff in this case, but Santa Cruz to be the
entity to buy portions of the Unix business, you said that you
were concerned because they didn't have enough cash at some
290
point. Is that right? That became a concern?
A Yeah. The Novell team, Bob, the rest of us, Jim Tolonen,
understood that SCO did not have enough cash to just simply
buy this outright.
Q But the initial plan was to sell the entire business
outright for cash; correct?
A Well, the plan was to sell the whole business period. It
wasn't a question of -- maybe that's the issue that I'm trying
to suggest. There was never a provision in the instructions
that I received go sell this for cash. The instruction was go
sell this lock, stock and barrel. Sell the business. It was
not go get cash for this business. It was go sell this.
Q And at a point during the negotiations it became clear
that Santa Cruz didn't have enough cash, didn't have close to
$300,000,000 in order to buy the business; right?
A That's right. They did not have $300,000,000 cash.
Q And because of that, the deal was restructured into the
structure that you've described for us, where one portion of
it was the payment of $6,000,000 of stock; right?
A The deal was not restructured, Mr. Acker.
Q Well, the deal became the giving of $6,000,000 -- or
6,000,000 shares of stock; correct?
A The way to pay for this was part stock, which was
limited -- our original estimate was that they'd be able to
pay for more of it with stock. But it was Novell's issue that
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it not be a larger amount of stock. SCO was fine giving more
stock. I'm not sure that anybody is aware of that, but SCO
was fine giving much more stock than they ended up giving.
But it was Novell's issue that they did not want more than 19
percent of the stock because Novell did not want to have a
consolidated financial reporting issue.
Q And so what Novell got was a little over 6,000,000 shares
of Santa Cruz stock; correct?
A Right.
Q And then another portion of this deal was this SVRX
license, which we're talking about 4.16(a) of the APA;
correct?
A Yes, the royalties.
Q Now, those were royalties that before the deal, AP --
that Novell was collecting; correct?
A Yes.
Q And you said it was about 47 -- or 47 to $50,000,000 a
year that Novell was collecting?
A I didn't say 47, but my recollection was that at or
around the time that we were making the deal, our estimates in
our mind it was around $50,000,000 a year.
Q And then after the transaction, the way it was
structured, is instead of Novell collecting that money
directly from licensees, Santa Cruz would collect the money
and remit 95 percent of it to Novell; correct?
292
A Well, that's exactly what happened, is that when
Novell -- when we did the transaction, Novell, which had been
the licensor under those licenses, transferred those licenses
to SCO, SCO became the licensor and now began to collect those
royalties.
Q And so what happened between -- before the APA and after
the APA is the amount of money that Novell was collecting from
those licenses decreased by five percent; correct?
A Correct.
Q And so to take a round number, for instance, if Novell
had been collecting $100 for the APA for those licenses, then
after the APA it would -- it would get a hundred dollars for
the APA, but it had to give five bucks back to Santa Cruz?
A That's correct.
Q That was the second part. We had stock, and then we had
this 4.16 SVRX license component to the deal?
A Actually, just to be precise, SCO would receive that
money. SCO would collect it, all of the royalties. SCO was
the party that was in touch with the clients. And SCO on a
periodic basis, and it seems to me that there were a
particular number of days after the collection of some of the
royalties that they were to remit those royalties back to
Novell.
Q But regardless of how the mechanics worked, the hundred
bucks came to Santa Cruz and 95 bucks went to Novell;
293
correct?
A Yes.
Q So the day before the APA, Novell was getting a hundred
bucks; the day after the APA they're getting 95; right?
A That's right. Well, not after the APA, but after we
closed in December, yeah.
Q And then the third part of the deal was the development
of a combined product; correct?
A That's right.
Q And the combined product was Santa Cruz was supposed to
go out and continue to develop UnixWare; correct?
A Well, the combined product was to combine the Unix
components with the SCO OpenServer and Open Desktop
components. That was the combined product.
Q And those monies, what Novell was able to get for the new
network -- NetWare combined product, that -- Novell -- or
Santa Cruz was entitled to those monies until they reached a
certain amount of revenue, and then Novell was entitled to its
share on a portion of that?
A Did you say NetWare combined product?
Q NetWare and UnixWare, yes.
A Well, okay. The combined product had elements of NetWare
in it, but it wasn't a NetWare product. It was -- it was
components of network enabled Unix combined with some of the
technologies in UnixWare.
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By the way -- or not UnixWare. The combined technologies
in OpenServer. That was SCO's product. And so which were
basically interface type elements which were coming from the
SCO. So yes. And there was a -- the way the schedule was set
up, that until SCO hits a certain target, there were no --
there was no sharing. And after they hit another target --
well, once they hit that target, however, then they would
share to a certain percentage. And then if they hit another
target, they would share at a higher percentage.
Q And this product that we're talking about, this is not
the old SVRX licenses. These are -- this is a new product
that's going to be developed after the APA by Santa Cruz;
correct?
A It was actually going to be developed by Santa Cruz with
contributions from Novell, and that included people and
money.
Q Okay. We'll get to that. But just so the jury is clear,
the part where there wasn't going to be any payment to Novell
until we hit a certain point, that's a new product that's
going to be developed by Santa Cruz; correct?
A Yes.
Q And the old licensing stream that was already existing at
Novell, that's the licensing stream in which Novell was
actually going to receive less money after the APA closed than
before; right?
295
A Yes.
Q Now, let's take a look at Novell Exhibit A1, which is the
APA without Amendment 1 and not Amendment 2. And if we could
go to Schedule 1.1(a), please. Now, in questions -- in
response to questions from Mr. Singer you said that this is a
schedule -- this is an asset purchase agreement, so it's --
the lawyers need to say what's in the deal and what's out of
the deal; right?
A Yes.
Q So you have a list, 1.1(a) and that's what is in the
deal; correct?
A Yes.
Q And then the next couple pages after that are Schedule
1.1B, which is what's not in the deal; correct?
A Yes.
Q And the reason for having those two schedules is so that
everybody knows what's being sold in 1.1(a) and what's not
being sold in 1.1(b); correct?
A Yes.
Q And what we see in schedule 1.1(a) is a listing of what
was included; correct?
A That's correct.
Q And you agree that what is listed in schedule 1.1(a) is
what was included in that, what was sold in the APA that went
from Novell to Santa Cruz in 1995; right?
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A That's what 1.1(a) is, included assets.
Q If we can take a look at section 1.1(a) paragraph Roman
Numeral five. And this again is the section of the included
assets that is referencing intellectual property; right?
A Yes.
Q And what it says is what is included in the deal is
trademarks Unix and UnixWare to the extent held by seller,
excluding any compensation seller receives with respect of the
license granted in X/Open regarding the Unix trademark;
right?
A Yes.
Q That's it; right?
A Well, no. That's not it.
Q In the paragraph --
A Oh, in the paragraph. But, no, that's one of many
included assets.
Q In the paragraph in the included assets it says
intellectual property, all that's listed is trademarks Unix
and UnixWare; right?
A I see that, yes.
Q And you would agree with me that copyrights are
intellectual property?
A I would agree that copyrights are intellectual
property.
Q And in the APA that was executed in September of '95 and
297
closed in December of '95, in the included assets section
referring to intellectual property, the only intellectual
property mentioned is trademarks Unix and UnixWare; right?
A In paragraph five, but all the rest of that assets
provision talks about intellectual property.
Q But in the intellectual property section of 1.1(a)
there's no mention of copyrights. Would you agree with
that?
A I would agree that it says what it says.
Q Okay. Let's go to the corresponding section 1.1(b)
paragraph five. Now, schedule 1.1(b) -- so to make it clear,
this is an asset purchase agreement, and 1.1(a) is what is
sold and 1.1(b) is what is not sold, that is what is retained
by Novell; correct?
A Correct.
Q And there's a corresponding paragraph in section 1.1(b),
again, Roman Numeral five, that says intellectual property;
right?
A Yes.
Q And it reads in the first section-A what is --
MR. SINGER: Your Honor, I object. I think this
should be identified as to prior or replaced language.
MR. ACKER: I'll be perfectly clear.
Q (BY MR. ACKER) We're talking about the APA that was
signed -- or signed by the board of directors in September of
298
1995; right? That's what we're talking about?
A That is this document, yes.
Q And we're not talking about anything that happened after.
I'm focusing on September of 1995, okay?
A Okay.
Q In the intellectual property section of what was
excluded, 1.1(b), in (a), what's listed there is all
copyrights and trademarks, except for the trademarks Unix and
UnixWare; correct?
A Yes.
Q And that was what was excluded from the sale; correct?
A Well, I see that.
Q You see those words?
A I don't agree with it.
Q I understand you don't agree with it. I heard your
testimony, but you see the words, and those are the words in
the deal?
A I see the words.
Q Okay. And there's some symmetry between what we saw in
the included assets 1.1(a) paragraph five that said the
trademarks Unix and UnixWare went with the deal and this
portion of 1.1(b), the excluded assets, that say all the other
copyrights and trademarks stayed, except for trademarks Unix
and UnixWare, which are included in the included assets
1.1(a); right?
299
A Their symmetry? Well, I see that Unix and UnixWare
trademarks are mentioned in both.
Q And now you testified on direct that when you say -- when
you read the words all copyrights as being excluded, you
thought that just meant copyrights to NetWare; right?
A NetWare and other Novell core products, that's right.
Q Can you show me where in this section, intellectual
property, paragraph 5(A) of the excluded assets, it says
NetWare?
A Well, it doesn't say that.
Q I'm sorry?
A It does not say that.
Q So in the section talking about intellectual property and
what's excluded from the deal, there is no mention of NetWare;
right?
A Mr. Acker, if you refer to the whole previous page, the
entire previous page, it mentions nothing but NetWare and
TUXEDO. And so what I am -- I guess my answer to you is this.
The reason that our understanding, our negotiating team's
understanding, that -- on this provision is because the entire
page preceding that line talks about NetWare.
Q And my question was really pretty simple. In the section
of the excluded assets from the deal that talk about
intellectual property, it says all copyrights, and there's no
mention of NetWare?
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A And my answer is equally simple. That made no sense. I
knew what the deal was. And the idea of delivering source
code, the idea of delivering these mountains of documentation
of this product, the entire business of Unix, to a company and
to somehow then suggest that you don't own the ability to use
that, just seems inconsistent. So that's my answer.
Q So it's your opinion that's inconsistent, but you don't
disagree that what the document actually says is that
copyrights were excluded from the deal?
A I don't disagree that this paragraph says copyrights are
excluded assets, but I do disagree that that had any bearing
on the transaction that we negotiated, the words that I said
to SCO, the words that I heard from Bob Frankenberg, and the
deal that we cut.
Q So it's your testimony that the actual language of the
agreement saying what is excluded have no bearing on what was
actually the deal was?
A It is not my testimony that the words have no bearing.
It is my testimony that these words do not accurately reflect
the transaction that I negotiated.
Q So now we're getting down to it. It's your testimony
that the actual deal, what was documented, what was signed,
what was approved by the board of directors, is inconsistent
with what you thought the deal was?
A It is my testimony that the APA is incomplete in that
301
there were a number of things that we modified in Amendment 1
and Amendment 2 to clarify this document.
Q All right. We'll ask you about Amendment 1, but you
didn't have anything to do with Amendment 2, did you?
A The negotiation of Amendment 2?
Q Yes.
A I did not negotiate Amendment 2.
Q So let me go back to my question. It's your testimony
that it's your opinion about what the deal was is inconsistent
with the language of the deal; correct?
A Yes, it is inconsistent with this language.
Q But you're not disputing that what the actual document
says that was approved by the board of directors says that
copyrights were excluded, are you?
A I'm not disputing that it says what it says.
Q And this is the deal that was approved by September of
1995 by the Novell board of directors; correct?
A I don't believe that.
Q Well, were you at the meeting?
A No. A member of my staff was at the meeting.
Q Did you listen to what was said to the members of the
board of directors before they approved the deal?
A A member of my staff was at the meeting.
Q My question was were you?
A No.
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Q Did you hear what was said?
A I did not hear them speaking. I was not at the
meeting.
Q Did you hear the vote of the directors?
A I was not at the meeting.
Q Did you have authority to approve this deal?
A I did not.
Q Who did?
A Bob Frankenberg and the board of directors.
Q And they approved the deal; correct?
A They did.
Q At that meeting in September of '95; right?
A That's my understanding.
Q And you weren't there; correct?
A I was not there.
Q And this is the language that came out of that meeting;
right?
A No. No. This was the language that was in the document
that was signed by Bob Frankenberg. I have no idea -- as you
properly point out, I was not at the meeting, so I don't know
what language they reviewed.
Q And is it also true, isn't it, that you do not recall any
specific discussion leading up to the execution of the APA in
September 1995 about copyright ownership; correct?
A I do not recall parsing out copyright ownership as
303
separate and apart from the rest of the business.
Q Now, you said something in response to Mr. Singer's
question earlier, and I want to make sure -- I wrote it down,
and I want to make sure I heard your testimony correctly. You
said -- when he asked you whether the copyrights were part of
the deal, you said you assumed they were because Santa Cruz
was given the whole business. Was that testimony correct?
A Yes.
Q You assume they were; right?
A I did.
Q Let me show you another document, Exhibit T5. Have you
had a chance to look at that, sir?
A Yes.
Q And T5 is Amendment No. 1, which is a cleanup document
that was prepared between September of '95 and the closing of
the deal in September of '95; correct?
A Yes.
Q And so the jurors understand, what happens is this was
sort of a tight deal towards the end. There was tight
negotiations and the deal got papered or documented pretty
quickly; is that right?
A There was significant pressure to get it done quickly.
Q And then after it got approved on September 18th by the
board, there's a period of time where the lawyers kind of go
through the document to make sure that in the rush to get the
304
document done there weren't mistakes made; right?
A Among other things, yeah.
Q So not only are mistakes caught, but there actually can
be some substantive negotiation back and forth to actually
change some of the terms?
A And to clarify some of the terms, that's right.
Q And the idea is you want to gain clarity about what the
document is before it actually is closed and a bill of sale is
signed that transfers -- and the assets actually get
transferred; right?
A Yes.
Q And that's what this document memorializes; correct?
A This document is the first amendment to the ADA.
Q But what it is --
A The APA, sorry.
Q It's the cleanup for the APA that got signed by you in
December -- on December 6th, 2005; right?
A Yes, it is.
Q So did lawyers for Novell go through the document to make
sure that everything was right?
A I assume so.
Q And did lawyers for --
A I don't recall any specific discussion with any of the
lawyers on that point, but I assume that that's what they were
doing.
305
Q And the business people at Novell, did Ed Chatlos and
others go through it?
A For certain the business people did.
Q Ed Chatlos actually was in charge of this; right?
A Yes. Yes, he was.
Q And his counterpart at Santa Cruz also went through the
document, the APA, the one we looked at, Exhibit A1, and they
made their changes too; right?
A Yes.
Q And then they all got written down in this piece of
paper, and you looked at it December 6th and you signed it;
right?
A Yes.
Q Did you read it before you signed it?
A Yes.
Q All of it?
A All of it.
Q And if you take a look at -- if we could go to the
signature page, please.
A I'm getting there.
Q That's your signature, sir?
A Yes.
Q Now, if you go back to I believe it's page nine, if we
could highlight the middle section there. Are you there, sir,
page nine?
306
A Yes.
Q Now, this -- there's a letter (I) paragraph-I of this
cleanup document, right, in the middle of the page?
A Yes. Isn't that (L)?
Q You're right, it is (L). The frailty of my eyes. And
that (L) refers to changes that were made to the excluded
asset portion of the APA; right?
A Yes.
Q And you see that in the top it says in schedule 1.1(b)
item seven is amended to read as follows, and there's some
changes that are made; correct?
A Yes.
Q And the changes are made to paragraph seven of the
excluded assets; right?
A Yes.
Q But the paragraph about intellectual property that
excluded copyrights was paragraph five; right?
A Yes.
Q So after the lawyers for Novell and Santa Cruz went
through the APA, and they looked at the excluded asset
portion, they didn't make any changes to the paragraph that
excluded copyrights; right?
A Not at this time, that's right.
Q And you read the document in December of 2005; right?
A Yes.
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Q I'm sorry, 2000 -- '95; right?
A 1995.
Q In 1995, correct, in December?
A Yes.
Q And you signed it; right? Correct?
A Yes, I did.
Q You thought it was accurate; right?
A Yes, it was.
Q And no changes were made to the 1.1(b) of the APA that
excluded copyrights; right?
A That's correct. These were the changes that were made in
Amendment 1.
Q And you did not recall any issue being raised during the
cleanup to the APA that resulted in Amendment No. 1 regarding
ownership of the Unix copyrights?
A No.
Q So no one from Santa Cruz came to anyone at Novell and
said, "Hey, the copyrights are excluded. That's not part of
the deal," right?
A Not to my knowledge. No one ever reported such a
discussion to me.
Q And by the way, this actually -- with the copyrights
excluded is actually a better deal for Novell than if the
copyrights had been included; correct?
A I don't exactly understand why it would be a better
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deal.
Q Well, they're giving up less rights; correct?
A Well, they're conveying all the business. So I guess the
question is this. Was it a better deal in the sense that they
got anymore money? Could they go out and resell those items?
They'd already sold them once. I think it was the same deal.
It wasn't a better deal. It wasn't a worse deal. It was the
same deal.
And I'll be very clear on that. We had already delivered
source code, all copies of the source code to SCO. So they
had it. They were now the licensors under the agreement.
They had it. Novell was no longer the licensor. It was now
simply receiving the royalties under those licenses.
So I don't understand how it could be a better deal or a
worse deal. It was the same deal because all the business had
been sold.
Q So it's your belief that it was the same deal whether or
not the copyrights were included or excluded?
A It was the same deal. All the business was sold. That's
my understanding of what happened.
THE COURT: Mr. Acker, do you want me to instruct
the witness to answer your question without proffering
additional testimony?
MR. ACKER: No, Your Honor. We're doing fine, but I
appreciate the offer.
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THE COURT: All right.
Q (BY MR. ACKER) Let me show you another document. You
signed another document in December of '95, a strategic
development agreement; is that right? Do you recall that?
Let me hand you what we've marked as V5. Exhibit V5 is a
strategic development agreement between Novell, Inc. and Santa
Cruz operation, Inc. And if you go to the last page, or page
15, you see your signature there?
A Yes.
Q And you executed this document on December 6, 1995, along
with the bill of sale and the other documents to close the
deal?
A Yes, I did.
MR. ACKER: Your Honor, I'd move for admission of
Exhibit V5.
MR. SINGER: No objection.
THE COURT: It will be admitted.
(Defendant's Exhibit V5 received in evidence)
Q (BY MR. ACKER) Now, Mr. Singer asked you some questions
about the technology licensing agreement. If we could bring
that up, please, SCO Exhibit 162. Do you have a copy there?
A I can see a copy on the screen.
Q I'll give you a hard copy too.
A Thanks.
Q Now, this is the document that you testified about that
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after the deal Novell was given a license back to the
technology that had been included assets that were part of the
deal; right?
A Yes.
Q But the only assets that were licensed back to Novell
were licenses that were included in schedule 1.1(a) of the
asset purchase agreement; correct?
A Yes.
Q If we could bring up SCO exhibit 90, please. This is the
bill of sale; correct?
A Yes, it is.
Q And so that the jurors understand, the bill of sale is
the document that actually transfers ownership from Novell to
Santa Cruz; right?
A Yes.
Q And so business people and lawyers can get together and
negotiate a deal and can decide we're going to transfer these
assets, but until the bill of sale is actually transferred,
nothing is transferred; right?
A That's my understanding, yes.
Q And you executed this document in December of 1995;
right?
A Yes.
Q And if we could blow up the first two paragraphs, please.
And the first paragraph just gives us some background. It
311
says, "Reference hereby is made to that certain asset purchase
agreement by and between the Santa Cruz operation, Inc. and
Novell dated as of September 19th, 1995, as amended by
Amendment No. 1," which we've looked at, "to asset purchase
agreement as of December 6, 1993 together -- 1995, (together,
the agreement)." Do you see that?
A Yes.
Q And it says, "Capitalized terms used in this bill of sale
and not otherwise defined shall have the meanings ascribed to
such terms in the agreement," right?
A Yes.
Q And that's really lawyer speak for if it's got a capital
in front of it, it means you've got to find a definition for
it somewhere; right?
A Yes.
Q What this is telling you is for the definition you have
to go back to the asset purchase agreement; correct?
A Correct.
Q And then in the second paragraph it reads, "In accordance
with article 1.1(a)," which was the included -- or excuse
me -- "in accordance with article 1.1(a) of the agreement,
seller, for valuable and good -- for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby transfer, convey, sell, assign and
deliver to buyer, without recourse, representation or warranty
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except as otherwise expressly provided in the agreement all of
the assets," right?
A Yes.
Q And what's being transferred is the assets with a capital
(A); right?
A Yes.
Q And the assets with a capital (A) are what is the defined
assets in the asset purchase agreement; right?
A The 1.1(a) of the --
Q Yes.
A Yes.
Q So what got transferred, the only thing that got
transferred, is what was included in schedule 1.1(a) of the
asset purchase agreement as it existed on September 19th,
1995; right?
A Isn't it as it existed on December 6, 1995?
Q You're absolutely right. With Amendment No. 1, as
schedule 1.1(a) existed in December of 1995, as those assets
were defined in schedule 1.1(a), that's what went from Novell
to Santa Cruz?
A That's the way the agreement was set up, yes.
Q And that's all that went; right?
A Yes.
Q Show you another document that we've marked as zero 10.
Hand a copy of that to you, sir.
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THE COURT: Mr. Acker, you said zero 10.
MR. ACKER: O-10, Your Honor.
Q (BY MR. ACKER) Have you had a chance to look at that,
sir?
A Yes.
Q Exhibit O-10 is an intellectual property assignment
between Santa Cruz and Caldera; correct?
A Yes.
Q And you were on the board of directors of actually both
companies at this point in time in 2001; is that right?
A No. Actually I think I was on the board of directors of
Santa Cruz operation only at this time.
Q Okay. And so Santa Cruz operations, so the jury follows,
is the company that got the assets from Novell in the APA and
then now we're six years later and they're going to turn
around and they've going to assign or transfer some of those
assets to Caldera, which becomes the plaintiff in this case,
SCO; right?
A Yes.
Q And that's what this document is; right?
A It appears to be what this is, yes.
Q Were you involved at all --
I'd move for admission of exhibit O-10, Your Honor.
MR. SINGER: No objection.
THE COURT: It will be admitted.
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(Defendant's Exhibit O-10 received in evidence)
Q (BY MR. ACKER) And if you take a look at paragraph six of
that document -- I'm sorry, paragraph eight. If we could
highlight the paragraph eight-five, please.
THE COURT: Mr. Singer.
MR. SINGER: If he was not involved, I object on
lack of foundation.
MR. ACKER: We haven't gotten an answer yet, so
we'll see how we go.
Q (BY MR. ACKER) Now, let me lay a little background. When
the assignment of certain rights are made, or in this case
assets are made, the assets that Santa Cruz purchased from
Novell, they're going to assign them to Caldera, Caldera wants
some sort of representations from Santa Cruz that they
actually own those assets; right?
MR. SINGER: Objection, lack of foundation.
THE COURT: I think we better, before you ask any
questions about the agreement or the language of the
agreement, would you please establish the foundation so we can
admit it.
MR. ACKER: Sure. And this is background just in
terms of his knowledge of how deals work, and then I'll get to
his knowledge of this document.
The Court: Why don't you just focus on the deals of
the document because I'm not sure the jury can distinguish
315
between your background questions and --
Q (BY MR. ACKER) Okay. You know that when you were on the
board of Santa Cruz they transferred the assets that they had
purchased a few years earlier to Caldera; right?
A Yes.
Q And they did it by an assignment; correct?
A I wasn't clear on what the document was, the manner in
which they made -- frankly I haven't seen this document. I
don't remember seeing this document actually.
Q Was the board of directors involved in the decision to
transfer the assets -- the board of directors of Santa Cruz
involved in the decision to transfer the assets at Santa Cruz
that they had bought three years earlier from Novell?
A Yes.
Q You were involved in that decision?
A Yes.
Q And when that decision was made at the board level, did
you understand that those assets would be transferred by an
assignment?
A I don't remember having a specific understanding of how
the assets would be transferred, only that the assets would be
transferred.
Q And your understanding as a member of the board of Santa
Cruz was that the only assets that transferred to Caldera and
that are now the plaintiff's assets in this case are the
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assets that Santa Cruz got in the APA; right?
A I'm trying to make sure I understand your question,
Mr. Acker. Are you asking me whether there were any other
assets that went as part of this other than those specific
assets which SCO obtained from Novell?
Q Right.
A I don't know the answer to that question.
Q All right. Do you know -- are you aware of any assets
being given to Caldera and now SCO other than what they
obtained from Novell by Santa Cruz?
A I'm not aware of any.
THE COURT: You're not going to offer it?
MR. ACKER: Well, I would offer to move O-10, Your
Honor. I think I already did. It's already admitted. I
think we did that.
The Court: well, all right.
MR. ACKER: I moved. He said no objection.
THE COURT: All right. It is admitted.
Mr. Singer, your question about it?
MR. SINGER: I was not questioning the document. I
just had an objection to --
THE COURT: Him being asked --
MR. SINGER: -- the question without foundation.
THE COURT: Are you going to pursue discussion of
zero -- O-10?
317
MR. ACKER: Not with Mr. Thompson, Your Honor.
THE COURT: Thank you.
Q (BY MR. ACKER) Now, you -- on direct examination Mr. Singer
showed you a Wall Street Journal article from 1995; right?
A Yes.
Q And is it your testimony to this jury that you have a
distinct memory of seeing that Wall Street Journal article 15
years ago?
A Well, I remember reading this article when it was issued
because it was something that my team had worked on, and we
wanted to make sure -- indeed, the press release -- working
out the press release is something my group had contact with
and involvement in, so I remember seeing this article, yes.
Q You're certain that you saw this exact article and these
exact words 15 years ago?
A My memory is that I saw the Wall Street Journal article
dated May 20th, 1995.
Q And you can remember that far back, and you can remember
that date, and you can remember that article?
A There are few things that I can remember that far back,
but this is one of them.
Q Okay. Let's take a look at it, SCO Exhibit 133. And if
we could highlight the first two paragraphs. Now, what the
words say are in the second paragraph, "The deal includes the
purchase by Santa Cruz Operation of most trademarks and
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intellectual property," right? Those are the words?
A That's the reporter's words; right?
Q And the reporter used the word most; correct?
A The reporter is quoting someone quote "familiar with the
situation", and he says, "Most trademarks and intellectual
property."
Q Doesn't say all; right?
A No, he did not say all.
Q Let me turn your attention now to when you -- after you
went on the board of what -- Caldera, what became the
plaintiff in this case, SCO. At some point in late 2002 and
early 2003 the C.E.O., relatively new C.E.O. of SCO, Darl
McBride, came to the board and asked the board to approve a
SCOsource licensing campaign; correct?
A Yes, that's right.
Q And that the idea behind the SCOsource licensing campaign
is that SCO was going to take what it -- the intellectual
property it believed it owned and ask users of Linux to pay it
royalties; is that right?
A The SCOsource licensing program was a way for SCO to
license rights to users who were at that point in time using
Linux.
Q And Mr. McBride's theory was that there is some
violation, copyright violation, by Linux users because there
is some Unix -- protected Unix in Linux; right?
319
A That was the theory.
Q But at this point in time in December of 2002, SCO was
actually selling the Linux product; right?
A I don't have dates in mind on that issue.
Q But it's true, isn't it, that the rest of the business at
SCO was not going very well; correct?
A The company was struggling.
Q In fact the fiscal quarter ending in the end of October
of 2002 SCO had lost more than $24,000,000; right?
A I don't have anything to -- the company was struggling.
It was a hard time for that company, yes.
Q And this was Mr. McBride's idea of how he was going to
turn the company around by using what he believed to be Unix
copyrights to sue everyone who used Linux; right?
A Well, no not to sue. This was Mr. McBride's idea on how
to gain some financial remuneration for intellectual property
that we believed SCO owned.
Q You wanted to increase revenues; correct?
A Yes.
Q The old model wasn't working, so this was a new plan;
correct?
A We wanted to increase revenues.
Q And the new plan was we'll use what we believe in Unix
and we'll send letters out to a thousand fortune 100 companies
and say you're using Linux. You've got to pay us money;
320
right?
A Did you say a thousand fortune 100 companies?
Q If I did, I misspoke. You sent out to over 1,000
companies in the top fortune 1,000 companies?
A I don't know how many letters. They sent out a lot of
letters.
Q A lot of letters; correct?
A Yes.
Q In fact they even sent a letter to Novell, didn't they?
A I do not know that.
Q But the board of directors approved this idea; right?
A We discussed and approved this initiative to try to go
out and license the Unix intellectual property, that's
right.
Q Fair to say this was sort of a Hail Mary for SCO?
A Your words, not mine.
Q Do you disagree with that?
A We're like every company in the United States that comes
on good times and bad times, how do we improve our business?
And we were looking for ways to improve our business.
Q And in fact before you -- this program was announced in
January of 2003, you were actually warned, weren't you, that
there would be a real problem with this because there was no
way there was actually any Unix in Linux? You were warned of
that concern?
321
A I was warned of that concern?
Q Yes.
A Personally?
Q Yes.
A Well, if you have something that could refresh my memory
on that warning and that time frame, I guess I'd take a look
at that.
Q Give me a minute. Let me hand you what we've marked as
G12. Have you had a chance to look at that?
A Yes.
Q It's an E-mail to you and a number of others from a Geoff
Seabrook; correct?
A It is.
Q And who is Mr. Seabrook?
A Geoff Seabrook, I don't know if he worked at SCO at this
time or if he had left the company at that time. Let me be
clear. At this point in time the company's name was
Tarantella -- Tarantella, the one down in Santa Cruz, the one
that had formerly been Santa Cruz Operation. And so Geoff
Seabrook had worked at that company. I don't know if he was
still an employee there at this time. So it's an E-mail from
Geoff Seabrook.
Q So somebody who worked there, and so we don't totally
confuse the jury, this company that you went to as a board of
director when you left Novell, Santa Cruz, that purchased what
322
it purchased in the asset purchase agreement; correct?
A Yes.
Q And he sends it to Alok Mohan; correct?
A It appears to be directed to Doug, and I assume that
means Doug Michels at Tarantella.
Q And who is Doug Michels at Tarantella?
A At that point in time Doug Michels -- well, he was a
senior executive at Tarantella. He actually may have been the
president at that point in time of Tarantella. He eventually
became the president of Tarantella. I don't know if he was at
that particular moment.
Q So the E-mail is to the president -- what you believe to
be the president at the time of Tarantella, or the old Santa
Cruz, as well as a number of board members?
A Yes, that's right.
Q And that includes yourself; correct?
A It does.
Q And he's giving you a warning about the SCOsource
program; correct?
A Well --
THE COURT: I think before you ask anymore
questions, let's see whether or not it can be admitted.
MR. ACKER: That was going to be my next question.
I move for admission of G12, Your Honor.
THE COURT: Any objection?
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MR. SINGER: No objection.
THE COURT: It will be admitted.
(Defendant's Exhibit G12 received in evidence)
Q (BY MR. ACKER) He gave you a warning. This is January
13th, about a week before Darl McBride announced SCOsource;
right?
A I have no recollection of this E-mail.
Q Let's take a read. Let's look at the first paragraph.
If you could highlight that, please. "I thought this was a
bad idea when we discussed in the days when we ran SCO, and I
still think it is a bad idea. Guys who run protection rackets
occasionally make a short-term profit but never build a
long-term business, usually they are dead. New SCO has far
few enough friends anyway without pulling this stunt." You
see that?
A Yes.
Q And he's referring to SCOsource; right?
A What do you mean he's referring to SCOsource?
Q The stunt being SCOsource?
A I don't see what -- it doesn't say in this document.
Q Why don't you take a look at the -- the article that's
attached to the bottom of his E-mail is actually an article
that leaked out before SCOsource was actually announced;
correct?
A Are you asking me a question?
324
Q Yeah. I'm asking you to look at the press release or the
article at the bottom of this to refresh your memory of what
this E-mail is about.
A Okay. Is this an article from some publication?
Q It's the E-mail that you got. I'm just asking, it's
true, isn't it, that what he's talking about is SCOsource,
isn't it? Do you have any doubt about that?
A Well, it's a little hard to tell because he talks about
something that says from SCO enforced patents. So I -- that
doesn't ring a bell.
Q Let's go to the last paragraph of the E-mail itself.
Maybe that will refresh your memory. If we could go up to the
last paragraph of the E-mail, "A program".
A Yes.
Q In the last Sentence he writes, "It would alienate the
whole Open Source community as well as users and potential
users. The main beneficiary will be Microsoft with Sun
possibly benefiting to a minor degree if they are aggressive
enough." Do you see that?
A Yes.
Q And you don't have any dispute that this was an E-mail
that you received before the SCOsource program was announced;
correct?
A I don't remember receiving this E-mail.
Q Do you have any reason to doubt that you received it?
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A No.
Q Was that a consideration in the board before the decision
to go ahead with SCOsource --
A I'm sorry. I have to answer that previous question. It
has my name on it, but it doesn't necessarily mean I received
it. It doesn't have my E-mail address on it. It simply has
my name on it, which -- and I see here that it also has all of
the other -- well, not all the other. It has some other of
the SCO board members on it. But I guess what I'm trying to
suggest is I don't remember seeing this.
Q Let me just ask this. In the discussion leading up to
the announcements of SCOsource, was there a concern on the
board that you were going to alienate the Linux community?
A Yes.
Q And why was that a concern?
A Because the reason there was some sense that this would
be an irritation to the Linux community was because the Linux
community viewed this software as being free, that the code,
the software and everything that related to it was free.
Q Did you also understand that another problem with the
SCOsource program was actually proving that there was any
protected Unix in Linux? Did you understand that that was
going to be an issue?
A Which part of that question do you want me to answer,
that there was a problem with it or that that was one of the
326
issues that had to be shown?
Q We'll start -- in the discussion about SCOsource, did the
board discuss the fact that in order for this program to be
successful, SCO was going to have to prove that there actually
was protected Unix prevalent in Linux?
A Okay. The manner in which the issue came to the board of
new SCO was, is there any Unix software, any of the
copyrighted materials, any of the source code, in Linux? The
discussion at the board level was show us that there is some
of that code in Linux. And if there is, then this is a good
idea. If there isn't, then it's not a good idea.
Q But wasn't it true that even months later, when the
SCOsource program was floundering, there was still a real
question at SCO, inside SCO, about whether or not there was
protected Unix code that was prevalent in Linux?
A We asked for information that would lead us to conclude
that there was Unix software in Linux.
Q My question wasn't that. My question was after SCOsource
got going and rolling -- and you would agree with me that
there was an uproar in the Linux community; correct?
A There were a lot of people that didn't like this idea.
Q And there was --
THE COURT: Mr. Thompson, that question can be
answered yes or no. And Mr. Acker hasn't asked for it, but
I'm going to. When a question is asked that can clearly be
327
answered yes or no, answer it yes or no. If you feel that
something more has to be said, Mr. Singer will have an
opportunity on redirect to point that out, but I want the
question answered as directly as possible.
THE Witness: Thank you.
THE COURT: Because we have to move this along.
MR. ACKER: Thank you, Your Honor.
Q (By MR. ACKER) There was an uproar in the Linux community;
correct?
A Yes.
Q And many, many people in the Linux community said that
there is no copyright infringement here because there is no
protected Unix prevalent in Linux; right?
A Yes.
Q And that was a real problem with the SCOsource program;
correct?
A The uproar was a problem?
Q No. The fact that the people that were the potential
licensees, the people that were going to be asked to pay
money, said there is no protected Unix in Linux?
A That was their statement, yes.
Q And that created a real problem in order for there to be
any licenses taken; right?
A Yes.
THE COURT: Mr. Acker, how much more do you have?
328
MR. ACKER: About three questions, one more
document.
THE COURT: Okay.
Q (BY MR. ACKER) Let me show you what's marked as Q22. Sir,
I'm going to ask you about a specific portion, but you can
always feel free to look at any part of it. Q22 is a Form
10-K that SCO filed with the Securities and Exchange
Commission for the year-ended December -- or October 31st,
2003; right?
A Yes.
Q And you as a member of the board of directors, if you
take a look at the very last page of the document, your
electronic signature is there. Do you see that?
A Yes.
Q And when you did that, when you allowed your electronic
signature to be put there, you were certifying that the
statements in the document were true; correct?
A To the best of my knowledge, yes.
Q Why don't we take a look --
I move for admission of Exhibit Q22, Your Honor.
MR. SINGER: Object on the grounds of relevancy at
this point.
THE COURT: Well, the court will admit the
document.
(Defendant's Exhibit Q22 received in evidence)
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Q (BY MR. ACKER) Why don't you take a look at page -- it's
page 19 I believe. I'm sorry, page 41 at the bottom. And I
will turn your attention to the paragraph -- no, 41. Do you
have that paragraph? Turn your attention to the paragraph
that begins with the word "notwithstanding".
A On page 41?
Q Yes. It's on the screen too.
A Oh, sorry, I'm looking at the page numbers on bottom
left, which does not line up. There we go. Okay. Okay, I
see that paragraph.
Q And to the best of your knowledge, that paragraph is
true; right?
THE COURT: Go ahead and take the time you need to
read it, Mr. Thompson.
THE WITNESS: Okay.
Q (By MR. ACKER) So let's walk through it. Do you believe
the statement is true as of October, 2003?
A Yes.
Q So after the SCOsource program has been going for about
ten months, the statements in this paragraph are still
accurate; right?
A I believe they are.
Q And the first sentence reads, "Notwithstanding our
assertions of full ownership of Unix-related intellectual
property rights, as set forth above, including copyrights, and
330
even if we are successful in our legal action against Novell,
the efforts of Novell and the other Linux proponents described
above may cause Linux end-users to be less willing to purchase
from us our SCOsource I.P. license authorizing their use of
our intellectual property contained in the Linux operating
system, which may adversely affect our revenue from SCOsource
initiatives. These efforts may also increase the negative
view some participants in our marketplace have regarding our
legal actions against IBM and Novell and our SCOsource
initiatives and may contribute to creating confusion in the
marketplace about the validity of our claim that the
unauthorized use of our Unix source code and derivative works
in Linux infringes on our copyrights. Increased negative
perception and potential confusion about our claims in our
marketplace could impede our continued pursuit of our
SCOsource initiatives and negatively impact our business."
It was true at this point, even in October of 2003, that
one of the reasons the SCOsource campaign was failing was
because Linux users did not believe there was Unix in Linux;
isn't that right?
A Yes.
Q And so after ten months, after ten months of SCOsource,
the campaign was still failing because people in the Linux
community did not believe SCO's claims of infringement;
right?
331
A I can't answer that yes or no.
Q Well --
A Because I don't agree it was failing. I agree that there
was tumult over this issue. We had licensed some of this to
other parties. And so the issue for me is was it failing?
Well, it wasn't a screaming success. Was there tumult in the
community? Yes, there was tumult in the Linux community.
Q And part of the reason that it was failing and there was
tumult in the community is because people who were using Linux
didn't believe SCO's claims that there was protected Unix in
Linux; right?
A I think that's correct.
Q And that has nothing to do with Novell's claim to
ownership of the Unix copyrights; right?
A Well, doesn't it have something to do with it? If Novell
owns those copyrights, then SCO would not have been able to
assert those claims.
Q But in terms of whether there is protected Unix code
prevalent in Linux, that issue has nothing to do with whether
Novell claims ownership --
A Yeah. If there's -- I think if the point you're asking
is if there is not Unix code in Linux, then it doesn't matter
who owns the Unix copyright.
Q And because of that, if the dispute and the problem out
in the Linux community is there is no protected Unix prevalent
332
in Linux, that issue has nothing to do with what Novell says
about who owns the copyrights; right?
A Well, Novell had said -- at first they said they owned
them, then they said they didn't own them, and then they said
they did own them. And that confusion had a bearing on how
successful SCO was in going out and licensing these items with
the Linux and the rest of the community.
Q But aside from that issue, aside from the ownership of
the Unix copyrights, there was tons of response from the Linux
community that we don't have to pay you a license because
there is no protected Unix in Linux; right?
A Okay, that's possible.
Q And that had nothing to do with Novell's claim that they
still owned the Unix copyrights; right?
A It had everything to do from SCO's point of view because
they were the ones that were trying to exercise the right. So
I guess the answer to the question is it may not have had
anything to do from the standpoint of Linux users. That's
their issue, not mine. It had everything to do from SCO's
point of view because we were trying to license, as a company,
license that technology into the marketplace.
Q And so the last question is from the Linux users point of
view, the fact that they did not believe that there was
protected Unix in Linux, that was a separate issue for them
unrelated to whether Novell or Unix owned the copyrights;
333
right?
A I'm not a Linux user, so this idea from the Linux users
own point of view -- my only point of view was SCO's point of
view. We couldn't license it with this cloud over the title.
That's the question from my perspective.
Q But what the Linux users were telling you was even if you
owned it, you can't -- I'm not going to pay you a license
because there is no protected Unix in Linux; right?
A Well, I think that was their position.
MR. ACKER: That's all I have, Your Honor.
The Court: Thank you. We'll take a 20 minute
recess and then come back for redirect.
(jury excused)
Mr. Thompson, my admonition to you worked for about three
questions.
Mr. Acker, I don't know whether or not you didn't request
that he answer the questions more directly because you were
simply being respectful or whether there's some other aim, but
I have an obligation to make sure this trial proceeds.
So I've got to again tell you, Mr. Thompson, that you
must answer the questions, particularly those from the
opposing attorney, directly and succinctly. And, again,
Mr. Singer will now have an opportunity to ask you additional
questions.
But I don't want a repeat of everything that he has
334
already given by way of his own answers to the questions posed
by Mr. Acker. So I want you to be careful in what you ask him
as well, Mr. Singer.
In the future I would encourage counsel, especially those
on cross-examination, when you think that the witness is not
being responsive to your questions, you certainly have a right
for me to instruct the witness to do so.
MR. ACKER: Appreciate that, Your Honor.
THE COURT: We'll take 20 minutes.
MR. SINGER: Your Honor, could I just -- I can raise
it now or later. My concern with this report is that parts of
it --
THE COURT: Which exhibit?
MR. SINGER: Q22, the S.E.C. report. Part of it
goes into the other litigation the court has excluded on
motions in limine. So before this goes to the jury, I would
think that that needs to be redacted so that --
THE COURT: What I would prefer is that you could
work together and only submit that part of the document that
is at all pertinent here, instead of giving them a huge stack
of paper with a whole bunch of black stuff in it, okay?
MR. ACKER: That's fine, Your Honor.
THE COURT: Thank you.
(Recess at 11:51 a.m.)
* * *
335
***** Part 3: *****
336
THE COURT: Ready, counsel?
MR. ACKER: Yes.
MR. SINGER: Yes.
THE COURT: Ms. Malley, if you would please bring
the jury in.
(Jury present)
THE COURT: Go ahead, Mr. Singer.
MR. SINGER: Thank you, Your Honor. I only have a
few areas.
REDIRECT EXAMINATION
BY MR. SINGER:
Q Mr. Thompson, the document that you were looking at at
the end of cross-examination by Mr. Acker is something
called a form 10-K filed by public companies, in this case
SCO, with the Securities and Exchange Commission. You are
familiar with that type of document?
A Yes.
Q Is there a section required in these documents to
disclose risks of corporate action and issues that are
affecting the corporation?
A Yes.
Q Is that so investors and shareholders can make an
informed choice as to whether or not to buy or hold the
company stock?
MR. ACKER: Object to leading, Your Honor, every
337
question.
THE COURT: I'll overrule the objection.
BY MR. SINGER:
Q Is the discussion on page 41, which you were being
asked about in connection with cross-examination, part of
the disclosure in a context of saying that investors should
be aware of risks that are involved in the company?
A Yes, it is.
Q Now specifically, and I don't think this part was shown
you when you were being asked about this paragraph on page
41, is that discussion relayed back to what is said three
paragraphs earlier?
MR. SINGER: And, Mr. Calvin, if you would blow up
that whole section so that the jury can see it.
BY MR. SINGER:
Q Three paragraphs earlier it says, on January 20th of
2004, in response to Novell's actions, we brought suit
against Novell for slander of title. Do you see that?
A I see that.
Q So the discussion that follows in connection with this
very lawsuit, correct?
MR. ACKER: Objection, leading. I know that was.
That end was correct.
BY MR. SINGER:
Q Does this --
338
MR. SINGER: I'll reframe the question, Your
Honor.
THE COURT: All right.
BY MR. SINGER:
Q Does the discussion which you were being asked three
paragraphs below when it talks about legal action against
Novell refer to this lawsuit?
A This is the lawsuit that's being referred to, yes.
Q And was the discussion, then, that the efforts of
Novell and other Linux proponents may cause Linux ends-users
to be less willing -- I don't think I've -- I'm going to ask
the question again.
Does the discussion that pertains to the paragraph here
that Linux users may be less willing to purchase SCO IP
licenses, that is saying it's due to the efforts of Novell
and Linux proponents; is that correct?
MR. ACKER: Objection, is that correct.
MR. SINGER: I will reframe the question.
THE COURT: All right. Go ahead.
BY MR. SINGER:
Q What was your understanding of why the disclosure
statement was talking about a possible adverse effect on
SCO's IP licensing program?
A My understanding was that the action -- the conflict
over the question of copyrights was causing doubt in the
339
marketplace about SCO's ability to license the software.
Q This is a disclosure document in 2003, I believe. Did
you anticipate it would take time for this lawsuit to be
resolved?
A Actually, isn't this the document for the period ending
in 2003 and actually filed in 2004?
Q Yes, but the fiscal year ended in 2003.
A Yes.
Q So this would have been filed -- this was filed in
early 2004?
A Yes.
Q And it's referring to a January 2004 lawsuit that's
filed?
A I see that, yes.
Q And would you anticipate and did the board anticipate
that it would take some time for this lawsuit to be
concluded and litigated?
A Yes.
Q Did the board and you anticipate in making this
disclosure that shareholders should know that you would
be -- there would be a likely adverse effect on SCOsource
licensing during the time that the lawsuit is pending?
A Well, I think we were trying to say there could be an
adverse effect because of this doubt and confusion, what we
call the FUD factor -- fear, uncertainty and doubt -- in the
340
marketplace about whether SCO owned the technology.
Q And when you say even if we are successful in our legal
action against Novell, end-users may be less willing to
purchase from us, did that refer to what was being said in a
prior paragraph about getting the title to the copyrights
cleared up?
A Actually I didn't read any of the prior paragraphs.
Q If you would look at the paragraph right before that
where it says, in the lawsuit, we request preliminary and
permanent injunctive relief as well as HELP. An injunction
would require Novell to assign to us all copyrights that we
believe Novell had wrongly registered, prevent Novell from
representing any ownership interest in those copyrights, and
require Novell to retract or withdraw all representations it
has made regarding its purported ownership to those
copyrights. Do you see that?
A Yes.
Q Then it's in the following paragraph where it says,
even if we are successful in our legal action against
Novell, these efforts may have had an adverse effect on the
willingness of people to buy Linux -- Linux users to buy IP
licenses from SCO?
A Yes, I see that.
Q So that is the context -- is that the context in which
these statements were made?
341
A Yes.
Q Now with respect to how Linux users feel about the
program, is it true that certain Linux users have bought
licenses?
A We have sold licenses. I assume that those users also
have Linux within their organizations.
Q And when you were being asked questions by Mr. Acker
about what Linux users feel one way or the other, is that a
group that only has one voice or are there millions of
people who are a potential market in this area?
A I would assume it is the later. I don't think there is
any one organization for Linux. In fact, I think that's
kind of the Linux community, is a community of many, many
components and parties and participants.
Q In connection with the decision to pursue SCOsource
licensing, was information presented to the board which
convinced you that there was a basis to believe that UNIX
intellectual property was contained in Linux?
A Yes.
Q That was looked at -- was that looked at by the board?
A Yes.
Q Now turning to a second topic. On section 1.1(a) of
the asset purchase agreement, you were asked some questions
by Mr. Acker about the fact that section V talks about
intellectual property and doesn't mention copyrights. Do
342
you recall that question?
A Yes.
Q If you go to the first part of schedule 1.1 -- can we
go to the first page and can we blow up section one,
including the part below it -- you see where it says all
rights and ownership of UNIX and UnixWare?
A Yes, I see that.
Q Did you understand copyrights would be included in a
statement that says all rights and ownership of UNIX and
UnixWare?
A Yes.
Q And then the specific products are listed below?
A Yes.
Q Are there various parts of this schedule such that you
would need to repeat that in a later section if it's covered
up here?
A I would think not.
Q And do you have any understanding of any way that all
rights and ownership of UNIX and UnixWare, including source
code, could be conveyed to Santa Cruz without conveying
copyrights?
A They were one in the same in my mind.
Q Now you were asked some questions about, well, from the
Novell point of view, would it have made any sense to hold
back the copyrights when you were selling the rest of the
343
business, and I believe your testimony was it wouldn't make
any sense. Do you recall that?
A It would not make any sense.
Q Right, because you were selling the business?
A Yes.
Q From the Santa Cruz perspective, however, would it make
a difference whether they were getting a company with the
copyrights as opposed to without the copyrights?
A Okay.
Q Whether they were the getting the UNIX business with
the copyrights and without the copyrights?
A So are you asking me to testify what my belief was at
the time we were negotiating it --
Q I'm asking --
A -- or just in general now?
Q Well, let's talk about at the time you were negotiating
it.
A At the time I was negotiating it, I did not represent
SCO's interest in that, I represented Novell's interest in
that, and that was something we proffered as part of the
sale was the entire business.
Q Did you do it on -- did you have any belief at that
time that it would make any sense to offer the entire UNIX
business to Santa Cruz but then say, well, you're not going
to get the copyrights?
344
A No.
Q In fact, can you tell me whether or not you would have
gone about selling the business to Santa Cruz, the UNIX and
UnixWare business, and not tell the purchaser that you are
going to withhold the copyrights? Is that something that
you would do?
A Well, it is an inconsistency. If there was something
that we were withholding, we would have told them. We
wouldn't have tried to sneak it in somehow on the last page
of a document. We would have actually had that discussion.
So the answer is no, I would not have the done that.
MR. SINGER: Thank you.
THE COURT: Mr. Acker.
MR. ACKER: One question, Your Honor.
THE COURT: Go ahead.
MR. ACKER: Can I do is from here?
THE COURT: You may.
RECROSS-EXAMINATION
BY MR. ACKER:
Q Sir, to your knowledge, did the lawyers and business
people at Santa Cruz have the opportunity to read the
included and excluded asset schedule before they agreed to
the APA?
A Yes.
MR. ACKER: That's all I've got.
345
THE COURT: Counsel, may Mr. Thompson be excused?
MR. ACKER: Yes, Your Honor.
MR. SINGER: Yes, Your Honor, subject to possible
re-call at the end of the case.
THE COURT: So he may not be excused, then, as
I've used that term?
MR. SINGER: Yes.
THE COURT: Mr. Thompson, it's possible that you
may be re-called. So if you would remain available. I do
have to instruct you to not discuss your testimony with any
other witness in this case or in the presence of any other
witness or in any way communicate with any other witness.
All right?
THE WITNESS: Yes.
THE COURT: Thank you, Mr. Thompson.
MR. SINGER: Mr. Normand will present our next
witness.
THE COURT: Mr. Normand, who might that be?
MR. NORMAND: Our next witness will be Ed Chatlos.
THE COURT: All right.
Mr. Normand, could I get you to do me a favor? A
lot of exhibits were left up here. Would you come and
retrieve those that will not be used.
MR. ACKER: Some of those are mine, Your Honor.
THE CLERK: Mr. Chatlos, do you want to come
346
forward?
EDWARD CHATLOS,
Having been duly sworn, was examined
and testified as follows:
THE CLERK: If you would please state and spell
your name for the Court.
THE WITNESS: Edward S. Chatlos. C-h-a-t-l-o-s.
DIRECT EXAMINATION
BY MR. NORMAND:
Q Good morning, Mr. Chatlos.
A Good morning.
Q Could you summarize your educational background?
A Yes. I have a bachelor's of science degree in
electronic engineering technology. A master's of science
degree in computer science from Johns Hopkins.
Q Can you briefly summarize your employment before you
joined Novell?
A After my bachelor's degree, I joined Western
Electric --
THE COURT: Mr. Chatlos, can I get you to scoot
forward, and also make certain the microphone is closer to
you.
THE WITNESS: Is that better?
THE COURT: I think so, yes.
THE WITNESS: After my bachelor's degree, I went
347
to Western Electric. Stayed there for about nine months.
And then left Western Electric, got my master's at John
Hopkins. Came back to Western Electric, and stayed there
for about nine months moving to the microprocessor product
management group, department management for software systems
there. Left after about a year and a half and went to the
AT&T microelectronic -- I'm sorry, the UNIX group in AT&T.
Stayed there until '87. Then, in '87, I moved to London and
did software licensing for UNIX in Europe for three years.
I came back and did business development, business planning
for UNIX with AT&T.
Q When did you join Novell?
A Right after the sale of UNIX to Novell by AT&T, 1993
maybe.
Q And what position did you assume?
A Senior director of strategic relationships.
Q What were your, in brief, responsibilities?
A I managed the big company relationships, like Computer
Associates, how we partnered with them.
Q How long were you at Novell?
A Through 1995, the end of 1995.
Q So when did you leave?
A Actually it was January 5th of 1996.
Q Why did you leave?
A I had an offer from AT&T and I thought it was a good
348
offer, so I left for that reason.
Q Did Novell want you to leave?
A No.
Q Did you have a chance to work with a man named Duff
Thompson during your time at Novell?
A Yes.
Q In what capacity?
A I worked in his organization at one time and then
reported to him towards the end.
Q Over what time span did you report to Mr. Thompson?
A Since I joined Novell, which was, again, '93 through
January of '96.
Q Now as of the beginning of 1995, what were the major
lines of business at Novell?
A You certainly had Netware. That was the biggest one.
You had UNIX. Some smaller lines of business, like
documentation training, WordPerfect, and may be others.
Q Did there come a time when Mr. Thompson -- Duff
Thompson spoke with you about Novell's intent to sell the
UNIX and UnixWare business?
A Yes.
Q Do you recall, approximately, when that occurred?
A In the May time frame of 1995.
Q What did Mr. Thompson tell you about his intent
regarding the sale of these assets?
349
A He said he wanted to sell the entire UNIX business to a
buyer. I am not sure if he said SCO at that time.
Q Did you have an understanding at that time as to why
Novell had decided to sell this entire business?
A I think so. It really was about Novell focusing on
their core NetWare products given all the competition coming
around them.
Q When you say you think so, did you discuss this issue
with Mr. Thompson?
A I don't believe so.
Q Did you discuss it with anyone else?
A I don't remember.
Q What role did Mr. Thompson ask you to play with respect
to the sale of these assets?
A He asked me to lead the negotiations for selling the
business.
Q Did you have a view at that time as to why he had asked
you to play that role?
A I think it was my background. I was certainly the UNIX
expert, business expert. I had done a lot of negotiation
before. So I think that was the reason.
Q As of that time, late 1995, how many transactions would
you estimate you were part of negotiating?
A I don't know, anywhere between 30 and 50. I'm not
sure. Some small, some very big.
350
Q Was there any effort within Novell around the time you
learned of this intent to find a proposed purchaser?
A Yes, there was.
Q Did you come to a decision as to who an appropriate
purchaser would be?
A Yes, SCO.
Q On what basis did you make that decision?
A Primarily their market reach, their experience in UNIX,
their staffing. It was a really good fit. They were
focused on binary sales, so that was an important thing as
well.
THE COURT: Mr. Chatlos, may I ask that you slow
down a little bit, primarily for the court reporter.
MR. NORMAND: Thank you, Your Honor.
BY MR. NORMAND:
Q Now did there come a time when you took Mr. Thompson up
on his request and began to negotiate with this potential
purchaser?
A Yeah, that began in mid June of 1995.
Q With whom from Santa Cruz did you begin and continue
these negotiations?
A The daily discussions and the regular discussions were
with Jeff Seabrook and Jim Wilt.
Q Over what period of time did these negotiations occur?
A We started mid June of 1995 and finished early
351
September 1995, so it was throughout the summer.
Q Can you explain for me physically how you went about
doing these negotiations? Where were you?
A Most of the negotiations occurred in California. I
live in New Jersey, so I went out every week. I commuted
actually every week. There were several hotels we used from
Palo Alto, Los Gatos and Santa Cruz.
Q What was the general nature of the transaction that you
were discussing with Mr. Wilt and Mr. Seabrook?
A To sell the entire business to SCO so they could
continue with it fully.
Q Did you and the Santa Cruz negotiators have a nickname
for this proposed transaction?
A We did. Sleigh ride.
Q Why was that the nickname?
A The first hotel we met in June of 1995, outside -- it
was a Holiday Inn in Palo Alto, and outside there was a
Santa Claus and a sleigh. For some reason James decided to
call it sleigh ride.
Q How much of the UNIX business was to be sold in this
transaction, as you recall it, during your negotiations?
A Well, the entire business.
Q Was it the sale of just UnixWare?
A No. It was definitely UNIX and UnixWare.
Q What was the relationship between UNIX and UnixWare as
352
those terms sometimes get thrown around?
A UnixWare was the latest offer and it encompassed most
of the previous efforts, like UNIX. So really one can use
that term interchangeably.
Q As part of the deal you negotiated with Santa Cruz,
were the UNIX and UnixWare copyrights to be included or
excluded from the transfer?
A The deal with SCO was to include the copyrights.
Q Would holding back the copyrights have been consistent
with your instructions from Mr. Thompson?
A Absolutely not.
Q Did you ever instruct anyone on the deal to hold back
the copyrights?
A No.
Q Did you ever suggest to Santa Cruz that they were
buying the UNIX software business but not its copyrights?
A Absolutely not.
Q When do you first recall discussing the possibility of
the transaction with the Santa Cruz executives? I'm going
back a little bit now.
A Sometime in May of 1995.
Q Did there, after that point, arise an issue with
respect to the cash or money that Santa Cruz could pay for
the transaction?
A Yes. It was going to -- in one of the meetings in late
353
1995.
Q Can you briefly describe what the issue was?
A Yeah. SCO didn't have enough cash to pay up front, so
we constructed a deal such that there would be three payment
components. One is the customers that existed in Novell
that were licensing binary copies of UNIX, that revenue
would be substantially paid to Novell as one component of
the compensation. Second component, stock in SCO. The
third component is a share of the revenue that SCO got for
any UNIX sales in the future.
Q Can you, again, briefly, but can you describe the
distinction between what you described as the first
component and the third component?
A Yes. The first component was the binary licenses that
existed at the time the APA was signed.
Q What is a binary license?
A Binary is a machine readable software. It's like the
application you buy when you buy a Microsoft operating
system.
Q And the third component, the UnixWare?
A Excuse me. It's the future UnixWare offer that SCO
sales, a portion of those binaries.
Q So if Santa Cruz had sold a certain amount of UnixWare
licenses in the future, it's your testimony that some of
that money would have gone back to Novell?
354
A Correct.
Q Do you know whether that threshold was ever met?
A I don't know. I had left.
Q Was it ever your intent on behalf of Novell to hold
back the copyrights because Santa Cruz couldn't pay enough
cash up front?
A Absolutely not.
Q Did you form any view as to whether the payments to
Novell through the ongoing binary royalties, what you
described as the first component, did you form any view as
to whether that would be valuable to Novell?
A Yes, and we did some modeling.
Q Again, briefly, what were the results of the modeling,
if you can recall?
A Hundreds of millions of dollars.
Q Were you personally involved in the transaction up to
the date that the APA was signed?
A Yes.
Q Did you ever give the lawyers authority to hold back
any UNIX or UnixWare copyrights?
A Absolutely not, no.
Q Would it have bothered you if anyone had drafted the
language of the APA to hold back the copyrights from UNIX
and UnixWare?
A Absolutely.
355
Q Why?
A The deal I negotiated with SCO included the copyrights,
so we modeled it to include the copyrights. And from a
personal standpoint, it would have been unethical to exclude
them.
Q Now just before the APA was signed, did Novell own all
of the lines of businesses that you identified earlier? I
think you said NetWare, WordPerfect, UNIX, UnixWare.
A Just before the APA was signed did they own them?
Q Yes.
A I believe so, yes.
Q Were they transferring all of those lines of business
to Santa Cruz?
A Certainly not.
Q Which ones were they transferring?
A Just the UNIX and UnixWare business.
MR. NORMAND: Mr. Calvin, could we look at SCO
Exhibit 1.
BY MR. NORMAND:
Q Is that in front of you on your screen, Mr. Chatlos?
A Yes.
MR. NORMAND: Highlight recital A.
BY MR. NORMAND:
Q Do you see that language in from front of you, Mr.
Chatlos?
356
A Yes.
Q It says, quote, seller is engaged in the business of
developing in the line of software products currently known
as UNIX and UnixWare, the sale of binary and source code
licenses to various versions of UNIX and UnixWare, the
support of such products and the sale of other products
which are directly related to UNIX and UnixWare,
collectively, the business. Do you see that language?
A Yes.
Q How does that language compare to your understanding of
the business in which Novell was engaged at the time?
A It reflects it.
MR. NORMAND: Mr. Calvin, can we have recital B?
BY MR. NORMAND:
Q This language, as you can see, Mr. Chatlos, says, the
boards of directors of each of seller and buyer believe it
is in the best interests of each company and their
respective stockholders that buyer acquire certain of the
assets and assume certain of the liabilities of seller
comprising the business, the, quote, acquisition. Do you
see that language?
A Yes.
Q How does that language comport with your understanding
of what Novell was intending to sell Santa Cruz?
A The intent was for Novell to keep its core NetWare
357
business and some other businesses and sell the UNIX and
UnixWare business. That reflects it.
THE COURT: Mr. Chatlos, again, I have to ask you
to please slow down.
THE WITNESS: I'm sorry.
MR. NORMAND: I will try to speak even slower and
you can mimic me.
THE COURT: Mr. Chatlos, I am serious about this,
that only for the court reporter, but my guess is that
members of the jury are having trouble following some of
your answers. It's very important that they hear what you
have to say.
MR. NORMAND: Thank you, Your Honor.
MR. NORMAND: Mr. Calvin, section 1.1(a),
highlight that.
BY MR. NORMAND:
Q I'm trying to save time, Mr. Chatlos. I take it you
are familiar with this language, you've seen it before?
A Yes.
Q If you need time to read it, let me know. How does
this language comport with your understanding of what the
assets were at issue in this transfer?
A It reflects it.
Q Do you see the reference to both schedules 1.1(a) and
schedule 1.1(b)?
358
A Yes.
MR. NORMAND: Could we go to schedule 1.1? Let's
bring out Roman numeral I.
BY MR. NORMAND:
Q Mr. Chatlos, this is from schedule 1.1(a), all rights
and ownership of UNIX and UnixWare, including but not
limited to all versions of UNIX and UnixWare and all copies
of UNIX and UnixWare, and I'll stop there. What are copies
of UNIX and UnixWare?
A The actual individual versions, and it would be the
source code copies and any binary copies we had.
Q In what forms do those exist -- or did they exist at
the time?
A They certainly did exist and they could have been on a
disk, a tape drive.
Q Were those physical materials being sent over as part
of the transfer, to your understanding?
A Yes.
Q Keep going, all technical, design, development,
installation, operation and maintenance information
concerning UNIX and UnixWare, including source code. I'll
stop there. Remind us again what source code is.
A Source code is human readable computer code where a
human can read it, understand it, modify it, and then you
take the compiler and compile it into binary.
359
Q You say modify it. What does that mean?
A Change aspects so it does something different than was
originally intended.
Q Keep going, source documentation, source listings and
annotations, appropriate engineering notebooks, test data
and test results, as well as all reference manuals and
support materials normally distributed by seller to
end-users and potential end-users in connection with the
distribution of UNIX and UnixWare, such assets to include
without limitation the following. Do you see that language?
A Yes.
Q How did that language overall comport with your
understanding of what assets were included in this transfer?
A It fully describes it.
Q Did you have a view at the time of the APA as to
whether this description, descriptions of materials such as
copies of UNIX and UnixWare, and the source code for UNIX
and UnixWare included the copyrights thereto?
A Without a doubt, yes.
MR. NORMAND: Go to schedule 1.1(b). Can we bring
up Roman numeral I?
BY MR. NORMAND:
Q Mr. Chatlos, you've seen this language before. Roman
numeral II refers to NetWare operating system and services.
Do you see that language?
360
A Yes.
Q How does that language, the inclusion of that reference
in the excluded asset schedule, comport with your
understanding of what was intended to be excluded?
A It was Novell's desire -- our desire to not include any
core business of Novell like NetWare, so we excluded it in
this attachment.
Q Did you ever intend to sell Santa Cruz the NetWare
business?
A No.
Q Did you ever intend to transfer to Santa Cruz any of
the NetWare copyrights?
A No.
Q Do you see Roman numeral IV, Mr. Chatlos?
A Yes.
THE COURT: Mr. Normand, just for the benefit of
the jury, you maybe want to indicate which page of the
Exhibit A you are referring to, title of this, please?
MR. NORMAND: Thank you, Your Honor.
BY MR. NORMAND:
Q Do you recognize this Roman numeral IV, Mr. Chatlos, as
from schedule 1.1(b) of the APA?
A Yes.
Q And do you have an understanding of the role that
schedule 1.1(b) was designed to serve within the APA?
361
A It was intended to identify the assets which did not go
to SCO and for the most part address the NetWare business
that would not be transferred to SCO.
Q I'm looking at the top of the screen, Roman numeral
IV-A, which says NetWare and other Novell code contained in
UnixWare 2.01 and Eiger. Do you see that language?
A Yes.
Q Did Novell intend to transfer NetWare and other Novell
code contained in UnixWare to Santa Cruz?
A No, certainly not.
Q Do you see Roman numeral V entitled intellectual
property?
A Yes.
Q Do you see the reference to all copyrights?
A Yes.
Q Did Novell intend to exclude from the transfer the UNIX
and UnixWare copyrights?
A No, not at all.
Q Do you think this language can be read to refer to the
exclusion of copyrights for UNIX and UnixWare?
A This language, section V, is in the NetWare schedule.
So it was certainly intended to deal with just NetWare.
Q You think it says NetWare?
A It's in a Novell attachment, so it means NetWare. That
was the intent of the agreement.
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Q Was it your understanding, in your review of these
documents, that this referred to NetWare?
A Yes.
Q Did you have a chance to review this document before
the APA was signed?
A Yes.
Q Was it ever your understanding that this Roman numeral
V referred to the exclusion of UNIX or UnixWare copyrights?
A No.
MR. NORMAND: Section 1.6.
BY MR. NORMAND:
Q Mr. Chatlos, I'm going to direct your attention to
section 1.6 of the APA --
A Yes.
Q -- which is titled license back of assets. I won't
read this paragraph. Do you recall discussions of Novell's
intent regarding this prospect of a license back?
A Yes.
Q Can you briefly describe what the point of the license
back was?
A Since Novell was transferring the entire business to
SCO, there were groups within Novell that were using some of
the UNIX and UnixWare technology, both within labs and
within product that is distributed to customers. This
section covered Novell continuing to have the right to use
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some of that UNIX code and include portions in their binary
products. So it's licensing from SCO to Novell the right to
use the source code and create some limited derivative
works.
Q Did you have a view, during the course of your
negotiations, as to why it would be necessary for Novell to
have a license back?
A Well, we were instructed to transfer the entire
business to SCO, so Novell would have no rights to it, so
this section covered giving back rights to Novell.
Q Mr. Chatlos, we're going to bring you back to schedule
1.1(b), the excluded assets schedule, and we're going to
look at the old language of the APA, the language that was
replaced referring to all copyrights. To your
understanding, if Novell had retained the UNIX and UnixWare
copyrights, would it have needed a license back?
A Absolutely not.
Q Why not?
A Retaining the copyrights is tantamount to having rights
to modify the source code.
Q Now you will recall, Mr. Chatlos, we had just looked at
section 1.6 of the APA which referred to a license back. We
now have on the screen Exhibit 162 titled Technology License
Agreement. Do you recognize this document?
A Yes.
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Q Did you have an understanding at the time as to the
substance of this document?
A Yes.
Q Could you briefly describe that?
A Sure. This addressed that previous paragraph we saw.
This was a license back to Novell and the terms in which
they could use source code and make derivative works.
Q Do you recall whether Novell intended to agree to any
restrictions on the extent to which they could use this UNIX
and UnixWare technology in selling products?
A There are restrictions in this document.
Q Why?
A We didn't -- excuse me -- SCO didn't want Novell to use
the technology they are getting back from SCO to create
competitive offer. So the restrictions, if I remember
correctly, were the source code could be used in the labs
and they could create derivative works. And then the binary
versions of those could be used in their NetWare product or
other products, but only in a very minor way. It couldn't
be considered a primary component of the developing product.
Q Were those restrictions subsequently imposed in the
technology license agreement?
A Yes. They are in a subsequent section, I believe.
Q If Novell had retained the UNIX and UnixWare
copyrights, wouldn't it have been able to do anything it
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wanted to do with the source code?
A Exactly right.
Q Mr. Chatlos, we're going to bring up section 1.2 of the
asset purchase agreement which is titled payments, and we're
going to keep it on two pages for a second. Do you see
there are three subsections, (a), (b), (c), and then running
down to (d)?
A Yes.
Q How does this language comport with your understanding
and intent as to what consideration Santa Cruz was giving
Novell for this transfer of assets?
A I think I said earlier that there were three components
to Novell being compensated for selling the business to SCO.
Paragraph (a) reflects the stock aspect of that. Paragraph
(b) reflects the royalty payments that would go back to
Novell of those existing customers. And paragraph (b), the
second half, reflects the future royalty -- sorry, the
future share of royalty payments SCO would receive for sales
of UnixWare.
Q Did you consider both of those components part of the
consideration that Novell was receiving?
A All three of those components, yes.
Q Now you are aware of Amendment No. 1 to the APA?
A Yes.
Q Were you part of the negotiation or discussion at that
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time?
A More of the discussion, correct.
Q And how did that come about that you were involved with
that?
A After the APA was signed, Novell created -- we created
a transition team consisting of mostly Novell people --
Novell people, but it included some SCO people. The members
of this team were HR, development, support, so forth. The
team was to work on how do you now effect this agreement and
transfer the business to SCO.
Q What was your role with respect to that transition
team?
A I was an adviser to all the individual team leaders for
the subsections.
Q Do you recall when the APA closed?
A Yes.
Q What is a closing, by the way, in your experience?
A Very uneventful. It's where both parties sign the
agreements in front of each other. That's it.
Q It's like signing legislation into law?
A Yes.
Q Who was at the closing?
A I don't remember everybody, but on Novell's side, it
was Duff Thompson and myself. There may have been a lawyer
or two and maybe a banker.
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Q On this issue of Amendment No. 1 in your transition
work, did the issue of copyrights ever come up?
A No.
Q Was it ever suggested to you by anyone that Novell had
retained copyrights?
A Absolutely not.
Q In your transition teamwork, did you ever tell anyone
that Novell had retained the copyrights?
A No, I didn't. I didn't need to.
Q Why not?
A The whole business went. And when you are in the
software business, you understand copyrights are associated
with software.
Q Was it your intent to have the copyrights transferred?
A Without a doubt.
Q At the beginning of the negotiations?
A In the beginning and in the end.
Q And in the middle?
A In the middle, yes.
MR. NORMAND: Can we look at section 4.16.
BY MR. NORMAND:
Q We're looking, Mr. Chatlos, at section 4.16 of the
asset purchase agreement, and I take it you are familiar
with subsection (a)?
A Yes.
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Q There is reference to SVRX royalties in the third line.
Do you see that?
A Yes.
Q Did you have an understanding or intent as to what SVDX
royalties were and why they are referenced here?
A Yes. This was one of the compensation components I
mentioned earlier, and that is the royalty stream from the
existing licensees that SCO would collect and pay Novell a
substantial portion of.
Q Do you see subsection (b)?
A Yes.
Q Do you see on the third line there is a sentence that
begins in addition, at seller's sole discretion and
direction?
A Yes.
Q Buyer shall amend, supplement, modify or waive any
rights under, or shall assign any rights to, any SVRX
licensee to the extent so directed and in the manner or
respect by seller?
A Yes.
Q Did have you an understanding or intent as to what that
provision was intended to accomplish?
A Yeah. This is dealing with the binary revenue stream
mentioned in (a). And we were trying to give Novell the
flexibility to modify the payment terms of that binary
369
royalty stream so it could be accelerated if they wanted
more cash up front. So instead of the computer companies or
the resellers of the binary paying over time as they
distributed the product, Novell could get them to pay up
front, almost like paying off your house or paying off your
car.
Q Did you have an understanding at the time as to what an
SVRX license was?
A In this context, it was the binary sublicense agreement
and the associated schedule for each product.
Q And, again, simply as you can, you won't offend us,
what is the difference between a source code agreement or a
software agreement on the one hand and on the other hand
what you are describing as an SVRX license?
A There are three agreements that address the licensing
of UNIX. The first one is a software licensing agreement.
It gives the customer the right to modify it. Included in
that language is protection of trade secret and intellectual
property, so on and so forth. It doesn't address a
particular product, per se.
The second agreement is the software sublicensing
agreement. That gives the customer the right to make binary
copies and distribute binary copies. And it's the structure
in which they pay for those distributions.
THE COURT: Mr. Chatlos, you do have water right
370
there, if you would like to --
THE WITNESS: I'm going to put another cough drop
in. Excuse me.
There is a third component which is called a
schedule, and the schedule is associated with each specific
product. In that schedule are the fees. I believe it
includes where that source code existed. And that's it. So
the sublicensing fees and where the source code existed,
plus some up front fees for the source code.
Q What is sub about the sublicensing? Why sublicensing?
A I don't know. I wasn't involved in the original
definition of these agreements. But what you are doing is
making a derivative of a higher form, so it's sub to the
original source code.
Q Let me understand this. You have got whatever
entity -- and you worked at AT&T, the entity that owns the
source code; is that right?
A Correct. At one point, yes.
Q They enter into source code agreements with companies
who do what?
A They modify the source code.
Q After they modify that source code, what do they do
with the modified source code?
A First of all, they modified it to adapt it to their
needs. Then they would compile it down, which turns it into
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binary. Then they would put it on their computers, or sell
it to stand alone and sell it.
Q Then they sell this third level, sublicensing
agreement?
A Correct.
Q Now did you have a view at the time of the APA as to
whether Novell had the right to waive Santa Cruz's rights
under the source code agreements?
A No, that wasn't included in this agreement. Section
(b) is waiving rights under the binary side.
Q Why did you not intend for Novell to have the right to
waive Santa Cruz's rights in the source code agreements?
A The source code is really the intellectual property of
the business. If Novell had a right to waive that, it could
have potentially created SCO's business.
Q Last question on this topic. Why would that have hurt
SCO's business?
A Well, Novell could have changed the rights of a source
code licensee so they could distribute the product however
they wanted to. That wouldn't have been right for us.
Q So I lied. One more question on this. Was it Novell's
intent to secure for itself the right to waive any efforts
Santa Cruz might make to enforce its rights in the source
code agreement against a third party if that third party was
infringing the source code agreement?
372
A I heard part of it. I want you to say it again so I
can parse it.
Q The question is whether it was Novell's intent to
secure for itself the right to waive Santa Cruz's claims
against a third party that Santa Cruz thought was violating
the source code agreement?
A No.
Q Why not?
A It wasn't Novell's intent. Novell's intent was to
provide SCO to protect those source code agreements. It was
Novell's intent to allow Novell to modify the payment terms
of the binary license agreement such that it could
accelerate payment and get cash up front.
Q Mr. Chatlos, are you married?
A Yes.
Q How long have you been married?
A Ten years in October.
Q What is your wife's name?
A Laura.
Q When did you meet Laura?
A I first met her in 1991. She joined AT&T in the UNIX
group.
Q When did you begin dating?
A After I left Novell, when I went to AT&T.
Q So Laura has been working in the UNIX and UnixWare
373
business for about 20 years?
A Yes. She started at AT&T, went to USL, which is the
subsidiary, then went to Novell, then went to SCO through
this transaction to Caldera, then the current SCO Group.
Q So she's still at SCO?
A She is still at SCO.
Q Does she hold any stock in SCO?
A She owns very little stock. She probably owns a couple
hundred shares and some options, probably less than 8,000.
Q Is that of any material value to you?
A Most of them are underwater. The strike price is above
the current stock price.
Q Now if this lawsuit were to work out successfully for
SCO, would that represent any material benefit to you?
A No, not really.
Q Mr. Chatlos, when you first learned in the last few
years that Novell was claiming to own the UNIX and UnixWare
copyrights, what was your reaction?
A I was shocked.
Q Why?
A Certainly that wasn't the deal that we did, and I
thought it was not right to claim that when that wasn't the
deal.
Q To your view, did the claim have any foundation?
A Correct. Correct.
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Q Did it have any foundation to you?
A No, it didn't.
MR. NORMAND: No further questions, Your Honor.
THE COURT: Mr. Acker.
MR. ACKER: Thank you, Your Honor.
CROSS-EXAMINATION
BY MR. ACKER:
Q Let me start, Mr. Chatlos, where counsel left off with
you and your wife and your wife's stock ownership in SCO.
Let me just be clear, your wife works at SCO now?
A Correct.
Q She owns several hundred actual pieces of stock --
shares of stock?
A I think the number is around 200.
Q She also owns options, and it's several thousands
options; is that right?
A It's less than 8,000 at various strike prices.
Q So the jurors understand, an option is the ability to
buy a share of stock at a given price, right?
A Correct.
Q And the strike price is the price you've got to pay to
buy a share of stock, right?
A Correct.
Q So if you buy a share of stock at the strike price, say
it's a dollar, and the share of stock is actually trading at
375
$10, you made the $9 difference?
A Correct.
Q So if SCO would be successful in this litigation and
its stock price were to go higher than the strike price of
your wife's options, she could sell those and make money,
right?
A Correct.
Q So if SCO was successful in this case and that results
in SCO's stock price going up, your wife could make money,
right?
A Correct.
Q Now, sir, your tenure at Novell, I just want to be
clear on that. You left the company, sounds like, right at
the end of the year in 1995 or the first day of 1996?
A It was probably the first week of 1996, correct.
Q So really this deal sounds like the last thing you did
at Novell, correct?
A Yes.
Q And when I say this deal, your involvement was in the
original agreement that was approved by the board of
directors in September of 1995, right?
A Yes.
Q And then you also worked on this Amendment No. 1 that
was worked on between September of '95 and December of '95,
correct?
376
A Yes.
Q That was the end of your involvement, right?
A No. I was involved in putting together the closing
documents for the December signing. I didn't write them. I
made sure they were all done and prepared.
Q After the deal got closed in December, you were done
with the deal?
A Correct.
Q And no involvement in anything after that, correct?
A I'm sure I did some work, but certainly not major. I
mean I did work at Novell at that time.
Q You worked on no amendments to this agreement after
Amendment No. 1?
A Correct.
Q Now this deal took place a long time ago, right, 15
years?
A Yes.
Q And it's true, isn't it, that the first time that you
had reason to focus on the intent of the meaning of the APA
after 1995 was when you were approached by SCO's lawyers in
2004; isn't that right?
A Correct.
Q And so you did a deal in 1995, nine years pass, you are
on to other things, correct?
A Yes.
377
Q Working other places, doing other deals, right?
A Yes.
Q Then the lawyers for the plaintiff come find you in
2004 and you have a conversation with them, and that's the
first time you focused on what the intent of the deal was
for the prior nine years; is that right?
A Probably, yes.
Q Nine years is a long time, isn't it, sir?
A Yes, it is.
MR. ACKER: If we could bring up one more time
today the schedule 1.1 of the asset purchase agreement,
please.
BY MR. ACKER:
Q Now you would agree with me, sir, that if we look at
paragraph V of 1.1(b), excluded assets, this is the
paragraph -- this is the paragraph in the asset purchase
agreement that tells us what was the intellectual property
that was excluded, that is did not transfer from Novell to
Santa Cruz under the asset purchase agreement, right?
MR. NORMAND: Object to the form for reasons we
discussed previously.
MR. ACKER: Let me deal with that.
BY MR. ACKER:
Q As far as you knew, in 1995, September of 1995, this
paragraph, paragraph V of 1.1(b), was the section that dealt
378
with what intellectual property was excluded from the
transfer, correct?
A Yes.
Q And as far as you knew when you left the company at the
end of the year, it was still this paragraph in this form is
what told both parties what intellectual property was
excluded from the deal, right?
A Yes.
Q And that paragraph reads, the intellectual property
paragraph of what was not transferred, in A, all copyrights
and trademarks, except for the trademarks UNIX and UnixWare,
correct?
A Yes, but I read this in the context of the entire
schedule, page 1 and page 2, and I had in my mind the intent
of what we were trying to accomplish.
Q I'm trying to focus -- and I'll get back to that in a
sec. I want to focus on the words here.
You would agree with me, wouldn't you, sir, this
doesn't say all NetWare copyrights, correct?
A That's correct. This whole language does not say that,
correct.
Q What it says is all copyrights, correct?
A Correct.
Q Now do I understand your testimony to be because there
were other references to NetWare in schedule 1.1(b), you
379
somehow imported the word NetWare into this exclusion? Do I
have that right?
A That's the way I read it, correct.
Q Despite the fact that the word NetWare is not there?
A Not on this page. It's in the previous bullet points.
Q But when talking about what intellectual property was
excluded, there is no reference to limiting it to NetWare
copyrights, correct?
A Correct.
MR. ACKER: If we could go to 4.16(b), please.
BY MR. ACKER:
Q Now this is the paragraph -- there is a lot of language
in there. Let me see if I can boil it down. Section
4.16(b) is a section that Novell wanted in the agreement to
allow them to tell Santa Cruz they had to waive certain
rights in order to protect Novell's SVRX revenue stream; is
that fair?
A Yes, it was intended to protect Novell's SVRX binary
royalty stream.
Q It's your testimony this was limited to simply waiver
of rights regarding binary licenses; is that true?
A Correct.
Q Now can you show me in this paragraph where it says
binary licenses or it's limited to binary licenses?
A It doesn't say binary explicitly, but it's in a section
380
that deals with binary licensing.
Q So in this waiver provision it says buyer shall not,
and shall not have the authority to, amend, modify or waive
any right under or assign any SVRX license without the prior
consent of seller. It says any SVRX license, right?
A It says that, yes.
Q It doesn't say any binary SVRX license, correct?
A No. But, again, you have to take the context of the
section.
Q Would you think that the same context would apply to
4.16(a), that that is limited solely to -- the pass through
of revenues for SVRX licenses was limited solely to binary
licenses?
A It's limited to binary licenses for the most part. I
can't see the top.
Q Let's go back. Let's look at 4.16(a).
So if I understand your position, despite the fact that
4.16(b) doesn't say binary licenses, you are limiting it to
that because it's in this 4.16 paragraph; is that right?
A Well, no. Yes, the language should say -- says that,
but also I'm going back to the intent. The intent when we
were sitting down around the table was for SCO to collect
the royalties and pay Novell 95 percent of them, in
paragraph (a), and then, in paragraph (b), to allow Novell
to modify the payment terms of those sublicensees on the
381
royalty payments.
Q So, again, the contract doesn't expressly say that, but
you are relying on your memory of a deal you did 15 years
ago?
A Without a doubt.
Q Now your working relationship with Tor Braham and the
rest of the Wilson team on the asset purchase agreement was
such that the lawyers drafted the APA because you did not
have the legal background to draft a lot of the terms in the
agreement; is that fair?
A Not completely, no. There were other lawyers involved.
I don't know that Tor Braham drafted the original APA.
Q I'm really drawing a distinction from yourself and the
lawyers from Wilson. The lawyers from Wilson drafted the
language, correct?
A I don't believe so. I believe it was originally
drafted by lawyers from Novell.
Q And then the lawyers from Wilson took over; is that
right?
A Most likely, yes.
Q So you are remembering that the lawyers at Novell
actually drafted the language and then the lawyers from
Wilson worked on it after that?
A I think they worked on it to reflect the intent of the
business relationship.
382
Q So the lawyers at Novell and the lawyers from Wilson
worked on the language to reflect the intent, and that is
the words that are in the agreement, according to you, as of
September of 1995?
A Yes.
Q It's your belief that the actual language in the
agreement, as of September 1995, reflects the deal?
A Yes.
Q Because the language, as of September of 1995, reflects
the deal, in your opinion, there would be absolutely no
reason to want to modify that deal or alter that deal after
you left the company in January of 1996, correct?
A I don't know what they would do. I think it included
the deal. But just as we created Amendment No. 1, there may
have been things they discovered afterwards that they
wanted.
Q With respect to copyrights, you think it's clear as day
that the copyrights exclusion only applies to NetWare and
there would be no reason to change that language?
A I believe that was our intent. Whether the language
needed to be tweaked to reflect that, that's an opportunity
I'm not aware of, but that was the intent.
Q Is it your position that the actual words in the
contract that don't refer to just NetWare copyrights being
excluded, is it your belief that that language is
383
inconsistent with your belief of what the intent was?
A I think it's consistent. I've read it and I thought it
was consistent.
Q So it's your belief that the language of the agreement
is consistent with what you believe the intent was?
A As I read it, yes.
Q So given that, there would be no reason to want to
amendment the agreement after you left in January of 1996?
A I can't give a view on that.
Q I'm asking you your view on that?
A I don't know the circumstances that existed when I left
the company to come to a conclusion that they needed to
modify.
Q When you read the agreement and you read the words at
the end of 1995 and you saw that it excluded all copyrights
and it didn't limit it to NetWare copyrights, did you think
that language needed to be amended?
A Well, my thinking was the intent of the deal was to
completely transfer the business, including the source code,
the copyrights, everything, the agreements, the revenue
streams. And when I read it September 15th -- 13th, I felt
it covered that.
Q By the way, did you attend a board meeting in the
middle of September when the deal was approved?
A No.
384
Q Because you were not present at that board meeting, you
obviously don't know what was discussed, right?
A Correct.
Q It was the Novell board that had the responsibility or
had the authority to approve the deal, correct?
A Correct.
Q And you don't know what was communicated from the
lawyers, Larry Sonsini and others from the Wilson firm or
in-house lawyers from Novell about what the deal was,
correct?
A I don't know what was stated in the meeting, correct.
Q Because you weren't there and you don't know what was
stated in the meeting, you don't know what was in the minds
of the directors when they approved the deal, correct?
A No. I have an idea as a result of what happened after
the meeting, that it was in line with the intent of the
agreement.
Q But you weren't in the room?
A I was not in the room, correct.
Q So you don't know what was in the minds of the
directors who approved the deal?
A Correct.
MR. ACKER: That's all I have, Your Honor.
THE COURT: Mr. Normand, do you have anything
else?
385
MR. NORMAND: Very few, Your Honor.
REDIRECT EXAMINATION
BY MR. NORMAND:
Q Mr. Chatlos, do you recall being asked about meeting
with attorneys for SCO in 2004?
A Yes.
Q By that time had you met with attorneys for IBM?
A Yes.
Q And what did you tell them about this issue of
copyright transfer?
A The same thing I'm saying today, that we transferred
the entire business, and that included the copyrights.
Q Did they propose that you sign a declaration?
A They did want me to sign a declaration, correct.
Q What happened?
A Well, after our meeting they said they would write up a
declaration and send it to me for signature.
Q Did they do that?
A They did do that.
Q Did you sign it?
A No, I didn't.
Q Why not?
A It didn't reflect anything near my conversation.
Q Do you have a clear recollection of your intent on
behalf of Novell to transfer all of the UNIX and UnixWare
386
assets?
A Yes, I believe so.
Q And whether it's nine years ago or 15 years ago, would
you remember something as fundamental as Novell's intent to
keep the copyrights?
A That would have destroyed the value of the deal for
SCO. Of course I would have remembered that.
MR. NORMAND: No further questions, Your Honor.
THE COURT: Mr. Acker.
MR. ACKER: Nothing else, Your Honor. Thank you.
THE COURT: Mr. Normand, may this witness be
excused, again, meaning he need not worry about being
re-called?
MR. NORMAND: Yes, Your Honor.
THE COURT: Mr. Acker?
MR. ACKER: Yes, Your Honor. Thank you.
THE COURT: Mr. Chatlos, thank you. That means
you do not need to worry about being re-called in this case.
You may go about your business. I will advice you to please
not discuss your testimony with any other witness in this
case or in the presence of any other witness or communicate
your testimony to any individual who may report that, okay?
THE WITNESS: Okay.
THE COURT: Thank you.
Do you have a witness you can get done in ten
387
minutes?
MR. SINGER: I'm afraid not, Your Honor.
THE COURT: I kind of figured that would be the
answer.
Ladies and gentlemen, we'll recess, then, for the
afternoon. I will not repeat everything that you've been
told now for several days, but I'll briefly remind you of
the importance of you not making up your mind in any way,
even though you have now heard two days of opening
statements and testimony. And, again, I will stress that
you are not to discuss this case with anyone or allow anyone
to discuss it with you. You are not to read or watch or
listen to anything about this case, nor are you to allow or
to do any research on your own or anything similar to that.
We'll start tomorrow morning at 8:30. We'll be in
recess until then.
(Jury excused)
THE COURT: I'm curious, Mr. Singer, are we on
schedule as you contemplate?
MR. SINGER: We're a bit behind schedule, Your
Honor. We had hoped today to get through several of the
video depositions. That would mean we're about an hour and
45 minutes behind our schedule.
THE COURT: You will begin tomorrow with those
video depositions; is that correct?
388
MR. SINGER: We would begin with Mr. Messman's
video. To break up the day, we probably will put on
Mr. Davis, then --
THE COURT: As a live witness?
MR. SINGER: As a live witness, and then return to
the video depos after that.
THE COURT: All right.
MR. ACKER: Your Honor, if we could inquire, will
their be any live witnesses other than Mr. Davis tomorrow?
MR. SINGER: It's possible we would get to Bill
Broderick, but that would only be after a number of depos.
The order which we contemplate would be Mr. Messman,
Mr. Davis, then going back to the Mohan, Wilt and Michels
videos.
MR. ACKER: So Broderick and Maciaszek after that?
MR. SINGER: Broderick would be after that if
there was time on Thursday.
MR. NORMAND: There is a travel issue. He may not
be here this week.
THE COURT: Is that all you need, Mr. Acker?
MR. ACKER: If they will tell me more, I'd be
happy to --
THE COURT: Well, if you want to pursue that, I'll
let you do it out of my presence.
MR. ACKER: Thank you, Your Honor.
389
THE COURT: Counsel, we do not have any hearings
this afternoon, so you do not have to clear the desks unless
you want to.
We'll be in recess until 8:30.
(Whereupon, the trial was continued to Thursday,
March 11, 2010 at 8:30 a.m.)
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