Here's the transcript as text for day four of the SCO v. Novell trial that began on Monday, March 8, 2010 in US District Court in Salt Lake City Utah and ran for 15 days, Monday through Friday, for three weeks. The Honorable Ted Stewart presided. Day 4 was Thursday, March 11, 2010, and the witnesses on that day, by video deposition, were Jack Messman, Burt Levine, Alok Mohan, Doug Michels, and Jim Wilt. William Broderick then took the stand, live. I know. Lots of witnesses, but it's short snips from prior depositions mainly. Still, it feels like a long, long day. This is still SCO presenting its case. Novell's turn comes later, and Novell's lawyer, Sterling Brennan, in his opening statement had asked the jury to wait for the rest of the story from Novell before reaching any conclusions during SCO's presentation. I have to say though that one inescapable conclusion from the day is that SCO didn't hit any solid home runs, but it definitely got hit in the head with a couple of fastballs. I think Fibers.com has a perfect T-shirt for SCO's Day 4 witnesses. It says: "I reject your reality and substitute my own". It's quite a stubborn performance by one and all. Novell shows them the APA and amendments, and witnesses say it's not what they meant, not what they had in mind.
The transcript of this day is in three parts as PDFs:
Part 1 [Text with line numbers],
Part 2 [Text with line numbers] and
Part 3 [Text with line numbers], but if you prefer to jump directly on this page to the transcript as text without the line numbers, you can:
Part 1, Part 2, Part 3.
Here is Groklaw's earlier eyewitness report from the courtroom for that day. The day before, day 3, the witnesses for SCO were R. Duff Thompson and Ed Chatlos, and on the first day of testimony, day 2 of the trial, SCO's first witness was Robert Frankenberg, and on that day we also heard both sides' lawyers present opening statements, Stuart Singer and Brent Hatch for SCO and Sterling Brennan for Novell. Day 1 was jury selection. So that should orient you. Jack Messman is not testifying for SCO, by the way. They presented him as a hostile witness by deposition, and later he will arrive and testify in person. And there are more lawyers actively questioning the witnesses on this, day 4, as Novell adds Michael Jacobs of Morrison & Foerster, who up to now has interacted with the judge but not with questioning of live witnesses.
G. Gervaise Davis was scheduled to appear live for SCO, but SCO opens the day by saying they won't be calling him after all. The judge inquires why, and it leads to this hilarious exchange between the judge, SCO's lawyer Stuart Singer and Novell's lawyer Michael Jacobs:
THE COURT: ...
Was Mr. Davis the elderly gentleman who has been
sitting through trial?
MR. SINGER: Yes.
THE COURT: Is his health not good, is that the
problem?
MR. SINGER: He does have some health issues, that
was one factor that played a role in our decision.
THE COURT: Okay.
MR. SINGER: We looked at, though, the fact
that -- just to get us back on schedule, we concluded we
didn't need him.
THE COURT: I just hate for someone to suffer
through three days of trial and not get the reward of being
able to testify. Maybe he wouldn't deem it to be a reward.
MR. SINGER: I think he is disappointed.
MR. JACOBS: As am I, Your Honor.
I enjoy Jacobs' understated sense of humor. If you read Novell's Motion for Daubert Hearing to Disqualify G. Gervaise Davis III [PDF] and the Memorandum of Points [PDF], I think you'll agree with me that very likely Jacobs was as eager as can be to cross examine Mr. Davis, SCO's expert that Novell argued was not qualified to testify on the subjects planned for him, and that this is the nature of Jacobs' disappointment, that SCO won't let the guy testify after all and therefore he can't make mincemeat of his testimony. Mr. Davis's expert report includes this gem:18. Nature of Software Businesses. Any software business is primarily one of using and leveraging intellectual property rights into the creation and marketing of products based on software that is sufficiently useful to end users that they will purchase licenses to use it. In 1995, SCO purchased the entire UNIX software business, a long standing software development and licensing business, from Novell. Any? Any software business? Are you sure? I mean, Caldera, now calling itself SCO Group, was exclusively in the Linux software distribution business for years, and they did it under the GPL, which forbids charging for a license and permits use of the IP rights without payment at all. Novell is in the Linux business as well, and so is Red Hat. So you can imagine the depth of Mr. Jacobs' disappointment, and that's just one example of the fun we will now miss. Mainly what Mr. Davis was supposed to testify to was "whether, in his experience, ownership of the copyrights was necessary for SCO to operate its business", as SCO put it in trying to get the judge to let him testify at all. And he was going to say they did, which directly contradicts what Darl McBride told the SEC, namely that the company didn't need the copyrights to run its UNIX or UnixWare software business. So all things considered, perhaps Mr. Davis's testimony might not have been particularly helpful.
There are some Novell objections to the Levine deposition, so that is the first order of business. Novell believes SCO is about to violate the order [PDF] on the Novell motion in limine [PDF] on this witness, and the judge says to give him their arguments in writing, and he'll discuss it with the parties at the first break. Novell doesn't have everything in writing yet, it says, but the judge says to hand his law clerk what is ready and he'll see if he can rule or if he needs further argument. Burt Levine's deposition is Exhibit 14 in this collection [PDF]. And the part in dispute is found on page 161, line 11, of his deposition
through page 162, line 10, which begins on page 32 of the PDF. He was asked about Amendment 2, as to whether or not he knew what rights SCO needed with respect to the acquisition of Unix and UnixWare technologies, referencing the wording in Amendment 2, but the judge ruled [PDF] on Novell's motion in limine No. 19 earlier and decided that Levine can't testify about Amendment 2 if his opinion is based just on reading it, as opposed to personal knowledge: Defendant seeks to preclude testimony from Mr. Levine concerning Amendment No. 2. Mr. Levine was not involved in the negotiations or drafting of Amendment No. 2. However, Mr. Levine testified that Amendment No. 2 confirmed his understanding that the copyrights were
transferred to Santa Cruz. It is unclear what Mr. Levine bases this understanding on, though it appears that it is just upon his reading of Amendment No. 2. If this is the case, the Court finds that such testimony would not be helpful to the trier of fact and must be excluded. This ruling does not preclude Mr. Levine from testifying concerning the APA.
SCO's position in its opposition [PDF] to Novell's motion in limine was that this was admissable testimony because he was one of the witnesses with personal knowledge of the negotiators' intent, that it was "extrinsic evidence of the circumstances in which the APA and Amendment No. 2 was drafted; of the negotiations that occurred leading up to the execution of the APA and Amendment 2", and the appeals court had ruled that it wasn't only negotiators of the documents whose testimony was relevant. SCO lost that point, but the judge kindly opened the way for them to follow up with evidence of any personal knowledge, if there was any such. But they didn't, since in reality he has no personal knowledge. Novell's attorney Sterling Brennan references some pages of the deposition that we don't have, at least not in that exhibit, where Levine says that he didn't know anything about Amendment 2. So that's that. Messman Jack Messman testifies by deposition video that Novell did finally find a signed copy of Amendment 2, but only months after the original dispute with SCO surfaced. Legal didn't have one. They finally found it in Finance, which is odd. A dispute arises about SCO interrupting the deposition to introduce exhibits being discussed to the jury. Novell's lawyer, Eric Acker, objects, saying if SCO wanted to do that, it should have highlighted by its questions at the deposition the portions SCO now is wanting to highlight. But the judge overrules that objection, so SCO plays a bit of the deposition, then it stops and shows the exhibit on the screen to the jury, and then it picks up again with the video. Later, Novell follows the same process. What's good for the goose, and all. However, later, reading other exhibits, SCO tries to read only parts of them, and Novell again objects and is sustained, so SCO has to read the entire exhibits. Thus, Stuart Singer reads to the jury the wording of Amendment 2. Next he reads the press releases Novell put out beginning on May 28, 2003 and asks if Messman knew that the SCO stock went down 30% that particular day. Messman says he wasn't tracking the stock, but it went up and down a lot depending on what Darl McBride was saying in the marketplace. I'm puzzled by SCO's focus on a dip on a certain day. I realize they are trying to demonstrate harm for their purposes at trial, but why would SCO executives care so much about a temporary dip in the stock, unless they were playing the market themselves? I mean, were they planning on making personal killings from what they hoped would be a huge increase in the stock that one day? What kind of business is that? Messman is asked about the Wall Street Journal article SCO loves so much, titled “Novell to Cede Control of Unix to 2 Companies” dated September 20, 1995, and so we find out what the first two paragraphs said, because Singer reads them:
Novell Inc. today is expected to announce plans to
relinquish control of the widely used UNIX operating system
to Santa Cruz Operation Inc. and Hewlett-Packard Company.
The deal includes the purchase by Santa Cruz Operation of
most trademarks and intellectual property associated with
UNIX software, one person familiar with the situation said.
He 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. Singer then asks: Q Now if your position is correct, no intellectual
property transferred to SCO, right?
A That's correct. I don't think that's exactly Novell's position, although it's substantially true, in that the 1995 APA says the excluded assets were "A. All copyrights and trademarks, except for the trademarks UNIX and UnixWare." But the excluded assets schedule does include this language:I. Any asset not listed in Schedule 1.1(a) including without limitation any asset which pertains to NetWare which is not listed on Schedule 1.1(a) So if it's not on 1.1(a), it didn't transfer. That is how I read that wording. Here's what is listed in 1.1(a) regarding intellectual property:V. Intellectual property - Trademarks UNIX and UnixWare as and to the extent held by Seller (excluding any compensation Seller receives with respect of the license granted to X/Open regarding the UNIX trademark). So, to me, even if you could change the other language in the excluded assets section about copyrights by Amendment 2, this wording is still in SCO's way. Next Messman is shown a letter from Chris Sontag, then at SCO, to Chris Stone at Novell: Q Do you see that the proposed letter that SCO asked
Novell to sign in February 2003 would, quote -- would
clarify that, quote, all right, title and interest in and to
the copyrights associated with SVRX agreements held by
Novell at the time of the asset purchase agreements were
intended to be included in the included assets identified on
schedule 1.1(a).
A I see that, yes.
Q When you've earlier testified that it was your
understanding that what SCO was asking for was a transfer of
the copyrights rather than a clarification that those had
transferred, were you aware of this correspondence between
Mr. Sontag and Mr. Jones?
A No. I just became aware of it right now.
Q I take it, then, in the May 28th, 2003 press release,
which told the public that SCO had asked for a transfer of
the copyrights, you were not aware of the February 2003
correspondence that we're looking at which asked for
clarification that those had been transferred; is that
correct?
A That's correct. I've never seen this before. Steven Sabbath earlier used that same method, Allison Amadia later testifies, asking for a clarification, and he was told that the copyrights never transferred, so Novell wouldn't "clarify" that, and Amendment 2 resulted instead. So you would think SCO would know better than to describe the amendment as a clarification, but this is SCO. So here again SCO is using the word "clarify" as if that means they were not seeking to get the copyrights, and then using that word to imply that Messman was not truthful in describing it as SCO seeking a transfer. But from Novell's point of view, that's exactly what it was, regardless of what word SCO used to cloak the request. What copyrights did SCO require to exercise its rights under the APA, he is asked? What was his view in 2003? Answer: His view was that they didn't need any copyrights to do what was contemplated by the APA, namely "to evolve the code that sat on top of the SVRX
licenses". At that point Messman says something interesting with regard to UNIX and why they didn't need the copyrights on UNIX: My view is they would be selling the stuff that they
developed on top of UnixWare or SVRX, which they had
develop. Remember, my view is, they had to evolve the code,
they couldn't just take SVRX and sell it. They had to
evolve the code to something more that they then had the
intellectual property rights to....
SCO was buying the rights to develop -- further develop
the SVRX code to create a merged product, to create a
product that would bring the UNIX industry together
hopefully to better compete with NT. That was the business
that they were buying into. That is how he explains the waiver rights Novell had under the APA, and explained like that, it makes sense. Jim Wilt Next up is Jim Wilt's deposition video from 2007. He admits he was active in the APA negotiations at the beginning more so than at the end, and he also says that no one ever specifically mentioned copyrights in his presence at least so far as he can recall it. But that was his assumption and intent on behalf of Santa Cruz. And he believes the Technology License Agreement is consistent with his belief. I don't think it helps him to use the TLA, in that the
APA speaks about the parties doing that document and it says this: 1.6 License Back of Assets. Concurrent with the Closing, Buyer shall execute a license agreement under which it shall grant to Seller a royalty-free, perpetual, worldwide license to (i) all of the technology included in the Assets and (ii) all derivatives of the technology included in the Assets, including the "Eiger" product release (such licensed back technology to be referred to collectively as "Licensed Technology"). This matches what Messman testified to, that the whole idea was to create code on top of what they were getting from Novell, and of course Novell would want to be able to use that. And a careful lawyer would include language such as the first part to make sure there were no lawsuits over what was already written and what was future code. And by the litigation that we are watching, you can see why they try to think of everything to try to avoid litigation. But having said this, this is also the part where SCO's strongest argument is found, that Novell shouldn't need a license back of the assets transferred, if it retained the copyrights. If you have no prior knowledge of this litigation, it resonates as being at least logical.
Wilt also says that he doesn't think, from reading Amendment 2, and the APA that Novell has any right to waive any of SCO's IP rights or protections. Discussion on Burt Levine Deposition Dispute The jury is then excused, and the judge brings up the Levine deposition issue, as he said he would at the beginning of the day. He points to his order regarding that motion in limine as saying that Levine could only testify as to Amendment 2 if he had personal knowledge. Had SCO provided anything that could establish that point? SCO's lawyer Ted Normand honestly admits they didn't and they can't: We don't dispute
that we don't have a factual foundation that he was involved
in the drafting. We do think it would be relevant,
particularly in light of the sorts of questions that have
been asked of witnesses already. He was an in-house
attorney, and in effect the question is asking him, do you
have a view as to what copyrights are required. So this is like Mr. Davis opining about what copyrights are required. In effect, the SCO argument is, they're lawyers, so they can opine from reading a document. Except there is one important difference. Mr. Davis was a designated expert, and Levine isn't. So he's not allowed to opine on the law. He can only testify to things he personally knows about, and he wasn't involved in Amendment 2. So in essence, I take it that SCO dropped Davis and now are trying to use Levine to say what Davis would have. The judge wavers a bit, wondering what to do, and he decides he wants to take more time to think. Novell's Brennan says if they are going to bring uninvolved lawyers in to opine on the words in Amendment 2, he could bring in "a whole slew of people. I could invite a number of lawyers from Salt Lake to come in and offer that opinion." The judge catches the point, and then there is a 15-minute break. And when he comes back, after likely researching the point or conferring with his law clerk, the judge decides SCO can't play that portion of the Levine deposition. Alok Mohan Next up is the video deposition of Alok Mohan, who was President and CEO of Santa Cruz in 1995. He acknowledges, somewhat reluctantly, that he was involved only at a high level, not in the drafting or the negotiations. Significantly, he says he read the APA in 1995 before he signed it, and it was accurate. That's hurtful to SCO, in that their final story about the APA, after several others, turned out to be that rogue lawyers inserted the exclusion of copyrights, and here's the CEO at the time, as well as the President and a member of the board, saying he read the document and it reflected the parties' intent, which is exactly what SCO is claiming it didn't do. He goes on to say that he believed they bought everything from Novell, but that's exactly what the APA doesn't say, in that there is a schedule titled "excluded assets". He's then shown the same Wall Street Journal article SCO is using over and over, the
day before as well (and I address some other problems with that article in my coverage of Day 3), and even that article says that only "some trademarks" would transfer, and that means it was not a lock-stock-and-barrel transaction, which is what he's trying to say was his intention with this deal and what he thought it was. So his testimony is contradictory, especially because he then adds that Santa Cruz couldn't afford the SVRx revenue stream, so Novell retained that. He is then asked this funny question: Q I want to fairly characterize what you're saying, so
correct me if I'm wrong. Is it a fair characterization of
your testimony that you believe that Novell was retaining no
rights through this transaction, but that it was retaining a
revenue stream related to SVRX? He's highlighting that his answer makes no sense. Mohan instead of making more sense, given the chance, digs himself in deeper:
A It's not so much a belief, because I know that there's
documents that have a certain defined definition of what they
can and cannot do. My negotiation, my involvement, was that
it was -- we bought the business. And there were some aspects
of things, and I can't tell you what they were, to allow them
to protect the fact that the revenue stream -- that they get
paid. And -- but I can't tell you anymore than that.
Q You keep referring to documents that you could look at.
Are you referring to the contract?
A Yeah, I assume.
Q Okay. So if I wanted to know what rights Novell
retained, can I look at the contract and find out?
A You'll have to look at it.
Q Is it true that if I wanted to find out what rights
Novell did retain, I could look at the contract?
A I don't know that. Mr. Mohan by the end seems to have caught on to the implications of this train of questions, and the last thing he wants to say is that you can understand the APA by reading it. SCO's position is that it didn't reflect the intent of the negotiators, after all. I would guess the jury noticed his discomfort in answering a really simple question. I can't imagine what possessed SCO to want to play this part of the deposition.
You know what I'm feeling at this point? We're well into SCO's presentation of its case, the fourth day if you count opening statements by its lawyers, and so far, I haven't seen any home runs. We do see a measure of consistency, in that all the witnesses say it was their intent to transfer the copyrights, which to me is a warning sign, in that witnesses normally don't concur on all details if they are being honest. No one yet has provided anything beyond hopes and dreams and intentions about the copyrights, and at that 15 years after the fact. No one at the time said a word about copyrights, according to these witnesses. And they're SCO's witnesses. Their position, which isn't consistent with the words used in the APA, is that they didn't need to mention copyrights, because when you buy an entire business, you get them automatically. But then they add details like Tuxedo didn't transfer and the patents didn't transfer, and the revenue stream didn't transfer. So how is that the entire business? And if it isn't the entire business, quite aside from the excluded assets wording, you surely do need to itemize, I was always taught. If they were supposed to get the copyrights, they'd have to list them with some specificity, so everyone was clear what did and what didn't transfer, in any situation where only some would and some wouldn't transfer. After all, they listed Tuxedo with specificity and more than one witness claimed the excluded assets meant NetWare copyrights, the problem is, the words don't say that. Plus this was called an Asset Purchase Agreement, not a Sale of a Business. If you really buy an entire business, instead of some of the assets, you wouldn't expect them to use an asset purchase agreement in the first place. At least I wouldn't. So there are many questions in my mind about the SCO presentation. For another example, SCO's lawyer reads from the SCO press release dated September 20, 1995 about the deal, which is Exhibit 8 in this collection [PDF], and it says this: According to the
terms of the agreement, SCO will acquire Novell's UnixWare
business and Unix intellectual property. Well, but does that mean SCO will acquire only the UnixWare business but not the UNIX business, and some or all the UNIX IP but not the UnixWare copyrights? The press release is not helpful to SCO, because it isn't clear. They also tried to present it as a joint press release with Novell, but the judge eventually ruled it was not so. It was a SCO press release, and that detracts from its value too. Also I notice that it uses the future tense, so as far as that goes, I see Santa Cruz predicting what the deal would be, but they didn't consider it a done deal on the day after the APA was signed. The main contribution Mohan makes is his testimony about the IBM buyout in 1996, which Mohan didn't like, because Santa Cruz wasn't consulted before Novell did it. Novell didn't think that the terms of the APA required it to do so, only the reverse, which tells you a lot right there about what Novell at the time understood the deal to have been. But Santa Cruz threatened to sue Novell, so they did some new wording to avoid a lawsuit. An exhibit is shown to him, a letter dated April 19, 1996 to him from Robert Frankenberg about the matter. Unfortunately, it's a letter we don't have available, but they go on to discuss Amendment X, which we do have. At issue is whether Novell ever had waiver rights. Amendment X was amending IBM's 1985 agreement with AT&T, and it includes this in the Recitals section: AT&T Technologies, Inc. ("AT&T") and IBM entered into various software license agreements concerning the Software Product: UNIX System V, Release 3.2, which are Software Agreement SOFT-00015 as amended, Sublicensing Agreement SUB-00015A as amended, Software Agreement SOFT-00015 Supplement No. 170 as amended (or any other Supplements that pertain to prior versions or releases of the Software Product), and Substitution Agreement XFER-00015B (the "Related Agreements"). Novell acquired AT&T's rights under the Related Agreements. In an agreement between Novell and SCO dated September 19, 1995 (the "Asset Purchase Agreement"), SCO purchased, and Novell retained, certain rights with respect to the Related Agreements. So right there, it's clear that SCO's witnesses are simply wrong to describe the deal as the entire business transferring, lock, stock and barrel. It says in black and white Novell retained rights. I mean, how much can SCO ignore? Even if the APA was from rogue lawyers, here's a second agreement, one that both Novell and Santa Cruz signed, that also says Novell retained some of what it got from AT&T. So, it was not everything. Or was this written by rogue lawyers too and nobody noticed once again? See how silly? And so the hapless Mr. Mohan is done on direct examination, claiming that the deal was completely everything, just like your body is arms, legs, and everything. The fact that this is the second SCO witness to use a body analogy -- remember the "your head goes with you"? -- tells me that there is at least the suspicion that the lawyers planted that idea or the witnesses got together and shared their thoughts. So next Michael Jacobs has at Mr. Mohan, as played in the Novell portions of the deposition, and he gets him to state his opinion that the lawyers for both sides of the APA were good lawyers, that both companies were experienced in software transactions, and that the deal was an arms-length transaction. Mohan is asked if the contract wording matters, and he says it is "one of the most important things" to determine the terms of a deal and that businesses use contracts to make business decisions. He even says that if there are disputes down the road, you look to the contract as the "best evidence" of the terms. Jacobs shows him another press release, a Santa Cruz release dated December 6, 1995, the closing date of the APA. The release lists a planned series of releases of products looking forward as far as the year 2000, including a merged product to be released in 1997, demonstrating that SCO had indeed planned to build on top of the code it was getting from Novell, that that was the purpose of the deal. Then Jacobs hands him another press release about working with HP and Novell to create "a high volume UNIX OS with advanced network and enterprise services". Next Jacobs reads to him from the APA, the section titled "Consideration", which lists as "full payment" as being only 6,127,500 shares of stock and the buyer assuming the assumed liabilities. It doesn't list the revenue stream for UNIX or confirm any of the rest of the stories the witnesses have told for SCO about how the copyrights were paid for. Jacobs then asks him to show him in the asset purchase agreement what wording supports his belief that UNIX business transferred in its entirety to Santa Cruz. Of course, he can't, so he just restates that it's his belief. OK, Jacobs says, let me ask that again: Where can you point to anything that supports that belief? He says he would have to probably go through it line by line, but he's already stated in answer to a previous question that the APA does reflect their intent. So he's painted himself into a corner. Or more accurately, Jacobs has gotten him painted there. Next Jacobs asks him if he knew that Steve Sabbath had signed two declarations? Mohan in his declaration, Exhibit 6 in this collection [PDF], had stated under oath that he had read Sabbath's October 2004 declaration. But did he know that in an earlier one, Sabbath had said that Novell had retained significant rights? Tellingly, Mohan says: A: I -- I was not aware -- I'm aware of it now that there
was an earlier declaration, but not when I looked at the
10-04, and I do not know of any declaration after 10-04.
Q Are you aware that in Mr. Sabbath's other declaration he
stated that Novell retained significant rights after the asset
purchase agreement, including the Unix copyrights?
A: I just found out about the --
MR. NORMAND: Objection to form.
THE WITNESS: -- Previous declaration the last day
or so. How would Mohan have just found out in the last day or so? Who is telling witnesses what other witnesses might have said or done? Here's the October 2003 Sabbath Declaration [PDF], by the way, if you want to check it.
Jacobs points out that Sabbath said that the retained rights are in the excluded assets schedule, all copyrights and trademarks except for Unix and Unixware. Mohan says he doesn't agree with Sabbath's words, then. Next he's shown the proxy statement Santa Cruz sent to shareholders about the deal. Mohan admits it doesn't say in the IP description that SCO got the copyrights. Did anyone at SCO, Mohan or anyone, ever say to Novell, "We want the Unix copyrights"? He says he wouldn't know that, but he doesn't recall "any such". Doug Michels Next comes Doug Michels' video deposition which was taken in 2007. He tells us that he's bad on dates, but he was approached at some Unix Forum or other by Mike DeFazio about doing the deal. The transcript says Uniform, not Unix Forum, but let's assume that this is what it means. [PJ: A Groklaw member, xtifr, has a more likely assumption than mine, that it may be Uniforum, which does hold conferences. And for historians, here's a report on Unix.org of a 1998 UniForum conference, which is significant because it shows that Linux was already being used in business in 1998 -- for example by Ikea -- which is before SCO claims IBM made that possible some years later.] He can't recall the names of all the people involved in negotiating the deal. Asked about the legal people, all he mentions is Kim Madsen. But he recalls clearly that the deal was to get everything from Novell that Novell had gotten from AT&T. That's so obviously false, to me, in that the patents didn't go to them, as SCO has acknowledged, and the trademarks went to X/Open, etc., that I don't understand why SCO lets their witnesses say something like this over and over, when jurors are not stupid and they are bound to think of exactly what I'm thinking, which is that the testimony can't be accurate even if it were sincerely offered. He says he was involved in the Technology License Agreement too. But then Jacobs drills deeper, in the video:
Q I want to talk a bit about some of the subsidiary related
agreements that came along with the Asset Purchase Agreement.
Did you have any involvement in the negotiation of the
technology licensing agreement?
A Yeah. I tried to stay completely away from the actual
mechanics of the agreement and stick to who was getting what.
And what was in which piece of paper, I mean, I completely --
you know, had a great business development team. We had a
good legal team. You know, as long as they found the right
way to engineer the documentation to match what -- what we had
agreed at a business level needed to happen, you know, as to
which agreement did what, you know, that wasn't my job.
Q I take it then the answer is no, that you didn't have
involvement in the actual negotiation of the technology
licensing agreement?
A I don't know if I did or not. I had involvement in
what -- what we got or what they had or who did what, which
document it went into, I don't know.
Q Do you recall seeing drafts of the technology licensing
agreement?
A I saw stacks of paper on people's desks.
Q But do you have any specific recollection of --
A Did I read them?
Q Do you have any specific recollection of seeing drafts of
the technology license agreement?
A I'm sure they were in the stacks of paper on people's
desks that I saw, but I didn't read them. Now, I don't know about you, but if I'm a juror, at this point I'm saying to myself, "In other words, Mr. Michels was out to lunch, and nothing he says about the TLA has any meaning, because he left it to others to handle the details." He goes on and on like this, giving the same answer for the Operating Agreement [PDF]. "I have no memory specific to any specific agreement," the breezy Mr. Michels admits on the stand. Ditto for Amendment 1. Did he review any drafts, at least, even if he didn't involve himself in the process? Nah. He worked from term sheets: We always worked from term sheets. And term sheets are
things that lawyers don't write. They're simple. They're
easy to read. They're clear. They're in English. I reviewed
term sheets. Mr. Jacobs at this point is having too much fun, methinks. He asks who is "we"? And Michels says Mahon, Madsen, Geoff Seabrook and Steve Sabbath. Uh oh. He's just contaminated them too, if all they were using was term sheets. Michels then says that not only did SCO buy Unix, it bought UnixWare, as well as "SVR IV and
SVR III and SVR V". Here's his explanation of the TLA's purpose: A Yes. We wanted to make sure that that license didn't
give them any rights to go back into the Unix business or to
use that technology other than had incidentally perhaps crept
in. And so we -- we did effectively grant them rights to Unix
technology as necessary to protect them from any incidental
use of Unix inside of their existing products. Next he waxes poetic about copyrights. Software businesses are about IP, he says, and you don't buy software without the copyrights. It's so essential, he says, it's like "breathing oxygen". It's "in the water". "There's no way," he says, "that the deal could have happened without getting the copyrights." And yet the SCO Group arranged to sell some IP assets to Darl McBride not too many months ago, in February, and the proposed deal was written with some of the copyrights remaining with SCO. Darl was to license the rest, as you can see on page 3 of this part [PDF] of the deal's paperwork, the Source Code License Agreement, Exhibit B. So perhaps Mr. Michels' analogies were a bit over the top. One can do such deals, I deduce, and SCO today is willing to do them. The deal later changed to a higher price so as to convey the copyrights too, but deals can be either one way or another, and the sky doesn't fall in, despite the testimony of SCO witnesses and the unused expert testimony of G. Gervais Davis that it never happens. I know. SCO has always been in the Keystone Kops vein. What were they thinking, when they set up that deal? The cherry on top of Michels' testimony is his assurance that there was no break in Santa Cruz's patterns of putting its own copyright on the code. But the truth is, they didn't do that. We've demonstrated that on Groklaw already repeatedly, but you can do it for yourself if you have Unix or Unixware. Just look at the copyrights with your own eyeballs.
The court takes a break, and you may want to too. When they return, before they play the Novell cross examination part of the video of Michels, the parties' lawyers discuss if Troy Keller is on the witness list, and he isn't, so the lawyers agree to try to work it out to see if he can be a witness for SCO on the following day. He was a lawyer who worked on the Santa Cruz to Caldera deal in 2000 and 2001. So that's five or six years after the Novell/Santa Cruz APA, which he had nothing to do with. He read it. So it's another attempt to get a lawyer on the stand who wasn't at all involved in the actual deal opining on what the deal meant with regard to copyrights. I don't know why they didn't just put Davis on the stand. Here's Keller's declaration. I've always found it odd that he claims he read the APA and all the amendments back then, including Amendment 2. Yet in 2003 SCO claimed to have "discovered" Amendment 2 in an old file cabinet a month *after* suing IBM. How could they not know about it until then? I find that story impossible to believe, since it doesn't match this declaration, for one thing. Mr. Keller never did take the stand, although he was deposed in the middle of the trial in another room, and if you read that linked article about his declaration, you may think he's a very fortunate man to be able to avoid the MOFO team asking about all that, if I could do as thorough a job of debunking his declaration, and I'm just a paralegal.
Then they get back to playing the Michels deposition video, but now the parts that Novell wants the jury to see, like the jaw-dropping part where Michels admits he's never even read the APA. He's glanced at it, and he's "skimmed through little bits of it", he says, but he didn't read it back then and he hasn't read it now, and ditto for the TLA and the amendments. He's not a lawyer.
No kidding.
So, asks Jacobs, before you signed your declaration, you hadn't read the APA? Nope, says the genial and nonchalant Mr. Michels. So how would you know what the deal was? He'd call the lawyer. Besides, it was the Board's responsibility to scrutinize details. Heh heh. And yet, they didn't notice the "excluded assets" language? Hmm.
Burt Levine
So, after that amusing testimony, up comes the deposition testimony of Burt Levine, yet another SCO witness who had nothing at all to do with Amendment 2. He was an AT&T lawyer back in the '80s who went to USL when it was spun off in 1991. When Novell purchased everything from USL in 1993, Levine was there, and afterward he went to work for Novell. He was with Novell in 1995 for the deal with Santa Cruz, but only a few months, though, and then he went to work for Santa Cruz, at least by February 1, 1996. He views the excluded assets language in the APA as unclear, in that it seems to contradict what he thought the deal was, so maybe it was a "mutual mistake which wipes out any kind of an integration clause."
Nevertheless he admits, in passing, that you can exclude a copyright if you are transferring just "the physical manifestation of the asset"-- which is exactly what Novell says it did. He matches his testimony to all the others, claiming that the revenue stream was part of the consideration. That was the intent of the parties, but he admits it doesn't say that. But it's "inconceivable" that anyone would do this deal as written. He also testifies that in his time at Novell, he was impressed that "it was a very ethical company". That doesn't help SCO, I don't think, but that's what he volunteers, adding that they'd never hold back something the other side was entitled to. This is all happening during SCO questioning him at the deposition. And it's SCO wanting to play this for the jury. And again, I can't figure out why they would want to. Next, Novell plays the parts it likes. Michael Jacobs asks him what, as an experienced lawyer, the phrase "excluded assets" means. I know some of you hate lawyers already, so I hesitate to show you his answer, but here it is:
If you have a definition in the agreement of a
particular term, an asset means so and so and so and so and
so and so, usually you would put the exclusion right in that
same paragraph, which is my practice. I'm assuming, because
I don't know different, that this has got the same effect
that whatever an asset is, it does not include this.
I know what you're thinking, that your little sister could explain it in a straighter line than that. So can he, of course. Mr. Jacobs helps him out by asking if he agrees that it means "assets that are
not included in the purchase" and he admits that "as a matter of form that's true." He may not wish to support the words, let alone mouth them: it means Santa Cruz didn't get the stuff on the excluded assets list. Jacobs is unrelentingly moving his chess pawn forward:Q. -- assets, correct? In reading this, do you
understand that Novell is excluding all patents from this
asset transfer?
A. I understand what the agreement says, I
understand what the exclusions are in the document.
Q. Okay. And based on reading this exclusion in the
contract do you understand that all copyrights and
trademarks except for the trademarks UNIX and UnixWare are
excluded from this asset transfer?
A. No, I don't.
Q. You disagree with the language in this schedule;
is that right?
A. No, I don't disagree that these are listed here,
I disagree that in the context of this agreement that this
is, that this is the whole story.
Q. Based on what you're saying today, would you have
stricken this from the Excluded Asset Schedule?
A. You're asking me to say what I would have done, certainly that would have been something that went through
my mind, I don't know what I would have done.
But Mr. Jacobs knows. It seems Mr. Levine has forgotten something: Q. So I take it today 12 years after the fact, you
would strike this reference to all copyrights and trademarks
except for the trademarks UNIX and UnixWare; is that right?
A. Or would have tried to have the agreement
reformed or amended, yeah.
Q. You wouldn't have left it in, correct?
A. No, I wouldn't have left it in.
Q. In fact, Mr. Levine, you did review schedule
1.1(b) prior to the execution of this Asset Purchase
Agreement on September 19th, 1995, didn't you?
A. I don't recall. Check. Mr. Jacobs hands him an exhibit, a fax from Levine to Aaron Alter at Wilson, Sonsini dated September 18, 1995, the day before the APA was signed:Q. Turning to Page 2 you write a note to Aaron Alter
and it says, "Aaron: Attached are copies of the following:
A suggested markups of certain pages in Schedules 1.1(a) and
1.1(b)." Do you see that?
A. Yes. So he had his opportunity to change the excluded assets language in 1.1(b) back in 1995 so as to add copyrights to the included assets list. Let's see what he did:
Q. And then do you see you've made some comments on
Roman V relating to intellectual property?
A. Yes.
Q. Okay. And you made one change adding the phrase
"and to the extent" in between the phrase "trademarks UNIX
and UnixWare as," and the phrase, quote, held by seller, do
you see that?
A. I see it.
Q. You left in place "trademarks UNIX and UnixWare"
as a type of intellectual property to be an included asset;
is that right?
A. Yes.
Q. Okay. And you did not add any other types of
intellectual property to this list of included assets, did
you?
A. No.
Q. You didn't add copyrights?
A. Not as a specific item, no.
Q. Okay. You did not add UNIX copyrights?
A. No.
Q. You did not add UnixWare copyrights?
A. No.
Q. You did not add patents?
A. No. And here's checkmate for Mr. Levine:
Q. And do you see that this is your markup of a
portion of Schedule 1.1(b) of the excluded assets?
A. That's what it appears to be, yeah.
Q. And you actually reviewed the Intellectual
Property section of the Excluded Assets Provision of
Schedule 1.1(b) before the Asset Purchase Agreement was
executed on September 19th, 1995; isn't that correct?
A. Yeah. Yes.
Q. And specifically looking at and commenting on
intellectual property you deleted a reference to patent
licenses, do you see that?
A. Yes.
Q. Okay. And do you see that in reviewing a draft
Schedule 1.1(b) prior to the execution of the agreement you
specifically looked at and commented on the exclusion of all
copyrights and trademarks except for the trademarks UNIX and
UnixWare?
A. Yes.
Q. Okay. And do you see that you made only one
comment on that line item?
A. Yes.
Q. Okay. And the comment that you added was at the
very end a phrase, quote, as and to the degree held by
Seller, quote; is that right?
A. That's true.
Q. Okay. When you looked at the Excluded Asset
Provision prior to the exclusion of the Asset Purchase
Agreement, you left in tact the exclusion of all copyrights
and trademarks except for the trademarks UNIX and UnixWare;
isn't that correct?
A. Yes.
Q. And you also left in the exclusion of all patents
as being a transferred asset; isn't that right?
A. Yes.
Q. And again you passed your comments on to the
outside lawyers of Wilson Sonsini who were representing
Novell in the negotiation and drafting of this contract
between Novell and Santa Cruz, correct?
A. That's correct.
Q. And your inclusion of "all copyrights and
trademarks except for the trademarks UNIX and UnixWare" in
the Excluded Assets provision of Schedule 1.1(b) was also
transmitted to Santa Cruz during the negotiations, correct?
A. Okay. My -- inclusion it wasn't modified "all of
the copyrights and trademarks," yeah.
Q. You did not modify the line item "all copyrights
and trademarks except for the trademarks UNIX and UnixWare,"
correct?
A. No.
Q. And so when your comments on Schedule 1.1(b) were
transmitted to Santa Cruz the line item "all copyrights and
trademarks" was included as an excluded asset, correct?
A. It was included.
Ta da! The masterful Mr. Jacobs at work. Trapping a fellow lawyer in his own words is very, very hard to accomplish, but here he has done it. And that isn't even the worst for Levine, because Jacobs now reads an email Levine sent to Chatlos in which Levine wrote:
My reading of the Asset Purchase
Agreement is that while we would have the right to direct
SCO to offer HP licenses on any terms we choose with respect
to any SVRX products that HP needs to carry on the Rhine
River work, it is not clear whether we can restrict SCO in
the terms they can offer HP for UnixWare licenses for this
purpose. Do you think we should try to cover by amendment
that at least with regard to HP, we should have the right to
specify the terms for UnixWare licenses as well?
This November 16, 1995 email is from the man who has just testified on the stand under oath that his understanding of the APA is that Novell had no right to waive. And yet back in the day, he understood it to mean the very opposite, that Novell had the right to direct SCO on any terms it chose with respect to any SVRx products. I can just imagine Mr. Levine slinking off the stand. William Broderick And then finally a live witness, our final one of the day, Bill Broderick of The SCO Group takes his place. Earlier, in 1991, he was with USL, managing the sales operations, until Novell bought the business, and then he went to Novell but still working on licensing source code. Then when Novell sold, he went to Santa Cruz in 1995. He was still licensing source code, but Santa Cruz, he tells us, had a binary product also. Broderick informs us that it was in fact Burt Levine who drafted the notice letter from Novell, lettings customers know of the transition. And then they had to get a second letter done for companies that had signed contracts with Novell, to get their approval for the assignment. SCO shows an exhibit, the latter type of letter, and Ted Normand reads from it:
As you
may know, Novell transferred to The Santa Cruz Operation,
Inc., SCO, its existing ownership interest in UNIX
System-based offerings and related products as listed in
Attachment A of this letter "collectively Transferred
Products." Broderick testifies that to him that matches his lock, stock and barrel understanding of the deal. But you can see with your own eyes, it doesn't say that. It says the ownership was going to transfer on the *products*, and it is silent on copyrights. This is the famous Prentice Hall letter [PDF] that you may recall from Darl McBride's testimony, or his attempt to use it in his testimony, at the first SCO v. Novell trial in 2008. As I explained at the time, AT&T and Prentice Hall had done a book deal in 1986, and this letter is about that. But it says nothing about copyrights, only ownership of the products, which is what SCO did get, the physical master tape and boxed stuff. And look at the RE part of the subject of the letter:RE: December 17, 1986 Publication Agreement, as amended, now in effect between Novell, Inc. ("Novell") and Prentice-Hall, Inc. ("Prentice-Hall") As you can see, this letter was not about software or copyrights. It was about a publication agreement from 1986, and it was letting Prentice Hall know it makes sense going forward to deal with SCO and that Novell represents that SCO has undertaken in writing to assume the obligations, and we know from the APA that contracts did transfer. He then states that his licensing work was exactly as it had been at Novell, just that they added licensing also binary products. And then Normand shows him the AT&T-IBM agreement, and just as they begin to discuss it, the judge indicates it's time to end for the day. Thank heaven. On day 5, Broderick will come back, and then Ty Mattingly and John Maciaszek are promised, plus the videotaped deposition of Maureen O'Gara. That should be a hoot. The parties may need to come in early to discuss further the Keller matter, if they can't resolve it in a meet and confer, and with that the day comes to an end. But here's the bottom line impression I get so far: that all of
SCO's evidence *almost* proves what it wants to prove, but not quite -- it never seems to go all the way to a home run. Housekeeping After the Jury Leaves: Mentioning Prior Trials and Orders After the jury leaves, perhaps pondering that very thing, the lawyers take up some matters, the most important being this one, raised by Novell's Michael Jacobs, regarding the issue of the court's prior ruling that neither side mention prior trials and rulings. But Jacobs feels that SCO has opened a door: Mr. Jacobs: ... We think that there was a quite significant door
opening event yesterday and in opening statements. And I
just want to pull up my notes on this. The topic is the
admissibility or instructions to the jury of what happened
during the course of this litigation over the past several
years.
The court's prior ruling and strong indication was
that the court was reluctant to have the jury hear about
that. And we understand the court's reasoning in that
regard. The door opening event is that in examining
Mr. Duff Thompson yesterday, Mr. Singer asked him what we're
going to colloquially refer to as the "to this day"
question. He asked Mr. Thompson, isn't it true that to this
day Novell is publishing the allegedly slanderous statements
on its website? That was not inadvertent because three
times in SCO's opening statement the "to this day" comment
was made as well. SCO argued to the jury "to this day
Novell is publishing these statements." Well that places
into question Novell's continuing basis for making the
statements for not taking down, I suppose, the statements
from the website. And, of course, Novell's continuing
intent is heavily informed by the rulings that have been
received over the course of the past several years.
What we propose to do is crystalize this in writing.
We would -- we realize it is something that the court has
given this whole question, that the court has given a lot of
thought to this, so we would like to submit something
tomorrow. Maybe give SCO until the first thing Monday or
something like that. It is -- it is not urgent that the
jury be informed of this, but I think both sides should know
where this issue would fall out going forward.
THE COURT: Okay. Your point is well taken and I
would request that you put it in the form of writing with a
specific request for SCO to respond.
And after that, SCO's Stuart Singer mentions there are some disputes regarding the upcoming O'Gara deposition. The judge says to put it in writing. It's easier for him to read it in advance before he hears oral argument. Singer agrees to do so by "this afternoon", and with that the trial day is finally over.
Whew.
This is our text version without line numbers, for readability, particularly for those who depend on screen readers. But we also have a text version with line numbers, to match the PDF filed with the court. For transcripts as text *with* line numbers for the rest of the days of the trial, click on the date in this calendar that interests you. Eventually, we'll do a calendar for the text versions without line numbers as well. You'll find all the PDFs for the entire trial there as well, so you can verify the text versions for every day:
**********************************
390
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 11, 2010
Jury Trial
REPORTED BY: Patti Walker, CSR, RPR, CP
[Address] Salt Lake City, Utah [Zip]
391
A P P E A R A N C E S
For Plaintiff: Brent Hatch
HATCH JAMES & DODGE
[Address]
Salt Lake City, Utah [Zip]
Stuart Singer
BOIES SCHILLER & FLEXNER
[Address]
Fort Lauderdale, Florida [Zip]
Edward Normand
BOIES SCHILLER & FLEXNER
[Address]
Armonk, New York [Zip]
For Defendant: Sterling Brennan
WORKMAN NYDEGGER
[Address]
Salt Lake City, Utah [Zip]
Eric Acker
Michael Jacobs
MORRISON & FOERSTER
[Address]
San Francisco, California [Zip]
392
I N D E X
| Witness | Examination By | PAGE |
| Jack Messman Deposition | | 397 |
| James Wilt Deposition | | 440 |
| Alok Mohan Deposition | | 455 |
| Douglas Michels Deposition | | 488 |
| Burt Levine Deposition | | 515 |
| William Broderick | Mr. Normand (Direct) | 541 |
|
| EXHIBITS RECEIVED INTO EVIDENCE: | |
| Plaintiff's 94 | | 404 |
| Plaintiff's 407 | | 407 |
| Plaintiff's 96 | | 411 |
| Plaintiff's 105 | | 416 |
| Plaintiff's 180 | | 470 |
| Defendant's J-10 | | 485 |
| Defendant's X-3 | | 532 |
| Defendant's I-5 | | 539 |
| Plaintiff's 580 | | 550 |
| Plaintiff's 4 | | 556 |
393
SALT LAKE CITY, UTAH; THURSDAY, MARCH 11, 2010; 8:30 A.M.
PROCEEDINGS
THE COURT: Good morning.
Do we have anything before we bring the jury in?
MR. SINGER: I don't believe so, Your Honor. I
did want to note that we have decided not to call Mr. Davis,
so we simply have depositions today. We have five
depositions lined up, four of them are ready to proceed. On
the fifth one, there are two objections, which perhaps at a
break could be resolved. But other than that, we have all
depositions for today all set ready to go.
THE COURT: All right.
MR. BRENNAN: Your Honor, just on that later
point, my impression is the deposition that Mr. Singer has
referenced is the deposition of Mr. Levine; am I accurate?
MR. SINGER: Yes.
THE COURT: The one over which there is dispute.
MR. BRENNAN: If the Court would like, we could do
it at a break. On the other hand, I don't think this issue
has been properly or timely tendered to the Court in line
with the instructions you gave us before. So if you want to
do it on the fly, we can do that.
THE COURT: Is there anything in writing that I
can look at during the break?
MR. SINGER: We can give you a copy of the
394
transcript. The objection is to two passages.
THE COURT: So you are objecting to something
designated by defendants?
MR. SINGER: I think the other way around, they
are objecting.
MR. BRENNAN: The very short version, without
trying to argue it now, is we believe this is contrary to
the motion in limine on this witness. I think the express
terms of the motion in limine would prevent this. There are
some other problems with the question and answer.
THE COURT: If you would give me what you have in
writing and I'll try to look at it at the first break and
decide whether I need argument or whether or not I can rule.
MR. BRENNAN: I'm sorry. I had my shirt sleeve
tugged.
THE COURT: I just said I would like to look at
what you have in writing and I'll decide whether or not I
need further argument or whether or not I might be able to
decide. You are correct that the timing on this is not what
the Court had requested. I don't want to waste trial time
either.
MR. BRENNAN: What we have at this juncture, Your
Honor, we have Your Honor's motion in limine, we have the
testimony that's at issue, we have the other testimony that
formed the basis for the Court' motion in limine. What we
395
don't have is a formal written position on that.
THE COURT: I think I should be able to discern
whether I need it from what you have. If you would just
give that to Mr. Copeland right now.
MR. SINGER: Just for the record, the issue
concerns the highlighted portion of page 161, line 11,
through page 162, line ten of Burt Levine's deposition.
MR. BRENNAN: Thank you.
Also for the record, Your Honor, what I will be
tendering does have our handwriting. I hope that's not
offensive to the Court. But this is the Court's motion in
limine with the highlighted portions, and also from the same
deposition the witness's testimony essentially saying he
didn't know anything about Amendment No. 2. That page
referenced is page number 190, lines 11 through 22.
THE COURT: All right.
MR. BRENNAN: Thank you, Your Honor.
THE COURT: Thank you.
Counsel, if there is nothing else, I'll have Ms.
Malley bring the jury in.
Was Mr. Davis the elderly gentleman who has been
sitting through trial?
MR. SINGER: Yes.
THE COURT: Is his health not good, is that the
problem?
396
MR. SINGER: He does have some health issues, that
was one factor that played a role in our decision.
THE COURT: Okay.
MR. SINGER: We looked at, though, the fact
that -- just to get us back on schedule, we concluded we
didn't need him.
THE COURT: I just hate for someone to suffer
through three days of trial and not get the reward of being
able to testify. Maybe he wouldn't deem it to be a reward.
MR. SINGER: I think he is disappointed.
MR. JACOBS: As am I, Your Honor.
(Jury present)
THE COURT: Good morning, ladies and gentlemen.
Earlier in the trial it was explained to you what
a deposition is. And today the witnesses that you will be
hearing will all be by way of video depositions, depositions
that were taken and videos were made of them. One of
them -- I believe the first one will be Mr. Messman.
Is that correct?
MR. SINGER: That's correct, Your Honor.
THE COURT: I think I should indicate to the jury
that he will be called as a live witness later in the trial,
but plaintiffs wanted to put this part of his deposition
before you earlier in the trial than he will be available.
So you will hear from him again.
397
Mr. Singer, with that introduction, if you would
like to go ahead, please.
MR. SINGER: Thank you, Your Honor.
We call, through deposition, the deposition of
Jack Messman that was taken in Boston, Massachusetts on
February 7th, 2007.
(Jack Messman Deposition)
Q I would like to begin with your background. When did
you join Novell?
A I've been associated with Novell since -- I think it
was 1981. I was a member of a venture capital firm called
Safeguard Scientifics, and we had a significant investment
in Novell, which was called Novell Data Systems at the time.
And it was a hardware manufacturer manufacturing a PC disk
drive and a printer. And we decided to change the strategy
of the company in '81 because the competitors' products were
significantly lower. So I became CEO for about two years
and turned the company into a software company. I then
hired Ray Noorda as my replacement, and other than a brief
period I've been on the board of Novell since then. Then in
2001 Novell acquired Cambridge Technology Partners, where I
was the CEO, and after the merger I became the CEO of the
combined companies. And my predecessor at Novell, Eric
Schmidt, left to become CEO of Google.
Q Did you have any personal involvement in the
398
transaction by which Novell sold certain assets to Santa
Cruz?
A I was a director of the company at the time. Other
than that, I had no personal involvement.
Q So as a director -- do you recall if that transaction
required board approval?
A Yes, it did.
Q And you approved the transaction; is that correct?
A The board approved the transaction.
Q Other than considering and approving the board, at the
board level, you had no other involvement in the negotiating
of the asset purchase agreement and other documents related
to that transaction; is that fair?
A Yes.
Q This is Exhibit 1, which has previously been marked,
and it's the asset purchase agreement between Santa Cruz
Operation and Novell dated September 19, 1995.
Have you ever read this agreement from cover to cover?
A Yes.
Q When did you first do so?
A I would say it was in 2003.
Q Can you be more exact?
A I would say it was after SCO raised certain issues in
the marketplace.
Q Well, more precisely, do you recall if you had read the
399
asset purchase agreement prior to a press release which was
issued by Novell on May 28th, 2003?
A May 28th. I think that's the press release in response
to a letter that Darl sent me from SCO, and I probably
didn't read it. I did glance at it, but I didn't study it
in-depth until sometime after that.
Q Do you recall ever having a discussion with anyone
prior to May 28th, 2003 on what was intended by the asset
purchase agreement?
A No.
Q That would include, then, by definition, the
individuals who had been involved in negotiating the deal
and drafting the documents back in 1995?
A Yes.
Q You never spoke with them prior to May 28th, 2003?
A Yes.
Q About the intent of the asset purchase agreement. Did
you have any personal involvement in the negotiation of
Amendment No. 2 to the asset purchase agreement?
A No.
Q Did you have any involvement with the drafting of
Amendment No. 2?
A No.
Q Were you surprised to learn of the existence of
Amendment No. 2?
400
A Yes.
Q You had not previously seen it in the course of your
work at Novell?
A I had not seen a signed copy.
Q Had you seen an unsigned copy?
A Yes.
Q When did you see an unsigned copy of Amendment 2?
A It was just prior to the conversation that I had with
Darl in early June.
Q My question precisely is: Did you take certain steps
to determine whether Novell had executed Amendment No. 2?
A Yes.
Q Did you determine whether or not Novell had executed
Amendment No. 2?
A Ultimately we did.
Q How much time elapsed before you made that
determination?
A My recollection is that we found our version of the
signed copy a couple months after Darl sent me a signed
copy.
Q Is it true that Novell had in its possession at all
relevant times in 2003 a signed copy of Amendment No. 2?
A No. It was only after Darl sent it to me that we had a
signed copy.
Q Did you subsequently find a signed copy in Novell's
401
files?
A A couple of months later we did.
Q Did you have any reason to believe that that copy was
not in Novell's files throughout the period in question, say
back from the beginning of 2003?
A I don't know where -- we didn't know where it was, and
we looked in all the normal spots, and ultimately we found
it in the finance files rather than in the legal department
or the contracts department.
Q So let me see if I can just clarify this point. You
had Amendment No. 2 in the finance department at Novell,
correct?
A Yes, that's where it was found.
Q You have no reason to believe that it wasn't in the
finance department of Novell say throughout the year 2003?
A I have no reason to believe that, right.
Q It's just you weren't aware that it was in those files?
A I was not aware of it.
Q Do you know if others at Novell were aware that
Amendment No. 2 was in fact signed and in the finance
department files?
A To my knowledge, nobody knew that we had a signed copy
of Amendment 2.
MR. SINGER: Your Honor, at this point we would
like to put Amendment No. 2, which is in evidence as part of
402
SCO Exhibit No. 1, before the jury, which is what the
witness is looking at in the deposition.
THE COURT: Any opposition to that?
MR. ACKER: I think the deposition should just be
played as it is, Your Honor, as opposed to interjecting
exhibits throughout it.
MR. SINGER: Your Honor, the questioning is about
the exhibit. The witness has the exhibit before him. The
exhibit is in evidence. It's just the jury following the
deposition. What we propose to do is put the exhibits on --
certain exhibits which we would move into evidence, if they
have not already been admitted into evidence -- this one is
in evidence -- and ask that certain portions that are
relevant be blown up, published to the jury, then taken down
and continue with that passage of the deposition, as we
would do if the witness was here at trial.
MR. ACKER: If they wanted to do that and
highlight the deposition that way, they should have asked
questions at the deposition to highlight those portions of
the exhibit as opposed to this sort of presentation.
THE COURT: Mr. Acker, I believe Mr. Singer is
correct. If Mr. Messman was here, this would have been the
appropriate time to allow the publishing. So the Court will
permit it.
MR. SINGER: Mr. Calvin, could you blow up -- what
403
is, for the record, before the jury is Amendment No. 2,
which is part of Trial Exhibit SCO 1, and would ask if you
could blow up the first part, section A. From the top down
to section A, highlight that section.
May I read this into the record?
THE COURT: Go ahead and read it into the record.
MR. SINGER: A, with respect to schedule 1.1(b) of
the agreement titled Excluded Assets, section V, subsection
A shall be revised to read: All copyrights and trademarks,
except for the copyrights and trademarks owned by Novell as
of the date of the agreement required for SCO to exercise
its rights with respect to the acquisition of UNIX and
UnixWare technologies. However, in no event shall Novell be
liable to SCO for any claim brought by any third party
pertaining to said copyrights and trademarks.
I would like to resume with the playing of
Mr. Messman's deposition.
THE COURT: If you would, please.
Q If we turn to Amendment 2, which is also in front of
you.
A Yes.
Q If you'd look at section A. Do you see it refers back
to a schedule of excluded assets, and it states that, all
copyrights and trademarks, except -- and this would be an
item of excluded assets, you understand that, correct?
404
A Yes.
Q You understood that when you read this in 2003 for the
first time?
A Uh-huh.
Q This was modifying the assets that Novell got to keep
under the agreement?
A Yes.
Q It would be all copyrights and trademarks, except for
the copyrights and trademarks owned by Novell as of the date
of the agreement required for SCO to exercise its rights
with respect to the acquisition of UNIX and UnixWare
technologies. Do you see that?
A Yes.
Q I would like to show you what --
MR. SINGER: We would like to, at this point, put
before the jury the exhibit, which is the letter to
Mr. McBride dated May 28th, 2003. And I thought I moved
this into evidence previously. This would be SCO Trial
Exhibit 94.
I would like to move Exhibit 94 into evidence at
this time.
THE COURT: Mr. Acker.
MR. ACKER: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 94 was received into
405
evidence.)
MR. SINGER: If I could similarly publish this to
the jury in the same fashion.
THE COURT: I'm assuming that this letter is now
going to be testified to by Mr. Messman, that's why we're
doing this; is that correct?
MR. SINGER: Yes. This is now going to be
discussed.
Mr. Calvin, can you go down to the second page,
page 2, and the last paragraph.
This is from the letter of May 28th, 2003, from
Jack Messman to Darl McBride. This paragraph reads,
importantly, and contrary to SCO's assertions, SCO is not
the owner of the UNIX copyrights. Not only would a quick
check of U.S. Copyright Office records reveal this fact, but
a review of the asset transfer agreement between Novell and
SCO confirms it. To Novell's knowledge, the 1995 agreement
governing SCO's purchase of UNIX from Novell does not convey
to SCO the associated copyrights. We believe it unlikely
that SCO can demonstrate that it has any ownership interest
whatsoever in those copyrights. Apparently, you share this
view, since over the last few months you have repeatedly
asked Novell to transfer the copyrights to SCO, requests
that Novell has rejected. Finally, we find it telling that
SCO failed to assert a claim for copyright or patent
406
infringement against IBM.
Please continue with the deposition.
Q -- has previously been marked as Exhibit 1012, which is
a letter from you to Mr. McBride dated May 28th, 2003. Is
this a letter which was sent by Novell -- in fact, sent by
you as CEO of Novell to Mr. McBride, who was the president
and CEO of the SCO Group?
A Yes.
Q Did you approve this letter before it was sent?
A Yes.
Q Do you recognize that in this letter you made the
statement that appears in paragraph -- the last paragraph on
page 2, quote, SCO is not the owner of the UNIX copyrights;
is that correct?
A Yes.
Q At the time when you stated this to SCO, had you fully
reviewed personally the entire APA?
A I think I had at this time.
Q You had not been read -- in fact, you were not aware of
Amendment No. 2?
A That's right.
Q At the time you made this statement on May 28th, 2003,
you had not spoken about the intent of the APA with any of
the individuals who had previously been at Novell and had
negotiated that deal or drafted those documents, correct?
407
A I did not talk with them about the intent. I only knew
what the agreement said.
Q Had you instructed either Mr. Stone or anyone else to
go back and speak with the people who had actually
negotiated the transaction on behalf of Novell and see what
was intended with respect to the transfer of copyrights?
A I would assume that they would do that as a normal
course of their work.
Q But you never made such an express instruction?
A I never instructed them to do so.
Q I would like to show you --
MR. SINGER: At this point, I would like to move
into evidence SCO Exhibit 525, which is the press release
which published the May 28th, 2003 letter.
MR. ACKER: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 525 was received into
evidence.)
MR. SINGER: I would like to publish this in the
same fashion before the jury before the witness proceeds to
testify concerning this letter.
THE COURT: Go ahead.
MR. SINGER: Could you show the top part first,
the press release.
THE COURT: It may be best if you, again,
408
emphasize the date of this press release.
MR. SINGER: This is the press release from Novell
dated May 28th, 2003. The heading is Novell challenges SCO
position, reiterates support for Linux. Provo, Utah. May
28th, 2003. Defending its interest in developing services
to operate on the Linux platform, Novell today issued a dual
challenge to the SCO Group over its recent statements
regarding its UNIX ownership and potential intellectual
property right claims over Linux.
First, Novell challenged SCO's assertion that it
owns the copyrights and patents to UNIX System V, pointing
out that the asset purchase agreement entered into between
Novell and SCO in 1995 did not transfer these rights to SCO.
Second, Novell sought from SCO facts to back up its
assertion that certain UNIX System V code has been copied
into Linux. Novell communicated these concerns to SCO via a
letter, text below, from Novell chairman and CEO Jack
Messman in response to SCO making these claims.
Mr. Calvin, could you go down to the last -- what
would be the paragraph that appears on the second page of
the letter.
This is the reproduction of the letter. Could you
go down a little bit further?
This is the same paragraph that was previously
read into the record from the May 28th, 2003 letter
409
beginning with the statement, importantly, and contrary to
SCO's assertions, SCO is not the owner of the UNIX
copyrights.
Could you resume the playing of Mr. Messman's
deposition.
Q -- Exhibit 1013, which is a press release issued by
Novell on May 28th, 2003. Did you approve the issuance of
this press release by Novell?
A Generally, yeah, I reviewed all press releases.
Q In this case you approved the issuance of the press
release that appears as Exhibit 1013?
A Yes.
Q Do you recognize that the text of the letter from you
to Mr. McBride, which we've just been looking at, Exhibit
1012, was reproduced in the press release?
A Yes.
Q Included therefor in the press release is your
statement, which we've seen in the letter and we're now
looking at in the press release, where you stated, quote --
this appears on the second page of the press release, the
third paragraph before the bottom, quote, SCO is not the
owner of the UNIX copyrights. Do you see that?
A You're on page 2 of this --
Q Page 2. It would be the third paragraph from the
bottom. Importantly, and contrary to SCO's assertions, SCO
410
is not the owner of the UNIX copyrights?
A I see that.
Q So is it fair to say that Novell, through your action
as CEO, intentionally communicated to the public on May
28th, 2003, that SCO did not own the UNIX copyrights; is
that correct?
A Yes.
Q Is it fair to say that you released the letter to
Mr. McBride, your May 28th letter, in a press release so as
many people as possible would read about it?
A That was the mechanism by which we could get our side
of the story out. I didn't have a feeling as to who would
read it.
Q At the time you wanted to get your position out as
broadly as possible; is that correct?
A Sure.
Q Were you subsequently aware that SCO's stock price
declined 30 percent in the immediate aftermath of your press
release?
A SCO's stock price was going up and down during that
period of time based on what was happening and what Darl was
saying in the marketplace. I can't recall what it did on
any given day when we were making these --
Q Clearly at the time of the press release, because it
was the same day as your May 28th letter, you also had at
411
that time no personal knowledge and had not spoken to any of
the individuals who negotiated the APA or its amendments
with respect to the transfer of the copyrights, correct?
A That's correct.
Q At the time of the press release on May 28th, just the
same as the time of the letter, you were unaware of the
existence of Amendment No. 2; is that correct?
A That's correct.
Q We haven't marked that yet --
MR. SINGER: At this time, I would like to move
the admission of SCO Exhibit 96, which is Mr. LaSala's
letter to Mr. McBride of June 6th, 2003, which accompanies
the June 6th, 2003 press releases. It's the next document
the witness will testify to.
MR. ACKER: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 96 was received into
evidence.)
MR. SINGER: Mr. Calvin, could you put Exhibit 96
on the screen and highlight or enlarge the portion of the
text.
This is a letter from Joseph A. LaSala, senior
vice president, general counsel and secretary of Novell, to
Darl McBride, the president and CEO of the SCO Group, dated
June 6th, 2003.
412
Dear Mr. McBride, I've received your letter to
Jack Messman with respect to Novell's May 28th, 2003 press
release.
For your information, Novell has today issued a
press release with respect to Amendment No. 2. A copy is
attached for your ease of reference.
Your letter contains absurd and unfounded
accusations against Novell and others, coupled with a veiled
threat to publicly state those allegations in a SCO press
call to be held today at 11:00 a.m. eastern standard time.
Novell continues to demand that SCO cease and desist its
practice of making unsubstantiated allegations, including
the allegations contained in your letter of June 6, 2003.
Sincerely, Joseph A. LaSala.
Turn to the press release, please.
This is for immediate release June 6th, 2003.
THE COURT: This was part of Exhibit 96?
MR. SINGER: Yes. This is part of Exhibit 96.
THE COURT: All right.
MR. SINGER: Novell statement on SCO contract
amendment. Provo, Utah. June 6, 2003. In a May 28th
letter to SCO, Novell challenged SCO's claims to UNIX patent
and copyright ownership and demanded that SCO substantiate
its allegations that Linux infringes SCO's intellectual
property rights. Amendment No. 2 to the 1995 SCO-Novell
413
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, however, which clearly remain with
Novell.
Novell reiterates its request to SCO to address
the fundamental issue Novell raised in it May 28 letter:
SCO's still unsubstantiated claims against the Linux
community.
Mr. Calvin, continue with the deposition.
Q This has previously been marked as Exhibit 1014.
Have you seen this letter before that Mr. LaSala wrote
Mr. McBride?
A Yes.
Q Did you approve Mr. LaSala sending it?
A Yes.
Q Did you review Mr. LaSala's letter in the press release
that's associated with it prior to it being sent?
A Yes, I did review it.
Q And approved it being sent?
A Yes.
Q You agree this letter was written in response to the
letter from Mr. McBride of the same date that we had just
414
seen?
A This is responding to Novell's May 28th -- I'm sorry.
He's responding on the June 6th to the May 28th, and then
we're responding to him.
Q This was a response to demands that SCO had made that
Novell clear up the record with respect to ownership of
copyrights, correct?
A That's the demands they were making in their letter,
yes.
Q And that press release, which was issued on June 6th,
the response is the one which appears on the second page of
this Exhibit 1014, correct?
A That's it.
Q That press release states that, in a May 28th letter to
SCO, Novell challenged SCO's claims to UNIX patent and
copyright ownership and demanded that SCO substantiate its
allegations that Linux infringes SCO's intellectual property
rights. Amendment No. 2 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, however, that clearly remain with
Novell.
415
That statement was issued with your approval as an
official Novell press release on June 6, 2003, correct?
A I did approve the release of this.
Q Everything in that statement was true and correct, to
the best of your knowledge?
A Yes.
Q These statements are all true and correct, to the best
of your knowledge?
A Yes.
Q Now the statement that to Novell's knowledge Amendment
No. 2 is not present in Novell's files, it turns out that
statement was false, correct?
A No. There was no signed amendment in our files.
Q You had determined at a later time that there was a
signed copy in the CFO's files?
A Yes.
Q Don't you consider the CFO's files to be Novell's
files?
A Sure.
Q At the time Novell said this, it was not aware that
that signed copy was in Novell's files. It later turned out
to be in Novell's files; is that correct?
A Yes.
MR. SINGER: I would now like to move into
evidence SCO Exhibit 105, which is correspondence between
416
Mr. LaSala and Mr. McBride dated August 4, 2003.
MR. ACKER: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 105 was received into
evidence.)
MR. SINGER: This is a letter, again, from Joseph
A. LaSala, senior vice president, general counsel and
secretary, to Darl McBride, president and chief executive
officer of the SCO Group, dated August 4, 2003.
Can you blow up the text of the letter so the jury
can read this?
Dear Mr. McBride. This is further to my letter of
June 6th, 2003 concerning ownership of the copyrights in
UNIX and follows your announcement that SCO has registered
its claim to copyrights in UNIX System V with the U.S.
Copyright Office. We dispute SCO's claim ownership to these
copyrights.
MR. ACKER: Your Honor, if we're going to read the
exhibit, we should read the whole exhibit as opposed to just
portions.
THE COURT: Let's go ahead and read the whole
thing, then.
MR. SINGER: The asset purchase agreement, in
schedule 1.1(b), contains a general exclusion of copyrights
from the assets transferred to Santa Cruz Operation.
417
Amendment No. 2 provides an exception to the exclusion, but
only for, quote, copyrights required for Santa Cruz
Operation to exercise its rights with respect to the
acquisition of UNIX and UnixWare technologies, close quote.
In other words, under the asset purchase agreement
and Amendment No. 2, copyrights were not transferred to
Santa Cruz Operation unless SCO could demonstrate that such
a right was, quote, required for Santa Cruz Operation, close
quote, to exercise the rights granted to it in the APA.
Santa Cruz Operation has never made such a demonstration,
and we certainly see no reason why Santa Cruz Operation
would have needed ownership of copyrights in UNIX System V
in order to exercise the limited rights granted SCO under
the APA. Nor is there any reason to think that a transfer
of the copyrights required for SCO to exercise its APA
rights necessarily entails transfer of the entire set of
exclusive rights associated with a particular copyrighted
computer program.
Unless and until SCO is able to establish that
some particular copyright right is, quote, required for SCO
to exercise its rights under the APA, SCO's claim to
ownership of any copyrights in UNIX technologies must be
rejected, and ownership of such rights instead remains with
Novell. Sincerely, Joseph LaSala.
Would you please continue the deposition.
418
Q I would like to now show you Exhibit 1023, which is
another piece of correspondence between Mr. LaSala and
Mr. McBride that's been dated August 4th, 2003.
Did you review this letter and approve it before it was
sent?
A Yes.
Q In this letter, is it fair to say Novell rejects SCO's
claim to ownership of any copyrights in UNIX technologies?
A Yes.
Q What background materials or other information not
available to Novell in June of 2003 have resulted now in
August of 2003 Novell taking this position?
A I don't think there were any new materials. There was
a lot more attention devoted to the agreement and
understanding the agreement.
Q So there was no new information that came to light,
that you're aware of, between June 6th, 2003 and August 4th,
2003?
A Not that I'm aware of.
Q The position that Novell took in this letter was,
quote, and I'm quoting from the third paragraph, we
certainly see no reason why Santa Cruz Operation would have
needed ownership of copyrights in UNIX System V in order to
exercise the limited rights granted SCO under the APA. Nor
is there any reason to think that a transfer of the
419
copyrights required for SCO to exercise its APA rights
necessarily entails transfer of the entire set of exclusive
rights associated with a particular copyrighted computer
program.
That was Novell's position; is that correct?
A Yes.
Q Which of those two things is Novell's position, as you
understand it, that no copyrights at all transferred or that
only partially a copyright transferred, as suggested by the
last sentence I read?
A My view is that we sold SCO the right to develop the
code further than what it was at the time we sold it, we
transferred the business to them, and they were going to
evolve the code, particularly to try to unify UNIX, the
various flavors UNIX and sell UnixWare.
Q So it's your view --
A And they didn't need the copyrights to do that.
MR. SINGER: At this point we have the Wall Street
Journal article dated September 20, 1995 that is already in
evidence. This is SCO Exhibit 133. With the Court's
permission, we would publish it at this time.
THE COURT: Go ahead.
MR. SINGER: This is the Wall Street Journal
article dated September 20, 1995. I would like to publish
the first two paragraphs.
420
Novell Inc. today is expected to announce plans to
relinquish control of the widely used UNIX operating system
to Santa Cruz Operation Inc. and Hewlett-Packard Company.
The deal includes the purchase by Santa Cruz Operation of
most trademarks and intellectual property associated with
UNIX software, one person familiar with the situation said.
He 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.
Mr. Calvin, can you continue with the deposition,
please.
Q I'd like to show you a Wall Street Journal article as
the next exhibit. This is Exhibit 1030, Wall Street Journal
article back on September 20, 1995. Do you recall whether
you've ever seen this before?
A I don't recall it.
Q You were on the board of Novell and may have read it in
The Wall Street Journal back then?
A I may have read it, yes.
Q Do you see where in this Wall Street Journal article it
states in the second paragraph, the deal includes the
purchase by Santa Cruz Operation of most trademarks and
intellectual property associated with UNIX software, one
person familiar with the situation said? Do you see that?
A I see it.
421
Q Now if your position is correct, no intellectual
property transferred to SCO, right?
A That's correct.
Q Do you know if Novell ever took any steps to correct
The Wall Street Journal's characterization to the public of
what had been sold?
A I don't know of any steps they took.
Q Are you aware of any public statement made by Novell
after 1995, after the APA was signed, where Novell publicly
stated it owned the copyrights up until the time, of course,
of your press release of March of 2003 -- May of 2003?
A I don't know of any such thing, but they did do another
transaction similar to this with BEA, and I know they may
have made some comments then, but I don't know for sure.
Q Certainly as you sit here today, you are not aware of
any public statement made during that eight-year period
between the closing of the asset purchase agreement in 1995
and the press release which we've been looking at on May
28th, 2003 where Novell ever asserted ownership of UNIX
copyrights?
A I'm not aware of any of that.
Q Look at Exhibit 1, and e-mail from Chris Sontag at SCO
to Greg Jones at Novell. It says, attached is a first cut
at a side letter to clarify the issues we discussed
yesterday. I'll give you a call later, and so forth.
422
Turning to Exhibit 2, you see a proposed letter. Have you
ever seen this before?
A No.
Q Do you see that the proposed letter that SCO asked
Novell to sign in February 2003 would, quote -- would
clarify that, quote, all right, title and interest in and to
the copyrights associated with SVRX agreements held by
Novell at the time of the asset purchase agreements were
intended to be included in the included assets identified on
schedule 1.1(a).
A I see that, yes.
Q When you've earlier testified that it was your
understanding that what SCO was asking for was a transfer of
the copyrights rather than a clarification that those had
transferred, were you aware of this correspondence between
Mr. Sontag and Mr. Jones?
A No. I just became aware of it right now.
Q I take it, then, in the May 28th, 2003 press release,
which told the public that SCO had asked for a transfer of
the copyrights, you were not aware of the February 2003
correspondence that we're looking at which asked for
clarification that those had been transferred; is that
correct?
A That's correct. I've never seen this before.
Q When did you retire as the chief executive officer of
423
Novell?
A June 21st, 2006.
Q Are you a stockholder in Novell at present?
A Yes.
Q Without wanting to pry into your financial affairs,
would you say that your share ownership of Novell is
material to yourself?
A Yes.
Q When did Novell begin considering a Linux strategy as
part of its business?
A It was late 2002.
Q At the time when it first considered Linux as part of
its strategy, what role did you envision Linux would play in
Novell's overall business strategy?
A At the time we were going to take the services that
were in NetWare and make them work on top of the Linux
operating system.
Q At that time Novell didn't contemplate, either directly
or through a subsidiary, being engaged in the business of
distributing Linux itself?
A I think that -- our approach was to put the NetWare
services on top of SuSE Linux, Readhat, even United Linux.
We didn't care what Linux was underneath. Our strategy was
to put our services on top of Linux.
Q But in late 2002 is when you decided that Novell should
424
make the Linux strategy a significant part of Novell's
business strategy moving forward?
A Yes.
Q When Novell decided it was going to pursue a Linux
strategy in late 2002, did that lead you to believe it was
important to have a relationship involving Linux with IBM?
A Well, we wanted to put NetWare on Linux and have IBM,
Dell and HP sell it. All three of those companies had been
involved with selling NetWare and had NetWare customers, and
we felt that was a good transition to put NetWare on top --
the NetWare services on top of Linux so they could
transition their customers to NetWare on Linux.
Q So one aspect of the Linux strategy, which would
involve IBM, would be IBM selling a product of NetWare on
top of Linux, correct?
A Yes.
Q Did there come a time when IBM paid Novell $50 million
to assist in its Linux strategy?
A They paid us -- they bought $50 million worth of our
stock, at my request, to give me comfort that they were
going to support the Linux strategy.
Q When did that occur?
A We bought -- I think I said we bought SuSE Linux either
in November or December -- I think it was November, and then
the investment occurred like February or March of the
425
following year.
Q When did you first discuss with IBM them making a $50
million investment in the stock of Novell?
A We had pretty much finished the negotiations with the
sellers of SuSE Linux and the bidding got up to
$210 million. We had $750 million worth of cash on our
balance sheet, we didn't need the cash, but I wanted to make
sure that if we bought this company, we would have support
in the marketplace. So I called IBM to ask them what
comfort they could give me that they were going to be there
if we bought this company, bought SuSE Linux, and they
asked --
Q Please continue.
A They asked me what were my thoughts as to what they
could do.
And we had talked about this back at Novell, and we
were of the opinion that the best way that they could do
that would be to sell our products and make an investment in
the company, that would give a signal to the marketplace
that they supported our acquisition of SuSE Linux.
Q My initial question was, when did you first discuss
this with IBM. I think you discussed how the conversation
came about, but you didn't put a date on that?
A I was saying we made the acquisition in November, and I
think it was in -- it was just before we closed that I
426
called them. I would say it was November.
Q Of 2003?
A 2003.
MR. SINGER: Your Honor, this completes the
plaintiff's designations from Mr. Messman's deposition.
There are a series of designated testimony that Novell
wishes to present.
THE COURT: All right.
Q Now was it your understanding in 2003 that any
copyrights were being transferred under this agreement by
Novell to Santa Cruz?
A It was my understanding that they were not being --
they were not part of the assets being sold.
Q When did you first come to that understanding?
A Upon reading the asset purchase agreement.
Q Did you have any understanding one way or the other
before reading the asset purchase agreement?
A I think in the board presentation they made to us in --
whenever it was, '81 or so. '83? No. Whatever that board
presentation was, they basically said to us that the
copyrights and the patents were not being sold.
Q Who said that?
A Well, I think David Bradford, who was the general
counsel, was making the presentation.
Q He was the general counsel at the time of Novell?
427
A Yes.
Q You have a distinct recollection of this board meeting,
which would have been 1995, not 1981 or 1983?
A '95, right. Okay.
Q You have a distinct recollection now in 2006 that at
this board meeting in 1995 the board was told that the
copyrights and patents were not being sold?
A Yes.
Q Do you recall anything else that Mr. Bradford said with
respect to assets being sold and not sold?
A No.
Q Just the issue about the copyrights?
A He explained the entire transaction, and it was a
structured transaction, not a straightforward buy and sell.
And it was complicated, and therefore we took time to
understand what was being sold and what wasn't being sold.
We were concerned about SCO and its viability, and we wanted
to protect ourselves, because we had these royalty
agreements out there, and therefore that was an issue that
we were concerned about.
Q Did have you an understanding, based on what
Mr. Bradford had said, that Novell was going to retain
certain rights to receive royalties on existing licenses in
order to -- to actually be part of the payment for the
company?
428
MR. BRAKEBILL: Foundation.
A Yes. We were selling certain of the assets that we had
brought from AT&T, but not all of them, and we were not
selling the existing royalty agreements, and we were not
selling the copyrights and the patents.
Q If we turn to Amendment 2, which is also in front of
you.
A Yes.
Q If you would look at section A. Do you see it refers
back to a schedule of excluded assets, and it states that
all copyrights and trademarks, except -- and this would be
an item of the excluded assets, you understand that,
correct?
A Yes.
Q You understood that when you read this in 2003 for the
first time?
A Um-hum.
Q This was modifying the assets that Novell got to keep
under the agreement?
A Yes.
Q It would be all copyrights and trademarks, except for
the copyrights and trademarks owned by Novell as of the date
of the agreement required for SCO to exercise its rights
with respect to the acquisition of UNIX and UnixWare
technologies. Do you see that?
429
A Yes.
Q What was your view in 2003 as to which copyrights were
necessary for SCO to exercise its rights with respect to the
acquisition of UNIX and UnixWare technologies?
MR. BRAKEBILL: Foundation.
Q Did you have any understanding?
A My understanding was that they didn't need any
copyrights and patents to do what they were planning to do,
which was to evolve the code that sat on top of the SVRX
licenses.
Q This letter was sent to you May 12, 2003 by Mr. McBride
of SCO. It's been previously marked as Exhibit 1021, dated
May 12, 2003. Is this a letter which you received by fax on
that date?
A I don't know how I received it.
Q Is this a letter that you received on or about that
date?
A I recall getting this letter. Whether this is the
one -- I mean, I received this letter.
Q Did you understand from this letter that SCO was
asserting claims that Linux infringed on its UNIX rights?
A Let me read it.
Yeah, I mean, that's what the assertion is, that UNIX
is -- I mean, that Linux is violating the UNIX copyrights.
Q What did you do in response to this letter?
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A I think this is the initiation of my getting involved
with these contracts and reviewing them and getting the
officers who reported to me to start to address the issue
and what we should do about it.
Q Why did Novell publish as a press release your letter
to Mr. McBride of May 28, 2003?
A Well, there was a feeding frenzy in the stock market
with regard to this issue that SCO continued to feed, and
many of the statements that SCO was making were, in our
opinion, misleading. And the press and the market weren't
hearing our responses or our actions, so we decided that we
had to be the ones who told them the other side of the
story.
Q Did you have an understanding when you issued the press
release that it was likely to adversely affect SCO's stock
price?
A No.
Q You didn't think it would affect SCO's stock price to
publicly state that SCO did not own the UNIX copyrights?
A I didn't have an opinion as to what it would do to
SCO's stock price.
Q When you're saying there is a feeding frenzy in the
market, did you believe that SCO's stock was trading upwards
because of a misunderstanding with respect to what rights it
in fact enjoyed?
431
A I don't think it was a misunderstanding with what
rights they enjoyed because the market didn't know. The
market was trying to find out.
Q You were trying to correct or inform that market by
making the statement that SCO did not in fact own the
copyrights; is that correct?
MR. BRAKEBILL: Objection.
A We were trying to make the market aware of our side of
the story, because the market was not being told the full
story, in our opinion.
Q Well, you were doing more, weren't you, Mr. Messman,
than saying, it's our position that SCO didn't own the
copyrights, you were saying definitively that SCO is not the
owner of the UNIX copyrights?
A Yes.
Q Correct?
A Yes.
Q Now you were also questioning in this letter the
assertions by SCO with respect to the infringement of its
UNIX rights by Linux; is that correct?
A Yes.
Q At this time, as of May 28th, 2003, what says
investigation had you personally done as to whether or not
any of the technology in Linux violated any of the
intellectual property rights in UNIX?
432
A Personally I had done none of that.
Q Did you ask Mr. Stone or anyone else at Novell to
investigate whether or not Linux had within it any
technology that would be protected by any of the
intellectual property rights associated with UNIX?
A Well, we didn't think that there was any UNIX in Linux,
and we were asking -- as I recall the sequence of events, we
were asking SCO to tell us where the offending code was and
if there was.
Q My question is a little bit different, Mr. Messman.
Maybe I didn't make it clear. My question was whether or
not you had asked anyone at Novell to investigate the issue
of whether any of Linux violated any of the intellectual
property protection in UNIX?
MR. BRAKEBILL: Apart from counsel?
MR. SINGER: Yes.
A No. I don't know how we would have done that, but I
didn't ask anybody to do that. It would be a tremendous
effort.
Q Following Mr. McBride's faxing that to you, did you
call Mr. McBride back shortly after that?
A He called me back.
MR. BRAKEBILL: Foundation.
THE WITNESS: I'm sorry.
Q He called you back, is your recollection, a second
433
time?
A Yes.
Q You're sure about that --
A No.
Q -- that you never placed a call to him? No. But
that's just your best recollection?
A My best recollection, Darl was calling me.
Q Did you agree with Mr. McBride on that phone call that
Amendment No. 2 confirmed that Novell had transferred the
UNIX and UnixWare copyrights to SCO?
A No.
Q You're certain about that?
A I'm sure we didn't transfer the copyrights for that
amendment.
Q My question is, are you sure you didn't agree with
Mr. McBride on the phone back on or about June 3, 2003, that
Amendment 2 had confirmed the transfer of copyrights?
MR. BRAKEBILL: Objection to form.
A My conversation with him only confirmed that we now had
a signed of copy Amendment 2. That's all we talked about.
Q Do you recall asking Mr. McBride what SCO wanted Novell
to do in consequence of Amendment No. 2?
A No.
Q You're not saying that didn't occur, you just don't
recall it?
434
A I don't think I would have asked that question, because
I hadn't focused on Amendment 2 yet.
Q Do you recall Mr. McBride saying that SCO wanted a
public statement by Novell that SCO is the copyright holder?
A No, I don't recall that.
Q Did Mr. McBride ask you about what involvement IBM had
had in your actions of May 28th?
A I do recall him asking that question.
Q What did you say?
A I think I said something to the effect that I talk with
IBM about a lot of things, and that's the way I left it.
Q In fact, had you talked to IBM specifically about the
issue of copyrights?
A No.
Q Had you talked about SCO's claims with respect to Linux
with IBM?
A No.
Q Why didn't you just deny to Mr. McBride that there had
been any communications with IBM on those subjects?
MR. BRAKEBILL: Form.
A I didn't know what specifically his intent was. It was
a nonanswer. I talk to IBM about a lot of things.
Q Are you aware of whether anyone at Novell, prior to May
28, 2003, had talked with anyone at IBM regarding what
position Novell should take regarding SCO's ownership of
435
copyright?
A I think I'm aware that at least Mr. LaSala talked to
them.
Q You were aware, even at the time of this press
statement, that there was an unsigned copy that had been in
Novell's files, correct?
MR. BRAKEBILL: Form, mischaracterizes earlier
testimony.
A I was aware that there was an unsigned copy of
Amendment 2, but there could have been unsigned copies of
other things too. They don't become binding until they are
signed.
Q As of the date of this press release, you had become
aware of the fact Amendment No. 2 had been signed, right?
A That's the purpose of that first statement.
Q Right. And that is the reason why you're informing the
public on June 6, 2003 that Amendment No. 2 appears to
support SCO's claim that ownership of certain copyrights for
UNIX did transfer to SCO in 1996; is that correct?
MR. BRAKEBILL: Form.
A We're saying that this amendment appears to support
SCO's claim. We're not saying that Amendment 2 transferred
the copyrights.
Q As you sit here today, who do you identify in your
mind, if you know, were the individuals who were in fact
436
involved at Novell in the asset purchase agreement
transaction?
MR. BRAKEBILL: Foundation.
A Well, we had a law firm that was doing most of the
work.
Q Which law firm was that?
A Wilson Sonsini. And I can't remember the guys in
corporate development that were working on this. There were
several of them. As a board member I'm talking, not as the
CEO of the company.
Q Right. You were a board member then?
A Yeah.
Q The position that Novell took in this letter was,
quote, and I'm quoting from the third paragraph, we
certainly see no reason why Santa Cruz Operation would have
needed ownership of copyrights in UNIX System V in order to
exercise the limited rights granted SCO under the APA. Nor
is there any reason to think that a transfer of the
copyrights required for SCO to exercise its APA rights
necessarily entails transfer of the entire set of exclusive
rights associated with a particular copyrighted computer
program.
That was Novell's position; is that correct?
A Yes.
Q I mean which of those two things is Novell's position,
437
as you understood it, that no copyrights at all transferred
or that only partially a copyright transferred, as suggested
by the last sentence I read?
MR. BRAKEBILL: Form, compound, argumentative.
A My view is that we sold SCO the right to develop the
code further than what it was at the time we sold it, we
transferred the business to them, and they were going to
evolve the code, particularly to try to unify UNIX, the
various flavors of UNIX, and sell UnixWare.
Q So it's your view --
A And they didn't need the copyrights to do that.
Q So it's your view that the transaction did not transfer
the intellectual property rights in UNIX to Santa Cruz?
A Yes.
Q Are you under any type of agreement with Novell that
requires you to continue to cooperate with them in
connection with litigation matters?
A No.
Q Do you have any type of nondisparagement agreement with
Novell?
A No.
Q Do you have any consulting agreement or other agreement
with Novell?
A No.
Q Would you agree they would either need to get the
438
copyright or they would need to get a license or sublicense
in order to be able to conduct a business of selling
end-user licenses to UnixWare?
MR. BRAKEBILL: It calls for a legal conclusion.
A My view is they would be selling the stuff that they
developed on top of UnixWare or SVRX, which they had
develop. Remember, my view is, they had to evolve the code,
they couldn't just take SVRX and sell it. They had to
evolve the code to something more that they then had the
intellectual property rights to.
Q I'm not talking about the legacy of SVRX products. I'm
talking about UnixWare now. Do you deny SCO had the right
after the closing to sell UnixWare --
A No.
Q -- in the form that 2.0 existed at the time of the
closing -- to sell UnixWare in the form that it existed at
the time of the closing?
MR. BRAKEBILL: It calls for a legal conclusion.
A Quite frankly, I haven't studied the UnixWare side of
all this, so I can't come to a conclusion on that without
further study.
Q Why didn't you enter into an agreement with them that
would obligate them to sell and promote SuSE Linux as
opposed to a $50 million cash investment in their stock?
MR. BRAKEBILL: Form.
439
A They wanted to make sure they treated all participants
in the Linux business equally, they had a relationship with
Readhat, and they didn't want to exclusively sell our
products, they wanted to get more than one into their
customer base.
Q My initial question was, when did you first discuss
this with IBM. I think you discussed how the conversation
came about, but you didn't put a date on that?
A I was saying we made the acquisition in November, and I
think it was in -- it was just before we closed that I
called them. I would say it was November.
Q Of 2003?
A 2003.
Q Now what was -- if any action that SCO took was subject
to being overruled by Novell, and Novell could force SCO to
take any action which it wanted, then what, in essence, was
SCO buying under the agreement?
MR. BRAKEBILL: Form, argumentative, asked and
answered.
A SCO was buying the rights to develop -- further develop
the SVRX code to create a merged product, to create a
product that would bring the UNIX industry together
hopefully to better compete with NT. That was the business
that they were buying into.
MR. SINGER: Your Honor, that completes the
440
designations and cross designations from the deposition of
Jack Messman. Do you want us at this time to proceed with
the next deposition?
THE COURT: I think we probably ought to get
started into it, if you would, please.
MR. NORMAND: Your Honor, the next witness whose
designations we'll play is Jim Wilt, who is in Santa Cruz.
THE COURT: Mr. Normand, will the deposition be
identified when this was taken? If not, would you please do
so.
MR. NORMAND: Yes, Your Honor. It was taken on
January 26th, 2007.
THE COURT: Thank you.
(James Wilt Deposition)
Q Do you recall the title you had at the time of the
asset purchase agreement?
A I believe my title was vice president of business
development. I had taken a very generic title.
Q And how about after that, did your title change when
you went into product engineering?
A Yes. I was senior vice president of products.
Q And did you have another position after senior vice
president of products?
A Yes.
Q What was that?
441
A I ran the consulting services business unit. I was
president of -- I think it was president of consulting
services. I'm not sure of the exact title.
Q What were your responsibilities as president of
consulting services?
A The consulting services was a business unit that
bespoke programming or services to help install or to create
programs that went along with the software.
Q Have we gotten up to the point of the SCO-Caldera
transaction yet or are we still in the period between the
asset purchase agreement and that transaction?
A It was while I was the -- ran the consulting services
that the Caldera transaction happened.
Q You said you were involved in some of the initial
discussions concerning that transaction. At what point in
the transaction did you stop your involvement?
A Relative to Caldera?
Q Relative to the Caldera. This is the SCO-Caldera
transaction I'm talking about.
A As we got into more details, we discussed it as a
management group.
Q Are you familiar with which assets were transferred as
part of that transaction to Caldera and which assets were
not?
A Of a general nature.
442
Q I take it then that the UNIX business of SCO
transferred to Caldera as part of the SCO-Caldera
transaction?
A That's correct.
Q Do you know -- as a preliminary matter, do you know who
Edward Chatlos is?
A Yes.
Q Who is he?
A He was the individual that we negotiated the agreement
with from Novell.
Q Would it be fair to say, though, that you were more
active in the negotiations at the beginning and less active
at the end of the negotiations?
A Less active -- probably less active.
Q Certainly. With this text in mind and recalling your
meetings with Novell leading up to the asset purchase
agreement, do you recall anyone from Novell ever
communicating to you affirmatively, specifically, that
Novell was selling SCO the UNIX or UnixWare copyrights?
A I do not have specific recollection of somebody
communicating they were transferring that explicitly in
terms of saying copyrights because it was such a fundamental
part of an asset purchase that if you didn't have copyrights
and such go along with it, there was no asset purchase.
It's called a license. We did not discuss a license. We
443
discussed a purchase. So there are a lot of things that we
didn't explicitly cull out as part of the purchase because
they were just assumed. I mean, when you walk out the door,
I assume your head goes with you, and the same thing is true
when you buy the assets. Copyrights and things like that
have got to go with it.
Q So to be clear, no one from Novell ever said to you
copyrights are part of this deal, we're selling you the
copyrights?
A That's not what I said. I said I could not recall
anyone explicitly saying it. If they did, it's not
something that would have been so out of the ordinary for me
to remember because, as I said, it was just a natural part
of what you expected to have transferred. So if somebody
made such a statement, it would not be remarkable and not be
something that one would remember.
On the other hand, if somebody would have said we're
not selling them to you, it would have been extremely
remarkable and probably would have ended the negotiations.
Q Just so I understand, though, you do not recall anyone
saying that copyrights were part of the assets transferred
as part of the APA?
A Is that the same question you asked before?
Q I'm asking that question now.
A I'm asking is that the same question you asked before?
444
It sounds like it. If it is, it's the same answer that I
gave before. It's not a remarkable statement that I would
have remembered.
Q I'm not asking whether it's remarkable or not. I'm
just asking if you recall anyone saying, from Novell,
copyrights were part of the assets transferred?
A And my answer is I have no recollection because it is
not something that would have been remarkable to remember.
Q Do you have any stock options in the entity that's the
plaintiff in this action, The SCO Group, Inc.?
A No.
Q Do you know whether any members of your immediate
family own any stock or stock options in The SCO Group, the
entity that is the plaintiff in this action?
A Not that I know of.
Q Mr. Wilt, you were handed an Exhibit 25 --
MR. NORMAND: Your Honor, there is reference to a
declaration. Obviously we're not undertaking to admit the
declaration into evidence. That's what is being referred
to.
THE COURT: All right.
Q -- earlier in the day, which is described as your first
declaration. Have you had occasion recently to review that
declaration?
A Yes. I did read through it last night.
445
Q Is there any part of the declaration that you feel is
inaccurate or that you would like to correct?
A No.
Q If I could direct your attention to some language in
that declaration. I'm looking at paragraph 7 at the end
where you say, in referring to the negotiations from August
to September 1995 between Santa Cruz and Novell, that you,
quote, understood Mr. Chatlos to be Novell's chief
negotiator during those negotiations. Is that a correct
statement?
A This is a correct statement.
Q You say in paragraph 8, quote, it was my understanding
and intent during those negotiations that SCO would acquire
Novell's entire UNIX and UnixWare business, including the
copyrights. I do not recall and do not believe that there
ever was any instance in which anyone at SCO or Novell ever
stated or exhibited any contrary intent or understanding to
me or anyone else.
Is that an accurate statement?
A That's an accurate statement.
Q You say in the back half of paragraph 9, quote, it was
my intent on behalf of SCO to acquire, through the APA,
Novell's entire UNIX and UnixWare business, including the
UNIX and UnixWare source code and all associated copyrights,
and I believed then, open parens, as now, close parens, that
446
Novell's intent was to tell sell all of those assets and
rights.
Is that an accurate statement?
A Yes, that's an accurate statement. You wouldn't have
had a business without having the copyrights and trademarks.
Q You say in paragraph 12, quote, I do not recall anyone
on either side of the negotiations or transaction ever
suggesting that Novell would retain a copyright relating to
UNIX or UnixWare. I am not aware of any discussions,
whether general or specific, during the negotiations that
contradict my understanding of the transaction as set forth
in this declaration.
Is that an accurate statement?
A That is an accurate statement.
Q You say in paragraph 16, quote, pursuant to the APA,
the parties also signed a technology licensing agreement in
early December 1995 in which Novell licensed source code
rights from SCO. In my view, this licensing agreement was
consistent with SCO's ownership of the UNIX and UnixWare
copyrights following the closing of the APA, end quote.
Is that an accurate statement?
A That's an accurate statement because if you look at the
technology licensing agreement, it includes our giving
Novell the right to reproduce and license, under certain
conditions, that code, which if we didn't own the copyrights
447
and such, we wouldn't have had to give to Novell and
wouldn't have been able to give to Novell.
Q I direct you back to paragraph 10 of your declaration.
It states, quote, paragraph 4.16 of the APA pertains to the
binary royalty income stream that Novell retained through
the APA. The parties agreed to the language in paragraph
4.16(b) in order to allow Novell to manage that royalty
stream within the operation of SCO's customer source code
licenses -- not at the expense of SCO's right to enforce its
intellectual property protections under any such licenses,
and not to permit Novell to waive any of those protections.
I have reviewed Amendment No. 2 to the APA and believe that
the language therein confirms that intent. In light of my
intent, and based on my understanding of the parties'
intent, I do not believe that Novell had or has any right to
waive, or to direct or require SCO to waive any of its
intellectual property rights or protections.
Is that an accurate statement?
A That's an accurate statement.
Q Let me direct your attention, Mr. Wilt, to what was
marked earlier as Exhibit 27, which was described as your
second declaration.
A Okay.
Q Have you had occasion recently to review Exhibit 27?
A Yes, I reviewed this yesterday again.
448
Q Is there any aspect of Exhibit 27 that you believe is
incorrect or that you would like to correct?
A No.
Q Let me ask you about some specific paragraphs in this
declaration. You say in paragraph 4, quote, Santa Cruz's
intent and agreement under the APA and Amendment No. 1 was
for Novell to transfer the entire UNIX business, including
the UNIX source code and copyrights to Santa Cruz except for
binary royalties paid under the existing agreements pursuant
to which UNIX System V, open paren, quote, SVRX, end quote,
close parens, licensees were paying such royalties, and
which Novell conveyed to Santa Cruz under the APA as part of
the UNIX business.
Is that an accurate statement?
A That's an accurate statement, and it was the existing
licenses at the time of the transfer to SVRX that Novell
retained, you know, the equity interest, the financial
interest in.
MR. NORMAND: Your Honor, that completes SCO's
designations of Mr. Wilt.
MR. JACOBS: Your Honor, we have no counter
designations.
THE COURT: We'll go ahead and take a recess now.
Ms. Malley.
(Jury excused)
449
THE COURT: Mr. Singer, let me ask you something
about Mr. Levine's deposition testimony. The Court's motion
in limine stated that Mr. Levine would only be allowed to
testify as to the second amendment if he had personal
knowledge in contrast to simply looking at it and saying,
well, reading it now, this is what my interpretation would
be. Have you supplied the Court -- and I said that because
you were given the opportunity to provide a foundation for
him having been involved in the negotiations so he would
know what was the intent of the second amendment. Have you
supplied the Court anything that would establish that
foundation of his personal involvement or is it just simply
his reading of the second amendment saying this is what I
think it means?
MR. SINGER: May I have a moment, Your Honor?
THE COURT: Yes. And if it's easier, Mr. Normand,
if you would just answer the question.
MR. NORMAND: Can I run my answer by Mr. Singer?
Run it by the Court first.
THE COURT: You may be safer if you run it by Mr.
Singer.
MR. NORMAND: I won't be long. We don't dispute
that we don't have a factual foundation that he was involved
in the drafting. We do think it would be relevant,
particularly in light of the sorts of questions that have
450
been asked of witnesses already. He was an in-house
attorney, and in effect the question is asking him, do you
have a view as to what copyrights are required. And I don't
think he would be anymore instructing the jury on what the
law of copyright is. I think he's offering at least a
largely relevant view as to his view why would you need
copyright ownership. That's how we interpreted his answer
to that question.
THE COURT: Do you wish to respond, Mr. Brennan?
MR. BRENNAN: Your Honor, I think this falls
squarely within the scope of the Court's motion in limine.
It's already been established that he did not have personal
involvement regarding Amendment No. 2. We tendered to the
Court the testimony that confirmed that.
In addition, I think a problem with this question
and the answer is the answer is not even responsive to the
question and it was objected to at the time. So we have a
couple of issues here. Number one, it's beyond the scope of
this witness's personal knowledge. Number two, and because
of number one, it falls within the ambit of the Court's
prior motion in limine ruling. Number three, the question,
as put to him, is whether he has a view as to what
copyrights were necessary. The answer doesn't even reveal
that.
For all those reasons, this particular question
451
and answer are objectionable and should not be presented to
the jury.
MR. NORMAND: Your Honor, I think what Mr. Brennan
said is begging the question a little bit. I think
Mr. Levine's response can be read to say I see the word
required, my view of what is required is all the copyrights.
So I read this as a clarification that all the copyrights
came over. I think the trial concerns, in significant part,
trying to help the jury understand what copyrights are
required, and I think the testimony of attorneys who were at
both companies is relevant to that issue. He is an attorney
whose testimony we want to rely on.
THE COURT: I will look at it. My concern is that
it becomes, then, expert testimony, speaking as an expert as
an attorney, as Mr. Davis was going to testify. And he was
designated as an expert and everything else was -- the T's
were crossed and the I's dotted to permit him. I just
don't -- let me take a look at it.
MR. NORMAND: The only comment I would add, maybe
you made the point jokingly in limine arguments about
Mr. Davis, but you pointed out that if he were not an
attorney, you wanted to get in his testimony if he were not
an attorney, we would hear an objection that he is not an
attorney.
THE COURT: Good point. All right. You are
452
throwing that back at me now, aren't you?
MR. NORMAND: I didn't mean to, Your Honor.
MR. SINGER: Mr. Normand obviously now understands
the comment you made on that point.
THE COURT: Which was injudicious on my part. I
never meant to insult Mr. Normand when I said that.
MR. BRENNAN: Your Honor, just so we're clear on
the point, the situation here, if we're going to have any
lawyer or any person, who is unconnected, uninvolved, to
come into this courtroom and say, I've read these words and
this is what I think it means, we would have a whole slew of
people. I could invite a number of lawyers from Salt Lake
to come in and offer that opinion.
THE COURT: Mr. Davis was uniquely qualified
because of the number of transactions he had been involved
in, and that was what the Court was relying on in allowing
him to testify. I don't know that we've got anything here
that would put Mr. Levine in that same category.
MR. NORMAND: While I would agree with that, Your
Honor, I still think it goes to the weight of his testimony.
That's for the jury to decide.
THE COURT: I will take a look at it and I will
let you know as soon as we come back from the break.
We'll take 15 minutes, counsel.
(Recess)
***** Part 3 *****
(10:20 A.M.)
THE COURT: Counsel, the Court will not allow the
jury to hear that portion of the deposition of Mr. Levine
that's in question. I believe that it would be inconsistent
with the Court's prior ruling, and I believe that the prior
ruling was well founded. So if you would make certain that
that part is not presented to the jury.
MR. NORMAND: Thank you, Your Honor.
THE COURT: Is there something else we need to deal
with before we bring the jury in?
MR. BRENNAN: Just a quick housekeeping matter in
terms of order, Your Honor. We've had a bit of a dialogue
during the break. As Novell understands it, the order of the
remaining videotape depositions today will be Mr. Mohan will
be next, and then Mr. Michels following, and then Mr. Levine,
the witness that you just made reference to in your comments,
Your Honor.
And then, at least as we've played through the time here,
it looks like there will still be time available. And I
believe, certainly SCO's attorneys can speak for themselves,
that they may try to bring over their next witness, who will
be a live witness. And if that can't be arranged, we'd have a
time gap. We would expect that that vacuum would be filled
with a charge against the plaintiffs for not using the time or
some other remedy that the court might think appropriate.
453
THE COURT: Mr. Singer.
MR. SINGER: We don't disagree with what Mr. Brennan
has said. I mean we'll try to get -- if there is time left
over after running through those three depositions, and it
makes sense to start Mr. Broderick if there's more than just a
few minutes, we'll try to present him. But we certainly
understand if he's not ready to go, if there's some gap of
time, that would be on our account.
THE COURT: Would you have any -- are you prepared
to deal with Mr. Broderick if he is brought on live?
MR. BRENNAN: We are, Your Honor.
THE COURT: I would prefer that we not waste any
time, the jury's time.
MR. SINGER: And that's our preference as well, and
we're trying to get him ready to go in the afternoon if
there's some time.
MR. NORMAND: We need to get him into a suit, Your
Honor.
The Court: A suit.
MR. NORMAND: A suit.
THE COURT: You know, the marshals have suits
downstairs I think. I'm not sure about the fit, but --
All right, Ms. Malley, if you'd please bring the jury in.
(jury present)
MR. NORMAND: Your Honor, the next witness SCO will
454
call by video deposition is Alok Mohan, who was deposed on
February 23rd, 2007.
(Alok Mohan called as a witness via videotape deposition)
Q In 1995 were you the President of the Santa Cruz
Operation?
A I was CEO around that time, '95 to '98.
Q Were you President and CEO Of the Santa Cruz Operation in
1995?
A I was Chief Operating Officer for a short while, and then
I became CEO.
Q Do you remember what your position was at the time of the
transaction between Novell and Santa Cruz Operation?
A I was the CEO.
Q Were you also a member of the Board of Directors?
A Yes.
Q And would it be fair -- what would -- you were aware that
there was a contract relating to the transaction between
Novell and Santa Cruz; correct?
A Yes.
Q Would it be fair to say that your involvement in the
Novell/Santa Cruz deal was only at a high level?
A I was involved as a CEO, at the CEO Level.
Q Would it be fair to say that your involvement as the CEO
For Santa Cruz on the Novell/Santa Cruz transaction was only
at a high level?
455
A What do you mean by high level?
Q Do you recall having characterized your involvement in
the Novell/Santa Cruz transaction as at the high level?
A Well, I was the CEO and there were a lot of people
involved within the transaction from our side, so I was
involved as a CEO.
Q So is it fair to say that your involvement in the
Novell/Santa Cruz deal was only at a high level?
A Yes.
Q Is it fair to say that you were not involved in the
details of the legal documents that were executed as part of
the Novell/Santa Cruz deal?
A I was involved in the normal processes. I was involved
in reviewing documents. I was not involved in writing them.
And the detail level of negotiations, I was not involved in
that, although I did have some discussions with Duff Thompson,
as well as Frankenberg.
Q You said, "I was involved in reviewing documents." As
you sit here today, what documents do you recall reviewing as
part of the Novell/Santa Cruz transaction?
A I recall looking at the APA and reviewing that.
Q Is it fair to say that you were -- you did not
participate in the negotiation meetings between
representatives of Novell and Santa Cruz when the legal
document was being drafted?
456
A I was --
MR. NORMAND: Objection to form.
THE WITNESS: -- involved in the negotiations with
Duff Thompson, and -- at a -- and, again, at a strategy and
CEO level. The specific drafting of the documents were done
by people, and I was not involved in that.
Q Now, you signed the Asset Purchase Agreement; is that
right?
A That's true.
Q Did you review the document before signing it?
A Yes, I did.
Q Did you go through it in a -- on a detailed basis by
yourself?
A I read it.
Q Did you read the Asset Purchase Agreement from the front
cover to the end?
A Yes.
Q And I take it that when you signed the Asset Purchase
Agreement on September 19th, 1995, you had no reason to
believe it was inaccurate?
A Yes, I agree with that.
Q And you had no reason to believe that the Asset Purchase
Agreement was not clear?
A It -- it -- these complex documents, it -- it represented
as best as we could tell at that time what the intent was.
457
And I looked at it, as I do all documents, with that in mind,
and it looked right to me so I signed it, yes.
Q When you read the document before you signed it, nothing
jumped out at you as being unclear; is that a fair
statement?
A Yes.
Q And when you signed the document on September 19, 1995,
you had no reason to believe that that contract did not
accurately reflect the parties' intent; correct?
A That's right.
Q One of the other items that Santa Cruz got through its
transaction with Novell in 1995 was the right to sell
UnixWare; correct?
A We bought the business.
Q Santa Cruz got the right to sell UnixWare; right?
A And, again, I -- I -- I will just keep it in terms of we
bought the business. We could do whatever we wanted to do it.
As part of that could we sell UnixWare? Absolutely. But as
part of the whole -- it's the whole business we bought.
Q And in 2000 do you recall that Santa Cruz agreed to sell,
among other things, the SCO OpenServer product to Caldera?
A This is where I was not -- I was on the Board. I was not
the CEO at that time. I was further removed from the
business, but -- so keep that in mind as you ask these
questions. Yes, we entered in an agreement to sell the Unix
458
business to Caldera.
Q And when you say that Santa Cruz agreed to sell the Unix
business to Caldera, I take it you're referring to not only
the SCO OpenServer product but also the Unix business that it
had purchased from Novell?
A Yes, everything.
Q In your personal view, what rights, if any, did Novell
retain after the Asset Purchase Agreement with Santa Cruz?
A I -- my belief has always been, and I believe we bought
the whole business. And I -- the intent of that -- intent of
that agreement, when I was talking to Duff Thompson and at
least in the higher level discussions, was we were buying the
whole business. It wasn't leaving any rights behind.
It was -- what happened was that since we couldn't afford
the purchase price of the SVRX revenue stream, which is like
checks coming in every month, basically what it was, and we
couldn't afford it. We couldn't pay the present value of what
that stream would be. We also felt that there was a
difference of opinion about what that stream is. And so as I
looked at it, it was a financial engineering -- it was a
transaction bridge between what we were willing to pay and
what they were willing to pay. What they wanted was to allow
them to keep that revenue stream.
Now, to keep a revenue stream, they needed the ability
to -- I assume -- the ability to make sure that we kept the
459
clients. If they had a problem with the SVRX, that we will
take care of -- or that problem is taken care of. But I was
not -- at least at our level, I was not thinking of that we're
leaving any rights like they owned anything or any rights of
that kind, no.
Q And So I -- I want to be clear. What particular rights
then do you think Novell retained? You said -- you said --
let me look at it this way. You said -- you said you thought
that Santa Cruz was leaving no rights behind.
A Yeah, pretty much.
Q So is it a fair statement then that you believe that
Novell was retaining no rights?
A My -- without -- without getting into the specific
documents, which every -- there were a lot of other people in
the organization who could do that for you. From a -- the
view of what we're buying, we're buying the whole business,
and we -- we had all the rights as we bought the business.
There was a revenue stream that -- and -- and I have to
assume that there is some ways to protect that revenue stream,
but I can't tell you what that would be, but it was not like
we were leaving something behind. We were buying the
business.
Q I want to fairly characterize what you're saying, so
correct me if I'm wrong. Is it a fair characterization of
your testimony that you believe that Novell was retaining no
460
rights through this transaction, but that it was retaining a
revenue stream related to SVRX?
A Yeah. I was -- I'm trying to state this is what my --
Q And I'm only talking about your personal belief, no one
else's.
A It's not so much a belief, because I know that there's
documents that have a certain defined definition of what they
can and cannot do. My negotiation, my involvement, was that
it was -- we bought the business. And there were some aspects
of things, and I can't tell you what they were, to allow them
to protect the fact that the revenue stream -- that they get
paid. And -- but I can't tell you anymore than that.
Q You keep referring to documents that you could look at.
Are you referring to the contract?
A Yeah, I assume.
Q Okay. So if I wanted to know what rights Novell
retained, can I look at the contract and find out?
A You'll have to look at it.
Q Is it true that if I wanted to find out what rights
Novell did retain, I could look at the contract?
A I don't know that.
Q You believe that Santa Cruz got the Unix copyrights
through the APA; is that right?
A We believe I bought the whole business. That includes
all kinds of stuff. And -- and, you know, I gave you the
461
answer. I think we bought -- we got the whole thing.
Q Okay. But you haven't -- you haven't confirmed. Is --
is -- are the Unix copyrights part of the Unix business?
A Absolutely.
Q What is the basis of your opinion that Santa Cruz got the
business?
A That -- that's -- that was the whole discussion and
intent, negotiations. That's my recollection of what we were
doing.
Q Now, back to the topic of Unix copyrights. Are you aware
that the subject of Unix copyrights was specifically addressed
in the contract?
A No, I'm not aware of that.
Q When you signed this document, you -- did you actually
look to see whether or not there were any provisions in here
relating to Unix copyrights?
A I -- I think -- I think we have to -- what I'm trying to
get across is it is not one item at a time. It is the
entirety of the document as I read it. I felt then that this
was buying the business. And I -- I -- it's not about
specific provisions. It was the entirety of the document.
And to me the business includes copyrights.
Q I'll just repeat the question. Is it your testimony that
you can't just look at the excluded assets provision to
determine whether or not Unix copyrights were included in the
462
transaction?
A Again, you got to look at the whole thing as an entirety.
And there were some issues relating to -- and that's why there
were amendments to these documents. And -- but my -- my point
that the intent was that we're buying the whole Unix business,
that included copyrights, etcetera, still that's what I
believe.
Q Do you recall who else at Novell you were dealing with
beside Mr. Frankenberg?
A The other person that I dealt with on the APA or the
discussion leading up to that was Duff Thompson.
Q Duff Thompson was the person that you were speaking to
before the Asset Purchase Agreement was executed?
A Right.
Q When you signed the declaration, were you content that
the language of the declaration reflected your views?
A Yes, I think so.
Q Looking at paragraph four of your declaration, Mr. Mohan,
you say in the third Sentence of that paragraph four quote:
"To the extent anyone is claiming that Novell retained the
Unix copyrights or that Novell retained the right to waive
material breaches of Unix system V agreements years after the
sale to Santa Cruz, such claims are contrary to my
understanding, intent and agreement. I would not have agreed
to do -- to those terms if anyone had suggested that that was
463
what Novell was offering," end quote. Do you see that
language?
A Yes.
Q Why would you not have agreed to those terms if someone
had suggested that that was what Novell had offered?
A Well, I -- I was -- I can speak to the strategy and the
intent was we wanted to buy the business. I made this point
earlier today. And the business included all the assets,
which included in my view copyrights. And what -- and we're
kind of buying the stuff lock, stock and barrel. It would
have been that way if you could have afforded the present
value of the royalty stream, but because of cash constraints
we had to -- cash constraints and the differences -- potential
differences on what the value of that future stream would be,
that we said we'd pass the revenue on to Novell, 95 percent of
it on to -- to Novell.
But as I saw it, we bought the business that included all
this stuff. And if you -- if you don't buy -- an evaluation
in my mind was set based on we bought the whole business.
Q Why would you not have agreed to the terms of the deal if
someone had told you that the Unix copyrights were being
retained by Novell?
A I felt -- I believe that is all part of the value of what
we were buying, and it's -- it's an assessment of the value of
what you buy, what you pay for. And to me that was -- that
464
was part of what we had bought, and it would be a lot less
value without it in my view.
Q Why would you not have agreed to the terms of the
transaction if anyone had suggested to you that Novell
retained the right to waive material breaches of Unix System V
agreements?
A If they could waive material breaches, then we did not
control Unix System V as an asset. It was of less value to
us.
Q You say in paragraph five quote, "As the Chairman of the
Board of Santa Cruz in 2001, I understood that Santa Cruz
conveyed to Caldera International, Inc. all of the Unix and
UnixWare assets that Santa Cruz owned, including all of the
Unix intellectual property rights, such as the copyrights that
Santa Cruz had obtained from Novell," end quote. Do you see
that language?
A Yes.
Q Is that an accurate statement?
A I think so.
MR. NORMAND: Your Honor, at this point we would ask
to publish to the jury SCO exhibit 526, which is already in,
And to highlight the portions of that exhibit that Mr. Mohan
will be subsequently asked about.
THE COURT: Go ahead.
MR. NORMAND: This is the press release from
465
September 20th, 1995 after the execution of the APA. The
first paragraph of the press release states quote, "The Santa
Cruz Operation, Inc. and Novell Inc. today announced a
definitive agreement for SCO to purchase the Unix business
from Novell."
Next paragraph down: "Alok Mohan, President and CEO Of
SCO, said, 'This extends SCO's leadership position in the
Business Critical Server market. Our customers and resellers
not only get a powerful Unix operating system, but also the
most advanced network services in the world. Novell's
advanced network services, such as NetWare Directory Services,
are setting the standard for business networking. Our
customers will be able to integrate their Business Critical
Servers with their existing work groups to provide their
people with greater access to corporate data."
And on page two of this press release there's a --
Mr. Calvin, let's start with the top paragraph -- those
two.
The first paragraph is a quote from Robert J.
Frankenberg, Chairman and CEO of Novell. And then the next
paragraph states: "According to the terms of the agreement,
SCO will acquire Novell's UnixWare business and Unix
intellectual property."
And I'd like to continue with the deposition, Your Honor.
Q -- Mr. Mohan, what's previously marked as Exhibit 1028.
466
Exhibit 1028 is titled "Press Release" under SCO letterhead.
The title of the press release is, quote: "SCO acquires Unix
business from Novell and licenses NetWare technology," end
quote.
Do you see that you're quoted in the second paragraph of
the first page?
A Yes.
Q And do you see that Robert Frankenberg, Chairman and CEO
Of Novell, is quoted at the top of the second page?
A Yes.
Q The press release states on page two, in the first
Sentence of the second paragraph quote: "According to the
terms of the agreement, SCO will acquire Novell's UnixWare
business and Unix intellectual property," end quote. Do you
see that language?
A Yes.
Q Does that language accurately reflect your understanding
of the transaction?
A This language is consistent with what I've been saying
today about we bought the business. We bought the UnixWare
and Unix intellectual property. We bought the business. And
that's what I thought we were buying, and I still believe
that's what we bought.
Q Did anyone from Novell ever say to you prior to the
execution of the APA that Novell intended to retain any Unix
467
or UnixWare copyrights?
A No.
Q Did anyone from Santa Cruz ever say to you prior to the
execution of the APA that they understood that Novell intended
to retain any Unix or UnixWare copyrights?
A No.
Q You say in paragraph six of your declaration quote: "In
approximately early April, 1996, it came to my attention that
Novell, purportedly on behalf of itself and Santa Cruz, was
planning to enter into an agreement with IBM purportedly
amended its Unix license agreements by granting IBM a buyout
of its binary royalty obligations and expanding its source
code rights," end quote. Do you see that language?
A Yes.
Q Did anyone from Novell ever say to you at anytime in 1996
that Novell had retained any Unix or UnixWare copyrights under
the APA?
A No, I don't recall that.
Q Did anyone from Santa Cruz, including Santa Cruz' outside
counsel, say to you at anytime in 1996 that they believed
Novell had retained any Unix or UnixWare copyrights?
A I don't recall that.
Q Was it ever your view in the course of 1996 that Novell
had the right to direct Santa Cruz to waive its rights under
its SVRX licenses?
468
A No. Again, I thought we had bought the business so we
had the rights. And if someone else could just tell us to
waive the rights, then what did we buy? So I -- I -- I
felt -- I had felt that we bought the business.
Q Do you recall whether Mr. Frankenberg or anyone else at
Novell ever said to you that Novell had retained the rights to
waive Santa Cruz' rights under Santa Cruz' SVRX agreements?
A No.
Q Was it ever your understanding of the APA that Novell had
the right to prevent SCO from exercising its rights with
respect to SVRX source code under the agreement?
A It was our business, it was our ownership, and we could
do according to whatever our rights were.
MR. NORMAND: Your Honor, we would propose to move
into evidence SCO exhibit 180 on the basis of foundation laid
a few minutes ago by Mr. Mohan regarding a dispute that had
arisen concerning IBM.
THE COURT: Mr. Jacobs.
Mr. JACOBS: Yes, Your Honor. Could we have a quick
sidebar, Your Honor?
THE COURT: Yes. Do you want this on the record?
Mr. JACOBS: Yes, please.
(bench conference discussion according to the reporter's
ability to hear and understand what was said)
Mr. JACOBS: I want to make sure at the time --
469
(Reporter interrupted due to inability to hear and understand)
(inaudible) there was a stand-still agreement between the
companies in agreeing that this sort of correspondence would
not come in in the event of a future dispute. I want to have
an understanding that if we don't object on the basis of that
agreement to this exhibit coming in, that SCO will not object
to corresponding exhibits from our side coming in with respect
to the nature of this dispute.
MR. NORMAND: We have no objection. We have no such
objection.
THE COURT: All right.
Mr. JACOBS: That's fine, Your Honor.
(In open court)
Mr. JACOBS: In light of our sidebar, Your Honor, no
objection.
THE COURT: Exhibit 180 will be admitted.
(Plaintiff's Exhibit 180 received in evidence)
MR. NORMAND: This is a letter dated April 19th,
1996 from Mr. Mohan identified as President and Chief
Executive -- sorry -- from Mr. Frankenberg, CEO of Novell, to
Mr. Mohan, President and Chief Executive Officer of SCO.
The first paragraph says: "Dear Alok, thank you for your
letter today. I understand your deep concern about this
matter. We had been expecting your response yesterday and
have already continued our discussions with IBM today. I will
470
do my best to make sure that we address your concerns in our
ongoing negotiations. In addition, I believe I need to
clarify some potential misconceptions in your letter."
The letter continues: "First of all, I would like to
clarify that we are not granting IBM any additional rights
beyond what they already have. With the minor exception of
allowing IBM's VAR -- VAR's to make minor modifications to AIX
code to support unique hardware devices and allowing IBM's
major accounts to make temporary fixes from AIX source code,
the proposed transaction does not grant any additional rights
beyond those granted other similarly situated Unix licensees.
Specifically no right to sublicense source code is being
granted."
And we'd like to continue with the deposition at this
point, Your Honor.
THE COURT: All right.
Q Mr. Mohan, what's been marked as Exhibit 1064, a letter
to you from Mr. Frankenberg dated April 19th, 1996. The
letter contains the following language in the -- beginning in
the second paragraph, quote: "First of all, I would like to
clarify that we are not granting IBM any additional rights
beyond what they already have, with the minor exception of
allowing IBM's VAR's to make minor modifications to AIX code
to support unique hardware devices and allowing IBM's major
accounts to make temporary fixes from the AIX source code.
471
The proposed transaction does not grant any additional rights
beyond those granted other similarly situated Unix licensees,"
end quote.
Do you see that language?
A Yes.
Q Was it ever your understanding of Amendment-X that IBM
received additional rights beyond what it already had, with
the exceptions that I just read into the record?
A I believe that -- that we did not grant any additional
rights in this buyout of the -- of the kind which is we talk
about here.
Q Assuming that Santa Cruz got the Unix copyrights in this
deal, would possession of the Unix copyrights have been a
significant part of Santa Cruz' business going forward?
A I don't know what you mean by a significant part. I
can't parse an asset purchase that has all these pieces that
we buy to parse it to -- to try to assign values within this
stuff. We bought the business. We paid a certain price for
the business. Business includes everything. It's like a
human being, you know, just you -- your arms and legs and
everything are part of you. It's part of the business.
MR. NORMAND: Your Honor, that completes SCO's
designations for Mr. Mohan's deposition testimony.
Mr. Jacobs: And we have some counterdesignations,
Your Honor.
472
THE COURT: All right. Go ahead, please.
Q You weren't participating in the meetings that were
occurring between the respective parties that were --
A I was not.
Q -- drafting the document?
A I was not.
Q Would you agree with me that both companies, Novell and
Santa Cruz, had very capable skilled legal teams that were
representing it in this transaction?
A You're looking for my opinion?
Q I'm asking for your opinion.
A My opinion is that these lawyers are probably pretty
good, yes.
Q I assume as Chief Executive Officer you've been involved
in a number of transactions over the years?
A Uh-huh. You're looking for my opinion?
Q I'm asking for your understanding.
A My opinion is that these lawyers are probably pretty
good, yes.
Q I assume as Chief Executive Officer you've been involved
in a number of transactions over the years?
A Uh-huh, yes.
Q And you would use experienced and capable law firms in
representing you in complex transactions such as this?
A We would try to.
473
Q Would you agree with me that Santa Cruz and Novell at the
time of the transaction were experienced companies in software
transactions?
A Yes.
Q They were both large companies?
A We were a $200,000,000 revenue company at that time.
Novell was larger.
Q Would you agree with me that the transaction between
Novell and Santa Cruz in 1995 was an arms-length transaction?
Mr. NORMAND: Objection to form.
THE WITNESS: Yes. We were two separate companies,
and there was no other connection between them.
Q Would you -- you have no reason to believe that either
company was in an unfair bargaining position at the time of
the deal?
MR. NORMAND: Objection to form.
THE WITNESS: I don't think so.
Would you agree with me that the contract is the
most important item in determining what the terms of the deal
are?
MR. NORMAND: Objection, asked and answered.
THE WITNESS: And you want my opinion on that?
Q Asking for your understanding based on your experience.
A I think contract is one of the most important things,
yes.
474
Q And based on your experience and understanding, companies
make their business decisions based upon the terms in a
contract; is that right?
MR. NORMAND: Objection to form.
THE WITNESS: Yes.
Q And if there's a dispute in the future after a
transaction, the first thing the parties would look to is the
contract to determine what the terms of the deal were; is that
right?
MR. NORMAND: Objection to form.
THE WITNESS: Yes.
Q And oftentimes disputes, such as in this case, they don't
arise until many years down the road?
A Many years? Yes.
Q And would you agree with me that when they do, the
contract is the best evidence of the parties' rights and
obligations under the deal?
MR. NORMAND: Objection to form.
THE WITNESS: Yes.
Q This is a Santa Cruz press release dated December 6th,
1995, entitled "SCO Takes Major Step in Consolidating Unix
System Market".
A Uh-huh.
Q And below that it says, "SCO Completes Agreement With
Novell, Significantly Increasing Market Strength; Industry
475
Partners Endorse".
A Uh-huh.
Q And do you see the -- again, the date of this was
December 6th, 1995, which was the date of the closing of the
Novell/Santa Cruz deal.
A Yep.
Q Do you recall that?
A I see it here, yeah.
Q Is this one of the press releases that you would have
reviewed in -- as your -- in your role as Chief Executive
Officer of Santa Cruz?
A Probably, I just don't recall this particular -- a
specific press release.
Q The second full paragraph it says quote: "SCO has
already planned a stream of product and technology releases
reaching beyond the year 2000. These releases will include
the next release of the SCO UnixWare system in 1996; the next
release of SCO OpenServer system in 1996; a Compatibility Tool
Kit in 1996 for creating applications that run on both the SCO
UnixWare system and the SCO OpenServer system; and a 1997
release that merges the SCO UnixWare system and the SCO
OpenServer system. SCO is also working closely with its
strategic allies, HP and Novell, to develop a highly -- a high
availability, high RAS, 64 bit Unix system for the next
generation intel architecture expected to ship in 1998."
476
A Uh-huh.
Q As you sit here today, do you have any reason to believe
that this was not Santa Cruz' plan after the closing of the
Novell/Santa Cruz transaction?
A I have no recollection that it wasn't our plan.
Generally at -- I remember at SCO we had road maps. We always
had road maps on our products, and they would have had events
like these. So it does not look unusual that we would have a
road map.
Q And this press release that was issued on December 6,
1995 is what Santa Cruz was telling the marketplace its plans
were going forward; correct?
A Some aspects of it, yes. That particular paragraph you
just read, it talks about future years.
Q And you see where it talks about release of a merged
product in 1997?
A Yes, it does. That's what I read right now.
Q And I'll hand you another exhibit that we'll mark as
exhibit 72. Mr. Mohan, this is another press release dated
September 20, 1995 entitled "HP, Novell and SCO to deliver
high volume Unix OS with advanced network and enterprise
services".
A Uh-huh.
Q Do you see that?
A Yes.
477
Q I'm referring to the second bullet point --
A Uh-huh.
Q -- on page one --
A Uh-huh.
Q -- where it reads, and I quote: "SCO has purchased the
UnixWare business from Novell and will consolidate its SCO
OpenServer system and Novell's UnixWare into a merged high
volume intel-based Unix operating system that provides
interfaces in common with HP-Unix." Do you see that?
A Yes, I see it.
Q Is that consistent with your memory of the transaction?
A Yeah.
Q I'm going to get into that in a second. The
consideration that was paid from Santa Cruz to Novell as part
of the Asset Purchase Agreement was Santa Cruz' issuance of
stock to Novell; right?
A Yes.
Q And I'd ask you to turn to page two of the contract.
A Yeah.
Q And do you see subparagraph-A? It says, "Consideration
for assets: stock"?
A Yes.
Q And I quote: "On the terms and subject to the conditions
set forth in this agreement, as full payment for the transfer
of the assets by buyer to -- by seller to buyer, at the
478
closing buyer shall assume the assumed liabilities and issue
to seller 6,127,500 shares of fully paid and non-assessable
shares of common stock to buyer." Do you see that?
A Yes.
Q Is that consistent with your memory that Santa Cruz paid
Novell 6,127,500 shares of stock for this purchase?
A Yes. It's in this agreement, and I've signed this
agreement. I assume the data is correct. But if you're
asking if I remember 6,127,500, I do not remember the exact
number, but it's here on this document.
Q Do you know who Steve Sabbath is?
A Yes.
Q Who is Steve Sabbath?
A Our legal counsel.
Q Is he the lead legal --
A Yes.
Q -- Counsel for Santa Cruz?
A Yes.
Q Did you trust Mr. Sabbath's judgment at the time?
A Yes.
Q When you use the phrase asset purchase agreement, are you
referring to the September 19th, 1995 agreement?
A Yes.
Q So, again, let me make sure I'm clear. It is your
testimony --
479
A Uh-huh.
Q -- that the September 1995 contract reflects the intent
of the parties concerning what the deal was about?
A The -- it's -- if you read the whole thing in its
entirety, it -- it reflects what we were trying to do.
Q Let me ask this question. Do you have any contractual
basis at all as we sit here today for your belief that the
Unix business was transferred to Santa Cruz in its entirety?
A My belief is that the APA in its entirety gave us the
right to the business.
Q Let me ask the question again. As you sit here today,
can you point me to any specific contractual provision in
support of that belief?
A Short of going through the document line by line, I --
I -- I can't tell you the answer to that question. I -- I can
tell you what the APA was, what the intent was, what we were
trying to do, and it was the purchase of the Unix business.
Q So you would need to go through this contract to answer
that question; is that right?
A Probably.
Q Paragraph four of your declaration says, "I have reviewed
the declarations of Jim Wilt October '04, and Steve Sabbath,
October '04."
A Yeah. That's the one -- that's the ones I've looked
at.
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Q Were you -- at any point were you ever aware that Steve
Sabbath had submitted a second declaration?
A After this? Before?
Q Or before?
A I -- I was not aware -- I'm aware of it now that there
was an earlier declaration, but not when I looked at the
10-04, and I do not know of any declaration after 10-04.
Q Are you aware that in Mr. Sabbath's other declaration he
stated that Novell retained significant rights after the asset
purchase agreement, including the Unix copyrights?
A I just found out about the --
MR. NORMAND: Objection to form.
THE WITNESS: -- Previous declaration the last day
or so.
Q So we're handing you exhibit 76, which is a December
22nd, 2003 declaration of Steve Sabbath. Do you see that?
A Yep.
MR. NORMAND: Your Honor, can we stop the tape for a
moment?
THE COURT: Yes.
MR. NORMAND: Can we stop the tape for a moment and
have a sidebar?
THE COURT: You may.
MR. NORMAND: Thank you, Your Honor.
THE COURT: On the record?
481
MR. NORMAND: Yes.
(Bench conference discussion according to the reporter's
ability to hear and understand).
THE COURT: Counsel, I want you to speak up. The
jury can't hear you no matter what, so speak loudly and
clearly.
MR. NORMAND: Your Honor, I can try to find the
documentation, but I had believed that we had objected to this
and it had been excluded. It's clearly hearsay on its face.
He's citing a declaration that someone else has signed.
Mr. JACOBS: Let me introduce Mr. Daniel Muino to
Your Honor. He's been working on these designations as we try
to keep up with SCO's designations.
Mr. MUINO: Good morning, Your Honor.
THE COURT: Good morning.
Mr. MUINO: As I recall, I believe we had agreed as
to a horse trade on this whereby this testimony from Mohan
would come in for the exchange for something else. I think we
have to --
(the reporter interrupted due to an inability to
hear clearly).
I believe we had come to an agreement on this. There may
have been a misunderstanding, but I thought we had agreed to
keep this in exchange for testimony that you had objected to
in the course of our negotiation on this.
482
MR. NORMAND: I apologize to Your Honor. I wish we
had a record here that reflects this. It's hard for me to
imagine I would have wanted this to come in. It's so clearly
hearsay. But I have no reason to dispute Mr. Muino's
description of what he understood. And I don't want to keep
Your Honor or the jury waiting. I'm not sure I have a great
solution other than the two of us taking three or four minutes
and trying to check our notes. I don't know if that -- that's
acceptable to Your Honor.
THE COURT: Why don't we do that. Let the jury
stand, get their attention back to where it ought to be. So
why don't you take the time you need and see if we can't
reconcile this.
MR. NORMAND: Thank you, Your Honor.
Mr. MUINO: Thank you.
THE COURT: Ladies and gentlemen, we're going to
take a brief recess, but here in the courtroom. So if you'd
like to stand for a few minutes while the attorneys do some
quick consulting.
(brief pause)
MR. SINGER: Your Honor, we apologize. We sorted it
out. The video can continue.
MR. JACOBS: Your Honor, with your permission, we're
just going to roll back about 15 seconds to start the sequence
over.
483
THE COURT: That will be fine. Before you do
though, if you'll hold on.
Ladies and gentlemen, I have to ask you this. During the
sidebars, do any of you hear anything that is being said, even
close?
A JUROR: No.
THE COURT: You can see our lips move?
A JUROR: Just a lot of fuzz.
THE COURT: All right, thank you.
Go ahead.
Q So we're handing you exhibit 76, which is a December
22nd, 2003 declaration of Steve Sabbath. Do you see that?
A Yep.
Q I'd ask you to turn to page 6, paragraph 11.
A Uh-huh.
Q It reads, quote: "Under the Asset Purchase Agreement,
Novell retains significant Unix related assets following the
sale. For example, schedule 1.1(b) of the Asset Purchase
Agreement provided that much of the Unix System V intellectual
property would not be transferred to Santa Cruz by listing the
following items as excluded assets." And then it goes on to
quote Roman V on intellectual property from excluded assets.
"A: all copyrights and trademarks, except for the trademarks
Unix and UnixWare." Do you see that?
A Uh-huh, I see it.
484
Q Do you agree with Mr. Sabbath's statement in paragraph 11
that we just read?
A No. As I've stated so many times to you, I believe that
we were buying the Unix business, and we were buying the
complete business, except for the economic financial binary
revenue stream. That was my intent. That was what my belief
is, and it still is belief, irrespective of number 11 on page
six on this old document, which is not something I'd seen
before.
Q Mr. Mohan, I'm -- I've handed you exhibit 80 --
A Yes.
Q -- which is the proxy statement -- I'll represent to you
is the proxy statement that was sent to Santa Cruz
shareholders.
A Okay.
Q Can you just look --
MR. JACOBS: Your Honor, at this point we would like
to move into evidence Novell's Exhibit J10, which is a
Santa Cruz proxy statement sent to shareholders. We will trim
this exhibit so that only the relevant pages are provided to
the jury. We'll be looking at pages 132 and 133.
THE COURT: Any objection?
MR. NORMAND: No objection, Your Honor.
THE COURT: It will be admitted.
(Defendant's Exhibit J10 received in evidence)
485
Q Look at the first couple pages of this, which are letters
from Steve Sabbath to the shareholders describing what this
document is.
A Yep.
Q Do you have any reason to believe this is not a proxy
statement that was sent out to shareholders on around 2001
prior to the Caldera transaction?
A I have no basis.
Q And do you see that on page 132 there is a description of
Santa Cruz' intellectual property, runs from page 132 to
133?
A Uh-huh.
Q I'd ask you to take a look at that, please.
THE COURT: Mr. Jacobs, do you want to read that as
we had Mr. Normand do?
Mr. JACOBS: Thank you, Your Honor. I think the
jury can read along with us pretty quickly, and I'd rather not
use the time for that.
THE COURT: All right.
Did you all get that read?
A JUROR: We're not that fast.
THE COURT: Have you all now read it? Anyone who
has not? All right.
Mr. JACOBS: Your honor, I think if anyone is still
reading it on the jury, the next question and answer sequence
486
will make clear the point of this excerpt in any case.
THE COURT: Go ahead, please.
A Do you want me to read all of page 133?
Q Just the section called intellectual property that begins
on 132 and runs onto 133.
A Okay.
Q Do you see that nowhere in this intellectual property
section does Santa Cruz claim to own the Unix copyrights?
A If you're asking if I can read English and say there's no
word copyright, my answer is yes, there is no word copyright
in here.
Q Did anyone from Novell at the time of the Asset Purchase
Agreement ever say to you or any representative of Santa Cruz
that SCO, after the transaction, would own the Unix
copyrights?
A Again, the same answer. No one from -- that I work with
from Novell, which would be limited people, Frankenberg and
Duff Thompson, they did not speak to copyrights, so they did
not tell me that they'd kept it. They did not tell me they'd
given it to us. So it's neither in nor out.
Q To your knowledge, at the time of the Asset Purchase
Agreement did anyone from Santa Cruz expressly say to Novell,
"We want the Unix copyrights as part of this transaction"?
A I would -- I would not know that. I -- that level, and I
don't recall any such -- I would not know that.
487
Mr. JACOBS: That completes the testimony of this
witness, Your Honor.
THE COURT: Thank you, Mr. Jacobs.
Mr. Normand, if you would, please, your next one.
MR. NORMAND: Your Honor, we next call -- we propose
to present the designations of Doug Michels, who was at Santa
Cruz.
THE COURT: The deposition was taken when?
MR. NORMAND: March 28th, 2007.
THE COURT: Thank you.
(Douglas Michels called as a witness via video deposition)
Q -- September of '95 at SCO?
A Dates aren't my favorite thing, but as best as I can
determine, I was probably CTO At that point, Executive
Vice-President and CTO.
Q Are there other possibilities or are you --
A I was there for 20 years and I had half-a-dozen titles,
and it never really changed my job much, so I never worried
about what the title was.
Q Well, how would you characterize your participation in
the Asset Purchase Agreement negotiations?
A Well, I was very involved in the initiation of it, and I
was very involved in the strategy behind it, and I was very
involved in the high level structure of the agreement, and I
was involved in supervising pretty directly the people who
488
were negotiating the details of the agreement.
Q When you say you were involved in the initiation of the
agreement, can you tell me what you mean by that?
A Well, unfortunately this is a very long time ago, and I'm
really bad at dates and, you know, trying to -- trying to get,
you know, remote facts in exactly the right order. But, you
know, the discussion of essentially acquiring Unix had been
going on for ten years. And before Novell even bought Unix we
were involved in discussing it with A.T.& T.
And so I believe this particular round that went to the
Asset Purchase Agreement was kicked off by Mike DeFazio
contacting me at a Uniform conference and opening up the
discussion. I mean I know he contacted me and I know he
opened up the discussion, and I'm pretty sure that it was that
conversation that went to the Asset Purchase Agreement, but it
could have been -- it could have been a different iteration.
I'm not a hundred percent sure. This was as a -- as I say, a
ten year process.
Q Understandable. Can you put even a rough time frame on
Mr. DeFazio's initial conversation with you?
A Well, we'd have to go identify when Uniform in Dallas
was, but I suspect it was, you know, within a few months of
the negotiations getting serious.
Q You also said that you were involved in the strategy of
the Asset Purchase Agreement. Can you tell me more about what
489
you meant by that?
A Sure. It's a big -- a major decision for the company
to -- to, you know, make that bet. So the whole issue of did
we want to own it? Did -- what did we want to do with it?
How do we figure out how to pay for it? I mean That was
all -- that was all, you know, discussions that were strategic
in nature and that I was involved with.
Q And you also mentioned that you supervised the people who
negotiated the deal. Who were those people?
A Primarily Jim and Geoff and some of the legal people, but
the real business development team was Jim Wilt and Geoff
Seabrook. And, again, I don't recall whether -- whether they
were directly reporting to me at that point or not, or one of
them was and one of them wasn't.
I mean, again, over the years they often reported to me,
and I worked very closely with -- whether they were reporting
to me or someone else, we worked very closely as the team and
business development was one of the -- one of my main roles.
I met with them regularly, and whatever issues came up that
they had trouble resolving, they would -- they would come to
me, so --
Q Apart from your initial meetings with Mr. DeFazio, did
you have other meetings face-to-face with Novell personnel as
part of the APA negotiations?
A Yes.
490
Q With whom?
A I don't remember.
Q How -- how many meetings would you say?
A Two or three.
Q Okay. Do you recall the time period of those? Was it
close to the execution? Earlier?
A Both.
Q Do you recall anyone who was at -- present at those
meetings, either from your side or from Novell?
A Well, certainly Jim Wilt and Geoff Seabrook and I think
Ed Chatlos, some of the legal -- some of the legal people.
Q Do you recall any of the legal people?
A Kim Madsen on our side. I don't remember the names of
the Novell legal people.
Q Do you have an understanding as to what the purpose of
the Asset Purchase Agreement was?
A Sure.
Q What is your understanding of the purpose of the Asset
Purchase Agreement?
A We were buying the original A.T.& T./Unix business from
Novell, who had bought it from A.T.& T.
Q And what's the basis for that statement? What leads you
to say that?
A That was the deal.
Q Um --
491
A That's what Mike and I talked about in Dallas and that's
what the deal was, was Novell didn't want it anymore, we'd
always wanted it. He said, "Do you want to buy it?" I said,
"Yeah." We bought it.
Q I want to talk a bit about some of the subsidiary related
agreements that came along with the Asset Purchase Agreement.
Did you have any involvement in the negotiation of the
technology licensing agreement?
A Yeah. I tried to stay completely away from the actual
mechanics of the agreement and stick to who was getting what.
And what was in which piece of paper, I mean, I completely --
you know, had a great business development team. We had a
good legal team. You know, as long as they found the right
way to engineer the documentation to match what -- what we had
agreed at a business level needed to happen, you know, as to
which agreement did what, you know, that wasn't my job.
Q I take it then the answer is no, that you didn't have
involvement in the actual negotiation of the technology
licensing agreement?
A I don't know if I did or not. I had involvement in
what -- what we got or what they had or who did what, which
document it went into, I don't know.
Q Do you recall seeing drafts of the technology licensing
agreement?
A I saw stacks of paper on people's desks.
492
Q But do you have any specific recollection of --
A Did I read them?
Q Do you have any specific recollection of seeing drafts of
the technology license agreement?
A I'm sure they were in the stacks of paper on people's
desks that I saw, but I didn't read them.
Q How about the Operating Agreement? Do you have any
recollection of being involved in the negotiation of the
Operating Agreement?
A Same answer. I was involved in the negotiation of the
deal. I was involved in the several page summary that all
those agreements stemmed from. And I was involved in
determining, you know, what we would give and what they would
give. And when issues came up about how would something work,
because in writing the agreements they would come up against
some -- some edge condition, and then they might bring it to
me and say, "Well, what do you think should happen in this
edge condition?" And we'd discuss it, and they'd go off and
do it. So was I involved in the agreement. I'm sure I was.
Do I know which agreement evolved out of which discussion?
No.
Q To clarify, you don't have any memory of being
specifically involved in the negotiation of the Operating
Agreement?
A I was specifically involved in the negotiation of all the
493
agreements, but I don't know what agreements were -- resulted
from what conversations. I was involved in the entire
process. I had daily discussions with the people doing the
negotiation, and they would come to me with issues and
concerns and discussions about how should something work. I
never asked them, "Well, does that go in the Operating
Agreement or does that go in the Technology License
Agreement?" I didn't care. Didn't matter to me.
Q I understand that you were involved in the deal
generally, and I understand the testimony you've given so far.
What I'm trying to do now is compartmentalize that a bit and
see if you have any memory specific to particular
agreements?
A I have no memory specific to any specific agreement.
Q Did you have any involvement in the negotiation of
Amendment No. 1 to the Asset Purchase Agreement came a few
months later?
A Same answer.
Q No memory specific to --
A I was involved in the discussions leading up to every
agreement. I was not focused on what pieces of paper came out
of those discussions.
Q Continuing in paragraph nine of your declaration on page
two, the last sentence of it reads, "There was no intent to
grant Novell any rights to waive or to direct or require SCO
494
to waive any of its intellectual property rights or
protections contained in the Unix licenses." What's the basis
for that statement?
A We bought the whole business.
Q Except for certain revenue streams though; isn't that
right?
A We bought the whole business. We partially paid for it
with the residual revenues from certain contracts.
Q As to those contracts, did Novell retain any rights?
A It was purely a financial arrangement. We bought the
whole business. The only rights they retained was rights
preventing us from arbitrarily destroying that revenue
stream.
Q What rights were those?
A Well, I mean if -- if we were to go to the customer and
say, "Okay, you don't have to pay anymore," then they would
have to approve that because that would be damaging their
revenue stream.
Q And I -- so I understand your testimony, and what I'm
trying to do here is drill down a bit. You've testified about
the intent of the deal, and you're testifying specifically
about the intent as applied to Novell's rights, and I want to
know why you believe this is the intent. Is this something
that was told to you? Is this something -- you know --
A This was the agreement that I reached with Novell, that
495
the group meetings -- I mean it was clear from day one in our
strategy we were buying the business. We needed to control
the customers. We didn't need to be -- have Novell also
talking to our customers.
The reason that -- even on the residual revenue stream
that they essentially got all the money, we said we're going
to collect the money for you because we don't even want you
talking to our customers at all. That was the discussion.
The reason we demanded the five percent was we needed that
just to cover our costs to collect the money because we were
collecting it on behalf of Novell because they were not to
ever talk to our customers. Otherwise we would have just let
them collect the money.
I mean that was clearly discussed by all parties, that we
were to be the complete relationship management of that -- of
all customers, and we should be the only ones ever talking to
them.
Q And what I'm talking about is something a little more
specific than that than relationship manager. Novell retained
certain revenue streams, we've agreed. And Novell has argued
in this case that it retained certain rights with respect to
those contracts. One of those rights is the ability to
command SCO to do certain things as concerns those contracts.
I take it that's inconsistent with your memory of the
negotiations; is that right?
496
A That's correct.
Q And tell me more about why it's inconsistent with your
memory of the negotiations. Can you come up with anything
specifically?
A Yes. Our -- our agreement with Novell was that we were
buying the entire business. We would have all relationship
management and account control with those customers. How can
you have all account control if somebody else can order you to
do something with them? Doesn't make any sense. It's
inconceivable. We would never agree to that.
Q Did they say at any point during -- did Novell convey
that it didn't have the authority to direct SCO to make
changes to SVRX licenses at any point to you?
A As I said, I'm talking about their actions, not what they
said. Their actions were that they made direct contact with a
customer and directly modified the license agreement with a
customer, and we said that's a breach of contract, and they
negotiated a settlement.
Q I take it then the answer to my question is no, you never
heard Novell say something like that?
A I'm not saying that.
Q Okay. I'll ask you the question again. Did you ever
hear Novell tell --
A You know --
Q -- you that -- that they did not have the authority to
497
direct SCO to take actions as concerned SVRX licenses?
A We had a very long discussion, set of discussions, with
Novell about the incorrect actions they had taken. And you're
asking me to recall specific conversations that happened ten
years ago, and I don't. But in those conversations they did
acknowledge that maybe they had exceeded the rights under
their license agreement, and they were willing to enter into
settlement discussions.
Q What was your involvement in those agreements? Did you
for example draft any of the language of those agreements?
A Oh, sure, of course. I love to write legal contracts.
Q I take it the answer is no, you did not write any of the
language in those agreements?
A No, I did not write any of the language in those
agreements.
Q You're not going to go to law school?
A I was involved in the discussions about the settlement
and what we would be willing to settle for and, you know,
what -- you know what -- what we needed them to agree to do to
avoid this happening in the future. How it got implemented
and what amendments, I don't know.
Q Do you recall reviewing any of the drafts of the
agreements that surrounded this, whether it be Amendment No. X
or Amendment No. 2 or whatever agreement?
A We always worked from term sheets. And term sheets are
498
things that lawyers don't write. They're simple. They're
easy to read. They're clear. They're in English. I reviewed
term sheets.
Q So I take it then the answer is no, you do not recall
reviewing any drafts of the actual language of the amendments
or agreements that took place as part of this?
A Only to the extent that it was the same as the language
in the term sheet, which it may or may not have been.
Q Do you recall there being term sheets as part of this
effort to resolve this dispute?
A There was some form of term sheet. What form it was in,
whether it was e-mails or whether there was an actual, you
know, Word document, I don't know. But there was definitely a
short English summary of what the terms of the settlement
would be.
Q And I take it you were involved in the term sheet portion
of this --
A Yes --
Q -- Negotiation?
A Absolutely.
Q Who else was involved in that?
A Alok, and I'm sure Geoff, Steve Sabbath, Kim. I don't
know who else.
Q You testified this morning that one of the purposes of
the APA was to buy the original Unix business. Do you recall
499
that?
A Yes.
Q Was one of the purposes of the APA to buy the UnixWare
business as well?
A Yeah. What I meant was the intent was to buy the
business that had originally started at A.T.& T. and Bell
Labs, and then became U.S.L., and then was acquired by Novell,
and then -- and that -- that whole business is also what
created UnixWare. But I mean we bought the employees and the
body of that business, which included everything they ever
did, which obviously included UnixWare, as well as SVR IV and
SVR III and SVR V.
Q Do you recall -- independent of how it was embodied in a
particular agreement, do you recall the issue of a license
back to Novell in --
A Yes. We wanted to make sure that that license didn't
give them any rights to go back into the Unix business or to
use that technology other than had incidentally perhaps crept
in. And so we -- we did effectively grant them rights to Unix
technology as necessary to protect them from any incidental
use of Unix inside of their existing products.
Q And did you have an understanding at the time as to the
basis on which Santa Cruz granted Novell rights to the Unix
technology?
A The basis, what do you mean?
500
Q Was it your view that Santa Cruz owned rights in the Unix
technology as of the date of the license back to Novell?
A Of course. We bought the business. And as a result of
buying the business, we owned all the intellectual property.
Q Was it ever your understanding when you were at Santa
Cruz that in order to acquire any Unix or UnixWare copyrights,
Santa Cruz was obligated to go back to Novell and make a case
as to why Santa Cruz needed the copyright?
A Of course not.
Q Did any attorney --
A We owned the business.
Q Did any attorney from Santa Cruz ever tell you any such
thing?
A No.
Q Did any executive or any employee of Santa Cruz ever tell
you such thing?
A Not that I can recall. If they did, I would have laughed
them out of my office.
Q Let me direct your attention to paragraph nine, which you
looked at earlier with Mr. Melaugh. You say in the last
sentence, quote, "There was no intent to grant Novell any
right to waive or to direct or require SCO to waive any of its
intellectual property rights or protections contained in the
Unix licenses," end quote. Do you see that language?
A Yes.
501
Q Does that language accurately reflect your intent?
A Yes, it does.
Q I have a few follow-ups. Let's begin where we left
off -- or he left off. And Mr. Normand just listed through a
series of bases for your testimony about the intent of the
deal. One of those bases was communications back from SCO
employees. What specific communications back from SCO
employees were you referring to?
A Again I had close, close interaction with particularly
Geoff Seabrook and Jim Wilt, as well as Kim and Steve and the
legal department and had, you know, virtually daily e-mails or
phone calls or conversations.
Q Okay.
A Continuous conversations I mean.
Q Can you recall any specific e-mail, telephone
conversation, in-person conversation that has informed the
testimony that you've given today?
A Oh, sure, ten years ago on Tuesday I think it was -- no,
of course not. I mean we talked daily.
Q I'm going to -- I'm going to ask the same thing about
each of the topics Mr. Normand went through, but maybe we can
shortcut it.
A That would be nice.
Q What is your opinion as to the scope of that phrase,
namely, copyrights required for SCO to exercise its rights,
502
and so on? What copyrights does that include?
A I mean I believe the scope of the term here is all
copyrights relating to the Unix business: Source code,
documentation, screens, you know, training materials, you
know, brochures, marketing literature. I mean, you know,
there's millions of copyright things in a business.
Q Why are all those copyrights required for SCO to exercise
its rights with respect to the acquisition?
A We took over the business. We were in the business of
selling intellectual property. We were in the business of
supporting the intellectual property. We were in the business
of providing training. We were in the business of providing
marketing materials. We couldn't do any of that without
owning the copyrights.
Q Just one question. You said in response to a question
from Mr. Melaugh that you assumed to the copyrights we're
going over. Do you recall using words to that effect?
A Okay, I might have.
Q To the extent that you did, what did you mean by that?
A I meant that the only way I know of and anyone on my team
knew of to buy a software business is to buy the copyrights.
And there's no way we would have ever done a deal to buy a
software business where we didn't get the copyrights and all
the other intellectual property. That's what you're buying.
And especially in the case of Unix with its convoluted
503
intellectual property history and whatnot, to not -- to not
get that stuff would be to not do the deal.
And so it was implicit in everything we did, everything
we thought. Every single person on my team understood that.
The lawyers understood it. The business development people
understood it. I mean it's just -- it's so essential it's,
you know, like breathing oxygen. I mean there's no way that
deal could have happened without getting the copyrights.
Q What's the basis for that testimony?
A And we had, you know, many meetings, many dinners. I
mean it was just implicit. It's in the -- it's in the water.
I mean you -- you don't buy software companies without buying
the intellectual property, and you don't buy the intellectual
property without buying the copyrights.
Q But no one from Novell ever said to you, "We're
transferring the Unix copyrights as part of this deal"?
A I have no idea what people said ten years ago.
Q You don't have a memory of someone saying that?
A Specific words? I have no memory of any specific words
at all from ten years ago.
Q Or words to that effect?
A You know, I'm not going to testify to words I don't
remember. I know that -- I know with certainty that everybody
involved understood the copyrights were part of the deal.
Q Did anyone from Novell -- I believe you were asked did
504
anyone from Novell ever tell you that Novell owned the Unix
copyrights. Did anyone from Novell ever tell you that SCO
owned the Unix copyrights between the time of the Asset
Purchase Agreement and 2001?
A You know, the reason I can say with certainty that nobody
from Novell ever said that they did is because that's so
preposterous a thing, I would remember it.
Q Well, Mr. Normand asked you I think a fairly specific
question, whether SCO held itself out to be the owner of the
Unix copyrights --
A Yes.
Q -- between 1995 and 2001?
A We thought ourselves to be the owner of everything. We
owned Unix. We owned the product. We spent a lot of money.
We gave away 20 percent of our company to buy Unix. Of course
we held ourselves out to be the owner of Unix.
Q I'm talking specifically about copyrights in this
instance.
A In my mind they're not separable. If you own UNIX, you
own the copyrights. It's a legal distinction that you're
making that doesn't parse to a -- to a normal human being. I
don't -- I don't know how to answer your questions. It's
jibberish.
Q Apart from the license deals, are you aware of any other
instance in which SCO held itself out specifically to be the
505
owner of the UNIX copyrights, as opposed to Unix generally?
A I don't -- I'd have to think about that. I don't know.
Q If you need a moment to think about it, I'm happy to --
A I can think about it for a couple hours I might not know.
I mean I don't think that way. We don't talk about
copyrights. But I'm sure there are places where we held
ourselves out to own the copyrights, because there's no
question in our minds that we did. You're asking me to recall
where specifically ten years ago we might have said something
obvious, and that's a very hard question.
Q If you don't have a memory of it, you don't have a memory
of it. I'm not asking you definitively whether it occurred or
not. I'm just asking you about your recollection.
A Well, you know, I guarantee you we put copyright notices
in every document we wrote. How could we do that if we didn't
own the copyrights? We put copyright notices in every module
of source code we wrote. They all said we owned the
copyrights. So there's two more examples. We signed
non-disclosure agreements with people. I'm sure they included
copyrights.
So I mean it's everywhere. Everything we did. There's
no -- there's no break in this pattern. We owned Unix. We
owned the copyrights. We owned the trademarks. We owned the
intellectual property, and every action we took represents
that.
506
MR. NORMAND: Your Honor, that concludes our
designations of Mr. Michels' amusing testimony.
Mr. JACOBS: We have some small amounts of
additional testimony.
The Court: How long do you think it will take,
Mr. Jacobs?
Mr. JACOBS: Ten minutes.
THE COURT: Would you have any objection if we were
to take our break before you start?
Mr. JACOBS: No.
THE COURT: Let's take a 20 minute recess.
(Jury excused)
After Mr. Michels, you will have who again?
MR. NORMAND: Mr. Levine, Your Honor.
THE COURT: Will his be very long?
MR. NORMAND: I think it adds up to 20, 25 minutes.
MR. SINGER: Ours is 18 minutes. I'm not sure how
much is designated by Novell.
MR. NORMAND: Apparently it adds up to more like 35
minutes, Your Honor.
THE COURT: Do you have anything before we recess?
MR. JACOBS: No, Your Honor.
MR. SINGER: No, Your Honor.
THE COURT: We'll take 20 minutes then.
(recess 11:47 a.m.)
507
***** Part 2 *****
(12:10 p.m.)
THE COURT: I understand that there are some of you
who are protesting my time keeping. Ms. Malley did not
indicate to me any specific names, but I try to keep us
going. Do you have anything, counsel, before we bring the
jury in?
MR. JACOBS: Not from us, Your Honor.
THE COURT: Ms. Malley, if you would, please. I'm
curious, Mr. Normand, Mr. Singer, why you don't have the
words below the deposition? Is there some conscious effort?
MR. NORMAND: There was no conscious decision, Your
Honor. It was my understanding was it was something that
was very difficult to accomplish.
MR. SINGER: Part of it was we had edited out
objections that weren't being made, and that couldn't have
been apparently done from running transcript.
MR. JACOBS: Just on that point, Your Honor, we're
going to try to make sure that the objections are edited out
going forward. You have been kind not to call us on it
but --
THE COURT: It is really quite distracting. It is
even more so than, well, I do -- I don't know which is
better in terms of whether you should have the banner below
or not, but it is kind of like going to a basketball game
and spending the whole time looking at the screen, the
508
floor, because you become distracted by those words moving
below it. I will not stop either of you from doing it or
not doing it, I was just curious why the decision was made
for one to do it and the other not.
Mr. Singer, did you have something?
MR. SINGER: There is. What we're trying to clarify
is one of the witnesses that we plan to call tomorrow there
has been a concern that somehow he is not properly listed.
And we are trying to get to the bottom of it. He is on the
pretrial order signed by the court. There has been a
suggestion that he was not on a more recent order and
Mr. Jacobs and I have been trying to work through that
issue. But right now there is nothing we need to take up
with Your Honor.
THE COURT: All right. Was his name read the first
day?
MR. HATCH: I will start bringing that every day. I
can look again, but I am pretty sure he was.
THE COURT: Is his name on my witness list?
MR. HATCH: That is the problem, Your Honor, Troy
Keller is the name.
MR. SINGER: He was on the pretrial order signed by
the court. We would need to check to see whether he was on
the list that was read.
MR. JACOBS: He is not on the list.
509
MR. HATCH: He is not on the list, I agree with that.
MR. JACOBS: There may be a set of privilege issues.
He is a lawyer. So we'll try and work this out and get it
up to you.
THE COURT: All right.
THE CLERK: All rise for the jury.
(Whereupon, the jury returned to the courtroom.)
THE COURT: Go ahead, Mr. Jacobs, if you would,
please.
(Whereupon, the deposition continued.)
Q. Did you draft any of the language of the Asset
Purchase Agreement?
A. No.
Q. Did you review drafts of the Asset Purchase
Agreement?
A. No, not really. I think there was, you know,
a -- a -- prior to the Asset Purchase Agreement there was
some kind of letter of intent or -- or high level deal, and
I'm sure I reviewed that carefully, but once we -- the
trans- -- translation from the sort of two- or three-page
deal to the Asset Purchase Agreement -- you know, had a
great team to do that, and they didn't -- they only came to
me if there was a debate about the translation process.
So --
Q. Do you recall any of the debates that they came
510
to you about on the translation process?
A. Not in detail, no.
Q. Even -- even vaguely?
A. Not really.
Q. But sitting here today, you don't have any
recollection of being involved in the negotiation of
Amendment Number 1?
A. I -- same answer. I was involved in the
negotiations of all of the agreements, and I don't have any
recollection specific to any particular agreement.
Q. Is the same true of Amendment Number 2? Were you
-- do you have any recollections of being involved --
specific recollections of being involved in the negotiations
of Amendment Number 2?
A. I don't even know what Amendment Number 2 is.
Q. Fair enough. Let's talk a bit about the
declaration you gave in this action. I'm going to hand you
a copy of it. Let's mark this as exhibit -- I think
we're -- the first one is Exhibit 241. Do you recognize
this document?
A. This is a declaration I gave in regard to the
case with IBM, not the case with Novell, correct?
Q. That is correct, as far as I understand. Now,
I'm -- the last page, that's your signature above the line,
"Doug Michels"?
511
A. I would say that looks like my signature.
Q. Did you draft the language of this declaration?
A. Not -- I edited it, but I didn't draft it.
Q. Who drafted the language of this declaration?
A. The -- the SCO attorneys.
Q. So let's talk again a bit more about the basis
for your conclusion that copyrights transferred as part of
the Asset Purchase Agreement. I take it that's based on
your general understanding of the deal? It's -- you don't
recall anything specifically told to you about this? Is it
based on -- are there provisions of the Asset Purchase
Agreement that you can recall that support this opinion?
A. I -- I didn't read it then, and I haven't read it
recently. I've never read it through. I'm not a lawyer,
and I have no comment about the Asset Purchase Agreement.
Q. And did you read the Asset Purchase Agreement
agreement in preparation for your December, I think --
November 2006 declaration?
A. No.
Q. When was the last time you read the Asset
Purchase Agreement?
A. I have never read the Asset Purchase Agreement.
I've glanced at it, I've skimmed through little bits of it,
but I have never read it.
Q. Is the same true of -- of the other agreements we
512
discussed earlier?
A. Yes.
Q. The Technology Licensing Agreement, The Operating
Agreement?
A. Yes.
Q. And the two amendments?
A. I have never read any of them cover to cover.
Q. So to begin back where we left off, to be clear,
you did not review the Asset Purchase Agreement in
preparation for the execution of your declaration?
A. I don't -- did not, no.
Q. And -- and you have not read the Asset Purchase
Agreement cover to cover?
A. No.
Q. So if I asked you, as a businessman, where would
I go to learn the answer to this question, what would your
answer be?
A. My answer would be I would call my counsel and
ask them, you know, what's the answer to this question?
Q. What was your involvement in those agreements?
Did you, for example, draft any of the language of those
agreements?
A. Oh, sure, of course. I love to write legal
contacts.
Q. I take it the answer is no, you didn't -- you did
513
not write any of the language in those agreements?
A. No, I did not write any of the language of those
agreements. I was involved --
Q. Now, is it fair to say that for all of those
topics -- term sheets, communications with Novell,
communications with the Board of Directors, press releases,
communications with counsel and paralegals -- you have no
specific recollection, sitting here today, that's informing
your testimony?
A. No. I mean, I can't give you a specific -- I
mean, I know in order to -- to do a deal in this magnitude
we had to do a major presentation to the Board, you know,
before you can make a deal involving nearly 20 percent of
the equity of the company. I mean, the Board -- the Board
had a duty to scrutinize it in great detail. And we -- we
prepared a detailed analysis of the deal, and the rights,
and, you know, all that.
So there was -- there was a lot of discussion
internally, and -- and even formalization of that. But, you
know, from ten years ago, can I remember the exact details
of that? No.
Q. I take it it is your testimony then, that you
don't have any specific memory of conversations with people
from Novell in which they said they're transferring the UNIX
copyrights as part of the Asset Purchase Agreement?
514
Q. I take it it's your testimony that you haven't
had conversations, one way or the other with Novell, about
UNIX copyright ownership between 1995 and 2001?
A. I might have. I don't know. I don't recall.
Q. You don't recall any conversation, one way or the
other?
A. I certainly recall with certainty that Novell
never claimed that they had the copyright.
Q. Did SCO -- did anyone from Novell ever say that
SCO owned the UNIX copyrights?
A. I don't know.
MR. JACOBS: That concludes this witnesses testimony,
Your Honor.
THE COURT: Thank you, Mr. Jacobs.
Mr. Normand, your next deposition?
MR. NORMAND: The next deposition designation will be
of Burt Levine who was deposed on March 23rd, 2007.
(Whereupon, the following is deposition excerpts of
Mr. Burt Levine's deposition.)
Q. Okay. You were a lawyer for AT&T back in the
1980's; is that correct?
A. That's correct.
Q. How many lawyers were there in the legal
department at AT&T in the eighties? Roughly.
A. I guess between 75 and a hundred.
515
Q. At some point in time when you were a lawyer in
AT&T's Legal Department, were you involved in working on
AT&T's UNIX business?
A. Yes.
Q. What portion of the 75 to a hundred lawyers in
AT&T's Legal Department were involved in working on AT&T's
UNIX business, to the best of your recollection?
A. I guess, um, 15 to 20.
Q. When AT&T spun off its UNIX business in the form
of UNIX Systems Labs in 1991, did you go to USL?
A. Yes.
Q. Now do you recall that I believe in 1993 USL and
its UNIX assets were purchased by Novell?
A. Yes.
Q. Do you recall what the purchase price was?
A. I don't.
Q. When Novell purchased USL and its UNIX assets in
1993, did you move to Novell?
A. Yes.
Q. And when I say "moved to Novell," I meant you
went to work for Novell in 1993; is that right?
A. That's correct.
Q. Is it fair to say that you and Mr. Weitz and
Mr. Tannenbaum in New Jersey were continuing to head up the
legal efforts relating to UNIX after Novell's purchase of
516
the USL in 1993?
A. That was my understanding.
Q. Do you have an understanding that on September
19th, 1995 Novell sold certain UNIX assets to a company
called Santa Cruz?
A. Yes.
Q. Immediately after that purchase on
September 19th, 1995 did you continue to work with Novell
back in New Jersey?
A. As I recall, I did. In the same facility --
Q. Right.
A. -- I remember I did.
Q. Were you still in Summit, New Jersey, at that
point in time?
A. I believe we were, yeah.
Q. A few months or so after the purchase by Santa
Cruz of certain UNIX assets from Novell did you then move to
Santa Cruz, meaning you began to work for Santa Cruz?
A. Yes.
Q. Do you remember approximately when that happened?
A. It was a transition time and by February 1st of
2006 I know that the three of us in the Legal Department
were considered SCO employees, whether there was anything
that was formalized on company records before that, I don't
know.
517
Q. Is this document, Schedule 1.1(b), unclear to
you?
A. Yes.
Q. How is it unclear to you?
A. The asset that purports to be transferred from
Novell to SCO in the intent of the parties ex -- will
include, to my reading or to my knowledge, even though I
don't remember the specific terms of this agreement, the
intention was to convey all of these ownership and auxiliary
ownership rights to the asset including copyright. And the
fact that there is this kind of an exclusion there tells me
that there is an ambiguity in this agreement or a mutual
mistake which wipes out any kind of an integration clause.
I don't agree that that's what the agreement means.
Q. Can you tell me in your view what is ambiguous
about the exclusion on Schedule 1.1(b) of, quote, all
copyrights and trademarks except for the trademarks UNIX and
UnixWare?
A. I don't think you can exclude a copyright in this
kind of an asset transfer. I think you can exclude a
copyright if you're transferring the physical manifestation
of the asset, but when you purport to transfer the whole
asset and all the business and everything else I think
inherent in that is going to be the copyright and it's a
contradiction in terms for the copyright to be excluded like
518
this.
Q. What language can you point me to where there is
that restriction in Section 4.16(b)?
A. I think you would have to look at the intent of
the parties. The intent of the parties was to give as one
category of compensation a royalty stream.
Q. Aside from the intent of the parties, can you
point me to any specific language in Section 4.1(b) that
supports your limitation on Novell's dictation right?
A. No, I can't point to anything specifically in
those sections but it's inconceivable to me that if you take
the language of (b) literally, this derogates 100 percent
from the grant that's being given from Novell to SCO. The
grant is illusory if Novell wanted to actually enforce
something like this to the extent it says in subsection (b).
There may as well not be an agreement.
Q. Now you've talked about the intent of the
parties, Mr. Levine, as being the basis for your view that
the dictation right in 4.16(b) is limited to a royalty
stream. What specifically can you point me to in support of
your view of the intent of the parties on 4.16(b). You can
answer?
A. I can't point you to anything in the agreement.
Q. What are you referring to when you talk about the
intent of the parties? What are you basing that on?
519
A. One of the few things that I can recollect about
these things is the discussions that I've had with the
negotiating people.
Q. Which people?
A. With Novell.
Q. Which people in the negotiating team did you
discuss concerning any limitation on Novell's dictation
right under Section 4.16(b)?
A. Definitely Chatlos and probably Maciaszek.
Q. Do you remember any specific conversations with
Ed Chatlos concerning your view that Section 4.16(b) in
Novell's dictation right thereunder is somehow limited to a
royalty stream?
A. No. No, nothing specific.
Q. Do you recall how long you stayed with Santa
Cruz?
A. Yes.
Q. How long did you stay with Santa Cruz?
A. Till September of 2000.
Q. Was it your understanding at the time of the
drafting or negotiations of the APA that Mr. Bradford was
personally involved at all?
A. Yes.
Q. Did Mr. Bradford ever tell you that Novell was
retaining any UNIX or UnixWare copyrights with respect to
520
the APA?
A. No.
Q. Did Mr. Bradford ever tell you that he had
informed Wilson Sonsini lawyers to draft the APA so as to
have Novell retain any Unix or UnixWare copyrights?
A. No.
Q. Mr. Levine, from the time of the APA in 1995
until you left Santa Cruz in 2000, did you ever hear anyone
whether inside or outside of Santa Cruz or inside or outside
of Novell say that Novell had retained the UNIX or UnixWare
copyrights?
A. No.
Q. If you had heard anyone make such a statement,
would that have been a surprise to you?
A. Very much so, yeah.
Q. And why do you say "very much so"?
A. My personal experience with the couple of years
that I spent at Novell was that it was a very ethical
company and I, I was very impressed with that.
Q. And how has that fact bear on your answer, the
fact that you had the view that Novell was an ethical
company?
A. Was ethical and I believe that being an ethical
company in its dealings with its partners or transferees or
whatever it is that they would not resort to withholding
521
information or trying to withhold something that the
transferee in this case would be entitled to.
Q. As I ask you now, what words would you use to
describe your view that the copyrights had been transferred?
A. Right. That the transfer of the business,
including both the physical assets and the intellectual
property assets, would automatically convey the copyright
along with the rest of the business assets.
Q. Is it your view that under the Asset Purchase
Agreement between Novell and Santa Cruz that Santa Cruz
merely acquired a license from Novell to use the UNIX and
UnixWare source code?
A. No, they obtained a full right, title and
interest in ownership of that asset.
Q. If a prospective licensee had signed a software
agreement and no other documentation with AT&T, what rights
with respect to source code did it have?
A. It would have no rights under the agreement
because there was no product identified.
Q. And how would that licensee gain rights to use
source code from AT&T?
A. It would have to obtain a supplement and schedule
for that product to define what it was it was licensing and
pay the fees.
Q. If a licensee had entered into a software
522
agreement and sublicensing agreement and no other agreement
with AT&T, what rights would it have, if any, with respect
to binary products or sublicensed products?
A. If you mean a form sublicensing agreement without
any identification of the product, then they would have no
rights.
Q. Do you recall reviewing the language of Section
4.16(b) with Mr. Brakebill earlier?
A. Yes.
Q. And I believe that you testified in response to
Mr. Brakebill's questions that part of the source of your
understanding of Section 4.16(b) is discussions with
Mr. Chatlos and Mr. Maciaszek following the execution of the
APA; is that fair to say?
A. Yes.
Q. And I believe you said with respect to Section
4.16(b) that to read it literally would make the transfer of
the assets and the licenses under the APA illusory, do you
recall using that word?
A. Words to that effect, yes.
Q. Could you just review for me in your words how it
is that you used that word and what you meant by using that
word illusory?
A. Yes. That given the scope of the grant of the
agreement, the fact that the intention of the parties, as I
523
read the agreement, was very broad and commensurate with
that, that to give this under -- to give this paragraph any
interpretation other than the limitation that I testified to
would render this broad grant illusory, certainly weaken it
substantially if the things that Novell could do or require
SCO to do were part of this agreement and in the limit it
could nullify it completely. So I think reading the
agreement as a whole as to what was intended and what is
here that this is the only proper interpretation of 4.16(b).
Q. Was it ever your view while at Novell or Santa
Cruz to the best of your recollection that Novell under the
APA retained the right to direct SCO to modify or change its
source code rights under the agreements that had been
transferred under the APA?
A. No.
MR. NORMAND: Your Honor, that completes SCO's
designations of Mr. Levine.
THE COURT: Mr. Jacobs?
MR. JACOBS: We have some additional testimony of
Mr. Levine.
THE COURT: If you would like to go ahead.
Q. Do you have an understanding that there was an
Asset Purchase Agreement that was signed by Novell and Santa
Cruz on September 19th, 1995?
A. Yes.
524
Q. Just so you have it, I'm going to hand you what's
been marked as Exhibit 1 in this case.
A. Thank you.
Q. Do you recognize this document, Mr. Levine?
A. Yes, I've seen it.
Q. Okay. And this is a document entitled Asset
Purchase Agreement By and Between The Santa Cruz Operation,
Inc. and Novell, Inc., dated as of September 19th, 1995; do
you see that?
A. I see it.
Q. As you sit here today, do you recall what
involvement, if any, you had in drafting or contributing any
portion of this particular agreement dated September 19th,
1995?
A. I know that I worked on drafting some of the
provisions, I don't know which ones in particular.
Q. And how is it that you recall that you were
involved in drafting some provisions?
A. I was asked to do it by the negotiators for
Novell.
Q. And as you sit here today are you sure that any
drafting that you did relating to the Novell-Santa Cruz deal
was in connection with this particular September 19th, 1995
contract as opposed to an amendment to this contract?
A. No, I can't recall specifically, you know, what
525
work I did on one versus the other.
Q. Do you remember any particular provisions in this
contract as you sit here today?
A. No.
Q. Memories can fade over time?
A. Yes.
Q. You would agree with me that a contract is
written to govern the rights and obligations of the party;
isn't that right?
A. I believe that's usually the purpose of it.
Q. Do you recall as you sit here today that there
were any provisions in this September 19, 1995 contract
relating to intellectual property as assets?
A. No, I don't recall.
Q. Let me turn your attention to Exhibit 1 which is
the September 1995 contract between Novell and Santa Cruz?
A. (Complies.)
Q. And ask you to turn to the page in the lower
right-hand corner ending in 950?
A. (Complies.)
Q. Are you there?
A. Yeah.
Q. Okay. And you'll see this is a part of the
contract entitled Schedule 1.1(a) entitled Assets?
A. Yes.
526
Q. Okay. And if you turn to -- you see there are a
series of Roman numerals on the left-hand side, do you see
that?
A. Yes.
Q. I'd ask you if you could turn to Roman numeral V
which is on the third page of Schedule 1.1(a)?
A. (Complies.)
Q. Do you see that?
A. I do.
Q. Okay. And do you see that Roman numeral V is
entitled Intellectual Property?
A. Yes.
Q. And do you see that it lists one particular type
of intellectual property as an asset?
A. Yes.
Q. And it's listed as "trademarks UNIX and UnixWare
as and to the extent held by Seller, parenthetical,
excluding any compensation Seller receives with respect to
the license granted to X/Open regarding the UNIX trademark"?
A. I see it, yeah.
Q. And that's the only type of intellectual property
listed as an asset; is that right?
A. Yes.
Q. Aside from listing trademarks UNIX and UnixWare,
it doesn't list any other type of intellectual property as
527
an asset, does it?
A. No.
Q. Do you recall that there was a schedule of
excluded assets in the September 19th, 1995 contract between
Novell and Santa Cruz?
A. I guess to the extent I remember anything about
this document, I would have remembered this, but -- as a
title of something in here, I think so, yeah.
Q. And I'll ask -- well, as an experienced lawyer in
transactions what does excluded assets mean to you?
A. Just off the top of my head what you're asking.
Q. Yes.
A. If you have a definition in the agreement of a
particular term, an asset means so and so and so and so and
so and so, usually you would put the exclusion right in that
same paragraph, which is my practice. I'm assuming, because
I don't know different, that this has got the same effect
that whatever an asset is, it does not include this.
Q. Do you see the last sentence, Mr. Levine, of this
Section 1.1(a) of the contract that says, quote,
Notwithstanding the foregoing the capital assets to be so
purchased shall not include those assets, parenthesis (the,
quote, excluded assets, quote) parenthesis, set forth on
Schedule 1.1(b)?
A. I see it.
528
Q. Now turning back to the Excluded Asset Schedule
in Schedule 1.1(b) that we were just looking at which is on
Page 954 of this document in front of you, as an experienced
lawyer do you understand that what's listed in this Excluded
Asset Schedule is specifically an asset or assets that are
not included in the purchase?
A. As a matter of form that's true, I agree with
you.
Q. Then referring you to Page 955 in the lower
right-hand corner which is the second page of the Excluded
Asset Schedule?
A. (Complies.)
Q. By the way, there are eight items that are listed
on the Excluded Asset Schedule; is that right?
A. Eight Roman numerals, yes.
Q. Right. And those are assets of substance; isn't
that right?
A. Intellectual property, yes, definitely.
Q. And if you look at Roman V it is entitled
Intellectual Property, correct?
A. Right.
Q. And it lists as two types of excluded
intellectual property, one, all copyrights and trademarks
except for the trademarks UNIX and UnixWare, and two, all
patents; do you see that?
529
A. I see that.
Q. Okay. What is listed is (a) and (b) of Roman V
are specifically excluded assets under this contract, would
you agree with me?
A. Specifically listed assets, yes.
Q. Specifically listed as excluded --
A. Right.
Q. -- assets, correct? In reading this, do you
understand that Novell is excluding all patents from this
asset transfer?
A. I understand what the agreement says, I
understand what the exclusions are in the document.
Q. Okay. And based on reading this exclusion in the
contract do you understand that all copyrights and
trademarks except for the trademarks UNIX and UnixWare are
excluded from this asset transfer?
A. No, I don't.
Q. You disagree with the language in this schedule;
is that right?
A. No, I don't disagree that these are listed here,
I disagree that in the context of this agreement that this
is, that this is the whole story.
Q. Based on what you're saying today, would you have
stricken this from the Excluded Asset Schedule?
A. You're asking me to say what I would have done,
530
certainly that would have been something that went through
my mind, I don't know what I would have done.
Q. Well, you seem to think there's an ambiguity as
you sit here today in this copyright --
A. Well, ambiguity or mistake, yeah.
Q. Okay. As you sit here today you think there's
some kind of ambiguity or mistake in this Excluded Assets
Schedule excluding all copyrights and trademarks except for
the trademarks UNIX and UnixWare; is that right?
A. Yes.
Q. So I take it today 12 years after the fact, you
would strike this reference to all copyrights and trademarks
except for the trademarks UNIX and UnixWare; is that right?
A. Or would have tried to have the agreement
reformed or amended, yeah.
Q. You wouldn't have left it in, correct?
A. No, I wouldn't have left it in.
Q. In fact, Mr. Levine, you did review schedule
1.1(b) prior to the execution of this Asset Purchase
Agreement on September 19th, 1995, didn't you?
A. I don't recall.
Q. I'm going to hand you what's been marked as
Exhibit 202?
A. Thank you.
Q. For the record this is a fax from you,
531
Mr. Levine, to an attorney named Aaron Alter at the Wilson
Sonsini firm that was representing Novell?
A. Okay.
Q. Do you see that?
A. I see.
Q. Okay. And this fax cover from you is dated
September 18th, 1995, do you see that?
A. Correct.
Q. In fact, there's a fax transmission line up at
the top, it says September 18, 5:20 a.m. USL Legal
Department, do you see that?
A. I see it.
Q. Okay. This is a fax that you sent, isn't that
correct?
A. I'll accept that I did, I have no reason to think
I didn't, but I don't recall it.
MR. JACOBS: Your Honor, I would like to move into
evidence Novell's Exhibit X3, the fax from Mr. Levine to
Aaron Alter at Wilson Sonsini just referred to in the
deposition.
MR. SINGER: No objection.
THE COURT: Exhibit X3 will be admitted.
(Whereupon, Defendant's Exhibit X3 was
admitted into evidence.)
MR. JACOBS: Your Honor, what I propose to do, the
532
witness is going to walk through various pages. So we'll go
through his walk through and alternate between the
deposition and showing the jury the various pages that he is
referring to, okay?
THE COURT: All right.
Q. Turning to Page 2 you write a note to Aaron Alter
and it says, "Aaron: Attached are copies of the following:
A suggested markups of certain pages in Schedules 1.1(a) and
1.1(b)." Do you see that?
A. Yes.
Q. Okay. And then turning you to Page 3 of this
document there's a draft of Schedule 1.1(a), do you see
that?
A. Yes.
Q. Okay. Do you recognize this as the schedule, a
draft of the Schedule 1.1(a) that you were just looking at?
A. Yes.
Q. And do you see some handwriting about halfway
down the page and then on a few of the subsequent pages of
Schedule 1.1(a), that's your handwriting; isn't that right?
A. Yes.
Q. Okay. You reviewed Schedule 1.1(a) prior to the
execution of this September 19th, 1995 contract; isn't that
right?
A. It seems that way, yeah.
533
Q. And you provided some comments on this Schedule
1.1(a) draft?
A. Yes.
Q. And if you turn to Roman V of this Schedule
1.1(a), do you see that page?
A. Yes.
Q. And up in the left you've written in your
handwriting "from Schedule 1.1(a)"?
A. Yes.
Q. And then do you see you've made some comments on
Roman V relating to intellectual property?
A. Yes.
Q. Okay. And you made one change adding the phrase
"and to the extent" in between the phrase "trademarks UNIX
and UnixWare as," and the phrase, quote, held by seller, do
you see that?
A. I see it.
Q. You left in place "trademarks UNIX and UnixWare"
as a type of intellectual property to be an included asset;
is that right?
A. Yes.
Q. Okay. And you did not add any other types of
intellectual property to this list of included assets, did
you?
A. No.
534
Q. You didn't add copyrights?
A. Not as a specific item, no.
Q. Okay. You did not add UNIX copyrights?
A. No.
Q. You did not add UnixWare copyrights?
A. No.
Q. You did not add patents?
A. No.
Q. Now your cover memo to Mr. Alter of Wilson
Sonsini says that you also were attaching suggested markups
of certain pages in Schedule 1.1(b), correct? And this is
Page 2 of the fax.
A. (Reviews.) 1.1(a) and 1.1(b), yes.
Q. And turning your attention to the excluded asset
draft which is on the page ending 613 of this fax number in
the lower right-hand corner, are you there?
A. Okay, yeah.
Q. Do you see that up in the left-hand corner you've
handwritten "from Schedule 1.1(b)"?
A. Yes.
Q. And do you see that this is your markup of a
portion of Schedule 1.1(b) of the excluded assets?
A. That's what it appears to be, yeah.
Q. And you actually reviewed the Intellectual
Property section of the Excluded Assets Provision of
535
Schedule 1.1(b) before the Asset Purchase Agreement was
executed on September 19th, 1995; isn't that correct?
A. Yeah. Yes.
Q. And specifically looking at and commenting on
intellectual property you deleted a reference to patent
licenses, do you see that?
A. Yes.
Q. Okay. And do you see that in reviewing a draft
Schedule 1.1(b) prior to the execution of the agreement you
specifically looked at and commented on the exclusion of all
copyrights and trademarks except for the trademarks UNIX and
UnixWare?
A. Yes.
Q. Okay. And do you see that you made only one
comment on that line item?
A. Yes.
Q. Okay. And the comment that you added was at the
very end a phrase, quote, as and to the degree held by
Seller, quote; is that right?
A. That's true.
Q. Okay. When you looked at the Excluded Asset
Provision prior to the exclusion of the Asset Purchase
Agreement, you left in tact the exclusion of all copyrights
and trademarks except for the trademarks UNIX and UnixWare;
isn't that correct?
536
A. Yes.
Q. And you also left in the exclusion of all patents
as being a transferred asset; isn't that right?
A. Yes.
Q. And again you passed your comments on to the
outside lawyers of Wilson Sonsini who were representing
Novell in the negotiation and drafting of this contract
between Novell and Santa Cruz, correct?
A. That's correct.
Q. And your inclusion of "all copyrights and
trademarks except for the trademarks UNIX and UnixWare" in
the Excluded Assets provision of Schedule 1.1(b) was also
transmitted to Santa Cruz during the negotiations, correct?
A. Okay. My -- inclusion it wasn't modified "all of
the copyrights and trademarks," yeah.
Q. You did not modify the line item "all copyrights
and trademarks except for the trademarks UNIX and UnixWare,"
correct?
A. No.
Q. And so when your comments on Schedule 1.1(b) were
transmitted to Santa Cruz the line item "all copyrights and
trademarks" was included as an excluded asset, correct?
A. It was included.
Q. And do you recall that one of the types of
intellectual property that was excluded was all patents?
537
A. Yes.
Q. As you sit here today, do you have any
understanding as to whether SCO as part of the Asset
Purchase Agreement in 1995 got a license to practice the
UNIX patents or any other IP that Novell retained?
A. Yes, I do.
Q. And what is your understanding today?
A. My understanding is similarly to my stand on
copyrights that the grant of the whole business carries with
it at least licenses under the patents needed to carry on
the business to the extent that Novell had them.
Q. Do you remember any specific conversations with
Ed Chatlos concerning your view that Section 4.16(b) in
Novell's dictation right thereunder is somehow limited to a
royalty stream?
A. No. No, nothing specific.
Q. So you just recall in general having a
conversation with Ed Chatlos --
A. Yes.
Q. -- at some point in time?
A. Yes.
Q. Okay. And 12 years ago you wrote some documents
concerning 4.16(b), didn't you?
A. Very possibly.
Q. And we looked at -- do you have Exhibit 206
538
before you?
A. Yes.
Q And if you look at Paragraph 2 at the bottom this
is an e-mail that you sent Mr. Chatlos on November 16th,
1995, do you recall that
A. I don't recall that, I see that that's what
happened.
Q. This is an e-mail that you sent to Mr. Chatlos on
November 16, 1995?
A. Okay.
MR. JACOBS: Your Honor, at this point we move into
evidence Exhibit I5 which is the memo or e-mail that is
being referred to in this portion of the deposition.
THE COURT: Any objection?
MR. SINGER: No objection.
THE COURT: I5 will be admitted.
(Whereupon, Defendant's Exhibit I5 was
received into evidence.)
MR. JACOBS: Your Honor, in this case I think it would
be helpful to read it out loud.
THE COURT: You may do so.
MR. JACOBS: My reading of the Asset Purchase
Agreement is that while we would have the right to direct
SCO to offer HP licenses on any terms we choose with respect
to any SVRX products that HP needs to carry on the Rhine
539
River work, it is not clear whether we can restrict SCO in
the terms they can offer HP for UnixWare licenses for this
purpose. Do you think we should try to cover by amendment
that at least with regard to HP, we should have the right to
specify the terms for UnixWare licenses as well?
Q. And in this e-mail to Mr. Chatlos you expressed
your viewpoint concerning Novell's rights to direct SCO to
offer licenses, quote, on any terms we choose with respect
to any SVRX products, isn't that what you said?
A. Yes, it is.
Q. You did not say in this memorandum dated November
16th, 1995 that Novell would have the right to direct SCO to
offer HP licenses on any terms we choose with respect to any
binary SVRX agreements, did you?
A. No, I didn't.
Q. You don't say in April of 1996 that Novell's
dictation right under 4.16(b) only extended to binary SVRX
agreements, isn't that the case?
A. That's true.
MR. JACOBS: That ends the testimony of Mr. Levine,
Your Honor.
THE COURT: Thank you, Mr. Jacobs.
Mr. Singer?
MR. SINGER: Our next witness is Bill Broderick.
THE COURT: All right.
540
THE CLERK: Mr. Broderick, if you would come forward.
If you would raise your right hand.
WILLIAM BRODERICK,
called as a witness at the request of the Plaintiff,
having been first duly sworn, was examined
and testified as follows:
THE WITNESS: Yes.
THE CLERK: Thank you. Please be seated. If you
would please state and spell your name for the court.
THE WITNESS: William Broderick, B-R-O-D-E-R-I-C-K.
THE CLERK: Thank you.
DIRECT EXAMINATION
BY MR. NORMAND:
Q. Good afternoon, Mr. Broderick.
A. Good afternoon.
Q. Are you currently employed?
A. Yes, I am.
Q. Where?
A. I am director of software licensing for the SCO
Group.
Q. Could you briefly summarize your responsibilities
in that capacity?
A. I am responsible for all software licensing and
contracts that go through the company.
Q. And what kind of software licensing or contracts
541
are you talking about?
A. Um, it is -- we have business in certain areas.
We have source code licensing, binary licensing, we have
support contracts, third-party software agreements where we
license products with third parties.
Q. Okay. I'm sure we will get into more of that
later. Could you briefly describe your educational
background?
A. Well, I graduated high school in 1966. I went my
freshman year out to Missouri. I have completed my freshman
year and I enlisted in the Army. I spent two and a half
years in the Army, a year and a half with 101st Airborne
Division in Vietnam. Came home, graduated in 1973 from
William Patterson College with a degree in business. And in
1975, I graduated from Santa Clara University of California
with an MBA.
Q. What did you do after that?
A. I went to work for Trans World Airlines. I spent
five years with them in various accounting positions in New
York, London and Paris.
Q. Did there come a time when you became involved in
the UNIX business?
A. I did. That was in 19 -- late 1991.
Q. And in what capacity did you become involved with
the business at that time?
542
A. I was working for a computer manufacturer in New
Jersey and I had an opportunity to join UNIX System
Laboratories, it was AT&T's UNIX Group. And in I believe it
was December of 1991, I joined USL as manager of sales
operations.
Q. USL is UNIX System Labs?
A. Yes.
Q. And what did you do there?
A. Um, I managed the sales operations. I had some
people that worked with me. I was responsible for the sales
compensation plan, of coordinating revenue forecasts and
expense forecasts with the finance people, and chasing down
any problems the vice-president of sales told me to chase
down.
Q. What did the UNIX group at USL do at that time?
A. At that time they -- they licensed source code
for the UNIX operating system. Source code is the code
where it's -- it is a code that you actually go in and
manipulate and you work with. So what we had was a lot of
computer manufacturers, also government agencies, that
licensed the source code because they wanted to go in and be
able to work with it. And you have got a computer, you take
the source code which is a generic operating system, you
know how to manipulate that source code so it would work on
your computer. So what you did was you created your flavor
543
of UNIX. And so we licensed the source code for companies
to do that. These are companies like Hewlett Packard, IBM,
Stratus, large -- every large computer manufacturer in the
world licensed to UNIX. And we licensed them the source
codes so that they could do that.
Q. And how long were you at USL?
A. I was at USL until 1993 when Novell purchased the
business. I think it was officially called a merger with
USL but it was a purchase of the business from AT&T.
Q. And did you transition over to Novell at that
point?
A. Yes, I did.
Q. And in what capacity?
A. I first went as -- I continued in sales
operations but just a short time, just a few weeks, and then
I was put into doing contracts and licensing.
Q. And what does that mean "doing contracts and
licensing"?
A. I became a person at Novell who worked with the
sales people, product management, development people and the
customers. We actually licensed the source code I talked
about earlier.
Q. And did there come a time when you became aware
of a sale of the UNIX business to Santa Cruz?
A. Yes, there was.
544
Q. When did you become aware of that?
A. That was the fall of 1995. We were all -- all of
the employees were called down to a cafeteria in the
building where we were at. And the executives from the --
from Novell's UNIX group were there. Mike DeFazio was the
lead executive and he chaired it and he made the
announcement that Novell was going to refocus their
attention back to their net ware product, which was their
flagship product, and as a result of that refocussing, they
were going to be selling the UNIX business and the
technology to a company called Santa Cruz Operation.
Q. And did you have any particular reaction to that
announcement?
A. God I hope I go to Santa Cruz Operation.
Q. Did that end up happening?
A. Yes, it did.
Q. And in what capacity did you end up going to
Santa Cruz?
A. Pretty much the same the job I had. We had three
license -- three people that did licensing and contracts at
Novell and we moved to the Santa Cruz Operation. And we
primarily handled the source code licensing, but Santa Cruz
was also in the business of licensing a binary product.
They weren't a computer manufacturer, but they had developed
a UNIX for what they -- it is sort of an Intel platform. I
545
don't want to get too complicated, but it was kind of like
Microsoft windows, but it was a UNIX operated system. And
they sold binary. You can go into a store and you can buy a
copy of Microsoft windows and load it onto your computer.
Santa Cruz had a product where you could go to a
distributor, go to a store, and actually buy a UNIX product,
same type, a binary, and load it onto your computer. So
Santa Cruz was in that business and now by purchasing the
UNIX Technology they were in the source licensing business.
So we did a combination of all of that.
Q. Did you participate in any transition process
upon the announcement of the sale from Novell to Santa Cruz?
A. Yes. Starting in the -- starting after the
announcement in September of '95 that they had -- Novell was
selling the business, um, they put together a lot of
employees in the transition teams. And these handled all of
the different areas of the company from the development,
product management, IT, contracts, finance, and they had to
work together to see how best to transition the business
from Novell to Santa Cruz. And we met over the next few
months.
Q. And in the course of those transition team
meetings, do you recall any discussion about the notion that
copyrights had been retained by Novell?
MR. ACKER: Objection, hearsay, Your Honor.
546
MR. NORMAND: The question is whether he recalls any
such statement being made.
THE COURT: I believe I can have this answer given but
not beyond that if it is going to be specific.
MR. NORMAND: Thank you, Your Honor.
Q. (By Mr. Normand) Mr. Broderick, do you recall the
question?
A. Yes. So I can give a simple yes or no?
THE COURT: You may.
THE WITNESS: Give the question again.
Q. (By Mr. Normand) Do you recall any discussions
in these transition meetings about whether Novell was
retaining any UNIX or UnixWare copyrights as part of the
transaction?
A. Retaining ownership, no, I did not hear any
comments.
Q. Did the transition team discuss the issue of
whether copyright notices in the source code had to be
changed?
MR. ACKER: Same objection, he is asking for hearsay.
Objection, Your Honor.
MR. NORMAND: Same response, Your Honor. It doesn't
go to the truth, it goes to what Mr. Broderick remembers and
how it bears on what he did during the transition work.
THE COURT: Well beyond that, isn't this a party
547
opponent?
MR. ACKER: Well, I don't know who he said he heard
things from.
THE COURT: Well, until we get more specific, I'm
going to have to allow the questions to be asked.
MR. ACKER: All right.
Q. (By Mr. Normand) I take it you don't recall the
question?
A. Give it again.
Q. Do you recall during the transition work as to
whether the issue of needing to change copyright notices
came up?
A. Yes.
Q. And in what sense did that issue come up?
A. The Novell software engineers announced that they
were completing the changing of the Novell copyrights in
UNIX to Santa Cruz.
Q. And do have any firsthand knowledge as to how
that work was undertaken?
A. No.
Q. In the course of explaining what copyright
notices would be changed, do you recall there being any
discussion about some copyright notices not being changed?
MR. ACKER: Your Honor, again I'm going to object.
That is really very vague as to who these comments were
548
allegedly coming from. I don't think he has clearly
established if it is going to come from a party to be
qualified as a party admission.
THE COURT: I would agree with Mr. Acker. You have
got to ask more specific questions before you elicit this
type of testimony.
MR. NORMAND: Thank you, Your Honor.
Q. (By Mr. Normand) In the course of this transition
work, did you undertake to send out any letters to UNIX
customers to inform them of the transition that was
happening?
A. Yes. As part of the transition meetings it was
Burt Levine who was the attorney at the Novell UNIX Group
who was tasked with putting together a notice letter. We
had some discussion on who the notification should go to the
licensees from, Santa Cruz or Novell, and it was decided
that Novell ought to send the license because, you know, if
you received a letter from somebody saying make your
mortgage payments to me now, you probably wouldn't comply
with it and have your bank to do it.
So Burt Levine drafted up a letter that would go to
all of the general licensees, all of the ones that had the
standard license agreements. And he drafted it up and
passed it around to some of us to look at. And that letter
was sent down to all licensees. Then what we did was we had
549
to go through because there was some contracts, mostly third
party suppliers, or we had some special agreements with some
other companies that required their approval of an
assignment of the contracts. So we had to go through, dig
through the files, and find those companies and they were
given a slightly different letter where it was, you know,
Novell is doing this, Santa Cruz is doing this, please sign
below your acceptance of the assignment.
Q. In your work with respect to the drafting of
these letters, did you ever speak with Mr. Levine about the
issue of any retention of copyright?
A. No.
MR. NORMAND: Your Honor, I would propose to put into
evidence SCO Exhibit 580.
THE COURT: Which number again?
MR. NORMAND: 580, Your Honor.
THE COURT: 580. Any objections to this?
MR. ACKER: No, Your Honor.
THE COURT: 580 will be admitted.
MR. NORMAND: Thank you, Your Honor.
(Whereupon, Plaintiff's Exhibit 580 was received
into evidence.)
Q. (By Mr. Normand) Do you see the document on your
screen?
A. Yes.
550
Q. I'm going to blow up the language so you and the
jury can see it better. Is this letter in the form of the
letters you just described?
A. Yes, it is. This is in the form of the letter of
one of the customers who would have to approve the
assignment of the agreement.
Q. And, again, what was your understanding as to the
purpose of this letter and letters of this sort?
A. Well, it was to advise any licensees or people we
had contracts with that Santa Cruz owned the business and
the technology.
Q. Would you pull up the first two paragraphs?
Actually, the one above that as well. The opening paragraph
of the letter, Mr. Broderick, as can you see, quote, "as you
may know, Novell transferred to The Santa Cruz Operation,
Inc., SCO, its existing ownership interest in UNIX
System-based offerings and related products as listed in
Attachment A of this letter "collectively Transferred
Products."
Could we go to Attachment A. Attachment A begins,
"Novell Software Products, all releases of UNIX System V and
prior Releases of the UNIX System. All UnixWare releases up
to and including UnixWare Release 2 (encompassing updates
and upgrades to these releases as well.)
Do you see that language, Mr. Broderick?
551
A. Yes, I do.
Q. How does this language comport with your
understanding of what ownership interest Novell had
transferred?
MR. ACKER: Objection, Your Honor, based on hearsay,
based on the testimony so far of what his understanding is
of what ownership rights --
MR. NORMAND: It is not all based on hearsay, Your
Honor. It is his personal experience and his work and his
work drafting the letter and the transition team meetings
and his employment.
MR. ACKER: He has testified that he had no
involvement in the APA, any of the contracts. That anything
that he heard was heard from others and he has already
established that is hearsay. This is going to be based on
hearsay.
MR. NORMAND: We have established, Your Honor, that
what he heard, at least some of what he has heard, he has
heard from Novell employees.
THE COURT: I will overrule the objection.
Q. (By Mr. Normand) The question, Mr. Broderick,
was how does this description of the ownership interest that
Novell had transferred comport with your understanding of
what you believe Novell had transferred during the course of
your employment?
552
A. It is -- it is exactly consistent with what I
know of the sale from Novell to Santa Cruz. In fact, during
the transition teams, we were given portions of the Asset
Purchase Agreement where Novell sold all right, title and
interest in the assets. This letter seems to state that
they sold all their interests.
Q. Go back to Page 1. Thank you. Mr. Broderick,
the second paragraph begins, "it makes immeasurably more
business sense for SCO, as the owner of the Transferred
Products, to handle directly with Prentice-Hall any matters
that may become relevant under the subject agreement." Do
you see that language?
A. Yes.
Q. How does that language comport with your
understanding of what Novell was intending to achieve by
sending these letters out?
A. It was telling people don't call us any more,
call SCO.
Q. Why?
A. Because SCO owned divisions from that point on.
Q. Do you recall who Prentice-Hall was, the
addressee in this letter?
A. They were a publisher, book publisher, they
published some books on UNIX.
Q. Do you see at the bottom of this paragraph,
553
Mr. Broderick, it states, "accordingly, Novell would
appreciate Prentice-Hall's formal concurrence under Section
28 of the subject agreement, to Novell's assignment of its
rights and delegation of any remaining obligations under the
subject agreement insofar as such rights and obligations
relate to the Transferred Products to SCO. Novell
represents that SCO has undertaken in writing to assume such
obligations." Do you see that language?
A. Yes.
Q. Is it your understanding that SCO had undertaken
to assume the obligations of the UNIX business?
A. Absolutely.
Q. Now, let me take a step back, Mr. Broderick. You
started to speak to this issue already. You did go over to
Santa Cruz as part of the transition; is that right?
A. Yes, I did.
Q. And what was your job responsibilities the next
several years?
A. It was as a licensing and contracts manager.
Q. What did you do from day-to-day?
A. I wrote contracts, issued contracts. I dealt
with sales people and customers, negotiated terms of the
contracts. We answered questions from current contract, you
know, companies that had contracts as far as what their
rights were under the contract. If you wanted to license
554
software from Santa Cruz Operation, you went through the
sales people to the contracts people, and I was one of the
contracts people.
Q. Did you approach your contracts work at Santa
Cruz in any way different from how you approached it when
you were at Novell?
A. With the exception that we added that extra
binary business to some of our responsibilities. As far as
the source code goes, they were exactly the same. In fact,
in the transition meetings, we were directed by Novell on
the source code licenses not to make any changes to the
licenses except to replace the name Novell with Santa Cruz.
Q. Is that what you did?
A. Yes.
Q. What were the agreements that Novell and Santa
Cruz actually used in licensing source code products to
licensees?
A. The source code products it is -- it started with
an umbrella agreement called the software agreement. And
that software agreement --
Q. What do you mean by umbrella agreement?
A. It is -- overall, it was the general terms and
conditions that you would agree to when you licensed the
source code product. So when I talk about -- we always
refer to it as an umbrella agreement because it covered the
555
general terms and conditions. We will license you source
code, you can do this with the source code, you can't do
this with the source code, you have to protect the source
code, you can't tell anybody or show anybody the source code
because the source code is the company's family jewels. If
you lose control of the source code, you're out of business.
Now, what we did was with the software agreement, it
was that umbrella agreement that had the general terms and
conditions for being able to license a source code product.
MR. NORMAND: Okay. Your Honor, I would move into
evidence SCO Exhibit 4?
MR. ACKER: No objection, Your Honor.
THE COURT: Exhibit 4 will be admitted.
(Whereupon, Plaintiff's Exhibit 4 was received
into evidence.)
Q. (By Mr. Normand) Do you see the document on the
screen, Mr. Broderick?
A. Yes.
Q. Do you recognize this document?
A. Yes, this is a software agreement.
Q. That is the document you just described?
A. Yes.
Q. And with whom is this software agreement or who
is it between?
A. This is between AT&T and IBM.
556
Q. And in the course of your work at Santa Cruz, did
you have occasion to read and review and grapple with
documents of this sort?
A. Yes, I did.
THE COURT: Mr. Normand, would you be looking for an
appropriate time for us to recess for the afternoon?
MR. NORMAND: I think in a minute or two we'll be
there, Your Honor. I apologize for the delay.
THE COURT: All right.
Q. (By Mr. Normand) Mr. Broderick, we're having
brought out Section 7.03 of the software agreement which
states, "AT&T warrants that it is empowered to grant the
rights granted hereunder." Do you see that paragraph?
A. Yes, I do.
Q. It continues a couple of lines down, "AT&T makes
no representations or warranties of merchantability or
fitness for any particular purpose, or that the use of any
Software Product will not infringe any patent, copyright or
trademark." Do you see that language?
A. Yes, I do.
Q. In the course of your work, did you develop an
understanding or view as to what the point of this kind of
language and software agreement was for?
A. Yes, I did.
Q. In summary, what was the view that you developed?
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A. Well, what they were doing was they were
licensing the software. You are licensing the software
product. Here is our software product, um, go ahead and
license it and go ahead and use it. Don't come back to us
and tell us it won't run your Ferris Wheel.
Q. Now we're going to stop in a few minutes. Did
the software agreement actually license any product as such?
A. No, it didn't. It was the umbrella agreement
that had general terms and conditions. If you look through
this software agreement, you get -- you get the right at
some point in time to license a software product. This does
-- this agreement does not give you a software product.
There are no fees associated or royalties associated with
this software agreement.
MR. NORMAND: Your Honor, on that cliff-hanger, we
will end.
THE COURT: All right. Thank you. Um, we will
recess. You get to come back tomorrow, Mr. Broderick. We
will recess for the afternoon.
Ladies and gentlemen of the jury, I do not want to,
again, be too specific other than to remind you about the
importance of you avoiding any exposure about this case on
the television, radio, newspaper, internet. Again, do not
do any research on your own. Do not do anything that would
violate those instructions you have been given. More
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specifically, do not discuss the case with anyone or allow
anyone to discuss it with you. If anyone attempts to, again
I will remind you to bring it to my attention.
Finally, as I have told you today, you have heard a
lot of evidence so far. You have yet to hear a lot more.
So it would be inappropriate for any of you to be making up
your minds about this case in any respect. And we'll start
at 8:30 in the morning and we will be in recess until then.
THE CLERK: All rise for the jury, please.
(Whereupon, the jury left the courtroom.)
THE COURT: Mr. Broderick, we will have you back here
I believe at 8:30 in the morning. You intend to continue
with this witness, don't you, Mr. Normand?
MR. NORMAND: Yes, Your Honor.
THE COURT: Please do not discuss your testimony with
any other witness or in the presence of any other witness.
Do not discuss this matter with anyone other than perhaps
attorneys. All right.
THE WITNESS: Certainly.
THE COURT: Thank you. Counsel, the issue about the
witness that suddenly appeared out of nowhere, is it a
significant issue that we need to meet earlier in the
morning to deal with it?
MR. SINGER: I don't believe so because what I think
we may be prepared to do, I mean this witness, Mr. Keller,
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was listed in initial 26(a)(3) disclosures and was in the
joint pretrial order as issued by the court. He was not on
the forms which were submitted to the court for witnesses.
And we understand that therefore there may be some surprise
to Mr. Jacobs and to Novell's team. So instead of us trying
to call him tomorrow, what we would propose to do is call
him out of turn. He is going to be out of the country next
week on business, he works for Huntsman Corporation, and he
would then appear out of turn during the third week with the
court's permission.
And hopefully during the time, between now and then,
Novell's counsel and myself would be able to work out any
issues regarding his privilege point which has been raised.
That is how we would propose to handle the issue.
THE COURT: Mr. Jacobs?
MR. JACOBS: Your Honor, if we could meet and confer
this afternoon and I'll alert your office if we need to come
in early tomorrow morning on this topic, all right?
THE COURT: All right. And unless I hear from you,
then we will presume we'll start at 8:30 then. All right.
But we are agreeable to start earlier, if necessary. I
would rather we deal with it before 8:30 instead of keeping
the jury in the jury room too long in the morning.
Anything else before we recess?
MR. SINGER: I was going to mention the order of
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witnesses or the other witnesses for tomorrow.
THE COURT: If you will, please.
MR. SINGER: We will finish with Mr. Broderick. Then
we are going to call Mr. Mattingly and then Mr. Maciaszek.
We may -- I'm not certain of the order of those, one order
or the other, it will be Maciaszek and Mattingly or
Mattingly and Maciaszek. And then we will go to the
videotape deposition of Ms. O'Gara. We think that would be
the final -- that will take us through the end of the day.
If not, we will play another deposition.
THE COURT: All right.
MR. JACOBS: Two things.
THE COURT: Yes, sir.
MR. JACOBS: We talked earlier about the relationship
between the evidence coming in on the breach of the covenant
of good faith and fair dealing relating to Section 4.16(b)
and the slander of title claim. And I think where we left
it is that you were considering -- as it is turning out,
evidence is coming in on both claims during the course of
the trial.
I think where we left it is that you were going to
consider instructing the jury that they're going to hear
evidence in the interest the efficiency, something like
that, but it is reserved for the court. So we would, now
that it has happened, it has crystalized in the proceeding,
561
we thought it might be a good time to renew that request.
THE COURT: Mr. Jacobs, my desire would be not to tell
the jury now because my fear is that they would begin to
speculate what they have to pay attention to and what they
don't. I think it would be best to just simply make a
strong -- give them strong instruction at the end that you
ought not to worry yourself about the fact that there will
be some issues you may have heard evidence to that you are
not asked in the verdict form to decide. But can you see my
concern? If I do it now, I think it would be fairly natural
for them to begin wondering okay what is and what isn't for
us to decide.
MR. JACOBS: I understand, Your Honor. The second
topic. We think that there was a quite significant door
opening event yesterday and in opening statements. And I
just want to pull up my notes on this. The topic is the
admissibility or instructions to the jury of what happened
during the course of this litigation over the past several
years.
The court's prior ruling and strong indication was
that the court was reluctant to have the jury hear about
that. And we understand the court's reasoning in that
regard. The door opening event is that in examining
Mr. Duff Thompson yesterday, Mr. Singer asked him what we're
going to colloquially refer to as the "to this day"
562
question. He asked Mr. Thompson, isn't it true that to this
day Novell is publishing the allegedly slanderous statements
on its website? That was not inadvertent because three
times in SCO's opening statement the "to this day" comment
was made as well. SCO argued to the jury "to this day
Novell is publishing these statements." Well that places
into question Novell's continuing basis for making the
statements for not taking down, I suppose, the statements
from the website. And, of course, Novell's continuing
intent is heavily informed by the rulings that have been
received over the course of the past several years.
What we propose to do is crystalize this in writing.
We would -- we realize it is something that the court has
given this whole question, that the court has given a lot of
thought to this, so we would like to submit something
tomorrow. Maybe give SCO until the first thing Monday or
something like that. It is -- it is not urgent that the
jury be informed of this, but I think both sides should know
where this issue would fall out going forward.
THE COURT: Okay. Your point is well taken and I
would request that you put it in the form of writing with a
specific request for SCO to respond.
MR. JACOBS: Perfect. Thank you, Your Honor.
THE COURT: All right. Anything else?
MR. SINGER: Um, Your Honor, there are some disputes
563
regarding Ms. O'Gara's deposition. Would you like to
undertake those now or bring us in early in the morning
or --
THE COURT: I would rather you get me something in
writing as I have requested. It always easier for me to
read it in advance before I hear argument on it.
MR. SINGER: We will submit something this afternoon.
THE COURT: Thank you. We do not have any hearings
this afternoon, so you don't need to move anything more than
you feel you need to. We'll be in recess. Thank you.
(Whereupon, the hearing adjourned for day
at 1:36 p.m. The jury trial will continue at
8:30 a.m. on Friday, March 12, 2010.)
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