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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 22, 2010
Jury Trial

REPORTED BY: Patti Walker, CSR, RPR, CP
[address]

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A P P E A R A N C E S

For Plaintiff: Brent Hatch
HATCH JAMES & DODGE
[address]

Stuart Singer
BOIES SCHILLER & FLEXNER
[address]

Edward Normand
BOIES SCHILLER & FLEXNER
[address]

For Defendant: Sterling Brennan
WORKMAN NYDEGGER
[address]

Eric Acker
Michael Jacobs
MORRISON & FOERSTER
[address]

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I N D E X

Witness	Examination By	PAGE
Ryan Tibbitts	Mr. Normand (Direct)	1806
	Mr. Brennan (Cross)	1846
	Mr. Normand (Redirect)	1860
	Mr. Brennan (Recross)	1873
Joseph A. LaSala	Mr. Acker (Direct)	1875
	Mr. Singer (Cross)	1936
	Mr. Acker (Redirect)	1980
	Mr. Singer (Recross)	1985

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EXHIBITS RECEIVED INTO EVIDENCE:	PAGE
Plaintiff's:
109	1810
110	1818
691	1819
108	1820
500	1823
575, #200	1841
165	1953
165, last page	1956
530	1988
Defendant's:
R-23	1836
J-15 and K-15	1895
Z-15	1900
S-16	1913
G-21	1930
X-23	1934
L-19	1985

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SALT LAKE CITY, UTAH; MONDAY, MARCH 22, 2010; 8:30 A.M.

PROCEEDINGS

THE COURT: Good morning. I'm going to give you some rulings on some of the motions that were filed over the weekend. First, as to the SCO motion to preclude the testimony of DeFazio regarding the intention of the APA, the Court will deny the motion. In reviewing the deposition testimony, the Court believes that this is more like that testimony that was permitted to be elicited from Mr. Frankenberg and other witnesses who were asked questions about the intent of the APA, and the Court permitted them.

Mr. DeFazio was clearly involved in the negotiations, he had personal knowledge, and the questions that were posed to him had to do with whether or not there was a specific discussion about copyrights. As with the other witnesses presented by the plaintiffs, apparently there were no such discussions, and that was the type of testimony the Court believes ought to be elicited, again, primarily because of his personal involvement in the negotiations of the APA.

Second, Novell's motion for leave to examine other witnesses about prior court rulings, the Court will deny it. The Court will find, first of all, that the relevance of the testimony, its probative value is very slight, if there is any, for the time frame in question. It's apparent that the

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time frame that matters is the year 2003 and early 2004 prior to the first ruling by Judge Kimball in June 2004. Further, the prejudicial value is still extremely high.

The Court would note, however, that the question of these Court rulings might be relevant to the issue of punitive damages, specifically there ought to be a means whereby the defendants can respond to the assertions that were made in the opening statement that the so-called -- well, the claim to title to the copyrights exists on the Novell Web sites to this day. Therefore, the Court will allow a witness to be asked the question why do they remain on the Web site. And if that witness can truthfully testify that they are there because of the prior court rulings, the Court will allow general reference to the court rulings, but the Court will not allow any reading of the rulings or anything more specific than that.

Regarding Troy Keller, there is no response from SCO. Do you wish to say something here this morning?

MR. SINGER: Yes. This was filed late last night.

Your Honor, Mr. Keller is to be called as a witness on the points in his declaration which reflect communications with Wilson Sonsini when Wilson Sonsini was representing Santa Cruz in the 2001 sale of these assets to Caldera and to why the language, which is questioned by Novell, states what it does and not something else.

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This was presented originally in May of 2007 in opposition to a motion for summary judgment. While this is a number of years ago, it's our best recollection this is the first time the issues surfaced, but in that motion for summary judgment and before that time there was no reason to believe Mr. Keller's testimony on that point relating to a 2001 transaction would be probative. The various disclosures were subsequently amended. There was no effort by Novell from the May 18, 2007 filing through the summary judgment in August of 2007 to raise this issue.

Novell notes that we did not list Mr. Keller in an August 22, 2007 pretrial disclosure. We, in fact, dropped him off the list, and that is quite correct, because by that time Judge Kimball had ruled on summary judgment against us on ownership issues, which this testimony related to, and the trial we were looking at in September would not have involved these issues. That's why he was, at that time, removed.

The case goes on appeal. It comes back to Your Honor in 2009. And in the first disclosures here we've included him as someone who we intended to call. There has been no effort from that point, which I think was in early February, until now to suggest that they needed the deposition of Mr. Keller.

Notwithstanding that, when this issue came up a

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week or so ago, we indicated that --

THE COURT: The one point they make is that you did not disclose him as a witness in this trial until subsequent to the commencement of trial, correct?

MR. SINGER: That's not quite correct, Your Honor. We listed him in the pretrial disclosure. It is in the order signed of witnesses.

THE COURT: But then the witness list that you submitted to the Court did not contain --

MR. SINGER: The witness list, inadvertently, did not contain it. That's why we said when we were going to call him in our case back over a week ago, that we wouldn't call him then. We would even agree to provide a deposition of him, which we're prepared to provide for a couple of hours this afternoon. We thought we were going to be able to work out these issues. The stumbling block has been, they said, well, we don't have all these Brobeck Phleger documents regarding due diligence, which of course they could have sought years ago if they wanted to pursue that. Brobeck isn't around.

This is important testimony regarding things that are not privileged with respect to his conversations with Wilson Sonsini in 2001 and why he drafted this document. We're prepared for him to be fully deposed on that even though they didn't take advantage of opportunities to ask

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for such a deposition in an earlier point in time. But he was disclosed prior to this trial in the joint pretrial order and in the supplemental disclosures preceding that pretrial order.

THE COURT: Remind me again, at what point did you disclose that you did intend to call him as a witness in this trial?

MR. SINGER: I know he was in a joint pretrial order that was --

THE COURT: No, during the trial.

MR. SINGER: During the trial, we disclosed on Thursday, I believe, that he was going to be called the following day as a witness.

THE COURT: Thursday of last week or the week prior?

MR. SINGER: The week prior.

THE COURT: So they have known for ten days in this trial that he was going to be called?

MR. SINGER: Yes.

THE COURT: All right. The Court is going to permit the testimony of Mr. Keller. If the deposition is necessary, the Court will order that he be admitted -- access be made available for him this afternoon so that that deposition may be taken.

MR. SINGER: Thank you.

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THE COURT: There is another motion filed by the plaintiff in this case limiting Novell's trial testimony based on privilege objections. Counsel, do you want to respond to that in writing or do you want to deal with it here orally this morning?

Mr. Jacobs.

MR. JACOBS: Your Honor, in discussing how to handle this witness with Mr. Singer before court began, Mr. Singer made it a little clearer that this was kind of a heads-up, here are the issues that might arise during testimony with which we understand. I would like to make a couple of global comments about privilege and about the material that they have submitted so that when a particular question is asked at least you have this background.

Number one, I believe the record is clear from the beginning that on the questions of copyright ownership and the negotiations of the asset purchase agreement, Novell did not assert or you could say waive subject matter privilege. So in that -- so when you are looking at a record where someone is saying we're asserting privilege over the APA, that may be true as a general matter -- or as they related to negotiations, that may be true as a general matter, but the specific subjects at issue in this lawsuit, the documents were produced, the witnesses testified, there were declarations that were submitted. And so on those subjects,

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there should not be any disagreement. You may have to penetrate a little bit the materials that have been provided to understand that. From the beginning, that has been our plan.

THE COURT: So let me make sure I understand. You are asserting that even though during the course of the depositions there were some general privilege objections made, when it came to specific questions regarding the issues in this case, the privilege was waived and the witnesses were allowed to answer those questions in the deposition?

MR. JACOBS: That's correct, Your Honor, as to the asset purchase agreement negotiations, the focus of my comments.

THE COURT: Okay.

MR. JACOBS: Now one of the places where there is some conflicting evidence submitted by SCO is in the deposition of Wilson Sonsini. This was a somewhat peculiar deposition. It was a deposition of Wilson Sonsini as an entity. I think at the time SCO was trying to pursue this idea that because there is Wilson Sonsini as a firm during the '95 negotiations and then Wilson Sonsini as a firm in the 2001 transaction with Caldera, there is some kind of an institutional position on the question of whether copyrights transferred.

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Mr. Parnes is Wilson Sonsini's lawyer representing Wilson Sonsini in that deposition. And the transcript -- frankly, Your Honor, because of the way that theory was being pursued, the transcript is a bit of a mess. As we discussed before, the team that represented Santa Cruz in 2001, 2002 was subject to an ethical wall from the team that represented Novell in 1995. So part of what Mr. Parnes as Wilson Sonsini's lawyer is trying to fend off in that deposition is this very idea that the firm as an institution has a position on the question of copyright ownership.

When he was making assertions, he was not doing so on behalf of Novell. That was a third-party deposition of Wilson Sonsini, the institution. So that's one additional piece of background because some of the materials they have submitted relate to that topic.

The third general point relates to the 2002, 2003 period. This is relevant to an upcoming -- to our first witness, Mr. LaSala, the general counsel. The Court has seen e-mails -- internal e-mails at Novell recounting the contents of communications with, for example, Mr. McBride when Mr. McBride was telephoning the Novell personnel and raising the topic of copyright ownership. Those are redacted because the contents of the communications we did not assert a point of privilege over, but the advice or what should we do in light of this call we regarded as internal

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legal advice. So that's what the redactions are. We've cued to that faithfully, we believe, and it's a little late now to be arguing over whether the redactions were appropriate or not.

Mr. LaSala will likely testify to what he understood the contents of the communications with Mr. McBride were. But, again, we did not assert a claim of privilege over those facts while we did assert a claim of privilege over internal legal advice.

Last point, because I think that the real danger here is not in the questions we're going to ask the witnesses that we're going to be presenting in our case in chief because we've had this plan in mind, if you will, for how we were going to deal with privilege issues, I think the bigger question comes up on cross-examination because it could be quite easier for the witness to hear a question on cross and think, oh, SCO is now opening the door, and to answer this question truthfully I have to discuss what happened internally at Novell. So it's really up to SCO, I believe, to frame its questions carefully so that the witness is not put in the awkward spot of understanding from the plan how we were going to deal with privilege issues but being asked a question that to answer truthfully requires inquiry into privilege matters.

With that, I don't need to say anything more

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because, again, we think we know where we assert the privilege and we've planned our direct examination accordingly.

THE COURT: Thank you, Mr. Jacobs.

Let me state that the Court has now been informed and SCO has been warned, and I will again restate generally what the Court ruled last week in regards to the requests made by Novell, that the Court is not going to permit testimony to be presented to the jury that was not explored in the deposition because of the claim of the privilege, across the board, both sides. That's what we're going to do.

I don't know enough about the specifics to go beyond that in regards to the motion by SCO at this point, but I hope we all have a little bit of a framework that we can operate on without too much trouble during the course of the next four days.

Mr. Brennan, do you have something?

MR. BRENNAN: Yes. Thank you. I appreciate that, Your Honor.

I just wanted to follow up with respect to the Court's ruling regarding prior rulings by Judge Kimball. I don't intend to reargue it, I just wanted to raise a point of a practicality, as I understand it.

Mr. Tibbitts, I believe, is the last witness that

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will be proffered today by the plaintiff before SCO begins its case, and one of the issues, at least as we understand it that has given rise to the request we made to the Court, is that Mr. Tibbitts had communications with potential licensees after the commencement of this case against Novell, after Novell had filed its motion to dismiss which led to the June 2004 ruling. And in those communications the issue of the Novell litigation and the status of the ruling on the motion to dismiss was a subject matter of discussion between Mr. Tibbitts and these potential licensees.

So my request, Your Honor, is in light of the Court's ruling, in particular the framing of the operative time period being, as I understood it, essentially prior to the commencement of the Novell case --

THE COURT: No, it was prior to the ruling by Judge Kimball in June of 2004.

MR. BRENNAN: Thank you, Your Honor.

With that in mind, it would seem unfair and inappropriate to allow Mr. Tibbitts to testify to the contact that he had with potential licensees after that ruling.

THE COURT: After June 2004?

MR. BRENNAN: Yes.

THE COURT: The only one I'm aware of is the

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Department of Defense, and SCO said that they were not going to explore that with Mr. Tibbitts.

MR. BRENNAN: I think there may be others. So with that guideline --

THE COURT: I would agree, that anything after June 2004 --

MR. NORMAND: There are no others. There are none that fall into that category.

MR. BRENNAN: That makes it easier.

Thank you, Your Honor.

THE COURT: Anything else?

MR. SINGER: Your Honor, before we turn over to Novell after Mr. Tibbitts, we would like to read in certain paragraphs of the answer that we believe constitute admissions. The objection that Novell raised last week was rejected by the Court. May we be permitted to do that after Mr. Tibbitts' testimony?

THE COURT: Mr. Jacobs, you wanted to reply?

MR. JACOBS: Two things, Your Honor. I believe what the Court said was we would see how things unfolded this week to see if anything needed to be revisited in that connection.

THE COURT: That is what the Court said.

Mr. Singer, the point the Court was trying to make is that though apparently in defendant's mind there is now

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some way to distinguish between UNIX and UnixWare, I don't believe that is yet before the jury. What I was anticipating is that during the course of their case, that they may try to make that distinction. If they do, then I'm going to allow you to read what you want. But you have your case, two more witnesses, so you will have an opportunity to do it. I would rather we do it only if it's justified. I don't want to confuse the jury any more than is necessary by having you out of the blue stand up and read that because I don't think they would understand the significance of that.

MR. SINGER: We understand, Your Honor.

MR. JACOBS: The only second point is that, as Mr. Singer acknowledged the other day, one important point of clarification would be, as Mr. Singer proposed, to say UNIX and UnixWare copyrights existing up to the date of the asset purchase agreement. There has never been a claim by Novell that we own copyrights to material created after the asset purchase agreement by Santa Cruz or SCO.

MR. SINGER: That's not a point of dispute.

THE COURT: All right. Ms. Malley, will you please bring the jury in.

(Jury present)

THE COURT: Good morning, ladies and gentlemen. We hope you had a nice weekend. We have another week ahead of us. As I said to you last week, we do appreciate the

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fact that you have paid attention as you have, that you have remained alert during the course of the trial. We hope that you will make an effort to do so during this next very important week.

I believe, Mr. Singer, I need to ask you, or is it Mr. Normand?

Mr. Normand.

MR. NORMAND: It's me, your Honor.

We call Ryan Tibbitts.

THE COURT: All right, Mr. Tibbitts.

RYAN TIBBITTS,

Having been duly sworn, was examined

and testified as follows:

THE CLERK: If you would please state and spell your name for the Court.

THE WITNESS: Ryan Tibbitts. R-y-a-n, T-i-b-b-i-t-t-s.

DIRECT EXAMINATION

BY MR. NORMAND:

Q Good morning, Mr. Tibbitts.

A Good morning.

Q Are you currently employed?

A I am.

Q Where?

A At The SCO Group, Inc.

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Q When did you start at SCO?

A The last week of May 2003.

Q Could you briefly describe your educational background?

A After I graduated from high school, over the course of the few years I attended a junior college in Idaho, Ricks College. Graduated from there. Then I attended Brigham Young University in Provo, received a business degree from there, and then also a law degree from BYU.

Q What did you do after law school?

A The first year out of law school I clerked for a judge -- that's just working for a state judge on various matters before that court -- for a year. Then I joined a large Salt Lake City law firm.

Q How long were you at the law firm?

A Just short of 16 years.

Q Did you serve in any management positions at the law firm?

A I did. I think the last eight or nine years I was there, I was on the board of directors. And then the last six years I was there, I was the president of the firm.

Q What did you do after you left the firm?

A I left the firm to join a technology company called Lineo, as general counsel. Was there for about a year. Then I joined a second technology company named Center 7, as general counsel. And then I joined The SCO Group. So I'm

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on to my third technology company.

Q Were you with SCO when Novell asserted in May 2003 that SCO does not own the copyrights at issue here?

A Yes. I had been there just a few days when that happened.

Q Do you generally recall the reaction from the community?

A Yeah. I think I was so new to the game at that point in the company, the significance was maybe lost on me a little bit. But I can say within the company, you know, a cross between absolute astonishment and total crisis mode for what it was doing to the company.

Q Now on the issue of copyrights, what happened next?

A Well, the next thing I recall was a few days later a secretary there at the company found the file with what we've referred to as Amendment No. 2 in the file. Our CEO, Darl McBride, faxed that off to Novell's CEO, Jack Messman. There were some phone conversations and letters that went back and forth. And then on June 6th, Novell issued a press release retracting what they had previously said about copyright ownership.

MR. NORMAND: Mr. Calvin, would you pull up Exhibit 97.

BY MR. NORMAND:

Q Mr. Tibbitts, is this the press release you were

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referring to?

A Yes, it is.

Q Was there particular language you were referring to in the answer you just gave?

A Yes. I think it's the last sentence of the first paragraph where it says, the amendment appears to support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996.

Q Did you rely on this press release in deciding that SCO owns the copyrights at issue here?

A Yes. I think we clearly looked at the press release, that Novell is a public company that's issued worldwide, and then the events that led up to that, including the conversations that Mr. McBride had with Mr. Messman and the letters that had gone back and forth up to that point.

Q Did SCO and Novell exchange correspondence about copyrights over the next many months?

A Yes, we did.

Q Did that correspondence change your mind about whether SCO had acquired the copyrights at issue in this case?

A No, it did not.

MR. NORMAND: Mr. Calvin, would you pull up Exhibit 109.

BY MR. NORMAND:

Q Do you recognize this document, Mr. Tibbitts?

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A Yes. This is a letter from September of '03 that I sent on behalf of SCO to Joseph LaSala, who was Novell's general counsel at the time.

MR. NORMAND: Your Honor, I would move the document into evidence.

MR. BRENNAN: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 109 was received into evidence.)

THE COURT: This is 109, correct?

MR. NORMAND: That's right, Your Honor.

BY MR. NORMAND:

Q So now that the jury can see the document, Mr. Tibbitts, what is the date again?

A Pardon me?

Q What is the date of the document?

A September 10th, 2003.

MR. NORMAND: Mr. Calvin, would you pull up the middle paragraph beginning we have reviewed.

BY MR. NORMAND:

Q Can you see that language, Mr. Tibbitts?

A I do.

Q Did this language reflect your views at the time?

A Yes. We were responding to a couple of letters as referenced in the first paragraph that they had sent us, so

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this was in response to several letters. We just conclude, we respectfully suggest that you carefully review all of the agreements in their entirety, and particularly Amendment No. 2.

Q Why did you call out Amendment No. 2?

A Well, because we believed, just as Novell had stated in their press release, that Amendment 2 cleared up the issue and confirmed that the copyrights had transferred many years before. We thought that was the end of the issue.

Q When you refer in the sentence to all the agreements, were there other documents that SCO relied on in forming the view reflected in this letter?

A Yes.

Q Do you recall reviewing the technology license agreement in 2003?

A We did.

Q Did you rely on that agreement?

A Yes, we did.

Q Do you recall relying on any other documents for the views reflected in this letter?

A Yes. All during this period of time, we were gathering the documents on this issue because Novell had sent a couple of additional letters. So, of course, we looked at the asset purchase agreement itself, both of the amendments, including Amendment No. 2. We looked at the technology

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license agreement. And then in various time frames other documents came to light, including the joint press release that Novell and SCO had issued at the time alerting the world that the intellectual property had transferred to Santa Cruz as part of this transaction. There were letters that came to light somewhere in this time frame that Novell had sent to their customers around the world.

Q When did Novell send those letters?

A Within a couple months after the closing date. All went out at different times. There was an SEC filing by Santa Cruz from -- I believe late '95, shortly after the deal closed, where they indicated that they had acquired the core intellectual property to the UNIX operating system, which anyone who understands source code and software, the core intellectual property would be the copyrights. Then there was, you know, other types of evidence that was coming in or statements about SCO being the copyright owner, including statements relating to SuSE, the company Novell announced it was going to acquire, and those sorts of documents.

MR. NORMAND: Mr. Calvin, could you pull up C-14. If you could pull up that paragraph beginning so far.

BY MR. NORMAND:

Q Is this the SuSE document that you were just referring

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to, Mr. Tibbitts?

A Yes.

Q Was there particular language in this paragraph that you had in mind?

A Yes. Third line up it says, SCO, which owns the copyright to UNIX. This was part of a story on InfoWorld that had come out relating to SuSE Linux, which was one of the largest Linux companies in the world. At this time I believe IBM was a majority owner of SuSE. Many IBM executives were involved with SuSE. And SuSE, during this time frame when they were talking about this UnitedLinux organization, had requested that SCO donate the UNIX technology and copyrights to SuSE and to the UnitedLinux organization. And, you know, that was further evidence on what the world understood and what people that were very heavily involved in this space understood about who owned the copyrights in the business.

Q Now you mentioned IBM. When you joined SCO, was SCO in litigation against IBM?

A Yes, we were.

Q What were the principal claims SCO had brought against IBM, if you recall?

A Well, the principal claim was essentially a breach of contract claim that related to SCO's allegations. SCO was the owner of all of those UNIX licenses under which other

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companies had developed their own flavor of UNIX, IBM being one of those. Their UNIX derived flavor was known as AIX. IBM had announced publicly to the world that they were going to donate all of AIX, if the Linux community wanted it, to Linux. We believed that was a very clear breach of their license agreement and would be devastating to our UNIX business, which is in the same market space as Linux. And so we sued them for breach of that license agreement.

Q Did Novell direct SCO to waive its contract claims against IBM?

A Yes.

Q Were you involved in the correspondence on that issue?

A Some of it. There were some letters earlier on, I believe, between Novell and our CEO, Mr. McBride. And then, as I say, I kind of moved into SCO in mid 2003. And so when they made some demands later on about asking us to waive certain claims against IBM, then I got involved at that juncture.

MR. NORMAND: Mr. Calvin, could you pull up SCO 243.

BY MR. NORMAND:

Q Do you recognize this document, Mr. Tibbitts?

A Yes, I do.

Q What is the document?

A This is a letter to me from Mr. LaSala of Novell.

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There is not a date on the front page, but I believe if we look at the headers on the second pages, it's October of 2003.

MR. NORMAND: Your Honor, I move SCO 243 into evidence.

THE COURT: It's already been admitted.

MR. NORMAND: Can we go to the last page, Mr. Calvin, and bring out those two paragraphs, if you would.

BY MR. NORMAND:

Q Mr. Tibbitts, what did you understand Mr. LaSala to be saying in this portion of the letter in particular?

MR. BRENNAN: Objection, Your Honor. In that regard it speaks for itself.

THE COURT: I'll sustain the objection.

BY MR. NORMAND:

Q Mr. Tibbitts, let me direct you to the last paragraph.

MR. NORMAND: If we could highlight that, Mr. Calvin.

BY MR. NORMAND:

Q Mr. Tibbitts, would you mind reading that into the record.

A Accordingly, pursuant to section 1.16(b) of the asset purchase agreement, Novell hereby --

THE COURT: You said 1.16. Do you want to look at that again?

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THE WITNESS: That's what it looks like on my screen.

MR. BRENNAN: It appears to be 4.16.

THE WITNESS: Excuse me. Sorry about that.

4.16(b) of the asset purchase agreement, Novell hereby directs SCO to waive any purported rights SCO may claim to require IBM to treat IBM code itself as subject to the confidentiality obligations or use restrictions of the agreements. Novell directs SCO to take this action by noon, MST, on October the 10th, 2003, and to notify Novell that it has done so by that time.

BY MR. NORMAND:

Q Do you recall whether SCO complied with this directive?

A No, we did not.

Q Do you see at the bottom the cc?

MR. NORMAND: If you could bring that out, Mr. Calvin.

BY MR. NORMAND:

Q Do you know who Mr. Ron Lauderdale was at that time?

A Yeah, by this time I knew who he was. He was an assistant general counsel in IBM's legal department.

Q Did it concern you that IBM was copied on this letter to you from Novell?

A Yes. They had copied them on some prior correspondence as well, and obviously that caused us some concern. You

1817

know, if companies like IBM and Novell are lined up against you, that's a serious matter. And, you know, our choice was do we -- do we stand up for our rights and fight for our customers and our shareholders or do we just, you know, let them run over us. We decided we had to stand up to them.

Q Mr. Tibbitts, let me show you SCO Exhibit 110. Do you recognize this document?

A Yes. This is a letter that I sent to Mr. LaSala on October the 9th, 2003. So I think this is responding to the letter that we just looked at.

MR. NORMAND: Your Honor, I don't believe SCO 110 is in evidence. I would move it in.

MR. BRENNAN: Your Honor, this letter was the subject of discussion in court on Friday regarding certain redactions. I don't see those redactions appearing in the letter, contrary to your agreement.

MR. NORMAND: I have a hard copy of the redactions.

This is the redacted version now on the screen, so the jury hasn't seen it.

THE COURT: Let Mr. Brennan see the redacted version and make certain he's comfortable with what has been redacted.

MR. BRENNAN: May I just inquire of counsel to see the unredacted version so I can make the comparison?

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THE COURT: Yes, certainly.

MR. BRENNAN: Thank you, Your Honor. I appreciate that.

THE COURT: So as redacted --

MR. BRENNAN: No objection, Your Honor.

THE COURT: Thank you.

(Plaintiff's Exhibit 110 was received into evidence.)

BY MR. NORMAND:

Q So, Mr. Tibbitts, I believe you were saying this was your letter in response to Mr. LaSala, the letter from Mr. LaSala that we've just reviewed; is that right?

A Yes.

Q Now let's pull out the second paragraph. Could you read the second to last and the last sentences of this paragraph?

A Starting with you claim?

Q Yes.

A You claim that any result other than your selective interpretation of the agreements would defy logic. We submit that your position that SCO received basically nothing for the many millions it paid Novell or that Novell has the unfettered right to simply declare that all SCO license rights have been waived defies logic.

Q And why did you use the phrase defies logic?

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A Well, that was their term. They said our position defied logic. And just by looking at the evidence that we had and our understanding, we thought, you know, their claim that they had literally the right to destroy our business and waive all our license protections against everybody defied logic.

Q Mr. Tibbitts, let's show you SCO Exhibit 691. Do you recognize this document?

A Yes. This is a letter from October 10th, 2003 addressed to me and Ron Lauderdale from Mr. LaSala at Novell.

MR. NORMAND: Your Honor, I move SCO 691 into evidence.

MR. BRENNAN: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 691 was received into evidence.)

BY MR. NORMAND:

Q Now again, Mr. Tibbitts, IBM is copied on this letter. So you recall reacting to that issue?

A Well, they weren't just copied on it. It was sent to them as well. And along the lines that I've said before, it was of great concern to us that two companies like IBM and Novell locking arms to try and waive all your rights of your business, and, you know, we viewed it as essentially an

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effort to shut us down. So this was their follow-up letter. Because we didn't comply with their order to waive our claims against IBM, they were purporting to waive those rights on our behalf.

MR. NORMAND: Mr. Calvin, let's go to the second page of this document and bring out those two paragraphs.

BY MR. NORMAND:

Q Is this the language you were referring to, Mr. Tibbitts?

A Yes.

Q So by this point you had not complied with their directive from a few days earlier?

A No, we had not.

Q Have you ever complied with that directive?

A No.

MR. NORMAND: Let's look at SCO 108, Mr. Calvin.

BY MR. NORMAND:

Q Do you recognize this document, Mr. Tibbitts?

A Yes. This is another letter from a few months later to me from Mr. LaSala at Novell.

MR. NORMAND: Your Honor, I move SCO 108 into evidence.

MR. BRENNAN: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 108 was received into

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evidence.)

MR. NORMAND: The jury can now see the front page of the document.

BY MR. NORMAND:

Q The subject line says, Sequent Computer Systems. Could you briefly describe what that refers to?

A Yes. This is a little tricky, so I hope I can explain it well. Sequent Computer Systems was another one of these UNIX licensees that had taken a license to make their own flavor or version of UNIX. So they had a UNIX derived version. Sequent was purchased by IBM in the late '90s. So at this time Sequent was actually part of IBM, but it was a different license agreement than the IBM license agreement. And IBM had started donating technology from Sequent's version of UNIX, their UNIX flavor, and they were donating portions of that operating system into Linux which would allow Linux to run enterprise servers. So it was directly competing with us at that point. So we had also terminated Sequent's license and said that they were in breach and no longer authorized to use that code, even though it was at that point owned by IBM. So it was a little complicated, but we felt the need that we had to terminate that license too because IBM was doing the same thing with Sequent Computer System as they

1822

were doing with their own UNIX flavor.

MR. NORMAND: Mr. Calvin, let's go to the second page of the document and bring out the last two paragraphs.

BY MR. NORMAND:

Q Mr. Tibbitts, could you just read that first paragraph into the record.

A Accordingly, pursuant to section 4.16(b) of the asset purchase agreement, Novell hereby directs SCO to waive any purported right SCO may claim to require Sequent, or IBM as its successor, to treat Sequent code as subject to the confidentiality obligations or use restrictions of Sequent's SVRX license. Novell directs SCO to take these actions by noon, MDT, February 11th, 2004, and to notify Novell that it has done so by that time.

Q Did SCO comply with this directive?

A No, we did not. It was another three days that they had given us to comply with this directive, and we did not.

Q Let's look at the last document in this series, Mr. Tibbitts, SCO Exhibit 500. Do you recognize this document, Mr. Tibbitts?

A Yes. This is another letter to me from Mr. LaSala -- actually the letter is to me and to Mr. Lauderdale of IBM. This is following up their other letter where they said because we didn't comply with their order, that they were going to just do it on their own.

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MR. BRENNAN: Objection, Your Honor, I move to strike that. The letter speaks for itself. The witness is characterizing it. The document itself is in evidence.

THE COURT: I will sustain the objection and strike the answer that Mr. Tibbitts just gave.

If you want to show the document, you may do so.

MR. NORMAND: I'm moving the document into evidence now, Your Honor. I move SCO 500 into evidence.

MR. BRENNAN: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 500 was received into evidence.)

BY MR. NORMAND:

Q Mr. Tibbitts, how does this letter relate to the letter we just looked at?

A As I said, this is a follow-up letter regarding Sequent Computer Systems. Because we did not comply with their previous order, they were taking that action on their own.

Q Let's look at the second page of the document.

MR. NORMAND: Mr. Calvin, if you would bring out the last two paragraphs.

BY MR. NORMAND:

Q Could you read that language into the record, Mr. Tibbitts?

A SCO has failed to take the actions directed by Novell.

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Accordingly, pursuant to section 4.16(b) of the asset purchase agreement, Novell, on behalf of The SCO Group, hereby waives any purported right SCO may claim to require Sequent, or IBM as its successor, to treat Sequent code as subject to the confidentiality obligations or use restrictions of Sequent's SVRX license.

Q So in this letter Novell was actually claiming to be acting on behalf of The SCO Group; is that right?

MR. BRENNAN: Objection, Your Honor, leading the witness.

THE COURT: Sustained.

MR. NORMAND: Summarizing his testimony.

MR. BRENNAN: I object to that. He ought to offer his own testimony.

BY MR. NORMAND:

Q When you received this letter, Mr. Tibbitts, what did you understand this language on behalf of The SCO Group to signify?

A That Novell was purporting to waive our rights under the license agreements that we owned relative to Sequent slash IBM.

Q Let's move to a different topic, Mr. Tibbitts, the SCOsource program. Did you have any involvement with the SCOsource program?

A Yes. When I joined the company, the IBM litigation was

1825

under the broad umbrella of the SCOsource division of SCO, so I got involved over time with that lawsuit. And then I also got involved in a few efforts to meet with customers and sell the SCOsource licenses it had developed.

Q What was your first direct involvement in the SCOsource program?

A My first involvement was the first part of August 2003 where we had -- where we obtained a license from one of the largest computer technology companies in the world, Computer Associates.

Q Could you explain how that works.

A I hope so. It's another bit of a story. But my prior employer, before I joined SCO, had been involved in a dispute with Computer Associates over an unrelated contract. There came a time when those parties decided they wanted to resolve that dispute. So we negotiated a settlement of that. At the last minute, after we thought we had everything put to bed, the person who was mediating that dispute for us came in and said, Computer Associates wants one other thing. We said, what's that. They said, well, they understand, Ryan, that you are now working for The SCO Group and they want some kind of a license from SCO to make sure they are okay with SCO's IP as it relates to Linux. This obviously surprised all of us because we were dealing with totally

1826

different issues. I said, well, I just started to work for SCO, that's true, but I don't have a position to grant you some kind of a license. I will certainly get you in touch with people at SCO who can talk to you about that. And so we proceeded in that fashion. A few days later Computer Associates gave us a list of the things they wanted. We negotiated back and forth. And ultimately, in early August, Computer Associates signed what I think was our first license that became -- I don't know if it was known at that point as the RTU, or right to use license that we've talked about, but that was the first license that went into that category, I believe.

Q And, in summary, why was that discussion significant to you?

A Well, because I knew CA was one of the -- I think it was a Fortune 500 company, one of the largest technology companies in the world, and they came to us and demanded that SCO provide some kind of a license to them. And they were willing to hang up this other deal they had been working on for years to get resolve over this point. So it told me it was a serious matter and that big companies out there were interested in this.

Q What did you say happened with respect to Computer Associates on this issue of a potential license?

A They signed a license agreement.

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Q Now with respect to the SCOsource program, what did you understand SCO's target market to be?

A Corporate users. They wanted businesses that were using Linux in their enterprise server environment as opposed to individuals or people that were using Linux as a hobby tool on their personal computers. That was not the target at all.

Q In connection with this SCOsource program, was the company collecting evidence that Linux was infringing on SCO's rights?

A Yes.

Q If you can recall it this way, what materials do you recall having organized by mid 2003 say?

A Well, there were several different categories I believe. This all started with a person within our company who was basically in charge of our Linux marketing, when he informed management that he understood that people in the marketplace were using our SCO UNIX libraries to migrate their systems to Linux. He viewed that as --

MR. BRENNAN: Your Honor, I think we're communicating hearsay. We're now hearing reports of some individual at SCO, unidentified. It's hearsay.

MR. NORMAND: We were speaking to the issue of Mr. Tibbitts' understanding of what materials had been collected by SCO.

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MR. BRENNAN: But that's not what the answer had been. We haven't heard what materials have been collected. We've been hearing what someone else at SCO identified.

THE COURT: Mr. Tibbitts, you know what hearsay is. Would you please try to testify avoiding hearsay.

Let's start over.

THE WITNESS: We gathered information about SCO's UNIX libraries that people were using to migrate their systems over to Linux away from UNIX. That was the first thing that we came up with.

There were -- I think the next thing was an e-mail from a gentleman who had a Linux company. I'm afraid I'll probably butcher his name, but it's Miguel de Icaza I believe. He had a company called Ximian that was working in the Linux space. Sometime in early 2003, he had sent an e-mail to the company asking SCO if it would consider donating technology that is called ELF -- or some components of ELF into the Linux open source community.

ELF is a very critical technology, which I'm not qualified to explain, about the reasons that Linux moved from being an operating system that individuals could mess around with to an enterprise grade server operating system that people like IBM would use. So here's this gentleman who was --

MR. BRENNAN: Your Honor, I'm sorry. The question

1829

that was asked is what materials were gathered. We've strayed beyond that.

MR. NORMAND: This is exposition as to how these materials were gathered and the basis for gathering. We can ask a series of six questions rather than one to get there.

MR. BRENNAN: The question was what materials were gathered.

THE COURT: Because this is direct, I want you to be more specific in your questions, Mr. Normand.

THE WITNESS: On that point, the information we gathered was an e-mail from this gentleman, who was well aware of Linux and the open source movement, asking us to donate portions of ELF technology into that movement.

BY MR. NORMAND:

Q Have you heard the phrase code room?

A I have.

Q Does SCO have a code room?

A Yes. By late summer of 2003, SCO set up a room there at our headquarters that had agreements and some television screens where people could come in and view some code comparisons that showed, you know, various files of UNIX code that had been copied almost verbatim into Linux.

Q Can you provide any examples of code, as you recall, that were copied verbatim?

A I think the first example that someone found in

1830

April or May of 2003 was some code called the Malloc code. And, again, I don't understand the technology enough to explain it, but it was UNIX code that was donated by a company called Silicon Graphics into a version of Linux. And I'm not sure who discovered it or how, but you could put those two different code comparisons up on the screen and highlight in red many, many lines of that code was directly copied into Linux. So that was one example that people could see when they visited our code room.

Q Now were SCO's salespeople allowed to show potential customers this kind of proof that you've been describing when you met with them?

A Not down to that level, no.

Q Why not?

A We didn't want salespeople out there running around disclosing code to people that we have no control over them or who they were. The salespeople did have bullet points that they would show identifying the categories, but we did not give them all of the specifics of the various claims that were in the IBM case or were involved with Linux in general.

Q Did people from outside the company come to visit the code room?

A Yes. There were a number of people that came in and viewed that code, and I attended some of those meetings.

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Q Did you have occasion to see how people reacted?

A Yeah, they were impressed with it. It's pretty glaring when you take a look at that.

Q Do you recall attending SCO Forum in the summer of 2003?

A I did not attend SCO Forum.

Q During this time, 2003, 2004, did SCO have other support for its claim that Linux was infringing SCO's copyrights? Did they present this support in presentation materials?

A Yes, we did. I do know at SCO Forum in 2003, some people in our company did show those examples to the people attending the forum. And we continued to gather more evidence. There were people saying, you know, show us how we're in violation.

MR. BRENNAN: Objection, Your Honor. We're at hearsay again. The witness said he wasn't at the show, and he told hearsay answers.

THE COURT: I'll sustain the objection.

BY MR. NORMAND:

Q Let me show you, Mr. Tibbitts, a slide from what's been marked as SCO Exhibit 748.

MR. NORMAND: Mr. Calvin, I'm looking at the slide that ends in the Bates number 69. //

1832

BY MR. NORMAND:

Q Do you recognize this slide, Mr. Tibbitts?

A Yes. This was one of the slides that was in various presentations that we showed to people who were interested in finding out what we were talking about.

MR. NORMAND: Your Honor, I move to admit this slide within SCO Exhibit 748. I don't move to admit the whole exhibit.

THE COURT: SCO 748 has already been admitted.

MR. NORMAND: Thank you, Your Honor. I thought there was only one slide from 748.

MR. BRENNAN: I think that's right, Your Honor, there is only a portion, and we do object to this as hearsay.

THE COURT: Let me see what page you are looking at. What page was it again?

MR. BRENNAN: What page number is this?

Your Honor, we believe, if I can read the fine print, what was permitted was Bates number 72. It's entitled comments from the industry analyst. As I recall, the reason this was permitted was these were comments from outsiders, not SCO, and that's different than what is before the Court that's been proffered. Page 69 is pure hearsay.

MR. NORMAND: It's not being submitted for the truth of the matter, Your Honor. It's being submitted to

1833

show what materials Mr. Tibbitts would show to potential customers and others in the marketplace at the time.

MR. BRENNAN: Object to relevance. It's still hearsay.

MR. NORMAND: It's an issue that Novell has raised throughout the trial, Your Honor.

THE COURT: Counsel, the Court is going to sustain the objection for the same reason I believe that this was denied when it was offered previously, except for that one page. It is hearsay.

MR. NORMAND: Okay. I thought it was because there was a foundation problem with Mr. McBride because he had not -- he acknowledged that he hadn't presented this material to anybody.

MR. BRENNAN: Your Honor, it was hearsay. That was the reason, quite clearly.

MR. NORMAND: If we could have a stipulation that Novell was not raising in the trial the question what materials were presented to potential customers, then I would be happy with that.

MR. BRENNAN: Well, Your Honor, I think the issue remains to be seen what we might use for impeachment purposes, but we're not there yet. We're on this document given the proffered reason at this juncture.

MR. NORMAND: There is a Novell claim in this case

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raising the issue of state of mind.

But I will move on, Your Honor.

THE COURT: There is no reason why you cannot ask questions about the information without the document being admitted.

MR. NORMAND: Agreed.

THE COURT: Assuming that a proper foundation is laid.

MR. NORMAND: Thank you, Your Honor.

BY MR. NORMAND:

Q Mr. Tibbitts, do you recall addressing the issue of SMP in the marketplace?

A Yes.

Q Could you briefly describe what you understand SMP to be and what its significance is?

A Well, I don't have a very deep understanding, but SMP is symmetrical multiprocessing, which is one of the technologies that was donated into Linux from people who had license restrictions on that, and that was one of the technologies we discussed with people who wanted to hear more about what we were claiming.

Q Let me show you, Mr. Tibbitts, what has been marked as R-23. Do you recognize this document?

A I do.

MR. NORMAND: If you would go to the last page,

1835

Mr. Calvin.

BY MR. NORMAND:

Q Is that your signature line, Mr. Tibbitts?

A Yes.

Q Do you recall sending this letter out to Linux users?

A Well, it wasn't just Linux users, I don't think. I mean, as a group it was sent out to corporate -- potential corporate users, many of them -- I think maybe as many as a thousand companies, again, just showing some of the things that we were finding along the way that we alleged was a problem for Linux. And so this is a letter outlining ABI code, which is application binary interface, that links the operating system with applications, critical technologies that we believed prove that Linux was using our stuff without our permission.

MR. NORMAND: Your Honor, we move Novell Exhibit R-23 into evidence.

MR. BRENNAN: Your Honor, we do object for several reasons. First of all, this is hearsay. Second of all, it's not an executed copy of a letter. There is no evidence on the face of it that it was sent to any particular person or company, and there has not been a demonstration that that particular communication was sent to any particular company.

Given all those reasons, it should not be admitted.

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THE COURT: The Court will admit the document.

(Defendant's Exhibit R-23 was received into evidence.)

BY MR. NORMAND:

Q Mr. Tibbitts, the jury, I think, can now see this document.

MR. NORMAND: Mr. Calvin, if you highlight the bottom part of this letter.

BY MR. NORMAND:

Q Again, Mr. Tibbitts, to your understanding, what is it that is being addressed in this part of the letter and the remainder of the letter regarding what I will refer to here as Linux files?

A Well, I think the best I can do is just read what it says. It says, any part of any Linux file that includes the copyrighted binary interface code must be removed. Files in Linux version 2.4.21 and other versions that incorporate the copyrighted binary interfaces include, and the list goes on for a couple of pages, if I recall. And, again, this is just code that our consultants looked at and reviewed and determined this was a problem. People were asking for information, so we shared this with many companies.

Q Mr. Tibbitts, let me show you a slide from what has been marked as SCO Exhibit 575.

MR. NORMAND: Mr. Calvin, I'm thinking of a slide

1837

that says what makes Linux different.

BY MR. NORMAND:

Q Do you recognize this slide, Mr. Tibbitts?

A I do.

Q On what basis do you recognize it?

A Well, this was a slide presentation that came in several forms, one of which we just simply pulled off the Internet somewhere in the 2003, 2004 time frame. It's a slide presentation by Dan Frye, who is an IBM executive that runs their whole Linux technology center. It's a marketing piece --

Q Let me stop you there because we may run into this same issue from a few minutes ago. What was the relevance of the slide to you?

A Well, this is one thing that we also showed people when they wanted to know what kind of things we were talking about, and this is a document that I personally showed to many people over the course of time.

MR. NORMAND: Your Honor, at least as a proffer, I would move this slide into evidence.

MR. BRENNAN: Objection, Your Honor, it suffers from the same problem before. First of all, there's not been a proper foundation laid as to its source of origin. This witness has not indicated that he himself did the pull off the Internet. He hasn't laid the foundation for that.

1838

It is hearsay on two levels.

MR. NORMAND: Your Honor, again, it falls into this category of materials that Mr. Tibbitts was showing in the marketplace, and for the reasons that I have stated before, I think it's relevant.

THE COURT: There is no proper foundation for it, but I think it could be -- it could avoid hearsay because I don't believe you're offering it for the truth, but I don't believe there's been a proper foundation.

BY MR. NORMAND:

Q Mr. Tibbitts, do you recall how it was that you came to have possession of this document -- this slide?

A Yes. A person who worked for SCO one day told me, look what I found on the Internet.

MR. BRENNAN: Objection, Your Honor, that's hearsay.

MR. NORMAND: It's not going in for the truth of the matter, Your Honor.

THE COURT: Overruled.

THE WITNESS: So he went to a link on the Web site where this IBM document was, and we flipped through it. I said, yes, this is very interesting, I would like a copy of that. And it remained on the Internet. You could get it until not long ago. We put some of these slides up on our Web site, and shortly thereafter it disappeared.

1839

BY MR. NORMAND:

Q Did you have occasion to see the color version of this slide on the Internet within the last several days?

A Yes.

MR. NORMAND: Your Honor, I submit that's proper foundation.

MR. BRENNAN: That is not an adequate foundation, Your Honor, for a document pulled off the Internet.

THE COURT: I'll overrule the objection.

BY MR. NORMAND:

Q So the jury can now see this document, Mr. Tibbitts. What is the particular language of the document that you regard as significant in the course of your presenting it to the marketplace?

A Several things. I would start with the logo down in the bottom right that says IBM, for International Business Machines, with a penguin next to it, which is the Linux logo, or mascot, if you will. Then at the top the heading is what makes Linux different. There are several things identified there. In the center it says Linux attributes. And then immediately to the left there it says derived from UNIX.

Q Why did you think that phrasing was relevant?

A Well, that's significant because it's an admission that that is exactly where Linux came from. It started with UNIX

1840

and was derived from UNIX. And, you know, I'm not saying this is the beginning -- or the end of the issue, but it's a good starting place when IBM admits that Linux is derived from UNIX.

Q Let me show you the next slide, Mr. Tibbitts.

THE COURT: The whole document has not been admitted. Only one slide at a time.

MR. NORMAND: That's right, Your Honor. I don't think the jury can see the next slide.

BY MR. NORMAND:

Q Do you recognize this slide, Mr. Tibbitts?

A I do.

Q Does this fall into the same category as the slide we just looked at in terms of the use you made of it and the significance you attributed to it?

A Yes, it's part of these presentations that we pulled off the Internet from IBM.

Q Is this a slide that you've seen the color version in the last few days on the Internet?

A It's also a slide that we've shown to potential customers and others who were interested in the issue.

MR. NORMAND: Your Honor, I move this slide into evidence.

MR. BRENNAN: Your Honor, the same objection. In fact, what we saw was a suggestion in connection with the

1841

previous one that it wasn't being offered for the truth of the matter asserted. May I suggest it was somehow an admission. Your Honor, so the first one was misused and now I suggest the same may be tried with this one. We still haven't met the evidentiary requirements for its admission.

THE COURT: I will overrule the objection. Let's make certain the Bates numbers of these are made available so Ms. Malley and I will know exactly which portion of 575 has been admitted.

MR. NORMAND: Yes, Your Honor. It's Bates number ending 200.

(Plaintiff's Exhibit 575, slide 200, was received into evidence.)

BY MR. NORMAND:

Q Was there any particular language in this slide, Mr. Tibbitts, that you found significant at the time you were making use of it?

A Yes. Again, it's an IBM presentation, IBM's logo and penguin, the question why does Linux work. And then the first bullet I guess is somebody's attempt to be humorous, maybe, I don't know, it says, UNIX was a pre-write of Linux.

MR. BRENNAN: Objection, Your Honor, calls for speculation. Move to strike.

BY MR. NORMAND:

Q How was this language significant to you at the time,

1842

Mr. Tibbitts?

A Again, I think this is a different way of saying that Linux is derived from UNIX, but they say UNIX was a pre-write, like UNIX was written just so Linux could be derived from it or something. But, anyway, it's clearly making the same point.

MR. BRENNAN: Objection, move to strike.

THE COURT: I'm going to grant the motion to strike because I think he's speculating about as to what it says and what it means. So the Court will instruct the jury to disregard the answers given by Mr. Tibbitts.

BY MR. NORMAND:

Q Do you recall having any discussions with anyone who was reviewing the slide with you about what that language meant?

A Sure.

Q Could you summarize what the discussions were?

MR. BRENNAN: Objection, Your Honor, lacks foundation and it's hearsay.

MR. NORMAND: I have no idea how that could lack foundation.

MR. BRENNAN: Because we don't know who he's speaking with. That's the problem.

THE COURT: I would agree. //

1843

BY MR. NORMAND:

Q Who did you discuss --

A Well, it says what it says.

Q Do you recall discussing this language with anyone in particular apart from your attorneys?

A Yes. I think I discussed this with a gentleman who pointed it out to me on the Internet. His name is Dean Zimmerman.

Q What do you recall discussing with Mr. Zimmerman about the language?

MR. BRENNAN: Objection, that's hearsay, Your Honor.

MR. NORMAND: It's going to Mr. Tibbitts' state of mind not to the truth of what Mr. Zimmerman stated.

MR. BRENNAN: I'm not sure what relevance that has, but it's still hearsay.

THE COURT: I will overrule the objection.

THE WITNESS: Well, the discussion was that this was, in our view, another way of saying that Linux is derived from UNIX. But it was, again, a different way of saying that by indicating that UNIX was written for Linux.

MR. BRENNAN: Your Honor, I move to strike. Again, that's speculation. Now we have Mr. Tibbitts engaging in speculation with somebody else.

MR. NORMAND: Your Honor, it was a description of

1844

his discussion with Mr. Zimmerman.

MR. BRENNAN: But the description is what they were speculating over, Your Honor.

THE COURT: I will strike the answer and ask the question be asked again. If you will simply, without speculating as to what the individual thought, just tell us what he said.

Go ahead, Mr. Tibbitts.

THE WITNESS: Okay. Well, what he said is it looked like it was another way of saying the same thing that was on the other slide, that Linux was derived from UNIX.

BY MR. NORMAND:

Q Now, Mr. Tibbitts, in connection with the SCOsource program, did you meet with a company called Questar?

A I did.

Q Do you recall when you met with them?

A Late 2003.

Q What was the tone of the meeting?

A It was a cordial business meeting.

Q Do you recall whether Questar entered into a license with SCO?

A Yes, they did. A few weeks after our meeting -- within a few weeks after our meeting, they entered into a SCOsource license.

Q Mr. Tibbitts, do you have a view as to whether

1845

ownership of the UNIX and UnixWare copyrights is required for SCO to run its UNIX related business?

A I do.

Q What is your view?

A The copyrights are critical for us to run the business that was purchased from Novell in '95, both the SCOsource business and the right to protect that core UNIX intellectual property, and then the products businesses that emanate off of that, to continue to develop and maximize that business opportunity.

Q Couldn't SCO run its UNIX business by just owning the UnixWare copyrights?

A Not our current business, no.

Q Why not?

A Because we own the core UNIX intellectual property and a very critical component of that at this point in time is to protect that IP, and we have got to have that IP to keep other people from encroaching into our marketplace.

Q Mr. Tibbitts, what kind of business would SCO have been left with without these copyrights?

A Well, as I said, we could not fully develop that core intellectual property. We could not protect it. And this venerable UNIX business that has been around for many years that many customers around the world are using would simply die off, and we have got to have that intellectual property

1846

to protect those crown jewels.

MR. NORMAND: No further questions, Your Honor.

THE COURT: Mr. Brennan.

MR. BRENNAN: Thank you, Your Honor.

CROSS-EXAMINATION

BY MR. BRENNAN:

Q Good morning, Mr. Tibbitts. How are you today?

A I'm doing fine. How are you?

Q Good. I think you told us that you joined SCO in May of 2003, correct?

A Yes.

Q And since you have joined SCO, you have been awarded either shares in the company or options to acquire shares, correct?

A Well, when you say awarded, I've been awarded options I guess. I am not sure -- I don't remember being awarded shares, but maybe you will prove me wrong.

Q Well, do you currently own shares of stock in SCO?

A Yes.

Q How many do you own?

A I don't know.

Q Any idea?

A Ownership I would think is in the few thousand shares that I purchased through the employee stock purchase plan, I

1847

believe.

Q If you were to combine the shares that you actually own and those that you have options to acquire, those would aggregate to over 420,000 shares, correct?

A Yes, I believe that's correct.

Q So as you sit here today, you understand that if SCO were to prevail in this litigation, that you would stand personally to gain, correct?

A Correct.

Q You have a financial stake in the outcome of this litigation, right?

A I believe so, yes.

Q Now you said that you joined SCO after the SCOsource business had been launched, right?

A Yes.

Q And as a result of that, given that you joined SCO in 2003, you had no involvement whatsoever in the drafting of the underlying asset purchase agreement between Novell and Santa Cruz Operation entered into in 1995, right?

A That's correct.

Q You had no involvement whatsoever in the drafting or negotiations over either Amendment No. 1 or Amendment No. 2, right?

A True.

Q Now in terms of the SCOsource program itself, that

1848

licensing program was directed, I think you told us, to Linux users, right?

A Corporate Linux users I believe.

Q And the basic premise of the SCOsource program was the suggestion that Linux contained elements of the UNIX software code, right?

A I would agree with your general description, yes.

Q And the thrust of the SCOsource program was that Linux thereby infringed UNIX, right?

A Yes.

Q And the code that was claimed to be protected, that is the protected UNIX code that SCO alleged was in Linux, was UNIX System V code, right?

A I believe so, yes.

Q So it's correct, then, that SCO's claim has been and the SCOsource program was premised upon the notion that Linux infringes UNIX System V software code, right?

A I believe that's correct, yes.

Q It's not premised upon the notion that Linux or other operating system software infringes UnixWare, right?

A I would disagree with that. UnixWare is System V, based on System V, and just the latest version, as I understand it.

Q So is it SCO's contention that the SCOsource program is premised on the notion that Linux users are infringing

1849

UnixWare?

A In part, I believe that's correct.

Q Now in connection with -- I think they called it Malloc code. Did I get that correct?

A Yes.

Q You indicated that someone at SCO had determined that there was some portion of this Malloc code in UNIX, right?

A Yes.

Q And the UNIX code that you make reference to contains how many lines of code?

A When I referenced -- which UNIX code are we talking about?

Q The UNIX code that is the subject of the SCOsource program.

A The whole UNIX operating code base?

Q I assume that's what the subject is --

A I think it's millions of lines of code.

Q More than 14 million lines?

A I don't know, but that would be in the ballpark.

Q So you would agree that the UNIX code that the SCOsource program is seeking to enforce against Linux users would be roughly 14 million lines of code, right?

A I think that's probably correct.

Q And the Malloc code that you had referenced contains no more than 70 lines of code, right?

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A I haven't counted them, but that sounds like it's in the ballpark.

Q So 70 of 14 million lines of code is what you were suggesting was the basis for the infringement?

A No, that's not what I was suggesting at all.

Q When you brought these potential licensees into the code room and pointed out the Malloc code, I think you told us we're talking about 70 lines of code?

A That was one example that we showed them. That was certainly not the entire presentation.

Q Now you also indicated that you believe that SCO could not conduct its business without the UNIX copyrights; is that correct?

A Its total business, that's true.

Q Now it is true that SCO has offered to sell its business without the UNIX copyrights, correct?

A At this point in time the copyrights were potentially going to go with that business when the issues get cleared up, yes.

Q You're aware of a proposed transaction just in the last year whereby SCO would have sold its business and retained solely the UNIX copyrights, correct?

A Correct.

Q So you then were -- that is SCO was undertaking to sell its business but believed that someone could buy and operate

1851

that business and not receive the UNIX copyrights, correct?

A Well, that's a portion of our business, as I said.

Q Again, just so we're all clear, SCO itself has proposed transactions and preliminarily entered into one transaction to sell its entire business but retain the UNIX copyrights?

A No, not our entire business, absolutely not.

Q The business that was related to UNIX, right?

A The product business, not the intellectual property business.

Q Just so we're clear -- thank you for that correction -- what SCO has proposed to do is sell the UNIX business -- product business, but retain the UNIX copyrights?

A Yes, and the rights to enforce those copyrights.

Q That is not a product, is it?

A Well, the licensing could be a product.

Q It's not a physical product, is it? It's not even a CD?

A No, it's not.

Q Now you were asked about letters that you exchanged with Mr. LaSala, who at the time that you were engaged in this letter exchange was general counsel of Novell, right?

A Correct.

Q And Mr. Normand didn't show you all the letters that went back and forth, did he?

A No, he did not.

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Q He made a selection of some letters, but didn't show all, correct?

A Correct. There was quite a barrage of letters that went back and forth.

Q So, for example, he didn't show you the letters that Mr. LaSala had written to SCO, right?

A No. He showed me a few of those.

Q But not all of them. For example, he didn't show you the August 4th or August 20th of 2003 letters, did he?

A I don't believe so.

Q And in terms of the suggestion that Novell had issued a directive relative to IBM or Sequent, you remember those questions that Mr. Normand asked you about?

A Yes, I do.

Q You understood by virtue of going back and looking at section 4.16(b) of the asset purchase agreement and reading the letters from Mr. LaSala and others, that what Novell was doing was asking SCO to act in accordance with the express contractual provisions of Section 4.16(b), right?

A No, that's not right.

Q You thought that Novell was acting under some other provision?

A No. They were relying on that provision, but it was an inaccurate reading and interpretation of that.

Q So you disagreed with Novell's reading of the rights

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permitted under section 4.16(b), correct?

A Very much so.

Q If we could look at Exhibit 1 in evidence. I would like to take a quick look at section 4.16(b). Now as you look at what's on the screen, do you understand this to be the operative language of 4.16(b)?

A Yes, as you highlighted 4.16(b), but 4.16(a) is also part of the equation.

Q But, as you understood it, the claims that Novell was making relative to the transaction with IBM and Sequent were pursuant to section 4.16(b), right?

A Well, they were attempting to do that, yes.

Q So let's take a look at that. It says buyer -- that would have been Santa Cruz Operation, right?

A Yes.

Q -- shall not, and shall not have the authority to, amend, modify or waive any right under or assign any SVRX license without the prior written consent of seller, right?

A Yes, that is what this sentence says.

Q The seller would be Novell, correct?

A Correct.

Q It says, in addition, at seller's sole discretion and direction -- that would be Novell's sole discretion and direction, correct?

A Correct.

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Q -- buyer shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX license to the extent so directed in any manner or respect by seller, correct?

A Yes, but you have to go up to the prior provision to see what this means.

Q If you look at that language that we've just read, there is not a qualifier there, is there?

A What do you mean?

Q The sentence does not have a qualifier or a limitation, does it?

A Yes, it does.

Q Well, let's read the words again. In addition, at seller's sole discretion and direction, buyer shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX license to the extent so directed in any manner or respect by seller. You see that, right?

A I do.

Q Then it continues, in the event that buyer shall fail to take any action concerning the SVRX licenses as required herein, seller shall be authorized and hereby is granted, the rights to take any action on buyer's own behalf. Do you see that?

A I see that language.

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Q So you understood when you engaged in this exchange with Mr. LaSala that Novell was taking the position that under section 4.16(b) they had the right to direct the successor of Santa Cruz Operation, that is SCO, to amend, supplement, modify or waive any rights with respect to an SVRX license, right?

A I think I understood what Novell was claiming. I just disagreed with it.

Q Well, in answer to my question, you understood that Novell was giving direction to SCO pursuant to this contractual provision, right?

A Yes, this whole section I would say.

Q You also understood that the contractual language agreed to and to which Santa Cruz had agreed to and SCO was bound provided that in the event that the buyer, which became SCO under the language of this agreement, if it were to fail to take the action that Novell directed, that Novell was authorized and granted the right to take action on SCO's behalf, right?

A If it was legitimate, yes.

Q So the contention by SCO is somehow it was illegitimate what Novell asked SCO to do?

A It was not authorized by this agreement.

Q You are not aware of any court order having been issued that affirmed that IBM has infringed any copyright interest

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held by SCO, are you?

A Say it again.

Q You are not aware of any court decision that has affirmed or confirmed a claim by SCO that Linux infringes any copyrights, have you?

A No. That case is still alive.

Q So any potential licensee who had any question in their mind about whether or not SCO would prevail with those claims still would have those questions in their mind, right?

A Maybe, maybe not.

Q Well, you are not aware of any ruling by any court that has adjudicated that, are you?

A Correct, but that's not the only analysis people would go into.

Q Now when you had communications with potential licensees and the issue of IBM came up or Novell came up, you suggested to those potential licensees that what they ought to do in order to resolve in their own minds any issue is to go to the publicly available documents that discussed the dispute, right?

A I don't recall necessarily saying that. That certainly could have been something we told them, among other things.

Q Do you recall, for example, in a telephone call with Google that you stated that, quote, that's an issue out

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there and all the documents are out publicly, so you should take a look and decide for yourself?

A Yeah, but that doesn't just mean court documents. There are a lot of documents available out there.

Q Just so we're clear, whenever you met with potential licensees or had communications with them and there was an issue that was raised as to either the dispute with IBM or any dispute with Novell, you suggested to these potential licensees that they ought to go to sources that identified publicly the background of the dispute and the legal documents that pertain to it, right?

A In general terms, yes.

Q And the source of that information was Novell, right?

A Not necessarily. They were one source.

Q So what you expected potential licensees to do is if they had a question as to whether they should take a SCOsource license is to go to look at sources like Novell who had made public the relevant documents and communications between the parties and make their own decision, right?

A Yes.

Q That was because you believed that those potential licensees could make their own determination as to who was right and who was wrong?

A To some degree, yes.

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Q That's because you felt that reasonable minds, even though they might differ, would be able to discern who had the better argument, correct?

A In some situations that would be true.

MR. BRENNAN: One second, Your Honor.

BY MR. BRENNAN:

Q Just a question or two more, Mr. Tibbitts. When we talked about the claim by SCO that perhaps either UNIX or UnixWare might infringe Linux, what particular versions of UNIX or UnixWare do you have reference to?

A I believe you said that UNIX or UnixWare infringed Linux.

Q I'm sorry. I got it backwards. Let me restate the question. Thank you. So when you were discussing with us the issue as to whether Linux was infringing either UNIX or UnixWare, what versions?

A Of Linux?

Q No. What versions of UNIX or UnixWare.

A That I don't have the answer to. I know it's the System V versions, but we've had people much more technical than me weigh in on that. Sorry, I don't know the answer for you today.

Q Just so we're clear, when you had communications with

1859

potential licensees and talked with them or communicated with them about Linux potentially infringing either UNIX or UnixWare, you didn't have in mind what versions of UNIX or UnixWare were being infringed?

A I didn't specifically, but I always went to those meetings with people who are more technical than me, and I believe they had that information at their disposal.

Q Now when SCOsource was launched, that was launched essentially as a new business, right?

A Well, a new business -- or a new licensing line within all the other licensing lines we had, so --

Q SCOsource was deemed to be a new organization within SCO, right?

A A new division within SCO.

Q And SCOsource was something that was created in about August of 2003, right?

A The division was not created then. The division was formed earlier in the year. In August, what I was testifying to is I think that's when we came up with the right to use license as requested by Computer Associates.

MR. BRENNAN: I have no further questions. Thank you.

THE COURT: Thank you, Mr. Brennan.

Mr. Normand. //

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REDIRECT EXAMINATION

BY MR. NORMAND:

Q Mr. Tibbitts, do you recall being asked by Mr. Brennan about section 4.16(b)?

A I do.

MR. NORMAND: Mr. Calvin, could you pull that up.

BY MR. NORMAND:

Q I thought I heard you refer to 4.16(a) in connection with the answers you gave. Do you recall that?

A Yes.

Q Why did you mention 4.16(a)?

A Because you can't get anything out of 4.16(b) unless you read and understand 4.16(a).

Q Why do you think that is?

A Well, I recall Mr. Brennan asking me about a sentence in (b) and whether there were any qualifications. I said there clearly were, and the qualification is with the term SVRX license, which takes you up to 4.16(a) where it talks about royalties due under SVRX licenses. Then there is a parenthetical as listed in detail under item VI of schedule 1.1(a) hereof and referred to as SVRX royalties. So then you have to go to the schedules and try and figure out what we're talking about here.

Q So why do you think the schedules are relevant to this issue of Novell's waiver rights?

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A Well, because that at least begins the discussion on how broad that waiver right is.

Q How so?

A Well, because it tells you what the licenses are that they would have some right to deal with.

Q And what have you understood those licenses to be that Novell had waiver rights over?

A Well, product licenses underneath the various master agreements for which binary royalties were being paid back to Novell when this transaction came together.

Q Were those the kind of agreements at issue in the breech of contract claims against IBM?

A No, not down to that level. The master agreement is involved, but that is in a different section of the schedule.

MR. NORMAND: Mr. Calvin, could you pull up Amendment 2. Pull up all of paragraph B, including the subsections, please.

BY MR. NORMAND:

Q Mr. Tibbitts, do you have a view as to whether Amendment No. 2 clarified the scope of Novell's waiver rights?

A Yes, it did.

Q How so?

A Well, one of the provisions is right at the bottom

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where it says, Novell may not prevent SCO from exercising its rights with respect to SVRX source code in accordance with the agreement. That's one of the places that jumps to mind.

MR. NORMAND: Now, Mr. Calvin, bring us back to 4.16.

BY MR. NORMAND:

Q And I wanted to show you, Mr. Tibbitts, what you referred to as the first three lines of (a), the reference to the SVRX licenses, and then you referred to item VI of schedule 1.1(a). Do you recall that?

A Yes.

Q Let's go to item VI of schedule 1.1(a), if we can.

MR. NORMAND: That's at the bottom, Mr. Calvin.

BY MR. NORMAND:

Q Mr. Tibbitts, how did you understand this item VI to relate to the answer you just gave about section 4.16(a)?

A Well, this is where it takes you on the notion of what are SVRX licenses and then SVRX royalties. As you see, it says, all contracts relating to the SVRX licenses listed below. So SVRX licenses, as I think we've heard, these are not technically licenses, so this is one place the agreement is confusing. These are products. And then you have the product schedules that list the royalty payments that go with that. So that is my understanding of what this is

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pointing us to here, and it's a subset of all contracts that relate to this.

Q Now let's go back to Amendment 2.

MR. NORMAND: Let's pull out that paragraph 5 again, Mr. Calvin at the bottom.

BY MR. NORMAND:

Q Could you just read this language into the record, Mr. Tibbitts?

A Paragraph 5?

Q Yes.

A This amendment does not give Novell the right to increase any SVRX licensee's rights to SVRX source code nor does it give Novell the right to grant new SVRX source code licenses. In addition, Novell may not prevent SCO from exercising its rights with respect to SVRX source code in accordance with the agreement.

Q Now, in summary, when you see the reference to SVRX source code on the bottom of that paragraph, what do you understand that to refer to?

A Well, that is the crown jewels of the core UNIX intellectual property. That's the UNIX source code. And that is what Novell was trying to direct us to waive our rights over. They didn't have that right.

Q Let me ask you a couple more questions, Mr. Tibbitts. You were asked by Mr. Brennan about whether there are any

1864

court orders on whether Linux infringes Linux copyrights. Do you recall that?

A Yes.

Q Do you recall saying there is a pending litigation concerning that issue?

A Correct.

Q Has SCO hired experts to address the issue of whether Linux infringes --

MR. BRENNAN: Objection, Your Honor, we're varying into territory.

MR. NORMAND: They opened this door, Your Honor.

THE COURT: You did, Mr. Brennan.

MR. BRENNAN: Well, we're going to have hearsay here is the problem.

MR. NORMAND: No. We're going to have a discussion of what the status of the pending litigation is.

THE COURT: Let's see what the questions are.

MR. BRENNAN: Your Honor, there were specific agreements. What I asked about was limited to suggestions made earlier. This would be a violation of an express agreement. Perhaps we should have a side-bar to make sure we're clear on this issue.

THE COURT: Let's go ahead and take a recess.

(Jury dismissed)

MR. NORMAND: We were so close to being done, Your

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Honor.

THE COURT: I know. I could tell you were just anxious.

MR. NORMAND: If it helps, the questions were not going to go to the merits. The questions were going to go whether there's pending litigation, whether experts have been hired, whether there's evidence for the Court to consider, and whether Mr. Tibbitts understands it will be resolved in the future.

THE COURT: Mr. Brennan.

MR. BRENNAN: If it's limited to that.

MR. NORMAND: I thought there was a suggestion that there will never be a resolution in SCO's favor. I was trying to put that suggestion to bed.

MR. BRENNAN: Otherwise, we're going to get into this duel because there are experts on the other side, there is a summary judgment motion --

THE COURT: We don't want to do that.

MR. NORMAND: We don't want a mini trial.

THE COURT: We don't. As long as the questions are as narrow as just defined, I think we're okay.

MR. BRENNAN: If Mr. Normand does ask those questions, then there would have to be the response there are experts on the other side.

THE COURT: Well, you would get another shot, Mr.

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Brennan. You may ask those questions.

MR. BRENNAN: Thank you.

THE COURT: All right. We'll take 15 minutes.

(Recess)

1867

(Recess)

THE COURT: What will be next?

MR. SINGER: I believe what will be next is we will turn over the baton, although we are not resting our case, and, Mr. LaSala, we are informed, would be their first witness.

MR. ACKER: That is correct, Your Honor.

MR. SINGER: There are a couple of issues concerning Mr. LaSala before bringing back the jury, if we could take a few moments now.

THE COURT: Let's do it.

MR. SINGER: One of them I think is a very quick issue, and I believe I'm entitled to elicit the fact that there is a joint defense agreement between IBM and Novell, and it goes to credibility. I am not planning on using the agreement or going beyond that, but I believe that is relevant just like other things are relevant to the credibility of witnesses.

MR. ACKER: We would disagree, Your Honor. Essentially he is trying to put before the jury that there are protected communications between I.B.M. and Novell and we think that is improper.

THE COURT: Well, let me see. Are you trying to put before the jury that there are protected communications, or are you focusing only on the fact that there is a joint

1868

defense agreement?

MR. SINGER: Only on the latter.

MR. ACKER: That is the very purpose for the joint defense agreement. That is the very essence of the joint defense agreement itself.

THE COURT: But if there are no questions elicited to that effect, the jury will never know that.

MR. ACKER: Well, then there is no relevance to the fact that there is one.

MR. SINGER: The relevancy is that they have entered into a joint defense agreement believing that their interests are aligned.

THE COURT: I will allow you to ask a limited question to that extent.

MR. SINGER: Your Honor, there are three documents that --

MR. ACKER: Before we move on, we ask that the jury be instructed as to what is a joint defense agreement, Your Honor, so that the jury has context to place that in.

MR. SINGER: Well --

MR. ACKER: Otherwise it is going to be left as it is, something that is nefarious or untold as opposed to it is common in everyday --

THE COURT: May I ask this, if I ask Mr. Singer to elicit from your witness what it is in the most bare bones

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terms, would that be an agreeable way to do this?

MR. ACKER: I'll do it on redirect. I need to be allowed to do it on redirect.

THE COURT: You certainly will be allowed to do that.

MR. SINGER: There are three documents, and these are Exhibits 6, 7 and 8 to the memorandum which we submitted to the Court on privilege and that will come up in connection with Mr. LaSala's testimony. These are all internal documents among lawyers, for the most part, at Novell. There may be a business party in one of the communications. Part of the documents were redacted and we don't think these are admissible.

First of all, they are self-serving hearsay. You can't create a memorandum and then say, well, I'm going to introduce this to help prove the point of what would be contained within the context of that memorandum. Beyond that, there is a serious privilege issue. In the course of this communication you selectively redact certain parts and want to use other parts of the same memorandum. The attorney-client privilege protects communications, and they can't selectively use part of these communications while withholding others.

MR. ACKER: What these are, Your Honor, is these are e-mails that Mr. Jones wrote immediately after having

1870

telephone conversations with Mr. McBride. In fact, these are exhibits that Mr. Singer himself has shown to witnesses including Chris Stone when he testified and he was shown these exhibits by SCO.

THE COURT: Have they been admitted?

MR. ACKER: They have not been admitted, Your Honor.

MR. SINGER: No.

MR. ACKER: He is wrong about the hearsay issue as well, but I'll get to that in a second.

The only portions that have been redacted, Your Honor, are legal advice or opinions of lawyers in the e-mails. The actual substance, that is the factual percipient witness testimony regarding what was said by Mr. McBride to Mr. Jones on these different dates, that has not been redacted and that was inquired about at length in Mr. LaSala's deposition and in Mr. Jones' deposition as well. So he is wrong about the privilege issue.

On the hearsay issue, it is a quintessential past recollection recorded, Your Honor. Here is a guy that has a telephone conversation with Mr. McBride, types an e-mail saying what was said some seven years ago, and he certainly can use that document at the very least to testify about the substance of the conversation. We would submit under past recollection recorded it is also admissible as a non-hearsay

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document.

THE COURT: I can see it being used to refresh his memory, if he is asked do you remember the conversation and do you remember what was said and what may have been communicated without the document itself being admitted.

You're seeking its admission --

MR. ACKER: Well, I don't know how the testimony is going to go, Your Honor, but we certainly can use these documents with these witnesses to place them in the frame of mind of when certain conversations occurred and when they learned about certain conversations and then allow them to testify --

THE COURT: To refresh their memory?

MR. ACKER: Yes, and to testify about the substance of what they knew.

THE COURT: Again, the documents can be used to refresh memory without being admitted to the jury.

MR. ACKER: I understand, Your Honor. I also think that this is a classic example of past recollection recorded. There are many events where they took place years ago where someone contemporaneously wrote it down at the time of the event immediately after the event what happened. The classic example is writing down a license plate after seeing it outside a window. Seven years from now you may not remember that license plate, but you know you wrote it

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down and you can testify, yes, I saw it and I wrote it down. You can look at the piece of paper that you wrote it done on and say, yes, that is it, then you certainly can use that document to testify and we also think it is admissible.

MR. SINGER: There are very limited exceptions for this past recorded recollection. If the witness is to testify from his memory he can't introduce a self-serving document. If he does not have a recollection it can be used to refresh his recollection, but it does not come into evidence. I think that would resolve the issue, as long as you are not seeking to move this into evidence. If you're not seeking to move it into evidence, I don't think we need to deal with the privilege issue, because he is just using it to refresh recollection.

MR. ACKER: Then, of course, if there is cross-examination of Mr. Jones or Mr. LaSala on these conversations with Mr. McBride, or SCO attempts to cast doubt on their ability to recall the conversations or what the substance of the conversations are, then we certainly can use the documents as evidence that this is a prior consistent statement and past recollection recorded to bolster their memory of that conversation when it is being alleged that they can't remember.

THE COURT: The rule on recorded recollection says that the memorandum of record may be read into evidence but

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may not itself be received as an exhibit unless offered by an adverse party.

So it may be used and it may be actually read, but it can't be admitted and sent to the jury.

MR. ACKER: That is my understanding, Your Honor.

THE COURT: All right.

MR. SINGER: Your Honor, we don't believe that they even get to do that unless we challenge the testimony on direct as to the recollection.

THE COURT: Let's wait and see how that plays out.

MR. SINGER: Yes.

THE COURT: Is that all that you have?

MR. SINGER: That's all that we have, Your Honor.

MR. ACKER: That's all that I have.

(WHEREUPON, the jury enters the proceedings.)

THE COURT: All right.

Go ahead, Mr. Normand.

MR. NORMAND: I have no further questions for Mr. Tibbitts.

MR. BRENNAN: I have just a few, Your Honor.

THE COURT: Go ahead.

RECROSS-EXAMINATION

BY MR. BRENNAN

Q. Mr. Tibbitts, so that we can be clear, when you went and made various presentations to potential SCO licensees

1874

and were talking about UNIX code, you were referring to pre-asset purchase agreement versions of UNIX, right?

A. In what context?

Q. Well, when you were talking to potential licensees about the SCOsource program.

A. In part, yes.

Q. In fact, if we could take a quick look at Trial Exhibit 1, and we would like you to look at Schedule 1.1-A, Roman numeral six that you were asked about by Mr. Normand. You'll see that there are various products that you have described, and each of those products is a pre-asset purchase agreement version of UNIX, correct?

A. I believe that is the case, yes.

Q. Then if we could take a look at amendment number two to the asset purchase agreement, and Mr. Normand asked you about subpart B of amendment number two. Let's just read together what this provision of amendment number two addresses. You'll see at the top it says, quote, except as provided in Section C below, and notwithstanding the provisions of Article 4.16, Sections B and C of the agreement, any potential transaction with an SVRX licensee which contains a buy out of any such licensee's royalty obligation shall be managed as follows. Do you see that?

A. I do see that.

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Q. Then there are five numbered paragraphs. Do you see those as well?

A. Yes.

Q. So amendment number two and this subpart B that is addressed by its own terms, was focused on the buy out of licensee's royalty obligations, right?

A. That language is there, yes.

MR. BRENNAN: Thank you. No further questions.

THE COURT: You may step down. Thank you. Unless you would rather stay.

THE WITNESS: It was a lot of fun.

THE COURT: Mr. Singer.

MR. SINGER: Your Honor, at this time, while there are other witnesses we will be calling later in the week, we are yielding the floor to Novell.

THE COURT: Mr. Acker?

MR. ACKER: Novell would call as its first witness Mr. Joe LaSala, and he will be here in a second.

JOSEPH A. LaSALA, JR.

Having been duly sworn, was examined

and testified as follows:

THE WITNESS: Yes. Good morning.

My name is Joseph A. LaSala, Junior. The last name is L-a-S-a-l-a.

DIRECT EXAMINATION

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BY MR. ACKER

Q. Good morning, Mr. LaSala.

A. Good morning.

Q. Tell the ladies and gentlemen what you do for a living.

A. Yes. I am general counsel of a company outside of Washington, D.C. called Discovery Communcations.

Q. Is there any relationship between Discovery Communcations and the Discovery Channel?

A. Yes. The Discovery Channel is part of Discovery Communcations.

Q. That is the channel of the Deadliest Catch, am I right?

A. Yes, among others.

Q. How long have you had that job, sir?

A. Since mid January of 2008.

Q. What are your responsibilities as general counsel at Discovery Communcations?

A. Broadly I'm responsible for all legal matters that the company is involved with. I supervise a legal department of about 20 lawyers on a worldwide basis. I advise management and the board of directors of the company on legal matters.

Q. Back up and tell the ladies and gentlemen of the jury what both your undergraduate and advanced degrees are in.

A. Yes. I received a bachelor's degree from the Catholic University of America in Washington, D.C. in 1976. I received a law degree from the Columbus School of Law at the

1877

Catholic University of America in 1981.

Q. What job did you have before going to work for Discovery Communications?

A. I was general counsel at Novell.

Q. During what period of time were you general counsel for Novell?

A. From July of 2001 through mid January of 2008.

Q. Generally what were your responsibilities in that position between 2001 and 2008?

A. Similar to those that I have at Discovery. Again, I was the general counsel there responsible for all of the legal matters at Novell, supervising the staff of lawyers, and advising the management of the company and the board of directors on legal issues.

Q. Who were the senior executives that you worked with during the period at Novell between 2002 and 2003?

A. Principally Mr. Jack Messman, who was the C.E.O. of the company, Mr. Chris Stone who was the C.O.O. of the company, and Mr. Carl Ledbetter, who was our chief technology officer and our then C.F.O., chief financial officer.

Q. Why did you decide to leave Novell in 2008 and go to Discovery?

A. I had an opportunity to go to Discovery. I was recruited by the company to come to work for them, and after considering all of the alternatives and considering what was

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in the best interest of myself and my family I decided to make the move.

Q. Let me place you back in time to the fall of 2002. At some point during the fall of 2002 did you became aware of issues at Novell relating to a man by the name of Darl McBride and a company called SCO?

A. Yes, I did.

Q. How did you become aware of those issues?

A. I received a series of e-mails and phone conversations from a lawyer who worked for me conveying to me conversations that he and others had had with Mr. McBride around that time.

Q. Had you ever heard of Mr. McBride or SCO prior to the fall of 2002?

A. No, I don't believe that I had.

Q. Let me show you what we have marked as K-11. If you could take a look at that, sir. Do you recognize K-11?

A. Yes, I do.

Q. What is it?

A. This is an e-mail from Mr. Jones to me and one of our colleagues concerning a conversation that he had had with an assistant to Mr. McBride around this time. It advises --

Q. Before going into the substance of it, is this an e-mail that you received on or about November 20th of 2002?

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A. Yes, it is.

Q. In addition to receiving this e-mail from Mr. Jones, did you also speak with Mr. Jones?

A. I did.

Q. Did Mr. Jones relay to you information regarding his conversation with Mr. McBride?

A. He did.

Q. What did he say?

MR. SINGER: Objection. This is hearsay. Mr. Jones works for Novell.

MR. ACKER: It goes to Mr. LaSala's state of mind, which is clearly at issue given their slander of title.

THE COURT: The Court will overrule the objection.

BY MR. ACKER

Q. What did Mr. Jones say?

A. Mr. Jones conveyed to me the substance of his conversation that he received from Mr. McBride's assistant, which was essentially that she was asked by Mr. McBride to gather documents related to an asset purchase agreement that occurred between S-C-O and Novell in the mid 1990s. In addition, Mr. Jones told me that he understood that one of the purposes of the request to be to further SCO's interest in asserting intellectual property rights that it thought it owned related to UNIX against Linux end users.

Q. What was your reaction to this initial conversation

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with Mr. Jones?

A. Well, my initial reaction to this conversation was, again, pretty much one event at a busy day at Novell. It was the first I had heard of this kind of thing. I said to Mr. Jones, well, thank you, and I appreciate you telling me and keeping me informed. Let me know of any further developments.

Q. Let me show you another document that we have marked as Exhibit R-11. Do you recognize that e-mail?

A. Yes, I do

Q. Is this another e-mail that you received from Mr. Jones?

A. It is.

Q. And the date you received it?

A. December 4, 2002.

Q. What information did Mr. Jones provide to you in this e-mail, R-11?

A. Well, he wanted to update me on further communications that he and one of this colleagues had with Mr. McBride at SCO. He conveyed to us Mr. McBride's renewed request for Novell's help in getting these documents that he had been asking for. He, for the first time to my knowledge, referenced the fact that SCO was intending to announce a Linux licensing

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program, and that he very much wanted Novell's cooperation in getting copies of those agreements in furtherance of SCO's Linux licensing program.

Q. Your reaction to this second e-mail and communication from Mr. Jones, was it any different than your reactions to the first?

A. Well, slightly. I guess my concern would be slightly more heightened at that point, understanding that Mr. McBride had in mind a specific program related to Linux, and I knew at our company that Novell had interests in getting into and had taken certain steps and made certain investments in the Linux business, so I was I guess slightly more concerned at that point about what Mr. McBride might be up to.

Q. At this point in time, in December of 2002, had you gone back and read the asset purchase agreement or any of its amendments?

A. No, I had not.

Q. Were you involved at all in the asset purchase agreement and the execution or negotiations of the agreement back in 1995 or 1996?

A. No, I was not.

Q. What was your response back, if any, to Mr. Jones getting the second communication in early December of 2002?

A. Well, my response was, okay, Greg, keep me posted for

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sure if you get anything further, because this seems to be going in a more serious direction than perhaps we had initially thought. Mr. McBride makes reference to Greg and Greg tells me that in his e-mail that, you know, he might be elevating the conversation to others in the company.

Q. Let me show you what we have marked as N-12. Do you recognize what has been admitted as N-12?

A. Yes, I do.

Q. What is that?

A. This is a copy of a press release that SCO issued on January 22, 2003, where it announces the establishment of SCOsource to license the UNIX intellectual property.

Q. Did you become aware of this announcement on or about January 22?

A. Yes, I did.

Q. What was your reaction at Novell when you saw this press release in January?

A. Our concern at this point is very high, as you might imagine, given our interest in Linux, that upon reflection this fulfilled Mr. McBride's promise that he was going to be announcing a campaign against Linux end users asserting that SCO was the owner of the copyrights to UNIX. We had a point of view ourselves on that ownership position that we subsequently did more work on, and so we were quite concerned at this point in time.

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Q. Why is Novell concerned that SCO is announcing this SCOsource product? Why does that create issues for Novell?

A. Principally because Novell, as I mentioned a few moments ago, had previously announced its intention to get involved in the Linux business. There had been a lot of work done, there had been a lot of planning done, and we viewed Linux as an area of computing that we thought we could really create some value and service customers well. We saw this as a threat to our potential business opportunities and our ability to be successful with Linux.

Q. Why was this campaign a threat to Novell's intent to get into the Linux business?

A. Because if Mr. McBride and SCO were threatening Linux end users with copyright infringement and making demands for payment from them, that would have the potential to slow down our own initiatives and throw some roadblocks in the way of our ability to conduct our own business. It would effect existing relationships with customers as well as potentially future relationships with potential customers.

Q. Let me show you another e-mail that is marked as W-12. Do you recognize what we have marked as W-12?

A. Yes, I do.

Q. What is it?

A. It is yet another e-mail from Mr. Jones to me dated February the 25th of 2003, where he updates me on subsequent

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conversations that one of our colleagues had with Mr. McBride concerning the subject that Mr. McBride had been calling about, the copyright ownership related to UNIX and his desire to get copies of the asset purchase agreement. Mr. Jones tells me that our colleague, and his name was Mr. Wright, told Mr. McBride that we were not in a position to fully evaluate the request at that time. Again, Mr. McBride suggested that he had a relationship with Mr. Messman, our C.E.O., and that he might have to take it upon himself to elevate this issue to Mr. Messman.

Q. Given the information that you have to date about the earlier communications in the fall of 2002, and the announcement of SCOsource and now this e-mail, what is your reaction in February of 2003?

A. Our concern is quite heightened at this point in time. Again, coming on the heels of the SCOsource announcement just a few weeks before, and wherein SCO asserted its ownership of the UNIX copyrights, and the fact that Mr. McBride was continuing to ask us for documentation and cooperation such that he could pursue this campaign really caused us concern.

Q. At some point in time do you and your staff sit down and review the A.P.A.?

A. Yes, we did.

Q. Approximately when was that?

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A. Well, I don't remember exactly when it was that we began to review the A.P.A. in earnest. It was around this time, though. I would say it was sometime in the February, late February time frame is my best recollection.

Q. Upon that review, what conclusion did you reach?

A. Well, the conclusion that I reached after our review of the asset purchase agreement was that Novell was the rightful owner of the UNIX copyrights, and that they had not transferred to SCO as a result of the asset purchase agreement that was executed in 1995.

Q. What portion of the A.P.A. did you base that conclusion on?

A. Well, there is a particular schedule attached to the agreement. It is referred to as Schedule 1.1-B and it is entitled excluded assets. It lists assets which are excluded from the transfer. Copyrights are expressly excluded from the transfer of the assets pursuant to that schedule.

Q. Did you learn on or about early March of 2003 about a lawsuit that SCO filed against Internal Business Machines or I.B.M.?

A. I did.

Q. How did you become aware of that?

A. I became aware of it through the press and on the web. It was a significant development in the industry, the fact

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that SCO was choosing to sue I.B.M., and there was publicity about that.

Q. Was there significant publicity about it?

A. Yes, there was significant publicity about it. It was well reported and well known throughout the industry. There was a lot of commentary about it and a lot of attention paid to it.

Q. Did that lawsuit combined with the other information that you had about SCOsource at that point, did that give you any concern regarding Novell's business interests?

A. Yes, it did. It suggested to us in the strongest form possible that SCO was serious about promoting its campaign against Linux, and that this was the first official salvo that it was going to launch against the Linux community. That really concerned us because of what I have said, our ongoing and continuing interest in the Linux business for ourselves. We were concerned about our own business prospects as a result of all of this.

Q. After the lawsuit against I.B.M., did you receive communication from someone representing I.B.M.?

A. Yes, I did.

Q. Can you explain that to the jury?

A. Yes. I don't recall the exact date, but it was within a matter of days after the lawsuit against I.B.M. was filed, that I received a call from a gentleman named Mr. David

1887

Marriott that was outside counsel for I.B.M. He called me. I remember I took the call at home on my cell phone at the end of the day. He called me and asked me if I was aware of the lawsuit. I told him that I was. And whether or not I was aware that Novell had certain rights under the asset purchase agreement that could be beneficial to I.B.M.? I told him that, you know, we were really just beginning to get into our analysis of the asset purchase agreement, and that I would take a look at it carefully and make our own judgment about the effect of this language that he was referring me to, and make our own independent judgment about it.

Q. Did you make any promises to Mr. Marriott about what Novell may or may not do?

A. No, I did not.

Q. Did he make any demands of Novell in terms of what they should or should not do?

A. No, he did not.

Q. About how long did this conversation last?

A. No more than five minutes. It was less than five minutes to my recollection.

Q. All right. At some point did you yourself have a direct conversation with Mr. McBride on this issue of copyright ownership?

A. Yes. I was a participant in a telephone conversation

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between Mr. Stone and Mr. McBride.

Q. Let's set the stage for the jurors. Where were you and Mr. Stone?

A. I was in Mr. Stone's office.

Q. Do you recall approximately when this was?

A. My recollection is that it was in the mid May time frame.

Q. Do you recall who called whom?

A. My recollection is that Mr. Stone placed that call, but that he was returning a call from Mr. McBride to Mr. Stone.

Q. Were you able to hear that conversation?

A. Yes. I was on the speakerphone, and Mr. Stone told Mr. McBride that I was in the room.

Q. Do you recall the substance of the conversation?

A. I do.

Q. What was that?

A. Well, it was essentially Mr. McBride reiterating what had now been repeated requests to Novell to have an amendment to the asset purchase agreement so that SCO could get the copyrights.

Q. What was the response from either yourself or Mr. Stone?

A. It was Mr. Stone who responded, and he told Mr. McBride that Novell had no interest in transferring those copyrights to SCO, that by this time we had a firm view that those

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copyrights were owned by Novell, and that we had no interest in participating in his SCOsource license campaign against Linux end users.

Q. At this point in time, the mid May time frame, had you or to your knowledge anyone else seen an executed copy of amendment number two to the asset purchase agreement?

A. No.

Q. Had you seen an unexecuted copy?

A. I may have seen an unexecuted copy of amendment number two by that time.

Q. Do you recall under what circumstances?

A. Yes. I think it was Mr. Jones who advised me around that time that we had located an unexecuted copy of a document that was entitled amendment number two, asset purchase agreement.

Q. What was your reaction to seeing the unexecuted amendment?

A. My reaction was first and principally that I thought this document had no legal effect because it was not executed. I read it. It was interesting what it said, but I concluded that it had no legal effect and pretty much dismissed it. I have been involved in enough transactions over the course of my career to know that drafts of documents are made with regularity, and more often than not they are not executed. I saw it as a document that had no

1890

legal effect on the question at issue.

Q. Did you give any instructions to anyone in your legal team about making efforts to see if there was an executed version of it?

A. I did. I recall sometime around then asking Mr. Lundberg, who was a lawyer who worked for me at the time, to look, to conduct -- you know, I think I said to him words to the effect, Jim, turn the company upside down because if there is an executed copy of amendment number two in Novell's files, that is something that would be relevant and we would like to know about that. Jim told me that he had done that and reported back sometime later that, you know, we have sent people off site and looked through various files within the law department and, you know, despite these efforts we could not find an executed copy of amendment number two in the company's files.

Q. Let me show you another document that was been admitted as H-14. If you could take a look at that.

A. Okay.

Q. Do you recognize that document?

A. I do.

Q. What is it?

A. It is a letter dated May 12, 2003 to Mr. Messman, the

1891

C.E.O. of Novell, from Mr. McBride. I came to understand that the exact version of this letter had also been sent to some 1,500 companies in the United States.

Q. In mid May, the same date?

A. I believe it was the same date.

Q. What was the reaction in the software community when this letter went to Mr. Messman as well as thousands of letters, to 1,500 other companies?

A. It was -- the attitude was game on here, I guess. Mr. McBride has decided to assert, we believe incorrectly, ownership of the UNIX copyrights against hundreds of companies including Novell, and is seeking to enforce what he believed to be were his company's rights with respect to the ownership of the UNIX copyrights against Linux end users. So the reaction in our company was profound, and the reaction throughout the computing industry was like nothing I had seen in the time that I was at Novell working in the computing industry. There was a lot of commentary on it and a lot of information around the web with respect to what Mr. McBride was up to. It was quite concerning I would say to most companies and most people knowledgeable and involved in the industry.

Q. Did Novell make a decision sometime after May 12th and after Mr. Messman received this letter that it needed to

1892

respond?

A. Yes, we did.

Q. Was that response to be public?

A. Well, after we received this letter, as you might imagine, I got together with my colleagues and we began thinking about what an appropriate response would be, and whether the response should be private or public. We concluded after some thought and deliberation that we finally had to make the public aware of our position on this very important issue, because Mr. McBride's campaign against Linux was in full swing about this point. To my knowledge Novell had made no public comment at all at this point in time. That is my recollection. We thought, given the full force of the campaign that had been launched, and now that this May 12th letter, which made some demands on Linux end users and some allegations that we thought were unfounded and inappropriate to make, we felt it was important to respond specifically and substantively to Mr. McBride's letter and to make that document public as well.

Q. What form was the response to take?

A. In the form of a letter to Mr. McBride and in the form of a press release publishing in effect the letter to the public.

Q. Who was tasked with overseeing the preparation of both

1893

the letter back to Mr. McBride and the press release?

A. I was.

Q. Did you do that?

A. I did.

Q. Was there a date selected that this letter was to go back to Mr. McBride and the press release was to be released?

A. No.

Q. Did you subsequently select a date?

A. I didn't select a date, per se, but the letter went out on May the 28th.

Q. Why was it that the letter went out on May the 28th?

A. Because that is when it was ready to go and all were comfortable with the letter itself and the position that we had taken, and it was ready to go on that day.

Q. Was the letter sent on May 28th in order to somehow impact an earnings announcement that SCO had on that same day?

A. No.

Q. Are you certain of that?

A. Yes, I am.

Q. Did you even know that SCO had an earning announcement on May the 28th before the letter went out and the press release went out?

A. I did not.

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Q. What was the reason for putting out the letter and responding to Mr. McBride? Was it done in order to somehow injure SCO or Mr. McBride, or was it done to protect Novell's interests?

A. It was totally motivated to protect Novell's interests. I have explained to you a little bit about our initiative into this business, this Linux business. As you can imagine, for a company that was preparing to devote a lot of resources and spend a lot of money getting into the business, this campaign of SCO's and Mr. McBride's really had the potential to disrupt all of that. With due respect, I had no opinion and I had really no care, per se, with respect to Mr. McBride or Mr. McBride's business. I was concerned about Novell's business and Novell's business interests.

Q. Let me show you what we have marked as K-15 and J-15.

THE COURT: Mr. Acker, you realize that none of these exhibits have been admitted?

MR. ACKER: I realize that, Your Honor. Many of these have already been admitted through other witnesses, Your Honor.

BY MR. ACKER

Q. Do you recognize those two documents, sir?

A. Yes, I do.

Q. Can you tell the ladies and gentlemen of the jury what

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each is?

A. Document J-15 is the letter that we have just been talking about, Mr. Messman's response to Mr. McBride's May 12th letter. As you can see, it is dated May 28th. Document K-15 is the press release that Novell issued that day announcing that we had sent this letter to Mr. McBride and quoting relevant portions of the letter, and then attaching the letter itself to the press release.

MR. ACKER: I would move for the admission of J-15 and K-15.

MR. SINGER: These are already in evidence as SCO exhibits, but we have no objection.

THE COURT: This is a problem, Mr. Acker.

MR. ACKER: I will make this promise to the Court, that what goes to the jury is only one copy of these, but the witness is testifying as to these, so if we can show these to the jury while he is testifying.

THE COURT: J-15 and K-15 will be admitted.

Counsel, I do request, respectfully, that you both make certain that we do not send duplications of the documents to the jury.

MR. ACKER: I understand. Thank you.

(Defendant's Exhibits J-15 and K-15 were received into evidence.)

BY MR. ACKER

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Q. Let's take a look at first starting with the press release which is K-15.

MR. ACKER: If we could highlight that, Mr. Lee, the whole press release.

BY MR. ACKER

Q. Now, in the first paragraph of that press release, Mr. LaSala, Novell wrote defending its interests in developing service 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. Do you see that?

A. I do.

Q. Was that statement true when you made it on May 28th, that you were putting out this press release in order to defend Novell's interests?

A. Absolutely.

Q. Do you believe that statement still to be true to this day?

A. Yes, I do.

Q. Is there anything that has happened in the almost seven years since this press release came out that would make you think that anything different, other than this press release put out, in order to defend Novell's interest?

A. No, nothing has subsequently happened that has changed

1897

my view on that.

Q. Then in this next paragraph down, and we can highlight that, first, Novell challenged SCO's assertion that it owns the copyrights and patents to the UNIX System V, pointing out that the asset purchase agreement entered into between Novell and SCO in 1995 did not transfer those rights to SCO. Did you believe that to be the case when this went out on May the 28th?

A. Yes, I did.

Q. Do you still believe that to be the case today?

A. Yes, I do.

Q. Then you also indicate, 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 letter, text below, from Novell, chairman and C.E.O., Jack Messman, in response to SCO making these claims. Do you see that?

A. Yes, I do.

Q. Why was it that Novell was putting SCO to its proof, that is, asking them what in fact was their claim with respect to UNIX and Linux and why were you doing that?

MR. SINGER: I object, Your Honor. This was previously objected to on a privilege.

THE COURT: Mr. Acker, I'm going to have to rely

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on the representation.

MR. ACKER: I will move on.

MR. SINGER: I can show you the precise cite.

BY MR. ACKER

Q. Let me ask you this question. Was your request of SCO that it actually put forth proof to support its claim, was that done in an attempt to somehow harm SCO?

A. Not at all, no.

Q. Then you attached to this press release the actual letter that Mr. Messman sent back to Mr. McBride on the same day which has been admitted into evidence, correct?

A. Yes.

Q. Did anyone at I.B.M. tell you, or to your knowledge anyone else at Novell, that it should put out this press release on May the 28th?

A. No.

Q. To your knowledge did I.B.M. exert any influence that resulted in the press release on May 28, 2003?

A. No, none whatsoever.

Q. Did you put out this press release on May the 28th in order to protect Novell's interests or some other company's interests?

A. Totally to protect Novell's business interests.

Q. Would you believe that you would have been doing your job as general counsel of the company if you had not

1899

responded to Mr. McBride's activities up to the middle of May of --

A. No. I felt it was imperative upon us to respond in a formal and public and forceful way to Mr. McBride's May 12th letter.

Q. At some point after the press release went out on May the 28th, did you become aware that there was in fact an executed copy of amendment number two to the asset purchase agreement?

A. I did.

Q. How did that happen?

A. My recollection is that on the evening of June the 5th that Mr. Messman advised me that he had had a conversation with Mr. McBride, and that Mr. McBride told him that SCO had identified a copy of an executed version of amendment number two, and that he, Mr. McBride, would be faxing that to us. That is how I found out about it.

Q. When did you actually see the document? Was it that night or the next day?

A. It would have been the evening of June the 5th. I can't remember the exact time.

Q. Then did you subsequently receive that morning of June 6th, receive a letter from Mr. McBride?

A. We did.

Q. Let me show you what we have marked as Z-15.

1900

Do you recognize that?

A. I do.

Q. What is that?

A. This is a letter from Mr. McBride to Mr. Messman dated June the 6th, 2003, that Mr. Messman received, my recollection is, the morning of June the 6th.

MR. ACKER: I move for the admission of Z-15, Your Honor.

MR. SINGER: Again, this is already in evidence, but we have no objection.

THE COURT: Z-15 will be admitted.

(Defendant's Exhibit Z-15 was received into evidence.)

BY MR. ACKER

Q. In this letter did Mr. McBride make demands of Mr. Messman and Novell?

A. Yes, he made numerous demands, outlined principally in the second half of the letter.

Q. If we could scroll down, you are referring to the numbered bullet points?

A. The paragraph that is prior to the numbered bullet points, as well as to the numbered bullet points.

Q. Let me read it first and then you can explain what impact this had on the company.

A. Sure.

1901

Q. SCO will hold a press call today at 11:00 a.m. Eastern Standard Time to clear up the matter so that our shareholders and customers are fully aware of SCO's rights with respect to the UNIX copyrights. You have time before that call to take the following corrective action in order to possibly mitigate any liability on the part of you, Jack Messman and Novell to SCO, and to your own shareholders for your false and groundless accusations. What was your reaction and what were the allegations that Mr. McBride was making toward Novell in his letter on the morning of June the 6th?

A. In the previous portion of the letter Mr. McBride alleges that our release of the press release on May 28th violated the United States securities laws. As you can imagine, as the general counsel of the company that type of allegation made against the company that I was the general counsel of was taken quite seriously, because those laws are laws that lawyers and companies spend a lot of time making sure that we comply with. The assertion by Mr. McBride that our company and our C.E.O. were violating U.S. securities laws I thought was outrageous and unsupported by the facts and circumstances.

Q. What if any impact did the fact have that Mr. McBride was going to hold a press conference at 11:00 that day have?

A. I felt somewhat -- I guess I would say our company felt

1902

pressed by Mr. McBride. He made these demands that are outlined in the lower half of this letter essentially saying that unless you comply with the demands that I am making of you, and the implication to me, the strong implication was that he would be making references to these allegations about violations of U.S. securities law in his call at 11:00. That is how I read this.

Q. Did you decide that you needed to respond?

A. Yes. I decided that I needed to respond very quickly.

Q. What was the nature of your response that you thought was appropriate?

A. I wrote a letter back to Mr. McBride as quickly as I could. The letter addressed two subjects. One was these allegations that he had made against our company regarding securities laws violations. The other related to a commentary on the fact that an executed copy of amendment number two had been found.

Q. Let me show you what we have marked as Exhibit Y-15.

MR. ACKER: This has been admitted, Your Honor, as SCO Exhibit Number 97.

BY MR. ACKER

Q. Take a look at the letter, Mr. LaSala. First let's take a look at your letter on June 6, 2003. You wrote I have received your letter to Jack Messman with respect to Novell's May 28th press release. For your

1903

information, Novell today has issued a press release with respect to amendment number two. 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 release call to be held at 11:00 a.m. Eastern Standard Time. What allegations, absurd and unfounded accusations were you referring to in your letter back to Mr. McBride?

A. That paragraph --

THE COURT: Just a moment.

MR. SINGER: Excuse me. This was also a subject that was objected to as privileged in his deposition, page 40, line 22.

MR. ACKER: This letter was the subject of pages of deposition testimony. He was asked directly about all of this in his deposition and gave the answers that he is about to give, Your Honor.

THE COURT: Mr. Acker, take a look at what Mr. Singer has.

MR. ACKER: Page and line, please.

MR. SINGER: Page 40, line 1, May of 2007, through page 41, line 3.

MR. ACKER: I'm sorry?

MR. SINGER: Page 40, line 1, through page 41,

1904

line 3.

MR. ACKER: This has nothing to do with this part of the letter.

MR. SINGER: It is the June 6 press release.

THE COURT: He is asking about the letter.

MR. SINGER: If you're drawing a distinction between the letter and the attached press release, and I think the objection was to the press release --

MR. ACKER: Well, as to the press release, I know that there were pages of testimony about the press release, Your Honor. If you're going to make an objection regarding the press release, we'll have to have a discussion about --

THE COURT: Go ahead. You asked him a question about the letter. Go ahead and ask the question.

Do you want the question reasked, Mr. LaSala?

BY MR. ACKER

Q. When you were talking in your letter about the absurd and unfounded accusations, what were you referring to, Mr. LaSala?

A. This was a reference to Mr. McBride's allegations that Mr. Messman, the C.E.O. of Novell, and Novell itself had violated U.S. securities laws.

Q. If we could turn to the next page, you also put out a press release on that day?

A. Yes, we did.

1905

Q. Is that what we're looking at now?

A. Yes.

Q. In that press release Novell stated 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 number two to the 1995 SCO-Novell asset purchase agreement was sent to Novell last night by SCO. That was true, correct?

A. Yes.

Q. That was the first time to your knowledge anyone at Novell had seen an executed copy of amendment two?

A. Yes.

Q. To Novell's knowledge this amendment is not present in Novell's files. Do you see that?

A. I do.

Q. When this press release went out on June 6, 2003, did you also believe that statement to be true?

A. Yes, I did.

Q. Did you later find out that, in fact, there was a copy, an executed copy of amendment number two at Novell?

A. I later found out that there was an executed copy of amendment number two at Novell.

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Q. Was that located before or after this press release went out?

A. To the best of my knowledge after this press release went out.

Q. So despite your instructions to your legal team to go and find it, they were not able to locate it before June 6, 2003?

A. That is correct.

Q. Then you wrote and the press release states the amendment appears to support SCO's claims that ownership of certain copyrights for UNIX did transfer to SCO in 1996. Correct?

A. Yes. That is what the press release says.

Q. What did you mean by that statement?

A. Well, I meant that on first blush, the first reading of the amendment, a hurried reading of the amendment that the amendment appeared to support claims of transfer of ownership of copyrights.

Q. Upon further reflection what was your conclusion about whether it did or did not?

A. My conclusion was that it did not.

Q. Why did Novell put this out to the public? Why did Novell do this?

A. Again, I think there were two motivations for Novell putting this out to the public that morning. The first we

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have talked about, those allegations that Mr. McBride had leveled against us, and we felt it important to respond to him and we did that, so that he would refrain from saying that our company had violated the securities laws on his 11:00 call that morning. Perhaps more importantly with respect to the ownership issue of the copyrights, we were getting -- we, the company, and colleagues of mine in the company were getting calls from the press that morning, asking us for comments on the fact that SCO had found and identified amendment number two, and that SCO was taking the position that amendment number two cleared up the question of ownership of copyrights. Apparently someone had leaked that to the press, and we were getting numerous calls that morning, and we felt compelled to be responsive to those, again, particularly in light of the fact that Mr. McBride had scheduled an 11:00 call that morning. So we wanted to get something out and we needed to do it quickly.

Q. What was the plan in place going forward after the June 6th, 2003 press release to determine the impact, if any, of amendment number two on the asset purchase agreement?

A. Well, my colleagues and I set about to best understand as we could amendment number two in the context of the entirety of the asset purchase agreement. We spent, as you might imagine, a considerable amount of time working on

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that.

Q. Let me show you what has been marked as F-16. Let me show you F-16, and this has been admitted as SCO exhibit, I believe, 672. Do you recognize that letter?

A. Yes, I do.

Q. Can you tell the ladies and gentlemen of the jury what it is?

A. Well, this is a letter from me to Mr. McBride dated June 9th 2003. In it I advise Mr. McBride of what Novell's rights are under Section 4.16-B of the asset purchase agreement. It was written in furtherance of the letter that we had sent to Mr. McBride on May the 28th. In this letter we tell Mr. McBride that we will be, again, pursuant to our rights under the asset purchase agreement, that we will be directing SCO to waive any right that it may claim to terminate an I.B.M. SVRX license.

Q. Prior to putting out this letter asking SCO to waive its claims with respect to SVRX licenses, I.B.M.'s SVRX license, had you had any other conversations with anyone from I.B.M.?

A. Yes. To be clear, this letter merely tells SCO that it should waive its claims to terminate I.B.M.'s SVRX licenses. Yes, I did have a conversation with someone at I.B.M. prior

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to this letter going out.

Q. Do you remember approximately when that was?

A. It would have been between -- I think it was in early June, between the time of the May 28th letter and the time of this letter.

Q. Who participated in the call?

A. The participants in the call were myself, Mr. Rosenberg from I.B.M., I believe at the he time was the general counsel of I.B.M., and Mr. Marriott, who was I.B.M.'s outside counsel, and Mr. Michael Jacobs from Morrison & Forester representing Novell, so the four of us participated in the call.

Q. What was the substance of the call?

A. The substance of the call, again, was Mr. Marriott explaining to us his view of how the asset purchase agreement worked, and asking that we consider waiving all claims that SCO had made or might make against I.B.M. with respect to I.B.M.'s SVRX license.

Q. How did you and your counsel respond?

A. Mr. Jacobs responded on my behalf and he said to the I.B.M. lawyers that, you know, we are in the process of reviewing these documents. We have taken a careful look at them. While the request was made that Novell waive all claims that SCO might make, that we would look at each on a case by case basis and make our own determination and act

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accordingly. If we felt that the interpretation that I.B.M. was suggesting was the correct one, that then we would act in that way, and if we felt it was not correct, then we wouldn't.

Q. Was that analysis done?

A. That analysis was done.

Q. Did that result in this letter on June 9th?

A. It did.

Q. Can you explain to the ladies and gentlemen of the jury, because it has been a little confusing, exactly what it is that you're asking or directing that SCO do in this letter and what provisions of the A.P.A. you believe gave you, that is Novell, the right to do so?

A. We are relying on an important provision of the asset purchase agreement that reserved to Novell certain rights with respect to existing SVRX licenses. Novell had a continuing economic interest in those licenses. We had been told and had learned that SCO had put I.B.M. on notice that it, SCO, was going to terminate that license because of the assertion that it, SCO, was the owner of the copyrights. Now, Novell had realized substantial economic benefit from this license that we had entered into with I.B.M. in the mid nineties, is my recollection, and we had been paid about $10 million by I.B.M. for a fully paid up irrevocable perpetual license, and --

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Q. Let me stop you there. When you use those words, fully paid up irrevocable license, what does that mean to you?

A. It means they got a license to SVRX code forever, and that they would owe us no further money, that it was paid up, fully paid up at that time, and that the license could not be revoked by Novell.

Q. What was your understanding of what SCO was attempting to do in this time frame?

A. SCO, my understanding is, put I.B.M. on notice that it, SCO, was telling I.B.M. that it planned to terminate that license, and to do so by a date certain, which I believe was June the 13th of 2003.

Q. What if any impact did you believe that that step, the termination of the I.B.M. license, would have on Novell's business interests?

A. Well, that act by SCO could have significant negative implications for Novell. As I said, I.B.M. had paid Novell about $10 million. If I.B.M. was going to have its license revoked by SCO, then it was conceivable that I.B.M. might seek to recoup its payment to us, the $10 million that it had paid us for its irrevocable license. That was a concern to us.

Q. Why is it that you made the decision to direct SCO to waive and not terminate the I.B.M. license?

A. Well, we have that right under 4.16-B of the asset

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purchase agreement, that is the rights related to existing SVRX licenses at the time of that agreement, and we controlled and retained the right to direct SCO to waive any claim that it might make against any of those licensees. I trust you can understand why we would do that, because we had an economic interest in those licenses, and if SCO was going to seek an amendment or a waiver or a revocation of licenses, it was in our interest to be sure that they couldn't do that and that they didn't do that. This was something upon my reading of the contract that strongly indicated that the parties had thought that through and had arranged the contract that way for that purpose.

Q. Was this done, this asking of SCO to waive its claim against I.B.M. or to not terminate its license, was that done in order to harm SCO or just to protect Novell's business interests?

A. No. Again, we had no interest in harming SCO. We were looking out for Novell's business interests. In this case there was at least $10 million at stake, and I could imagine a claim coming to Novell seeking not only $10 million, but $10 million plus, you know, ten year's of interest. This was a concern.

Q. Let me show you another letter that you wrote on June 26, 2003.

A. June 24th?

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Q. I'm sorry. June 24th, yes.

THE COURT: What is this marked as?

MR. ACKER: S-16.

THE COURT: Has a version of this already been admitted?

MR. ACKER: I don't believe so, Your Honor.

MR. SINGER: We are not certain that this has previously been admitted. We do not have an objection.

MR. ACKER: I move the admission of S-16. Your Honor.

THE COURT: S-16 will be admitted.

(Defendant's Exhibit S-16 was. received into evidence.)

BY MR. ACKER

Q. On June 24th you wrote another letter to Mr. McBride, correct, Mr. LaSala?

A. I did.

Q. Can you sum up for the ladies and gentlemen of the jury what you're asking from SCO in this letter written on June 24, 2003?

A. Well, essentially we're asking SCO for copies of the SVRX licenses that it announced to the public that it had entered into with third parties.

Q. If we could go down to the paragraph that begins with amendment number two --

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A. Yes.

Q. You wrote, amendment number two to the asset purchase agreement reinforces the restrictions on SCO providing that Novell, as well as SCO, has the right to approve any transaction with an SVRX licensee which concerns a buy out of any such licensee's royalty obligation. Do you see that?

A. I do.

Q. What is it that you're asking for from SCO? In this letter, simply put, what were you asking him?

A. Copies of recent licenses that they had entered into with Microsoft and another at that point unnamed party, because we felt that we had an economic interest in those licenses.

Q. Why did you think you had an economic interest?

MR. SINGER: I object, Your Honor. I don't think these are issues that are before us in this case.

THE COURT: I'll overrule the objection.

BY MR. ACKER

Q. Why did you make this simple request of SCO?

A. Because consistent with our rights in this Section 4.16-B that we have been talking about, SCO did not have the right to enter into new SVRX licenses, except in some limited circumstances. We learned from their securities filings that they had in fact entered into new SVRX

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licenses. We thought that to the extent that they had done so, that we might have an economic interest in whatever license arrangement they had made.

Q. How would that economic interest -- where would that come from?

A. It would come from royalties that these parties would pay under the license to SCO, and arguably we thought rightfully would belong to us.

Q. Why is it that Novell would be entitled to royalties that had been paid to SCO?

A. Because SCO didn't have the authority to enter into these new SVRX license, and to the extent that they had done so our view was that, you know, those proceeds from those SVRX licenses belong to us because of our ownership position with respect to the copyrights.

Q. Was that part of the --

MR. SINGER: Your Honor, may we approach?

THE COURT: Yes.

(WHEREUPON, a bench conference was begun.)

MR. SINGER: Your Honor, we filed a motion in limine that dealt with the fact that the determination of these licenses and the 2.5 million to Novell -- in other words, all events relating to the 2008 trial shouldn't come in here and that motion in limine was granted, if I recall. That is exactly the line of questioning that Mr. Acker is

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getting into, the interpretation and whether the Microsoft and Sun agreement or SVRX licenses and royalties. This doesn't bear on copyright and ownership issues. It goes right into the areas which this Court --

MR. ACKER: There is a claim for specific performance and we have a defense to that claim for specific performance and material breach of the A.P.A. Those are Court issues that the Court is to decide. We attempted to not have those come in front of the jury and be issues and SCO didn't want to. They wanted all this to come in before the jury. That is why Mr. LaSala is here and this is the testimony that we're providing.

THE COURT: Does this go to the issue of unclean hands?

MR. ACKER: And it goes to the issue of a material breach and preventing them from moving forward on this specific -- both issues.

MR. SINGER: We had also filed, and I believe the Court ruled in our favor, that there was nothing here -- a breach by virtue of this provision that would affect our rights with regard to copyright ownership, and there were motions in limine that were argued and the Court ruled on this subject, and the mere fact that he is asserting that this relates specifically to performance does not create a predicate for getting in or bringing in that part of the

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case that was already decided and adjudicated now into this proceeding.

They argued that we couldn't raise issues here that we had breached, and the Court said, no, it did not find that our failure to pay over those royalties constituted a basis to relieve them from their obligations that are at issue in this case, and --

MR. ACKER: If we can have a stipulation that Mr. LaSala's testimony and the other witness's testimony on this issue from the bench trial would be admissible here for the issues that the Court is to decide, I'll move on to another issue.

THE COURT: Say that again.

MR. ACKER: If we can have a stipulation that the testimony from the bench trial from Mr. LaSala and other witnesses on these issues, that is like Sun and Microsoft, the licenses, and the failure of SCO to provide those licenses to Novell when requested in 2003, then if they'll agree that the Court can consider that and decide those issues, then I don't need to go into it with Mr. LaSala.

MR. SINGER: We'll agree that you may consider it in that fashion on those issues.

THE COURT: By way of reference to those parts of the transcript in your proposed findings of fact and conclusions of law?

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MR. SINGER: Yes.

MR. ACKER: Yes.

THE COURT: That is what we'll do.

MR. SINGER: So no further discussion of these subjects with Mr. LaSala or other witnesses?

MR. ACKER: Not in front of the jury.

MR. SINGER: Okay.

(WHEREUPON, the bench conference was concluded.)

BY MR. ACKER

Q. Let me show you another letter, sir, T-16, which has been admitted as SCO 678. Do you recognize that letter?

A. I do.

Q. If we could highlight the first paragraph. On June 26th you wrote to Mr. McBride, Mr. LaSala, and you write to address SCO's recent statements to the press and securities filing in your amended complaint in the I.B.M. case and other materials, that SCO owns all of the intellectual property rights associated with UNIX and UnixWare. For example, your June 6th press release states that SCO owns all rights to the UNIX and UnixWare technology, and the description of your SCOsource program on your web site states that SCO owns the patents and copyrights and core technology associated with the UNIX system.

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Go to the next paragraph. Then you write very clearly, SCO's statements are simply wrong. Do you see that?

A. Yes.

Q. Now, why is it on June 26, 2003 that in this letter to Mr. McBride that you're referencing the public statements since June 6th, and you're telling him his statements are wrong. Why do you do that?

A. Well, it had become a bit of a practice of ours to try to rebut at every opportunity that we could every misstatement that Mr. McBride made, public misstatements that Mr. McBride made about the ownership issue. I must tell you that it was a challenge to keep up. I'm sure that we missed some occasions, but in this instance we were writing in furtherance of the June 6th letter, and we were doing so in response to continued public statements being made by SCO that it was the rightful owner of the copyrights. I would remind you that we were doing this in a private way. We were sending private letters back to him and he was making public statements.

Q. Why did you feel it was necessary to tell Mr. McBride privately that his statements about ownership were wrong?

A. Well, we wanted it to be clear to Mr. McBride that he should not be relying on anything that we had previously

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said with respect to the ownership of the copyrights in a way that would permit him to make -- continue to make assertions that SCO was the owner of the copyrights. That is what this letter did. It was, again, to put Mr. McBride on notice that we believed strongly that we were the rightful owners and that they were not, and that to the extent that they may have been relying on something that we had previously said on June the 6th, that they should not so rely on that. To be clear, we believed that their statements were wrong.

Q. In telling Mr. McBride on June 26th in a private letter that you thought that he was wrong about ownership, were you intending somehow to harm SCO?

A. No. Again, we had no interest in harming SCO. Our desire was to look out for Novell's business interests, and this certainly -- this correspondence was certainly in furtherance of that.

Q. I'm going to show you what we have marked as D-18.

MR. ACKER: This has been admitted as SCO Exhibit 105, Your Honor.

BY MR. ACKER

Q. Do you recognize that letter, sir?

A. Yes, I do.

Q. Is this a letter that you wrote to Mr. McBride on August 4, 2003?

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A. Yes, it is.

Q. Let's take a look at the first paragraph. This letter is in furtherance of my letter of June 26th, 2003 concerning ownership of the copyrights in UNIX. It follows your recent announcement that SCO has registered its claim to copyrights in UNIX System V with the U.S. Copyright Office. Was that something that Novell became aware of in early August of 2003?

A. Yes, it was.

Q. Then you wrote in the second paragraph, we dispute SCO's claim to ownership of the copyrights. The asset purchase agreement in Schedule 1.1-B contains a general exclusion of copyrights from the assets transferred to Santa Cruz Operation. Amendment number two provides an exception to that exclusion, but only for copyrights required for Santa Cruz Operation to exercise its rights with respect to the acquisition of UNIX and UnixWare technology. Then you continue in the third paragraph, in other words, under the asset purchase agreement and amendment number two, copyrights were not transferred to Santa Cruz Operation unless SCO could demonstrate that such a right was required for Santa Cruz Operation to exercise the right granted to it in the A.P.A. Santa Cruz Operation has never made such a demonstration, and we certainly see no reason why Santa Cruz Operation would need ownership copyrights in

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UNIX System V in order to exercise the limited rights granted SCO under the A.P.A., nor is there any reason to think that a transfer of the copyrights required for SCO to exercise its A.P.A. rights necessarily entails the transfer of the entire set of exclusive rights associated with particular copyrighted computer programs. Then in the final paragraph to Mr. McBride you wrote unless and until SCO is able to establish that some particular copyright right is required for SCO to exercise its rights under the A.P.A., SCO's claim to ownership of any copyrights in UNIX technologies must be rejected, and ownership of such rights instead remains with Novell. Do you see that?

A. Yes, I do.

Q. Was that your belief of how, if at all, amendment number two impacted the A.P.A. in August of 2003?

A. Yes, it is.

Q. Is that still your belief today?

A. Yes, it is.

Q. Did you convey that belief in no uncertain terms to Mr. McBride on August 4th, 2003?

A. Yes, we did. With this letter we think we accomplished that.

Q. Did you do that publicly or privately?

A. This again was a private letter.

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Q. Why did you take that step? Why did you write Mr. McBride this letter on August 4, 2003 and tell him what Novell's position was under the asset purchase agreement as amended by amendment number two?

A. Because SCO had taken yet additional steps in a very public fashion to assert its ownership of the copyrights, and it did so by seeking to register its copyrights at the U.S. Copyright Office. That is public. As I mentioned in one of my previous answers, we thought it is important to continue to put SCO on notice that we disagreed with the public positions they were taking. We did so repeatedly throughout the course of the summer. This was the latest example of that effort on our part.

Q. Did Novell itself take steps to register the UNIX copyrights at some point?

A. Yes, we did.

Q. Explain that.

A. At some time later, and I believe it was in September, but I may not have the time frame exactly right, Novell chose to register the copyrights to SVRX and to UNIX at the copyright office itself. We, in fact, completed that registration.

Q. And with those steps and in writing Mr. McBride and telling him Novell's position regarding the asset purchase

1924

agreement and registering the copyrights, was that done in an attempt to harm SCO or was that done to protect Novell's business interests?

A. No. It was not done at all to harm SCO. Again, it was done in furtherance of these business interests of Novell that we have been talking about.

Q. Let me show you another letter F-21. It has been admitted as SCO's Exhibit 243. Do you recognize that letter?

A. Yes, I do.

Q. There is no date on the first page, but if we go to the second page you can bring up the date.

A. Yes.

Q. This is a letter that you wrote to Mr. Tibbitts on October 7th, 2003, right?

A. Yes.

Q. Why are you writing this letter, F-21, or SCO Exhibit 243 to Mr. Tibbitts in early October of 2003?

A. Because it had come to our attention that SCO was taking the position that code development by I.B.M. or licensed by I.B.M. from a third party, which I.B.M. then incorporated into its version of Linux, could be subject and would be subject to a license effort by SCO against I.B.M. for that code that I.B.M. had developed on its own.

Q. Boiling it down, what are you saying?

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A. We are essentially saying to Mr. Tibbitts in this letter that the I.B.M. code that it had developed and contributed to its variant of UNIX was not subject to claims of ownership by SCO, and we take him through in some detail our rationale for that.

Q. Then if you take a look at the final paragraph of the letter you write, accordingly, pursuant to Section 4.16 of the asset purchase agreement, Novell hereby directs SCO to waive any purported right SCO may claim to require I.B.M. to treat I.B.M. code itself as subject to the confidentiality obligations or use restrictions of the agreement.

A. Yes.

Q. Do you see that?

A. Yes.

Q. Why were you doing this?

A. Well --

Q. What was in Novell's business interest to do this?

A. Again, if SCO had the ability to allege a breach of contract against I.B.M. or any other user of SVRX code, which it then developed its own code and built on top of that basic code, if SCO had the ability to say that that newly created code was subject to a confidentiality agreement, then SCO could claim a breach of that agreement, and that has a further potential to disrupt the business relationships that we had with I.B.M. and others.

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We'll see I believe in a moment that there is other correspondence regarding other companies, and it was in our interest to again put SCO on notice that it didn't have this right to do this. This was one more attempt in our view by SCO to further disrupt the Linux business. As I have described, we had a real keen interest in that business, because of our participation in it and our entry into it, and the investments that we made in it. Again, this was an instance where it came to our attention that SCO was making these types of claims, and in this case I believe it was a breach of contract claim against I.B.M.

Q. Were you doing this in order to hurt SCO or to protect Novell's business interests?

A. No. Again, not to hurt SCO, but to protect Novell's business interests.

THE COURT: Mr. Acker, look for a good time for us to take our recess.

MR. ACKER: This is a good time.

THE COURT: Ms. Malley.

(WHEREUPON, the jury leaves the proceedings.)

THE COURT: Anything, counsel?

MR. SINGER: No, just perhaps the question how much longer --

MR. ACKER: I would say less than 30 minutes, Your Honor.

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THE COURT: Okay.

Let's take 20 minutes, counsel.

(Recess)

THE COURT: Counsel, let me explain, on the jury instructions and verdict form that you were just given, I would like any response to it by 8:00 o'clock Wednesday morning. And I will decide, thereafter, whether or not we actually have to have a jury instruction conference or whether or not -- whether, if you disagree with some, we'll determine whether or not we have a jury instruction conference or whether or not I will rely upon your written objections as you create in the record for the instructions, okay? Thank you.

If we're ready, Ms. Malley.

MR. ACKER: We're set.

THE COURT: How long do you think it will be reasonable for the findings of fact and conclusions of law?

MR. JACOBS: Two weeks, Your Honor, after the jury verdict is entered.

THE COURT: Well, there's a thought here. Number 1, I would like it as soon as possible, just because I want my memory to be refreshed, but, on the other hand, the more time you take, probably the greater -- the better your product will be. So, give me what you think would be reasonable to meet both of those.

MR. SINGER: We were thinking 20 days.

MR. JACOBS: That's fine.

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THE COURT: Okay. Plan on 20 days, then, counsel. Thank you.

MR. JACOBS: Just to be clear on the form of this, then, the findings of fact and conclusions of law will, in a sense, be a self-contained argument with reference to supporting evidence, including, as we discussed, the bench trial record?

THE COURT: Yes.

MR. JACOBS: Great.

MR. SINGER: To be exchanged simultaneously?

THE COURT: Exactly. And in not just written form but also submitted electronically so that we can manipulate it, please.

MS. MALLEY: All rise.

(Jury btought into the courtroom.)

THE COURT: Go ahead, Mr. Acker.

MR. ACKER: Thank you, Your Honor.

Q. BY MR. ACKER: Mr. LaSala, let me show you what we have marked as G-21 and ask if you recognize that letter?

A. Yes, I do.

Q. And is that a letter that you wrote to Mr. Tibbitts on October 7, 2003?

A. Yes, it is.

MR. ACKER: I move for admission of G-21, Your

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Honor.

MR. SINGER: No objection.

THE COURT: It will be admitted.

(Novell Exhibit G-21 received in evidence.)

Q. BY MR. ACKER: Can you -- before we take a look at the specific provisions of the letter, could you tell the ladies and gentlemen of the jury, in sum, what you were doing in this letter to Mr. Tibbitts?

A. This letter to Mr. Tibbitts is very much in the vein of a letter we spoke about just before the break concerning IBM code that had been developed by IBM, and this letter concerns SCO's threat to terminate the license that a company called SGI has with respect to SVRX by October 14, if SGI did not correct alleged breaches of the license agreement that SCO claimed it made.

Q. And, to your knowledge, is there any relationship between SGI and IBM?

A. To my knowledge, there is no relationship. They are two totally different companies.

Q. And how did you; that is, Novell, become aware of SCO's actions toward SGI that caused this letter to be drafted and sent to Mr. Tibbitts?

A. My recollection is I got a call from the general counsel at Silicon Graphics, at SGI, advising me

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that they had received this letter from Mr. McBride, that we are talking about, and asking if we would take a look at a claim that was being made and act appropriately.

Q. And what action did you ask SCO to take?

A. Well, in this letter, we, again, reminded SCO of Novell's rights under Section 4.16(b), and we asked SCO -- or we directed SCO to waive any claim that it might have to terminate SGI's SVRX license.

Q. Did you believe it was in Novell's business interest to do so?

A. Yes, I did.

Q. Why is that?

A. For the same reason that we took the action with respect to IBM, because we believed that SCO was making these claims, and, in this case, with respect to SGI, in a way or under circumstances in which it did not have the rights to do so. And, if it were allowed to do this, were allowed to terminate this license, it could have harmed Novell's business interest, again, by disturbing, disrupting the Linux market, which is a market we were -- we had, by this time, gotten very much into.

Q. And when you say "by this time," by October of 2003, what steps had Novell made to enter into the Linux market?

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A. We had taken numerous actions, going back to 2002, to transition our company to take -- to participate in the Linux business. Perhaps the two most significant things that we did were, in August of 2003, we acquired a Linux company called Zimion. That was in August, 2003. And, by this time, October 7, 2003, we were in negotiations to acquire the second leading distributor of Linux code in the world, a company called SUSE Linux, which was a German -- a German company.

Q. And did IBM subsequently make an investment in Novell with respect to Novell's acquisition of SUSE Linux?

A. It did, yes.

Q. And can you explain that for the jury, please?

A. Sure. When Novell acquired this company called SUSE Linux in Germany, we completed the acquisition in November, and our CEO, Mr. Messman, was really looking for a marketplace affirmation of the significance of that transaction. And it's important to appreciate that our acquisition of this company was quite a significant deal in the industry and for Novell because it really put our -- you know, our commitment to Linux on the table. I think the acquisition was about $210 million.

So, what we were looking for was an affirmation

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by a leading market player. In this case, it was IBM. And what our CEO requested that IBM do was to make an investment in Novell and then to publicly announce that they had made that investment. And we viewed that as a -- if you will, a stamp of approval or an endorsement by a leading technology company with respect to the significance of Novell buying this Linux distribution company.

Q. Was there any relationship between the actions that Novell took with respect to SCO and IBM's decision to purchase Novell stock?

A. No.

Q. Let me show you one final exhibit, X-22.

A. Twenty-three?

Q. I'm sorry. X-23. Do you recognize that?

A. Yes, I do.

Q. And what is it?

A. This is a press release that Novell issued on December 22, 2003, wherein we assert publicly our belief that we own the copyrights to UNIX, and we include correspondence between Novell and SCO in a link so that the reader can access that correspondence on -- between SCO and Novell as it relates to the question of ownership of copyrights.

MR. ACKER: All right. I'd move for admission

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of X-23, Your Honor.

MR. SINGER: This is already in evidence as a SCO exhibit.

THE COURT: It will be admitted.

(Novell Exhibit X-23 received in evidence.)

Q. BY MR. ACKER: Let's take a look at that.

A. Okay.

Q. On December 22, the press release reads:

"Novell believes it owns the copyrights in UNIX."

Do you see that?

A. I do.

Q. And was that true as of December 22, 2003?

A. Yes.

Q. And you still have that belief today?

A. Yes.

Q. "And has applied for and received copyright registrations pertaining to UNIX consistent with that position."

Is that also true as of the December 22, 2002?

A. Yes.

Q. "Novell detailed the basis for its ownership position in correspondence with SCO."

Do you see that?

A. I do.

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Q. And is that a reference to your June 26 and August 4 letters to Mr. McBride?

A. Yes.

Q. And were those letters attached to this link so that readers could view it?

A. Yes.

Q. And then you wrote:

"Copies of our correspondence and SCO's reply are available here."

Do you see that?

A. I do.

Q. Also, in addition to your letters to Mr. McBride on August 4 and June 26, did you also attach Mr. Tibbitts' reply to those letters?

A. We did.

Q. Why?

A. Well, we thought it was important to really allow the public to see the communication on the substance of a very important issue, the ownership of the UNIX copyrights. And, for the first time, as I alluded to prior to our break, we had Mr. McBride out there, over the course of, you know, almost an entire year, making public statements as to SCO's ownership of UNIX. And, as we have gone through here, we were making -- we were sending private letters back to Mr. McBride and other

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representatives at SCO correcting them at every turn, where we had the opportunity.

And we finally got to the point where we, again, felt it was important to allow the public to see both sides of the argument so that they could make some judgments, themselves, about this very important question because all they were seeing, as a matter of publicity, were the statements and comments that Mr. McBride and his colleagues were making about ownership.

And, all along, we were taking -- as we recounted, we were taking every reasonable opportunity we could to let them know that we thought that those were wrong. So we finally got to a point where we said to ourselves, "Hey, look, we've got to get our position out there, let the public see it, let the public see the retort from Mr. McBride or from SCO." And that's why we did this.

MR. ACKER: I don't have anything else, Your Honor.

THE COURT: Thank you.

CROSS EXAMINATION

BY MR. SINGER

Q. Mr. LaSala, you testified earlier that Novell made decisions to waive SCO's rights for Novell's interests, not those of IBM; is that correct?

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A. Yes.

Q. You testified, however, that Mr. Marriott, who is a lawyer for IBM, asked you to take that action to waive those rights, correct?

A. Yes. He asked us to take -- to assert our rights to waive all claims, yes, he did.

Q. Now, you were asked that question at your deposition in February, 2007, whether IBM had asked Novell to waive those rights. Do you recall that?

A. Not specifically.

Q. Let's look at your February, 2007, deposition. And this is going to be page 158, line 1, to 158, line 7.

MR. ACKER: Just a second. I'm sorry. 158, line 1?

MR. SINGER: Yes.

MR. ACKER: All right.

MR. SINGER: Mr. Calvin, will you play clip 10.

This will be on your screen.

(Video clip played as follows:)

Q. Did IBM ever ask you to direct SCO to take the steps that Novell directed SCO to take?

A. No.

Q. Do you know if IBM asked anyone at Novell to take the steps that Novell directed SCO to take?

A. No. I'm not aware that such a thing ever

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occurred.

(End of video clip.)

Q. BY MR. SINGER: So, Mr. LaSala, under oath, in February, 2007, you denied what you've testified here to today, that IBM asked Novell to take these steps, right?

A. Well, the request that was made, at that time, was a broader request. It was a request to waive all claims, is my recollection, by Mr. Marriott, and we, as I testified earlier, responded in such a way as to say that we would take a look at that, and we took subsequent actions related to a more narrowed set of issues than what was being asked.

Q. Sir, wasn't the very question you were asked in deposition about the action that Mr. Marriott asked you to take in not allowing SCO to terminate a license with respect to UNIX code?

MR. ACKER: Your Honor, that misstates the video clip, and also there is -- well, I'll do it on redirect.

THE COURT: Well, I think, in fairness, it was not clear, from the video clip, what the question was.

MR. SINGER: I would ask clip 9 to be played, which plays the prior question and answer.

THE COURT: All right.

(Video clip played as follows:)

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Q. In what way did you think that the actions Novell was taking in directing SCO to take certain steps could be beneficial to IBM?

A. Well, one example is SCO's attempt to terminate the IBM/AT&T license could benefit IBM, Novell's actions in relation to that could benefit IBM by preventing that termination from occurring, and, thereby, had it occurred, IBM would have been prevented from continuing to distribute certain code. So, that's one example.

Q. Did IBM ever ask you to direct SCO to take the steps that Novell directed SCO to take?

A. No.

Q. Do you know if IBM asked anyone at Novell to take the steps that Novell directed SCO to take?

A. No. I'm not aware that such a thing ever occurred.

(End of video clip.)

Q. BY MR. SINGER: Mr. LaSala, you see that you were asked in February, 2007, specifically whether IBM had asked Novell to take the steps regarding SCO's efforts to terminate the license that IBM had, right?

MR. ACKER: It misstates the prior testimony, Your Honor. It wasn't a question.

MR. SINGER: The question has been read.

THE COURT: The jury has read the question.

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The jury can decide what was asked.

Q. BY MR. SINGER: Mr. LaSala?

A. My understanding of the question that was asked in February and the question that you asked me just now are different. What was -- what was asked of me by you is whether or not IBM had asked us to take the actions that we directed SCO to take. And what we were asked by IBM was whether or not we would waive the claims that SCO could possibly make against IBM. And what we responded, at that time, was that we would review the matter and take actions as we deemed to be appropriate.

So, the subsequent action that we took was narrower than SCO -- than what was asked -- what you've asked me about, I believe.

Q. So, are you saying that it is -- that your testimony in February was correct, that IBM did not ask you to direct SCO to take the steps that Novell directed SCO to take with respect to terminating -- to preventing the termination of the license?

A. I think that's -- what you said I think is right. And the reason I say that, again, is because my recollection of the conversation that we had with IBM was that they asked us to waive all of the potential claims that SCO might assert against IBM, and we told IBM that we would look at them on a claim-by-claim basis.

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Mr. Jacobs spoke on our behalf at that meeting, is my recollection.

Q. Well, in fact, Mr. LaSala, in June, 2003, wasn't there an express request made to you by Mr. Marriott and Mr. Rosenberg, lawyers at IBM, that you stop SCO from terminating this license?

A. No.

MR. SINGER: Would you play clip 15, which is page 115 to -- line 11, to 115, line 22 of the May, 2007, deposition.

MR. ACKER: Before it's played, Your Honor, may I look at the clip? I'm sorry. What was the page numbers?

MR. SINGER: This is page 115, line 11, to page 115, line 22.

MR. ACKER: Your Honor, may we approach on this?

THE COURT: Yes. Do you want this on the record?

MR. ACKER: Yes, please. (Discussion between the Court and counsel out of the

hearing of the jury.)

MR. ACKER: This is the point. Mr. LaSala testified in his individual capacity as a 30(b)(6) witness, and this is why I stood up before. I objected

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that this is unfair because the exact testimony he gave today, he testified about in his deposition. They have a copy of a -- the statement itself, about this conversation, and Mr. LaSala testified during his deposition as a 30(b)(6) witness.

So now they are trying to leave the impression that that testimony was never given during the course of the deposition. It's totally unfair, and that's exactly what he's saying in this clip.

MR. SINGER: Well, but what happened first of all, in February of '07, he denied, as the testimony we just played, that IBM had a role in what Novell did. In May, 2007, he admitted that. And now, in his testimony on the stand, he's saying that, well, they didn't tell me to waive the rights with code. The clip I'm about to play specifically says they were to waive the rights with code. The explanation doesn't make any sense. I'm entitled to do that.

MR. ACKER: That's the exact point. When he stood up there and accused Mr. LaSala -- and I disagree about your characterization about any inconsistencies so far -- but when he accused Mr. LaSala of not providing that testimony during the deposition, this testimony, it is exactly the conversation.

THE COURT: Well, I believe he's entitled to

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use the depositions to impeach the witness. If you want to draw the jury's attention to the inconsistencies, you will be able to do that. If you want to rely on additional parts of the deposition, you certainly may do that. But I believe that, again, Mr. Singer is entitled to use the depositions in this way.

MR. ACKER: As long as he's accurate about characterizing them. He stands up and says, "you never made --"

MR. SINGER. I can --

MR. ACKER: Let me just finish. "You never made these. You never testified during your deposition about this."

When you know he did. You know he did. It's an improper question.

THE COURT: Mr. Acker, I believe he has the right to use the depositions as I have said. I don't believe it's correct to characterize the nature of the testimony and draw -- and, in effect, be testifying as to his inconsistencies. You may point them out, but I don't think you should, in your questions, be testifying, trying to draw undue attention to it. Fair enough?

MR. SINGER: Fair enough.

THE COURT: Okay.

(Proceedings continued in open court.)

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MR. SINGER: Mr. Calvin, would you play clip 15, which is testimony from the May, 2007, deposition, page 115, line 11 to line 22.

(Video clip played as follows:)

Q. You say in the second paragraph:

"Mr. Marriott explained that IBM had paid Novell for a paid-up, irrevocable license through Amendment X and that SCO was threatening to terminate IBM's UNIX/AIX license. Mr. Marriott requested that Novell exercise its rights under Section 4.16(b) of the APA and waive SCO's claims against IBM. He noted that the matter was urgent in view of of SCO's threatened termination date." End quote.

Do you see that language?

A. I do.

(End of video clip.)

Q. Did you give that testimony?

A. Yes.

Q. Would you take a look at SCO Exhibit 530.

MR. ACKER: Could we get a copy?

Q. BY MR. SINGER: Mr. LaSala, is Exhibit 530 a document which you created in connection with your deposition in a corporate capacity in May, 2007?

A. Yes, it is.

Q. And does this document summarize testimony --

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summarize conversations that you had with Mr. Marriott, of IBM, and Mr. Rosenberg, of IBM, in June of 2003?

A. Yes, it does.

Q. And, am I correct that, in June, 2003, you had a phone conversation where you participated on behalf of Novell, together with Mr. Jacobs, correct?

A. Yes.

Q. Mr. Marriott, who is an outside lawyer for IBM, participated, correct?

A. Yes.

Q. And, at the same time, a Mr. Rosenberg, who is an in-house lawyer for IBM, participated, correct?

A. Yes.

Q. And, in that conversation, am I correct that the IBM lawyers specifically requested that Novell take action, under its agreement, to waive SCO's claims against IBM?

A. Yes. SCO's claims against IBM.

Q. And, at that time, the particular -- and, at that time, Mr. Marriott noted that the matter was urgent in view of SCO's threatened termination date; is that correct?

A. Yes, it is.

Q. The threatened termination date was the date that SCO had given IBM that, if this issue wasn't

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resolved, they were going to pull the UNIX license and say that it had been terminated, correct?

A. That's my understanding.

Q. And you wrote a letter, then, on June 9, 2003, specifically telling SCO not to do that, right?

A. Not to do what?

Q. Not to terminate IBM's AIX -- IBM's UNIX license?

A. Yes. I wrote that letter, and not to put too fine a point on it, that letter related to termination. The request that we're talking about relates to a waiver of SCO's claims. So, that was one of the claims. But this letter is -- this note suggests there was a broader request than the one that was ultimately granted.

Q. Well, in fact, what was requested by IBM was that you waive SCO's ability to terminate that license, which IBM, in SCO's view, had breached, correct?

A. I'm not trying to be difficult, but I really understood the request to be broader than that, and I think, if you read the notes regarding Mr. Jacob's response, it --

Q. I'm not asking you about Mr. Jacob's responses, Mr. LaSala.

A. Okay.

MR. ACKER: Your Honor, Mr. LaSala should be

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allowed to answer Mr. Singer's question.

MR. SINGER: He will have redirect. He can elicit other things he wants in response.

THE COURT: That's correct, Mr. LaSala. In effect, what I'm saying is, please answer the questions as directly as possible that Mr. Singer may ask you. If there is additional information that you think is relevant, Mr. Acker will be able to ask you questions on redirect to bring those out.

THE WITNESS: Understood.

Q. BY MR. SINGER: Mr. LaSala, in fact, IBM asked you both to waive all of SCO's claims, right?

A. I understood them to be asking us to waive all of SCO's claims.

Q. And you did that, correct? You tried to waive every claim that you had a right to waive or you thought you had a right to waive?

A. I'm not sure that's the case.

Q. Well, you waived -- you wrote a letter purporting to waive the claims under the contract agreement between SCO -- between IBM and AT&T, which SCO was seeking to exercise rights to, correct?

A. We did write a letter directing SCO to waive the breach of contract claims in connection with SCO's allegation that IBM breached the confidentiality

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provision.

Q. And Mr. Marriott was also asking you to take urgent action with respect to the termination that SCO was seeking to take, the termination action with respect to their license, correct?

A. He said the matter was urgent. He said the matter was urgent.

Q. And the matter we're talking about is the termination of the UNIX license that IBM had, right?

A. Yes.

Q. And, after Mr. Marriott made that request, that's exactly what you did. You then directed SCO to waive those rights to terminate that license, correct?

A. We directed SCO to waive the termination of the IBM license. We did.

Q. Now let's talk about the issue of Novell's interest that you talked about with respect to having a $10 million royalty interest. There was a buyout of all the royalties that IBM had to pay Novell that was done in 1996, correct?

A. That's my understanding, yes.

Q. So there weren't any current royalties between 1996 and 2003 that were being paid by IBM on that license?

A. They weren't being paid currently. All of

1948

those royalty obligations were paid up in full. We were making reference to the earlier statement.

Q. Now, you understood that SCO was pursuing a court suit to determine that IBM had breached its rights under its contract by disclosing code that shouldn't have been disclosed, correct?

A. Yes.

Q. And you sought to shortcut that process so, instead of the Court deciding who was right, IBM or SCO, Novell was going to just move in and waive those rights so there wouldn't need to be a court dispute on that, right?

A. No.

Q. Well, what is the purpose of the waiver, other than to stop SCO from asserting those rights in court?

A. I think you said we were seeking to shortcut the court process, and that was not our intention. I wasn't -- we weren't seeking to shortcut the court process.

Q. Well, what term would you put on waiving a party's rights to bring a legal claim in court, other than shortcutting that process?

A. We were looking out for our interests. As I said, we had $10 million at stake, and we wanted to make sure our interests in those were protected.

1949

Q. Let's talk about the $10 million. That's money that was paid in 1996, correct?

A. I believe that's right, yes.

Q. Let's assume, if the SCO lawsuit had proceeded on without any waiver and SCO was right, that IBM breached the agreement, IBM wouldn't be able to demand back its $10 million from you, would they?

A. Well, I don't know whether they would have succeeded in doing so, but we had a concern that they might try to do so.

Q. Well, if they breached the agreement, they wouldn't be able to successfully get that $10 million back because they would have been in the wrong. They would have breached. Correct?

A. I don't know.

Q. You don't know that?

A. Not for certain, no.

Q. And, if it turns out in court that IBM was right, and SCO was wrong, well then IBM wouldn't have any right then, either, to ask for the $10 million back from Novell because they wouldn't have had any right under any agreement to do so, correct?

A. Well, if IBM had prevailed in that litigation that you're talking about, I imagine they would not have come and asked us for the $10 million. That's correct.

1950

Q. And, in fact, at no point did IBM actually ask you for $10 million back, correct?

A. Not that I'm aware of.

Q. In fact, what happened in November of 2003 is IBM paid Novell $50 million to facilitate the purchase of a Linux company, right?

A. No.

Q. No? The $50 million wasn't invested in Novell for the purchase of SUSE Linux?

A. I'm sorry. You said IBM paid Novell $50 million I think is what you said. And my answer to that was, no, Novell did not pay $50 million.

Q. They transferred the money to Novell, $50 million, as an investment in Novell for the purpose of purchasing SUSE Linux, correct?

A. I'm trying to be precise here. It was not for the purpose. It was not so Novell could purchase SUSE Linux. And Novell -- excuse me -- IBM did make an investment of $50 million in Novell. That is true.

Q. With respect to the other waivers that Novell directed SCO to make, you testified earlier about one regarding SGI, Silicon Graphics. Do you recall that?

A. Yes.

Q. Are you aware, Mr. LaSala, that Silicon Graphics issued a public statement that they made a

1951

mistake and put UNIX code in Linux, and then they removed that code. Are you aware of that?

A. Yes.

Q. Now, with respect to the IBM code, you agree that you waived rights. You caused Novell to waive SCO's rights with respect both to IBM and a company called Sequent that IBM then owned, correct?

A. Yes. That second letter came a bit later.

Q. And you talked about this being irrevocable rights. Are you familiar with an agreement called Amendment X that was entered into between the Santa Cruz Operation and IBM?

A. Yes.

Q. I'd like to show you Exhibit 165, which is in evidence, I believe, already, as Novell Exhibit 08.

MR. ACKER: Do you have a copy?

MR. SINGER: I'm sure this was premarked. It's your Exhibit 08, and it's SCO Exhibit 165.

Q. BY MR. SINGER: Do you see this in front of you, Mr. LaSala?

A. Yes, I do.

Q. And I would move the admission of SCO Exhibit 165 so this copy is before the Court.

MR. ACKER: No objection, Your Honor.

THE COURT: It will be admitted.

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(SCO Exhibit 165 received in evidence.)

Q. BY MR. SINGER: Do you recognize this to be what we were referring as Amendment X, an amendment entered into between IBM and Santa Cruz Operation; is that correct?

A. Yes.

Q. And Novell was a party to that agreement, correct?

A. Yes.

Q. This was part of resolving a dispute that came up in 1996, right?

A. That's my understanding.

Q. And, if you turn to page 2 of the agreement, -- in fact, why don't we start on page 1, with the "No additional royalties."

Mr. Calvin, if you can blowup the Amendment Number X, paragraph 1.

And here you see the reference that upon payment to SCO of the consideration in the section entitled Consideration, IBM will have the irrevocable, fully paid-up, perpetual right to exercise all of its rights under the related agreements, beginning January 1, 1996, with no additional royalty payment.

And it says:

"However, if IBM requests delivery of

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additional copies of source code of the --" let's turn now to the next page -- "of the software product, IBM will pay certain fees listed on this schedule."

And I'd like to direct your attention to the next statement:

"Notwithstanding the above, the irrevocable nature of the above rights will in no way be construed to limit Novell's or SCO's rights to enjoin or otherwise prohibit IBM from violating any and all of Novell's or SCO's rights under this Amendment X to related agreements or under general patent, copyright or trademark law."

Do you see that?

A. I do.

Q. Were you aware of this when you sought to waive SCO's rights to proceed against IBM under contract claims?

A. Yes.

Q. I'd like to go back now to something you testified to near the start of your direct examination, your discussions with Mr. McBride regarding copyright ownership.

Now, is it your testimony that Mr. McBride specifically said, in your presence, that he wanted Novell to transfer copyrights to SCO?

A. I don't recall that he used the word

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"transfer."

Q. He was seeking a clarification, was he not, that those rights already existed with SCO, correct?

A. That was not my understanding of what he was asking.

Q. Well, in fact, it's true you don't recall the phrasing that Mr. McBride used?

A. Not the precise phrasing.

Q. And you are -- you're not aware of Mr. McBride having had a copy of Amendment Number 2 at the time of those conversations, are you?

A. I don't know whether he did or he did not.

Q. But you are aware that there was a document that was forwarded by SCO to Novell which sought to clarify these issues. Were you aware of that?

A. I'm sorry. I'm not sure what you are referring to.

Q. I'd like to show you the last page of SCO Exhibit 615. Do you recognize this to be a draft document provided by SCO to Novell?

A. I've not seen this document until now.

Q. You have never seen this document before?

A. I don't recall ever having seen this document.

MR. SINGER: We would move the admission of the

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last page of Exhibit 615.

MR. ACKER: I have no objection, Your Honor, as long as it's just the last page.

MR. SINGER: The last page.

MR. ACKER: Not the declaration in front.

THE COURT: All right. The last page only?

MR. SINGER: Yes.

THE COURT: Of exhibit 615 will be admitted.

(The last page of SCO Exhibit 615 received in evidence.)

Q. BY MR. SINGER: This was a document sent for the purpose of clarifying -- well, you have never seen this; is that right?

A. That's my recollection is that I've not seen this.

Q. Now, there were discussions in late 2002 between SCO and Novell, where SCO indicated its interest in licensing UNIX technology for use in Linux; is that correct?

A. That's my understanding.

Q. At any time between those conversations in late 2002 and June, 2003, did you, as general counsel, ever directly tell SCO that it could not engage in SCOsource licensing?

A. No. I don't believe I did.

Q. Did you ever direct others to tell SCO that it

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couldn't engage in SCOsource licensing?

A. No.

Q. And, in fact, there were public announcements in the early part of 2003 which announced that SCO planned to do that, to engage in that licensing, correct?

A. Yes.

Q. But, instead of telling SCO that, in your view, they didn't have the rights to do that, you went public on May 28, 2003, with a press release, right?

A. I'm not sure it was instead of, but we did go public with the press release on May 28.

Q. Now let's talk about that press release and the events surrounding that. Now, you joined Novell in 2002 as general counsel, correct?

A. 2001.

Q. 2001. You weren't involved in the negotiation of the transaction by which the UNIX business was sold to Santa Cruz, correct?

A. That's correct.

Q. And you had no involvement in the Asset Purchase Agreement and its negotiation, correct?

A. Correct.

Q. And you never spoke with any of the negotiators of the deal about these issues, right?

A. Me, personally?

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Q. Yes.

A. I did not.

Q. So, you were, however, an individual who approved the May 28 press release before it was issued, right?

A. Yes.

Q. You issued a press release which stated that Novell, not SCO, owned the UNIX copyrights, correct?

A. Yes.

Q. And you testified that you were aware of Amendment Number 2 in an unsigned fashion before you sent that press release out, correct?

A. Yes.

Q. And, in fact, I think what you testified to -- and you tell me if I'm wrong -- is that you turned the company upside down trying to find whether there was a signed version of Amendment Number 2. Do you recall that?

MR. ACKER: Objection. That misstates his testimony.

Q. BY MR. SINGER: Isn't that what you said, sir, you turned the company upside down trying to find it?

A. I asked Mr. Lundberg to do that.

Q. And the reason you asked Mr. Lundberg, who is counsel for -- another lawyer for Novell to do that is

1958

that you understood that Amendment Number 2 was very important because it would clarify the issue as to who owned the UNIX copyrights, right?

A. If amendment -- no. That's not correct.

Q. So you just asked Mr. Lundberg to turn the company upside down for a document that didn't matter. Is that your testimony?

A. No. That's not my testimony.

Q. Now, you had outside counsel involved in the Asset Purchase Agreement, correct, the Wilson, Sonsini firm? Are you familiar with --

A. I'm not familiar --

MR. ACKER: Your Honor, objection. There is no foundation. It's going to call for speculation. He wasn't around at the time of the Asset Purchase Agreement.

MR. SINGER: I'll reframe the question.

Q. BY MR. SINGER: Were you aware, Mr. LaSala, that there was outside counsel representing Novell at the time of the Asset Purchase Agreement?

A. Yes.

Q. Did you ask that outside counsel whether they had a copy of the signed version of Amendment 2 before you went public with your May 28 press release?

A. Did I personally do that?

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Q. Did either you or did you ask anyone else to do that?

A. I did not do that.

Q. Did you ask --

A. And I really don't recall whether I asked anyone who worked for me to reach out to Wilson, Sonsini or anyone who worked on that agreement to see if a copy of -- an executed copy of Amendment Number 2 was available.

Q. Wouldn't that have been a very logical thing to do if you were trying to find out whether or not Amendment Number 2 had been signed before going public with the press release?

A. Not illogical.

Q. Now, it turned out Amendment Number 2 was present in Novell's files, correct?

A. That's what I was told, yes.

Q. And it wasn't off-site in some storage, was it? It was in one of the executive's files, correct?

A. I didn't understand it to be in an executive's files.

Q. Well, where do you understand the document was found?

A. My recollection is that it was found in the tax department.

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Q. Now, the tax department is a department of Novell. It's not like in some warehouse somewhere, correct?

A. Yes. But -- and I don't know the answer to this. It could have been in off-site, but it could have been in the building. I just don't know.

Q. Now, you, never the less, went ahead with the May 28 press release before having determined whether or not Amendment Number 2 had been signed, correct?

A. Yes.

Q. And there wasn't any urgency that you had to come out on May 28. You could have kept looking for that signed version of Amendment Number 2, right?

A. Yes. We could have. Yes.

Q. But it's your view that it's just a coincidence that May 28 was also the day that SCO announced its earnings?

A. There was no connection between the release of the letter on May 28 and SCO's earnings release date.

Q. Now let's look at the June 6 press release, which is SCO Exhibit 97. And you recognize that, in this press release, there is the statement that, to Novell's knowledge, this amendment is not present in Novell's files. It turned out it was, correct?

A. Yes.

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Q. And you understand that an amendment to language is very important, that it replaces language that exists in the agreement before it, correct?

A. It has the potential to replace it, or it could be additive to it.

Q. Well, in this case, you had seen an unsigned copy of Amendment Number 2, correct?

A. I had seen an unsigned copy of Amendment Number 2.

Q. And did you understand that, if this had been signed, then the language replaced the exclusion of copyrights that you had been looking at in the Asset Purchase Agreement?

A. I probably didn't give it that much attention, to be honest were you, the unsigned copy.

Q. On June 6, the press release states that the amendment appears to support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996, right?

A. Yes.

Q. And your approval indicated that you believed that this was a true and correct statement?

A. Yes.

Q. And, in fact, even now you recognize that SCO can get certain copyrights under Amendment 2, that it

1962

doesn't vest ownership of copyrights with Novell; is that correct?

A. I would agree with -- I think I would agree with the first part of your statement but not the second part.

Q. And, is it also true that you have no view, yourself, as to whether the UNIX copyrights are in fact required for SCO to conduct its business with respect to the UNIX and UnixWare technologies it purchased?

A. I am not aware that SCO has a need for the copyrights to conduct the business that it purchased.

Q. Well, when you were asked that question at your deposition -- and this is page 45 --

MR. ACKER: Which deposition? February 8, 2000 --

MR. SINGER: February 8, 2007, page 45, line 13 to line 17.

MR. ACKER: Let me have a sec, please. I'm sorry. Okay.

Q. BY MR. SINGER: Do you recall giving the following testimony?

Which is clip 3, Mr. Calvin.

(Video clip played as follows:)

Q. Do you have a view, as you sit here today, as to whether SCO needed any copyrights to exercise its

1963

rights with respect to the acquisition of UNIX and UnixWare technologies?

A. I don't have a view.

(End of video clip.)

Q. BY MR. SINGER: That was your testimony in February, 2007, correct?

A. Yes.

Q. Now, you were also familiar with the license back provisions of the Asset Purchase Agreement, even before you saw Amendment Number 2, right?

A. Yes.

Q. And, in fact, Novell wouldn't need a license back of existing technology if it had kept the copyrights, correct?

A. I don't believe that's correct.

Q. Do you believe that Novell would need a license back to technology that it wasn't giving anyone?

A. Well, I didn't say that, but there were other rights conveyed to SCO in the Asset Purchase Agreement, and there were -- there was additional code to be developed by SCO as a result of the Asset Purchase Agreement, to which Novell was going to have a license.

Q. But, in addition to that future code, the technology licensing agreement also provided a license back to the existing technology and code that was being

1964

sold at the time of the APA, right?

A. To the existing technology? Everything that was being transferred to SCO, this is my understanding, was the subject of a license back from SCO to Novell.

Q. And you agree that this technology licensing agreement can be read as inconsistent with Novell retaining the copyrights?

A. Well, that's a possible reading of it.

MR. SINGER: I'd like to play clip 8 at page 95 of his February 8, 2007 deposition, line 10 to 16

MR. ACKER: Wait, if I could just --

MR. SINGER: Certainly.

MR. ACKER: February?

MR. SINGER: Yes. This is page 95, line 10 to 16.

MR. ACKER: Your Honor, I'm just going to object. It's not inconsistent. They can keep playing clips, but they are not inconsistent.

MR. SINGER: That's for the jury --

THE COURT: That's for the jury to determine. I will let the jury decide that, Mr. Acker.

MR. SINGER: Mr. Calvin, will you play clip 8.

(Video clip played as follows:)

Q. Do you think it would be reasonable for somebody to read the technology licensing agreement as

1965

inconsistent with the reading of the APA, that the UNIX copyrights were retained by Novell?

A. Yes.

(End of video clip.)

Q. Now let's talk about your June 24 letter, which is SCO Exhibit 103. I'm sorry. It's your June 26 letter.

Mr. Calvin, could you expand the second paragraph.

Q. BY MR. SINGER: This is part of your letter to Mr. McBride on June 26, 2003, correct?

A. Yes, it is.

Q. And what you stated in this paragraph was:

"We acknowledge, as noted in our June 6 public statement, that Amendment Number 2 to the Asset Purchase Agreement appears to support a claim that Santa Cruz Operation had the right to acquire some copyrights from Novell."

That's what you said in your June 26 letter, correct?

A. Yes.

Q. Now, in fact, that's not what the June 6 public statement says, is it?

A. I think it is.

Q. Well, let's take a look at it.

1966

A. Okay.

Q. If we can go back to the June 6 press release, which is Exhibit 97. In the public statement, isn't it true you didn't say that Amendment Number 2 supports a claim that Santa Cruz had the right to acquire some copyrights from Novell, you stated that the amendment appears to support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996.

Correct?

A. That's correct.

Q. The June 6 statement talks about what had transferred in 1996. You characterized that, in June 26, 2003, as being a statement about a claim to acquire some copyrights from Novell, right?

A. To your point, the statements are different.

Q. Now, you also stated, in your June 26 letter, that upon closer scrutiny, however, Amendment Number 2 raises as many questions about copyright transfers as it answers.

You put that into the letter, correct?

A. Yes.

Q. And am I correct that, in writing that, you didn't have anything specific in mind with respect to what questions were raised; is that right?

A. No. I probably did have things specific in

1967

mind when that was written.

MR. SINGER: Okay. Let's take a look at your deposition on February 8, 2007, at page 53, line 24, to 54, 09; 55, 04 --

MR. ACKER: I'm sorry. Page 53?

MR. SINGER: Yes. 53, 24 to 54, 09. 55, 04 to 55, 05.

MR. ACKER: 53, line 24?

MR. SINGER: Yes, to 54, 09.

MR. ACKER: Yes.

MR. SINGER: Then 55, 04, to 55, 05.

MR. ACKER: Okay.

MR. SINGER: Mr. Calvin, would you play clip 4.

(Video clip played as follows:)

Q. What did you mean by saying that Amendment Number 2 raises as many questions about copyright transfers as it answers?

A. Well, it was made in the context of comments that Mr. McBride made about the effect of Amendment Number 2 on the question of copyright ownership. And it was intended to point out to the reader that it wasn't as clear as he was suggesting -- to the addressee, that it wasn't as clear as he's suggesting.

Q. And do you have anything specific in mind?

1968

A. No, I don't.

MR. ACKER: Whoa. Whoa. Your Honor, we need to approach. (Discussion among the Court and counsel out of the

hearing of the jury.)

MR. ACKER: He's cut out a whole clip. The next section was.

"And were there questions that you had in

mind as of the time of this letter that

Amendment Number 2 raised but did not answer."

"Yes. I'm sure -- at the time, I'm sure I

had in mind questions that had been raised that

the amendment didn't answer."

He's cut that out.

MR. SINGER: I don't believe it requires --

MR. ACKER: It would have required, for purposes of completeness, that it be included.

MR. SINGER: I raised this with you before --

MR. ACKER: You made it as one single clip. That's a misrepresentation. And the next question and answer made clear that, at the time of his deposition, he had questions in mind. And you just left that out.

MR. SINGER: "Did you have anything specific in mind? "

"No, I didn't."

1969

"Were there questions you had in mind?"

"Yes. I'm sure -- at the time, I'm sure I had in mind questions that had been raised but weren't answered."

"As you sit here, do you know what those questions are?"

"Yes. I'm having a difficult time doing that, but it, I believe --"

MR. ACKER: But you --

MR. SINGER: Let me finish.

"I'm having a difficult time doing that."

I asked him:

"Do you have anything specific in mind?"

"No, I don't."

I think that's fair use of the examination.

MR. ACKER: But you cut out the middle where he said he had questions in mind at the time. You can't do that

MR. JACOBS: Your Honor --

THE COURT: Mr. Jacobs?

MR. ACKER: But you played it as a clip as though it was one continuous question and answer. You left out the middle where he was asked and said he had questions in mind at the time. That's clearly improper. You can't do that.

1970

MR. SINGER: I don't think there is anything improper in the use of this. I identified the specific lines I was reading. He says that, about this press release, my question to him before I used this impeachment.

"Can you identify specifically what those questions are?"

He said: "I'm sure I could."

And then I asked him: "Do you have anything specific in mind?" And he wasn't identify anything specifically at the time of his deposition.

THE COURT: All right. All right.

MR. ACKER: It's not --

THE COURT: Be quiet. If you want to right now stand up and point out that you think there was something that was left out of the clip, you may read it to the witness, all right?

MR. ACKER: Yes.

(Proceedings continued in open court.)

MR. ACKER: Your Honor, if I might, I want to read -- to have Mr. LaSala confirm that there were portions of his testimony that was left out from the clips that SKO's counsel played for him. And I'm going to give him a copy of his deposition.

MR. SINGER: Your Honor, I think what you had

1971

asked is that the section be read.

THE COURT: Well, I think we need to confirm whether or not it did, in fact, happen, Mr. Singer. And I'll let Mr. LaSala look at his own testimony.

MR. ACKER: Mr. LaSala, will you look at page 54, please.

THE WITNESS: Okay.

MR. ACKER: And starting at the bottom of page 53, do you have that, line 24?

THE WITNESS: Yes.

MR. ACKER: So you were asked the following questions and gave the following answers in the deposition:

"What did you mean in your statement that SCO's press release raised as many questions as it answered?"

"Well, it was made in the context of comments that Mr. McBride made about the effect of Amendment Number 2 and the question of copyright ownership. And it was intended to point out to the reader that it wasn't as clear as he was suggesting -- to the addressee, that it wasn't as clear as he was suggesting."

And then you were asked the following question and gave the following answer that we haven't heard:

1972

"And were there questions that you had in

mind at the time of this letter that Amendment

Number 2 raised but did not answer?"

"Yes. I'm sure -- at the time, I'm sure I

had in mind questions that had been raised that

weren't answered."

MR. ACKER: Did you give that testimony under oath?

THE WITNESS: Yes.

MR. ACKER: That's all I have, Your Honor.

Q. BY MR. SINGER: And were you then asked:

"And, as you sit here, can you recall what

those questions might have been?"

A. That's what the transcript says.

Q. Yes. And you said:

"I'm having a difficult time doing that, but

I believe it relates to our interpretation of

Amendment Number 2, and the fact that there had

been previous statements made by us about

Amendment Number 2 and that there would be

subsequent statements made by us with respect to

its meaning, and, you know, things that hadn't

yet been articulated were being articulated or

were going to be articulated at some point in

the future."

1973

And then you were asked:

"And do you have anything specific in mind?"

And your answer was:

"No, I don't."

That's your testimony. Correct?

A. That's correct.

Q. Now, turning back to the June 26 release, after that you proceeded, on August 4, to write another letter to SCO, this one the letter that's identified as SCO Exhibit 105, correct?

A. Yes, sir.

Q. And, if we go down to the bottom of that letter, it says:

"Unless and until SCO is able to establish that some particular copyright right is required for SCO to exercise its rights under the APA, SCO's claim to ownership of any rights in UNIX technologies must be rejected and ownership of such rights, instead, remains with Novell."

You wrote that, correct?

A. Yes.

Q. So, did you contemplate some process where SCO would have to go to Novell and say: "Novell, we actually need this copyright."

And then Novell would decide whether or not SCO

1974

could have it?

A. Essentially, yes.

Q. Now, if SCO doesn't own the copyrights, they'd have to have a license in order to distribute UnixWare, correct?

A. Yes.

Q. And they would have to have a license in order to develop new code, correct?

A. Yes.

Q. And you agree, there is no explicit license in the Asset Purchase Agreement to Santa Cruz to make use of the UNIX copyrights, right?

A. I think that's correct.

Q. So, what you're talking about is an unwritten, implied license. That's what, in your view, Santa Cruz has and what SCO today has, an unwritten, implied license, right?

A. Yes.

Q. So, the entire basis for SCO to run this business would be an unwritten, implied license to use UNIX and UnixWare copyrights, correct?

A. Yes. An implied license.

Q. Now, do you also know that, to bring lawsuits to defend your intellectual property, to defend your copyrights, you must either be a copyright owner or an

1975

exclusive licensee, correct?

A. I wouldn't care to comment on that.

Q. Well, you're an attorney who worked for technology companies, works for a technology -- well, a communications company right now, so you're familiar with copyright law, are you not?

A. Somewhat. Not well enough to speak with authority on it.

Q. So, are you saying, in August of 2003, when you wrote this letter, you didn't know whether or not, in order to be able to protect your copyrights, in order to bring a copyright suit against someone you thought was infringing your copyrights, you had to either own the copyrights or be an exclusive licensee? You didn't know that?

A. You know, I'm not saying I didn't know it. I suspect the position is correct. But those were not thoughts that were going through my mind at the time.

Q. Because you weren't thinking about what rights SCO might need to protect as part of rights, of why it would need the copyrights? That wasn't a concern to you?

A. I wasn't really thinking about or contemplating the rights that SCO might need. I was contemplating what the agreement said.

Q. But don't the agreements speak to what

1976

copyrights SCO requires in order to exercise its rights under the agreement?

A. They do.

Q. And is one of the rights SCO has, the rights to bring claims to protect its business?

A. SCO has the rights to bring claims to protect its business, yes.

Q. And if it doesn't own the copyrights or have an exclusive license, it can't bring a copyright infringement claim, correct?

A. I don't know.

Q. You didn't know -- when you wrote this letter, you didn't know, in August of 2003?

A. Right.

Q. Do you understand the difference between an exclusive license, in that an exclusive license can't be an implied license, it has to be something in writing? Do you know that?

A. Yes. I know that. An exclusive license or an express license?

Q. Well, you have to have -- in order for an exclusive license, it has to be in writing, correct?

A. Yes.

Q. And we've already covered the fact that what you thought Santa Cruz, SCO, has is not something in

1977

writing, some implied license, right?

A. Yes.

Q. And so, you have no basis to say, then, if you didn't know that you needed to either be a copyright owner or an exclusive licensee, with a written exclusive license, that SCO didn't need the copyrights to enforce its rights back in August of 2003, when you wrote this letter, did you?

A. Could you say that again. I apologize.

Q. You didn't have a basis to say that the copyrights weren't required for SCO to exercise its rights if you didn't know, back in August of 2003, that SCO couldn't bring copyright infringement suits to protect its rights without either being an owner or an exclusive licensee, right?

A. What I knew in 2003 was that we -- at this point in 2003, that we had an Amendment Number 2 that arguably granted to SCO certain copyrights, those that it would need to exercise the rights that it had acquired under the Asset Purchase Agreement. That was the focus of my thought at the time. And I also knew that SCO had never demonstrated to us that they had that -- that -- the need for a copyright to exercise their rights under the APA. That's what was going through my mind at the time.

1978

Q. Now, following this, in September and October, you had Novell apply for copyrights; is that correct?

A. Yes.

Q. And, in fact, those were copyrights to the same UNIX technology that AT&T had copyrighted and which Santa Cruz had the copyright registrations for, correct?

A. I believe so, yes.

Q. And you told the copyright office that those copyrights were owned by Novell, correct?

A. Yes.

Q. And, in October and September, you didn't go public with the fact that you had acquired those copyright registrations? At that time, you didn't go public with that, correct?

A. Well, it's a public registration, so it's public.

Q. But you didn't put out a press release to that effect?

A. I don't believe we did.

Q. And you didn't put out your August 4 letter in a press release at the time either, did you?

A. No.

Q. But, in December of 2003, December 22, 2003, you did put out a press release that we've seen, correct?

A. Yes.

1979

Q. And that press release was one in which you revealed that you did have -- you had applied for copyrights and registered the copyrights earlier that year, correct?

A. That's my recollection of what it said. I don't have it in front of me. Actually, I do have it in front of me. I apologize. Yes. That's what it says.

Q. And you didn't go public with those copyright registrations in August, September, October or November. You went public with them on December 22, correct?

A. Yes.

Q. Were you aware that December 22, 2003, was the date that SCO was announcing its earnings?

A. No, I was not.

Q. Just as you weren't aware that May 28, 2003, was also a date that SCO was announcing its earnings?

A. That's correct.

Q. So, both of those were coincidences. The date you went public in May, May 28, was a coincidence to be SCO earnings release, and the date you went public in December, that date was also a coincidence?

A. Yes.

MR. SINGER: Would you give me one moment. I have nothing further.

REDIRECT EXAMINATION

1980

BY MR. ACKER:

Q. Mr. LaSala, let me back up to the part where Mr. Singer finished off on December 22. When did you first learn that SCO had a press release on December 22, 2003?

A. An earnings release or a press release?

Q. When did you learn that SCO had an earnings release on the 22nd of December, 2003?

A. Yesterday.

Q. Now, leading up to that December 22 release by Novell, you testified on direct that part of the motivation is that because Mr. McBride was in the marketplace saying that SCO still owned the copyrights. In addition to speaking on behalf of SCO, did you also become aware of statements Mr. McBride made where he seemed to be speaking on behalf of Novell?

A. Yes. It was one of the things that concerned us was, in my recollection, in particular, is a comment he made in an interview that had been published on the web somewhere. I think it was in the July, mid-July time frame, where he was not only asserting that SCO owned the copyrights, but he was asserting that he was sure that, if you asked Novell, they would say that they didn't.

And that caused us a great deal of concern, as you might imagine.

1981

Q. And is that part of the reason that the press release was issued in December of 2003?

A. Yes, it was. It had gotten to the point where, again, Mr. McBride was making public statements about SCO's ownership claims, and he had made at least one, and I think others who worked for SCO had made similar claims, that Novell would say that we didn't own them.

And so we felt the need to put before the public the arguments that we were making with respect to ownership and the rebuttal that we received from SCO. And that's why we did this on December 22.

Q. Is it fair to say that Novell didn't have in your corporate offices a calendar with a big red circle around when SCO's earnings announcements were?

A. Not that I'm aware of. No. We certainly would not have had that.

Q. Let me show you what Mr. Singer showed you, a SCO exhibit that lists a number of communications that you had or others had at Novell with IBM during the 2002/2003, time frame. Do you see that?

A. Yes.

Q. And Mr. Singer seemed to imply in his questioning of you that somehow you had, during the discovery process in this case, kept from SCO these conversations. Do you recall that series of questions

1982

and playing clips from your deposition?

A. Yes.

Q. That document that actually lists the conversations between folks at Novell and folks at IBM. Was that provided to Mr. Singer during the course of discovery?

A. Yes, it was.

Q. And was provided to Mr. Normand during the course of discovery?

A. It was.

Q. So, those statements between IBM and Novell, that was something that these guys have had for years. Would that be fair?

A. Yes.

Q. Let me show you what we've marked as L-19. And, on that last point, did you ever try and keep secret from the lawyers for SCO, during the course of discovery, these conversations that you have testified about between yourself and representatives of IBM?

A. No. Of course not.

Q. And what is L-19, sir?

A. L-19 is an August 20, 2003, letter to Mr. McBride from me.

Q. And, in the letter, are you requesting something of SCO?

1983

A. Yes. We're requesting that SCO provide us with the source in binary code due to Novell under the asset purchase agreement pursuant to the technology license agreement that we -- that the parties had executed back in 1995.

Q. Okay. And then, so the jury understands, can you explain in simple terms what you understand the technology licensing agreement to be?

A. The technology licensing agreement was an agreement between Novell and SCO, at the time the Asset Purchase Agreement was entered into, whereby Novell would get a license to all of the assets that had been transferred to SCO. We would have a license back to those. And Novell would get a license to newly developed code by SCO after it acquired this business.

Q. And were the assets to which Novell was obtaining a license, were they limited to assets that were actually transferred during -- in the Asset Purchase Agreement?

A. No. They were -- they were -- they were to code that SCO developed subsequent to the Asset Purchase Agreement.

Q. But, in your letter, what is it you're requesting?

A. We are requesting source and binary code under

1984

the Asset -- due to Novell under the Asset Purchase Agreement. And we're -- we make reference to the assets, the definition of assets in the APA, and we make reference to the excluded assets. And we say that the included assets includes all versions of UNIX and UnixWare, including UNIX source code products in UNIX binary product releases.

MR. ACKER: Your Honor, I move for the admission of L-19.

MR. SINGER: No objection.

THE COURT: It will be admitted.

(Novell Exhibit L-19 received in evidence.)

Q. BY MR. ACKER: And when you were asking for SCO to get back to you the source code, were you asking for the copyrights or simply the source code?

A. The source code.

Q. So, was it your understanding, in August of 2003, that the technology license agreement provided for the license back of assets that had been transferred that did not include the copyrights?

A. That is correct.

MR. ACKER: I don't have anything else, Your Honor.

MR. SINGER: Your Honor, I have a couple questions on recross.

1985

THE COURT: Go ahead.

RECROSS EXAMINATION

BY MR. SINGER:

Q. If you look at L-19, Mr. LaSala?

A. Yes, sir.

Q. It's on the screen. The second paragraph. It says:

"It follows from the foregoing that Novell is entitled to copies of the source and binary code for the versions of UNIX and UnixWare under SCO's control."

That was under SCO's control because SCO had ownership of it, correct?

A. No.

Q. Would you turn to Exhibit 162, the actual technology licensing agreement that this letter refers to.

A. I don't have it. I'm sorry.

Q. It's on the screen.

A. I beg your pardon.

Q. And if we turn to, I think it's the third page that talks about ownership. Have you ever seen this provision which says that, as between Novell and SCO, the ownership of the licensed technology shall reside in SCO?

A. I see that.

Q. Have you ever seen that before?

1986

A. I'm sure I have. I don't recall it at this moment, but I'm sure I have, since I've read this document.

Q. And if I recall correctly, your testimony was that you could see how a reasonable person would look at the technology licensing agreement and conclude that Novell did not have ownership of the copyrights, correct?

A. I don't think that quite accurately characterizes the testimony.

Q. Well, the jury heard your earlier testimony, so we'll go with what they recall.

A. Okay.

Q. One further area of questioning. You were asked about the consistency of your testimony in your deposition about the contacts with IBM, asking Novell to waive rights. Do you recall that?

A. Yes.

Q. Now, the document which set forth the conversations you had with Mr. Marriott and Mr. Jacobs and Mr. Rosenberg from IBM, you have that before you?

A. I do

MR. SINGER: In fact, I'd like to move into evidence that exhibit.

MR. ACKER: You already did.

MR. SINGER: Okay. If it's in evidence.

1987

THE COURT: Which number is it? Remind me.

MR. SINGER: It's 530.

Q. BY MR. SINGER: This was presented in a deposition where you were a corporate representative in May, 2007, correct?

A. That's my recollection.

Q. The testimony that I showed you at the beginning of your cross examination --

THE COURT: One second. 530 is not in.

MR. SINGER: Okay.

MR. ACKER: I apologize, Your Honor. I'm fairly sure that Mr. Singer asked for it to be admitted. I didn't object.

MR. SINGER: I didn't think I had, but I will now.

THE COURT: Okay. He's going asking now. Do you object now?

MR. ACKER: No.

THE COURT: Okay. It will be admitted.

(SCO Exhibit 530 received in evidence.)

Q. BY MR. SINGER: The deposition that you prepared this for as a corporate representative and we questioned you about, it was in May of 2007. Do you recall that?

A. Yes.

1988

Q. However, you had given an earlier deposition in February, 2007, in your individual capacity, correct?

A. I did.

Q. And the testimony that you were presented with in my cross examination, where you said that there had not been these requests for IBM to waive rights, that was given in your February, 2007, deposition, correct?

A. I believe that's correct, subject to your characterization of my testimony, which we have been through already.

Q. And, at that time, in February, 2007, neither I nor SCO had the document that's in front of you, SCO Exhibit 530, did we?

A. No.

MR. SINGER: Okay. Thank you.

THE COURT: Counsel, may this witness be excused?

MR. ACKER: Can I ask one more question? I promise one.

THE COURT: Each attorney gets a third round one time in the entire trial. If you want to take it right now, you may.

MR. ACKER: I'll save it, Your Honor.

MR. SINGER: We do not perceive a need to recall Mr. LaSala.

1989

MR. ACKER: No.

THE COURT: He may be excused, then.

MR. ACKER: Thank you, Your Honor.

THE COURT: That means you can return to Virginia, and you don't have need to worry about being recalled, but, Mr. LaSala, I will instruct you not to discuss your testimony with any other witnesses, in the presence of any other witness, or indicate in any way what your testimony was. Thank you.

THE WITNESS: Thank you, Your Honor.

THE CLERK: Mr. LaSala, you may want to go out that door.

THE COURT: We'll go ahead and break for the afternoon.

MS. MALLEY: All rise for the jury, please.

(Jury leaves the courtroom.)

THE COURT: Do you have anything, counsel?

MR. SINGER: We don't.

MR. ACKER: No, Your Honor.

THE COURT: Okay. We'll see you at 8:30 in the morning. We do have hearings this afternoon, Counsel.

MR. SINGER: Thank you, Your Honor.

(Whereupon the proceedings were concluded for the day.)

1990

REPORTER'S CERTIFICATE STATE OF UTAH )

) ss. COUNTY OF SALT LAKE )

I, REBECCA JANKE, do hereby certify that I am a Certified Court Reporter for the State of Utah;

That as such Reporter I attended the hearing of the foregoing matter on March 22, 2110, and thereat reported in Stenotype all of the testimony and proceedings had, and caused said notes to be transcribed into typewriting, and the foregoing pages numbered 1936 through 1990 constitute a full, true and correct record of the proceedings transcribed.

That I am not of kin to any of the parties and have no interest in the outcome of the matter;

And hereby set my hand and seal this 22nd day of March, 2010.

_______________________________

REBECCA JANKE, CSR, RPR, RMR

1991