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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 24, 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
Greg Jones	Mr. Acker (Direct)	2207
	Mr. Normand (Cross)	2234
	Mr. Acker (Redirect)	2248
	Mr. Normand (Recross)	2250
	Mr. Acker (Further Redirect)	2251
Jack Messman	Mr. Singer (Direct)	2252
	Mr. Acker (Cross)	2281
	Mr. Singer (Redirect)	2290
Michael DeFazio	(Deposition)	2300
Tor Braham	Mr. Jacobs (Direct)	2325
	Mr. Singer (Cross)	2368

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EXHIBITS RECEIVED INTO EVIDENCE:
Plaintiff's:
756	2230
755	2244
552	2272
Defendant's:
V-12	2219
U-45	2229
H-2	2330
U-3	2348
V-3	2354
D-4	2360
Y-3	2362

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SALT LAKE CITY, UTAH; WEDNESDAY, MARCH 24, 2010; 8:30 A.M.

PROCEEDINGS

THE COURT: Good morning.

Overnight Novell filed a motion to strike testimony of damages after June 9th, 2004. The Court will deny the motion based upon the prior rulings of the Court and the conclusion of the Court that the defendants are, in fact, confusing intent and damages. Therefore, it will be denied.

When will Tor Braham be testifying?

MR. JACOBS: He will be at the end of the day today, Your Honor, or first thing tomorrow.

THE COURT: Would a solution to this dispute be to make him available for a deposition today?

MR. JACOBS: I think you're asking me if it's feasible for us to produce him for a deposition today, and the answer is yes.

THE COURT: Mr. Singer.

MR. SINGER: I think that under the circumstances that would probably be the most equitable way to deal with these issues.

THE COURT: Mr. Jacobs, I think that's what we better do. It is a confusing issue, but I think there is merit to your argument that a decision by plaintiff not to depose him was a part of their strategy and they ought not

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to be rewarded for it. But, on the other hand, I am conscious of the rather limited privilege exercised by the Wilson Sonsini law firm representative, and if we can solve the problem by making him available for a brief deposition, then I would like to request that that take place.

MR. JACOBS: Your Honor, given everything that's going on, let me urge the briefer side of brief.

THE COURT: It would have to be brief. We're talking really about, in my judgment, one issue, and that was the question that was posed to Mr. Alter about whether or not any communication had gone to anyone at Novell other than Mr. Bradford as to the retaining of the UNIX copyrights. That was the question that was posed at the deposition that a privilege was then exercised.

I'm not saying that the deposition has to be confined to that alone, but it seems to me that that is the focal point of the dispute and that's where the deposition ought to be begin and ought not to extend much beyond.

MR. JACOBS: Let me suggest an hour, Your Honor. I think that would be plenty to cover the topics.

MR. SINGER: Your Honor, may I note that, in connection with this issue, last night Novell served -- I don't know the exact amount, these were served in the middle of the night -- probably somewhere around 30 documents that previously were withheld on the grounds of privilege. We

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haven't even had time to properly review those, but we believe that, of course, is also a proper subject to this deposition. And we think that it wouldn't certainly take more than 60 or 90 minutes at the outmost, given that's the ruling.

THE COURT: Novell has asserted from the beginning and I think they run the risk now of being shown to be not playing fair, it's not the fact that those documents that were withheld -- and I was told there were a hundred, at least the filings would indicate there were a hundred -- are not relevant. And, you know, if -- well, I would say a one-hour deposition. All right, counsel?

MR. JACOBS: Thank you, Your Honor.

MR. SINGER: I understand, Your Honor.

MR. JACOBS: Your Honor, just for the record, I'm holding up the file. It's one red well of documents.

THE COURT: That would not appear to be much if it weren't for the fact that we're only two days, technically, away from the end of this trial. So they look big in light of that.

Counsel, you both met the deadline, but just barely. I was hoping you would be 30 seconds late and I then would have disregarded it, but it didn't happen. The Court will try to get a revised package to you by tomorrow morning, and then we'll have a jury instruction conference

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tomorrow afternoon at three o'clock where you can make your record if you have opposition to any of the instructions after we've looked at what you have filed here today. All right. It may be that -- well, we'll just deal with that at three o'clock tomorrow.

Any problem?

MR. JACOBS: No, Your Honor.

THE COURT: Is there anything else we need to deal with then?

MR. JACOBS: Briefly, Your Honor. Just to make sure we're all on the same page on time, we've reached agreement with SCO that there is four hours and seven minutes remaining for Novell's presentation of its case and three hours and 13 minutes for SCO time at the podium.

THE COURT: All right. You say those are stipulated times?

MR. NORMAND: We're splitting the difference between the parties' inexplicable differences of time.

THE COURT: What were the extent of the inexplicable differences?

MR. NORMAND: We had us at 35 minutes where Novell had us at one hour and 15 minutes. To be fair, I think there may be confusion as to how side-bars were being counted and whatnot, so we agreed to split the difference.

THE COURT: All right. Thank you.

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Mr. Acker.

MR. ACKER: Good morning, Your Honor.

With respect to Mr. Messman, the Court will recall -- and this has to do with time. The Court will recall that the jury has heard lengthy deposition clips from Mr. Messman, and we had agreement we would bring him live. Given the time restraints and the way the evidence has come in, Novell is not seeking to put Mr. Messman on, simply producing him because SCO has indicated they want him.

However, I do have a transcript of the depo clips that were played. SCO put on almost 50 minutes of his testimony, and we countered with 19 minutes. It's our position that when Mr. Messman testifies today, the areas that they have inquired in during the deposition should not be resewed during the examination of Mr. Messman today.

Those areas included his background, time on the board of Novell, the APA, discussions regarding anyone who negotiated the APA, Amendment No. 2, Novell's efforts to locate a signed copy of Amendment No. 2, the May 28th press release, the reasons for the May 28th press release, the June 6th, 2003 press release, whether or not Mr. Messman has spoken with anyone who had participated in the APA, the August 4th letter after the June 6th press release, the Wall Street Journal article, as well as Mr. Sontag's request for clarification of the APA. Those were all issues that were

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covered in depth in his examination. And when they made the pitch to the Court early on said in a sense what we're doing is we're continuing Mr. Messman's direct examination.

So given the shortness of time, the amount we need to cover in the next day and a half, we don't think it's fair for them to be able to, in our case, continue to put on evidence that the jury has already heard.

THE COURT: Even if it counts on their time?

MR. ACKER: Even if it counts on their time, yes, Your Honor. It's a classic asked and answered, particularly given the tightness of time.

THE COURT: Let me hear from Mr. Singer.

MR. SINGER: First of all, we think we are well incentivized by the time limits, given that this counts on our time, to be efficient and not unnecessarily cover ground that's properly treated in the deposition. But this issue rises because Mr. Messman was not available to be called the first week of trial when we asked for him. So in light of that, and I don't propose that we revisit all the arguments relating to that issue, the decision was that we could play his deposition at that time. It obviously would have been unfair to the plaintiffs to have to wait until now before they heard anything about Mr. Messman.

The subjects listed by Mr. Acker cover virtually every issue in this case and certainly every issue relating

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to Mr. Messman. I'm entitled to relay issues I'm going to go to, even if that goes across some of the points that were raised before. I don't think we should be interrupted by objections and such saying, well, this question is a duplicate of a question asked that the jury may have heard two to three weeks ago. I should be entitled to present a cohesive direct examination of Mr. Messman as though he was present here when we asked for him during the first week of trial.

MR. ACKER: That's really the point, Your Honor. We gave them the option. We said we'll leave your case open and you can have Mr. Messman, the full examination in our case. They chose not to do that. They wanted to put on his direct testimony, at least portions of it in their case. They made that decision. So I don't think it's fair for them now to be able to go back and redo what they have already decided they wanted to do via video when they knew he was going to be here, particularly given where we are in the trial.

THE COURT: Mr. Acker, I think you accurately reflected what happened. It's true that they wanted him earlier. You couldn't produce him. They were given the option of either waiting and taking all of his testimony live. They chose to put it on by way of deposition. I think it would be unfair for me to preclude areas of

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questioning.

I think what I will do is, number one, I agree with Mr. Singer, that they are going to have great incentive to be very efficient because of the amount of time they have left, but I will instruct them that they ought not to simply ask the same questions that were asked at the deposition. If it becomes clear that that's what is happening to the best of our recollection, the Court's recollection, I will sustain objections that it's been asked and answered. But I can't say you can't discuss anything about all these areas that you just listed because, as pointed out, that would preclude the necessity of testimony. And I think that Mr. Singer ought to be allowed to explore further those areas without asking the same questions over again.

MR. ACKER: For the Court's convenience, I'm going to proffer the Court a copy of the deposition clips that were played by defendants.

THE COURT: That would be very helpful, Mr. Acker. Thank you.

MR. SINGER: Your Honor, I just note, it's not my intent to go into questions that were substantively covered before. However, inevitably, just so the jury knows where I am, for example, I'm going to show them the May 28th press release as I did in the deposition. I would like to think that wouldn't elicit an objection because the fact that was

2200

asked and answered, otherwise the jury wouldn't --

THE COURT: Again, I am not going to preclude areas. If you can ask additional questions about the press release that were not already covered, you will be permitted to do so.

MR. ACKER: Thank you, Your Honor.

THE COURT: Counsel, do any of you have anything else?

MR. BRENNAN: Just so we can complete the lineup, Your Honor. I think this will be relatively brief.

Last night we were informed by plaintiff's counsel that they wished to introduce two exhibits that have not previously been denominated as trial exhibits. They have been identified as SCO 757 and 758. Your Honor, both of these are documents the produced in discovery I think in excess of three years ago. They have been in the possession of SCO's lawyers for a substantial amount of time. These are not surprise documents, not newly produced documents. We're mindful of the fact that a couple of days ago the Court would not permit Novell to produce AK filings by SCO on the ground that --

THE COURT: Well, it's more than AK. I mean, there were other things.

MR. BRENNAN: Right. The point was --

THE COURT: Your point is well taken, Mr. Brennan.

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The Court is not going to permit at this late date exhibits that have not been previously disclosed to the other side.

MR. BRENNAN: Thank you, Your Honor.

MR. NORMAND: Can I make one point on one exhibit, Your Honor?

THE COURT: You may.

MR. NORMAND: One of the exhibits was an exhibit to a Novell motion for summary judgment and it's an exhibit that Mr. Jones was asked about at deposition.

THE COURT: That's not the point, Mr. Normand. The AK and the other things were probably known to you and by the other side as well. The point is at this late date to be coming in with entirely new exhibits I just think is prejudicial and I cannot allow you to do something that I precluded Novell from doing just a few days ago.

MR. NORMAND: Very good, Your Honor.

There one last issue, Your Honor.

THE COURT: Before you go, Mr. Brennan, tell me your order of witnesses today, please.

MR. BRENNAN: Yes, Your Honor. We intend to call Greg Jones, who is Novell in-house counsel. And as the Court heard, Mr. Jack Messman, the former Novell CEO, will be called.

THE COURT: He will be your last witness; is that correct?

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MR. SINGER: That's correct.

MR. BRENNAN: Then we will have the deposition of Mike DeFazio, the former general manager of the UNIX group. I think the clip length is about 45 minutes. And then assuming we're able to get to him, we intend to start with Mr. Braham. And the Court has indicated this afternoon his deposition would be conducted. So that's the lineup for today, Your Honor.

THE COURT: Okay.

Mr. Normand.

MR. NORMAND: Thank you, Your Honor.

The issue that Mr. Singer raised a few days ago was in what context would it be appropriate for SCO to put in Novell shareholder value and market capitalization. I propose to do that with Mr. Jones with Your Honor's permission.

THE COURT: Any objection?

MR. ACKER: No, Your Honor. I assume if he knows the answer, but, all right, they can ask.

MR. NORMAND: Your Honor, I propose to do it -- we could do it in the redacted form, but I propose to do it with a trial exhibit we have, which is a Novell 10-K.

THE COURT: Why don't we wait and see what the foundation is.

MR. ACKER: Let's do it the old fashioned way and

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see what he has to say.

THE COURT: That's all we can do.

MR. NORMAND: I guess the point we're making, Your Honor, is we thought we were going to be given the opportunity to get this in. It seems as if we should be able to do it with a Novell witness, otherwise we would simply propose to read it to the Court and to the jury.

THE COURT: Well, let's play it by ear. Okay.

MR. NORMAND: Thank you, Your Honor.

THE COURT: Counsel, we have to talk about juror number ten. During the voir dire -- I have talked about this already -- she indicated she had a vacation that was planned to begin Friday. She and her family are planning to go to Las Vegas for the weekend. Yesterday she was very upset because she senses there is no way that the jury is going to be able to finish its deliberations by Friday. Therefore, she was asking Ms. Malley what to do.

In the course of that, the jury, among themselves I guess, said what if we were to, if we can't finish Friday night, come back Tuesday and allow her then to take her vacation through at least part of the day Monday. The alternative would be to have her be the designated alternate juror and simply dismiss her when we finish the case.

So what is your thought?

MR. SINGER: I think we would like to have a

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little bit of time to discuss the implications of that. Can we respond to the Court at the first break?

THE COURT: Yes.

I think -- and, Sandy, tell me if I'm wrong. I think if we were able to communicate to her that it would be all right for her to be gone Monday, the deliberations can continue Tuesday, that if we can tell her that, that will solve her emotional dilemma. She apparently is quite upset.

MR. SINGER: My inclination is to say that would be an acceptable course to not be here for Monday. I would like to have a chance -- if we could have a few minutes?

THE COURT: I was just going to say, if we can communicate to her something by the end of today, even if it's as general as we are aware of your concern and we'll take care of it, that then leaves us the option of having her be the alternate. So, please, both sides think about it. Before today is up, let me know what you think and I will try to communicate something to her so her mind can be put to rest.

MR. BRENNAN: Your Honor, I appreciate the Court's sensitivity. I have one proposal on Novell's behalf. A happy juror is a better juror. We're of the mind to allow that decision to be made now so she doesn't spend the day fretting.

THE COURT: That's a good point, Mr. Brennan.

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Those guys want to talk, so let's let them visit for a second.

MR. SINGER: May we have a couple minutes to discuss this issue?

THE COURT: Go ahead.

MR. SINGER: Your Honor, SCO is in agreement with the Court informing this morning juror number ten that this issue will be worked out in one of the ways that the Court has enumerated. We're prepared, if she is on the jury and the decision isn't back Friday, for Monday to be a day that the jury does not deliberate, we pick up on Tuesday. We're prepared, alternatively, to discuss the possibility that she would serve as an alternate.

THE COURT: All right. If I inform her when she comes in that if the jury is not able to reach a verdict on Friday, that they can then be dismissed or excused, recess over the weekend, including Monday, come back Tuesday, will that be an acceptable alternative?

MR. BRENNAN: That's agreeable, Your Honor. Thank you.

MR. SINGER: We would suggest, if it meets with the Court's approval, she be told privately rather than --

THE COURT: The only problem with that, Mr. Singer, is it affects the whole jury. You know, they are the ones who are going to have to come back Tuesday as well,

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so I think it's probably best. I think it will be communicated to them through her, in any event, because apparently yesterday it was a subject of some discussion, because they were wondering why she was crying.

MR. SINGER: We certainly are in agreement with her mind being put at ease on that issue as soon as possible.

THE COURT: That's what I'll do as soon as they come in.

Mr. BRENNAN: Yes. Thank you, Your Honor.

THE COURT: If there is nothing else, counsel, we'll have Ms. Malley bring the jury in.

Could you be getting Mr. Jones in, please.

MR. ACKER: I am, Your Honor.

(Jury present)

THE COURT: Good morning, ladies and gentlemen.

Ms. Thomas, we understand that we are causing you some consternation about your vacation. As I recall, during voir dire, you indicated to us that you had it planned and so it was not withheld. I just wanted you to know that if it became necessary because the jury was not able to reach a unanimous verdict on Friday, that if the jury decided they wanted to wait until Tuesday to reconvene to complete the deliberations, that is something that you can do.

In fairness, let me ask you this, will that solve

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your dilemma so your mind is now at rest?

JUROR NO. 10: Yeah, it would.

THE COURT: Let me ask the other jurors, is that going to create a serious problem for any of you if that is the outcome? Is there anyone who would have a problem with that?

Okay. So everyone should put those things aside and focus entirely on the testimony that you will be hearing today.

Mr. Acker.

MR. ACKER: Thank you, Your Honor.

Novell will call Mr. Greg Jones.

GREG JONES,

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: Greg Jones. G-r-e-g, J-o-n-e-s.

DIRECT EXAMINATION

BY MR. ACKER:

Q Mr. Jones, if you would adjust that mike up, it might make it a little easier for you and the court reporter. Mr. Jones, what do you do for a living?

A I'm in-house counsel at Novell.

Q How long have you been in-house counsel for Novell?

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A I think since March of 1992.

Q Can you tell the ladies and gentlemen of the jury what your responsibilities are as a lawyer inside of Novell?

A So I lead a team of lawyers and paralegals that provide legal support to our engineering, research and development teams, product development teams.

Q Where do you live and work?

A In Provo, Utah.

Q At some point in time during 1995 and 1996, or earlier, did you have occasion to meet someone by the name of Darl McBride?

A Yes, I did.

Q How did that happen?

A Darl and I both were working at Novell. Darl had business responsibilities with Novell Japan. I had legal responsibilities for Novell Japan. I think it's in that context of when he and I first met.

Q So you worked together for a short period of time?

A Yes.

Q Let me fast forward now to 2002. Were you contacted by Mr. McBride?

A Yes, I was.

Q Approximately when did that occur?

A It was in the fall. I think the first contact was October 10th, was the first contact.

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Q When you say contact, was that an in-person conversation or telephone call?

A It was a telephone call.

Q Who called whom?

A Darl McBride called me.

Q Do you recall before October of 2002 when was the last time you had spoken with Mr. McBride?

A The last time I had spoken to Darl was probably when he left Novell, sometime in the mid 1990s.

Q What did Mr. McBride say to you?

A So when he called me, he kind of updated me on his career. He told me that he had just joined Caldera, the company that later would be called The SCO Group. He had joined them about three months earlier as their CEO. He described to me that SCO was collecting UNIX royalties for Novell as they were required to by the agreement and how they were paid five percent of those royalties and said, you know, that's not really cost efficient for us. It costs us more to collect the royalties than we're getting paid, kind of mentioned that. Then he said they were looking into whether users of Linux might be violating UNIX intellectual property rights in some way. Then, in that call -- or it could have been in a later call in November, he mentioned that in the agreement between Novell and SCO called the asset purchase agreement whereby

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Novell had transferred certain parts of the UNIX business to SCO, that that agreement excluded copyrights, and so those copyrights stayed with Novell and had not transferred to SCO. And he said he thought that must be some type of clerical error or something in the agreement.

Q Did he ask for anything in that first call?

A I can't recall him actually asking for something in that first call.

Q Did you respond at all to his statement regarding the copyrights being excluded?

A Yes. Yeah, he had pointed out to me in the agreement where they were excluded, so I agreed with him the agreement did exclude the copyrights.

Q Did you agree with him his statement that this was some sort of a mistake or some sort of clerical error?

A No. I told him I understood what he was saying, why he might have a question, but I didn't agree with him that it was a clerical error that led to those copyrights being excluded.

Q After the first conversation in October of 2002, did you have subsequent calls or conversations with Mr. McBride or other folks at SCO?

A Yes. The first one was from Joanie Bingham, who I understood to be an assistant to Darl McBride of The SCO Group. She left some messages for us.

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Q Did you actually call Ms. Bingham back?

A Yes. Yes, I did.

Q After that conversation, did you document your call with her in an e-mail?

A Yes, I did.

Q Let me show you, Mr. Jones, what we've marked as Exhibit G-11, and ask you to take a look at that. Do you recognize it?

A Yes, I do.

Q What is it?

A This is an e-mail I wrote about the conversation that I had with Joanie Bingham, an e-mail I wrote about that conversation.

Q Either from your memory or reading from the e-mail itself, can you tell the ladies and gentlemen of the jury what Ms. Bingham said to you and what you said to her on or about the 15th of November in 2002?

MR. NORMAND: Your Honor, I am not sure we have laid a foundation for the use of the document if Mr. Jones is going to read from the document.

THE COURT: I will not allow him to read from it until you've asked him whether or not he needs his memory refreshed. Let's just lay the foundation properly, Mr. Acker. //

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BY MR. ACKER:

Q Do you have a recollection of the call from Ms. Bingham?

A Yes, I do.

Q Can you tell the ladies and gentlemen of the jury what you said to her and what she said to you?

A Yeah. Basically she left me these messages, and in her messages she had wanted access to our files -- some of our files at Novell. So I asked her, you know, what she needed, why she wanted access to these files. She said she had an assignment from Darl McBride, her boss, to help him with some type of IP tracking. He wanted to know something about -- I believe it was the agreement between Novell and UNIX System Laboratories when Novell had purchased the UNIX business from AT&T, and at that time AT&T had a company called UNIX System Laboratories. I think she was saying that Darl would like her to get access to those, look into them. And I told her, you know, I need to understand this better, so I'm going to be calling Darl.

Q So you left her that you were going to call Darl McBride directly?

A Yes.

Q Did you do that or was there a subsequent telephone conversation with Mr. McBride?

A Yes, there was.

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Q Do you recall approximately when that was?

A Within several days of this e-mail. I can't remember the specific date.

Q Did you actually speak with Mr. McBride?

A Yes, I did.

Q Did you draft an e-mail after speaking with him, after this call with Ms. Bingham?

A Yes, I did.

Q Let me show you what we've marked as Exhibit K-11. Do you recognize what that is?

A Yes, I do.

Q What is it?

A This was an e-mail that I wrote on November 20th reporting a phone call that Dave Wright -- Dave Wright is someone at Novell who works in our corporate development team. So in this an e-mail I talk about a conversation that Dave Wright and I had with Darl McBride on that day, November 20th.

Q Did you document in this e-mail the substance of the conversation with Mr. McBride after it happened?

A Yes, I did.

Q Can you tell the ladies and gentlemen of the jury what it was that Mr. McBride said to you and to Mr. Wright and what, if anything, you said in return?

MR. NORMAND: Again, Your Honor, as long as

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Mr. Jones is not reading off the document.

BY MR. ACKER:

Q Do you have a memory of what was said?

A Yeah. So basically we wanted to get back in touch with Darl to find out why he wanted access to these materials. He said he wanted to research the IP rights that SCO might have in UNIX, what rights they have, and this was for the purpose of looking at pursuing end users of Linux if they were violating UNIX intellectual property rights. He also suggested -- he brought up again the fact that SCO was collecting these SVRX royalties of Novell's that were being sent to us and suggested that, you know -- I think what he was saying is that people might be moving from SVRX to Linux, so if we, SCO, are taking IP enforcement actions against these Linux users, maybe your SVRX revenues will be supported in some way so you will get more revenues. So, Novell, this might be in your interest to help us out this way, to give us access to the information because it's going to help with those revenues. I basically told Darl, you know, that's sensitive, you may be getting into litigation with third parties. That's very sensitive for us to be sharing information with you in that context. Also some of the materials you're asking for may be confidential. Then said I would get back to him.

Q Is that how you left the conversation with Mr. McBride

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on November 20th?

A Yes.

Q What did you do internally after that telephone call with Mr. McBride and Mr. Wright on November 20th?

A So, for example, I wrote this e-mail. I wanted to inform my boss and people in the legal department that this contact had happened, so I wrote this e-mail. I also brought this to the attention of Carl Ledbetter and Chris Stone, they were the executives responsible for Novell's research and development and product development efforts at Novell at the time, to find out what their reaction was, if they would have any interest in supporting SCO in these types of activities Darl was describing to me.

Q Did you get a response from either Mr. Stone or Mr. Ledbetter, or both?

A I got a response, yeah, from both of them. They said no, they were not interested in supporting these efforts.

Q Did you have a subsequent telephone conversation with Mr. McBride in the fall or winter of 2002?

A Yes, I did.

Q Did you document that in an e-mail as well?

A Yes, I did.

Q Let me show you what we've marked as R-11. Do you recognize that?

A Yes, I do.

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Q What is it?

A This was an e-mail I wrote on December 4th, 2002 reporting on a conversation that Dave Wright and I again had with Darl McBride on that day, December 4th.

Q Could you tell the ladies and gentlemen of the jury the substance of that conversation on December 4th?

A Yes. So basically we got back to Darl, followed up with him, let him know that Novell was not going to be supporting him, this research effort that he was undertaking to find these documents and so forth. And, you know, Darl can be very persistent, so he -- so he tried to advocate, I still think this is in your interest to help us out. This would still be something that would be beneficial to you. And so we just let him know, well, there are several reasons why Novell had made this decision not to support SCO's efforts in this regard.

Q What were the reasons?

A Well, one was, you know, he had said we have these SVRX revenues, those might be supported in some way by his activities. And we said, we don't know if that's going to happen, that may not necessarily happen. Also it's really, again, sensitive that this may involve litigation with third parties. And also, you know, to go access these materials and do the research and do this type of due diligence effort, that takes time and resource and it's just not

2217

something we're going to spend our time on. Lastly, you know, that we have customers and partners that distribute Linux and they use Linux, so, you know, we value those relationships more than we would any other type of benefit, such as those SVRX revenues being a benefit in some way.

Q At any point during your first conversation in October, your conversation on November 20th or this conversation on December 4th, did you ever agree with, in any way, Mr. McBride's position or statement that somehow the exclusion of copyrights in the asset purchase agreement was somehow a clerical error or mistake?

A No, I didn't.

Q How did Mr. McBride react when you told him you weren't going to be -- Novell was not going to be participating or assisting in his efforts?

A Well, so Darl, you know, very, very persistent, saying, well, you know, who's making these decisions, who's calling the shots, I would like to explore this further. So I let him know that basically, you know, these individuals had been identified to you before, Carl Ledbetter and Chris Stone. They are on the executive management -- they were at the time on the executive management team at Novell, the worldwide management team, the highest level. So I told Darl our highest executive level had made that decision.

2218

That's who was calling the shots. And then he indicated that he would, you know, be revisiting the topic.

Q After the holidays into 2003, did you have subsequent contact with someone from SCO on the issue of the copyrights?

A Yes, I did.

Q What happened?

A Well, I was contacted by Chris Sontag. Chris Sontag worked with Darl at SCO and he had responsibility for this licensing program that Darl had mentioned to me earlier, so he had responsibility for that and was contacting me in that context.

Q Do you recall approximately when that call was with Mr. Sontag?

A This was sometime in February, I think mid February, maybe around -- one of them was around the 20th of February.

Q Did you subsequently get an e-mail from Mr. Sontag after the call?

A Yes, I did.

Q Let me show you what we've marked as Exhibit V-12. Do you recognize V-12?

A Yes, I do.

Q There appears to be two e-mails here; is that right?

A Yes.

Q One from Mr. Sontag and from you on the bottom; is that

2219

right?

A That's right.

Q What is the date of that e-mail to you?

A The one to me is February 20th.

Q And you responded back to him on the following day?

A Yes, I did.

MR. ACKER: Your Honor, I move for admission of Exhibit V-12.

MR. NORMAND: No objection, Your Honor.

THE COURT: V-12 will be admitted.

(Defendant's Exhibit V-12 was received into evidence.)

MR. ACKER: Highlight the first e-mail at the bottom from Mr. Sontag, Mr. Lee.

BY MR. ACKER:

Q So, on the 20th, Mr. Sontag wrote to you and said, attached is a first cut at a side letter to clarify the issues that we discussed yesterday. I will give you a call later, or feel free to call me on my cell. Regards, Chris Sontag. Does that help you place the date of the telephone call with Mr. Sontag?

A Yes.

Q When was it?

A Pardon?

Q When was the call?

2220

A February 20th -- well, so this is -- let me see. So it's February 19th.

Q Do you recall what was discussed with Mr. Sontag in the call on February 19th?

A So what had happened is obviously we had -- Novell had rejected SCO's request that we provide them with research assistance and access to documents and so forth. But then Chris came back because they were still concerned the asset purchase agreement was left with saying the copyrights were excluded from the transferred assets, so they are staying with Novell, SCO wants them to be with SCO. So they are wanting to change this in some way. So I basically told Chris, look, we've told you we're not going to do this research and so forth for you. Whatever -- if you want to send a written document, some terms that we just evaluate one time and get back to you, then I could look at that.

Q Is that what Mr. Sontag attached to his e-mail on the 20th, what he refers to as a side letter?

A Yes.

Q If we go up to your response to him on the 21st, you wrote, Chris, as I mentioned on the phone, I need to work in conjunction with a business person here at Novell, and I am still trying to get a business person assigned to this. I will keep you posted. What did you mean by that?

2221

A Well, that, you know, I'm in-house counsel at Novell and so I'm their lawyer, but decisions like this need to be made by the appropriate -- people in appropriate authority, the business people, the management team. So I told that to Chris. So he had sent me this document. So basically I'm telling him I'll take a look at it and I will take it to the appropriate executive or people in management at Novell.

Q Let me hand you what has already been admitted, the final page of Exhibit I-31. Take a look at that.

MR. ACKER: If we could bring that up, Mr. Lee.

BY MR. ACKER:

Q Is this the side letter that Mr. Sontag sent to you on the 20th of February of 2003?

A Yes.

Q If we take a look at the first sentence --

MR. ACKER: Actually, just highlight the entire body of it for the jury.

THE COURT: Excuse me. You say I-31?

MR. ACKER: Yeah, the final page of I-31, Your Honor.

MR. NORMAND: Your Honor, the final page of I-31 I think has been admitted as the redacted portion of SCO 615.

THE COURT: That's why I was confused.

MR. ACKER: Thank you for that clarification.

THE COURT: Go ahead.

2222

BY MR. ACKER:

Q If you go down to the signature page. So this was a proposal that SCO was making to Novell. Do I have that right?

A Correct.

Q And if we can go up to the top of the body of it, we can see the first sentence, what Mr. Sontag was proposing was a letter that says this letter clarifies the intent of the parties with respect to the above-captioned transaction, correct?

A Correct.

Q Then if we move down to the sentence that begins we wish to clarify the following?

A Yes.

Q Below that bullet point one says, all right, title and interest in and to copyrights associated with the AT&T SVRX agreements held by Novell at the time of the asset purchase agreement were intended to be in part of the included assets identified in schedule 1.1(a). Do you see that?

A Yes, I see that.

Q Did you have an understanding when Mr. Sontag sent this to you in February 2003 why he wanted that language changed in the APA?

A Only that he was involved in their licensing program, he had responsibilities there, and so this was in that

2223

context.

Q Did you understand in the APA that, in fact, the copyrights to the UNIX code were not included in the transferred assets?

A Yes.

MR. NORMAND: Objection, Your Honor.

THE COURT: Excuse me.

MR. NORMAND: Objection, Your Honor, calls for a legal conclusion, among other things.

THE COURT: I'll overrule the objection.

BY MR. ACKER:

Q If we go down to bullet point number two, Mr. Sontag was also asking that no right, title or interest in and copyrights associated with the AT&T SVRX agreements otherwise held by Novell at the time of the asset purchase agreement were intended to be part of excluded assets identified in schedule 1.1(b). Do you see that?

A Yes.

Q So what were you understanding that Mr. Sontag was asking Novell to do with respect to the excluded asset portion of the asset purchase agreement?

A Well, this language is directly in conflict with the actual language of the asset purchase agreement, so I understood him to be saying, you know, the asset purchase agreement says the copyrights are here. I want to have some

2224

document that says that they should be here with SCO.

Q When you say at first that the copyrights were here, referring to --

A To Novell. So basically under the asset purchase agreement copyrights are with Novell and he's saying I want something that says that they were intended to be with SCO and they should be with SCO.

Q Again, this request is being made to you in February -- around February 20th, 2003?

A That's right.

Q What did you do with this request from Mr. Sontag?

A So I reported this to Chris Stone, the executive I mentioned earlier, and asked -- and basically he rejected this and said no, Novell would not do this.

Q Would not do what?

A Would not accept this proposal, sign this document.

MR. NORMAND: Your Honor, I move to strike because there was an objection at his deposition to subsequent conversations with any business person.

MR. ACKER: Mr. Stone has already provided that testimony in this courtroom, Your Honor.

MR. NORMAND: That doesn't mean it comes in through, Mr. Jones, Your Honor.

THE COURT: Mr. Acker, are you disputing that a privilege was exerted?

2225

MR. ACKER: Off the top of my head, I don't know, Your Honor.

THE COURT: I'm going to have to rely upon Mr. Normand's representation, and I would agree that anything privileged ought not to come in through this witness. So the Court will instruct the jury to disregard the answer to the question just given regarding this conversation with Mr. Stone.

BY MR. ACKER:

Q Did you respond back to Mr. Sontag?

A We responded back to him. I can't remember specifically if I called him or how we got back to him, but we got back to him and let him know what the response was.

Q What was the response?

A The response was no, that their proposal was rejected.

Q At some point in early 2003, sometime before May 28th, 2003, did you see a copy of -- an unexecuted copy of what is Amendment No. 2 to the asset purchase agreement?

A Yes, I did.

Q Can you explain to the jurors how that happened?

A Well, so we had had these contacts from SCO asking about the asset purchase agreement, you know, dealing with the copyright ownership issue. We started to review some of our documents internally at Novell. In the course of doing that, we came upon this unsigned Amendment No. 2 to the

2226

asset purchase agreement.

Q Do you recall where that was found?

A No.

Q Did you make any efforts to find an executed copy of Amendment No. 2?

A A member of our legal department was given the assignment to see if there was a signed Amendment 2 in the files of Novell.

Q Did that occur before May 28th, 2003?

A Yes, it did.

Q Was that person able to locate a signed copy of Amendment 2?

A No, he was not.

Q Where, typically, at Novell are legal documents -- these contractual documents maintained?

A In the legal department itself, in our law department, in our file room, or in our archives that the legal department has sent off-site.

Q Is that where the person on your team that was assigned to look looked for the executed copy of Amendment 2?

A I'm sure the places he looked included those locations.

Q At some point in time in 2003, did you see a signed copy of Amendment 2?

A Yes, I did.

Q When was that?

2227

A June 6th, 2003.

Q Do you know how it was that you came to see that?

A Yes. SCO had located a signed Amendment 2 and they faxed that to Novell, and that's when I saw the signed Amendment 2.

Q Was that the first time you saw a signed copy of it?

A In 2003, that was the first time I saw a signed copy.

Q Subsequently was the signed copy of Amendment No. 2 located in Novell's files?

A Yes, it was.

Q Do you know where it was found?

A It was found in the tax department.

Q Was that a relatively unusual place for a contract to be found?

A Well, it was not where we store our documents. It's not -- they may have occasion to review our documents, but it's not where we store them. It's not our file room, you know.

Q At some point in time in the fall of 2003, did Novell register copyrights with the U.S. Copyright Office for the UNIX code?

A Yes, we did.

Q Let me show you what is marked as U-45. Let me show that to you, Mr. Jones. Do you recognize what that compilation document is?

2228

A These are the certificates of registration that were given to Novell after Novell applied for copyright registrations on versions of UNIX.

Q What was the latest version of UNIX or UnixWare that Novell filed a copyright registration for?

A I believe it was UNIX SVRX 4.2MP.

Q Is UNIX SVRX 4.2MP the version of UNIX that was in existence prior to the closing of the APA in 1995?

A Yes.

Q Is that the most recent version that was in existence prior to the closing of the APA in 1995?

A To my knowledge, yes.

Q Did Novell have to pay money in order to get those registrations on file?

A Yes.

Q How much?

A The fees we paid the copyright office totaled $9,540.

THE COURT: Mr. Acker, are you going to offer U-45?

MR. ACKER: Yes. I'm moving to admit Exhibit U-45, Your Honor. I believe there is a stipulation on its admissibility.

MR. NORMAND: There is, Your Honor. The other half of the stipulation is our similar compilation will come in. I propose to do that with Mr. Jones as well.

2229

THE COURT: All right. U-45 will be admitted.

(Defendant's Exhibit U-45 was received into evidence.)

BY MR. ACKER:

Q Let me show you two documents, Mr. Jones, X-23 and SCO Exhibit 756. X-23 is a document. Can you refresh the ladies and gentlemen of the jury's memory about what that is?

A So after Novell obtained these registrations, we were concerned that SCO had been saying that they were the owners of these copyrights. So we felt it was important that we make it known we had obtained these registrations. So one of the things that we did was on December 22nd, 2003 post on Novell's Web site correspondence we had with SCO on this topic and a statement that we had obtained these copyright registrations, and letting people know if they wanted to see these registrations, they were available on the copyright office Web site.

Q Do you know what documents were posted on December 22nd, 2003 in connection with this press release?

A I know it was correspondence between Novell and SCO on this topic.

Q On the topic of?

A The topic of copyright ownership and Novell's belief that Novell is the owner of these copyrights under the asset

2230

purchase agreement.

Q If you can look at SCO Exhibit 756. Do you recognize what that is?

A Yes.

Q What is that?

A This is a press release from Novell on January 13th, 2004. It's announcing that Novell -- by this time Novell has just acquired SuSE Linux. So now Novell is in the Linux business directly and we are going to be distributing Linux. This is telling our customers at this point that we have an indemnification program. So basically if anyone were to tell you that your use of Linux violates their rights, then we will back you up, we've got your back, we'll support you, and also saying that we actually believe that we are the rightful owner of the UNIX copyrights. So that's basically what this is announcing.

MR. ACKER: Your Honor, I move for admission of SCO Exhibit 756.

MR. NORMAND: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 756 was received into evidence.)

BY MR. ACKER:

Q Unfortunately Mr. Lee doesn't have it in the system yet, so I'm going to have to ask you some questions about

2231

it, Mr. Jones. Turn to the second page of the document. Do you see there's a section there that says copies of relevant correspondence between Novell and SCO are available and it gives the Novell Web site address? Do you see that?

A Yes.

Q Do you know what correspondence -- what body of correspondence went up on the Novell Web site as of January 10th, 2004?

A Well, in general it was correspondence back and forth between Novell and SCO on the topic of ownership of these copyrights, then also some other contractual issues that the two companies had with each other.

Q Why was it that Novell decided to put all the correspondence between itself and SCO up on its public Web site?

A Well, this had become a matter of great public concern. The things that SCO was doing were very visible, very public, so we felt there was a need to put people on notice of Novell's position in what we believe the true situation was, and so just to be transparent and put those materials out there so that people have the opportunity to go view them.

Q Did you also put up what SCO had asserted its position was in the correspondence it had sent to Novell?

2232

A Correct. It was correspondence, it was the back and forth. It was the Novell letter to SCO, here's the letter back to Novell from SCO, and the back and forth that was going on.

Q That correspondence remained up on Novell's Web site over the next five, six years?

A Yes.

Q Were you aware and did you review a ruling by a district court in this case on a motion for remand and a motion to dismiss on June 9th, 2004?

THE COURT: One second.

MR. NORMAND: Objection, Your Honor. I don't know that a side-bar is appropriate, but this has been an ongoing issue.

MR. ACKER: I believe the Court's ruling the other day is we could go into this issue with respect to punitive damages.

MR. NORMAND: We have an issue with respect to which he came to it, Your Honor.

MR. ACKER: If the Court will let me lead.

THE COURT: You go ahead and lead.

MR. ACKER: Yes, Your Honor.

BY MR. ACKER:

Q Did you review that ruling on June 9th, 2004, Mr. Jones?

2233

A Yes.

Q Was there anything in that decision of the district court of June 9th, 2004 that you believe was inconsistent with Novell's continuing assertion that it owned the UNIX copyrights?

A No.

Q Did you also review an order granting summary judgment of August 10th, 2007 by the district court in this case?

A Yes, I did.

Q Was there anything in that order granting summary judgment that was inconsistent in any way with Novell's continued assertion of ownership of the UNIX copyrights?

A No.

Q Did you also review the Tenth Circuit Court of Appeals decision on August 24th -- dated August 24th, 2009 in this case?

A Yes, I did.

Q Was there anything in that opinion that was inconsistent with Novell continuing to maintain its position into 2009 that it was the owner of the UNIX copyrights?

A No.

MR. ACKER: That's all I have, Your Honor.

THE COURT: Mr. Normand.

MR. NORMAND: Just a moment, Your Honor. //

2234

CROSS-EXAMINATION

BY MR. NORMAND:

Q Good morning, Mr. Jones.

A Good morning.

Q You just mentioned the Tenth Circuit opinion. Do you recall that?

A Yes.

Q You've read that opinion?

A Yes.

Q You understand that that opinion is why we're having a trial here, correct?

A Yes.

Q You understand that this trial could result in a situation in which Novell does not own the UNIX and UnixWare copyrights, correct?

A Yes.

Q You understand that SCO is bringing a claim for slander of title at this trial, correct?

A Yes.

Q That prospect has no bearing on your testimony on whether you wanted to keep that information up on Novell's Web site, right?

A That's correct.

Q Now you were asked, Mr. Jones -- let's look at SCO Exhibit 756. This is a Novell press release in which it

2235

announces that it's offering SuSE Linux enterprise server customers a new indemnification program, correct?

A That's right.

Q And Novell made this announcement shortly after IBM had invested $50 million in Novell, correct?

A I know that was part of the transaction. I don't know the date that the investment took place.

Q Mr. Jones, Novell has a joint defense agreement with IBM, correct?

A Yes.

Q That agreement exists because Novell and IBM share common interests opposing SCO's claims in litigation, correct?

A I know there was a joint defense agreement, and there is a commonality of interest. If it fits exactly your description, I wouldn't be surprised. I know there is a joint defense agreement.

Q That joint defense agreement existed prior to January 2004, correct?

A I don't know what date the joint defense agreement was put in place.

Q If I were to represent to you there's been testimony it began in May 2003, would that refresh your recollection?

MR. ACKER: Your Honor, there has been no such testimony. If he has a question, he should ask him. He

2236

shouldn't be testifying.

THE COURT: I will sustain the objection and ask you to rephrase the question.

BY MR. NORMAND:

Q The relationship began in May 2003, is that right, Mr. Jones?

A I don't know when the joint defense agreement was put in place. I don't know.

Q You know that counsel for IBM spoke with counsel for Novell in the spring of 2003, correct?

A Yes.

Q You know there have been discussions about those communications in discovery in this case, correct?

A Yes.

Q Now you spoke about your communications with SCO in the fall of 2002. Do you recall that testimony?

A Yes.

Q Those conversations included discussions about copyrights; is that right?

A That's right.

Q You don't recall all of the exact language that SCO used in those discussions, correct?

A Yeah, the exact words, the exact language that they used, I wouldn't remember that.

Q I think you did say that you recall the gist of the

2237

conversations was that Mr. McBride thought the original language of the asset purchase agreement on the issue of copyrights contained a clerical error; is that right?

A Yeah, that was part of what he said was that he thought there was a clerical error.

Q You understood him to mean that the original language of the asset purchase agreement on the issue of copyrights can't reflect what the parties intended, correct?

A That seemed to be what he was expressing.

Q Now you understand that Mr. McBride wanted to correct what he regarded as a clerical error, correct?

A Yes.

Q Now the internal e-mails Mr. Acker asked you to look at, in none of those e-mails did you assert that Novell owned the copyrights, did you?

A There was no need to. It was understood, Mr. McBride had brought to my attention the asset purchase agreement excluded the copyrights.

Q In those e-mails you weren't speaking to Mr. McBride, correct?

A I was not. Those e-mails don't -- those e-mails report discussions that I had with Mr. McBride.

Q So you never said to Mr. McBride in the discussions Novell owns those copyrights, correct?

A In effect, I did because he told me the asset purchase

2238

agreement excluded the copyrights and I agreed with him.

Q So that is something you are saying you told Mr. McBride but you did not report in your e-mails; is that right?

A Correct.

Q Why is that?

A Again, I think Novell's ownership of the copyrights was well understood by us.

Q It's your testimony that before you heard from Mr. McBride in the fall of 2002 you believed that Novell owned the UNIX and UnixWare copyrights?

A Before that happened -- well, in 2002, I would have had -- when he called me, it had been a long time since I'd even looked at the issue.

Q You didn't know whether Novell owned the UNIX or UnixWare copyrights before you spoke with Mr. McBride?

A At the moment he called, I didn't have an understanding, didn't have a recollection.

Q Let's look, Mr. Jones, at what we've shown to you, Exhibit R-11.

MR. NORMAND: If we could blow up the full text of that language.

BY MR. NORMAND:

Q This is an internal e-mail, Mr. Jones, from December 4th, 2002 to your colleagues at Novell from yourself; is

2239

that right?

A That's correct.

Q You say at the bottom of the second to last paragraph that you did not mention in any way Novell's own interest in becoming more active in the Linux area in a more direct manner. You say that, correct?

A That's right.

Q So in this internal e-mail you were acknowledging you were not straight with Mr. McBride in your discussion with him, right?

A I don't think that's a fair --

Q But you didn't tell him in this, correct?

A No, I'm answering your question, which was that I was not straight with him. I think that's a very unfair characterization. I'm a lawyer and -- I'm answering your question.

Q Very good, Mr. Jones.

A I'm a lawyer for Novell. I'm apprized of confidential business plans that they are developing and considering, and so I'm not at liberty to share with others who are calling me the various things that we may intend to do in the future. It would be inappropriate for me to share information that's given to me in my capacity as a lawyer for Novell.

Q There was information that you thought was relevant to

2240

your discussion with Mr. McBride that you opted not to tell him, correct?

A Yeah. I believe I had very appropriate reasons.

Q Now in your discussions with Mr. McBride, he was explaining to you ways in which Novell could make more money, correct?

A Yeah, that's right. His idea was either more money or at least SVRX royalties would not decline as rapidly. One way or another, he was suggesting there might be some benefit to you, Novell.

Q Now you spoke to this issue of a side letter that you received from Mr. Sontag in February 2003. Do you recall that?

A Yes.

MR. NORMAND: Can we look at Exhibit I-31. If we could blow up the text of that letter for the jury.

THE COURT: This one has been admitted, so do you want it shown to the jury?

MR. NORMAND: Yes, Your Honor.

THE COURT: This is the one that has been -- this one has been admitted?

MR. NORMAND: I believe it was admitted.

MR. ACKER: Yes, the last page of I-31.

THE COURT: That's all you were referring to?

MR. NORMAND: Yes, Your Honor.

2241

BY MR. NORMAND:

Q This is a letter, Mr. Jones, in which Mr. Sontag sought to clarify the original language of the asset purchase agreement; is that right?

A The words of the document are clarified.

Q And your understanding is that Mr. Sontag sent you this letter before he had seen Amendment No. 2, correct?

A You know, I don't know when he saw Amendment 2. I know that later he said he had not seen it prior to June of 2003.

Q Now by this time you had seen an unsigned copy of Amendment No. 2, correct?

A You know, I may have. I'm just not certain the date when I first saw the unsigned copy of Amendment 2. I'm just really not certain when I first saw it.

Q I thought I heard you tell Mr. Acker that by this point you had seen an unsigned copy?

A I'm sorry. I thought he was asking me sometime in the spring of 2003. I hadn't recalled him asking me if prior to this conversation with Mr. Sontag I had seen it. I don't believe that's what he asked me.

Q Maybe I misheard. At some point in the next couple of months, however, you saw an unsigned copy of Amendment No. 2, correct?

A That's true.

Q You thought the language of Amendment No. 2 was

2242

potentially significant, correct?

A Yeah, I would say potentially significant is correct.

Q You thought it was a potentially important document, correct?

A It was a relevant document, so we would want to actually see if it was signed or not.

Q You didn't make any personal effort to find the signed copy; is that right?

A I did in the sense that I was involved in assigning someone else who had experience finding documents that we might have difficulty tracking down to go see if he could find it.

Q You don't know exactly what that person did to try and find it, do you?

A I don't know all his efforts. I do know his efforts included looking at our file rooms and pulling boxes out of the archives.

Q Do you know whether this person made any effort to contact anyone that had negotiated the asset purchase agreement?

A I don't know.

Q You made no such effort, correct?

A I did not.

Q Novell's tax department is part of Novell's files, correct?

2243

A It is. Our legal department files, yeah. The Novell general files is part of our company. They have files.

Q You were asked about the issue of copyright registrations. Do you recall that?

A Yes.

Q I believe that Exhibit U-45 was a compilation of Novell copyright registrations?

A Yes.

Q Novell filed those copyright registrations after SCO had filed its own set of registrations?

A That's correct.

MR. NORMAND: And could we pull up SCO 755.

THE WITNESS: Do I have that one?

MR. NORMAND: I think it's in front of you on the screen, Mr. Jones.

Your Honor, I move SCO 755 pursuant to the stipulation with counsel.

MR. ACKER: I have no objection. I just need to check to make sure it is what was stipulated to. I don't doubt counsel's representation.

MR. NORMAND: We'll give Mr. Acker an opportunity to review it.

THE COURT: You don't have a copy for him to look at?

MR. NORMAND: I think we do. I know I have one

2244

handy.

MR. ACKER: I don't have an objection subject to being able to look at this and compare it --

THE COURT: All right. Let's go ahead. I will admit it, then, subject to Mr. Acker's subsequent review.

(Plaintiff's Exhibit 755 was received into evidence.)

BY MR. NORMAND:

Q Do you recognize the front page of that document, Mr. Jones?

A Can it be blown up a bit?

Q I think we can. You recognize it to be a certificate of registration?

A I recognize that's what it is, yes.

Q You have seen SCO's -- or at least some of SCO's own copyright registrations before, correct?

A As you know, there are many documents in this case. I may have.

Q Novell was aware that SCO had filed its copyright registrations before Novell filed its own, correct?

A Absolutely, we knew.

Q As an attorney, you understand that by filing a copyright registration it doesn't mean you own the copyrights, correct?

A Yes. The fact that SCO obtained this didn't mean they

2245

actually were the owners of the copyrights. It's not indicative of that.

Q Now, Mr. Jones, you understand that one of the issues in this trial is whether Novell has falsely claimed to own UNIX and UnixWare copyrights, correct?

A Yes.

Q Your view is that Novell has publicly claimed to own UNIX copyrights, correct?

A Yes, it is. It's a fact.

Q Your view is also that Novell has publicly claimed to own UnixWare copyrights, correct?

A That I'm not following you on.

Q Mr. Jones, while counsel looks at this, I wanted to show you, and read to yourself lines 16 through 20. That is from the 2008 trial testimony.

A Yes.

Q Having looked at that, do you acknowledge your view that Novell has claimed to own UnixWare copyrights?

A I'm sorry. You're saying based on that testimony that was given at trial? Is that the question?

Q The question is whether your testimony at trial was that you acknowledge that Novell has claimed --

A No. What happened at trial --

Q Let me finish the question, Mr. Jones. The question is whether you said at trial that you acknowledge that Novell

2246

has claimed to own UnixWare copyrights?

A I'm going to answer that no. I was -- during the course of the testimony that I was giving, it wasn't clear to me in the asset purchase agreement at what point in time certain products had been excluded. And during the back and forth that I had had with Mr. Normand at the trial, we worked through the actual agreement and identified at which version that stopped, and that it wasn't UnixWare. So I thought that was resolved. When I was stating that at trial, I was stating it as a question that I thought we had worked through live during trial.

MR. NORMAND: Your Honor, may I read this question and answer into the record?

THE COURT: Yes, you may.

BY MR. NORMAND:

Q The question, has Novell ever claimed to own copyrights to SCO UnixWare. Answer: No. If by SCO UnixWare you mean any UnixWare code produced after the date of the asset purchase agreement, no. So your position, if I understand it, is Novell has not claimed to own any UnixWare code produced after the date of the asset purchase agreement; is that correct?

A Again, there is a broader testimony. That is not -- that is a statement that I made as I was working through an issue with you and ultimately that was not my conclusion.

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So I would not regard that as being some sort of a statement on behalf of Novell, even a statement that I would have made by the end of the trial, that I would make today.

Q Mr. Jones, you are aware, generally, that in its answer Novell has acknowledged this claimed ownership of UNIX and UnixWare copyrights, correct?

A UNIX and UnixWare copyrights?

Q Correct.

A I am not aware of that.

Q Let me ask you if you agree with this statement from Novell's answer, quote, Novell admits that it has registered its claim to the UNIX and UnixWare copyrights enumerated in paragraph 14-G of this answer. Do you agree with that statement?

A I guess I would say I'm not -- I am not familiar with the statement, I am not familiar with the exhibits that are attached, and so it's just hard for me to agree with because I just don't have -- I'm not sitting here with the agreement reading it and seeing the exhibits. I'm not sure in that context how the term UnixWare is being used. In this questioning, I would just say that what the asset purchase agreement says in terms of copyright ownership is what -- we have attempted to be faithful to that. If there are versions of UnixWare that correspond to those things that were excluded from the asset purchase

2248

agreement as transferred assets, then that's all I've ever intended to identify. I think that's all Novell has ever intended to identify. If there is some confusion about product naming or versioning or something about that, I don't know. But I can tell you all Novell has ever intended to do was to assert ownership for those things that were excluded from the asset purchase agreement.

Q You don't have any reason to disbelieve that Novell made an accurate statement in its answer in this case, correct?

A No.

Q Wouldn't you agree, Mr. Jones, Novell has publicly claimed to own copyrights at issue in this trial, correct?

A Yes.

MR. NORMAND: No further questions, Your Honor.

MR. ACKER: Just a few questions, Your Honor.

REDIRECT EXAMINATION

BY MR. ACKER:

Q In your conversations in the fall of 2002 with Mr. McBride, he said to you he thought Novell could make more money if Novell participated with SCO in this licensing campaign?

A Generally.

Q Can you explain as best you can to the jurors what it

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was that Mr. McBride was conveying to you?

A All I understood -- all I understood Darl to be saying was that, you know, if Novell is entitled to royalties on these SVRX products, SCO is collecting those and sending those to Novell, and I think the -- I think basically what he was saying is that some of these SVRX customers might be moving to Linux. And so if SCO does something that stops them from moving from SVRX to Linux, then these revenues will stay up and thereby Novell would get more money. That's basically what I understood Darl to be saying.

Q So implicit in that statement that Novell could stand to make more money was that SCO's licensing campaign would prevent a migration from UNIX to Linux?

A That seemed to be the underlying assumption of what Darl was telling me.

Q Going back to your first conversation with Mr. McBride or the first several conversations, what is it that gave you the impression that Mr. McBride understood that the asset purchase agreement excluded the UNIX copyrights?

A He directly told me it did. I mean, he pointed me to the section of the agreement that excluded the copyrights.

MR. ACKER: That's all I have, Your Honor.

MR. NORMAND: Just a few questions.

THE COURT: Go ahead. //

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RECROSS-EXAMINATION

BY MR. NORMAND:

Q Mr. Jones, you understand that the language of the original asset purchase agreement that you and Mr. McBride were discussing in 2002 has been amended, correct?

A Correct. There's been at least two amendments to the agreement.

Q You understand in particular the issue of copyright addressed in the original APA, that language has been amended and is not the operative language anymore, correct?

A Yeah. Amendment 2 amended it, and that would be the operative language, as you put it.

Q Now on this issue of your discussions with Mr. McBride and Mr. Sontag, when you found an unsigned copy of Amendment No. 2, you didn't call SCO to tell them you had found an unsigned copy, did you?

A We did not.

Q You knew it was relevant to the issue you had been talking about with Mr. McBride and Mr. Sontag, correct?

A Yep.

Q You knew it went to the issue that Chris had sought to clarify in that side letter, correct?

A It related to it.

Q You didn't tell them about it, correct?

A That's correct.

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FURTHER REDIRECT EXAMINATION

BY MR. ACKER:

Q Mr. Jones, are you in the habit of sending unsigned documents to presidents of other companies?

A Definitely not.

MR. ACKER: Nothing else, Your Honor.

THE COURT: You realize you just took your --

MR. ACKER: I used it up, you're right. Thank you, Your Honor.

THE COURT: I have to mark you down.

May this witness be excused, counsel?

MR. NORMAND: Yes.

MR. ACKER: Yes, Your Honor.

THE COURT: Mr. Jones, that means you do not need to worry about being re-called. You may go about your business. But I do need to caution you to please not discuss your testimony with any other witness in this case or in the presence of any other witness or in any way communicate what the content of your testimony was. Thank you.

Mr. Acker.

MR. ACKER: I believe it's Mr. Singer's witness.

THE COURT: Mr. Singer.

MR. SINGER: Your Honor, at this time we call Jack Messman as an adverse witness.

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THE COURT: Ladies and gentlemen -- Mr. Acker, I want you to hear this to make certain I don't misrepresent anything. Mr. Messman, you may recall you heard previously a portion of his deposition testimony. Plaintiffs had hoped to have called him originally, but he was not available at the time that the plaintiffs originally wished to call him, and he therefore is appearing today as the final witness for the plaintiffs in their case in chief.

Go ahead, please, Mr. Acker.

JACK L. MESSMAN,

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: My name is Jack L. Messman. M-e-s-s-m-a-n.

THE COURT: Mr. Singer, I will remind you that we have about ten minutes until the normal break time, if you could try to keep that in mind, please.

MR. SINGER: I will look for an appropriate time.

THE COURT: Thank you.

DIRECT EXAMINATION

BY MR. SINGER:

Q Good morning, Mr. Messman. My name is Stuart Singer. I am one of the attorneys for The SCO Group. I think you'll

2253

recall that we met at your deposition taken several years ago in this case.

A Yes. Good to see you again.

Q Now the jury has had an opportunity to hear excerpts of that deposition earlier in the trial. We're going to discuss some areas the jury has not yet heard precise questions on. I would like to go back to the time of 5-28, the May 28th press release, SCO Exhibit 525. These documents will appear on the screen before you. I believe you are familiar with this press release?

A Yes.

Q Which you approved Novell issuing on May 28th, 2003, correct?

A Yes.

Q And at that time you understood that press release stated that Novell, not SCO, owned copyrights to the UNIX and UnixWare operating system, correct?

A Yes.

Q Why was your press release issued on May 28th, that specific day?

A We didn't pick any particular day. That was the day that we got the work done necessary to release it.

Q Are you aware Mr. McBride sent a letter to Novell that was dated May 12th?

2254

A Yes.

Q Did you believe it was important to respond to that letter?

A Yes.

Q Why did you wait 16 days from May 12th to May 28th?

A Well, we didn't want to react without thinking it through and understanding the implications of his letter to us.

Q Well, in terms of thinking it through, had you thoroughly read the asset purchase agreement before issuing this press release?

A I had glanced at it in this case, and I had been a part of the board in 1995 that approved the asset purchase agreement.

Q You had only glanced at it?

A Because I had read it after that board meeting.

Q Had you been informed prior to issuing the press release by Mr. LaSala that he had been turning the company upside down to find a signed copy of what we've referred to as Amendment No. 2?

A He told me that he had an unsigned copy called Amendment 2. I said until we found Amendment 2 signed, it didn't exist legally.

Q So at the time you approved the issuance of this press release on May 28th, you knew there was an unsigned copy and

2255

Novell hadn't found out whether or not that it had been executed, correct?

A That's correct.

Q Yet you believed you were ready on May 28th to send out the press release?

A Yes.

Q Now you were aware, since you were on the board in 1995, that the Wilson Sonsini firm represented Novell in that transaction, correct?

A Yes.

Q Did you or anyone at your direction make efforts to contact Wilson Sonsini to see if they had a signed copy of Amendment No. 2 before you issued this press release?

A I did not, but the people who reported to me were responsible for doing those sorts of things.

Q Did you direct them to do that?

A No.

Q Did you know if they did that?

A I don't know if they did that.

Q You weren't informed before May 28th when you sent out this press release that there was such a signed version of Amendment No. 2?

A That's correct.

Q Similarly, you never asked SCO about whether they had a signed copy of the second amendment? You never sent them

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your unsigned copy and said before we come out with a press release saying we own the UNIX copyrights, can you tell us if you happen to have a signed version of this? That didn't happen.

A That did not happen. I did not do that.

Q You didn't direct anyone else to do that?

A That's correct.

Q You could have sent this letter privately to SCO before you put it out as a press release, correct?

A I could have.

Q You didn't do that either?

A I did not.

Q Now you knew the press release would hurt SCO in saying that they didn't own these UNIX copyrights, right?

A I didn't know it would hurt them. I was putting out our side of the story.

Q You didn't think that putting out a press release saying that the core intellectual property, the copyrights to the UNIX operating system weren't owned by the company that is running that business would hurt them?

A I didn't know. I wasn't following the stock market. I only knew we owned the copyrights and the patents, and I was letting the outside world know that we owned the copyrights and the patents.

Q My question is simple, did you believe it would hurt

2257

them? Yes or no.

A I didn't know.

Q You didn't know. Now you wanted to get the press release as broadly as possible; is that correct?

A Yes.

Q And in a statement about copyright ownership -- let me be more precise. Did you believe that asserting that you owned these copyrights would hurt SCO's SCOsource licensing program?

A I didn't know because it was a new licensing program.

Q You didn't have the view that the reason you were putting this out was to basically convince people to not get a SCOsource license?

A I didn't know what SCOsource licensing was all about at that point. It was new.

Q It was announced in January of 2003; was it not?

A Yes, it was.

Q And wasn't that one of the reasons that you went public with this press release in May of 2003 is the SCOsource licensing program?

A It was not the reason.

Q That was not reason?

A No.

Q It had nothing to do with it?

2258

A It wasn't the reason why we did it.

Q Now in your May 28th letter you asserted that SCO had not proven to your satisfaction its case for a copyright infringement, correct?

A They hadn't proved anything to us. We believed there was no UNIX in Linux.

Q Now you could have made that point without also saying that we own the UNIX copyrights, correct?

A I could have.

Q Now you understood a claim of ownership to UNIX copyrights coming from the company, Novell, that had then sold the business to Santa Cruz would have special force in the outside world, correct?

A We owned the copyrights and we sold the rights to those copyrights to Santa Cruz Operation.

Q Mr. Messman, my question must have been unclear because that's not what I asked. I asked did you understand that a statement coming from the seller of the business, Novell, saying we still own the copyrights would have special force and effect in the outside world?

A I didn't know what the effect would be. I was trying to make sure the customers knew what the facts were.

Q So you didn't think that it would have more effect on listeners who heard Novell, the former owner of the business, saying we still own the copyrights than some other

2259

third party making that claim?

A Well, we were the only ones that could make that statement because we knew we owned the copyrights and the patents.

Q Now you understand the difference between getting out your side of the story and making a false statement?

A Sure.

Q Now what would have been your reaction if AT&T, after you had bought the UNIX business from them, had said we still own the UNIX copyrights?

A That's a hypothetical.

Q Yes, it is.

A I don't think I would have reacted to it.

Q You don't think it would have mattered to you?

A No. We had our documents and I would have probably had Joe LaSala, our general counsel, contact them.

Q Do you think, sir, that it would have been okay if AT&T said we still own the copyrights but we'll put in your side of the story, Mr. LaSala's statement perhaps out on a Web site at the same time so people can decide what they think? That would have been perfectly okay with you?

A I don't know what they would have done.

Q My question is would that have been okay with you?

A Well, it wasn't the facts. We owned the copyrights and the patents. We bought them from them in 19 -- whenever it

2260

was we bought USL, UNIX System Laboratories, so they would not have had the right to say that.

Q They wouldn't have had the right to say it because it wouldn't have been true, correct?

A It wouldn't have been true.

Q Do you think that your interest in supporting Linux would justify Novell telling a 2003 and 2004 falsehood?

A I don't think we did tell a falsehood.

Q That wasn't my question.

A I'm sorry. Would you repeat it?

Q Yes, sir. Do you think your interest in supporting Linux justifies Novell telling a falsehood in 2003 or 2004?

A No, I don't.

Q Now after the May 28th press release, there was a June 6th press release. That's SCO Exhibit 97. Would you take a look at that, please. Do you recognize this as a press release which you approved, eight days later?

A Yes.

Q And do you recognize that you stated in this press release that Amendment No. 2 appears to supports SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996, correct?

A I see that, yes, sir.

2261

Q Now your general counsel, Mr. LaSala, worked with you on this press release, correct?

A It was his press release. I worked with him on it.

Q Fair enough. You would expect your general counsel not to approve a press release involving the interpretation of a legal document unless he was comfortable that he had it right, correct?

A I think he's saying that he hadn't done all the work yet and therefore on the surface it appeared --

Q Would you answer my question, sir?

A Sure. Would you repeat it?

Q Yes. My question was would you expect your general counsel to write a press release interpreting a legal document and to do so in a way that was correct?

A Yes, I would.

Q Now were you aware that Mr. LaSala had been looking at an unsigned version of Amendment No. 2 for several weeks before this press release came out and even before the May 28th press release came out?

A I was aware he had an unsigned copy.

Q So there was plenty opportunity over a period of weeks to try to interpret the document and decide what it meant, correct?

2262

A I don't know whether he had -- how much time he had. I can't remember the amount of time it was in his possession. And as far as I was concerned, when he brought it up with me, it wasn't part of the document until I saw a signed copy.

Q Now the statement that Novell says the amendment appears to support SCO's claims that ownership of certain copyrights to UNIX did transfer to SCO in 1996, you approved that at the time this was issued, correct?

A Yes.

Q And would you agree that after June 6th Novell engaged in the process of trying to back away from that statement?

A I don't think we were trying to back away from it. We were clarifying what appears in it.

Q Well, are you aware that on August 4th, 2003 there was a letter from Mr. LaSala to SCO that was different than what this said?

A I recall that there was a letter that said that we had done our investigation work and we now believe there is no merit to your claims that the copyrights and the patents transferred.

Q Isn't it true that between the time of June 6th when this was issued and August 4th when that letter was sent nothing had changed, there had been no new information that had come to light?

2263

A I don't know what had come to light during that period of time.

Q Do you recall being asked about that in your deposition?

A Being asked about what, sir?

Q Whether anything different had come to light between June 6th, 2003 and the August 4, 2003 letter?

A I don't recall what I said at that point in time.

Q Are you aware of anything that occurred differently between June the 6th and August the 4th?

A No, I can't recall. There might have been something that occurred, but I don't recall it.

Q Now did you authorize Novell to go public with the August 4th letter if they had wanted to do so?

A Could you refresh my memory of what the August 4th letter is?

Q The August 4th letter, Mr. LaSala's letter to Mr. McBride or Mr. Tibbitts which said that we believe ownership of the UNIX copyrights still rests with Novell. That was not published, correct?

A Correct.

MR. SINGER: I think this might be a good time for us to have a break, Your Honor. We will move on to other subjects.

THE COURT: All right. We'll take a 15-minute

2264

break.

(Jury excused)

THE COURT: Mr. Brennan, what is your intent as far as a Rule 50 motion?

MR. BRENNAN: We intend to file one.

In terms of timing, Your Honor?

THE COURT: Timing.

MR. BRENNAN: If I could confer with Mr. Jacobs, I can give you a prompt answer.

Your Honor, rather than me be a mouthpiece, I think Mr. Jacobs --

THE COURT: Mr. Jacobs, that's a good idea.

MR. JACOBS: Thank you, Your Honor.

We obviously intend to file a Rule 50 motion before the case goes to the jury and, if necessary, after the case goes to the jury. In terms of the close of plaintiff's case a Rule 50 motion, we're aiming for this evening, Your Honor.

THE COURT: All right.

MR. SINGER: Well, we can only imagine what they plan to file.

THE COURT: Yes, you probably can.

MR. BRENNAN: I can confirm it will be interesting.

THE COURT: All right. That helps the Court a

2265

little bit. Normally, at the end of the plaintiff's last witness, I will ask do you now rest, and that then will trigger you saying, Your Honor we want to reserve the right, et cetera, et cetera. I'm going to assume that has now been done so we don't have to interrupt as soon as we're through with Mr. Messman. Is that agreeable, counsel?

MR. SINGER: That's fine with us.

MR. JACOBS: Thank you, Your Honor.

THE COURT: Thank you.

(Recess)

2266

(Recess)

THE COURT: Ready, counsel?

MR. SINGER: There was one item we wanted to bring up before the jury returns and before we formally rest our case, and that relates to the introduction of just these two figures from the 10-K that relate to the net worth of Novell, which come in for punitive damages.

MR. NORMAND: I misunderstood Your Honor's directive, after speaking with my colleagues, and I thought your point was when you said let's see how if goes, that I could see if Mr. Jones's direct would allow me to use the document with him. Apparently that was not how the rest of the members of my team interpreted what Your Honor said, so I didn't make an effort to use it with him because I thought the scope of his direct --

MR. BRENNAN: Your Honor, on that subject I don't think there was a misunderstanding and there was no attempt made to use it. I think they have run out of the right now to try to do that with Mr. Jones.

MR. NORMAND: I just actually saw Mr. Jones in the hall, so if we are going to get to the point of the silliness of calling Mr. Jones back or asking Mr. Russell to stand up to answer four or five questions, we can do that, but I don't know on what grounds Novell is going to dispute the substance of this 10-K.

2267

THE COURT: I would agree that perhaps you misunderstood, but the Court's intention was that you be allowed to make the offer and a lay foundation, then there could have been an objection, but if you misunderstood it is the Court's problem and I want you to be able to solve it.

So we can either have Mr. Jones stay and bring him back, or if you want to have another witness called that can accomplish the same thing, whatever is most efficient.

MR. BRENNAN: Your Honor, just as were considering the point, there is an issue regarding Mr. Jones's examination by Mr. Normand. The Court may recall that during Mr. Normand's cross-examination of Mr. Jones he made an express, explicit reference to previous trial testimony, not deposition testimony, trial testimony in the context of asking Mr. Jones about copyright ownership issues.

Novell believes that that has left the impression in the minds of the jury that there was a previous trial related to copyright ownership issues, and given the limitations we have been faced with explaining the outcome of these various matters, perhaps a suggestion in the jury's mind that that issue in a previous trial was decided differently than now in this proceeding.

This, again, is a case where in our view plaintiff's counsel through its own questioning has opened the door and has created an issue of confusion. What we

2268

would ask the Court to do to resolve that point of confusion, is to instruct the jury that there was in fact a previous trial between Novell and SCO, and not on the issue of ownership but others, that a judgment was entered in Novell's favor and that that wasn't reversed by the Tenth Circuit. Otherwise, the jury is left to wonder about all of this by virtue of the way SCO's attorneys conducted the examination.

I would just note as well, Your Honor, that it is my understanding that there had been a previous agreement that if there was to be any reference to previous testimony, that it would be phrased in that terminology and not trial testimony. That agreement was not observed.

THE COURT: Go ahead, Mr. Normand.

MR. NORMAND: Well, I can speak to the issue or Your Honor can speak to it first.

THE COURT: The Court's recollection is that the questions asked about prior testimony, and it was not prior trial testimony, and it was Mr. Jones who raised the issue about it being trial testimony. That was concerning to the Court, but he then went on with a broad explanation about how this was at the end of the trial and in trying to work through something at the trial and so on and so forth.

I don't think it can be laid at the feet of Mr. Normand, when he asked a question about in your prior

2269

testimony is this not what you said?

MR. BRENNAN: Would the Court view it differently if, in fact, the question that referenced trial was in the question rather than the answer?

MR. NORMAND: Your Honor, my recollection is as yours, that Mr. Jones raised it. I can't say that I remember chapter and verse how the question was phrased. Mr. Acker asked me where the testimony came from and I told him it was from trial, and Mr. Jones may have heard me speak with Mr. Acker.

I took care not to ask Mr. Jones any substantive questions, after his long answer and explanation about the trial, I didn't ask him anything about the trial. I was trying to stay away from that issue. One, I don't think the jury picked up on this issue that Mr. Brennan has raised. Two, the solution proposed is grossly overbroad. At most, you should tell the jury there was a prior trial and that it was on different issues than are at issues here, but I don't think the jury is drawing a big distinction between the trial and the deposition testimony.

MR. BRENNAN: Your Honor, it seems to me that speculation by SCO's counsel about what the jury is drawing or not is always drawn in their favor. SCO always puts it in the position of, well, this is what I think the jury would have done or wouldn't have done and it is favorable to

2270

them.

I sit on the side of a defendant who is being accused of slandering title and damages have been sought of $250 million. I believe that we have every right and entitlement to make it clear to the jury what really has happened, when SCO's attorneys have invited the problem.

THE COURT: I am not sure that they did. That is my problem. Even if he had simply made reference to trial testimony, I don't believe that by itself would have raised the issue. I believe it was Mr. Jones's explanation in great detail about what happened at the trial that may have raised any type of issue at all.

I think in fairness and to avoid the issue, the Court will instruct the jury when they return that there was reference in Mr. Jones's testimony to a prior trial, but understand that it is not the same trial involving the issues in this case and just leave it at that.

MR. BRENNAN: Thank you, Your Honor.

Back to the question of how we ought to proceed in light of the misunderstanding regarding how to seek to introduce information from Mr. Jones, may I confer with my colleagues for one minute?

THE COURT: Go ahead.

(Time lapse)

MR. BRENNAN: Your Honor, our suggestion in light

2271

of the apparent misunderstanding, is that the parties stipulate to the admission of -- I believe it is form 8-K.

Is that correct? 10-K.

MR. NORMAND: 10-K.

MR. BRENNAN: That it simply be admitted into evidence without further discussion or explanation.

MR. NORMAND: If that has built into it that it can be addressed at closing, then we would --

THE COURT: If it is an admitted exhibit, then it certainly can be referred to at closing.

MR. BRENNAN: With that understanding, we would just stipulate to the admission of the 10-K.

THE COURT: What is it marked as?

MR. NORMAND: It is marked as SCO Exhibit 552, Your Honor.

MR. SINGER: It will be redacted to just reflect the information on I think the first page with respect to the market capitalization of Novell, and on page 26 with respect to the stockholder equity of Novell.

MR. BRENNAN: Our understanding, of course, is that the admission of that redacted 10-K would be subject to our reservation of all rights and arguments relative to the entitlement to punitive damages and otherwise, Your Honor.

THE COURT: Certainly.

Exhibit 552 as redacted, and in the form and way

2272

that Mr. Normand just represented it would be redacted, will be admitted.

(Plaintiff's Exhibit 552 was received into evidence.)

MR. BRENNAN: Thank you, Your Honor.

THE COURT: Ms. Malley, please bring the jury in.

(WHEREUPON, the jury enters the proceedings.)

THE COURT: Ladies and gentlemen, before we continue with the examination of Mr. Messman, I do need to instruct you on one thing. During the examination of Mr. Jones there was a reference to a prior trial. You may remember that there was an exchange between Mr. Normand and Mr. Jones about Mr. Jones's prior testimony in another trial.

That trial did not have anything to with the issues that you are going to be asked to address in this trial, so you should not pay any attention unduly to the fact that there was a prior trial, nor draw any conclusions about what that trial was about.

Go ahead, Mr. Singer.

MR. SINGER: Thank you, Your Honor.

BY MR. SINGER

Q. Mr. Messman, before the break I was asking you about the August 4, 2003 letter. Do you recall that question?

2273

A. Yes.

Q. I was asking you if there was any new information which came to light between the June 6 press release and the August 4th letter. Do you recall that?

A. I recall the question.

Q. Was there any such additional information that came to light between June 6 and August 4?

A. I don't recall.

Q. Would it be fair to say that you're not aware of any such new information?

A. It could be that I wasn't aware of it, but I don't recall that I was not aware of it.

Q. Well, is it fair to say that you don't think there were any new materials?

A. If I thought there were new materials, I would have said I recalled them.

Q. As far as you know, there wasn't anything different that Novell had on August 4th that it didn't on June the 6th?

A. I don't recall.

Q. And yet the company reached a completely different position in its August 4th letter than in the one on June the 6th, correct?

MR. ACKER: Your Honor, that is argumentative and

2274

it misstates his testimony.

THE COURT: Sustained.

MR. SINGER: I will rephrase the question.

BY MR. SINGER

Q. Did you after August the 4th authorize Novell to file copyright registrations for UNIX copyrights in September and October of 2003?

A. Yes.

Q. Were you aware that those copyrights covered the same versions of UNIX that AT&T had obtained copyright registrations on and which were transferred -- the copyright registrations were left with Santa Cruz back in 1995?

A. I was not aware that they were left with Santa Cruz. I was under the impression that they were still registered in AT&T's name.

Q. Did you have an understanding that those were the same copyrights which were being referred to in your June the 6th letter?

A. Yes, they were. It was my opinion and I was of the opinion that they were the same.

Q. Did you have an understanding in September and October of 2003 that SCO had at that time copyright registrations in its name for those copyrights?

A. I was informed that SCO had filed registrations on top of the AT&T registrations.

2275

Q. Now, in October and November -- September, October and November you didn't go public with respect to any of those registrations, correct?

A. They were a matter of public record. If anybody wanted to go get them they are at the U.S. patent office.

Q. But you didn't issue a press release about them, correct?

A. Correct.

Q. You didn't publish your August 4th letter either, did you?

A. I would have to see the letter to remember.

Q. It is Exhibit 105. This letter was not published as a press release, correct?

MR. ACKER: Objection, vague as to time.

BY MR. SINGER

Q. At the time, in August of 2003.

A. I don't think it was.

Q. Now, did you approve a press release that was issued on December 22nd, 2003, which is SCO Exhibit 517?

A. I'm familiar with that press release. I was involved with all press releases, so I'm sure I approved it.

Q. And you understood that this press release stated that Novell believes that it owns the copyrights in UNIX and has applied for and received copyright registrations pertaining

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to UNIX consistent with that position; is that correct?

A. Yes.

Q. Now, why was December 22nd, 2003 chosen as the date to inform the public about copyright registrations that you had obtained in August or September or October?

A. I don't know.

Q. Well, I would like to show you a demonstrative exhibit, which is a calendar of 2003. I would like you to assume for the moment that we have accurately indicated the dates of SCO's earnings releases for the calendar year 2003 as having been February 26, May 28th, August 14th and December 22nd. Mr. Messman, as former chairman of a public company you understand that the earnings release dates are important dates for a public company, correct?

A. Yes.

Q. Now, May 28th, we have already covered was the date that Novell issued its first public claimed ownership of the UNIX copyrights, correct?

A. That is correct.

Q. Is it your understanding that that was a coincidence, that that also happened to be the date that SCO announced its earnings for the preceding quarter?

A. It was coincidence.

Q. December 22nd, 2003, when SCO issued its earnings for the year to date period before that, also happened to be the

2277

date that you issued a press release pertaining to the copyright registrations and reasserting ownership of UNIX copyrights, correct?

A. That is the date we released this press release, correct.

Q. Do you have an understanding as to why that precise date was chosen?

A. Mr. LaSala came to me and asked me about putting the information that the public didn't have on our Web site and I approved doing it. I did not approve the date. I assumed he was going to do it as soon as he could.

Q. So you don't have any understanding of why that specific date was chosen?

A. I do not.

Q. Do you believe it is just a coincidence that that also was the date that SCO's earnings were released?

A. I think it is coincidence.

Q. Now, there are only two public statements by Novell in 2003 asserting copyright ownership, correct, the one in May and the one in December? May 28th and December 22nd, correct?

A. There were a number of letters. I don't know which ones were public, but there were a number of letters between us and SCO where we asserted the ownership of copyrights and patents.

2278

Q. I think my question -- maybe I didn't phrase it clearly -- but was about public assertions like in press releases. Those were only on May 28 and December 22nd, correct?

A. I would have to see all of the press releases to answer that question. I can't recall.

Q. Are you aware of any others?

A. Not off the top of my head.

Q. So assuming that those are the only two public statements by Novell in calendar year 2003 asserting copyright ownership, and if my assumption is right that those are the dates in which you have SCO earnings releases, both of those fell on dates, two of the four dates that SCO released earnings for the whole calender year and that was a coincidence, correct?

A. Assuming that those were the only two announcements that we made, that is a coincidence.

Q. Mr. Messman, were you following SCO's stock at all in 2003?

A. I had a lot of things to do and I was not following SCO's stock.

Q. In fact, weren't you aware of the fact that in May of 2003 SCO's stock was going up and down?

A. I knew that the volume of press releases from SCO was going up and down. I wasn't following their stock.

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Q. I would like to ask you to take a look at what is clip eight of your deposition.

MR. SINGER: Mr. Calvin --

MR. ACKER: Can I have the page and line?

MR. SINGER: This is page 56, line 20, to 57, line 3.

Mr. Calvin, would you play that clip.

(WHEREUPON, the following deposition clip was played.)

Q. Were you subsequently aware that SCO's stock price declined 30 percent in the immediate aftermath of your press release?

A. SCO's stock price was going up and down during that period of time based on what was happening and what Darl was saying in the marketplace. I can't recall what it did on any given day when we were making these.

BY MR. SINGER

Q. Do you agree that that was your testimony, Mr. Messman?

A. Yes.

Q. You agree that you were aware that SCO's stock price was going up and down during that period of time in 2003?

A. I was aware, but I was not following it.

Q. In January of 2004 did you approve the announcement of a Linux indemnification program?

A. Yes.

2280

Q. I would like you to look at SCO Exhibit 756. Was this a press release on January 13, 2004 announcing that indemnification program?

A. Yes.

Q. And in connection with this release did you state in the statement that says Novell's unique --

MR. SINGER: Let me first move Exhibit 756 into evidence.

MR. ACKER: It is already in evidence.

BY MR. SINGER

Q. If we turn to Novell's unique legal rights, and we go down a little further on the page --

MR. SINGER: Mr. Calvin, expand that.

BY MR. SINGER

Q. You stated at that time that Novell had rights which include, and if we turn to the next page, the third point was as previously confirmed by Novell, copyright registrations on UNIX SVRX releases consistent with Novell's position that it retained ownership of these copyrights. You approved that?

A. Yes.

Q. Now, are you aware, Mr. Messman, that Chris Stone, who at the time was the number two man in the company, your vice chairman, made a statement at an open source development conference in March 2004 regarding the ownership of UNIX?

2281

A. I am aware that Chris made several presentations to several trade groups, but I am not aware of the particular one you're talking about.

Q. Are you aware of a conference where Mr. Stone stood up and said publicly that we still own UNIX, referring to Novell still owning UNIX?

A. Yes. I mean, I think that is true so it wouldn't bother me that he said that.

Q. You think it is a true statement that Novell still owns UNIX?

A. Yes.

Q. How long after that statement did you wait before asking Mr. Stone to leave Novell?

A. We sent Mr. Stone away to Harvard for I think it was a nine to 12 week program. He was gone for a period of time. In may have been May or June before he left the company.

Q. Was Mr. Stone asked to leave Novell?

A. No.

Q. Thank you.

THE COURT: Mr. Acker.

MR. ACKER: Just a very few questions, Your Honor.

CROSS EXAMINATION

BY MR. ACKER

Q. Mr. Messman, take a step back a little bit and tell the ladies and gentlemen of the jury about your undergraduate

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and graduate degrees.

A. I have a degree in chemical engineering from the University of Delaware in 1962, and a degree in business from the Harvard Business School in 1968.

Q. Were you at Novell in the beginning of the company?

A. Yes.

Q. Can you explain that for the jury, please.

A. Well, I had been running a consumer products company through most of the seventies and I joined Safeguard Scientifics -- I believe it was in the 1980s, late '80, and Safeguard had made a significant investment in a company called Novell Data Systems, Inc. It was in trouble. I was asked to come out to Provo and figure out what to do. I did that. After an analysis that took maybe three or four weeks, I called back to the head office and said I think we ought to shut it down. They instructed me to do that. It was not just as if we could just turn the key overnight and shut the thing down. We decided it would be better if we did an orderly liquidation, because we had lots of spare parts that could be used by other manufacturers of the equipment. We started to try to sell the parts to various people in the industry. In the course of terminating various people I ran across three young fellows from Brigham Young University who

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were programmers on contract to Novell. To make a long story short, they had a product that I recognized the potential of. I decided, and I convinced Safeguard, who wanted to get out of the business, I convinced them to recapitalize the company, and we changed the name from Novell Data Systems to Novell, Inc. I was the C.E.O. My job was to get this business off the ground with a software strategy, and ultimately to hire my replacement. I hired Ray Norda as my replacement, and Mr. Norda gets all the credit for having built the company to what it is today.

Q. What was the product that the three young programmers from BYU had?

A. It was NetWare. It was a piece of software that allowed computers to interact with one another at the same time. It was something that hadn't been done at that point in time.

Q. After Mr. Yarrow became the C.E.O., did you remain on the Novell board?

A. Mr. Norda.

Q. I'm sorry. After Mr. Norda became C.E.O., did you remain on the Novell board?

A. I went off the board for I think about a year, because I left Safeguard and went to work in the cable business in New York City. When they got ready to go public I rejoined the board. Other than a period of maybe a year, I have been

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associated with Novell since 1980.

Q. Were you on the board in September of 1995?

A. I was.

Q. Let me show you what we have admitted into evidence as Z-3. Do you recognize that as the minutes of the Novell board of directors meeting on Monday, September 18, 1995?

A. I do.

Q. Were you present for that telephonic board meeting?

A. I was.

Q. Was there a discussion at that board meeting regarding the asset purchase agreement?

A. Yes.

Q. Is this the meeting at which that asset purchase agreement was approved?

A. Yes.

Q. Was there a discussion at the meeting about whether copyrights would be included or excluded from that sale?

A. It was -- I don't know whether to say mandatory or not, but it was important that they were not included, because we felt SCO was a company that was a little bit of a fledgling company, and we were worried that this revenue stream that we were getting from the UNIX licenses would be at risk, and we insisted that we keep the copyrights and patents so that if anything happened to SCO that we would be able to get

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full control of the revenue stream.

Q. Was the fact that the copyrights were to be excluded from the deal, was that discussed at the board meeting on September the 18th, 1995?

A. Absolutely. That was the key part of the deal that convinced the board to do that deal.

Q. Let me fast forward now and ask you a few questions about some documents and dates. On May 28, 2003 Novell issued a press release claiming ownership of the UNIX copyrights.

A. Yes.

Q. Tell the ladies and gentlemen of the jury why Novell did that.

A. Well, I think the marketplace both for UNIX and for Linux was being bombarded by accusations that Mr. McBride was making that were in our opinion untrue. He was claiming that it was UNIX and Linux -- he was claiming that all Linux users, end users, not just the companies but the end users, probably should have to pay a license to use Linux. It is an open source community which develops Linux, which is all about not paying any licenses. It is free software. This was a very confusing time and a tumultuous time. UNIX customers and UNIX licensees were calling to ask what is going on with my license? Linux customers were delaying their orders until they figured out what was going on with

2286

regard to having to pay a royalty.

Q. Was that press release put out to protect Novell's business interests or to harm SCO?

A. We did it to protect Novell's interests and to protect our shareholders and to protect the revenue stream.

Q. How many conversations have you had with Mr. McBride in your life?

A. I have had one telephone conversation with him and one meeting with him.

Q. The telephone conversation, was that on the evening of June the 5th?

A. It was.

Q. Can you describe that conversation for the jury, please.

A. Well, it was late at night because everybody in my office had gone home. I was still there. The call came in and, therefore, I answered it. I normally don't answer the calls that come in directly. I answered it and it was Mr. McBride. He says, have you got it? I said, what are you talking about? He said, well, amendment two. I said, no, I don't have amendment two. He made a few comments, and I don't recall all of the conversation, and we hung up. Shortly after that a fax copy came and somebody in our office that was still around brought it into my office and showed it to me. Mr. McBride

2287

called again and said, now do you have it? I said obviously I did have it. He then said it took him three to four months to find it himself. I said we hadn't had it until you sent it. He asked me what did I think of it. I said, well, I have not had a chance to review it and contemplate what it means. He said, have you talked to I.B.M. about this? I said I wouldn't have talked to I.B.M. if I just got it, but I talk to I.B.M. about a lot of things. He was quite agitated and excited. I didn't know him well enough to say whether he was mad, but we hung up on the phone call and I proceeded to then talk to my general counsel the next morning.

Q. At any point during that conversation did you say words that in any manner conveyed to Mr. McBride that you believed that SCO owned the UNIX copyrights?

A. Absolutely not.

Q. Any doubt in your mind about that?

A. None.

Q. Another press release was put out on December the 22nd of 2003. Can you tell the ladies and gentlemen of the jury why Novell did that?

A. Well, again, it was a one-sided conversation that Mr. McBride was having with the marketplace and at trade shows and at press conferences and in press releases and things of

2288

that nature. We thought he was wrong. The Linux community, which is a very open community, wanted to know what was going on. We felt that the best way to tell our side of the story was not to interpret the documents and make press releases, that we ought to just put the information out on our Web site so that everybody could see it and make their own judgments.

Q. One final topic. At some point in the fall of 2003 Novell began the acquisition of a Linux company SUSE Linux?

A. Yes.

Q. Can you tell the ladies and gentlemen of the jury why it was that Novell sought to acquire SUSE Linux?

A. Well, I think that there was a great deal of concern about what was going to happen to Linux if Mr. McBride's accusations were true. We were looking for a way to solve that problem, and one of the ways was for us to acquire a Linux operating system company. I think it was late September or early October when we were made aware that SUSE Linux was available for sale. We got the brochures from the investment bankers and we read them, and we thought that there was a possibility that we would be interested, so we started a process of making bids. We won the bid, which allowed us to then negotiate exclusively with the sellers. The sellers were venture

2289

capitalists, not the company itself. Venture capitalists owned the company and they were interested in maximizing the price that they got. We did our due diligence and then closed the deal I think in the first or second week of January of 2004.

Q. In connection with that deal, did I.B.M. subsequently purchase $50 million worth of Novell stock?

A. They did, at my suggestion. I was worried that we were paying $210 million for a company that had very little revenues but had great technology. I was trying to figure out how to get comfortable with that risk. We decided that we would call some of the bigger players in the industry to figure out whether they would join us in some way in supporting us. I called Bill Zeigler, who was the executive at I.B.M. that I was dealing with on a regular basis, and I asked him if he would be willing to give us some comfort that we were doing the right thing. He asked me, well, what form did I think the comfort would come in? I didn't think we wanted him to buy a piece of the SUSE Linux deal, because then we wouldn't own 100 percent, so I suggest an investment in Novell. So he said, well, how much do you think we ought to invest? Well, it has to be something that the marketplace would think would be significant. He said, well, what is

2290

that number? I said, I think it is $50 million. He said he would consider it. I think it was a week or two later, and I can't recall exactly the time frame, but he came back and said they would do it. We did not close that transaction until after -- I think it was in March or early April, so the SUSE Linux acquisition closed in January, and they made their investment in late March or early April.

Q. 2004?

A. 2004.

Q. Was there any relationship at all to the events involving SCO in 2002 and 2003 and I.B.M.'s investment in Novell regarding SUSE Linux?

A. There is no connection.

MR. ACKER: That's all that I have, Your Honor.

THE COURT: Mr. Singer.

REDIRECT EXAMINATION

BY MR. SINGER

Q. Mr. Messman, I would like you to take a look at Exhibit 754. Do you recognize this to be a memorandum that Mr. Bradford sent to you and other members of the Novell board of directors on September 15, 1995, three days before the board meeting that you have testified about?

A. I don't remember it, but I'm sure that I got it if it was sent to the board of directors. I was a director. I am

2291

reading it now.

Q. Why don't you take a look at it. You can see on the first page that it says there is certain information pertaining to SCO which is being included, including item E, a term sheet for the proposed transaction. Do you see that?

A. Yes, I do.

Q. Would you turn to the term sheet.

MR. SINGER: Mr. Calvin, would you blow up the first two items, what Novell transfers and what Novell retains.

BY MR. SINGER

Q. The term sheet that you received right before the board meeting from the general counsel, Mr. Bradford, said that Novell transfers to SCO UNIX technology assets and UnixWare technology assets, correct?

A. I see that.

Q. And it says Novell retains all patents, that it will have a license back to UNIX and UnixWare for internal use and resale in bundled products, and Tuxedo and other miscellaneous unrelated technology. Do you see that?

A. I see that.

Q. Do you see anywhere on that list of what Novell retains that word copyrights?

2292

A. Not on this list.

Q. This was the term sheet that accompanied a memorandum sent by the general counsel to the board of directors in advance of the meeting, correct?

A. Yes, sir.

Q. Now, let's take a look at the board minutes which are Exhibit Z-3.

MR. SINGER: Mr. Calvin, can you expand the first page of the minutes where it says proposed sale of UnixWare business and equity investment in SCO?

BY MR. SINGER

Q. Do you understand that this summarizes the discussion of what was being discussed by the board in connection with that transaction?

A. Yes.

Q. Do you see where it says Mr. Bradford and Mr. Frankenberg first confirmed that the directors had received the materials on several transactions and then there is a summary of the discussion. That discussion then continues, and I would like you to read these three paragraphs, and I am going to ask you to read the first paragraph on the next page which is a continuation of this. So you have my question in mind, my question is going to be, do you see any reference in this summary of the discussion at the board meeting to copyrights?

2293

A. Not in the first three paragraphs.

Q. Look and see if there is any reference to that in the fourth paragraph.

A. No, there is no reference there.

Q. The only reference is in the text of the resolution, which then follows.

MR. SINGER: Mr. Calvin, blow up where it says resolved.

BY MR. SINGER

Q. After the resolution there is a summary which says that Novell will transfer to SCO its UNIX and UnixWare technology assets --

A. Where are you, Mr. Singer?

Q. This is on the resolution. It is highlighted on the screen. Do you see that?

A. Yes.

Q. The only reference to copyrights is then in the third paragraph under the word resolved, where it says Novell will retain all of its patents, copyrights and trademarks, correct?

A. Yes.

Q. It also goes on to say that there would be a worldwide license back to UNIX and UnixWare for internal use and resale in bundled products, correct?

2294

A. Yes.

Q. And that would be a license back of the technology being sold, correct?

A. Of the technology being sold, right.

Q. One of the copyrights that was not being transferred was NetWare copyrights, correct?

A. Yes.

Q. Now, it is your testimony that you have a specific recollection of the copyright issue being discussed even though it is not captured in the discussion summary in the board of director minutes, correct?

A. Yes. It is the prerogative of boards to make decisions based on discussions that take place.

Q. Even though it was not mentioned as something being retained in a term sheet that was provided to the board in advance of this meeting?

A. Yes. Terms change as the board discusses them.

Q. Is it your testimony that the transaction changed from Friday the 15th of September to when the board met to consider this on the 18th of September?

A. All I can tell you is that we were very concerned about any transactions with Santa Cruz Operation, which I have characterized as a fledgling corporation, and we were worried that we were turning over this very valuable stream of royalties to a company that may not make it, so we

2295

retained the copyrights and patents.

Q. You have a distinct recollection in now 2010, that at this board meeting that was 15 years ago, that the board was told the copyrights were not being sold, correct?

A. It was a point of discussion at the board meeting and that is how we resolved it as this resolution shows.

Q. Do you recall anything else that Mr. Bradford said with respect to the assets being told and not sold, leaving aside what you have just seen in the minutes, do you recall anything else except the copyrights and patents not being sold?

A. Well, that was the most important from my point of view and I remember that, but there probably were other things that I don't remember.

Q. Isn't it true that at least as of the time of your deposition in 2007 that you couldn't recall anything else that Mr. Bradford said with respect to the assets being sold or not sold other than your recollection about copyrights and patents?

A. If my earlier deposition said that it is probably true because my memory is -- I'm 70 years old and my memory is getting worse.

Q. Let's take a look at clip two, page 27, 19 to 28, 03, to see if that is in fact what you said.

MR. ACKER: Your Honor, he just confirmed the

2296

deposition testimony. I don't know what the purpose is of playing the clip.

THE COURT: Unless there is something contrary to what he testified to in the deposition testimony, I don't think it would appropriate for you to show it.

BY MR. SINGER

Q. As you sit here today, Mr. Messman, you agree that at the time of your deposition the only thing that you recall Mr. Bradford saying was this recollection that you have regarding the copyrights and patents?

A. Yes, because it was the most important thing covered.

Q. With respect to the press release that was issued after the transaction, I would like you to look at SCO Exhibit 526. This was a press release issued September 20, 2005. I am sorry. 1995. If we scroll down, why don't we scroll down a little bit further for a moment. Do you see that it says Santa Cruz Operation and Novell today announced a definitive agreement for SCO to purchase the UNIX business from Novell? Do you see that?

A. I see that.

Q. Do you see that under the agreement Novell will receive approximately 6.1 million shares of SCO common stock? Then if we go down to the next page, do you see that there is a quote from Robert Frankenberg, chairman and C.E.O. of

2297

Novell? Do you see that?

A. Yes.

Q. Do you have any reason to believe that this was not the approved joint press release by Novell and SCO after the announcement of the transaction?

A. I don't think it is a joint press release.

Q. Well, you wouldn't quarrel with Mr. Frankenberg's view on that, since he was the chairman, would you?

MR. ACKER: Your Honor, I just object if he is referring to the testimony of another witness in the trial. I don't think --

MR. SINGER: I don't think I expressly referred to testimony.

MR. ACKER: I don't think Mr. Frankenberg is quoted, Mr. Frankenberg saying that this is a joint press release and --

MR. SINGER: Now it is Mr. Acker who is referring to the testimony of witnesses.

MR. ACKER: He needs to ask this witness's knowledge. Ask him if he thinks this is a joint press release. That is the question.

THE COURT: It is not appropriate for you to be asking this witness to comment on the testimony of another witness. If you can elicit testimony that would not do

2298

that, please.

BY MR. SINGER

Q. Do you think Mr. Frankenberg would be in a position to say, since he was chairman and C.E.O. of Novell at the time, whether this was an approved press release on behalf of Novell as well as Santa Cruz?

A. He was in a position to know what the deal was.

Q. Do you see in the next paragraph it says according to the terms of the agreement SCO will acquire Novell's UnixWare business and UNIX intellectual property, correct?

A. I see that.

Q. Now, I would like to turn to the issue that you discussed in cross-examination about the timing of I.B.M.'s investment in Novell. You referred to that as March and April of 2004, correct?

A. I think that is when it closed.

Q. But, in fact, the commitment of I.B.M. to invest $50 million was made in November of 2003, correct?

A. I think we made an announcement about that. Whenever that was is when it took place.

Q. What is you best recollection?

A. I thought it was sometime in December, but you could be right that it was earlier.

Q. Okay. During that same period of time, the fall of 2003, are you aware of whether or not Novell took action to

2299

waive SCO's legal claims against I.B.M.?

A. Yes, we did.

Q. In fact, you did that on June 12th and in October and then again in February of 2004, correct?

A. I can't recall the February one, but I think the first two are correct.

Q. In the middle of that process is when I.B.M. made a $50 million investment in Novell?

A. I think it is coincidental. The two are unconnected.

Q. In fact, you didn't need the $50 million in order to purchase SUSE Linux because you had $750 million in cash on your balance sheet at the time?

A. That is correct. We didn't need the money, but we needed their commitment to support us in the marketplace.

Q. It is just a coincidence that these things all happened at the same time?

A. They didn't happen at the same time. The waiver of the patents and the copyright issues and the investment by I.B.M. were at different times of the year.

Q. Well, are you aware of whether or not I.B.M. asked Novell in June of 2003 to exercise its waiver rights at that time?

A. I am not aware of that.

MR. SINGER: Thank you.

THE COURT: Mr. Acker?

2300

MR. ACKER: I don't have anything else, Your Honor.

THE COURT: Counsel, may this witness be excused?

MR. SINGER: Yes.

THE COURT: Mr. Acker?

MR. ACKER: Yes. Thank you.

THE COURT: Mr. Messman, you do not need to worry about being re-called. I would caution you, however, to please not discuss your testimony with any other witnesses in this case or in the presence of any other witness, or communicate to anyone who will be a witness the nature of your testimony in any way.

THE WITNESS: When can I find out what happens?

THE COURT: I am confident that you'll find out very quickly after the rest of us do.

THE WITNESS: Thank you.

THE COURT: Again, you don't have to worry about being re-called. You may return to your place of residence.

Mr. Jacobs.

MR. JACOBS: Your Honor, our next witness is Michael DeFazio by deposition.

(WHEREUPON, the following deposition was played.)

Q. Good morning, Mr. DeFazio.

A. Good morning.

Q. Were you the head of the organization responsible for

2301

product management, marketing and licensing terms and conditions for the UNIX System V operating system from 1984 until 1995, first with AT&T, then with USL and finally with Novell?

A. I was the head from 1984 to 1995.

Q. After 1995, Mr. DeFazio, when Novell sold certain of its UNIX related assets to the Santa Cruz Operation, Inc., which is now known as Tarantella, did you continue to be involved in Novell's remaining UNIX business in, primarily in an administrative and advisory capacity?

A. Yes, I had to help out to make sure Novell implemented its part of the agreement. I also had a different responsibility within Novell in that period.

Q. What were your responsibilities with respect to the UNIX operating system during the period from 1984 through 1995?

A. My initial responsibilities when I transferred into the organization was to head the product management organization. Over the course of time I assumed increasing responsibilities. I always maintained the product management organizational responsibility. I then assumed responsibility for licensing operations. I assumed responsibility for our overseas affiliates in Japan and Europe. I assumed UNIX marketing responsibility and I assumed UNIX development responsibility.

2302

By the time we were in USL, I was the executive vice president responsible for the overall UNIX system business and within Novell, after we were merged into Novell, and some period of time we consolidated UNIX operations within Novell, and I was named executive vice president and general manager of the so-called UNIX system group within Novell.

Q. And in January 1994 did you become executive vice president of UNIX systems group of Novell?

A. Yes, I did.

Q. Did there come a point when you met with Mr. Frankenberg and Mr. Michaels to discuss the possibility of a sale of Novell's UNIX business to Santa Cruz?

A. Yes, there was in, I believe, it was July of 1995, perhaps June.

Q. Would it be fair to say Mr. DeFazio that at that time that you were the senior executive most knowledgeable within Novell regarding UNIX?

A. Yes, that's correct.

Q. And did you spend, well, how much time, Mr. DeFazio, did you spend negotiating that transaction with Novell?

A. I met with Doug Michaels and Bob Frankenberg and out of that meeting we agreed to pursue a sale. I then with Ed Chatlos and Ty Mattingly, Bob Frankenberg's assistant, traveled and met with Doug Michaels and some of this colleagues in Santa Cruz with a specific proposal for how we

2303

would do that sale. We came out of that meeting with a high-level agreement. I went back and we put together a team headed by Ed Chatlos to work the details of how we would implement that, and I spent essentially all of my time subsequently working in one way or another aspects of that deal. Now, most of my time after that meeting was spent working within Novell itself on all of the details, architecting the way we would do it. Working the time frames and working the large number of personnel issues that were associated with this since the organization had probably 400 people at that time. So I can't give you a number of hours other than to say this was my prime job in that period and there was a strong team of people, Novell people, Novell lawyers, Novell outside lawyers working with their counterparts at Santa Cruz to put together the details of the deal.

Q. On September 19, 1995 Novell entered into an asset purchase agreement with Santa Cruz; is that right?

A. That is correct.

Q. Is it agreeable if during this deposition we refer to the asset purchase agreement between Novell and Santa Cruz as the A.P.A.?

A. Yes.

Q. Did there come a point when Novell sold certain UNIX

2304

assets to Santa Cruz pursuant to the A.P.A.?

A. Yes.

Q. Do you have any understanding, sir, as to whether Novell retained any rights with respect to the UNIX System V source code licensing business?

A. Yes.

Q. Including those under the I.B.M. related agreements and the Sequent related agreements?

A. Novell retained substantive rights under the agreement, as we had two UNIX system businesses and really sold Santa Cruz one of them.

Q. And referring you to the last sentence of paragraph 10 of your declaration would you agree that the rights retained by Novell were what you considered to be significant, substantive rights?

A. Yes, I would.

Q. I believe you testified earlier that you understood Novell to have retained significant assets in that sale; is that right?

A. That is correct.

Q. And did the retained assets include, as you understand it, important intellectual property and significant substantive rights under the UNIX System V source code license agreement such as the I.B.M. related agreements and the Sequent related agreements?

2305

A. Yes, that's correct.

Q. And was responsible for negotiating the sale of Novell's UNIX business to Santa Cruz?

A. Ed Chatlos and I were primarily responsible.

Q. How many UNIX businesses did Novell then have?

A. The way we looked at the UNIX business, we parsed it into two components at that time. A UnixWare business and a source licensing or legacy System V business.

Q. And what was the purpose of each of those businesses, if you would briefly describe it?

A. The UNIX System V source licensing business was the outgrowth of the original way that we provided UNIX system technology to the marketplace where we provided it in source form customers were adapted it to their marketplace needs, they in turn would ship a binary version of the operating system to their customers, pay us a royalty. The UnixWare business was Novell actually developing a final binary form version of the UNIX operating system that was targeted to Intel specific X86 computer systems, basically PCs and servers and providing that product, that operating system product in binary form into the marketplace.

Q. And initially did Santa Cruz express an interest in purchasing both of the businesses?

A. Yes, when Ed Chatlos, I and Ty Mattingly visited them,

2306

as I related earlier, the idea was that we would sell all of the UNIX system, both the UNIX system business to Santa Cruz.

Q. And is that in fact what happened?

A. No, it is not. The value that we, Novell placed on the combination of those two businesses was much, much larger than Santa Cruz was in a position to pay for the business, and so they basically in that meeting I referred to said this is too expensive, whether we agree with your value or not, it's still too expensive. We, Santa Cruz, in the form of Doug Michaels came up with an idea and said, why don't we just buy the going forward business, the UnixWare business from you. Why don't you, Novell, retain the source licensing business. And it was very clear to me very quickly that since most of the financial value we placed on the combination of those two businesses was attributable to the UNIX source licensing royalty stream that in fact that idea by Doug Michaels was very good, and although we had to rework some of the financials that that idea would allow us to get to an agreement, whereby we could provide the UnixWare business to SCO at a price much closer to what they could afford.

Q. Do you recall, Mr. DeFazio, what value you attributed to both of the businesses combined?

A. I believe that our initial proposal going into that

2307

meeting was for a composite value of about $800 million. That's my recollection.

Q. Do you have a recollection of what portion of the $800 million you attributed to the source code portion of the business?

A. Certainly the majority of that 800 million would be attributed to the source code business, but I don't recall the specific fraction.

Q. Do you recall how Novell reacted to the Santa Cruz proposal?

A. I reacted very well to it, because it struck me that this was a way that we would close a financials value gap that looked to be otherwise insurmountable. So I complimented Santa Cruz, I said this is a very creative idea, and I said it's good with me. I'm going to take it back to my management, meaning Bob Frankenberg. And it was very good from a Novell viewpoint because although it meant we did not receive the kind of immediate payoff from Santa Cruz that we had estimated the value of the two businesses would be, what we did receive was a substantial payment in cash and equity in Santa Cruz Operation in excess of $100 million, but we maintained the source legacy business. At the time the $800 million I mentioned had two components, the source business in UnixWare, much of the

2308

UnixWare component was projected growth from the future. The value that UnixWare was contributing in 1995 was much smaller and so by implementing this proposal Novell was able to in essence maintain or keep the vast majority, 80 to 90 percent of the revenue stream from the two UNIX businesses while shedding the vast majority of the expenses associated with those two business, shedding perhaps 90 percent. So Novell maintained a royalty stream that was financially significant, very high margin, because the costs going forward after the sale would be very, very small.

Q. As you understood the deal, Mr. DeFazio, did Novell generally receive any royalties payable under the UNIX System V source code license agreements including the I.B.M. related agreements and the Sequent related agreements and Novell paid Santa Cruz a five percent administrative fee for its services in collecting such royalties?

A. Yes, that was the way that we implemented the deal. The royalties would flow through to Novell from Santa Cruz and they would be paid five percent for their work in administering that.

Q. And you said twice, I believe, that Novell retained significant assets following the sale; is that right?

A. That's correct.

Q. Do you recall that there was a provision in the A.P.A. known as 4.16B?

2309

A. Yes.

Q. Let me refer you, if I might, to Exhibit 8 to your declaration. And in specific the Section 4.16 B. It's at page 24 of Exhibit A to your declaration.

A. Page 24 says 4.16.

Q. Right. And if you just look down the page you'll see a subsection B. Do you see that, it begins buyer shall not.

A. Yes.

Q. Would you just take a minute to refresh your memory as to the contents of that section.

A. Yes. Yes.

Q. Now, substituting Santa Cruz for the term buyer and Novell for the term seller, Section 4.16B provides in part Santa Cruz shall not, comma, and shall not have the authority to, comma, amend, comma, modify or waive any right under or assign any SVRX license without the prior written consent of Novell, period. In addition, at Novell's sole discretion and direction Santa Cruz 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 Novell. In the event that Santa Cruz shall fail to take such action concerning the SVRX licenses as required herein, Novell shall be authorized and hereby is granted the right to take any action on Santa Cruz' own behalf.

2310

Do you see that?

A. Yes, I do.

Q. Let me ask you, Mr. DeFazio, if you would tell me please what you understood to be the intent of this provision?

A. Yes. My understanding of this when we came back with the notion that we would retain one business and sell the other one, that was a high-level concept. And to then go forward and do the A.P.A., which you can see from here is perhaps 150 or 200 pages of documentation took a lot of work on the part of SCO people and Novell people and outside attorneys and the drafting of the document I was not involved in, but the teams were involved. However, I had provided specific guidance recognizing that this future royalty stream would be very significant to Novell. And not knowing exactly how we would craft the terms in the document to protect that royalty stream I had said we have to bulletproof, and I used those words, bulletproof, that's a business term I think not a legal term, bulletproof the parts of the agreement to make sure that Novell's ongoing financial interests, which I knew would be very significant, would be maintained, that there would be no loop holes possible for Santa Cruz to be able to somehow get around Novell collecting that -- that royalty. So with that general guidance of bulletproofing the

2311

team then went off and parts of the A.P.A. reflect the team's creation or ideas on how to achieve that bulletproofing and this section is an example of that. So this is part of the implementation to make sure that Novell's ongoing lucrative financial interest would be maintained and assured.

Q. Was it your understanding that the A.P.A. at the time was intended to transfer the copyrights for UNIX to Santa Cruz?

A. No. The A.P.A. as it was written retained it and my understanding was that the retention was a way the team crafted the words to implement the goal of bulletproofing this financial asset stream. I was not involved in any discussions within Novell or certainly with Santa Cruz that talked about transferring the copyright or not transferring it. It just appeared this way in the A.P.A. and that's what was executed.

Q. So your testimony concerning the copyright issue is based on your reading of the A.P.A.; is that fair to say?

A. Well, it is based on two things. It's my reading of the A.P.A., but also my recalling that I was not involved in any discussions one way or the other keeping the copyright or transferring it. It just wasn't discussed with me and wasn't discussed -- wasn't an issue that was escalated and certainly wasn't discussed in my meetings with Santa Cruz.

2312

That would be, you know, kind of a specific of the deal, not part of the broad discussions on the whole concept of what we were trying to do with the A.P.A.

Q. But that would have been something within Ed Chatlos' realm of responsibility if there were discussions about that?

A. If there was a discussion and an impasse on that question that certainly would have been escalated to me.

Q. If there was not an impasse but there was a discussion was that something that would have been within Mr. Chatlos' responsibility?

A. The entire A.P.A. if there was no impasse or disagreement between the two parties generally that would just take place and until it was reviewed for signature a lot of the details we wouldn't even have been, I wouldn't even have been aware of.

Q. And Mr. Chatlos would have been the person, the point person for those portions?

A. He should have been aware of those details as team leader, yes.

Q. If Novell owned the copyrights to UNIX why did Novell need to take out a license from Santa Cruz to be able to use the UNIX product?

A. Yeah, I was going to say that the way that you phrased that to me is more a legal question.

2313

Q. Do you have any sense from a business perspective?

A. Yeah, the business perspective is that we had transferred -- the asset to Santa Cruz, Novell wanted to retain rights to do some things with that technology in the future. The copyright retention portion that I spoke to earlier I linked to more this goal of bulletproofing and making sure that Novell's binary legacy revenue stream was protected. The technology license gave Novell the right, if they had wanted it to, for example, add Unix software into its products like NetWare and in turn ship those to the market, irrespective of what we were doing with our legacy UNIX source business, our source licensee, so that's kind of two different things.

Q. Well, if Novell was bulletproof, to use your term, with respect to the ownership of the copyrights, then why did it need a license as a business perspective from Santa Cruz in order to be able to use that UNIX technology?

A. It was bulletproofed relative to the revenue stream. It needed the license because this had nothing to do with the revenue stream. This was to give Novell the rights to take UNIX and very specifically combine it with its core product which was NetWare if it chose to do and ship those into the marketplace.

Q. Now, you talked about I think you used the term bulletproofing in connection with this provision you're

2314

aware, are you not, that I.B.M. bought a fully paid up license with respect to UNIX System V in 19 -- in the mid 1990s, right?

A. Yes, we discussed that earlier, 1996, April.

Q. So, if that was the case, then what need was there on the -- on behalf of Novell to waive rights, source code rights with respect to agreements that had already been fully paid up? What bulletproofing or what interest was being protected conceivably have been protected by Novell under those circumstances?

A. I think you'd have to ask the Novell the need, what I tried to say in conjunction with this and these exhibits 382 and so forth is that what Novell did was consistent with my understanding of their rights in the A.P.A. I did not try to comment on their motivations for doing that, which is what I think you're asking when you say the need.

Q. Well, was it your understanding that Novell under the A.P.A. had the right to modify provisions or cancel provisions of SVRX source code agreements, software agreements without having any -- without protecting any interest that they had at stake in connection with the royalty rights that they had retained?

A. Novell had the right if they felt a legacy licensee was violating the license to take some actions and Novell had the right to ensure which is part of the bulletproofing that

2315

the old Santa Cruz company could not take any actions which would mess up its arrangement with those customers.

MR. JACOBS: That completes Novell's introduction of testimony from Michael DeFazio. This was from a deposition dated January 13, 2005.

THE COURT: Thank you.

MR. NORMAND: Your Honor, SCO has some counter designations.

THE COURT: Do you know long those would be?

MR. NORMAND: I have been told it is about eight and a half minutes.

THE COURT: Okay. Let's go ahead then.

MR. NORMAND: Thank you.

(WHEREUPON, the following deposition was played.)

Q. Are you currently represented in connection with this case by Mr. Jacobs as well?

A. Yes, I am.

Q. And who is paying his fees?

A. His fees are being paid for by Novell.

Q. You signed a declaration in this case I believe in October of 2003?

A. Yes.

Q. Who had drafted that declaration?

A. I.B.M. drafted it as a result of the meeting that I had with them.

2316

MR. NORMAND: Your Honor, there was a problem with the videotape during the deposition, so this following clip did not make it onto the videotape. I would propose to read the question and answer into the record and then have the videotape continue.

MR. JACOBS: No objection, Your Honor.

MR. NORMAND: Question, after the sale, did your work focus on Novell's broader network strategy? Answer, yes. After the sale I took over a group that had to do with Novell business processes that span the entire company, and was sort of in support of what Novell was trying to accomplish with a new networking strategy that it was implementing post UNIX. I still continued, as I said earlier, with my administrative oversight responsibilities for any residual UNIX system related activities.

THE COURT: All right.

(WHEREUPON, the following deposition was played.)

Q. Do you have an understanding, Mr. DeFazio, as to whether there was an amendment two to the A.P.A.?

A. I have an understanding that there was an amendment two to the A.P.A.

Q. And in paragraph 53 of the declaration you say that you were not involved in negotiating amendment number two, and that you do not have personal knowledge as to what it was intended to accomplish and are unable to address what it

2317

means. Is that an accurate statement?

A. That is correct.

Q. Were you directly involved in negotiating the April 1996 amendment or amendment X?

A. No, I was not.

Q. During much of your examination by Mr. Marriott you were referring to a particular document or holding a document in front and reading it while he was asking you questions, was that the declaration that I.B.M. drafted for you?

A. This is my declaration of October 2003, correct.

Q. And is that the document that you've had in front of you during your entire examination by Mr. Marriott?

A. Yes.

Q. Who requested that you provide that declaration in connection with this case?

A. At the end of my first meeting with I.B.M. Mr. Marriott and/or his colleague Gabe Saltarelli asked me if I would be willing to provide a declaration and I said I would be willing to do so if someone else did the initial drafting.

Q. And that someone else who did the drafting was I.B.M. --

A. Yes.

Q. -- counsel? You, with reference to the asset purchase agreement, do

2318

you remember being asked questions about that agreement?

A. Yes.

Q. Okay. The negotiation team from Novell was led by a person named Ed Chatlos; is that correct?

A. That's correct.

Q. Is it your view that Mr. Chatlos would have a strong understanding of Novell's intent with respect to that transaction?

A. Yes.

Q. Is there anybody who had a better understanding of Novell's intent with respect to that transaction than Mr. Chatlos that you know of?

A. Well, I certainly think that I had an understanding of the intent and I certainly think that my boss, Bob Frankenberg, had an understanding of the intent, and I'm sure that our outside counsel had an understanding. Ed was in the top tier of people with a very good understanding, yes. Ty Mattingly was another one.

Q. And you said that you did not have any involvement with amendment number two to the asset purchase agreement; is that right?

A. That's correct.

Q. Were you still employed by Novell at at the time of amendment number two?

A. Yes, I was.

2319

Q. So is it fair to say that after putting the negotiation team together and attending the first meetings that you discussed with Mr. Marriott that Mr. Chatlos was the person who had primary day-to-day responsibility for the negotiation of the A.P.A?

A. That's my perception, and it was Ed Chatlos I looked to during this process as, you know, the principal.

Q. And with respect to amendment number two, is it your view that amendment number two did not effect any significant or substantial changes to the parties' deal as it was embodied in the A.P.A.?

A. Well, I can't really answer that because amendment two was, I was not involved in that.

Q. Do you think that you would have been involved if it had been, if it had effected a substantial change to the parties agreement under the A.P.A.?

A. I think I would have been involved if it required being escalated to me. Apparently it did not.

Q. You spoke with Mr. Marriott about two businesses that in your view were bifurcated for purposes of the A.P.A. transaction?

A. Yes.

Q. And you referred to one of those as the source code, source licensing business, right?

A. Yes.

2320

Q. That's the one in your view that was retained by Novell under the A.P.A.?

A. Correct.

Q. Does that source licensing business include the licensing of source code or is it just the collection of binary sub, you know, royalties on sublicense products?

A. It was primarily the collection of royalties, but to the extent that a licensee needed to extend its source code rights to additional CPUs, additional computers, I believe Novell would be paid a nominal fee for that under those agreements, but by far the vast majority of those revenues came about from binary royalties attributable to licensees' shipments of binary forms of the UNIX operating system.

Q. And those binary forms of the UNIX operating system were binaries distributed under already existing UNIX source code licenses; is that correct?

A. That's correct.

Q. Now, the other portion, the portion that was transferred, as you said, to Santa Cruz through the A.P.A. is, I believe you described it as the UnixWare side of the business. Is that an accurate description?

A. I called it the UnixWare business and it reflected the binary product that Novell developed but UnixWare was also the then current source product, so beyond SVRX UnixWare was our latest and greatest instantiation of UNIX system

2321

technology and what we transferred was that current technology and as importantly the engineering wherewithal to continue to evolve that technology in the form --

Q. Okay.

A. -- of a subset of the engineering team.

Q. Let me rephrase the question. In your view was the UNIX, was it the intent of Novell to transfer the intellectual property of the UNIX program to Santa Cruz through the asset purchase agreement?

A. To the extent that that was a part of that business, yes, that would be my understanding.

Q. And was the intellectual property in UNIX an important part of the going forward UnixWare business?

A. Yes.

Q. You said earlier that there was a team that was involved in preparing this language for Novell. Who was on that team?

A. Well, Ed Chatlos was the leader of the team and it consisted of people from finance, from internal legal and from outside legal.

Q. And in your view would Mr. Chatlos have a good understanding of what 4.16B was intended to mean by Novell?

A. I would assume that he would, but I'm not sure, you know, I can't say specifically. He has a detailed understanding of every piece but as the guy I looked to I

2322

would hope I could have dialogued if I needed to at the time with him on various pieces.

MR. NORMAND: Your Honor, that completes SCO's designations for Mr. DeFazio.

THE COURT: Thank you.

Ladies and gentlemen, we'll now take a 20-minute recess.

MR. JACOBS: I am sorry, Judge. Just one second. Okay. I thought it was incomplete.

THE COURT: Is it complete?

MR. JACOBS: Yes.

THE COURT: That was all you needed from Mr. DeFazio?

MR. JACOBS: Yes.

THE COURT: 20 minutes.

(WHEREUPON, the jury leaves the proceedings.)

THE COURT: When we return we'll start with Mr. Brown?

MR. JACOBS: That is correct.

THE COURT: Is he going to go long enough to finish today?

MR. JACOBS: I believe so.

THE COURT: I guess that wasn't a good question on my part. Will he take the entire time?

MR. JACOBS: Yes, I believe so.

2323

THE COURT: Thank you, counsel. 20 minutes.

(Recess)

THE COURT: Are we ready?

MR. JACOBS: We are, Your Honor.

THE COURT: Okay. Ms. Malley.

We went a little bit longer because the jury did not receive its allotment of rations until later on.

MR. JACOBS: I'll go along with Mr. Brennan. A hungry jury is not a happy jury.

THE COURT: That's a good point.

Is Mr. Braham in the courtroom?

MR. JACOBS: Yes.

THE COURT: Okay.

(Jury brought into the courtroom.)

Mr. Jacobs.

MR. JACOBS: Your Honor, Novell calls Mr. Tor Braham.

THE COURT: Mr. Braham, if you will please come forward.

TOR BRAHAM, the witness hereinbefore named, being first duly cautioned and sworn or affirmed to tell the truth, the whole truth, and nothing but the truth, was examined and testified as follows:

THE CLERK: Please be seated. And if you would please state and spell your name for the Court.

A. Tor Braham. T-o-r. B-r-a-h-a-m.

2324

DIRECT EXAMINATION

BY MR. JACOBS:

Q. Good afternoon Mr. Braham.

A. Good afternoon.

Q. What was your role in the 1995 Asset Purchase Agreement between Novell and Santa Cruz?

A. I was one of the lead negotiators and the head of the outside legal group that managed the transaction on behalf of Novell as a partner at Wilson, Sonsini, Goodrich and Rosati.

Q. How did you happen to become a partner at Wilson, Sonsini? What was -- where did you start in terms of school?

A. I went to college at Colombia University in New York and then went to law school at New York University in New York. I came out to California, really, to work with technology companies. I started at a law firm in Southern California called Manaf, Phelps, Rothenberg & Tunis. And, after about a year and a half --

THE COURT: Mr. Braham, may I remind you that the Court reporter has got to get everything you say, and when you start using terms such as the names of law firms and so on, slow down a little bit so everything can be heard?

THE WITNESS: Okay. Sure.

2325

THE COURT: Thank you.

A. I joined Wilson, Sonsini Goodrich & Rosati in, I think, 1984 as an associate and worked there, until I left the firm in 1997, doing exclusively mergers and acquisitions, initial public offerings, and intellectual property work and related corporate work for technology companies located in Silicon Valley and around the United States.

Q. So give the jury a sense of your practice as of the mid-'90's. What kind of transactions were you doing, and what was your role?

A. So, by the mid-'90's, I had transitioned into being primarily a lawyer working and advising on mergers and acquisitions. I still did some work on initial public offerings or registration statements with the SEC for companies when they do financing, but I also continued to do a fair amount of intellectual property licensing for my clients.

So, I would have a range of clients, and I would generally -- all corporations that were technology companies, and I would represent them in everything, sort of soup to nuts, but, by the mid-'90's, I had transitioned into a particular focus on mergers and acquisitions for the tech companies.

Q. And describe your relationship with Novell as

2326

of 1995.

A. So, Novell was one of my biggest clients, and the firm's biggest clients, and particularly around mergers and acquisitions or M&A. We had done work from them, worked with them for a long time. And my mentor and the top partner at Wilson, Sonsini is a guy named Larry Sonsini. And he was on the board of Novell and was one of the lead directors there who created, in addition to my work with the company, a close relationship.

And so I knew the company well, and I had, by the mid-'90's, worked on eight or nine different acquisition transactions representing them, and they were one of my biggest clients and one that I was -- you know, a substantial portion of my time was working with them, as they did all kinds of deals and built the company.

Q. So, again, just to give the jury a sense of this, as an outside counsel, what kind of understanding do you gain of a company like Novell's business in the course of representing them?

A. Well, you get to know, you know, all the different moving parts, and you get to know all the people as well. You -- frequently, when you work with them on an acquisition, you get to know the business, intimately, of what was acquired, and then sometimes, when those businesses are separated or you do a different

2327

transaction, then you kind of bring your institutional history to bear on remembering what you learned when you worked on a different deal.

You also -- one of the reasons why corporate law firm relationships are long-term relationships is that you learn how decisions are made within a company and how to interact with the company to help them come to decisions and come to terms on a transaction, and which is frequently difficult to do when it's a new client, but when you have a long history, you get a familiarity with all the people and what their strategies are and objectives are for the company, as well as how to -- how to navigate through all the different voices that compose a corporation.

Q. So, as of 1995, your relationship with Novell, who were you interacting with? Who were you taking direction from?

A. At that time, David Bradford was my primary interaction. He was the general counsel of Novell. But, more importantly, he was, for me, the lead voice on -- about what kinds of business decisions Novell was making, and he would give me direction on how to represent Novell in various different transactions, but also Jim Tolonen, who was the CFO. Jim actually resided out in the West Coast. Novell was headquartered in Provo, Utah, but it

2328

had a very significant business fingerprint in Silicon Valley, and Jim Tolonen, the CFO, lived out on the West Coast, and that had me meeting him a little bit more than the Utah -- all of the other Utah Novell people.

Mary Burnside, who was the chief operating officer, who was -- kind of ran the nuts and bolts, day-to-day of the company, less involved in deals, but I would interact with her.

Q. So, as of 1995, to sum up, you have done, eight, nine transactions. You've worked with David Bradford on those transactions?

A. I worked extensively with David Bradford, but I also worked with my partner Larry Sonsini, who would give me direction from time to time, and I probably worked on another, I mean, maybe that many transactions that didn't happen, and I also worked on deals that were contemplated or ideas that never crystalized into actual transactions.

Q. And, in all those transactions, how would you describe your role -- the role of David Bradford in giving you direction, in a nutshell?

A. He would be the person I would get the most ultimate instruction from as to how to -- how to advance Novell's interest and where the various different tradeoffs that occur in a deal should be balanced. And

2329

we had done enough deals together where we kind of had a very efficient methodology of -- with him as sort of the business negotiator and guider of me, and me being the implementer along with him. And we understood each other well.

Q. Mr. Braham, I'd like to show you a document, Exhibit H-2, and ask if you can identify that for us, please.

A. This is the agreement and plan of merger or acquisition agreement under which Novell acquired the UNIX business from AT&T, through acquisition of the UNIX System Laboratories, Inc. company, which was a corporation owned by AT&T -- owned primarily by AT&T. It actually had some small minority investors as well.

Q. Did you represent Novell in that transaction?

A. I did.

MR. JACOBS: Your Honor, we would move H-2 into evidence.

MR. SINGER: No objection.

THE COURT: It will be admitted.

(Novell Exhibit H-2 received in evidence.)

Q. BY MR. JACOBS: To step back a little bit in time Mr. Braham, did you become familiar with the UNIX Operating System in the course of your work with Wilson, Sonsini?

2330

A. Yes.

Q. And how did that happen?

A. Well, over the years, even before this transaction, UNIX was a pretty high-profile collection of technologies. I had worked a lot with companies in Silicon Valley who used UNIX or touched UNIX in various different parts of their business. SUN Microsystems, for example, was a client of Wilson, Sonsini, and UNIX was the other operating system or collection of operating systems out there, in contrast to Microsoft and Microsoft Windows, Microsoft Windows NT operating system. And a lot was covered in the press and certainly in the industry around UNIX and the importance of UNIX as an alternative to Microsoft, particularly as Microsoft became more and more powerful and the perception that Microsoft was becoming a monopoly emerged.

So I learned about UNIX through our clients, but also through the financial and technology press, but never worked directly with the UNIX technologies until this deal.

Q. So, let's describe this -- this transaction in a nutshell. It's called an Agreement and Plan of Reorganization and Merger. Can you describe for the jury in sort of a lay-person's terms, what the form of the Novell/USL/AT&T transaction was?

2331

A. So, I mean, in simplest terms, it was an acquisition of the corporation, UNIX Systems Labs. It's called an agreement and plan of reorganization and merger because it was done as a stock-for-stock transaction. Novell issued stock, which went to AT&T, and acquired this business, and for tax reasons and for historical corporate reasons, these things are done in what's called a reverse triangular merger, which is a little complicated.

But, basically, you have the subsidiary of AT&T merge with a newly-formed subsidiary of Novell end up as a subsidiary of Novell. And there's a variety of reasons why it's done that way rather than simply I-buy-your-stock kind of deal, but largely driven by tax and some corporate history.

Q. And describe the -- as compared with other kinds of M&A deals, is it simpler or more complicated if you buy an entity like, say, USL, as compared with buying specific assets, for example?

A. You know, generally speaking, it's simpler to buy the whole company and just to buy a business because then you're not going to have to go through and parse what assets am I getting? What assets am I leaving behind? Asset deals are very time intensive and very complex.

2332

You know, I think, intuitively, sometimes you think, well, if I don't buy the whole business, maybe it will be simpler. But the reality is, it's simpler to say, I'm going to buy the whole corporation. And you just inherit whatever is there; whereas, when you do an asset deal and buy a business out of another entity but by doing it by assets, you now have to go essentially asset by asset and define what's coming, what's staying behind.

And very often there are shared assets or there are assets that bear not only on the business you are acquiring but on the business that's being left behind and so you have to parse out, how do we share? And this is not just intellectual property. How do we share a building that has employees who might work for both businesses? How do we share customers who may be continuing.

And so the process of doing an assset deal is -- you know, you can start with, we are going to buy this business, but then you have to actually go and, in some cases, down to the desk top, what am I transferring and what am I keeping? And it's a lot of work.

So, as a general rule, you know, you kind of want to buy the whole corporation if you can so you don't have to have the arm wrestling asset by asset, just

2333

because it's a lot of work. And it's also possible, you know, to have confusion in that. But, you know, people do asset -- when you have a business within a larger entity, you frequently are stuck with doing an asset deal, and when you have a business where you're continuing relationships on both sides, you frequently do an asset deal.

Q. So, this was the simpler kind of acquisition, an acquisition of an entity?

A. Yes. It was simpler. It was not simple, but it was simpler.

Q. Okay. And this being the USL transaction. Do you recall the value of the stock that Novell issued in exchange for the UNIX Systems Laboratory, Inc., business?

A. Yes. It was approximately 300 million.

Q. So, this transaction is dated as of February 12, 1993. And, about two and a half years later, the Asset Purchase Agreement between Novell and Santa Cruz is going to get negotiated. What's your understanding of what changed as you were brought into the APA? What changed such that Novell was now divesting assets that it had just acquired?

A. So, Novell's interest in UNIX was -- it had a variety of different purposes, in acquiring UNIX, in owning it, and in ultimately selling it, selling a piece

2334

of the business. There was the financial side. This was an important technology that there was royalties that were -- that USL was collecting and Novell was partnered with the company that partly built itself through acquisition, but there was also a strategic side which was that Novell, in the industry, had a very important role in providing software and infrastructure for networking, and it was important for its business that Microsoft not have too much strength and too much power over the entire world of software.

Netware, which was its core product, and then ultimately Netware directory services and other related products, would flourish more if Microsoft was not in a position of going to corporations and saying: You'll take my operating system. You'll take my networking architecture. You'll take my applications. I'll provide it all to you.

Netware was a set of infrastructure software that would work to connect different computers, and particularly disparate kinds of computers, and if Microsoft had too much dominance, the importance of Netware and the value of Netware and the money that could be made by selling Netware would be diminished.

So, it was originally acquired, UNIX Systems Labs, partly for financial reasons, but partly for Novell

2335

to become a good shepherd of the UNIX Operating System and collection of operating systems, which is really what it was, so that the other players in the industry, major players in the industry, would have -- could sell computers that ran on operating systems that were not solely Microsoft; so AT&T, SUN, HP, Sequent, Digital Equipment Corporation, on down, would have -- not have to only seem Microsoft software.

And there was a feeling, at AT&T, that they were not in a great position. AT&T, of course, is a phone company and the backbone of the internet from a physical standpoint, but that they weren't in the best position to license software around the country, to develop it and to be responsive to all of the corporations who wanted to use UNIX, and there was a feeling that Novell was a good home for it.

And Novell felt that way, and AT&T felt that way, and so they bought it.

Q. So that explains the 1993 transaction. That explains the inbound transaction, right?

A. Yes.

Q. Okay. Then what happens?

A. Once they bought it, they found that they were not in the strongest position to support and proliferate UNIX. They had their own battles to fight around other

2336

technologies, Netware, GroupWise, others. And they began to feel that they couldn't invest all the resources that would be desirable to make it as successful as possible, and they were developing a set of technologies, a particular flavor or brand of UNIX called UnixWare, and they had worked on that, and there was a feeling that they were not in the best position to continue to develop it and to market that particular flavor to exploit.

Now, UnixWare was addressed to the Intel -- the Intel microprocessor hardware, and there was a feeling that -- which is where Microsoft had the greatest dominance. And there was a feeling at Novell that emerged that we want this to be successful, but we can't put all the wood behind this arrow ourselves, and, if we can find another home for UnixWare, that would be desirable if it could be somebody who would really go after that business more agressively and with more focus than we can.

Q. So you gained this understanding as you were brought in to represent Novell in the Asset Purchase Agreement; is that correct?

A. Yes. I may have got some of that understanding simply working with Novell over the two years in the interim, but got more of it as we got into discussion of the potential sale to SCO.

2337

Q. In a general case, leaving aside the specifics of the Asset Purchase Agreement for a minute, at what point does an outside counsel like yourself get involved in an M&A transaction like this?

A. Well, you're talking about any outside counsel? I mean, it might be any point --

Q. Well, let's take your experience with Novell. Typically how would you get get involved, and at what point would you be brought in?

A. In the case of Novell, I would probably get involved maybe a month, six weeks before a transaction, when people were still crystallizing ideas about the deal. In other situations, outside counsel isn't brought in until the end. And, in fact, in many companies -- not Novell -- companies might do transactions by themselves without outside counsel at all. They might do them all internally.

But, with Novell, I would hear about them relatively early, either through David Bradford or Jim Tolonen or others at Novell or through my partner Larry Sonsini who, of course, sat on the board, and I would hear about things in the germination stage more often.

Q. Now, at some point, you get involved in the Asset Purchase Agreement?

A. Yes.

2338

Q. What is your recollection when your period of intense involvement actually got underway?

A. The most intense involvement I remember over the last week or so before the announcement of the transaction. And it's hard for me to remember exactly. It was 15 years ago. But I remember what people sometimes refer to as a forced march, where people show up at a law firm, day after day after day, negotiating drafts and turning a deal. And you have representatives of both sides there. And I remember that forced march very clearly at the offices of Brobeck, Phleger, primarily in -- I don't remember exactly the time frame.

Q. It sounds like you have a picture in your mind of this place?

A. I have a picture in my mind of the place and the conference room and where I was sitting and where other people from the law firm on the other side, Brobeck Phleger, as well as some SCO people were in the room. And I have a picture in my mind of an exhausting series of days, including one weekend, all weekend long. Placing that in an exact time frame is just very hard after 15 years.

Q. Now, Mr. Braham, who was on the Wilson, Sonsini team representing Novell in that forced march to

2339

concluding the agreement?

A. So, primarily it was myself, and then a younger lawyer named Allen -- Aaron Alter, who is a partner there now. I'm not sure whether he was a partner or a senior associate. At the time, I think he was a young partner. And then a very smart associate named Shannon Whisenant, who worked at Wilson -- actually she's from this area -- but she was a younger associate.

And then, behind that, there was a tax lawyer named Don Bradley. He didn't appear at the negotiations, but he was -- gave me counsel behind the scenes. And then Larry Sonsini, although he wasn't day-to-day on the transaction, was back in his office and a resource for me to consult with.

Q. And who were your counterparts representing Santa Cruz in the negotiations?

A. So, there was -- the most senior person who did appear at the negotiations was a partner there named Ed Leonard, who was one of the top business lawyers at Brobeck, Phleger. There was a younger partner named Scott Lester and, then, most immediately, day-to-day, was a smart associate there named Jeff Higgins.

Q. Now, in an M&A deal, as opposed to maybe some other kinds of transactions, talk about the differing roles and agendas that people in a transaction like that

2340

might have and what the role of outside counsel is in putting all that together?

A. So, the different agendas among --

Q. Among the company representatives, the people who might be funneling to you or funneling through the general counsel.

A. On the Novell side?

Q. Yes.

A. So, there's David Bradford, who was the primary communicator to me and the lead negotiator as to what positions to take and what was most important, both objectives and weighing of tradeoffs that occur in the negotiation, and he would be right up there. And he had been involved in all of the transactions for Novell, and you know, I viewed as a very credible, authorized and dispassionate voice as to how to think about Novell's interests.

Then there were a whole range of people who were involved in the USL UNIX business within Novell, and some of those people -- in fact, most of them had come over from USL when we acquired USL. When Novell acquired USL from AT&T. And those people were good people and were very important to the UNIX business, but they -- they were more interested in that business and, as I remember, I knew many of them, and I don't know if it's

2341

even clear which we were going to move over and be part of the acquired business.

One of the things that happens in a disposition, when a company is being -- selling off a business, is you have people who still are technically or still working for the seller but who are going to be moving over and working for and going to be compensated and fed by and looking for protection from the buyer. And this results in an inherent conflict of interest. It's nothing that's wrong about it.

It's just that you have people whose roles are moving, and their interests frequently are different than the interests of the seller. And, frankly, they are also different, sometimes, from the interests of the buyer. They have interests that coincide with each side and some that are different from each side. So there was that universe of people, and I think, you know, they were -- they have to be involved because they are the most knowledgeable about the business, but you also have to be sensitive to -- that not everything that they want is what's necessarily in the best interests of your client, the seller.

Q. Okay. And when you are referring, now, to your client, who, ultimately, are you accountable to?

A. So, it would be the -- David Bradford is the

2342

spokesman for the client, and he was accountable to the board of directors of the company and to -- and with direction from the CEO, but not exclusively the CEO of the company.

Q. Specifically, with respect to the Asset Purchase Agreement, then, what was your day-to-day responsibility in that intense period of negotiation?

A. To represent Novell, to determine what Novell wanted to accomplish with the transaction at a strategic level as well as an execution level, to be their primary mouthpiece in the negotiations, funneling through all the different inputs that I would get from Novell, to negotiate for them the best I could, to protect their interests, to draft the contract along those lines, to supervise people who worked for me to draft other pieces of the contract along those lines, to report back to David Bradford and others at Novell faithfully what the art of the possible is in the negotiation and to implement the best deal I could get Novell consistent with the direction I had been given as to how to protect them.

Q. As you got into the period of intensity for your involvement, what did you understand some of the specific issues to be on account of the fact that Santa Cruz was the acquiror here?

2343

A. So, fairly along the way, we discovered that Santa Cruz, as we spent more time with it, really did not have the financial resources to buy all of the UNIX business that was owned by Novell, and it was a small company. It was struggling. It was a publicly-held corporation, but it had struggled for a number of years. Its stock price had come under pressure. I think there was a perception that its business, which was developing and licensing a flavor of the UNIX business for the Intel 386 microprocessors, that that business was under pressure and potentially not viable at all, long-term.

So its stock priced suffered, and they didn't have sufficient -- they didn't have significant cash. They didn't have any excess cash. What cash they had, they needed for their operations, and they had a limited market cap or a limited market value of their company and thus were limited in their ability to pay for a collection of technologies that Novell had purchased for 300 million and were worth a tremendous amount of money.

Q. So, how was the deal structured in order to address that concern?

A. So, a number of -- a number of moving parts to go in to get into a collection of economics that could make the deal work with Novell. So, first of all, they got what turned out to be a little over 16 percent of

2344

Santa Cruz Operation's stock.

Q. Meaning Novell, here?

A. Novell did. And that particular piece was constrained by a NASDAQ, which is a Federal Rule that says that a public company can't issue more than that amount of its shares in an acquisition without getting stockholder approval of its own shareholders.

So if you were going to issue, for example, 50 percent of your company to somebody to acquire a business, you need stockholder approval. To get -- you need to go to your own stockholders for approval. To do that, you need to file a proxy statement with the Securities and Exchange Commission, and that proxy statement needs to include a tremendous amount of information, including audited financial statements of the business that you're acquiring.

In this case, there weren't separate audited financial statements for the UNIX business or the UnixWare business or any piece of it at Novell. And so financial statements couldn't be obtained that would have enabled SCO to go to its shareholders, and it would have taken a year. I have been through this a number of times. It could have taken at least a year for them to be in a position to make that filing.

So nobody wanted to wait a year, so that was a

2345

constraint. We had to keep the number of shares below that threshold so that we wouldn't have to go through that process. Time was passing, and it's not desirable for either side to go through that. So we're limited in terms of the value of stock, and that was about 50 million.

So, beyond that, there was a royalty arrangement that said that, if SCO developed -- was required to actually develop and complete a new version of UnixWare called the merged product and go out and license that, and there would be royalties that would come, if they hit their business plan, to Novell, to pay a portion -- to pay additional cash flows to Novell for -- that would come back to Novell. And that was viewed as a potential contingent element of the purchase price.

And then, perhaps most importantly, Novell retained all the economics and relationships arising out of the UNIX business. This is not the UnixWare flavor, but the basic UNIX business under which Novell, USL and then Novell, had licensed to IBM and SUN and HP and Sequent and all these other companies, their own version of UNIX. Those -- that business or the economics of that business is retained for Novell, so that we weren't selling all that we bought from AT&T. Novell wasn't

2346

selling all that we bought from AT&T.

We basically carved down to what SCO could afford to pay for, which was the UnixWare business, or the right to exploit and develop that particular flavor, which was the objective of the deal to begin with.

Q. So, let's talk for a bit about the retained portion of the business, the UNIX part of the business that dated back to the AT&T days, as opposed to the UnixWare business. Let me -- as the deal was presented to you for implementation, did you understand that SCO would have some role, vis-a-vis the old UNIX business, or SCO would have some role, vis-a-vis the old UNIX business?

A. Yes.

Q. And what was that role?

A. They were going to be the agent to manage the collection of monies, of royalties on behalf of Novell, of those older base UNIX businesses, those other relationships. And the reason for that is we were transferring all the physical manifestations of the contracts and the people to SCO, and it made sense for there just to be one administrator, so they acted as an agent.

They were intended to act as an agent to manage that business on our behalf, on Novell's behalf, so that

2347

you wouldn't have a licensing group at Novell and a licensing group at SCO doing -- you know, tripping over each other. They were basically put in as an agent.

Q. I'm showing you U-3, Mr. Braham. Is U-3 a draft of the Asset Purchase Agreement with your handwriting on it?

A. It is.

MR. JACOBS: Offer U-3 into evidence, Your Honor.

MR. SINGER: No objection.

THE COURT: U-3 will be admitted.

(Novell Exhibit U-3 received in evidence.)

Q. BY MR. JACOBS: So, Mr. Braham, this is a draft of the Asset Purchase Agreement. It has a typed-on-it date, in the lower left-hand corner, of September 16, 1995. Do you see that?

A. I do.

Q. And it has a lot of your handwriting on it, right?

A. It does. That's my handwriting.

Q. This is only three days from the closing, right -- not the closing but the execution of the Asset Purchase Agreement?

A. I believe that's correct, yes.

Q. So does this refresh your recollection a little

2348

bit about what you were referring to as to the forced march and as to when that was likely taking place?

A. Yeah. I believe that the forced march of the day-after-day meetings, that this was in the middle of that.

Q. Now, if you turn to, in the draft, page 26, Bates Novell 42712.

A. Yes.

Q. I'm sorry. Twenty-seven Can you see a section there marked 4.16?

A. Yes.

Q. Now, what's going on in this section and what can you tell, from some of the handwriting that you've applied to this draft?

MR. SINGER: Excuse me, Mr. Jacobs, the copy of this exhibit you have provided me doesn't have page 27.

MR. JACOBS: It's out of order.

THE COURT: Nor does mine. Where will I find it?

MR. JACOBS: It's out of order, Your Honor. It's before 26.

THE COURT: What's the Bates number?

MR. JACOBS: 42711.

THE COURT: 427.

MR. JACOBS: 11.

2349

THE COURT: 11?

THE WITNESS: So this is -- 4.16 is the key provision that embodied the deal that the UNIX business, as compared to the UnixWare business, that the old UNIX business, the base ownership of UNIX and the relationship of all the other hardware companies, IBM, SUN, HP, Sequent, etc., that those licenses and those relationships would be -- would remain with Novell, but be administered by SCO.

And I'm putting in language here -- this is my handwriting -- to make very clear that SCO did not have the right to modify or change or waive those licenses without our written consent and that they were acting -- they were to act only as our agent, and, if they did not, we could step in and do it ourselves. So this was an enforcement mechanism that established that SCO would act as Novell's agent to exploit these SVRX licenses, which is really -- think of it as the UNIX relationship with the other big companies.

And it was important that we establish that this is Novell's business, essentially, and their involvement in it is to be our agent, and if they didn't do what they were supposed to do, we could step in and do it on our own.

Q. The concept of an agent, that's something that

2350

lawyers become familiar with in law school, correct?

A. Yes.

Q. And what's the basic idea of an agent and what their duties are?

A. So, if you are -- if you own an asset or a business or have the economic rights to something, you can appoint somebody to act on your behalf so that you don't need to be there every minute and sign every document or to exploit -- it empowers somebody to work for you and to represent you.

And we all have real estate agents when we sell our home, and they might go into negotiations on our behalf when we are selling a home or when we are buying a home. Sometimes the agents don't have any power on their own. Sometimes they are given limited powers, but within the scope of the agency, to act on our behalf.

You see it in real state. You see it in all kinds of businesses, where businesses identify somebody who has a limited power to do the work on behalf of somebody else, and they frequently get -- in our real estate deals, we get commissions. In this case, they got a 5 percent share of the royalties.

But the idea is, is that it's our money, our business, and you work for me except for your slice of the economics. And that's what we were trying to get at

2351

here.

Q. And if the person who has retained the agent is dissatisfied with the agent's performance, what can typically happen?

A. Well, then you can terminate the agent at-will. Now, there's frequently negotiations over -- in a real estate deal, you can terminate your agent, but if he's brought you a buyer, you can't terminate him and cut him out of that fee. You have what people call a tail that deals with a transitional relationship between termination of an agent and going to maybe -- and starting with a new agent. But the agent works for and at the pleasure of the principal and has frequently fiduciary duties to the principal, meaning very high duties to work for you, not for himself.

Q. And what were you trying to configure here, vis-a-vis the agency relationship that you testified to?

A. I was trying to configure here -- or not really me. Novell was trying to configure here, with me as its negotiator and implementer, a relationship where SCO would work on Novell's behalf around this set of technologies to maximize and assist Novell in maintaining the viability of this business because this was a critical part of the purchase price that made it possible

2352

for them to buy the UnixWare and take over the UnixWare assets that it got.

Q. And did Novell, in the drafting that you did of section 4.16, limit its authority to direct SCO as to what it could do vis-a-vie the UNIX licenses?

A. It did.

Q. Sorry?

A. It did restrict SCO. The language that I recognize here says: Shall not have the right to enter into future licenses and amendments of the SVRX licenses, it says, except as may be incidental to the UnixWare business that they were acquiring.

And it -- they couldn't do SVRX licenses without our consent.

Q. And if you go to the bracketed sentence: In addition, at seller's sole discretion and at seller's direction, buyer shall amend, modify or waive.

Do you see that? It's highlighted on your screen, Mr. Braham.

A. Yes. Yes.

Q. Did Novell, seller, limit itself in any way as to the direction it could give to Santa Cruz, the buyer?

A. It did not. That sole discretion is put in there to try to make completely clear that Novell is in control here, and Novell has the right to tell SCO what

2353

it can do and can't do and to avoid -- people talk about for the avoidance of doubt. That's something people talk about in legal contracts. That's in there for the avoidance of doubt.

Q. The avoidance of doubt of what, sir?

A. As to whether Novell had complete rights to control what happened with the UNIX business, the SVRX historical UNIX assets and technologies.

Q. Showing you V-3, is that your handwriting on V-3, sir?

A. It is.

MR. JACOBS: I move V-3 into evidence, Your Honor.

MR. SINGER: No objection.

THE COURT: It will be admitted.

(Novell Exhibit V-3 received in evidence.)

Q. BY MR. JACOBS: Now, if you turn -- so V-3 is another draft of the Asset Purchase Agreement with your handwriting on it; is that right, Mr. Braham?

A. It is.

Q. And now if we turn to section 4.16 in this draft, which is at 42765, could you read aloud, Mr. Braham, the handwritten box at the bottom of that page?

A. "In the event that buyer shall fail to take any

2354

such action concerning the SVRX licenses as required herein, seller shall be and hereby is granted the rights to take any such action on its own behalf."

Q. So, the intent of that language, Mr. Braham, was what?

A. If SCO didn't do what it was supposed to do as our agent, we could step in, on our own, on our own initiative, at our choice, and do it ourselves. And so it's intending to give us the right to do that, as well as granting us any rights we need in order to be able to have the power to do that. So, it is intended to be a crystal clear communication that Novell can step in and protect itself if SCO goes off the reservation.

Q. Now, were there a couple of particular concerns that Novell had about being able to direct Santa Cruz back in September of 1995? Were there some agenda items that related to this provision in the company's agenda?

A. I'm not sure I understand what you mean by that.

Q. Were you aware that Novell had entered into buyouts of SVRX royalties going into these negotiations?

A. Yes. They had done -- I believe that they had -- I'm not sure what they had done before, but there was always the possibility of doing complete buyout transactions with the end user -- not really the end

2355

user, the OEM customer of UNIX, such as an IBM, Sequent, HP, other big companies that might be running royalties in the UNIX relationships.

In other words, those companies pay a per-copy fee or pay for source code access, and they might do a deal with Novell, where we just pay a lump sum, and now we have a royalty-free, unfettered right in the future. And the ability to do those buyouts was something that we were very interested in preserving.

Q. And then was there a project related to Hewlett Packard that was on the company's agenda at that time?

A. There was. So -- it was believed -- I believed. People at Novell communicated to me that they believed that the best party to advance UNIX, for the Intel 64 bit architecture. So, at this time, Intel's microprocessors were 32 bit microprocessors.

And think have of it as they are like a 6-cylinder car but not a 12-cylinder car. And so you had software in UNIX for the 6-cylinder car, but HP was working on its 64 bit architecture, and it was believed that they would be the best party to develop the software for the 64 bit architecture, so the 12-cylinder car.

And Novell -- it was very important to Novell to retain the rights to enable HP to develop that flavor of UNIX. And another purpose of the retention in rights

2356

is so that Novell had the ability to enable HP to go off and do this.

So, the licenses to UNIX with these other big companies, it wasn't as simple as we're granting you technology and you can put it with your computers and ship it. Within each of those relationships, there was source code, which enabled those companies to go off and develop their own flavors of UNIX and to use in their own computer systems. And, in this case, HP, there was one coming up with HP, where they were going to develop a flavor for the 64 bit microprocessor, and we wanted the flexibility -- insisted upon, and I don't even think it was controversial -- the flexibility to grant those rights to HP to allow them to do that for the benefit, ultimately, of UNIX in the marketplace.

Q. Now let's create a picture here of what's going on. You're drafting away. You're in this conference room. How are the negotiations actually taking place between the Santa Cruz representatives and the Novell representatives over issues like this particular language?

A. So, from time to time, Santa Cruz executives might appear for a very short period of time in the negotiating room, but they were not the voice. They weren't negotiating anything. The negotiations were

2357

happening between me and my team and Brobeck and its team.

So the way it works, which is very common in the way complex deals are done is, each side funnels in its viewpoints, its hopes and aspirations and fears into their negotiating people, and then that -- those negotiating people articulate a position to the other side, which then is communicated to the lawyers on the other side, and then the lawyers funnel that back to their people. And so you kind of a funnel of all these different inputs which then get put out to the lead negotiator.

And it's helpful, to avoid chaos in deals, that that there actually be a single voice representing an entire constituency on each side. It isn't always the case that it works that way, but in this situation it did. They had Brobeck, Phleger as their voice. We were live, in person; me in the conference room, in their offices, as well as Aaron Alter with me most of the time, and the lawyers on their side. And so that was -- that was the war room, where the deal was negotiated.

Q. And would the people on your team, acting at your direction, would they exchange drafts with the Brobeck representatives?

A. We would. There was -- we would send over, by

2358

e-mail or fax, drafts. This was a time where e-mail was happening, but we all forget that there was a time before e-mail, but we would have e-mail at this point as well as faxes.

Q. The good old days?

A. Yeah.

Q. Let me show you D-4, please. What is D-4, Mr. Braham?

A. I'm trying to look at this and see whether -- it looks like it's a fax. I'm not sure whether this was a fax or an e-mail. But it's an enclosure, sending some language to Jeff Higgins, who was the associate on the deal for Brobeck, from Aaron Alter.

Q. And Aaron Alter was your subordinate on the team, correct?

A. Yes. So this is a fax, so we're still in the time of the faxing.

At this point, people, when they had handwritten stuff on documents, they would fax rather than e-mail because -- right now you can e-mail, and you can put it in a PDF and then you can e-mail it. Back then, PDF's were not -- it may have been possible, but when people had a mark up of something, they would fax those pages rather than e-mail.

THE COURT: Mr. Braham, I've got to ask you.

2359

You've got a lot of information, but only some of it is relevant to the case, and I want you to please answer the questions posed to you by Mr. Jacobs as directly as you can, please.

THE WITNESS: Okay.

MR. JACOBS: I offer D-4 into evidence, Your Honor.

THE COURT: Any objection.

MR. SINGER: No objection.

THE COURT: D-4 will be admitted.

(Novell Exhibit D-4 received in evidence.)

Q. BY MR. JACOBS: So, as you said, Mr. Braham, this is a fax cover sheet from Aaron Alter to Jeff Higgins, you see it's on Wilson, Sonsini letterhead, and it's going over to Brobeck, and it's dated September 18, 1995. Do you see that?

A. Yes.

Q. And if you look on the third page, you'll see some of what's called a rider, with some language in it about -- about bankruptcy in the middle. Do you see that?

A. Yes.

Q. What was the concern that drove the proposed inclusion of that language?

A. So, there was a question on the Novell team as

2360

to whether SCO was -- potentially at risk for going under, going bankrupt or becoming insolvent. And there is concern, in intellectual property situations, that, in bankruptcy, contracts can be modified or you really don't know how they are going to be handled in bankruptcy.

And so, we were concerned that we wanted to make sure that Novell had the equitable interest in the SVRX agreements and royalties because under -- my understanding is that under the Bankruptcy Code, that would enable us not to be -- enable Novell not to be adversely affected if SCO did go into bankruptcy and so that we wouldn't have the unpredictability that can occur as intellectual property or contracts or agreements find their way into a company that's in bankruptcy.

Q. So, September 18, 1995. The Asset Purchase Agreement will be executed on September 19, 1995?

A. Yes.

Q. And the language is going back and forth between the negotiating teams?

A. Yes.

Q. Y-3. If you look at especially the third page in on Y-3, Mr. Braham, can you identify what we've got here? Do you see Shannon Whisenant's name there, on 407?

A. Yes.

Q. And you see that she's faxing to Jeff Higgins?

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A. Yes.

Q. And Shannon was on your team and working at your direction, correct?

A. Yes.

MR. JACOBS: Offer Y-3 into evidence.

MR. SINGER: No objection.

THE COURT: It will be admitted.

(Novell Exhibit Y-3 received in evidence.)

Q. So, actually, let's start on the front page. And this is a fax from Shannon Whisenant to Burt Levine. Do you see that?

A. Yes.

Q. Did you know who Burt Levine was?

A. I believe he was a lawyer who worked in the UNIX business at Novell at this point.

Q. And if you see the city, state, it says Floren Park, New Jersey?

A. Yes.

Q. Is that consistent with your recollection that he worked in the UNIX business unit?

A. Yes. That's where the UNIX business was and remained at Novell.

Q. And then the cover sheet that I was showing you at 40407, that's from Shannon Whisenant -- I'm not saying her name right, am I?

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A. Whisenant.

Q. Whisenant at Wilson, Sonsini, again, to Jeff Higgins at Brobeck. Do you see that?

A. Yes.

Q. And then, if you look at the schedules, you'll see there is a draft dated 9/18/95 of Schedule 1.1(a) and Schedule 1.1(b).

A. Yes.

Q. Do you see that? And if you look at schedule 1.1(a), and you look at the intellectual property section, you see intellectual property listed on 1.1(a). Do you see that? That's 1.1(a) is the included asset schedule?

A. Yes.

Q. And then if you turn the page over to 1.1(b) and look at Roman V, you'll see that in intellectual property, all copyrights are excluded. Do you see that?

A. Yes, I do.

Q. How did it come to be that copyrights were listed as an excluded asset in the drafts of schedules to the Asset Purchase Agreement?

A. We proposed it, negotiated for it. It was agreed upon, and that's how the agreement was executed.

Q. And at whose direction did you implement the exclusion, on the excluded assets schedule of all

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copyrights?

A. At Novell's, but through David Bradford.

Q. And what was the rationale that you understood for excluding the copyrights?

A. We were protecting Novell's interests. We were concerned about the copyrights moving over from a bankruptcy standpoint. We were concerned about the copyrights moving over because we had a very important interest in retaining the UNIX business, which is part of the core economics of the deal. And this was the deal we negotiated for.

It's not -- when you go through an asset deal, you negotiate asset-by-asset, and we were unwilling to transfer the copyrights, and they were willing to acquire the business without them.

Q. Do you recall any push back from Santa Cruz during negotiations on this question?

A. I recall some discussion, but I don't -- I don't actually recall strong push back.

Q. And did you have an understanding of how the structure of the Asset Purchase Agreement would work if copyrights were excluded, ownership of copyrights were excluded as an asset being transferred to Santa Cruz? How would the deal work? How would -- for example, how did you understand Santa Cruz would go forth and prosper

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in the UnixWare business without copyrights?

A. It had access -- it had physical ownership, in terms of the actual physical embodiment, of the disketts, the manuals, the people who understood it, the computers that had the UnixWare business, the software on it. And, essentially, it had a license to use that to then build a new version of UnixWare, and it would own the copyrights in what it built on top of the base UNIX and UnixWare software that it had a copy of.

And it would go forth and license that to third parties, sell it. And because its embodiment, its improvements on that were its copyrights, they had complete ability to exploit the business.

Q. And how did that compare with your understanding of the basic structure of the relationship with other vendors of UNIX flavors?

A. Well, those other vendors had licenses to UNIX from -- to their version of UNIX and would build their own improvements on their versions of UNIX to which they also had their own copyrights and ownership. Everybody is -- everybody starts out with a foundation and then they build their own house on top of it, and they have the ability, then, to sell that house or exploit that house as they wish, but -- so, everybody sort of starts with a basis that they get a license to, and then they go

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off and build what is actually theirs on top of it.

Q. I'd like to show you, sir, SCO Exhibit 1. Actually, at this time, I think I won't. Just to tell the jury where we're going on this, you weren't involved in Amendment Number 2, were you, sir?

A. I was not.

Q. So, let's look at A-1, which is the Asset Purchase Agreement as executed on September 19, 1995. Would you please look at Section 1.1(a), Purchase And Sale Of Assets. And do you see there's an explanation there of what is going to go to seller and what is not -- what is going to go from seller to buyer and what is not? Do you see that?

A. Yes.

Q. I would like to ask you particularly about the phrase "notwithstanding the foregoing."

A. So, 1.1(a) lays out a list of assets or actually refers to the attachment as a list of assets that are going to be transferred to SCO. 1.1(b) is a definition of assets that are excluded. Sometimes, in drafting an agreement, you have provisions which can be read as inconsistent, or you can have a schedule that looks like it overlaps with another schedule.

And what you do in drafting, hopefully, is to clarify that one trumps the other; that, in the event

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there is a conflict, one wins, so that people can say, well, I know -- maybe I'm confused as to what's on Schedule A, but Schedule B is very clear, and now I need to know who wins in the event that you have a potential overlap.

And, "notwithstanding the foregoing," is magic language, in my view and my understanding, that makes it clear that 1.1(b) wins over 1.1(a).

I was focused on this language when we were drafting because I was watching with a keen eye to protect Novell's interests, and it's very difficult, in working on a hundred-page agreement, to be absolutely confident as to how every clause is going to be viewed. So you set up some rules to order them. And that "notwithstanding the foregoing" is actually one of the things that I remember very clearly, 15 years later.

Q. If you turn, then, to Schedule 1.1(b) and you look at the reference there to intellectual property and the excluded assets, all copyrights and trademarks, do you see that? You can follow on the screen. I think it may be easier.

A. Yes.

Q. Did the Santa Cruz representatives have an opportunity to review this language before the Asset Purchase Agreement was signed?

2367

A. Yes, they did.

Q. Was Santa Cruz represented by skilled counsel in the transaction?

A. They certainly were.

Q. Is there any doubt in your mind that the Santa Cruz representatives, in looking at this schedule, were capable of understanding your intent to exclude the UNIX and UnixWare copyrights existing as of the date of the Asset Purchase Agreement?

A. No doubt, whatsoever.

MR. JACOBS: Thank you, Mr. Braham.

THE COURT: Mr. Singer.

MR. SINGER: Your Honor, with the Court's permission, I'll look for an appropriate breaking point in about ten minutes or so.

THE COURT: Thank you, Mr. Singer.

CROSS EXAMINATION

BY MR. SINGER:

Q. Good afternoon, Mr. Braham. My name is Stuart Singer. I'm one of the attorneys for the SCO Group.

A. Good afternoon.

Q. Now, have you heard of Amendment Number 2?

A. I have.

Q. You understand that Amendment Number 2 changed the language in the Schedule of Excluded Assets that you

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were discussing with Mr. Jacobs, right?

THE COURT: One second, please.

MR. JACOBS: Your Honor, this is beyond the scope. I specifically excluded him from any -- he specifically excluded himself from any involvement of Amendment Number 2, and now Mr. Singer is just going to engage in a lawyers' debate about the meaning of Amendment Number 2.

THE COURT: Well, you asked him about his involvement with Amendment Number 2, so Mr. Singer must be permitted to ask some questions about it as well.

MR. JACOBS: If it's about his involvement, fine. If it's about asking this lawyer to be a legal interpreter, I think we're beyond the scope of the direct and wasting time.

THE COURT: Do you intend to ask this lawyer about his lawyerly opinion on Amendment Number 2?

MR. SINGER: Well, I don't know where this is going with him, but I intend to elicit the existence of Amendment Number 2, the role Amendment Number 2 has versus the others.

THE COURT: Why don't you go ahead, and Mr. Jacobs can object to specific questions.

Mr. Braham, I'm sure you understand that if Mr. Jacobs stands up before you have answered the

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question, please pause so that I can hear the objection.

THE WITNESS: Okay.

Q. BY MR. SINGER: Mr. Braham, just so we're clear on what we're talking about, let's put Amendment Number 2 before you, which is part of SCO Exhibit 1. Which is the last part of that exhibit. You have seen this before, haven't you?

A. I have.

Q. And you understand that the way an amendment works -- you were talking a few minutes ago about something having priority over something else. An amendment like this has priority over the language which is replaced, correct?

A. It should be read together, but I'm not sure I understand priority.

Q. Well, let me be more specific. You understand that when it says, as it does here in paragraph A, "With respect to Schedule 1.1(b) of the agreement titled Excluded Assets, Section 5, Subsection A shall be revised to read."

When you have a later amendment like that, you understand that the old language that you were testifying to on the Excluded Assets Schedule no longer exists, and this is the new language that that has replaced it, correct?

2370

A. Yes.

Q. This is now the operative language, from October, 1996, forward, that has been put into the agreement, correct?

A. Yes.

Q. And so, what you were talking about with this asset schedule that was carefully negotiated, that excluded copyrights from the deal; one year later, that exclusion was taken out and replaced with this language?

A. I don't believe that it had the effect of --

Q. I'm not asking you that. I'm asking you: That language was taken out?

A. The language was taken out and replaced by this. I assumed that it was properly executed. I don't -- I didn't -- wasn't participating in it, so I assume it was properly executed.

Q. I assure you, Mr. Braham, if this wasn't carefully and properly executed, we would be hearing all about it from Novell.

A. Okay.

Q. So, assuming that this was properly executed, you understand that the language that you have been testifying about earlier, on copyrights being excluded, was replaced by the language which now appears in Amendment Number 2?

2371

A. Yes.

Q. Now, you weren't involved in the drafting of Amendment Number 2, correct?

A. No.

Q. And you weren't involved in the negotiation of Amendment Number 2, correct?

A. Correct.

Q. Okay. Now let's turn back to what you were involved in, which were the issues on the Included Asset Schedule. Is copyright, sir, a way of indicating ownership of source code?

A. It's a way of -- it is a -- one of the intellectual property interests involved in ownership. It is not the only form of intellectual property interest in ownership of software or in source code, but it is a particular -- it is a particular slice of intellectual property interests that relate to a software or source code.

Q. So there may be other forms of ownership, like owning the tangible media. That's one form of ownership, correct?

A. Yes. That's ownership of the tangible media, correct.

Q. And another type of ownership is the ownership of the copyright in that source code?

2372

A. Correct.

Q. Correct? Okay. Now let's look at what was the Included Asset Schedule in the agreement you negotiated, Schedule 1.1(a). And let's take a look at it together. And if Mr. Calvin highlights that first paragraph, I think you will be able to read even more clearly.

You understood that, in the agreement you negotiated, these were the assets being sold to Santa Cruz, correct?

A. Yes.

Q. And that says: "All rights in ownership of UNIX and UnixWare, including but not limited to all versions of UNIX and UnixWare."

And let's pause there. This included all versions of both UNIX and UnixWare, correct?

A. Yes, but the --

Q. Well.

A. Yes, but you have to read this in connection with the specific paragraph on intellectual property. So --

Q. We're going to get to that. You have -- each of these paragraphs, sir, is cumulative. In other words, if you sell Santa Cruz an asset in paragraph 1 of the list of included assets, you don't have to repeat that in, say, paragraph 5, right?

2373

A. Sometimes you have more specific clauses that could be a subset of a more general clause, and the specific clause is what lawyers typically look to, to deal with those specific items so --

Q. Well, my question --

A. -- you said you don't have to, but it is the practice, in drafting contracts, to sometimes have broader sets and narrower sets, and sometimes they overlap.

Q. If something is transferred on a list of assets that I'm buying on one paragraph, and we're still on another paragraph of the list of assets I'm buying, if something isn't listed in that paragraph, are you saying that somehow it means that it wasn't included in the first paragraph?

A. I'm confused.

Q. Okay. That wasn't a very good question. So let's look at what this actually says: "All rights in ownership of UNIX and UnixWare, including but not limited to all versions of UNIX and UnixWare.".

And if you go down -- and I'm going to skip over some of this that the jury has seen before, and it says: "Including source code."

Do you see that? Correct?

A. Yes.

2374

Q. So one of the included assets, when you just look at the schedule of assets being sold, are all rights of UNIX and UnixWare, including, but not limited to, all versions UnixWare, including source code.

Do you see that?

A. Yes.

Q. And then, Mr. Braham, if we go down to the list of products right before that.

Mr. Calvin, if you could blowup the last part of paragraph 1.

At the end there it says: "Such assets to include, without limitation."

Now, "without limitation" is also a term of art in your field, right?

A. Yes.

Q. Can you tell the jury what it means?

A. If you are making a list of something under a general statement, then the list doesn't -- if there's something that's not on the list, it doesn't necessarily mean that it's not included. So, it enables you to talk about something and give examples but not necessarily give every single example, so your list is representative but not necessarily complete. It may be complete. It may not be. But the -- what you're saying is that, by virtue of making the list, you're not necessarily making

2375

it complete.

Q. Right. It includes the assets, without limitation, meaning at least the following, but there may be more. Correct?

A. Yes.

Q. Now, if we look at what is then following that paragraph, you have a list of UNIX source code products, correct?

A. Yes.

Q. And those are both UnixWare 2.0 and products listed as prior products on such schedule. Do you see that?

A. Yes.

Q. And you have the UNIX products, which are listed then below that, which are products that are called UNIX System V Release 4, 1/ES, and prior products to that, UNIX SVR 4, 4.0 MP, and prior products to that, correct?

A. Yes.

Q. So all rights total -- so all rights in interest, all rights in ownership, to use your language, of UNIX and UnixWare, in these products, and/or prior products, were being transmitted in the Schedule of Included Assets, right?

A. I believe the intellectual property clause has

2376

to be read with this. So, you're saying all rights in ownership. Copyrights are part of rights in ownership, but copyrights and IP is dealt with specifically under the IP section. So, in the absence of that section being there, I would agree with you, but, because that section is there, that specifically deals with the issue of intellectual property, I believe this relates to the physical manifestations of the source code. It's not -- it's not as comprehensive as you say.

Q. So you're saying, when you said all rights in ownership of UNIX and UnixWare, that doesn't include the rights you get by copyright. That is what you're saying?

A. Because of how we drafted the intellectual property section, that's correct.

MR. SINGER: I think we'll pick up with this tomorrow if it's all right with the Court, Your Honor.

THE COURT: All right. Ladies and gentlemen, we will recess for the afternoon, and we will continue tomorrow at 8:30.

(Jury leaves the courtroom.)

Mr. Braham, do you pronounce your last name Braham or Braham?

THE WITNESS: Braham like "graham" only with a B.

THE COURT: All right. Thank you. I think we

2377

all ought to be somewhat consistent with the names.

Is there anything, counsel, before we recess?

MR. SINGER: Not from us, Your Honor.

MR. BRENNAN: Your Honor, we just have a brief matter.

THE COURT: Go ahead.

MR. JACOBS: Maybe we could let Mr. Braham step out.

THE COURT: Mr. Braham, if you would just please excuse yourself to the hallway.

MR. BRENNAN: Your Honor, this is a matter that we would solicit your assistance in. The practice and understanding, I think express agreement between counsel for the respective parties has been to notify one another the day prior as to who the expected witnesses would be. We received a request from SCO's counsel as to who we would call tomorrow, the last day of evidence, and we informed SCO's counsel that we expected, if Mr. Braham didn't finish, we would conclude with him, and we expected to call Terry Musika, who is the expert witness and, with time, David Bradford.

We, in turn, since tomorrow is the last day, asked for SCO's counsel to identify to us who they expected to call, recognizing there's not a lot of time and that we were keeping track, and the response was to

2378

give us a list of seven different individuals. And, Your Honor that really just isn't very helpful. I don't think it's consonant with the spirit of what we were going to do.

I hate to end trial with this sort of disagreement. We've been very clear about who we were going to be presenting, and, just in short, Dr. Musika or Mr. Musika has been deposed. They know what his opinions are. There is no surprise there. They certainly know who David Bradford is. The question, Your Honor, is if we could get, frankly, a more specific indication, if there is any time, and I'm not confident there will be, but who, in fact, they would expect to call. And we would be able to prepare.

THE COURT: Mr. Singer?

MR. SINGER: Yes, Your Honor. They have a number of witnesses who haven't yet testified, and I will mention the list and why we are where we are with it. We intend to call rebuttal witnesses to be extremely focused, as we think the purpose of rebuttal testimony is.

THE COURT: I'm sure that's true. 1:30 is the witching hour, you understand, Mr. Singer?

MR. SINGER: We understand that. We are going to have to be very careful how we allocate that time.

2379

There have been witnesses who have testified, where we would intend to call Mr. Frankenberg and Mr. Thompson. If Mr. Bradford testifies, and it still sounds equivocal, Mr. Johnson, Lee Johnson, would be a likely rebuttal witness to it. We don't know for sure whether Mr. Bradford is going to testify, and Mr. Mattingly falls in that same category. We listed Ms. Botosan as a potential rebuttal witness because we haven't gotten, yet, to the direct testimony of Mr. Musika.

THE COURT: You do know what his report says.

MR. SINGER: If his report comes in as anticipated, we believe Ms. Botosan would have a short rebuttal testimony. The other two witnesses listed, in an abundance of caution, Ryan Tibbitts and Chris Sontag, I think those are less likely to be needed, and it would only have to be if something unanticipated happened, and these witnesses will remain to be called.

THE COURT: It doesn't help a lot, Mr. Brennan.

MR. BRENNAN: It, frankly, doesn't. I think, as a practical matter, given the course of where we're headed, there will be very limited time, and to, again, be given a list of seven people, I don't think is --

THE COURT: I do understand what you're saying, but I don't know what more I can force out of him.

2380

MR. BRENNAN: I'm not asking you to force. I'm just asking you to encourage cooperation.

MR. SINGER: I can help a little bit. Unless there is something really unforeseen tomorrow -- and if it happened, we would raise it as briefly as possible -- we don't anticipate calling Mr. Sontag and Mr. Tibbitts. I thought those were more safety valves if something came up we weren't expecting.

THE COURT: To that end, then, in order to reinforce this a bit more, the Court would not allow you to recall them unless you could make a very convincing argument they are necessary. Do you understand?

MR. SINGER: I understand, Your Honor.

THE COURT: Clear and convincing argument.

MR. SINGER: Excuse me, Your Honor?

THE COURT: Clear and convincing argument.

MR. SINGER: Clear and convincing argument. We will be especially careful before going there. On the other hand, the other witnesses, I think, are ones which should be anticipated, at least depending on our time. And it would be very focused testimony. Obviously Ms. Botosan would be in relationship to what Mr. Musika says, and the others depend a great deal on what Mr. Bradford says on the stand and relate also to what Mr. Tolonen said.

2381

THE COURT: In the spirit of cooperation, if, by chance, you decide not to call Mr. Bradford, I think it would be helpful if you communicate that so that witnesses will not be kept on call that will not be called.

MR. BRENNAN: We certainly will do that. And I can at least make this -- I will do exactly as the Court has instructed.

THE COURT: And you, too, Mr. Singer. If you decide there are any witnesses of those remaining five you clearly will not call, I think you should communicate that immediately to Mr. Brennan.

MR. SINGER: We will do so. Will we know, say, before the end of the day today about Mr. Bradford?

MR. BRENNAN: Your Honor, so we are precise, I think this is going to be a function solely of the clock. That's going to be the determining factor, how much time is still consumed on our behalf with Mr. Braham, how much is spent with Mr. Musika, and then that will be the driving factor.

THE COURT: Okay. I think we all understand each other. All right then

MR. BRENNAN: Thank you, Your Honor.

MR. SINGER: Yes.

THE COURT: Is there anything else?

2382

MR. BRENNAN: No, that's fine, Your Honor.

THE COURT: All right. We'll be in recess. Counsel, there are no hearings, if that makes any difference.

(Whereupon the proceedings were concluded for the day.)

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