Here's the text version of IBM's Greatest Hits' Exhibit 227, the Declaration of David McCrabb.
SNELL & WILMER LLP
Alan L. Sullivan (3152)
Todd M. Shaughnessy (6651)
Amy F. Sorenson (8947)
[address, phone, fax]
CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler (admitted pro hac vice)
David R. Marriott (7572)
[address, phone, fax]
Attorneys for Defendant/Counterclaim-Plaintiff
Business Machines Corporation
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
THE SCO GROUP, INC.,
INTERNATIONAL BUSINESS MACHINES
DECLARATION OF DAVID McCRABB
Case No. 2:03CV0294 DAK
Honorable Dale A. Kimball
Magistrate Judge Brooke C. Wells
I, David McCrabb, declare as follows:
1. This declaration is submitted in connection with the lawsuit brought
by The SCO Group, Inc. ("SCO") against IBM titled The SCO Group v.
International Business Machines Corporation, Civil No. 2:03CV-0294
DAK (D. Utah 2003). I make this declaration based upon personal
2. 46rom 1995 through 2001, I was employed by Santa Cruz Operation,
Inc. ("Santa Cruz") in various executive management positions. I was
President of Santa Cruz's Server Software Division when that division
was sold to Caldera International, Inc. ("Caldera") in May 2001.
Following the acquisition, I became President and Chief Operating
Officer ("COO") of Caldera. I left Caldera in October 2001 to become
Chief Executive Officer of NewMonics, Inc.
Career at Santa Cruz
3. I joined Santa Cruz in 1995 as Vice President of Corporate Marketing,
then soon after became Vice President of Marketing and Channel Sales,
where I directed the company's branding, awareness, and channel
architecture strategies. A "channel" is essentially a route of
distribution for products where, for example, a Santa Cruz product would
be sold to a computer hardware manufacturer, loaded onto the
manufacturer's hardware and then sold to the consumer.
4. I later became Senior Vice President of Worldwide Sales and Field
Operations, where I led a unified worldwide sales organization,
responsible for channel, OEM (original equipment manufacturer) and
5. I ultimately became President of the Server Software Division in
2000, where I was responsible for Santa Cruz's UNIX and Linux products
and support services. In that capacity I became familiar with software
licenses because I was the executive in charge of all negotiations with
OEMs and other major licenses.
Santa Cruz's Purchase of UNIX Assets from Novell
6. In December 1995, soon after I had joined the company, Santa Cruz
acquired certain UNIX assets from Novell for approximately $53,000,000.
The assets included the UnixWare product line, the rights to the UNIX
System V code and certain existing System V licenses.
7. I belive Santa Cruz overpaid for the UNIX assets it acquired from
Novell. While UnixWare was in some ways a more reliable operating
system, it was also more difficult to install than Santa Cruz's own
product, OpenServer. In addition, Santa Cruz did not acquire a large
customer base from Novell, and also did not dramatically increase the
size of its channel, gaining only a few additional OEMs and independent
software vendors ("ISVs") in the transaction.
Santa Cruz's Rights with Respect to Code Developed by Its
8. As the President of Santa Cruz's Server Software Division, I
understood and believed that the UNIX System V licenses that Santa Cruz
acquired from Novell entitiled Santa Cruz to control certain rights
regarding its licensees' use of the System V code. I did not understand
or interpret the System V licenses to allow Santa Cruz to control or
limit the code, modifications and derivative works, including any
methods or concepts therein, which were developed by its licensees. I
understood and believed that the licenses permitted Santa Cruz to
prohibit the disclosure of System V code, but did not permit the company
to limit or prohibit the use or disclosure of the licensees' own code.
My reading of the language of the licenses led me to conclude that
System V licensees were free to do as they wished with their own code,
modifications and derivative works, so long as the code, modifications
and derivative works did not contain System V code. Santa Cruz told
licensees that it interpreted the license agreements in this manner. In
fact, I can recall personally expressing this viewpoint in license
negotiations on Santa Cruz's behalf with Lucent Technologies.
9. Prior to Santa Cruz's acquisition of the UNIX assets from Novell,
Santa Cruz was itself a System V licensee and distributed its OpenServer
product under that license agreement. During that time, Santa Cruz
developed source code, methods, and concepts for its OpenServer product
and considered that code and those methods and concepts to be Santa
Cruz's intellectual property. This "value add" was an essential portion
of the operating system, and Santa Cruz believed that it had the right
to control all portions of OpenServer that it had developed itself.
Santa Cruz did not believe that Novell (or any of Novell's predecessors
in ownership to UNIX System V) had the right to control the code,
methods, and concepts developed by Santa Cruz that were part of Open
10. During the time that I was President of Santa Cruz's Server Software
Division, I believed that Santa Cruz's System V licensees were free to
do as they wished with their own code, modifications, derivative works,
methods, and concepts, so long as they did not disclose System V
11. During my years in executive management positions in the software
industry, I have become familiar with how software licenses work and how
companies and licensees interpret their respective rights under
licensing agreements. I would be surprised if any established software
company takes a public position with what I understand to be SCO's
interpretations of its rights with respect to source code,
modifications, derivative works, methods, and concepts developed by its
licensees. If a software company were to take a position consistent with
SCO's interpretation, I believe that licensees would be extremely
reluctant to agree to such restrictive terms and would likely decline to
enter into such licensing agreements. Licensees would be very hesitant
to enter into such agreements because they would never realize any value
from their own work.
IBM's System V License Buyout
12. In 1996, Santa Cruz, Novell, and IBM entered into Amendment No. X
which, in exchange for IBM's one-time payment of $10,125,000, gave IBM
the "irrevocable, fully-paid up, perpetual right to exercise all of its
rights under [the IBM Software and Sublicensing Agreements] beginning
January 1, 1996 at no additional royalty fee."
13. I understood this language from the agreement to mean that Novell
and Santa Cruz no longer had any termination right with respect to IBM's
System V license, though Novell and Santa Cruz retained the right to
seek to enjoin or otherwise prohibit conduct that violated their
14. In the Summer of 2000, I became the Santa Cruz executive who was
responsible for Santa Cruz's involvement in Project Monterey. For
several reasons, I believed that the decision to participate in Project
Monterey was a bad business decision for Santa Cruz. I believed it was a
bad business decision because Santa Cruz received no money or additional
license revenue in the deal and IBM, rather than Santa Cruz, would lead
the development efforts. I believed that Santa Cruz should have taken
the lead in development for several reasons, chief among them that IBM
already had a 64-bit operating system and would likely have little
incentive to move quickly to create a competing product within that
market. Nonetheless, IBM did move forward with development on the
project and was making progress towards delivering a product.
15. In the fall of 2000, during the time that Caldera was conducting due
diligence for the transaction in which it would acquire Santa Cruz's
Server Software and Professional Services divisions, Caldera
specifically asked me about Project Monterey. I shared with Caldera my
belief that the Project Monterey contract was a bad agreement for Santa
Cruz. I also told Caldera that because there was a change of control
provision clearly in the IBM contract, IBM would have the option to
withdraw from the Project Monterey agreement after the Caldera
transaction. In addition, I expressed my opinion that it was unlikely
that the 64-bit UNIX on Intel chip would actually be delivered and that
Project Monterey would probably not produce a product within five
16. The Joint Development Agreement ("JDA") entered into by Santa Cruz
and IBM in October 1998 specifically envisioned IBM's use of
UnixWare/SVR4 code in IBM's AIX for Power product. Indeed the JDA, which
set forth the parties' rights and obligations with respect to
UnixWare/SVR4 code in its products including AIX for Power. I was aware
as early as August 2000 that IBM incorporated UnixWare/SVR4 code into
AIX for Power. IBM made clear to us - in fact, to the whole market -
that it had included UnixWare/SVR4 code into AIX for Power.
Santa Cruz's Involvement In Standardization
17. Santa Cruz participated in UNIX standardization efforts during the
time I was employed by the company. Santa Cruz believed standardization
was important to growth and success of UNIX and the various flavors of
UNIX operating systems, and encouraged its licensees to adopt the
standards set forth in IEEE's POSIX and The Open Group's Single UNIX
18. Santa Cruz did not view its licensees' compliance with such UNIX
standards as a violation of their UNIX license agreements with Santa
Cruz. Santa Cruz was aware that its licensees were complying with the
POSIX and Single UNIX Specification standards and had no intention of
taking legal action in response to such activity.
19. Santa Cruz also supported the standardization movement with regard
to Linux. Santa Cruz encouraged adoption of the Linux Standard Base
(LSB) and saw compliance with standards as vital to the future success
and adoption of Linux.
20. In May 2000, I was interviewed by Slashdot regarding Santa Cruz's
plans regarding Linux. Slashdot is an internet news source that
specializes in technology-related news. In that interview, I stated:
"With our investments throughout the Linux Community, we care about the
Linux market more than ever. This being the case, we are very concerned
about fragmentation. This is why we stand whole-heartedly behind the
Linux Standard Base".
Santa Cruz's Linux Strategy
21. Santa Cruz was aware of the development of Linux as a UNIX-like
operating system and knew that there were many similarities between
Linux and UNIX.
22. During the time that Santa Cruz owned the UNIX assets, individuals
within Santa Cruz raised the issue of whether Linux might infringe on
Santa Cruz's UNIX intellectual property rights. At one point, Santa Cruz
considered selling intellectual property insurance to Linux users that
would include a guarantee and indemnification from Santa Cruz that users
who purchased the insurance would not be liable for violating any of
Santa Cruz's intellectual property rights through their use of Linux.
Such a program was discussed in late 1999 and early 2000, but ultimately
was not pursued.
23. In early 2000, Santa Cruz changed its business strategy and decided
to develop and distribute its own Linux product. Santa Cruz saw that the
Linux tide was coming and decided it needed to ride the wave; the
company also knew that sales of its aging product, OpenServer, were
declining and that Linux provided a tremendous opportunity. Santa Cruz
studied the Linux opportunity and developed a roadmap to pursue it. A
primary part of the roadmap was to phase out OpenServer and work toward
migrating Santa Cruz Operation's OpenServer customer base to Linux.
24. Santa Cruz believed that it would be well-positioned to use its UNIX
expertise to improve Linux and produce a high-quality Linux
25. Santa Cruz had incorporated a considerable amount of open source
code into its own OpenServer product and had widely distributed that
product since before I began my employment with the company; therefore,
the company was familiar with open source code and how to incorporate it
into its products.
26. In the Spring of 2000 Santa Cruz announced to its OEMs and partners
that it was developing a Linux product. The Santa Cruz Linux product was
planned to be a server, rather than a desktop, product.
27. Santa Cruz did not have any concerns about following clean room
procedures in developing its Linux product because it believed that it
could control any code that was ultimately open-sourced to the public.
Therefore, the company selected programmers who were experienced in
writing effective UNIX code and put them to work on writing and
compiling Santa Cruz's Linux product.
28. In my May 2000 interview with Slashdot, I stated "[Santa Cruz] is
accellerating its participation in and contributions to, the Open Source
Community. In some cases, we will be taking current technology that we
think is needed in the Linux market and driving it forward as the
project maintainers. Right now, we are focusing on bringing some of our
high-performance Intel development tools to Linux."
29. I also told Slashdot: "When making comparisons between UNIX and
Linux platforms, there are still meaningful and significant areas where
Linux falls short. We see ourselves as being in a position to help
address these areas".
30. Santa Cruz was also interested in developing the capability to run
Linux binaries on its UNIX operating systems, and worked towards
developing programs, including the Linux Kernel Personality ("LKP"),
that would make it possible to run Linux applications on UNIX operating
31. In my May 2000 Slashdot interview, I stated: "Linux is experiencing
tremendous momentum and attracting ISVs who have never ported
applications to SCO Unix platforms. To leverage this activity, SCO is
currently developing better Linux binary compatibility for our existing
32. In early 2001 and as part of its Linux product strategy, Santa Cruz
obtained certification of Linux on UnixWare from Oracle, a prominent
software manufacturer. To "certify" Linux on OpenWare means that
applications developed for Linux could be run on the UnixWare operating
system. The significance of this certification was to assure customers
that they could run Linux applications on UnixWare.
Caldera's purchase of Divisions from Santa Cruz
33. Santa Cruz had a successful year in 1999 due to the Y2K phenomenon.
In 2000, however, businesses dramatically reduced their technology
spending, resulting in shrinking revenues for Santa Cruz. At the same
time, Santa Cruz was also hurt by increased competition from Microsoft,
which was getting stronger in the server market. As a result of these
factors, Santa Cruz downsized substantially in 2000.
34. Caldera did an initial public offering of stock in March 2000. The
company, however, did not have a substantial distribution channel or any
established products, so it decided to use the proceeds of the initial
public offering to acquire another company with a large channel and
existing portfolio of products.
35. In May 2001, Caldera purchased the Server Software and Professional
Services Divisions of Santa Cruz. Included in this acquisition was Santa
Cruz's UNIX business, of which I was then in charge.
36. After the Caldera acquisition, I was offered the position as
President and COO of Caldera. I accepted this position and served in
that role from May to October of 2001.
37. Like Santa Cruz before it, Caldera's acquisition of the UNIX System
V licenses entitled it to control certain rights regarding its licensees
use of the System V code, but the licenses did not allow Caldera to
control or limit the code, modifications and derivative works, including
any methods or concepts therein, which were developed by its licensees.
I understood and believed that the licenses permitted Caldera to
prohibit the disclosure of System V code, but did not permit the company
to limit or prohibit the use or disclosure of code that licensees
developed on their own.
38. The CEO of Caldera at that time was Ransom Love. Mr. Love believed
that the company should develop desktop Linux to compete with Microsoft
in the desktop operating system market. I did not want Caldera to pursue
desktop Linux because I did not think that Caldera could compete
effectively with Microsoft. I tried to prevent this strategy from being
implemented because I thought it would drain both the company's economic
and technical resources without much promise of return on investment.
39. Ransom Love's vision for Caldera company was to pursue a business
plan that emphasized developing Linux compatibility for UnixWare and
40. Caldera's plan was to sell Linux into the former Santa Cruz channel.
Caldera's Linux product strategy was to use the newly acquired UNIX
assets to make Linux more reliable, powerful and "enterprise
Caldera Recognized Linux As "UNIX-like" and Encouraged Linux
41. As both a Linux company and a UNIX company, Caldera recognized the
many similarities between the two operating systems.
42. Caldera recognized the importance of Linux standardization and saw
compliance with standards as vital to the future success and adoption of
Linux. Caldera participated in standardization efforts and encouraged
adoption of the Linux Standard Base (LSB).20
43. In a 2001 presentation to the Hong Kong Computer Society entitles
"Linux: Insuring the Future" on behalf of Caldera, I referred to Linux
as a "simple technology with UNIX-like feel and capabilities" and stated
that a critical factor to the success of Linux was the adoption of the
Linux Standard Base standards.
44. In a presentation I gave on behalf of Caldera entitled "Unifying
UNIX and Linux for Business", I listed five critical factors for
insuring the success of Linux. Santa Cruz believed so strongly in the
necessity of Linux standardization that factors one through three were
"LSB". I also stated in that presentation that Caldera's "suggestion is
for all Linux companies to support the LSB".
45. I believed that adopting the Linux Standards Base was important
Linux needed one common version and establishing standards would help
avoid fragmentation and was critical to encouraging adoption by
46. I declare under penalty of perjury that the foregoing is true and
Executed September 18, 2006
Los Gatos, California