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Day 2 of the Novell v. SCO trial - Updated 6Xs
Wednesday, April 30 2008 @ 08:38 PM EDT

I just heard from Chris Brown and there's a docket entry from Day 2 of the SCO v. Novell, now morphed into Novell v. SCO, trial. Today was also the hearing in the afternoon on the summary judgment motions. We'll have a longer report from Chris, and I think others, to follow. Darl took the stand today, called by Novell.

Here's Chris's first word:
I've just returned from the courthouse of the second day of the SCO v. Novell trial as well as the summary judgment hearing. I have transcripts from yesterday's hearing which I will send ... momentarily.

Ah, transcripts. Hmm. How shall I say this... just yesterday was $247.20. That's about $50/hr of trial. Today was probably over 6 hrs and there's about 10 hours left... Can we afford transcripts? It would seem the entire trial would come in at about $1,000. Wow.

Let me know what you want me to do.

Today we heard some really interesting testimony. Novell finished questioning Chris Sontag, called Darl McBride (SCO's CEO for those few who don't know) and Greg Jones (VP of Technology Law at Novell), and then Novell rested. SCO called John Maciaszek (Unix Product Manager for Unix System Labs, Novell, Santa Cruz, and The SCO Group).

Then there was the Summary Judgment hearing where we heard both sides argue both motions and yet they were done in less than an hour.

Reports to follow.

I will leave it up to everyone here. If you want full transcripts, we'll need to pass the hat. I used what you donated to send someone to cover the trial. I'll also inquire at the courthouse. Sometimes it's cheaper if you wait until one of the parties orders first. While we think it over, here's the court docket entry:

531 - Minute Entry for proceedings held before Judge Dale A. Kimball: Bench Trial held on 4/30/2008. Court opened at 8:28 AM with all parties present. Testimony of witnesses was heard and evidence rec'd. Deposition of Greg Jones was published. Novell rested its case. Mr. Singer moved for involuntary dismissal; the Court took the motion under advisement without hearing argument at this time. SCO began presenting its case. Court recessed at 2:08 PM. Attorney for Plaintiff: Stuart Singer, Edward Normand, Jason Cyrulnik; Attorney for Defendant: Michael Jacobs, Eric Acker, David Melaugh. Court Reporter: Kelly Hicken/Becky Janke. (kmj) (Entered: 04/30/2008)

To refresh your memory, here are the two summary judgment motions, first Novell's:

Now SCO's motion:

Update: You guys are the best! We have enough to get the transcripts. And then some! I'm so happy. I was trying to be a grownup, but thinking of not having them was hard. So thank you so much for helping.

Update 2: And here's a second eyewitness account, telling us that today was a lot more fun than yesterday:

Judge Kimball had suggested that SCO and Novell keep their boxes and exhibits in the courtroom overnight, and the courtroom felt a little full. The public area had about 15 people in it today. Court went from 8:30 AM to about 2:05 PM with two 15-minute breaks. The summary judgments were then heard from 3:00 PM to about 3:45 PM. Michael Jacobs, Eric Acker, and David Melaugh argued for Novell, and Stuart Singer and Edward Normand argued for SCO.

When I arrived a little after 8:00 AM, SCO's team was already in the room and had brought in more boxes. There was so many boxes that the stack of boxes was as high as the divider between the public area and SCO's table. Every time one of the SCO attorneys, other then Mr. Singer, needed to go to the podium to speak, Mr. Singer had to get out of his chair so they could pass by, because there was not enough room to pass behind him. There was always a little bit of commotion at their table whenever this happened.

The SCO legal team started off a little more polished then Tuesday, but things deteriorated several times. Once, their AV system failed, and several times Mr. Normand was questioning Mr. Jones about an exhibit without giving him a copy of the exhibit they were asking questions about. Novell's Mr. Acker objected every time until the witness was given a binder with the exhibits. It seemed like Mr. Normand was winging it somewhat and did not have his exhibits well thought out.

The issue of entering exhibits into evidence was handled better today, but when Mr. Jacobs was giving his closing remarks before resting, he did ask Judge Kimball to enter several exhibits into evidence that were present by SCO which they did not ask to be entered into evidence. Mr. Jacobs also reserved the right to come back after checking the entered exhibits, if any other exhibits had not been entered.

Judge Kimball was a little more active today but only spoke up to keep the trial running in an orderly fashion. He seemed to be slightly smiling at times to himself, but it was impossible to tell what was on his mind.

Four witnesses appeared today. Chris Sontag, Darl McBride, and Greg Jones (VP of Technology Law at Novell) were called by Novell. After Novell rested SCO called John Maciaszek (Unix Product Manager for Unix System Labs, Novell, Santa Cruz, and Caldera/The SCO Group).

Mr. Sontag had recovered from Tuesday and quickly finished testifying. Mr. McBride was interesting to watch. He was somewhat defiant and combative at times. He talked at times like the summary judgment (the August 10 ruling) never happened. Mr. Jones was informative but had to work hard at not getting tricked into saying the wrong thing when being questions by Mr. Normand. Mr. Maciaszek was also interesting, but did not seem like an overly helpful witness for SCO.

The summary judgment hearing was short. The first motion heard was Novell's Motion for Summary Judgment on its Fourth Claim for Relief, and it was fairly brief. The second motion heard was for Judgment on the Pleadings on Novell's Claims for Money or Claim for Declaratory Relief. SCO used the majority of the time to make their arguments. Given that the hearing was under way, it did not seem like Judge Kimball needs to approve either one. It did seem like both SCO and Novell each made a better case for their respective motions.

Judge Kimball did say he had a conflict on Friday, and he wanted to start at 8:00 AM and end at 1:30 PM.

Today was more enjoyable over all. I am not as worn out today.

Remember yesterday, about the tree trunk and whether UNIX and UnixWare were the same thing? Someone sent me this article from way back when, June 16, 2003, and it makes it so, so clear that this "UnixWare and System V are the same thing" story SCO started telling after August 10 is not at all what they said when they believed they owned the copyrights. It's an article friom, an interview with Darl on why SCO decided to start suing, and here's what he said about that famous tree trunk, UNIX System V:

Where people get a little confused is when they think of SCO Unix as just the Unix that runs the cash register at McDonalds. We think of this as a tree. We have the tree trunk, with Unix System 5 running right down the middle of the trunk. That is our core ownership position on Unix.

Off the tree trunk, you have a number of branches, and these are the various flavors of Unix. HP-UX, IBM's AIX, Sun Solaris, Fujitsu, NEC--there are a number of flavors out there. SCO has a couple of flavors, too, called OpenServer and UnixWare. But don't confuse the branches with the trunk. The System 5 source code, that is really the area that gives us incredible rights, because it includes the control rights on the derivative works that branch off from that trunk.

Hilarious, no? Now they are telling the judge that all the value is in UnixWare, not System V.

Update 3: Our second reporter adds this note, which we'll understand better once we have the longer account:

These files were talked about today in court.

Note that Sun has open sourced AT&T's code on the links below:



Update 4: Here's the longer report by Chris, and it's fascinating. My favorite part is SCO's demo problems resulting from an XP malfunction:

Today's trial continued with Chris Sontag still on the stand with Novell's Eric Acker conducting redirect. Mr. Acker asked Mr. Sontag if he's aware of any code unique to UnixWare that is in Linux (that is, code not present in SVR4.2 for example). Chris responded, circuitously, that he is not aware of such.

Regarding yesterday's discussion of the SCOTech program to license the libraries (to allow SCO compiled applications to run on Linux) Chris admitted no licenses had been issued under that program.

When questioned about the 2003 Sun Agreement and Sun's already having had licenses for the 30+ pre-APA Unix releases, Mr. Sontag admitted Sun wanted an agreement that would loosen the confidentiality provisions on those releases.

Chris Sontag stated that SCO stopped listing prior products licensed in contracts, but that such was implied. Mr. Acker showed a license to Cyberguard for UnixWare 7.0 from 1998 which called out prior products and only listed UnixWare 2.0 and 2.1. Chris agreed that in this particular case that appeared to be the case, but that he had been told by Bill Broderick that they were normally not included.

Mr. Acker then showed the Alps Electric Co. license, where there was a page entitled "Prior Products" followed by a note that the page has been "intentionally left blank." Mr. Acker asked if it wasn't true that these examples were inconsistent with his, Sontag's, testimony? Isn't it true that what you know of historical practices is based on what you've been told? Mr. Sontag agreed.

Mr. Acker then discussed the Microsoft agreement, and Chris Sontag stated that they were only interested in latest SCO products. Mr. Sontag further stated that he is not aware of Microsoft including any SVRX, OpenServer, or UnixWare code in any of their products.

SCO's Ted Normand then questioned Mr. Sontag. He first showed an exhibit, an agreement with NCR where only a recent UnixWare version appeared to be shown in the 1996 agreement, and he then displayed a 1997 document with NCR that listed all previous releases, asking Mr. Sontag to identify each.

When asked, Sontag characterized the Sun and Microsoft agreements as being about equal.

Novell's Eric Acker then asked Sontag again if he believes the Sun and Microsoft agreements are about equal, to which he agreed. Mr. Acker then asked if Microsoft can open source UnixWare, to which Chris Sontag stated that they cannot.

SCO's Mr. Normand asked, with respect to open sourcing, are they equal? This time Sontag responded that he's not a lawyer, doesn't know.

Novell then released Sontag and Mr. Acker then called SCO's CEO Darl McBride to the stand.

Mr. McBride testified that when he was hired in 2002, SCO was not profitable. He asked his top managers what they would do if they ran the company. One manager, John Terpstra, said he believed Unix was in Linux, that most of the company's efforts up to this time had been in Linux, but that most of the income was from Unix.

Mr. Acker then displayed a letter to SCO shareholders dated August 2002 and highlighted where it read "Caldera owns... IP rights to Unix" and further elaborated "our Unix Intel property includes Unix SVRX, UnixWare, and SCO OpenServer." Darl claimed that those were brands, not core assets. When asked "doesn't the core IP underlie all those brands?" Darl answered that it does.

Eric Acker showed SCO's "Tree View" on a SCO slide carrying the subtext "more than 3,000 Unix source code licenses." Mr. Acker pointed out that SCO UnixWare is a branch. Mr. McBride responded that UnixWare is unique in that the route to the trunk is through UnixWare. Mr. Acker follows up asking if he calls the core IP "System V" or "SVRX" which he answered yes.

Mr. McBride was asked whether or not all of the trunk exists in UnixWare to which he said "you'd have to ask the engineers." Has a study been done to determine that? Again, "you'd have to ask the engineers." He further elaborated that he worked at Novell for 8 years and knows it was a conscious choice to embody SVRX in UnixWare.

Mr. Acker cited a SCO description of SCOsource from January 2003 stating that the "core technology dates back to 1969" at AT&T. Darl agreed that part of it does date back that far.

Showing the letter Mr. McBride sent to Fortune 1000 companies, Mr. Acker asked about Unix System V source code having been copied into Linux. There was a back and forth exchange about if the letter directs the recipients to get a license from SCO, with Darl denying the letter does so. It does put the recipients on notice, but doesn't tell them to get a SCOsource license, he maintained.

Mr. Acker highlighted the example in the letter of SCO having initiated legal action against IBM, but Darl claimed the letter doesn't say SCO will sue them.

There was extended questioning about whether the 2003 Microsoft and Sun licenses were SCOsource, licenses with Darl McBride insisting they were UnixWare licenses, not SCOsource.

Eric then showed a letter from Novell's Mr. LaSala to Mr. McBride from 2003 where Mr. LaSala references 2.16.B of the APA and demands copies of the Microsoft and Sun agreements. Darl confirmed that he refused to provide copies.

Darl claimed that while SCO was a fiduciary of Novell's, it was not in respect to these licenses, that Novell had no standing to demand these licenses.

There was then a long, interesting, SCO description on how the dispute between SCO and Novell over SCOsource came about. Darl described Novell "carpet bombing" of SCO with legal letters. I can't adequately describe the descriptions, they're priceless. I recommend you read this in the forthcoming transcripts.

Eric Acker presented a February 5th, 2004 letter from SCO's Ryan Tibbits which Mr. Acker read as stating SCO's position back in 2003 was that Novell wasn't entitled to revenue from the Sun and Microsoft agreements because they were *new*, not existing licenses. Darl said all new licenses were UnixWare licenses and further that Novell was only entitled to pre-existing revenue sources.

Mr. Acker displayed the eWeek article from April 13, 2005 entitled "SCO gives Sun Blessings to Open-Source Solaris." On questioning Darl said he believes Sun's open-sourcing of Solaris is in accordance with their license from SCO.

Mr. Acker then asked Mr. McBride if he's always told the truth in SEC filings and 10Qs, to which Mr. McBride emphatically stated that he has.

Eric then displayed, and spent some time discussing, SCO's 10Q SEC filing (which I believe to be for the quarter ending April 30, 2003). In it, he drew Darl's attention to "we initiated the SCOsource offer to review the state of these [Unix] licenses..." And to the 10Q describing the Microsoft and the yet unidentified Sun agreements as SCOsource licenses. Further that the Sun license was described as a "clean-up" license. Mr. Acker pointed out that the 10Q does not include the Microsoft or Sun licenses under the OpenServer and UnixWare revenue.

Darl took issue with what he believed was Mr. Acker calling him a liar. Mr. Acker took exception and said he thought it had already been established that Mr. McBride tells the truth in the 10Qs.

Eric Acker then displayed SCO's 10Q for the quarter ending April 30, 2004 and pointed out that similarly the UnixWare revenue does not include the Microsoft and Sun license fees. And that further down in the 10Q, they can both be found under the SCOsource revenue.

Mr. Acker spent considerable time discussing revenue reporting, why those licenses would be shown in that fashion, about the tree, trunk, and branches. He asserted that UnixWare reporting is branch. Mr. McBride repeatedly circumvented answering Mr. Acker's direct question about if he'd told the investing public and SEC in 2004 the Sun and Microsoft agreements were UnixWare revenue.

Mr. Acker had Darl McBride confirm that this lawsuit was that of a slander of title causing hundreds of millions of dollars of damages. He then asked, "isn't it true that the basis of the slander of title allegation is that Novell claimed ownership of the copyrights to" the code base preexisting the APA? Mr. McBride said "yes". Mr. Acker continued with "isn't it true that Novell never claimed ownership to code after the APA?" This prompted a long story from Mr. McBride about how Novell never spoke up until right after SCO filed suit against IBM. Mr. McBride did, however, agree.

On that Mr. Acker concluded his questioning.

SCO's Mr. Singer then questioned Mr. McBride regarding the Microsoft and Sun licensing. He asked, "weren't their licenses to UnixWare and drivers?" Yes.

Regarding the eWeek article, Darl said that Sun wanted to bring Solaris to Intel, and that licensees never asked just for old software.

Mr. Singer asked about a provision that Novell would receive a portion of certain revenue (UnixWare?) if it was over a certain floor. Yes, it was never reached and never requested by Novell.

Darl related his conversations with Novell's Greg Jones. He related how the conversation was started because SCO had been going through agreements and, while they saw the majority of APA assets going to Santa Cruz, found one small item... that copyrights had been excluded. That as SCO wanted to enforce their rights, he contacted Mr. Jones to explain the oversight. Darl reported that Mr. Jones said he would "see what he could do." They discussed this back and forth (over time). Eventually, after some Novell "high ups" got involved, Novell had come back and said they weren't interested.

Darl said that at no point did Novell say SCO could not go forward with SCOsource, nor that if SCO did so that they would have to pay Novell.

Mr. Singer presented a 2004 letter from Mr. LaSala to Mr. Tibbits and asked Darl, "has Novell, as late as 2004, told SCO that their publicly available SCOsource licenses violated Novell's rights?" No, they had not.

Mr. Acker then questioned Mr. McBride about the same 2004 letter. He highlighted Novell's demand for copies of all SVRX licenses (Microsoft, Sun, and others).

Mr. Acker asked about SCO's early SCOtech program and Darl confirmed that no one took a license to the SCO libraries.

Darl confirmed that Darl did not disclose to Novell SCO's intention to enter into agreements with Microsoft or Sun. He further admitted that when Novell demanded the agreements, Darl had refused to provide them as well as many other things.

Mr. Singer then questioned Mr. McBride, but I missed recording the brief questions asked. Mr. McBride was then released.

Novell's David Melaugh made his appearance and called Greg Jones, Novell's Vice President of Technology Law. Mr. Jones stated he has a computer science and JD degree and that he's been with Novell from 2002 to present. He said he's responsible for IP licensing and R&D licensing. He said he had been present in the courtroom during Mr. Sontag's and Mr. McBride's testimony.

Mr. Melaugh asked if Mr. McBride's testimony reflected his memory of those early discussions. No, it hadn't, he said, that Darl was never that specific that they intended to license SVRX or the scope of what the SCOsource program would be. He was never very detailed. Never did SCO suggest they would open source SVRX, that they would amend or restate agreements, or enter into an agreement with Microsoft.

Mr. Melaugh showed an email dated November 21, 2002 from SCO's Chris Stone to Greg Jones. This email was never zoomed in on the screen and the details and purpose of this email were not discussed.

He next displayed the 2003 Sun Agreement and asked Mr. Jones what he did when he first received it. Greg answered that he went back and reviewed the 1994 Sun Agreement and the APA. He noted how the 2003 agreement affects confidentiality, also that it concerns a buy-out (which requires Novell agreement). He noted that SVRX is not incidental. He concluded that it should not have been entered into without Novell's approval and that the 1994 Sun agreement imposes confidentiality and sublicensing rights under strict rules and that the 2003 agreement imposes no confidentiality at all.

Mr. Melaugh asked about the result of open sourcing Solaris. Mr. Jones noted that OpenSolaris is competitive to Linux, that it is in direct competition with Novell's Linux business.

He related that he downloaded the OpenSolaris code over the Internet. He stated that it was free and did not require any agreement to be signed. He compared the downloaded source code with SVRX code and found some SVRX code included.

He displayed on the screen a side-by=side comparison of "autopush.c" from OpenSolaris and SVR4.2 and said that substantial parts are identical. Specifically highlighted were the copyright notices in the OpenSolaris code demonstrating their SVRX provenance.

Mr. Melaugh next displayed "diskusg.c". He pointed out that Sun had made some changes in 1999 but that substantial parts are the same.

Mr. Melaugh displayed another the same way. Novell then entered into evidence over a dozen more like exhibits.

When asked, Mr. Jones stated he does not know if any UnixWare code is in Solaris and clarified that he did not undertake any comprehensive search for such.

When asked about whether Novell would have agreed to the License he replied that it is not in Novell's interest to enable a competitor. He stated that Novell would not have agreed to open source SVRX.

He characterized the 2003 Sun agreement as "extraordinary", especially in the sense of taking the code from proprietary to open source.

Mr. Melaugh and Mr. Jones reviewed sections of a letter from Novell to SCO requesting information from them on the agreements.

Mr. Melaugh displayed parts of the Microsoft Agreement and Mr. Jones confirmed that it was only received through discovery in this case. Greg Jones said that when he first reviewed it, he saw numerous instances of SVRX licenses. He therefore reviewed SCO's APA. He saw that this agreement is not an amendment to an existing agreement, that it's a new SVRX agreement. Further he saw that it grants expansive rights to Microsoft.

When asked by Mr. Melaugh, Mr. Jones stated that Novell would not have entered into it, that there was no competitive advantage to enter into it.

Regarding Section 2 of the agreement, he said he finds it broadly relates to Unix and that revenue from it should all go to Novell. Section 3 is not being pursued by Novell. Section 4 provides a license grant relating to all products listed in the agreement's exhibit C, and that it grants new rights to SVRX technologies. He stated that Novell should receive all of this money.

Greg Jones stated that Novell was counting on SCO, as their fiduciary, to identify when Novell's rights were being implicated.

Next displayed was an IP Compliance License for SCO Unix Rights granted to Computer Associates. Mr. Melaugh noted the language "Unix-based code" and "Unix System V or UnixWare." Mr. Jones stated that this license is not adding UnixWare on top of pre-existing Unix rights, that it is a brand new grant.

When asked, Mr. Jones stated that Novell would not have entered into the Computer Associates agreement, that there was no business justification for Novell. And he stated Novell is entitled to all the revenue.

Mr. Jones stated the same on a number of other agreements.

SCO's Ted Normand cross examined him. Mr. Jones admitted he has not been involved in sales, marketing, or pricing software. He has however been involved in negotiations in post-APA agreements in Silicon Graphics and Cray.

Mr. Jones was questioned extensively on his knowledge of the history of Unix and Solaris and relative valuation.

Mr. Normand played a section of Mr. Jones' May 10, 2007 deposition providing his testimony of his belief of what's been transferred from Novell to SCO. The testimony when asked was his belief that trade secrets, know how, and etc. were transferred to the extent that they are not listed on the excluded assets.

Mr. Jones was questioned on his knowledge of how previous license agreements were made and whether previous software versions were included. Mr. Jones stated that his understanding was that they were included provided consideration had been received.

Mr. Normand asked whether it was Novell's purpose going into the APA to sell the entire Unix business to SCO. Greg replied that it was not the entire purpose, but significantly, yes.

Mr. Normand played a section of his deposition testimony where he said it was Novell's purpose to transition it all to SCO.

Mr. Jones was then questioned on how he understands prior product licenses and incidental licenses. Mr. Jones replied that he relies on several definitions of incidental including the definition found in the dictionary.

There was a 15-minute break which I was late returning from (as I was spending money in the court reporter's office). When I entered, Mr. Normand was questioning Greg Jones regarding terms of a Unisys agreement which I believe was executed by SCO. Mr. Jones, having been handed a paper copy of the agreement, stated that he is not familiar with the document and cannot answer to its terms. He was repeatedly asked to give his belief regarding several parts to which he said he could only repeat back that he can see what is contained on the page, but not what it means. He stated that generally lawyers need to *read* a document in order to provide answers about its meaning.

Mr. Normand dropped discussion of the specific document and asked generally whether the circumstances of an agreement have a bearing on its meaning. Mr. Jones said that the terms of the agreement are important. When pressed he answered that the circumstances have some bearing.

Mr. Normand then played a section of Mr. Jones' deposition where he states the most important part are the terms, though the entire circumstances also play a part.

An email was then presented from Greg Jones to Darl McBride dated November 15, 2002. The email mentions SCO pursuing Linux end-users for their use of Unix libraries.

Mr. Normand was unable to complete questioning on this email as they seemed to be having difficulty with the Windows XP computer used for the demonstration requiring a reboot. In the interim Judge Kimball asked if Mr. Normand could continue on a different topic. Judge Kimball opined that all he could hear from SCO's equipment was a sound like a truck backing up.

Ted Normand then questioned Greg on how Novell had source code to SVRX (to do the software comparison) if Novell had transferred it to SCO. He replied that Novell still has the repository, is fully entitled to it, and besides a contemporaneous cross-license agreement had been executed (Mr. McBride seated in front of me was nodding his head in agreement to this answer).

Mr. Normand repeatedly questioned Mr. Jones on how he comes to the judgment that in the Sun Agreement Novell gets all and values UnixWare as without value. Greg's point was that absent an apportionment rationale from SCO, Novell's position is that Novell receives it all.

There was some further discussion of what Darl had told Greg in 2002 and what responses Greg had made.

With SCO's computer back up and functioning, Mr. Normand displayed a letter from Novell to Prentice Hall where Novell's Michael DeFazio states Novell is transferring its ownership interest in all versions of Unix to SCO. Greg says that the statement is inconsistent with the terms of the APA. Mr. Jones, under questioning, stated he cannot answer why Mr. DeFazio would write that.

Mr. Normand then displays what he claims is a similar letter to Microsoft. Viewing the highlighted text displayed it was referring to "Microsoft Xenix." Mr. Normand did not ask questions on it, but instead asked to go back to the email displayed before the reboot.

In the email, SCO stated that they would be announcing a Unix licensing program for Linux.

Mr. Normand next displayed letters from Novell to Microsoft and Sun indicating Novell's belief that the 2003 agreement is unenforceable, void, etc.

Mr. Normand had no more questions, nor did Novell, and Greg Jones was released.

There was some discussion of exhibits being entered into the record. Nothing was objected to.

Novell's Michael Jacobs rested their case.

Next SCO's Mr. Singer immediately moved for dismissal. Judge Kimball noted it, and Mr. Singer called John Maciaszek as his first witness.

Mr. Maciaszek identified himself as currently semi-retired and working for SCO part-time. He joined Unix System Labs as Product Manager in 1991 and has worked there under Novell, Santa Cruz, and most recently SCO.

When asked to describe UnixWare he called it the "next release of Unix System V." He discussed SVRX versions and relationships to UnixWare versions. He described how licensing was done, that when a company licensed Unix the practice was to receive a "right to use" for all prior versions. He stated that customers would not pay extra for the right to use and (his group) had no thought to charge for it.

Mr. Singer displayed an NCR license for UnixWare source code version 2.1 and specifically directed attention to the exhibit listing prior products licensed to use. Mr. Maciaszek said that no additional fee was charged. He described it as a standard agreement. He claimed that at UnixWare 7 they stopped including a list of prior products. He said the licensee still had the right to use prior products and still didn't need to pay an additional fee. If the licensee requested it, a list of such products would be included.

Mr. Maciaszek said that UnixWare 2 included NetWare components, that NetWare was provided as binary but the licensee could pay more for a NetWare software source license. However there were additional restrictions on what they could do with it.

Mr. Maciaszek related what their "one line of code" policy was: that if an OEM had a derivative work that was built on legacy SVRX code and included even a single line of UnixWare code, then it was licensed as UnixWare.

Novell's Michael Jacobs cross-examined Mr. Maciaszek. He called his attention to the previously discussed NCR agreement and noted that it was #112. Mr. Maciaszek agreed that under standard practice NCR would have paid for each of the preceding 111 software product agreements.

Mr. Jacobs then asked whether the licensee could publish the code. Mr. Maciaszek answered "absolutely not." Mr. Jacobs questioned further if it would be a "big deal." and Mr. Maciaszek answered that it would be a violation of the software agreement.

Mr. Jacobs asked, could an OEM take the source and build their own Unix with their own name on it? He answered of course they could. Did Sun do so? Yes. Mr. Jacobs clarified that if they based their product on, say, SVR 4.2, then their product would be "frozen" to that version and build on it. Yes, he answered. And that absent a new agreement they would stay with that version? Yes.

Mr. Jacobs then asked if one were to write a letter to Sun requesting they take all the legacy SVRX code from their product, what would happen? Mr. Maciaszek answered that "it would not be favorably received." At this everyone in the courtroom laughed.

Mr. Jacobs had no more questions, and Judge Kimball held the court in recess until tomorrow.

Update 5: Of course that wasn't the end of the day's activities. The hearing on the two motions for summary judgment happened in the afternoon, and here's Chris's report on that:

The motion hearing started with Novell's Motion for Summary Judgment on its Fourth Claim for Relief. Mr. Jacobs indicated that he would need 5 minutes while SCO's Mr. Singer claimed he would need perhaps 10. In the end I don't think they took 10 minutes between them.

Mr. Jacobs said that events have overtaken the motion. He essentially just stated that Novell believes their fourth claim for relief may be decided as a matter of law. He said SCO's 2003 Sun Agreement purports to amend the 1994 agreement, that this is a question of law. He said that the 2003 Microsoft Agreement grants new SVRX rights and that this too is a question of law. He then asked that Judge Kimball rule that SCO was without authority to enter into the Sun and Microsoft agreements.

Mr. Singer had graphics for his presentation. He had four points. First he said at a minimum there is a genuine fact dispute about whether SVRX components are incidental to UnixWare. Second, he said that the 2003 Sun Agreement is not a buyout, that it overwhelmingly concerns source code rights not subject to Novell's approval. Third, there are genuine factual issues as to whether SCOsource licenses are SVRX licenses at all. And fourth, that a genuine estoppel exists in that Novell was aware from late 2002 of SCO's intentions.

Mr. Singer further elaborated on the third point that there has been no summary judgment determination that SCOsource licenses are SVRX licenses at all, that SCO has a right to release its own claims.

Mr. Jacobs responded that the APA B.5 says Novell cannot infringe SCO's rights, but that this does not expand whatever rights SCO has. That it's a circular assertion that doesn't change anything.

Next we heard SCO's Motion for Judgment on the Pleadings on Novell's Claims for Money or Claim for Declaratory Relief. As this was SCO's motion, their Mr. Ted Normand went first.

Mr. Normand went over what amounted to a decision matrix for the court. First, was SCO Novell's agent? Second, was SCO authorized? Third, if SCO was not authorized, has Novell ratified SCO's actions? Fourth, If SCO is not authorized and Novell has not ratified, do the parties get their money back? Fifth, if SCO is not authorized and Novell has not ratified, does Novell hold the money?

On the first point Mr. Normand expanded that in September of 2007, Novell wrote letters to Microsoft and Sun, which letters Novell produced only yesterday, where Novell tells Microsoft and Sun that SCO's agreement is void, unenforceable, and invalid. In support of his fourth point, Mr. Normand cited case law indicating where a contract is void or invalid the counterparty is entitled to restitution (get their money back).

On his fifth point, Mr. Normand asserted that Novell does not hold the money, that if an agent has acted without authority, they have no duty to account to the principal. He said that Novell has not ratified the agreements and that the letters from Novell to Microsoft and Sun are relevant here. He claimed that no theory permits a principal to hold money when it has not ratified.

Novell's Michael Jacobs responded. He opined that people will be talking about this case in law schools, that of all interesting cases, this is one of the more interesting ones.
He differentiates this case from other cases in that in this litigation, the third parties are not here arguing for restitution.

Mr. Jacobs advanced an example which he said more closely matches the situation. He suggested that this be likened to an employer and an employee where the employee makes an agreement he has no authority to enter into. The employee here doesn't get to keep the money. And that there would be no question of the agency relationship between the employer and employee. He said in the present case, Novell is not disclaiming the agency. He said the right thing is for Novell to hold the money, to step in between the agent and the 3rd party, and to work out with the 3rd party where to go from here.

Mr. Jacobs said that SCO has no cases that are "on all fours" for this case.

Regarding Novell's letters to Microsoft and Novell, they stated "belief"... It is Novell's "belief" that the agreements have no legal effect. The validity of the agreements have not been determined such as by a court.

Mr. Normand countered that from Novell's letters, it is clear they have repudiated the agreements. He further pointed out that principals have a requirement to act promptly upon learning about an agreement.

Judge Kimball thanked them and said he had some questions generally. He said he read in the motions that SCO advanced "unclean hands"... Mr. Singer responded they are not pursuing that.

He next asked about the constructive trust originally asked for in light of the bankruptcy. Both Mr. Normand and Mr. Jacobs agree the question of a constructive trust rests with the bankruptcy court.

Judge Kimball then mentioned a presentation he has scheduled at 2 pm Friday that conflicts with this case. He said it's just up the street, and he can make it if he leaves at 1:30. He asked if the parties would have a problem starting at 8 AM Friday instead. Both parties agree that would be no problem, but also indicated they believed they are currently making good time, and it may not be an issue anyway. It was agreed that the parties will see where they are with the case tomorrow and then decide about Friday.

Judge Kimball then adjourned the court.

I asked Chris to explain what McBride said about UnixWare and the branch to the trunk stuff as it made no sense to me. Here's the explanation:

This statement was one that was stated and restated. He's saying that while the core IP property is in the trunk, the only way anyone can get a license to use it is by purchasing a SCO UnixWare license. That is the route to the trunk is through the UnixWare branch. How this logically fits in the tree metaphor is beyond my meager imagination.

Update 6: Here's the docket entry for the motion hearing:

Minute Entry for proceedings held before Judge Dale A. Kimball: Motion Hearing held on 4/30/2008 re [478] MOTION for Summary Judgment /on Novell's Fourth Claim for Relief/ filed by Novell, Inc. and SCO's Motion for Judgment on the Pleadings. After hearing the arguments of counsel, the Court took the motions under advisement. Attorney for Plaintiff: Stuart Singer, Edward Normand, Mauricio Gonzalez; Attorney for Defendant: Michael Jacobs, Eric Acker, David Melaugh. Court Reporter: Laura Robinson. (kmj)

Wayne Richardson on ars technica also attended, and here's his account. His final word:

When SCO sent threatening letters out to Fortune 1000 companies in May of 2003, it probably didn't expect this to be the result.

No kidding. Then again, who knows? I'm waiting for the transcripts before I reach any solid conclusions. The first day arrived, but the transcripts were provided on floppies, and for some reasons they didn't work, so Chris is working the kinks out of that and we should have it by tonight, I would think. Anyway, just so you know that it's in the works, thanks to you. I can't wait. And since we received more donations than we require for these particular transcripts, if any of you intended that your donation be exclusively for that, let me know so I can reimburse you. Most of you mentioned to me already that the donation was not exclusively for this particular set of transcripts, but for whatever we need to keep Groklaw going. And I thank you. But I wish to be scrupulously careful never to take advantage of anyone's goodness, so sing out if you feel you'd like to be reimbursed.

Here's Greg Jones' Affidavit, submitted to the bankruptcy court, in which he explains how Novell views the APA.

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