decoration decoration
Stories

GROKLAW
When you want to know more...
decoration
For layout only
Home
Archives
Site Map
Search
About Groklaw
Awards
Legal Research
Timelines
ApplevSamsung
ApplevSamsung p.2
ArchiveExplorer
Autozone
Bilski
Cases
Cast: Lawyers
Comes v. MS
Contracts/Documents
Courts
DRM
Gordon v MS
GPL
Grokdoc
HTML How To
IPI v RH
IV v. Google
Legal Docs
Lodsys
MS Litigations
MSvB&N
News Picks
Novell v. MS
Novell-MS Deal
ODF/OOXML
OOXML Appeals
OraclevGoogle
Patents
ProjectMonterey
Psystar
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v IBM
SCO v Novell
SCO:Soup2Nuts
SCOsource
Sean Daly
Software Patents
Switch to Linux
Transcripts
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.


To read comments to this article, go here
Day 1, April 29th, in Novell v. SCO - as text (no line #s version)
Friday, May 02 2008 @ 03:45 AM EDT

Here is the transcript of day one of the Novell v. SCO trial, April 29, as text, thanks principally to Steve Martin. As always, go by the PDFs for anything that matters, as we strive for accuracy but we can't guarantee it when we are working so fast. This is a version with no line numbers, because those who rely on screen readers have told me how hard it is to read otherwise. We'll be posting a version with line numbers also, to be as close to the original as possible.

Here are the PDFs again, divided into three parts:

Part 1
Part 2
Part 3
This is the day that saw opening statements by both sides, Michael Jacobs of Morrison & Foerster for Novell, and Stuart Singer of Boies Schiller for SCO. Then we see Joseph LaSala, who was at relevant times General Counsel at Novell, testify, and then we have the first part of Chris Sontag's testimony. He continued on day two, and we're working on that now.

****************************

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

________________________________

THE SCO GROUP, INC., a Delaware
corporation,

Plaintiff and Counterclaim-
Defendant,

vs.

NOVELL, INC., a Delaware
corporation,

Defendant and Counterclaim-
Plaintiff.

Case No. 2:04-CV-139 dak

________________________________

BEFORE THE HONORABLE DALE A. KIMBALL

DATE: APRIL 29, 2008

REPORTER'S TRANSCRIPT OF PROCEEDINGS

TRIAL TRANSCRIPT

Reporter: REBECCA JANKE, CSR, RMR
KELLY BROWN HICKEN, CSR,RMR

1

APPEARANCES

FOR NOVELL: MORRISON & FOERSTER LLP
BY: MICHAEL A. JACOBS, ESQ.
EIRC M. ACKER, ESQ.
DAVID E. MELAUGH, ESQ.
[address]
FOR SCO: BOIES, SCHILLER & FLEXNER LLP
BY: STUART H. SINGER, ESQ.
EDWARD J. NORMAND, ESQ.
JASON CYRULNIK, ESQ.
[address]

HATCH, JAMES & DODGE, P.C.
BY: BRENT O. HATCH, ESQ.
[address]

2

INDEX

WITNESSES EXAMINATION PAGE
JOSEPH LA SALA Direct by Jacobs 45
Cross by Singer 64
Redirect by Jacobs 75
CHRISTOPHER SONGAG Direct by Acker 77
Cross by Normand 151

E X H I B I T S

NOVELL'S - RECEIVED

215 - 47
220 - 50
234 - 53
280 - 55
293 - 56
297 - 59
303 - 60
317 - 64
27 - 126
30 - 126

SCO'S

189 - 193

3

APRIL 29, 2008 SALT LAKE CITY, UTAH

PROCEEDINGS
* * *

THE COURT: Good morning. I'm advised that we had a few calls about lap tops. The court policy is that you can't have them here. You can have your cell phones, but they need to be off.

We're here for the trial of the issues remaining in SCO Group vs. Novell, 2:04-CV-139. SCO is represented by Stuart Singer.

MR. SINGER: Good morning, Your Honor.

THE COURT: Good Morning. Mr. Ted Normand.

MR. NORMAND: Good morning, Your Honor.

the court: Mr. Brent Hatch.

MR. HATCH: Good morning, Your Honor.

THE COURT: And Mr. Jason Cyrulnik.

MR. SINGER: He will be here shortly, Your Honor.

THE COURT: All right. And defendant Novell by Mr. Michael Jacobs.

MR. JACOBS: Good morning, Your Honor.

THE COURT: Good morning. Mr. Eric Acker.

MR. AKCER:: Good morning, Your Honor.

THE COURT: Good morning.

4

And Mr. David Melaugh.

MR. MELAUGH: Good morning, Your Honor.

THE COURT: I received a joint statement and then an amended one. I was going to say you people ought to teach everyone else how to conduct a trial with that one statement. But I haven't had a chance to read the amendment. How is it different, the amended joint statement?

MR. NORMAND: Your Honor, that is one exhibit that Novell had not addressed in the original stipulation.

THE COURT: All right.

MR. NORMAND: But to which we had reached an agreement as to the admissibility.

THE COURT: Very good. Is it the last one?

MR. NORMAND: Yes, sir. It's 411, I believe.

THE COURT: 411? Is that right? And does either party want to invoke the witness exclusion?

MR. SINGER: We do, Your Honor.

MR. JACOBS: I'm afraid so, Your Honor.

THE COURT: All right. So, is there anyone sitting back there who is going to testify who is not one of your client -- who is not a client representative? They have to leave until their testimony is complete.

MR. JACOBS: Each side may have one client

5

representative, correct?

THE COURT: Yes. Each of you has a client representative, of course. They can stay, even if they're going to be a witness. Now, will part of the trial have to be sealed? Some of the material is proprietary. Talk to me about that for a moment.

MR. SINGER: We believe we have worked that out and that it will not be necessary to close the courtroom or take any extraordinary efforts in that regard.

THE COURT: Thank you.

MR. JACOBS: That's our understanding as well, Your Honor.

THE COURT: All right. Who's going to make the opening statement for Novell.

MR. JACOBS: I will, Your Honor.

THE COURT: Mr. Jacobs, go ahead.

MR. JACOBS: Well, here we are, Your Honor.

THE COURT: Who's going to -- who do you propose, by the way, counsel, keeps the time limits you've set on yourselves?

MR. JACOBS: Yes. I think we worked that out, the time limits.

MR. ACKER: We have agreed between SCO and Novell, but we are prepared to keep track of time.

6

MR. SINGER: We have worked out, as this Court is aware, an allocation of time so that we will definitely finish in the time allotted by the Court, and everything, including opening, will count against our respective time.

THE COURT: It's one thing to work out an allocation. It's another to abide buy it.

MR. SINGER: We have a number of people here with watches.

THE COURT: All right, go ahead, Mr. Jacobs.

MR. JACOBS: Your Honor, in this bench trial, we seek a recovery of exactly $19,979,561 from SCO, based on the Court's earlier findings of breach of fiduciary duty, conversion, unjust enrichment. This is an amount we seek from SCO based on its licenses to Sun, Microsoft and what we're referring to as the SCOsource licenses. And we'll be going through those in the course of both my opening statement and this trial. In view of the Court's earlier findings, our case rests on four basic points, and the evidence will, over the course of this trial, Your Honor, prove these points. First. Contrary to what SCO would have the Court believe in this trial, when it was active, SCOsource was all about SVRX. It was not about

7

SCO-written code or Santa Cruz-written code. It was not about UnixWare, in the sense that it was not about the code that Santa Cruz contributed to the code base that evolved over time and became UnixWare.

It was, rather, all about SVRX, the rights that SCO claimed to have acquired from Novell but the Court has found that it did not.

Second. The SCOsource licenses convey substantial SVRX rights; not merely trivial SVRX rights, not merely unimportant SVRX rights, but, in fact, substantial SVRX rights. And, in a sense, I think, in this trial, we will be eliding or finessing the question of incidentalness that was raised in the wake of the Court's summary judgment ruling. We will prove that these licenses were not incidental we will be proving that they were substantial SVRX rights, and in a sense, our claim to this amount of recovery turns to that finding, that the SVRX rights granted in these SCOsource licenses were substantial.

Third. Contrary to SCO's review of the history of UNIX licensing, the practice of UNIX licensing over time does not help it. We will show that, in fact, you can learn from the history of UNIX licensing what an incidental or unimportant or not very much value SVRX license looks like, and we will show that these -- that

8

that isn't what these licenses look like. That isn't what the SCOsource licenses look like.

And then, finally, a mix of a legal and a factual point. The factual point is: SCO has not offered any apportionment. We actually have, as you will see when we go through the Microsoft license, we have done our best to work with that agreement and come up with an apportionment. SCO has not. That's factually indisputable. The legal point on which our claim to this entire amount rests is that as our fiduciary, having met our initial burden, it was their burden to develop an apportionment and approve that apportionment if there was any deduction from the amounts they recovered on account of these SVRX SCOsource licenses.

With that in mind, let's proceed to what the evidence will show at trial. First. The focus of SCOsource was SVRX. Reading SCO's trial brief, it appears that SCO will try to rewrite history. It will try to argue that, contrary to what it said over and over again about the importance of the SVRX code base that it believed it had acquired through this chain of transactions, including the Asset Purchase Agreement, SCO is now arguing: No, no, no, that wasn't what was so important. What was important was UnixWare, and what these licenses are all about is UnixWare and not the SVRX

9

code base.

As I have foreshadowed, that was not what SCO said at the time. So let's set the stage. It's the second half of -- or the last quarter of 2002, early 2003. By this time, Caldera has bought the UNIX business from Santa Cruz, that Santa Cruz had acquired from Novell pursuant to the Asset Purchase Agreement, acquiring no more than Santa Cruz had acquired from Novell.

New management has come into Caldera. The company is renaming itself SCO, and it's developing its business strategy, and it has concluded that the licensing revenue from UnixWare and from OpenServer, the two flagship products of Santa Cruz and then Caldera SCO, those two products did not generate enough licensing revenue for a viable business strategy. In fact, it was a declining revenue base.

So, instead, SCO decided to set out to, mixing the metaphor a bit, to mine the trunk of the tree. And this metaphor that SCO used to describe its strategy, which we will introduce as Novell Exhibit 421, is a powerful metaphor, and it really tells us a lot about what was going on at the time.

What SCO was saying is that there are these various branches representing various flavors of UNIX, and some of these the Court has become quite

10

familiar with from earlier rulings. So there's IBM AIX over on the upper left. That's IBM's flavor of UNIX. That was the subject of SCO's claims against IBM. There is Sequent. You'll remember there was also a Sequent dispute between the parties. And then up at the top is Sun Solaris, another flavor of UNIX. And then, down at the bottom on the lower right-hand corner, there is SCO UnixWare. These are all branches SCO explained, based on the trunk, which was the UNIX core System V code base.

All those branches were based on that code base, and what SCO's strategy -- since SCO's strategy of licensing branches, SCO OpenServer and SCO UnixWare was not a viable business strategy, SCO was going to develop revenue from the trunk. And that trunk, SCO made clear, was the legacy code base that SCO had acquired from Santa Cruz and, in turn, from Novell, it contended, by virtue of the Asset Purchase Agreement.

Now SCO would like to claim that it's all in the branches, that the value in these SCOsource licenses was in the branches. But, at the time, SCO said: No. The value was in the intellectual property in the trunk. And SCO, the strategy was explained, was going to mine the trunk. One of the key moments in the history of SCOsource was the May 12, 2003 letter to Fortune 1,000

11

companies that SCO sent out seeking to mine the trunk, seeking to frighten, scare the many users of Linux into signing SCOsource intellectual property licenses. And there was a very simple contention that SCO advanced. That contention was that UNIX source code distributed by AT&T has found its way into Linux.

Remember, the basic proposition that SCO was advancing during this the time was that this UNIX code base in the trunk had proliferated through these various derivatives such as IBM's AIX. And through the wide access to these derivatives and, SCO claimed, the carelessness of the developer community, the code from the trunk had leaked out through the derivatives and, in fact, had leaked out into Linux.

Now, at no time in the ramp up of SCOsource, did SCO claim: Oh, by the by, there is also some SCO UnixWare code in Linux. There is some code that we wrote that's in Linux.

And, as we'll see, at no time that has SCO articulated a theory of the case that rests on SCO-written, SCO-copyrighted code. And SCO -- in this connection, I am using SCO and Santa Cruz interchangably. After years of litigation and the investment of tens of millions of dollars, in the IBM case, SCO was put to its proof and that that proof that SCO was put to was:

12

All right, this is it. After all these rulings that I have issued and that my magistrate judge has issued, I'm telling you, SCO, you have really got to lay it out for us. What exactly are you contending was misappropriated in Linux?

And this is -- this demonstrative reflects the final expert report from Mr. Cargill, SCO's expert, who undertook to lay all that out. With all the incentive in the world to show that there was something in SCO UnixWare that had found its way into Linux, Mr. Cargill found only UNIX System V, Release 4 code as infringing Linux. And, of course, UNIX System V, Release 4 releases are SVRX under the Asset Purchase Agreement.

At Novell, we know very well what SCOsource was all about because, of course, we got in the middle of it, I think it's fair to say, when we said: No, SCO, you don't own the UNIX System V code base copyrights. We own those.

And so, of course, SCO sued Novell for slander of title and claimed that that contention by Novell had caused hundreds of millions of damage to SCO and, more particularly, frustrated it's SCOsource licensing campaign. Now, at no time in that whole process, did SCO say to the SCOsource licensees or potential licensees: Oh, don't mind the Novell claim to own the SVRX

13

copyrights. Pay no attention. We have a theory. We have a claim. We have value in SCO UnixWare. We have value in the branch of the tree.

They never said that, and they claimed that our contention to own the UNIX System V copyrights had crushed SCOsource.

The Court's summary judgment order left open the possibility that maybe there was a copyright claim in SCO UnixWare and SCO- or Santa Cruz-written code and the copyrights that had not transferred -- in the copyrights as to which Novell's claim of ownership was immaterial; that is, copyrights that, indisputably, SCO owned by virtue of its acquisition of the UNIX business from Santa Cruz. The Court's summary judgment ruling left that possibility open.

At no time has SCO articulated a theory under that opening. And, in particular, in the SUSE arbitration, which is still stayed pending the bankruptcy, when SCO was arguing to the bankruptcy panel -- I'm sorry -- arguing to the arbitral panel: Don't go forward with this arbitration. There is no need. The Court -- the District Court in Utah, Judge Kimball, has already ruled on all the important issues here.

SCO said it was pointless for the arbitration

14

to continue because the ownership decisions that the Court made here addressed all of SCO's claims relating to Linux. So, having been given the opportunity to articulate a claim, an opportunity very evident on the Court's summary judgment ruling, a claim based on SCO UnixWare, SCO has failed to do so.

So, what's the point of all this? We're looking at litigation pleadings. We're looking at letters that SCO sent out. You will hear much more in the scope of the trial. The point of all this is that SCOsource was about System V, Release X. It was about the releases on the exhibit to the Asset Purchase Agreement. The whole SCOsource campaign was premised on mining the trunk. And the trunk was not what SCO was saying -- is now saying where the value lies, the trunk was the UNIX System V code base.

Point number 2. When you look at the SCOsource licenses, particularly in light of the SCOsource campaign, the SCOsource licenses convey substantial SVRX rights, or at least attempt to convey. Our proposition, of course, is that SCO had no power to convey that, but the licenses on their face and the licenses in the wake of SCOsource indicate the party's intentions; that is, that substantial SVRX rights would be conveyed by the SCOsource licenses.

15

Let's briefly -- let me briefly walk the Court through the Microsoft and the Sun agreements. We'll leave the other SCOsource licenses to the proceedings at trial. I'll just briefly refer to them. As the court is probably by now aware from the pretrial briefing, there are three relevant sections of the Microsoft/SCOsource agreement, and we are seeking a recovery of what SCO received from Sections 2 and Section 4, and we're leaving Section 3 out of our claim. We have apportioned, Your Honor, because that, as you'll see, Section 3 appears to relate specifically to UnixWare.

Now, Section 2 and its two subsections grant Microsoft broad licenses and releases to SCO intellectual property. Our view is that in light of the SCOsource campaign and in light of the intellectual property that SCO claimed to own, this release -- the value in this release lies in SVRX. And we will introduce testimony in the course of the trial that confirms that that was SCO's view, that while there may be some value from this release in UnixWare, there is substantial SVRX value. And there's no way, looking at Section 2, to pars the SVRX value from anything else. And so our contention is, we're entitled to the Section 2 amounts. Section 3 is the section that, as I indicated, we are apportioning to SCO. Section 3 is explicitly an

16

option to purchase a UnixWare license and a UnixWare license only. And it's $7 million the amount that SCO received.

Now, if we had wanted to, it seems we could have taken a run at this in two ways. We could have said: Well, this is all artificial. It can't be that there's $7 million worth of UnixWare value here. The other thing we could have pointed out is that this option, this Section 3 amount is a gateway to Section 4. Microsoft had to exercise its option under Section 3 in order to receive the Section 4 grants, and as you'll see, the Section 4 grants are heavily laden with SVRX.

But we're asking for, on Section 2 and Section 4, for the uncertainties to go our way, and so while there is arguably uncertainty about Section 3 and how the total value of that might fall, we're allocating that, we're apportioning that to SCO.

It looks like the copy that I handed the Court may be missing some slides, so we will get those to Your Honor.

So, this is Section 4. And Section 4, when you look at it, compared to the exhibits of the Microsoft license, there are at least 28 versions of SVRX that are licensed to Microsoft in Section 4. There are some non-APA SVRX releases as well that are the subject of

17

Section 4, but the grant of rights is really tremendous. In Section 4, it's a fire sale. SCO, for $8 million, gave Microsoft virtually unlimited rights to SVRX and to use it in a wide variety of ways. Yes, there is some UnixWare -- there are some UnixWare rights in there, but because there is so much SVRX in Section 4, we believe we are entitled to the entire 8.25 million of Section 4 revenue.

Well, that's Microsoft. As you can see from the face of the Microsoft agreement, it actually was possible to do an apportionment because SCO broke out a portion that was particular to UnixWare. And, again, while there are some uncertainties about that apportionment, and we are asking for the uncertainties to go our way on Section 2 and Section 4, we are leaving the uncertainties associated with Section 3 with SCO.

Let's look at the Sun agreement. And to understand the Sun agreement, which of course is a 2003 agreement, we need to first look at the 1994 Novell/Sun agreement. Now, you will recall from the tree metaphor that Sun Solaris is a flavor of UNIX System V. It is a variant and derivative of UNIX System V.

And the 1994 Novell/Sun agreement was an agreement by which Sun bought out its obligations to pay ongoing revenues to then Novell for -- in effect for the

18

distribution of the Solaris proprietary Sun operating system. So, it was a buyout of its royalty obligations under the traditional UNIX licensing model that Sun had inherited up to that time.

Now, importantly, all it really did is buy out the royalty obligation. It left the confidentiality obligations largely intact. And all that the 1994 agreement did was allow Sun to distribute Solaris, a non-Open source, proprietary operating system and not pay ongoing per-unit royalties. They bought out the royalty obligation. But there was nothing -- in terms of the structure of the license, other than the royalty buyout, there is nothing extraordinary about the Novell/Sun agreement form 1994.

Now let's look at the 2003 SCO/Sun agreement. Now, as we pointed out to the Court, on its face this agreement purports to amend the 1994 agreement and, in doing so runs flat into the language of Section 4.16B which says to SCO: Thou shalt not amend an SVRX license without Novell's approval.

And, of course, again on its face, it relates to a buyout agreement, and it is, itself, a buyout in the sense that there is a one-time payment rather than ongoing payments to SCO that are contemplated by this agreement. So, that's our amendment number 2 argument.

19

The parties agreed on a program for buy-outs for agreements relating to buy-outs, agreements relating to buyouts, and that's exactly what the 2003 agreement is.

But the real significance of the 2003 agreement between SCO and Sun was that it relaxed the licensing restrictions that had been imposed over time by the AT&T licensing model on Sun and that were carried forward largely in tact the 1994 agreement. The license grant in the 2003 SCO/Sun agreement is, once again, extraordinarily broad, imposing virtually no limitations on Sun's ability to license the licensed products.

And, in particular, and this is quite remarkable language, in Section 8.1 in which Sun is allowed, if it reproduced, distributes, etc., the technology, which is the licensed code, under any licensing model now known or developed hereafter in Sun's sole discretion, pursuant to the license granted by SCO herein, then the technology is not confidential information.

So, this is a clause that essentially says to Sun: Not only are your payments -- do you not have any pavement obligations; those have been taken care of by the 1994 agreement, and we are not imposing any per unit royalties under the 2003 agreement, but now you can do virtually whatever you want with the code that's licensed

20

under the 2003 agreement. You can -- you can use any licensing model now known or developed hereafter in Sun's sole discretion. That's what the 2003 agreement allows Sun to do. And, once that happens, it's not confidential.

So, in a variety of different ways, this agreement allowed Sun to do something that it couldn't have done under the 1994 agreement. Most importantly, it allowed it to open source Solaris. Solaris, earlier a proprietary derivative, another branch of the tree, just like the rest of them, could now be open sourced and made available pursuant to open source licenses.

Is this really de minimus, trivial, unimportant SVRX licensing? Well, if you look at the exhibit, you'll see -- to the Sun agreement, you'll see all the SVRX releases listed there. But really the core point is this. And it's essentially undisputed. Many of -- much of what we will be pointing out to the Court in the course of this trial would be, to people in the technology community, proof of the stunningly obvious, and one of the elements of our proof is that open Solaris is in fact derived from a System V release code base.

And this is an example -- on the left-hand side, you can see -- you can see the so-called CDDL header. CDDL is the name of the open source license

21

under which open source under which OpenSolaris is licensed. You have heard about the GPL in the course of the case today. This is a different license, the CDDL. And you will see in OpenSolaris, if you just download the code over the internet, it's littered with AT&T copyright notices from '84 to '89. That is System V. That is System V, Release X. That is SVRX within the meaning of the asset purchase agreement.

So, again, what the 2003 agreement allowed Sun to do is illustrated precisely by this demonstrative. Any one of us can now go to the Sun web site, download OpenSolaris and look at OpenSolaris code, which happens to be AT&T code, SVRX code, Novell's code, the code that SCO was restricted from licensing, restricted from amending licenses to in the Asset Purchase Agreement.

The other SCOsource licenses, as we will see, they purport to license SVRX and UnixWare. They purport to license System V and UnixWare. The other SCOsource licensees, of course, the people who received the Fortune 1000 letter or who heard about the Fortune 1000 letter and, trying to mitigate the legal threat from SCO, decided to take the SCO intellectual property license for Linux. And, again, that was all driven by SCO's claim that System V code was in Linux, not UnixWare, not SCO UnixWare code.

22

UNIX licensing practices. The practices over time do not help SCO in this case. SCO apparently has concluded, from its review of the history of UNIX licensing, that it knows what incidental is, number 1, what incidental licensing is; and, number 2, that those examples or the practice of incidental SVRX licensing is exactly what happened in the SCOsource licenses.

And, essentially, what their point is, is this: Look, we can look at some of the licenses that the parties entered into over time, whether it was AT&T or AT&T/USL or Novell or Santa Cruz in which, if you look at the attachments, there's SVRX code licensed pursuant to an attachment or a supplement, but the main license, if you will, is to UnixWare. And they say that's incidental SVRX licensing. And, so, look, look, look. Look at the Microsoft agreement. There's UnixWare and then there's a list of SVRX. It must mean that that SVRX is incidental, too.

We will show the Court that the analogy part of this fails, but we actually kind of agree with SCO about the first part of this; that is, that you can see examples of incidental SVRX licensing through the UNIX licenses or the UnixWare licenses that were entered into and that are on their exhibit list.

So, to get into this a little bit, let's just

23

review the timeline here and try and standardize, at least on our side, the vocabulary that we're going to try to use to keep things clear. So, right in the middle of this timeline is the APA, the last SVRX release, System V, Release 4.2 MP that is under Novell's auspices, is also the last SVRX release that's on the Asset Purchase Agreement or attachment.

And then SCO takes over, and they start releasing UnixWare releases, and you can see the history of UnixWare up through the latest -- I believe the latest release. Now, recall that pre-1995, first AT&T is the owner of UNIX. Then they set it up in the sub, USL, and then USL is bought by Novell, and so Novell is doing these licenses. And, indeed, the practice was that a customer would get the latest release.

But recall that what's going on here is that the customer is licensed in turn. These are OEM's. These are computer companies that are, in turn, licensing UNIX out to their end users. And so they need to retain the rights to the previous versions because they have end users who are still using the previous versions, who still haven't updated to the latest release. So the practice in UNIX licensing was to execute a supplement for the latest release and then have on the supplement all the previous releases as well.

24

So let's take a look at one of the -- so this is the NCR supplement on SCO's exhibit list. And recall the basic structure from our earlier briefing leading up to the summary judgment motion. There would be a software agreement that would define the basic rights of the parties and obligations, and then there would be the supplements that would provide the fee and the exact software being licensed pursuant to the software agreement.

So this is a supplement. It's a supplement to NCR. It's from Santa Cruz. You can see that it was executed by the Santa Cruz operation in 1997. And it includes a license to UnixWare 2.1 Source at an extended price of $250,000. And then, if you go to the next slide, you'll see all the prior products are licensed. So, here are all the SVRX releases, for example, that predated this UnixWare release, and you can see 4.2 MP on there as an SVRX release.

And SCO says: Look, incidental licensing. You've got a UnixWare license and you've got all this SVRX code being licensed as well. That is what incidental licensing meant. And I think we've actually got a pretty good example of incidental licensing here because note what supplement number this is. This is supplement number 112. Over this timeline, NCR executed

25

112 supplements, each time adding a new release or a new variant of a release to the licensed code that it had, and each time, just as in this case, paying $250,000 for the latest refresh, if you will; each time, paying the amount for that SVRX code. And so each of these listed releases, if you go back through the history of NCR's licensing, was the subject of its own supplements by which the licensee, in this case NCR, paid the owner of its UNIX business the amount for that licensed code.

Why is this incidental? Why this is an example of incidental licensing of SVRX? Because the licensee, NCR, had already paid for each of these releases. It already had the rights to each of these releases. In fact, its rights to those releases were not in any way expanded because software agreement -- remember, that's the stable document through all on this -- and the software agreement is what defines the rights and obligations of the parties as to each of these releases.

So, I think we're comfortable with this being an example of incidental licensing; software you've already paid for as to which you get no expanded rights. But, as you've seen from Microsoft and Sun, that's exactly not what happened in those two cases, and it's certainly not what happened in the other SCOsource licenses. In the case of Microsoft, to the best of our

26

knowledge, no previous UNIX license at all. This was the license that gave them all the rights to SVRX that they ever got and greatly -- and wide rights, broad rights, expansive rights.

And, in the case of Sun, while it's true that they had previously paid for SVRX releases, their new SVRX releases on the 2003 Sun agreement, new and still on the asset purchase exhibit, and then these incredibly broad rights to take a proprietary operating system and make it open source, the opposite of incidental; substantial, significant, major, predominant.

SCO, Novell's fiduciary, has failed to apportion. So I haven't harped on this, but let me just spend a moment on it. The Court has already found that SCO is in breach. They breached fiduciary duties. Fiduciary duties are duties to place the interests here of Novell above SCO's interests. They are the duty to avoid precisely this situation in which the amounts of money are commingled. And so we start out with a heavy thumb on the side of the scale of Novell in looking at these revenues that SCO has retained from the SCOsource licenses.

We have done our best, looking at the face of the licenses themselves, to apportion by allocating a substantial portion of the Microsoft agreement to SCO.

27

SCO has not done anything like that. They have not come forward with an apportionment.

Now, the software aspect of this can add a technology overlay to what, in some senses, is a very straightforward and simple dispute. So, let's take a real property analogy. Let's imagine that SCO was a real estate agent for Novell and that they sold a property that Novell had the right -- as to the land, Novell had the rights to get the revenues, and as to the house, maybe SCO built the house and SCO gets the rights to the revenues of the house. But they sell the property for a single amount, and they commingle, if you will, the value of the land and the value of the house.

And Novell, the principal, goes to SCO and says: Wait a minute. We are entitled to the revenues, and you commingled them, and there is no separate -- there is no way to separate them out. And SCO doesn't come forward with what you'd expect it to come forward with. You'd expect it to do an appraisal. You'd expect it to appraise the value of the land. You'd expect it to appraise the value of the house, and do its best, notwithstanding the heavy burden it bears, as a fiduciary, to apportion the amounts that it retained.

Maybe it would even bring in the buyer to testify before the Court and say that that apportionment

28

actually makes sense to me because I went out and I got valuations of land, and I got valuations of the house. I knew what I was doing, and the valuation that SCO has presented to the Court is consistent with my, the buyer's, personal view of the value of the respective components of this acquisition.

SCO has done nothing like that. They would like the Court to believe that the land here, SVRX, the trunk of the tree, is valueless in the SCOsource licenses, that all the value is in the house that SCO built, that nothing should be awarded to Novell and that it cannot and should not be acquired to apportion.

In the face of the overwhelming evidence about what SCOsource was all about, the documents themselves, the agreements themselves and their substantial licensing of SVRX, the history of UNIX licensing, which we think favors us, not SCO, and that the legal duties imposed on SCO, as Novell's fiduciary, we think there really can't -- there can be no other outcome here than to award Novell the amount Novell seeks; again, a little over $19 million.

Thank you very much, Your Honor.

THE COURT: Thank you, Mr. Jacobs. Mr. Singer, you may make your opening statement.

29

MR. SINGER: Thank you, Your Honor. If I might approach?

THE COURT: Yes.

MR. SINGER: The book. Good morning, Your Honor.

THE COURT: Good morning.

MR. SINGER: I'd like to start with three observations based on what Mr. Jacobs has said. The first thing he said this morning was that the amount of damages that they will be looking for is exactly $19,979,561, which I thought was an interesting development since, just that few days ago, in their trial brief, Novell stated that, as the Court may have surmised from the motion in limine briefing, neither Novell nor SCO intends to come into the Court and argue, e.g., the evidence definitely establishes Novell is entitled to precisely 98 percent of this license's revenue, 88 percent from this license, etc.

It seems now they have a to a dollar figure which they believe the evidence will sustain. It is our position in this case that there is a de minimus value to the SVRX rights, and I'm using that term in the sense in which the Court used it in the summary judgment order with respect to meaning just those amounts which, under that order, Novell is entitled to as a royalty.

30

The second point I'd like to turn to, which, if we turn to slide 19 in the binder of materials -- and hopefully we'll put it on the screen momentarily here. And it is a follow-up of a statement Mr. Jacobs made here today, where he said the focus of SCOsource is SVRX. And that's really similar to a statement which was filed in Novell's memorandum in support of its motion for summary judgment on its fourth claim, which is, from start to finish, Novell said, SCO never claimed SCOsource had anything to do with SCO's UNIX derivative rights and any attempt by SCO to recast SCOsource now should fail.

So they are feeling the Court in its papers and now in open court, that SCOsource had nothing to do with UnixWare. That is simply not so. If one turns to what the documents the Court will see during this week of trial will show, and the very next slide -- it's the December 2002 press release. SCO's shared libraries -- and it talks about UnixWare and OpenServer licensing agreements did not allow those UNIX libraries to be separated from the operating systems.

The January 2003 announcement, which talks about SCO's UnixWare and OpenServer license agreements, the February 2003 sales guide, which says precisely that with respect to the shared library, the document repeatedly refers to SCO's concern that UnixWare and

31

OpenServer technology have been improperly used in Linux. In the July 2003 press release, where it says the company also announced it will offer UnixWare licenses to support one-time binary use of Linux for all commercial users of Linux based upon certain terms.

So the evidence will show that in fact SCOsource, at its inception and throughout remained concerned with technology that was in UnixWare and OpenServer.

And the third point I'd like to observe comes off of a chart which Mr. Jacobs used which tries to draw this distinction. It's the chart that was the timeline where on the left-hand side you had SVRX and, on the right-hand side, you had SCO UnixWare. And it suggests that these are two different universes, that SVRX and SCO UnixWare are somehow distinct and, if you're referring to SVRX, you're not including UnixWare, and vice-versa.

The reality is, is that there is not a dichotomy in terms of the technology between UnixWare and System V. UnixWare is System V technology. It is the latest evolution of that. It is UnixWare -- UNIX System V, 4.2 MP. And this dichotomy that Novell seeks to draw between UnixWare and System V, with respect to the technology, is simply not the case. And that's shown, for example, by documents such as Novell's own sales

32

binders for UnixWare, which says that this is the latest implementation of UNIX System V, Release 4.2 MP technology and repeats that many times as being the latest generation of that use, that this is powerful, scalable, reliable UNIX System V, Release 5.

Thus, when we talk about our UnixWare rights, when we talk about the System V license in the context of SCOsource, that doesn't mean something other than UnixWare, that includes UnixWare. And that will be important as we look at the fact that UnixWare has within it the critical System V technology, and SCO obtained the right to license that technology and do other things with that technology with third parties through the Sun agreement, the Microsoft agreement and the SCOsource agreement.

The question is valuation of -- for the purposes of the APA, what is the value on the SVRX rights, as defined in the APA, for that portion on which that has to flow through to Novell.

Now, if I can put that -- and let me, before leaving that issue, refer to a couple of the documents that Mr. Jacobs referred to. He refers to a letter that was sent out to a lot of people with respect to SCOsource licensing and it talked about are UNIX System V, but that does not exclude UnixWare, which is part of System V

33

technology. It refers to the IBM disclosures and expert reports in that case, and it was important in the IBM case to link back those technology disclosures as early as possible in the chain of development to show how it was in breach of those contract rights.

Nothing in either Mr. Cargill's report -- Mr. Cargill will testify this week -- or in the disclosures submitted to the court in the IBM case indicates that those technologies are not also in UnixWare. They may have originated in earlier versions of System V, but they were carried forth into UnixWare.

Now, with respect to the issues before the Court, we don't think there is any strong disagreement -- we don't think there's any disagreement on what the three issues are that the Court has to decide this week.

First. Which components of the Microsoft and Sun agreements are SVRX licenses and what value to attribute to them.

Second. Whether parts of the SCOsource agreements are SVRX licenses and, if so, what value to attribute to them because when they moved for summary judgment, they didn't even move that the SCOsource licenses, outside of Microsoft and Sun, were SVRX licenses within the meaning of the APA.

And, third, whether SCO had the authority to

34

enter into the Microsoft, Sun and SCOsource agreements. And tomorrow there's a summary judgment argument on the inconsistencies between the first two issues, which is a royalty that Novell wants to collect, and the third issue where they are seeking to say that the agreements are unauthorized.

Now, if we turn to, first of all, the Microsoft agreement, Section 2 of the Microsoft agreement is a release of claims not having anything to do with Linux, because this is Microsoft, but claims regarding Microsoft's products. There is nothing in the record which shows Microsoft had the concerns with respect to the SCOsource program and Linux that Mr. Jacobs is talking about, but, in any event, that release only releases SCO's claims, not, by its terms, Novell's claims.

So a release that only releases SCO's claims cannot, we submit, be viewed as a license of Novell's copyrights or technology. At most, it may mean that Microsoft did not get as much protection as it otherwise would have gotten. It only releases the claims that SCO has.

Section 3 was a UnixWare license. Now, Mr. Jacobs makes a great deal this morning about saying that, well, this is what we have apportioned to SCO.

35

Well, I submit to Your Honor that if there was any credible basis that Novell could have held out for that revenue, they would have been arguing for it here today. It has not been apportioned to SCO. There was nothing to apportion. The only thing in that section of the agreement is a UnixWare license, so it clearly belongs to us, and there is no issue concerning it.

Section 4 is where the issue arises. When they moved for summary judgment, Your Honor, that part of the Microsoft agreement was an SVRX license, it was because you had a list of older SVRX technology in Section 4, along with licenses to UnixWare and OpenServer source code. That's really the only section that is implicated in the issues this week, and it is that section where you had basically 8.25 million dollars at issue.

Now, on the Sun agreement, also only a minor part of that agreement is an SVRX license within the meaning of this Court's ruling. Section 4 was the license that's at issue, and the Sun agreement, that's a license to UnixWare and previous releases of System V and to a number of drivers which allow these UnixWare and OpenServer products to operate on different platforms. You will hear testimony this week about the importance of those drivers.

Only a minor part of Section 4 constitutes an

36

SVRX license. The other parts of the Sun agreement do not. Section 10 is an indemnification of Sun's activities by SCO. No implication of Novell. Section 12 is a release of claims by SCO. Doesn't implicate Novell. In section 13 is basically a most favorable nation clause. They won't give more favorable rights of redistribution to anyone that SCO has given to anyone else, and that's never been granted to anyone and is not applicable. Now, the key thing which supports our position, Your Honor, is that the System V prior products licensed with UnixWare have no significant independent value.

Mr. Jacobs said that they agree that the licensing of prior products is what incidental licensing means. We'd like to you hold Mr. Jacobs and Novell to that statement because we believe the testimony will show, this week, that that licensing of prior products supports SCO's position, that you had a single price paid for the most recent release, and there was no incremental amount charged to customers for the prior product releases that were built in. And that was true when Novell ran this product. It was true when Santa Cruz ran this product, and it was true when SCO licensed this product with respect to Microsoft and Sun.

Now, this is reflected in the history of

37

licensing of these older versions. You have a series of versions, pre-System V, Release 1, 2, 3, System V release 4, UnixWare. And, as you can see, when there is the announcement of a new release, you have a precipitous decline in the sales or licenses for value of the older releases, and within a few years, that older release drops away to nothing at all, nothing at all.

So, when you get out here to the UnixWare licensing, in the period in which you had the Microsoft and Sun agreements, these older versions have no commercial value whatsoever. They haven't been licensed for years, and there's no way to believe that anyone would pay more for them being tacked on to a license agreement for current version UnixWare, which we agree, there is a trunk to UNIX, and UnixWare is the living trunk. That is the most recent version. And if there is source code in that trunk, it continues all the way up here to UnixWare. You're getting that source code in UnixWare, and no one is going to pay more for the older versions they have a right to. And that is true not only from looking at the historical licensing, but looking at certain agreements.

For example. If the Court looks at licenses to his UNISYS, you'll see that there was an amount of $375,000, and you had prior products that were all

38

included. That $375,000 is the same amount when you had a source code right-to-use fee for ALFs, where you didn't have any prior products listed. There wasn't anything extra charged to UNISYS because you got the prior outdated products along with it. We think the evidence will show that Novell's own practices showed that they recognized there was no value to be apportioned out of the UnixWare licenses due to these prior products.

There was a period of time, and the Court will hear testimony about this, where Novell granted its licenses to UNISYS. It audited those books. They knew UNISYS paid millions in binary royalties, and they never asked for any of those payments to be apportioned with part of it going to these earlier releases. And, in fact, beyond UNISYS, the testimony will show that for years, after the sale of the APA, when Novell looked at the royalties being remitted by Santa Cruz, they knew there was all these UnixWare licenses out there that had these prior products listed, and never once did Novell come in and say: You owe us some percentage on those royalties because you have these prior products and those prior products have a value.

Not once. And that is the strongest evidence that Novell knew there was no separate value to the older products that went along with the current version of

39

UnixWare.

So, what does that mean in the context of the Microsoft and Sun agreements where the Court has found there is some element of SVRX? We submit it means that there is no value beyond a de minimus amount for that SVRX prior products licensing. In the UnixWare Section -- in Section 4 of the Microsoft agreement it is the UnixWare and OpenServer rights which are the current products that are very valuable.

And OpenServer, by the way, is a product which Novell has no rights to whatsoever. It was developed by Santa Cruz, and that's part of these products. We think that that, in itself, was a strong basis for the licensing value that Microsoft got because that is two-thirds of SCO's annual revenue, and it was the first time that SCO had offered a source code license to the OpenServer source code.

That's what happened in the Microsoft agreement in 2003. In fact, in that agreement itself, in an amendment, paragraph B reflected that Microsoft was concerned that components in SCO's UnixWare 7, a UnixWare release, might be present in Windows. So, because the UnixWare license gave Microsoft the right to use the prior products and there was no significant value to those, we think that there's only a de minimus royalty or

40

an amount which -- of the Microsoft rights which are under Section 4 which should be apportioned to Novell.

Now, with respect to Sun, again, it is the UnixWare license that is valuable because that permitted Sun to develop compatibility for Solaris using the latest release of System V, the UnixWare release which was out there on the market. As I mentioned, there's these drivers that allowed Sun to use UnixWare for various actual purposes, to run applications, and they got that in the 2003 agreement, not the '94 agreement.

Your Honor, I would also note, because Novell did not do so, in the '94 agreement, where they got these binary rights for what was System V binary products, that was over $80,000,000, and Novell got that $80,000,000. That is where Novell got and kept the value, the economic value for the older technology, in the '94 agreement, and it was over $80,000,000. The $10,000,000 here for the latest UnixWare rights, the UNIX OpenServer drivers, and we believe that the changes with respect to the confidentiality provisions are a very minor, de minimus aspect of that because, under the earlier agreement, Sun had the right to license to any number of distributors and subdistributors, this code.

So, we don't think there's any significant value that can be shown for the changes with respect to

41

that in 2003.

Now, we then turn to the second issue, the SCOsource licenses with other parties. Are they even SVRX agreements in the meaning of the APA? Remember that's not an issue the Court determined in summary judgment. And, if so, what value does that aspect of the SVRX contain? I'd like to start with the fact that in the APA, SCO owns claims. For example, among the assets Novell transferred to Santa Cruz are all of seller's claims arising after the closing date against any parties relating to any right, property or asset included in the business.

The SCOsource agreements only release the claims that SCO has. Therefore, if SCO, because of UNIX copyrights being owned by Novell, has less to release, that means the buyer got less. It doesn't mean that SCO was releasing something that Novell controlled because it didn't have the right to do that. That's the meaning of the Court's ruling that the UNIX copyrights, the older UNIX copyrights, remains with Novell. Those releases released only claims that SCO had the right to release.

Now, we believe that the release of claims by SCO, which owns the UnixWare systems and has the rights to license UnixWare are fully broad enough to give protection to those people because UnixWare contained

42

this earlier technology, and the right to use the UNIX technology in UnixWare included the right to use the older SV -- System V technology that carried through to UnixWare, and there won't be any showing in this case, by Novell, that there was any System V technology that didn't go forward into UnixWare, which somehow was important to the outside world and is something which only Novell could give these people.

The last issue is the issue of whether SCO exceeded its authority to execute SVRX licenses. The Court did not term, in its ruling last year, that there was any exceeding of authority. That was not a motion which was brought by Novell at that time. They have subsequently brought a summary judgment motion on that, which is to be argued tomorrow. Novell recognizes that if these agreements involve only incidental licensing of SVRX in the meaning of the APA, those products, that that was something SCO was authorized to do, even without Novell's permission.

And we believe, under the dictionary definitions of the word "incidentally," as well as the custom and practice of how Novell and its successors operated the licensing of prior products, that this is the very meaning of why you had that incidental licensing language in the APA, to allow for the licensing of these

43

earlier, prior products.

Now, there's one more argument that Novell has raised. They have said that, with respect to the Sun agreement, that also was unauthorized because of amendment number 2, to the APA, because that was a buyout. We believe that the testimony will show that the '94 agreement, which bought out all of the binary licenses that were out there was a buyout. That's what gave rise, in fact, to this type of issue. That buyout is not what happened in 2003. The fact that the 2003 agreement references the '94 agreement does not make the 2004 agreement a buyout.

Moreover, there's a paragraph in amendment number 2 that says that Novell may not prevent SCO from exercising its rights with respect to SVRX source code as a result of that amendment. And, overwhelmingly, what we're talking about in the 2003 Sun agreement are rights to source code. So, even if amendment number 2 applied, the B5 exclusion would mean that, with respect to the 2003 amendments dealing with source code, we didn't have to go to Novell.

Your Honor, the testimony in this case, I believe, will show that these agreements included prior products because that was the custom and practice of UnixWare licensing, but there was nothing extra charged

44

for those products, therefore Novell is entitled only to a de minimus royalty with respect to its residual rights.

THE COURT: Thank you, Mr. Singer. You may call your first witness.

MR. JACOBS: We do, Your Honor. We call Mr. Joe LaSala.

THE COURT: Come forward and be sworn, please right up here in front of the clerk of the Court.

JOSEPH LA SALA, 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 state your name and spell it for the record.

THE WITNESS: My name is Joseph A. LaSala, Jr. My last name is spelled L-a, capital S-a-l-a.

THE CLERK: Thank you.

THE COURT: Go ahead, Mr. Jacobs.

DIRECT EXAMINATION BY MR. JACOBS:

Q. Good morning, Mr. LaSala. Could you briefly introduce yourself and your background to the Court.

A. Yes. Good morning. My name is Joe LaSala. I was the general counsel at Novell from July of 2001

45

through mid-January, 2008. Today I am, and since that time, I have been the general counsel of Discovery Communications.

Q. Were you involved in the dispute and the relationship between SCO and Novell as the SCOsource campaign unfolded?

A. Yes, I was.

Q. Can you characterize the level of your involvement, please?

A. Well, as general counsel of the company, I was made aware of virtually all of the important activities in connection with the litigation and in connection with SCO's launch of the SCOsource campaign, our company's reaction to that, the various public and private communications that occurred between the companies at the time and the engagement of counsel and overall the strategy with respect to our company's response to those activities.

Q. Could you look at the first exhibit in your binder, please, Novell Exhibit 215?

A. Yes.

Q. What is that?

A. This is a June 24, 2003 letter from me to Mr. McBride, and I think it constitutes one of the first letters that Novell sent to SCO, and the principal

46

purpose of this letter was to request that SCO provide us with copies of two SCOsource licenses that it had recently announced that it had entered into; one with Microsoft and one with an unnamed party.

MR. JACOBS: Your Honor, offer Exhibit 215 into evidence.

THE COURT: I thought we were going to put all these in by stipulation.

MR. JACOBS: This one, I believe SCO has objected to, Your Honor.

MR. SINGER: We have no objection, Your Honor.

THE COURT: 215 is received.

(Novell Exhibit 215 received in evidence.)

Q. Mr. LaSala, could you explain to the Court, please, what led up to the sending of -- or to the transmittal of this letter?

A. Well, the precipitating event was a securities filing SCO had recently made just prior to this letter being sent, parts of which are quoted in this letter, where it became apparent to us that SCO had entered into these two SCOsource licenses.

But, really, the letter was a combination of events of the past or previous six months or so, where we had come to a -- we had concerns that what SCO was doing

47

with its SCOsource campaign may implicate rights that Novell had under the Asset Purchase Agreement, and through their public statements, their press releases, their securities filings, some private communication, a May 12 letter that they had sent to, I think, the Fortune 1000 companies in the United States, all of those things led us to believe that things that SCO was doing with the SCOsource campaign may implicate certain rights that Novell had under the Asset Purchase Agreement.

Q. Could you look at the bottom of page 2 of the letter, the second half of page 2, please?

A. Yes.

Q. And what, exactly, was Novell asking SCO to do?

A. Well, here Novell was specifically asking SCO to provide it with copies of the two agreements in question and any other agreements that SCO may have entered into which purported to amend any SVRX licenses.

Q. And in paragraph B?

A. In paragraph B, we were asking SCO that they not enter into any further agreements in which SCO purports to amend these licenses or to enter into any new SVRX licenses.

Q. And in paragraph C?

A. In paragraph C, we were requesting that SCO

48

comply with its obligations under amendment number 2 to the Asset Purchase Agreement with respect to the management of potential buyouts of a licensee's royalty obligation.

Q. Could you please turn to Novell Exhibit 220, the second tab in your binder?

A. Yes.

Q. What is Novell Exhibit 220?

A. Well, Novell Exhibit 220 is a letter dated July 11, 2003, from Mr. Mike Brady, who is an employee at Novell who, at the time, ran the contract management group, to the CFO of SCO, Mr. Robert Bench, advising Mr. Bench of two things. First, that it had been more than six months since Novell had received its -- any royalty reports or royalty payments from SCO and that we were demanding that we receive those payments and reports in a manner consistent with the Asset Purchase Agreement which, I think, required that they be provided quarterly.

And the second thing that the letter does is it notifies SCO that Novell intended to conduct an audit of SCO concerning the royalties and other payments due under the SVRX licenses and the Asset Purchase Agreement.

So the letters served those two purposes.

Q. Did you work with with Mr. Brady on the transmittal of this letter?

49

A. I don't recall specifically, but I'm quite sure that I did.

MR. JACOBS: Your Honor, we offer Novell Exhibit 220 in evidence.

MR. SINGER: No objection.

THE COURT: 220 is received.

(Novell Exhibit 220 received in evidence.)

Q. Now 220, Mr. LaSala, is dated July 11, 2003.

A. Yes.

Q. And 215 is dated June 24, 2003. Between the June 24 letter and the July 11 letter, had you received a response to 215, your letter to Darl McBride?

A. No.

Q. And why did Novell decide to audit SCO's compliance with the the Asset Purchase Agreement?

A. Well, again, Novell had concerns that SCO's activity with respect to its SCOsource campaign may be resulting in monies being paid to SCO that rightfully belonged to Novell. So the right to audit is very clear in the Asset Purchase Agreement, and we thought, given this body of evidence that had been accumulating over the previous six months or so, we thought the wise course of action would be to notify SCO of our intention to conduct an audit.

Q. Would you turn to the next tab, please, Novell

50

Exhibit 222?

A. Yes.

Q. 222 is a letter dated July 17, from Mr. Bench at SCO to Mr. Bready at Novell?

A. Yes, it is.

Q. And what did you understand Mr. Bench to be responding to?

A. Well, Mr. Bench, in his letter, notes that he's responding to Mr. Bready's July 11 letter, where we made the request -- the demand for an audit, and in this letter, he notifies Novell that payment, current payment due to Novell, has been or is being made. He references that Novell was withholding its payments to -- or excuse me -- SCO was withholding payments to Novell based upon a review that SCO was conducting on Novell's activities with respect to our Linux announcements and that they were evaluating the scope of Novell's Linux-related activities for compliance.

And they also notified -- the letter also notifies Mr. Bready that SCO reserves the right to further withhold royalty payments owed to Novell in its discretion if it believes that Novell is violating its obligations under the Asset Purchase Agreement.

Q. What was your reaction when you read this letter?

51

A. Well, somewhere between furious and bemused. I guess I would say it that way.

Q. Why?

A. Well, furious because, in our view, SCO was a fiduciary to Novell and had a duty and an obligation to collect those royalty payments and to pass them through to Novell. Plain and simple. It didn't have any right in the an Asset Purchase Agreement or anywhere else, under any rule or law that I'm familiar with, to offset or withhold payments due to Novell, for any reason, and so the assertion that SCO was withholding payments, pending its review of Novell's Linux-related activities was absurd on its face, as far as we were concerned.

And it was somewhat frustrating but, as I say somewhat amusing as well because we thought it was totally without foundation.

Q. Could you turn to the next exhibit, 234?

A. Yes.

Q. What is Novell Exhibit 234?

A. This is a letter from me to Mr. McBride dated August 7, 2003, where I essentially conveyed to Mr. McBride, Novell's position with regard to Mr. Bench's assertion in the previous letter, those that I just outlined for you, and pointed out to Mr. McBride that, you know, SCO was without any right or foundation to

52

withhold any royalty obligations that were owed to Novell.

MR. JACOBS: We offer 234 into evidence, Your Honor.

MR. SINGER: No objection, Your Honor.

THE COURT: 234 is received.

(Novell Exhibit 234 received in evidence.)

Q. Now, this letter is dated August 7, 2003, this being 234. And your initial letter to SCO about the Microsoft and unnamed third-party license, the other license, is dated June 24. By this time have you received a response to your June 24 letter?

A. No. No, we have not.

Q. Could you turn, please, to Novell Exhibit 267?

A. Yes.

Q. What is 267?

A. Well, 267 is a November 21, 2003 letter from Mr. Bready to Mr. Bench, again, and pretty much most of the fall has passed by this time. And, in this letter, Mr. Bready points out to Mr. Bench that there are certain requests that Novell has made with respect to the audit that have not been fulfilled, and he lays out in some detail the basis of those requests and asks, again, specifically for copies of the two agreements in question.

53

Q. So, had the audit been conducted by this time?

A. Well, I'm really not clear -- the audit certainly had not been conducted and completed. Whether or not it had commenced, I think it had, and Mr. Bready references in his letter that, you know, the purpose of the letter is to request further information and information that had previously been requested to assist Novell with the conduct of the audit.

Q. If you look at paragraph 1.4 or 1.5 of this letter, what, exactly, are -- was Novell requesting of SCO in this letter?

A. Well, again, quite specifically, Novell was requesting that SCO provide Novell with copies of the Sun -- by this time we knew that this second agreement was the Sun agreement -- copies of the Sun and Microsoft agreements to verify SCO's compliance with 4.16B of the Asset Purchase Agreement. In addition, Novell was requesting copies of any similar agreements that SCO may have entered into. Of course, we had not known whether they had or not.

And, finally, Novell was requesting that SCO identify any potential buyout transactions that it might be aware of, so that Novell could be properly put on notice if any such types of transactions existed.

Q. If you look at paragraph 2.2 and 2.3?

54

A. Yes.

Q. What was Novell asking for there?

A. In 2.2 and 2.3, Novell references a new license called SCO Intellectual Property License for Linux and requested copies of any licenses for Linux that SCO may have entered into under that new license regime that it had established.

MR. JACOBS: Your Honor, offer 267 into evidence.

MR. SINGER: No objection.

THE COURT: 267 is received.

(Novell Exhibit received 267 in evidence.)

Q. Let's turn to the next tab, Mr. LaSala, of Exhibit 280, Novell Exhibit 280. What is 280?

A. 280 is a December 29, 2003 letter from Mr. Bready to Mr. Bench, essentially reminding Mr. Bench of Novell's repeated requests for the information that Novell needed to conduct its audit and expressing a view that it would like to have a response no later than January 12, 2004.

MR. JACOBS: Your Honor, offer Novell Exhibit 280 into evidence, Your Honor.

MR. SINGER: No objection.

THE COURT: 280 is received.

(Novell Exhibit 280 received in evidence.)

55

Q. Let's turn to the next tab, 293. What is 293?

A. 293 is yet another letter from Mr. Bready to Mr. Bench which reiterates or references the November 21 letter for information that Novell thought it needed to conduct its audit and reiterates the request for the information contained in that November 21 letter. And again, it -- and in the second paragraph of that letter, it makes note that, you know, Novell had sent you the November 21 letter and sent you a second letter on December 29 asking that you comply with the request.

Q. Let's turn to 294.

A. Okay.

Q. Novell Exhibit 294, which has been pre-admitted.

THE COURT: Are you going to offer 293?

MR. JACOBS: I'm sorry. Thank you, Your Honor. Offer 293 into evidence.

THE COURT: Are you going object?

MR. SINGER: No.

THE COURT: 293 is received.

MR. JACOBS: Thank you, Your Honor.

(Novell Exhibit 293 received in evidence.)

Q. Let's look at 294, Mr. LaSala.

A. Yes.

Q. 294, now, is the letter from Mr. Tibbitts at

56

the general counsel of SCO to you?

A. Yes, it is. It's dated February 5, the next day after the February 4 letter from Mr. Bready. And this letter outlines various -- makes several points to Novell from SCO. The first was that it expresses SCO's view that many of the questions that were asked in the November 21 letter were outside the scope of Novell's audit rights. It asserts that the scope of the other points and questions raised in the body of the November 21 letter were the result of cooperation that we allegedly had entered into with IBM in the course of this litigation with SCO and then proceeds to respond, with some specificity, to a couple of the points that were raised in Mr. Bready's November 21 letter.

Essentially, Mr. Tibbitts is telling us that whatever rights Novell may have under Section 4.16 of the Asset Purchase Agreement, with respect to the revenue stream from the SVRX licenses that were in existence at the time of the APA, those rights do not extend, he says, to either the Sun or the Microsoft agreements. And he calls the Sun agreement a new contract, and he calls the Microsoft agreement a new agreement not covered by the APA in this letter.

Q. And then, what was his response on intellectual property licenses for Linux?

57

A. With respect to our request that SCO identify potential intellectual property licenses entered into under the new SCO IP license for Linux, he says that -- he says that that was not a new SVRX license.

Q. Did -- at any point, in your back and forth with SCO leading up to this letter, did SCO ever, first of all, give you copies of the Microsoft and Sun agreements?

A. No.

Q. And did SCO ever say to you that those agreements are not the subject of your rights under the Asset Purchase Agreement because they only incidentally license SVRX?

A. No.

Q. Let's turn to 297. What is 297, Novell Exhibit 297?

A. 297 is a March 1, 2004 letter from me to Mr. Tibbitts where I write, in response to the February 5 letter that we just talked about, and I point out what I think is the blindingly -- I make the blindingly obvious point that it appears that the question at issue here is whether or not the Sun and Microsoft agreements are SVRX licenses. And I refer Mr. Tibbitts to the fact that Novell has reviewed SCO's intellectual property license

58

from its web site and made a conclusion that licenses taken under that agreement would be SVRX licenses because of the definition of SCO IP that's included in that license, and then I make the point that we would expect the same to be true for the Sun and Microsoft agreements but, of course, we could not be sure of that because they hadn't yet been shown to us, and I reiterate Novell's desire that SCO provide those agreements and any other intellectual property licenses for Linux agreements that SCO may have entered into.

Q. And did you -- and what kind of time frame did you put on that request?

A. Well, I asked that they be provided immediately.

MR. JACOBS: I offer 297 into evidence.

THE COURT: Any objection?

MR. SINGER: No objection.

THE COURT: 297 is received.

(Novell Exhibit 297 received in evidence.)

Q. Let's turn to the next tab in the binder, Mr. LaSala, Novell Exhibit 303.

A. Yes. Novell Exhibit 303 is another letter from me to Mr. Tibbitts, this one dated April 2 or roughly about one month later, and in it I simply point out to Mr. Tibbitts that Novell has received no response to the

59

March 1 letter regarding the agreements which SCO has entered into and express to him the view that Novell believes that we are deserving of a response and we would urge that he provide one promptly.

Q. And then, at the end of the letter, you say: If we do not hear from you shortly, we will infer that SCO has nothing to say in response. Do you see that?

A. I do.

Q. What were you inferring at that point from SCO's non-response about whether the Sun and Microsoft agreements represented SVRX licenses under the Asset Purchase Agreement? A. Well, we were beginning to try, in an appropriate way, to put SCO on notice that, you know, we were of the firm conclusion -- that we were trying to verify that these licenses were SVRX licenses, and we were essentially saying that, if you're not going to respond, you know, further, you don't really have anything to say about that.

MR. JACOBS: I offer 303 into evidence.

THE COURT: 303 is received.

MR. SINGER: No objection.

(Novell Exhibit 303 received in evidence.)

Q. Let's turn to the last exhibit in your binder,

60

Mr. LaSala, Novell Exhibit 317.

A. Yes.

Q. What is 317?

A. So, 317 is a November 17, 2004 letter to Mr. Tibbitts from me. By this time, many months have gone by, and I point out to Mr. Tibbitts that we have had numerous communications with SCO regarding their handling of UNIX licenses and point out that we think that our audit rights under the Asset Purchase Agreement entitle us to these agreements and remind him that we sent him letters about this.

And I point out to him, really for the first time, that we had noted recently that Sun had confirmed its plans to open source its Solaris operating system, and we knew, of course, that its Sun Solaris operating system was based on SVRX, the code, and we took note of the fact of Sun's announcement to open source its Solaris operating system.

And we outlined for Mr. Tibbitts, again, the rights that we believed that we had with respect to UNIX licenses in Section 4.16 and that, you know, SCO had no authority to amend the license that existed with Sun, which was a 1994, I believe it was, buyout of Sun's royalty obligations to Novell at the time. And we wanted to make SCO aware of that.

61

And then, finally, we asked, yet again, that SCO provide us with copies of any of the agreements, particularly the Sun agreement in this case, and somewhat fruitlessly, I included a deadline of Friday, December 3, 2004.

Q. Now, in this letter you also cc'd the Senior Vice President and General Counsel at Sun Microsystems?

A. I did. And in the last paragraph of the letter, I notified Mr. Tibbitts that we would be doing that, and, of course, on its face, we have done that. And we also separately corresponded with Sun, advising them of our point of view on these matters and requesting that Sun might be able to cooperate with us and provide us a copy of the Sun/SCO agreement.

Q. And then, in the last paragraph of this letter, you say -- you refer to putting Sun on notice of potential issues?

A. Yes.

Q. What were you driving at?

A. We wanted to to make sure that Sun was aware of what Novell's rights were with respect to the Asset Purchase Agreement and our view that SCO lacked the authority to enter into an amendment to the buyout agreement, and we thought it was important, since Sun had undertaken this initiative to open source its Solaris

62

operating system that they be aware of Novell's position.

Q. Did you have -- aside from the legal concerns that you have referred to, did Novell have a business concern about Sun's open sourcing plans?

A. Very much so. By this time, Novell's intentions to enter into the Linux marketplace were well known, and Novell's business was up and running, and we had completed a major acquisition of an open source company. We had established ourselves, we think, in the marketplace as one of the leading providers of Linux and open source technology.

And the fact that Sun would take upon itself to open source its Solaris operating system caused us some business concerns, sure.

Q. Did you ever receive a response to your November 17, 2004 letter to Novell, Exhibit 317?

A. No.

Q. So, over the -- and then, at some point, the Sun and Microsoft agreements are produced in discovery. That happens. I'll just set the chronology. That happens in the winter of 2006. So, up until that point, did SCO ever comply with your request under these letters that it supply Novell with the Sun and Microsoft agreements?

63

A. No.

Q. Did it ever comply with the request pursuant to the audit provisions of the Asset Purchase Agreement that Novell be allowed to audit SCO's compliance with the Asset Purchase Agreement as it related to the Sun and Microsoft agreements?

A. No.

Q. Did SCO ever tell you in any communications outside litigation pleadings in the last year and a half or so, that its theory was: These agreements were not SVRX licenses as to which it owed you a payment obligation because the SVRX was only incidental?

A. No.

MR. JACOBS: Thank you very much, Mr. LaSala.

THE COURT: Are you going to offer 317?

MR. JACOBS: Yes, Your Honor, 317, please.

THE COURT: Any objection?

MR. SINGER: No, Your Honor.

THE COURT: 317 is received.

(Plaintiff's Exhbit 317 received in evidence.)

THE COURT: Thank you. Mr. Singer, you may cross examine.

CROSS EXAMINATION BY MR. SINGER:

Q. Good morning, Mr. LaSala.

64

A. Good morning,.

Q. You had testified about the June 24, 2007 letter that you wrote Mr. McBride which has been introduced as Exhibit 215, the first exhibit you were asked about this morning. Do you recall that?

A. Yes.

Q. Is it true, though, that you were aware of SCO's plans to engage in what we have referred to as SCOsource licensing going back into late 2002?

A. I don't think my awareness went back quite that far. Certainly not by the name of SCOsource.

Q. Well, maybe not by the name of SCOsource, but do you recall that, in late 2002, there were conversations between representatives of SCO and representatives of Novell that -- where SCO indicated its interest in licensing UNIX technology for use in Linux?

A. Yes. I'm aware of those conversations.

Q. Okay. And, at any time between those conversations and late 2002, and June 24, 2003, did you, as general counsel, ever directly or by directing others, tell SCO that it could not engage in SCOsource licensing?

A. No. I don't believe we did because we weren't sure exactly what the nature of the the SCOsource licensing program was, and we were trying to get a

65

complete understanding of it before we would make such a request.

Q. There were public announcements in the early part of 2003 about SCOsource licensing, was there not?

A. I think there was one in January of 2003.

Q. Now, at any time prior to and even as of June 24, 2003, did you demand -- well, let me rephrase that question. Prior to June 24, 2003, did you ever tell SCO that Novell would be asking for the revenue that SCO obtained through those SCOsource licenses?

A. I don't believe we did.

Q. You testified in the latter part of your direct examination about Sun. Are you aware of whether Sun open sourced Solaris under what's referred to as the GPL, the general public license?

A. I'm not aware that they have.

Q. That is the license under which Linux operates, correct?

A. It's one of them.

Q. One of them. Now, have you ever told Sun that its agreement, its 2003 agreement with SCO, is unauthorized by Novell and Novell will seek to repudiate it?

A. I sent a letter to the general counsel of Sun, subsequent to the last letter that we referred to in the

66

back and forth with myself and Mr. Tibbitts, and I can't recall in that letter whether I used the words that you used, but I think essentially what I did in that letter was have Novell put Sun on notice of the rights that Novell had with respect to the agreement that SCO and Sun had entered into.

Q. But did you tell Sun that you are repudiating that agreement as unauthorized?

A. I don't believe we did, but I can't recall precisely whether or not we did.

Q. So, as of today, you have never told Sun that Novell repudiates that agreement; is that correct?

A. I think that's correct.

Q. And would the same be true of the agreement in 2003 between SCO and Microsoft?

A. Yes.

Q. Now, with respect to the aspect of the letter that you were asked about on direct examination of the agreement with Sun releasing confidentiality rights, do you recall giving a declaration in the IBM case on behalf of IBM?

A. I recall that.

Q. Do you recall saying in that declaration that Novell understands that neither AT&T nor USL intended to assert ownership or control over licensee's own

67

modifications to and derivative works of UNIX software exclusive of any UNIX software included in those modifications or derivative works?

A. I don't recall that, but I'm sure that's what the declaration says because I suspect you're reading from it.

Q. I am.

A. Yes.

Q. And you acknowledge that Solaris is a derivative work of UNIX software?

A. Yes.

Q. So the position that you took in the declaration in the IBM case was that there were no rights to restrict what a licensee did with its derivative works that it might create, correct?

A. If that's what the declaration says, I think that's correct.

Q. Now, with respect to the audits that were conducted at Novell -- and you were general counsel through -- was it November of 2007?

A. Mid-January of 2008.

Q. Mid-January of 2008. Are you aware that there was a separate provision of the Asset Purchase Agreement which provided for UnixWare royalty?

A. Generally, yes.

68

Q. And that was a royalty which would only be triggered if the sales of UnixWare reached a certain threshold, correct?

A. I'm -- I can't verify that right now as we sit here.

Q. Does that -- it's not something which you took any particular interest in?

A. I really can't recall at this point in time. I'm sorry.

Q. Okay. Do you recall whether you --

MR. JACOBS: Your Honor, I object to this line of questioning as beyond the scope of the direct.

THE COURT: Mr. Singer?

MR. SINGER: Your Honor, we think it's -- first of all, we think that with respect to witnesses being called, rather than having to recall the witness in our case for this, we should be allowed to exceed the scope, but that this does relate to the issue of the audits and what they were looking at in the audits.

THE COURT: I agree with you on both counts. It would be better to get the witness done, even if you have to exceed the scope of direct. And, arguably, it does relate to the audit, so the objection is overruled, and you may continue.

Q. Did you ever seek any royalties from SCO with

69

respect to the UnixWare royalty provisions of the APA?

A. I don't know.

Q. You had audits of SCO which would reflect that it was receiving royalties on UnixWare, correct?

A. I don't know.

Q. You don't know that SCO was generating revenue by licensing UnixWare to the public?

A. I don't think that's what you asked me.

Q. Well, let me rephrase the question. Are you aware of the fact that SCO was in the business of licensing UnixWare for money?

A. Yes.

Q. Did you ever tell SCO that Novell had an interest in receiving part of that money?

A. I just don't know at this point in time. I'm sorry.

Q. You're not aware of that happening, though, are you?

A. I'm not.

Q. Now, are you aware of, at any time during the audits which were conducted of SCO, whether any issue was ever raised that SCO had to remit a part of the UnixWare royalty to Novell because some of the prior products that were listed in those licenses were products that were referenced in the APA as System V products in which

70

Novell retained the royalty right?

A. So, just to be clear, are you talking about the most recent audit or audits done prior to that?

Q. Earlier audits.

A. Earlier audits? I'm not familiar with the results of the earlier audits.

Q. Now, you've mentioned that you did not receive, until the litigation, copies of the Sun and Microsoft and SCOsource agreements. You now have those, correct?

A. Yes.

Q. And since the litigation has begun, has Novell taken any further steps to continue the audit process outside of the litigation?

A. Well, I'm not aware that it has. And my recollection is that, at the time shortly after this last letter exchanged between myself and Mr. Tibbitts, my recollection is that the litigation itself began to get more active, and I can't tell you today what the ultimate outcome of the audit was, although it's my view, my belief, that it has not been completed.

Q. Well, Novell didn't take any steps to continue the audit after the litigation began, correct?

A. I don't know that that's -- I don't know.

Q. Well, do you recall in your deposition -- and this is as a 30(b)(6) witness. It's at page 169 in your

71

deposition that was taken May 16, 2007, page 169, line 5. Has Novell --

THE COURT: You want the deposition published, then, right, the deposition of the witness published?

MR. SINGER: I was going to ask the witness if he gave testimony and publish his question and answer.

THE COURT: Well, to do that, we need to publish it first. The deposition of the witness is published. And now you can ask him whatever you want about it.

MR. SINGER: Yes.

Q. Mr. LaSala, do you recall being asked at line 5: Has Novell undertaken to continue the audit at any time since the litigation began or whenever it was that the audit petered out, in your view?
Answer: No.
Did you give that testimony?

A. I don't recall that I did, but I'm certain those are my words, since they were from the deposition transcript.

MR. SINGER: Now, through the discovery process.

MR. JACOBS: Could the witness have a copy of his transcript if he's going to be asked about it?

72

THE COURT: Sure. Do you have one for him? Mr. Singer, go ahead and hand him at least that part. Are you going to ask him more about the deposition?

MR. SINGER: That's the part, a discrete question and answer. That's the only part.

MR. JACOBS: I withdraw my objection. Sorry.

MR. SINGER: It was just the part that was being used for that purpose.

Q. During the litigation process you have acknowledged, Mr. LaSala, that Novell has received copies of the Novell agreements -- excuse me -- the Microsoft agreement, the Sun agreement and the other SCOsource agreements, correct?

A. Yes.

Q. And you have received information as to whatever amounts were paid by Microsoft and Sun for other SCOsource licensees under those agreements, correct?

A. Yes.

Q. If Novell had wanted to do so, it would have had the right to take deposition discovery of Sun and Microsoft itself, correct?

A. I presume that's correct.

Q. Which is a right that you wouldn't even have in connection with an audit, but you would have in

73

litigation?

A. That makes sense.

Q. So, as we sit here today, trying to figure out how much of a royalty Novell should receive with respect to those agreements, can you point to any way in which Novell has been prejudiced, at the present time, by not receiving the agreements until discovery has occurred?

A. Well, had Novell -- I mean, it's all somewhat speculative, because had we received them in a timely fashion consistent with the requests that were being made, presumably we would have known their contents at an earlier point in time, and I don't know what course of action that may have led to, but it may have changed our course of behavior had we been able to get our eyes on those agreements when they were requested.

Q. Well, in terms of calculating the amount of the royalty received in 2003 by SCO, you're not prejudiced in any way now in your ability to argue what part of that belongs to Novell, correct?

A. I think that's probably correct.

MR. SINGER: Nothing further, Your Honor.

THE COURT: Thank you. Any redirect, Mr. Jacobs?

74

REDIRECT EXAMINATION BY MR. JACOBS:

Q. Mr. LaSala, Mr. Singer asked you about a declaration you supplied in the IBM case, and to paraphrase what he asked you about, he asked you about the -- he asked you about testimony you gave in that declaration about whether AT&T and its successors had the rights over code that IBM had written and added to the IBM code base. Do you recall that question?

A. Yes.

Q. What's the issue with respect to the Sun agreement? Is it with respect to code that Sun wrote or code that Sun has in Solaris that is SVRX code?

A. It's the latter. It's code that Sun has in Solaris with respect to the SVRX license.

Q. In the intervening years between your letter of July, 2003 and this trial, what is your understanding of what has happened to SCO's financial condition?

A. My understanding is that SCO's financial condition has deteriorated precipitously since that time.

Q. And had you had access to the Sun and Microsoft agreements in 2003, what would have been different about your potential ability to recover from SCO?

A. Well, they would more likely have -- they would

75

have more money than they do today.

MR. JACOBS: No further questions.

THE COURT: Thank you. Any recross, Mr. Singer?

MR. SINGER: No, Your Honor.

THE COURT: You may step down, Mr. LaSala. I assume that this witness may be excused?

MR. JACOBS: Yes.

MR. SINGER: We have nothing further for him.

THE COURT: You may be excused. Let's take our first break. We'll be in recess for 15 minutes. Thank you.

(Short break)

76

THE COURT: You may call your next witness.

MR. ACKER: Thank you, Your Honor. Novell will call Chris Sontag. For the Court's convenience, there are exhibits that I may refer to in binders that I left with your clerk there.

THE COURT: Okay.

THE CLERK: And you're the witness. Okay. Please raise right hand.

CHRISTOPHER S. SONTAG, called as a witness at the request of Novell, having been first duly sworn, was examined and testified as follows:

THE WITNESS: I do.

THE CLERK: Thank you. Please take the witness stand. Please state your name and spell it for the record.

THE WITNESS: Christopher S. Sontag. C-H-R-I-S-T-O-P-H-E-R. Sontag, S-O-N-T-A-G.

DIRECT EXAMINATION BY MR. ACKER:

Q. Good morning, Mr. Sontag.

A. Good morning.

Q. You were formally employed at SCO; right?

A. That is correct.

77

Q. And you joined SCO in 2002; right?

A. That's correct.

Q. Now, when you joined the company in 2002, the company was not profitable; is that right?

A. No, it was not.

Q. In fact, SCO had a net loss for the fiscal year ending October 31, 2002, of more than $24 million; is that right?

A. Sounds about right.

Q. And the company told the investing public at the end of fiscal -- of that year ending October 31st, 2002, that if SCO did not achieve positive cash flow from operation it would not be able to implement its business plan without additional funding; isn't that true?

A. I suspect that's the case.

Q. And the SCOsource program was just getting started when you joined; right?

A. I don't know if it really had been started. I think some initial thoughts of looking at all the assets across SCO were being considered. Among them were the UNIX assets the company had. But anything and any form related to a SCOsource program had not been initiated when I started.

Q. That review was being done about the time you started; is that right?

A. It was just started.

78

Q. And after you joined the company in October of 2002, you were placed at the head of what was then called SCO Tech; correct?

A. Yes.

Q. And SCO Tech eventually became SCOsource; right?

A. I had a number of roles that I was responsible for. I mean, I was responsible as the senior vice-president over the operating system division, and I also had responsibility for some elements of strategy as well as looking at what could be done with the UNIX assets within the company.

Q. But you were ahead of SCOsource from its inception; right?

A. Yes.

Q. And you and others hoped that the SCOsource campaign would become an important revenue generator for the company; correct?

A. Of course.

Q. In fact, you thought it would generate billions; right?

A. We viewed the UNIX assets held by SCO to be a very valuable asset and had potential to generate significant revenues.

Q. That included billions; right?

A. Potentially, yes.

Q. Now, let me show you what we have marked as and has

79

been admitted as Exhibit 147. If I may approach, Your Honor?

THE COURT: You may.

MR. ACKER: Bring that up, please.

Q. BY MR. ACKER: I'm going to hand you what we've marked, Mr. Sontag, as Exhibit 147. Have you had a chance to look at that, sir?

A. I have.

Q. And Exhibit 147 is a draft press release prepared on or about October 22nd of 2002 regarding what was then referred to as the SCO Tech program; correct?

A. Yes.

Q. And you're quoted in the press release; right?

A. Yes.

Q. And you had a chance to read that quote just now?

A. Yes.

Q. Is it accurate?

A. Yes.

Q. Okay. And what you said back in October of 2002 about SCO Tech was, this is your quote:

As one of the earlier developers of the UNIX operating system, SCO owns several patents, copyrights and much of the intellectual property around UNIX including the SVR4 and OSR5 software libraries.

80

Correct?

A. Yes.

Q. So the only -- in this quote when you're talking about SCO Tech in October of 2002, the only version of SVRX you referred to was Version 4; right?

A. Well, UnixWare is an SVR4 version of the UNIX operating system.

Q. But it's not a version created by SCO; right?

A. That would be a hard thing to pars. The creation of UnixWare was derived out of previous versions of UNIX. And so, you know, it's a constant development process that's occurred.

Q. But SVR4 Version 4 was in existence before the APA; correct?

A. I think 4.0 was in existence before the APA. 4.2 was the basis of UnixWare 1.

Q. And was in existence before the APA; correct?

A. I don't know the exact time frame. All I know is, I remember the first version of UnixWare was based on SVR4.2.

Q. And isn't it true that both Version 4.0 and 4.2 are listed in the assets for which royalties have to flow back to Novell in the APA?

A. I don't know that I can characterize it that way because a significant portion of UnixWare is based on, you

81

know, SVR4 and predecessors. And it is a significant basis for what was licensed with UnixWare going forward in the future.

Q. And my question was very simple. Isn't it true that SVR4.0 and SVR4.2 are listed in the assets in the APA for which royalties must flow back to Novell?

A. That's not exactly my understanding. My understanding was there was royalties for specific licensees called the SVRX licensees that needed to be paid to Novell.

MR. ACKER: Can we bring up Exhibit 1, please.

Q. BY MR. ACKER: Let me hand you a copy of that, Mr. Sontag. Let me hand you a copy of the APA, Mr. Sontag. And I want to direct your attention to Schedule 1.1(a) Section VI. If you would bring that up. It's SCO 85952.

A. 952?

Q. Yes. If we could highlight the section of the bottom, please.

A. Schedule 1.1(a)?

Q. Yes, sir.

A. Okay.

Q. Do you have that?

A. I do.

Q. And you understand, don't you, that Schedule 1.1(a) in the APA lists:

82

All contracts relating to SVRX licenses listed below for which royalties must flow back to the Novell in the APA. Correct?

A. These are listed in the contracts that are part of the assets that are transferred to SCO.

Q. Well, you know, don't you, that this Court has determined that all royalties flowing from these contracts flow back to Novell? You know that; correct?

A. My understanding is that the contracts specified by the agreement the royalties went back to SCO. I don't know if it's necessarily this listing or if it's another listing that specifies the SVRX contracts specifically have royalties that flow back to Novell. But we honored those obligations.

Q. But you see in Schedule 1.1(a)VI that UNIX System Release 4.2 MP is listed; correct?

A. As an asset that was transferred.

Q. And System 4.2 MP International Edition was also listed; correct?

A. Again, as an asset transferred to SCO.

Q. And also 4.1; correct?

A. Again, yes.

Q. And if you turn to the next page, you see the UNIX System V Release 4.0 also listed; correct?

A. You're on Page 4 now?

83

Q. The following page.

A. Yes.

Q. And you see on the following page of Schedule 1.1(a) of the APA, UNIX System V Release 4.0 is listed; correct?

A. Again, as an asset that was transferred to SCO.

Q. And that was the release that you are referring to that is SVR4 when you drafted your press release in October of 2002; correct?

A. Again, going back to that press release, it was a draft press release. And we often use different labels to mean the same thing. We'd often use System V to refer to all of our UNIX intellectual property. We would use SVR4 to describe UnixWare in some cases. I mean, we were considering renaming UnixWare and renaming it System V or possibly System VI. And so at different times different labels apply to things in draft documents or in press releases that were put out. But in the end, what we were talking about is SCO's UNIX intellectual property assets.

MR. ACKER: Go back to 147, Mr. Sontag's quote.

Q. BY MR. ACKER: You say it's a draft press release. Do you now think that the press release was inaccurate or something is inaccurate in it?

A. No. All I'm saying is that I don't know if this is

84

the press release that was released or if we actually ended up releasing this press release.

Q. When you prepared it in October of 2002, you were talking about the SCO Tech program; correct?

A. We were talking about the SCO Tech program that we actually changed the name of or just barely starting to initiate at this time frame.

Q. And when you were talking about the SCO Tech program, you were talking about the SVRX releases you were planning to release under the SCO Tech program; correct?

A. To me, SVR4 could be easily replaced with UnixWare, and it means the same thing to me.

Q. But you didn't say UnixWare; right?

A. It means the same thing.

Q. And you didn't say SVR5; correct?

A. No. In this case, we said SVR4.

Q. Okay. Let me show you what has been admitted as Exhibit 143. If you could take a look at that, sir.

A. Okay.

Q. Exhibit 143 is an analyst briefing that was prepared for Mr. McBride on or about October 22nd, 2002; correct?

A. Yes.

Q. And it was an analyst briefing regarding the announcement of the SCO Tech program; correct?

85

A. Yes.

Q. If we could take a look at the third page in. It announces you, Chris Sontag, joins the executive team; correct?

A. Yes.

Q. It announces that you will be the senior VP of operating systems with responsibilities for operating systems, SCO Tech and corporate marketing; correct?

A. Yes.

Q. And that was all true; right?

A. Yes.

Q. You go to the next page, I believe it's 4. On the bottom of that page, there's a slide "Why SCO Tech?" Correct?

A. Yes.

Q. And what SCO said back in October of 2002 when SCO Tech was starting is: Partners and customers wish to license our technology. Correct?

A. Yes.

Q. And then you referred to specific technology; right?

A. Yes.

Q. And the only release of SVRX that you referred to was SVR4?

86

A. Again, this is the same thing as saying UnixWare. UnixWare was basically SVR4 operating system.

Q. SVR4 was not UnixWare that was created by SCO; correct?

A. You have dot releases. It basically would be considered SVR4.3 or 4. -- I mean 4.3 or 4.4 or 4.5. I mean, it was an SVR4-based operating system. It is the latest version of UNIX System V.

Q. SVR 4 --

A. It is the referenced version that has had many precedents.

Q. And SVR4, that version of UnixWare was created before the APA; correct?

A. The first version of SVR4 was created before the APA. Subsequent versions of SVR4 including UnixWare 1, 2, you know, up to 7.1.4 are all versions of SVR4.

Q. But each of those versions of UnixWare created after the APA don't carry the SVRX Version 4 monitor; correct?

A. No. A lot of times we've used SVR4 to refer to the UnixWare code.

Q. Let me show you what we've marked as Exhibit 159. Bring up 159. This has also been admitted, Your Honor.

THE COURT: Yes.

Q. BY MR. ACKER: This is another draft press release

87

that was prepared regarding SCOsource on December 11th, 2002; correct?

A. Yes.

Q. And if we could bring up the next highlight. Down at the bottom, there's a description of what SCOsource is; correct?

A. Yes.

Q. And what SCO wrote in December of 2002 was that: SCO's patents, copyrights and core technology date back to 1969 when Bell Laboratories created the original UNIX source code. Correct?

A. Yes.

Q. SCOsource, a new division within SCO, will address the licensing of this software technology. Correct?

A. Yes. Now, a couple things I would say on this. SCO had a number of patents that are referred to in this that could be licensed by SCOsource that were not related to the core UNIX technology.

Q. Well, when you said, this software technology that you're going to license under SCOsource, you were talking about technology that dated back to 1969 when Bell Laboratories created the original source code; correct?

A. That was part of the UNIX tree that SCO had

88

purchased and acquired and was responsible for continuing and continuing to license and to enforce the contracts with the licensees.

Q. And this UNIX tree that SCO had purchased, that was what SCOsource sought to license; correct?

A. In part.

Q. And that tree dated back to technology back to Bell Laboratories; right?

A. Yes.

Q. Let me show you what we've marked and has been admitted as 173. Mr. Sontag, let me show you what we've marked and had been admitted as Exhibit 173. If you could read that, please.

A. I don't know if you want me to read the whole thing.

Q. Well, I'm going to direct you to a certain portion. I'm sure you're familiar with this document; correct?

A. Most likely. Okay.

Q. And this is the announcement in January of 2002 of the SCO, you've written the first portion or first version of SCO Tech; correct?

A. I think we made some level of an announcement that we're further announcing, you know, what we're doing with SCOsource program in January of 2003.

89

Q. And unlike the prior releases, this press release, Exhibit 173, was actually released to the public; right?

A. I don't recall if the previous one had also been released or not. I know we briefed analysts and so on about the concepts in the previous release, but I know that this press release was released.

Q. And we can take a look at the highlighted portion in the middle under the highlighted SCOsource. Again, when SCO announced the SCOsource program to the public in January of 2002, you again told the public what it was; right?

A. January of 2003?

Q. Excuse me. January 2003. You told the public what it was; right?

A. Yes.

Q. And what you said was, again: SCO's patents, copyrights and core technology date back to 1969 when Bell Laboratories created the original UNIX source code. SCOsource will manage the licensing of this software technology. Correct?

A. Yes. And basically we're saying we're providing licenses of SCO's intellectual property including our UNIX intellectual property as well as other patents that SCO had

90

related to other technologies within the company.

Q. And that technology dates back to Bell Laboratories in 1969; correct?

A. Not all of the technology.

Q. But some of it does; correct?

A. Yes.

Q. And that was with SCOsource?

A. Yes.

Q. And that's what SCOsource sought to license in SCOsource program; correct?

A. Well, in general we were licensing the most recent versions of SCO's intellectual property mostly in the form of UnixWare licenses, source code UnixWare licenses as well as developing an intellectual property licensing program related to customers who were concerned about intellectual property issues with their use of Linux, such as the runtime libraries and OpenServer UNIX.

Q. But you wanted to mine this entire body of intellectual property; right? That was the plan.

A. That was my understanding of the intellectual property body that we had rights to license.

Q. Going back to 1969; right?

A. Correct.

Q. And this was what you hoped you would make millions of dollars licensing; correct?

91

A. Well, mostly around the latest versions of the intellectual property. But the whole body at work is part of the buildup and legacy of that intellectual property and library.

Q. Now, if you take a look -- let me go back, I'm sorry, to Exhibit 173. Take a look down at the bottom, if you would, sir, 173. Under the SCO System V for Linux. Do you see that?

A. Yes.

Q. And we have it up on the screen now. SCO told the public you were announcing this in January of 2003: In the past SCO's UnixWare and OpenServer license agreements did not allow these UNIX libraries to be used outside of SCO's operating systems. Correct?

A. Yes.

Q. With this announcement, customers can now run these libraries from SCO for use with Linux without having to license the entire SCO operating system. Correct?

A. Yes.

Q. So that means you get access to this core UNIX technology that SCO believed it owned without having to

92

license the latest version in the entire operating system; correct?

A. Let me say that a different way.

Q. Well, could you answer that question? Isn't that right?

A. Well, to best answer your question I can't just answer yes or no. We were licensing the libraries to the latest versions of OpenServer and UnixWare to these customers who wanted to apply them to a version of Linux to allow them to run OpenServer or UnixWare applications on top of Linux. That is what we were licensing.

Q. But as you said in your press release in 2003, it didn't require the licensee to license the entire operating system; correct?

A. Right. They were licensing a portion of the operating system, which were the runtime libraries.

Q. And that was the core UNIX technology that was a part of the SCOsource program; correct?

A. I wouldn't call that the core. I would call it a part of the UNIX operating system technology. The libraries are just one piece of an entire operating system.

Q. But in the SCOsource program, like if they didn't have to license the entire operating system, they could simply license the libraries; right?

A. If they needed to be able to run UnixWare or

93

OpenServer application on top of Linux, they would need to be able to gain access to the runtime libraries to install them into their Linux product to allow them to run those applications. Part of that license was also a license to all of SCO's intellectual property or a release from issues within any of SCO's overall IP rights. So we were giving them rights to any IP that SCO had ownership of. And if they needed the runtime libraries, they could obtain those, as well. That was the basis for the SCOsource, you know, licensing program at this time.

Q. Any IP that SCO had or believed it owned dating back to AT&T; right?

A. Any of SCO's intellectual property was provided to any of those customers in a release or in a license.

Q. That was SCOsource; right?

A. That was SCOsource. The runtime or right to use license that was part of SCOsource.

Q. Now, after the initial announcement of these library licenses under SCO Tech or SCOsource, there was a second phase to the program; correct?

A. No. It was continuously evolving. It was -- the names were even changing as we, you know, continued with the program.

Q. And the second phase or the evolvement or the

94

evolution of this program was this right to license or right to use program that you just mentioned; correct?

A. Could you repeat the question?

Q. Sure. Let me show you an exhibit. Exhibit 194. Let me show you what's been marked and admitted as Exhibit 194. If you could take a look at that, Mr. Sontag.

A. Okay.

Q. And Exhibit 194 is a letter that Mr. McBride sent on May 12th, 2003, to the Fortune 1000 companies regarding this SCOsource program; correct?

A. Yes.

Q. And if we could take a look at the first sentence of the letter that Mr. McBride wrote, he wrote: SCO holds the rights to the UNIX operating system originally licensed by AT&T to approximately 6,000 companies and institutions worldwide, the UNIX licensees. Correct?

A. Yes.

Q. And that was the core technology that was at the heart of SCOsource; right?

A. No. That was just a portion of what was under SCOsource. Those licenses were contracts for which we had the responsibility of enforcing. In addition to that, there was all the source code and the latest versions of source code for

95

UnixWare and OpenServer and other SCO products.

Q. And it's your testimony that all of that was the core technology that SCO sought to monetize in the SCOsource program?

A. Yes. Any intellectual property inside of the SCO was potentially licensable IP within the SCOsource program.

Q. And if we could take a look at Paragraph 5 of the letter Mr. McBride wrote: Many Linux contributors were originally UNIX developers who had access to UNIX source code distributed to AT&T and were subject to confidentiality agreements, including confidentiality of the methods and concepts involved in software design. Correct?

A. Yes.

Q. And what SCO says is: We have evidence that portions of UNIX System V software code have been copied into Linux. Right?

A. We claimed that we had, you know, different intellectual property violations that we felt had been applied into Linux, some in the form of, you know, literally copyrighted code; others in the form of methods and concepts;

96

others in the form of derivative works; and other IP issues that we felt may be at issue with Linux.

Q. But in the letter that Mr. McBride wrote on May 12th of 2003, he's talking about software IP that dates back to AT&T and the developers of AT&T; correct?

A. I think he was -- you know, we're not trying to be specific about every last area of intellectual property or methods of intellectual property from patents to copyrights to contracts to derivative works and otherwise. It was simply us just trying to say that we have a broad base of intellectual property that we believe is valuable that we are making available and licensing. The specifics of -- you know, if we say, UNIX System V and not also saying OpenServer or UnixWare, it doesn't mean when we say UNIX System V or we are talking about UNIX, we're not also referring to them. It's just like, I'll give an analogy to ice cream. I may say ice cream to my kids. Would you like some ice cream? I don't have to be specific every time and say, would you like chocolate ice cream or vanilla ice cream? I might just ask them first, would you like ice cream? And I'm referring to any possible choice that might reside under that.

Q. What Mr. McBride referred to specifically in his letter in May of 2003 was source code distributed by AT&T; right?

A. Again, I believe what is really being referred to

97

in this letter is SCO's broad intellectual property portfolio, not just specific versions of early UNIX originally developed by AT&T. But I view that as part of that portfolio.

Q. The only specific reference that Mr. McBride makes in the letter is to source code distributed by AT&T; correct?

A. In this particular paragraph, that's what he is referring to. But, again, the intent was to talk about the entire portfolio of SCO's intellectual property.

Q. And Mr. McBride sent this letter to 1,000 different companies asking them to take a license under the SCOsource program; correct?

A. Yes. Or at least consider it, get themselves educated, find out if they should have concerns or issues or not.

Q. Take a look at the first paragraph on the next page. Mr. McBride also wrote: We believe that Linux infringes our UNIX intellectual property and other rights. We intend to aggressively protect and enforce these rights. Consistent with this effort, on March 7, we initiated legal action against IBM for alleged unfair competition and breach of contract with respect to our UNIX rights. Correct?

98

A. Yes.

Q. And you understood, didn't you, that the basis for this letter going out to these 1,0000 different companies across the United States was the same basis for which SCO brought action against IBM; correct?

A. And again, when we're talking about SCO's UNIX rights, I view that we're referring to all of SCO's intellectual property portfolio related to UNIX.

Q. All of it from time to memorial; correct?

A. All that is under the purview of SCO, yes. Why would you only enforce a portion of your rights if you have a broader portfolio of rights?

Q. But it was the same basis that there was some portion of SCO's intellectual property that was in Linux that caused Mr. McBride to write this letter. It was also for the basis for the action against IBM; correct?

A. We believe in part some of the actions that we undertook against IBM were a significant portion of the IP that we were concerned about within Linux.

Q. Okay. And it's true, isn't it, that the only UNIX code that SCO's experts in the IBM case found in IBM's version of Linux was UNIX System V Version 4.2? Isn't that true?

A. I couldn't characterize what specifically was found by our experts. That would have to be presented by them.

Q. Let me show you what we've marked as Exhibit 428.

99

A. I assume you don't want me to read all of this right now.

Q. No, I don't. If you could take a look at -- first of all, Exhibit 428 is a report of Dr. Thomas Cargill of The Infringement of Unix System V Release 4 Operating System By the Linux Operating System. Do you see that title?

A. Right. And I believe this is just one of many reports.

Q. Well, I'm going to ask you about that. But take a look at Page 3, if you would, the summary of opinions. You see in Paragraph A, summary of opinions, Dr. Cargill wrote: It is my opinion that Linux 2.4 and Linux 2.6 are substantially similar to the UNIX System V Release 4 operating system in satisfaction of that element of copyright infringement. Do you see that?

A. Okay.

Q. And then if you go down, you see, he wrote: Overall, Linux is a substantial copy of the UNIX System V Version 4 operating system. Do you see that?

A. Yes.

100

Q. And if you take a look at the next page --

A. For which I would view UnixWare is the latest version of that.

Q. I understand that's your position. But take a look at the next page. You'll see the last part of Dr. Cargill's opinion. He writes: Instead, it is my opinion that significant design choices and code incorporated in Linux were copied from UNIX System V Version 4. Correct?

A. Yes.

Q. And it's true, isn't it, that no other expert in the IBM case ever came to the conclusion that anything else other than SVR4 was allegedly in IBM's version of Linux? Isn't that true?

A. I can't characterize specifically what the rest of the expert testimony and reports -- I don't -- I did not read them, so I can't characterize that one way or another.

Q. Are you ware -- are you aware of any expert in the IBM case retained by SCO finding any code in IBM's version of the Linux other than System V Version 4?

A. Again, since I did not read any of the expert reports I couldn't characterize it one way or another.

Q. Well, you made some public disclosures with respect to what code SCO believed was in IBM's version of Linux;

101

correct?

A. Yes.

Q. And you made those disclosures both publicly and under nondisclosure agreements; correct?

A. Yes.

Q. And let me show you what we've marked as Exhibit -- SCO Exhibit 379. Now, SCO Exhibit 379 is a PowerPoint presentation that you gave at a SCO forum in 2003; correct?

A. Yes.

Q. And you gave it along with your lawyers; right?

A. Yes.

Q. And the purpose of it was to tell the public what portions of SCO's core intellectual property SCO believed was in IBM's version of Linux; right?

A. I don't know if I characterize it that way. I viewed it as a presentation intended to provide a high-level education as to SCO's position.

Q. And if you could take a look at Novell document -- Novell Bate Number 12733, this is part of the presentation where you and your lawyers actually laid out what you believed was the infringing code; correct?

A. No. Not laid out the infringing code. We laid out one example, one very small example.

Q. And this example is the Malloc example; right?

102

A. I don't have a file name on here, so I can't be sure if this happens to be the Malloc code. But certainly that was one example that we did show.

Q. And it's true, isn't it, that this forum when you told the public what it is that you believe was in IBM's version of Linux that infringed your core IP, all of the examples you gave and the only examples you provided were for System V Release 4; correct?

A. No. The most important point that I tried to stress in this presentation would be actually the slide on Page 8, which would be Novell 12731. And this is the slide where I would present -- show that there's different forms of intellectual property protection. Literal copying; literal copyright infringement, which is word by word the same, being copied by somebody; nonliteral, which would be some amount of munging and changing the code or obfuscating the code; derivative works, which the point I was trying to make was the most important area, which was to contractually protect any areas specifically around derivative works code being contributed into Linux from UNIX by companies such as IBM. That was the most important point. And if you had been sitting in on this presentation, that was the big point that I tried to make of this whole presentation was that right there.

Q. But the only examples of literal copying that you

103

showed was of System V Version 4; correct?

A. I could have put up a version showing an example of UnixWare 7.1.3 in the Malloc code versus Linux, you know, the latest release of Linux, and you would receive substantially the same copied code, because that same code in Malloc was substantially similar between UnixWare 7.1.3 and previous versions of UNIX, such as UNIX, you know, 4.2 DS.

Q. But the only versions of the literal copying that you showed at the SCOsource -- or SCO forum of 2003 was the Malloc example; correct?

A. It was the only example that we intended to show.

Q. And that example was a System V Release 4 code; correct?

A. I believe it was System V Release 4.2 DS.

Q. And isn't it true that you are not aware of any other expert at any point ever coming to the determination that there was literal copying of any code beyond System V Version 4.2; correct?

A. Again, I have not read any of the expert reports, so I'm not aware of if there are examples or not.

Q. Let me show you what we marked as Exhibit 274. Exhibit 274 is a letter written to the chairman of Lehman Brothers by general counsel SCO Mr. Ryan Tibbits on December 19, 2003; correct?

A. Yes.

104

Q. And in it he is essentially accusing Lehman Brothers of violating SCO's core intellectual property; correct?

A. I don't know if I would characterize it that way.

Q. Well, in the first sentence he wrote: In May 2003, SCO warned about enterprise use of the Linux operating system in violation of its intellectual property rights in UNIX technology. Without exhausting or explaining all potential claims, this letter addresses one specific area in which certain versions of Linux violate SCO's rights in UNIX. Right?

A. Yes.

Q. And in the second page of the letter, he gives, provides Mr. Fuld with a list of code; correct?

A. Yes.

Q. And down below that Mr. Tibbits wrote: The only code identified -- the code identified above was also part of a settlement agreement entered between the University of California at Berkeley and Berkeley Systems Development, collectively BSDI, regarding alleged violations by BSDI and USL's right to UNIX system technology.

105

Right?

A. Yes.

Q. And it's true that that settlement was reached between Berkeley and BSDI in February in 1994; right?

A. Yes.

Q. And so the code that we're talking about here is code that existed long before the APA; correct?

A. The one example that is given here. Again, I'd go back to the first paragraph, though, as one of potentially many is this example.

Q. Isn't it true, Mr. Sontag, that neither you or anyone at SCO ever said that there has been taking of code from UnixWare intellectual property by Linux users? Isn't that right?

A. Again, I think we also referred to SCO's intellectual property which is all inclusive of all of SCO's intellectual property portfolio including UnixWare, including OpenServer, including preceding versions of UNIX, as well.

Q. Isn't it true that neither you or anyone at SCO ever said that there has been a taking of code from UnixWare intellectual property by Linux users? Isn't that an accurate statement?

A. Again, I think it's a mischaracterization.

Q. You testified under oath in deposition on March 17th -- excuse me -- April 30th of 2007; correct?

106

A. I had several depositions.

MR. ACKER: And, counsel, this is at Line 45 -- Page 45 Line 21, Page 46 Line 9. If we could play that clip, please.

THE COURT: You want that deposition published, I believe.

MR. ACKER: Yes, sir.

THE COURT: The deposition is published. (A portion of the deposition was played.)

Q. BY MR. ACKER: So it's true, isn't it, sir, that either you or as far as you know anyone at SCO has never said that there has been a taking of code from UnixWare intellectual property by Linux users; right?

A. Again, whenever we're referring to UNIX intellectual property, as far as when I was saying that, I was speaking of all of SCO's UNIX intellectual property, UnixWare, OpenServer and otherwise. So specifically mentioning UnixWare or OpenServer I didn't feel was necessary if I was talking about SCO's UNIX intellectual property because those were included as part of that.

Q. But neither you nor anyone at SCO has ever said to a Linux user, you're infringing UnixWare; right?

A. Simply because -- I think you're splitting semantic hairs. We're saying, you've been, you know, violating SCO's UNIX intellectual property rights which include UnixWare and

107

OpenServer. We didn't necessarily have to list out all of our products every time we were talking to somebody.

Q. But never at any point have you listed out UnixWare and said, Linux user, you're violating UnixWare; right?

A. Again, if we were saying SCO's intellectual property rights, that includes UnixWare, that includes OpenServer, that includes all of SCO's intellectual property rights.

Q. But you never told the Linux community, you're violating UnixWare; right?

A. Don't know why that would be necessary if we're saying, you're violating our UNIX intellectual property rights. That includes all of our UNIX intellectual property rights.

Q. But we can agree, can't we, that you or no one at SCO has said that, that you, Linux user, are violating UnixWare; right?

A. I'm not aware that I specifically said UnixWare. I know I often said UNIX intellectual property rights.

Q. And you're not aware of anyone at SCO saying, Linux users, you're violating UnixWare; right?

A. I'm not aware one way or the other.

Q. Let me show you the Sun license agreement what's been admitted as Exhibit 187. You're familiar with that document, I assume, sir?

108

A. Yes, I am.

Q. And Exhibit 187 is the license that was entered into between SCO and Sun on February 25th of 2003; correct?

A. Yes.

Q. You were one of the principal negotiators for SCO; is that right?

A. Yes.

Q. You actually signed this document for SCO?

A. Yes.

Q. And you would agree that the Sun license is a SCOsource license; correct?

A. It's a SCO intellectual property license executed by the SCOsource division.

Q. Part of the SCOsource program; correct?

A. The overall SCOsource program.

Q. And if we take a look at the first three clauses, the "whereas" clauses of the document, please. The recitals of the document are accurate; correct?

A. I'm not an attorney, but I assume those are accurate.

Q. And what those say is that: Whereas, Sun and UNIX System Laboratories or Novell are parties to a software license and distribution agreement dated January 1st, 1994, the original agreement.

109

And then, whereas, Novell has transferred and assigned the original agreement to SCO. And, whereas, Sun and SCO desire to amend and restate the original agreement by the execution of this agreement. Correct?

A. That's what it says.

Q. And that was what this agreement did, is it amended and restated the original 1994 agreement between Novell and Sun; correct?

A. Well, I don't know if I necessarily characterize it that way. I view that the majority of the document was dealing with a UnixWare license. It was only portions that dealt with I think anything related to the older agreement.

Q. But you would agree, wouldn't you, that the statement is accurate, that this agreement, 187, the 2003 Sun agreement, amended and restated the earlier agreement between Novell and Sun?

A. In part.

Q. No doubt about that; right?

A. Again, in part.

Q. Let me show you Exhibit 5, which was the original agreement. Novell Exhibit 5, which has been admitted into evidence, is the original 1994 agreement between Novell and Sun; correct?

110

A. Yes, I believe so.

Q. And you're familiar with this document; correct?

A. To a certain extent.

Q. And in the original agreement Sun paid 82.5 million in order to obtain a license that included UNIX System 5 software; right?

A. Yes.

Q. And Attachment 1 of the original agreement lists that UNIX System V software that Sun licensed in 1994; correct?

A. Yes.

Q. And we have that up on the screen. Do you see that?

A. I do.

Q. And then if we go back to 187, Attachment 1 of the 2003 Sun license lists the software licensed to Sun in the amended and restated 2003 license; correct?

A. Did it have a listing?

Q. Sure. It's SCO 1287218. It's the Attachment 1 to the 2003 agreement.

A. Okay.

Q. Now, if we take a look at Attachment 1 to the 1994 agreement here on the left and we compare it to the first page of Attachment 1 -- there we go, and we compare it to the first page of Attachment 1 of the later agreement, you'd agree with

111

me that those listing of 30 items of software, 30 pieces of code are identical.

A. They appear to be very similar. I would take much longer to be able to say that definitively they were identical. But they look very similar.

Q. So other than this asterisk and "not currently licensed by Sun but considered to be by the parties as a licensed product," other than that language they are photocopies, aren't they?

A. Again, they are substantially similar.

Q. They're identical, aren't they?

A. If you want me to look letter by letter to say they're absolutely identical, I can do that.

Q. Well, you negotiated the 2003 deal; right?

A. Yes.

Q. And you know what happened was in the 2003 deal for the first page of Attachment 1, you simply took the old Attachment 1 from the earlier deal and made a copy of it; right?

A. I suspect that's the case. I wasn't involved in drafting that page of the contract.

Q. And what's on the left is a list of what was licensed in 1994 by Novell to Sun; correct?

A. Yes.

Q. And what is on the right, with an exception that

112

we're going to get to on the second page of this attachment in a second, is what was licensed to Sun by SCO in 2003; right?

A. Well, it's a listing of technologies much of which Sun had already licensed. So I view that as belt and suspenders.

Q. You view that as belt and suspenders. Now, the 2003 Sun license also granted license to seven additional versions of software; correct?

A. Yes. I believe that to be the case.

Q. This is Page 2 of the attachment to the 2003 Sun license. This is what in addition to the 30 identical pieces of software that had been part of the earlier agreement, these seven pieces of software that we have on the board now are what the additional software was that Sun got in the later agreement in 2003; correct?

A. Yes.

Q. And of those seven pieces of software, five of them are System V Release 4.2 or earlier; correct?

A. Yes.

Q. And the only two pieces of software that came into existence after the APA that were licensed to Sun in 2003 are these last two, System V Release 5 and Open UNIX 8; correct?

A. Yes. And the primary license product was the UnixWare 7.1.3 product.

Q. So just to be clear for the Court, if we drew a

113

line right here above System V Release 5, that's -- from a time standpoint, that's when the APA was executed; right?

A. I believe that to be the case.

Q. And these UNIX 4, the UNIX 4.1 grant that SCO provided to Sun in 2003, that was expressly omitted from the earlier license to Sun; correct?

A. Well, my understanding was those weren't yet in existence at the time of the prior Sun agreement.

Q. Why don't we take a look at the earlier agreement, Exhibit 5. If we could go to Attachment 2. System V -- are you there, sir?

A. Attachment 2?

Q. Yes.

A. Yes.

Q. So you see there's a section there in the early agreement that refers to deliberately omitted software; right?

A. Yes.

Q. So back in 1994 when Novell and Sun entered into an agreement, Novell expressly did not license to Sun System V Release 4.1; right?

A. Yes.

Q. But SCO granted a license to that software to Sun in 2003; correct?

A. Yes. For the purpose of them having a complete set of all the versions. And again, that was primarily -- those

114

prior versions were all intended to just be used for source comparison. The latest version we provided to them, UnixWare 7.1.3, was the version that was primarily intended and licensed to them for development.

Q. Now, Section 3 of the original Sun license of Exhibit 5 sets out what rights were granted to Sun in 1994 for the technology; correct? If you turn to Section 3 of the earlier license.

A. Section 3?

Q. Yes.

A. Okay.

Q. And it was a worldwide, royalty-free, paid-up license to the UNIX System V software in the Attachment 1 that we looked at; right?

A. Yes.

Q. And what those rights granted in the original 1994 agreement do not grant to Sun the right to publicly display the source code and object code of the license UNIX 5 software; right?

A. Where are you reading that?

Q. Well, you know, don't you, that the early agreement did not allow Sun to publicly display the software that was licensed in 1993?

A. I know that they had -- the whole agreement allowed them to broadly distribute the source code to their licensees

115

who in turn could distribute the, you know, Solaris source code to sublicensees. So Sun had very broad rights with this, you know, '94 agreement to effectively license the source code extremely broadly to a large customer base.

Q. Isn't it true that they couldn't open source that, Sun could not open source that software code under the early agreement?

A. It depends on what your definition of open source is.

Q. Well, why don't we take a look at paragraph 3.2 (A)(b) of the earlier license.

A. 3.2?

Q. Yes, sir. Do you see that? And what that required was: The Sun source sublicensees will protect the licensed products contained in their derivative works, and Novell's trade secrets and other intellectual property embodied in such licensed products, to at least the degree to which Sun protect its own most valuable proprietary source code. Correct?

A. Yes.

Q. And if we take a look at 3.2(B), this was another requirement in the earlier license.

116

In the event that Sun becomes aware, whether through notification by Novell or otherwise, that a Sun source sublicensee is not complying with its obligations under the applicable Sun source code license agreement, including obligations to protect the confidentiality of the source code of licensed products, to the extent that such obligation impacts licensed products contained in derivative works, Sun agrees to take appropriate steps to rectify such noncompliance. Correct?

A. Yes.

Q. And Sun made it clear during the negotiations that they wanted a broader license so Sun could open source Solaris; correct?

A. Actually, Sun believed that they had almost all the rights they needed or had all the rights they needed. Now, that was their posturing and positioning going into the negotiations, that they did not need anymore rights to be able to do a form of open sourcing and be in compliance with this agreement. Now, that was their position coming into the negotiations.

Q. Isn't it true that Sun made it clear during negotiations that they wanted a broader license so Sun could open source Solaris? Isn't that accurate?

117

A. I don't know that I necessarily would say that it was -- you know, it was a part of what they asked for. But the most important thing they were asking for was the ability to quickly take the Solaris product and make it available on an Intel compatible platform, which they would be able to do with the UnixWare 7.1.3 source code license and the software drivers for UnixWare.

Q. Now, you gave a number of depositions in this case and in the IBM litigation including a deposition on December 21st, 2005; correct?

A. Yes.

MR. ACKER: And, counsel, I'm going to publish Page 144 Lines 13 to 22 from that testimony.

Q. BY MR. ACKER: It's true, sir, that when you testified on December 21st of 2005, you wrote: When did SCO become aware of the facts that Sun had open sourced -- or the Solaris system. As part of the negotiations related to the latest IP license from -- we entered into with Sun, one of their desires of that license was the ability to have a broader IP license where they could to an extent open source Solaris with restrictions that it could not be open sourced into Linux or other open source licenses that did not protect copyright ownership.

118

Is the testimony accurate?

A. Yes. I would also add to that they basically had the rights necessary to do that, anyways.

Q. But that's what they wanted in the negotiations, broader confidentiality provisions; correct?

A. Yes. I don't believe that was an important part to them.

Q. But it's part of what they wanted and part of what they paid for; correct?

A. Yes.

Q. And Sun Solaris operating system is a derivative work of UNIX System V; right?

A. Yes.

Q. Why don't we take a look at Exhibit 187. But it's also true, isn't it, that it's SCO's position that Sun was entitled to open source Solaris as a result of the 2003 agreement with SCO? Correct?

A. I would view that -- well, open source as in -- with the limitations set forth in the agreement.

Q. So you would agree with me that as a result of the 2003 agreement, Sun was able to open source open Solaris?

A. Again, with the caveat that I just mentioned.

Q. Yes. They were able to do that as a result of the agreement?

A. Yes.

119

Q. Now, if we could take a look at Exhibit 187 and specifically Paragraph 3.1. Now, in addition to being able to having broader confidentiality rights with respect to that software, you actually delivered copies of the software to Sun; right?

A. Yes. Primarily UnixWare 7.1.3.

Q. But you didn't just deliver that version. You delivered all of it; right?

A. We delivered at least a number of other source takes or previous versions. But the primary one that was of importance to Sun was the 7.1.3 source and the source for the hardware drivers for UnixWare.

Q. But Sun didn't say to you, we're not interested in that other code. Don't bother delivering it to us. Just give us the latest version and the drivers; right? Sun didn't say that to you?

A. No, I don't believe they did; nor did we ask them. We were just delivering on our obligations under the contract.

Q. And the obligations under the contract were to provide copies of all of the software; right?

A. Yes.

Q. And that's what SCO did; correct?

A. Yes.

Q. And SCO was paid just under $10 million by Sun for this license; right?

120

A. Yes.

Q. And not a single penny of that was paid to Novell; correct?

A. No.

Q. And before entering into the 2003 Sun license, SCO did not obtain permission from Novell to do the deal; right?

A. We did not believe we needed their permission.

Q. In fact, you didn't even inform them about the deal before it was done; correct?

A. No. Again, this was primarily a UnixWare license.

Q. But it's true, isn't it, that SCO understood that the APA requires prior written approval from Novell for all new agreements or changes to current agreements relating to UNIX System V? Correct?

A. Again, this agreement was primarily about -- and the value of this agreement was primarily about UnixWare. And since Sun already had a buyout to, you know, the previous System V technologies, there was no need to have Novell involved in a primarily UnixWare license.

Q. But isn't it true that SCO understood that the APA requires prior written approval from Novell for any new agreements or changes to current agreements relating to UNIX System V that you understood that at the time you did the deal with Sun?

A. Yes. And again this was not a System V license.

121

This was a UnixWare license.

Q. There's over 35 versions of System V software that was licensed to Sun; correct?

A. Those were ancillary products. The primary product being licensed was UnixWare.

Q. Is there anywhere in the APA that says you only have to obtain permission for licensing the primary product and not the other 38 UNIX System V versions that you give -- you license?

A. Since Sun had a buyout of any royalty obligations, I would not believe that would be necessary because there was no revenue impact for Novell.

Q. So that was just a unilateral decision that Sun made that, because we believe that the primary portion of this agreement is the latest version of the software even though it includes the earlier versions, we're not going to ask for Sun Novell's permission?

A. We did not believe we needed Novell's permission.

Q. Let me show you what we've marked as Exhibit 27. I show you Exhibit 27.

A. Okay.

Q. Exhibit 27 is a letter from senior contracts manager or John Luehs of SCO to Miss Cynthia Lamont of Novell dated May 20th, 1996; do you see that?

A. Yes.

122

Q. In the first paragraph of that letter, Mr. Luehs wrote to Novell on behalf of SCO: The agreement between the Santa Cruz Operations, SCO, and Novell, Inc., Novell, requires prior written approval from Novell for all new agreements or changes to current agreements relating to UNIX System V. Correct?

A. Yes.

Q. And you would agree with me, wouldn't you, that Sun 2003 is an agreement relating to UNIX System V? Wouldn't you?

A. Yes and no. Yes, that UNIX System V was a portion of that and that UnixWare in my view, we would describe under UNIX System V. But --

Q. Because --

A. But the primary -- primarily that agreement was related to a UnixWare source code license.

Q. And because the 2003 agreement with Sun was an agreement relating to UNIX System V, SCO needed Novell's approval before they did the deal; isn't that true?

A. I do not agree with that statement.

Q. So you disagree with the senior contracts manager, what a senior contracts manager of SCO wrote in 1996; is that right?

A. If it was a SVRX older license, that's how I would

123

view that. This was a UnixWare license primarily with Sun, which is different.

Q. Let me show you what we've marked as Exhibit 30.

(Time lapse.)

Have you had a chance to read Exhibit 30, sir?

A. I scanned it.

Q. Exhibit 30 is a letter from the management, law and corporate affairs, Mr. Broderick of SCO on May 26, 1996, to Novell; correct?

A. Yes.

Q. And you know who Mr. Broderick is; correct?

A. Yes, I do.

Q. What his current position at SCO?

A. Very similar position. He's in the --

Q. Management, law and corporate affairs --

A. Yes.

Q. -- currently of the company?

A. Yes.

Q. And going to testify in this trial?

A. Yes.

Q. And let's take a look at what Mr. Broderick wrote on May 26, 1996, to Novell. Take a look at that first sentence. Again, he wrote: The agreement between Santa Cruz Operations, Inc., SCO, and Novell, Inc., Novell, require prior

124

written approval from Novell for all new agreements or changes to current agreements relating to UNIX System V. Correct?

A. Yes.

Q. And you don't have any reason to doubt Mr. Broderick's understanding of the APA; correct?

A. No.

Q. And you have no reason to doubt the statement that Mr. Broderick made back in May of 1996; correct?

A. No. And I would add that --

Q. Let me ask --

A. -- Mr. Broderick would view that UNIX System V in this context is referring to older System V licenses and source codes. And if we were doing a UnixWare code license, there was no permission required from Novell.

Q. And I'm sure Mr. Broderick can speak for himself, and I'm sure he will.

A. All right.

Q. Let me show you what we marked as Exhibit 189.

THE COURT: You didn't offer 27 or 30.

MR. ACKER: Yes. I move for their admission.

THE COURT: I don't know if they object.

MR. NORMAND: No objection, Your Honor.

THE COURT: 27 and 30 are received.

125

MR. ACKER: Thank you, Your Honor.

(Whereupon, Novel Exhibits 27 and 30 were received.)

Q. BY MR. ACKER: I show you what's been marked and admitted as Exhibit 189.

A. All right.

Q. Now, Exhibit 189 is the Microsoft license entered into between SCO and Microsoft in April of 2003; right?

A. Yes.

Q. And you were the principal or one of the negotiators in this agreement, as well?

A. Yes.

Q. And prior to the execution of the agreement, there were term sheets that were exchanged; correct?

A. Yes.

Q. And let me show you what we have marked and has been admitted at Exhibit 171. Exhibit 171, you'll see there's an e-mail chain at the top where an e-mail was sent to you from a Mike Anderer on January 15th, 2003; correct?

A. Yes.

Q. And he wrote: Mike, here is the first cut at the TS to MS. Feel free to mark up. And we will see you in Lindon tomorrow afternoon. Regards, Chris. Do you see that?

126

A. Yes.

Q. And down below is a proposed term sheet of the Microsoft deal with SCO; right?

A. Yes.

Q. And in Paragraph 3 of that, you set out what the license code would be; correct?

A. I view this as a kind of an al a carte list of various areas and things that we could discuss with Microsoft.

Q. And on the top of the list is UNIX System V; right?

A. Yes.

Q. And in January of 2003 when you're going into these negotiations, you understood that UNIX System V was part of what was going to be licensed to Microsoft if the deal happens; right?

A. It was an area that could be licensed. Again, I'm almost being redundant in saying UNIX System V and UnixWare. But in order to have more items on the list to potentially discuss, that was -- those were all items placed on the list.

Q. Well, you separately culled it out here, didn't you?

A. Yes. But in a lot of cases, we're referring to the same thing. If they're taking a UNIX or a license they're gaining access to a majority of the System V source code that preceded it.

Q. But in the same OU, you didn't just say UnixWare

127

and OpenServer; right?

A. No. We're trying to provide as many possible areas of discussion for deal points as we can.

Q. And one of those areas of discussions and deal points was UNIX System V; correct?

A. Yes.

Q. Take a look at the next page. Paragraph 5. It's written: SCO will recognize a retroactive license in favor of Microsoft against any present or previous violations of SCO's UNIX IP rights, as follows. Correct?

A. Yes.

Q. And this is eventually what matured into Section 2 of the Microsoft deal; right?

A. To an extent, that release.

Q. And that release is what you call the retroactive license in favor of Microsoft includes other System V UNIX technologies. Right?

A. Yes. And to me in this case, that would refer to UnixWare, potentially OpenServer and prior releases.

Q. And prior releases; correct?

A. Yes.

Q. And so Microsoft was concerned that there might be

128

some of SCO's intellectual property in their products; right?

A. Yes, potentially.

Q. So in Section 2, they wanted a release that included releases for all of SCO's IP and all of Microsoft's products; right?

A. Yes.

Q. And during negotiations, they expressed concern that they may have inadvertently used SCO's IP in their products, including SVRX code; right? A. Potentially yes.

Q. And Microsoft's concerns about having SCO's IP in its product would not have been assuaged if the license in Section 2 had granted rights merely to the current UnixWare technology; right?

A. I don't know if I would characterize it that way. This ended up not being an area that we discussed. But the vast majority of the active and important code, you know, significant percentage was available in the UnixWare product.

Q. Okay. You testified on March 14th, 2007, at your deposition -- And, counsel, this is Lines 162-24 to 163-5. -- you were asked the following questions and gave the following answers.

(A portion of the deposition was played.)

Q. BY MR. ACKER: But Microsoft's --

129

MR. NORMAND: Your Honor, to complete this, I would like to publish the remaining testimony from that portion of the deposition.

MR. ACKER: Well, he certainly will have that opportunity.

MR. NORMAND: I'm not sure of Your Honor's practice. On occasion to save time, we play it at the time of the playing of the deposition.

THE COURT: You prefer that he do it when he does his examination?

MR. ACKER: Yes. Absolutely.

MR. NORMAND: Thank you, Your Honor.

THE COURT: You can do it then.

Q. BY MR. ACKER: But Microsoft's concerns about having SCO's IP in its products wouldn't have been taken care of, wouldn't have been assuaged in Section 2 had they only gotten rights to UnixWare; right?

A. That's a hypothetical because we never had that discussion.

Q. All right. Why don't we play your deposition at Page 163 Lines 16 to 20.

(A portion of the deposition was played.)

Q. BY MR. ACKER: So that was true; right?

A. I don't know. I mean, possibly not. But I think if that had been an issue, we could have likely convinced

130

Microsoft that the, you know, the vast preponderance of the code of UnixWare was all they needed to provide the IP protection they needed. But we didn't at that time consider that an issue in view that we had the rights to license them the entire portfolio.

Q. But wasn't it your understanding that Microsoft also needed the rights to the older UNIX technology to address its concerns?

A. Again, we never specifically had a discussion of this. It was our standard practice and SCO's predecessor's when licensing UNIX technology to also always license the preceding versions of the UNIX code, as well. That's what we were doing in this case.

Q. Why don't we take a look at your deposition on March 14, 2007, at Page 64 Lines 10 to 14.

(A portion of the deposition was played.)

Q. BY MR. ACKER: That testimony was accurate, wasn't it?

A. Again, I don't view that in conflict with what I'm saying right now.

Q. So part of what Microsoft wanted in negotiation around Section 2 was a license that protected them against potential claims relating both to UnixWare and to older SVRX technology; right?

A. That was the license that was provided to them.

131

Q. So the license that was provided to them included both protection against violation of UnixWare and also older UnixWare technology; right?

A. Older UnixWare technology, yes.

Q. And for this release in license, Microsoft paid $1 1/2 million; right?

A. Yes.

Q. And none of that money was provided to Novell; correct?

A. No, it was not.

Q. And you never sought Novell's permission before entering into that portion of the deal; correct?

A. No. Again, this was a UnixWare license. And the standard matter of course was to provide a license to all preceding versions of UNIX. That was, you know, the standard practice that had always been performed.

Q. Let me turn to Section 4 of the Microsoft agreement. Now, in order to be entitled to take the license in Section 4 of the agreement, Microsoft first had to pay $7 million for the license in Section 3; correct?

A. Correct.

Q. And Section 3 of the Microsoft agreement is titled, if we could bring that up, "Option to Purchase UnixWare License." Correct?

132

A. Yes.

Q. So they have paid $7 million in this section, Section 3 in order to both take an option to get the UnixWare license and to actually get the license; correct?

A. That option for that UnixWare license had significant limitations to it.

Q. And the Section 3 provides for licenses of software in Exhibits A and B of the agreement; right?

A. Yes.

Q. And the license in Section 4 licensed the software listed in Exhibits A, B and C; right?

A. Now, the primary component of Section 4 was an expansion of that UnixWare license.

Q. I didn't ask you that. What I asked you was, in Section 4, isn't it true that the license that was granted was to Exhibits A, B and C of the agreement?

A. Yes.

Q. And Exhibit C of the agreement contains UNIX System V Versions 1 through 4.2; correct?

A. Yes.

Q. So if we look up on the screen, here's Exhibit C. Everything that is highlighted that was granted as part of the Section 4 license is UNIX System V Version 4.2 or earlier software; right?

A. Yes.

133

Q. And not only did Microsoft purchase a license to all of this software, that is, the versions that we've highlighted, but you also delivered actual copies of the code to Microsoft; right?

A. As many as we possibly could.

Q. So they not only got a license to use it, but they also got physical possession of the software?

A. Yes. And those older versions, by the way, were, the sole intent for them was for a source analysis repository.

Q. And before this license was signed, the 2003 deal with Microsoft, Microsoft did not have a preexisting license for any of this code that we've highlighted that is UNIX System V code Versions 1 to 4.2; right?

A. They at a previous time had a license, but I think that license had been revoked or discontinued. So at this time, they did not have a license.

Q. So at this time when they entered in 2003, they didn't have a license to any of this code; correct?

A. Correct.

Q. And you gave them a license to this code; correct?

A. As part of a broader UnixWare source code license, yes.

Q. And that code includes UNIX System V Versions 1 to 4.2; right?

A. Yes.

134

Q. And in order to obtain this license in Section 4, Microsoft paid, initially paid an option amount of $250,000; right?

A. Yes.

Q. And then they paid another $8 million; right?

A. Yes.

Q. So this license in Section 4 cost Microsoft $8 1/4 million?

A. Yes. Now, again, the majority of the value of that $8 million was for an expansion of the UnixWare distribution lines.

Q. And they already paid $7 million in Section 3 for UnixWare license; right?

A. For UnixWare source code license that was limited to a very limited set of Microsoft products called Services for UNIX and Connectix. And with the Section 4, they were allowed to use the UnixWare source code across their entire product line, which is a significant increase in their rights. And that was where the value was.

Q. Do you know of Microsoft ever distributing copies of UnixWare with their products?

A. I don't know if they have or not.

Q. You don't know if they've ever done that; right?

A. (Witness indicates by shaking head side to side.)

Q. You have to answer yes or no.

135

A. I do not know.

Q. Let me show you a chart of -- a list of SCOsource revenue licenses. It's Exhibit 383. What I've handed to you and what's been admitted into evidence is Exhibit 383, which is, SCO's Supplemental Responses and Objections to Novell's Second and Third Set of Interrogatories. And I want to direct your attention to a chart that's at NOVTR, and the page is 4238.

A. All right.

Q. And can you make out that chart on your screen?

A. I'll look at it on the screen as opposed to potentially having a big mess with a loose set of papers.

Q. Now, this is a listing, is it not, provided by your lawyers of all of the licenses that were entered in the SCOsource program? Correct?

A. Yes.

Q. And the total amount that Novell -- or SCO collected as a result of the SCOsource program and these licenses was $26,956,260.14; correct?

A. Yes.

Q. And the largest portions of that were the Microsoft deal at $16,680,000; correct?

A. Yes.

Q. And then the Sun deal at $9,143,450.63; correct?

A. Yes.

136

Q. And if my math is correct, what we have left is a series of licenses to smaller entities for 1.1 million -- or $1,132,809.51; correct?

A. Yes.

Q. And those licenses that you entered into, those other licenses Sun and Microsoft that you entered into as part of the SCOsource program were done in a variety of ways; fair?

A. They were intended to be effectively the same license, but the license I think evolved over time.

Q. And sometimes the licenses were done by what was called a click-through on the SCO website; right?

A. Yes.

Q. Let me show you what we've marked as Exhibit 422. Again, this has been admitted, Your Honor.

(Time lapse.)

THE WITNESS: Okay.

Q. BY MR. ACKER: Exhibit 422, the second page that we'll bring up on the screen is a screen shot of the SCO website regarding this SCO intellectual property license; correct?

A. Yes.

Q. And if you take a look, there's definitions that are provided on the SCO website as to what is being licensed if one comes on line and enters into one of these agreements with SCO; right?

137

A. Yes.

Q. And the first line says: The agreement is the agreement between you and the SCO Group, Inc., relating to rights acquired by you. Correct?

A. Yes.

Q. And then there's a definition of SCO IP. It says: SCO IP shall mean the SCO intellectual property included in its UNIX based code in object code format licensed by SCO under SCO's standard commercial license. Correct?

A. Yes.

Q. And then you define for potential licensees what UNIX based code shall mean; right?

A. Yes.

Q. And you define it by saying: It is both UNIX System V and UnixWare. Correct?

A. It says UNIX System V or UnixWare.

Q. It's both of those things; correct?

A. Yes.

Q. So when someone comes on line and clicks through and gets one of these license, they're obtaining a license to

138

UnixWare System V and UnixWare; right?

A. Yes.

Q. You know how many of these licenses you entered into, the online click method?

A. A handful. Less than 20 or 30.

Q. Let me show you -- I'm going to show you a series of documents.

(Time lapse.)

I'll hand you these as a group. But I'm going to hand you -- I'll put them upside down so you can flip them back over. But Exhibit 257, which has been admitted; Exhibit 237, also been admitted; Exhibit 426, also been admitted; Exhibit 301, which has also been admitted; Exhibit 310, which has also been admitted; Exhibit 312, which has also been admitted; Exhibit 322, also been admitted; Exhibit 286, also been admitted; Exhibit 423, which has also been admitted. If we could start with Exhibit 257, sir.

A. Okay.

Q. Exhibit 257, if you could bring that up, if we could go to the next page, the invoice. You see there on the second page of Exhibit 257 there's an invoice where an entity CDM purchased one of these SCO source licenses and paid SCO a total of $9,865.45; correct?

139

A. Yes.

Q. And this was done as part of the SCOsource licensing program?

A. Yes.

Q. The click-through program; right?

A. Yes.

Q. And you didn't ask permission of Novell before entering into that agreement; correct?

A. No.

Q. And you didn't remit any of those -- any of that $9,865 to Novell; correct?

A. No.

Q. Take a look at Exhibit 237. Exhibit 237 is a license agreement between Computer Associates International, Inc., and the SCO Group; correct?

A. Yes.

Q. And this one is a written agreement; correct?

A. Yes.

Q. Signed by you?

A. I believe so.

Q. And if you take a look at the definition section, Paragraph 1.11, you define that you're granting a license to software products commonly known as UNIX System V and/or, and/or UnixWare; right?

A. Yes.

140

Q. That was the license that you were granting to Computer Associates; right?

A. Yes.

Q. And for that license, Computer Associates paid you -- paid SCO $20,000; right?

A. Yes.

Q. And you didn't ask Novell's permission before entering into this license; correct?

A. No.

Q. And didn't remit any of those funds to Novell; correct?

A. No.

Q. Take a look at Exhibit 426. This is another written agreement that was entered into between SCO and an entity referred to as Cymphonix; correct?

A. Yes.

Q. And again, we have a written agreement; right?

A. Yes.

Q. And it looks like there was as part of a development agreement between Cymphonix and SCO, Cymphonix also entered into one of the SCO intellectual property agreements; right?

A. I believe that to be the case.

Q. And if you take a look at that Exhibit A of this license, which is the intellectual property agreement --

141

A. Yes.

Q. -- and specifically the next page and look at the definitions, what was licensed to SCO under the -- license to Cymphonix under the intellectual property agreement was SCO UNIX based code; right?

A. Yes.

Q. And the definition of SCO UNIX based code was UNIX System V or UnixWare; right?

A. Yes.

Q. And Cymphonix paid Novell $8,112 for this license; right?

A. I believe that would be the case.

Q. And none of that money -- paid SCO $8,112; correct?

A. Yes.

Q. And none of that money went to Novell; right?

A. I believe that to be the case.

Q. And you didn't ask Novell's permission before entering into that agreement; correct?

A. No.

Q. Take a look at Exhibit 301. 301 is another intellectual property license under the SCOsource program between SCO and an entity called Everyones Internet; right?

A. Yes.

Q. And again, you signed the agreement on behalf of

142

SCO?

A. Yes.

Q. And if we go to the definitions, we can again see what it was that was licensed; correct?

A. Yes.

Q. And what was licensed was SCO UNIX based code; correct?

A. Well, UNIX System V or UnixWare.

Q. Okay. Well, SCO UNIX based code is the definition of what the license is being granted for, but the definition of UNIX based code is UNIX System V or UnixWare; correct?

A. Yes.

Q. And for getting this license, Everyones Internet paid SCO $534,444; correct?

A. Yes.

Q. None of that money went to Novell; right?

A. No.

Q. And you didn't ask permission of Novell before entering into that agreement; correct?

A. No.

Q. Why don't we take a look at Exhibit 310. Exhibit 310 is another intellectual property agreement that you signed on behalf of SCO with an entity called HEB or HEB. HEB Grocery Company LP; right?

A. Yes.

143

Q. And this is a similar license. If we take a look at the definitions -- well, what was licensed was something called SCO IP; right?

A. Yes.

Q. And the definition of SCO IP is SCO UNIX based code; right?

A. Yes.

Q. And that means UNIX System V or UnixWare; right?

A. Yes.

Q. And HEB paid SCO a half million dollars, $500,000 for this license; correct?

A. Yes.

Q. And none of that money went to Novell?

A. No.

Q. And you didn't ask Novell's permission before entering that that agreement; correct?

A. No.

Q. Why don't we take a look at Exhibit 312.

THE COURT: Unless you're about done with this witness, let's take our second break.

MR. ACKER: Very well, Your Honor.

THE COURT: Are you about done?

MR. ACKER: 15 minutes.

THE COURT: Let's take our second break. 15 minutes.

144

(Short recess)

THE COURT: You may proceed.

MR. ACKER: Thank you, Your Honor.

Q. Mr. Sontag, before the break, I believe we left off with Exhibit 312. If you would look at that, please. This is another intellectual property agreement between the SCO Group and Lane Furniture, correct?

A. Yes.

Q. And, again, if you take a look at the definitions -- if you would go to the next one, please -- what's being licensed here is SCO IP, and, again, the definition is SCO UNIX-based code in Section -- in paragraph 1.7, and then the definition of what that is is UNIX System V or UnixWare, correct?

A. Yes.

Q. Did Lane Furniture pay SCO any money for this license?

A. I believe so.

Q. Do you know how much?

A. I do not.

Q. Were any of those funds remitted to Novell?

A. No.

Q. Did you ask permission before entering into this agreement with Lane Furniture?

A. No.

145

Q. Would you take a look at Exhibit 332. This is another SCOsource IP license, this time between OCE printing and SCO, correct?

A. Yes.

Q. And if you would take a look at the definitions, if you go to the second page, please, again, it's the same definition. SCO IP means SCO UNIX-based code, correct?

A. Yes.

Q. And the definition of what that is, SCO UNIX-based code, is UNIX SCO System V or UnixWare, correct?

A. Yes.

Q. And you were paid -- or SCO was paid $49,500 actually by Siemens for this license, correct? Does that sound right?

A. I believe that to be the case.

Q. And, again, none of that money was remitted to Novell, correct?

A. No.

Q. And you didn't seek permission before entering into this agreement, correct?

A. No.

Q. Take a look at the Exhibit 286. This is another SCO group intellectual property license, correct?

146

A. Yes.

Q. And this time it's entered into with Questar, correct?

A. Yes.

Q. And why don't we take a look at the definition section of this agreement. Here the definition was a little different as to what SCO IP rights were, correct?

A. Yes.

Q. And what was licensed to Questar was SCO IP rights, which shall mean SCO's intellectual property rights in any and all past, current or future versions of -- or portions of SCO's software products commonly known as UNIX System V and/or UnixWare correct?

A. Yes.

Q. That's what the license grant was, correct?

A. Yes.

Q. And if you take a look at paragraph 114 -- I'm sorry, 2.1 -- well, let's go back to -- if we could highlight 114. And, again, the definition of UNIX-based code there includes both UNIX System V or UnixWare, right?

A. Yes.

Q. And Questar paid SCO $19,125 for this license, correct?

A. Yes.

147

Q. And none of that money was remitted to Novell, correct?

A. No.

Q. And you didn't seek Novell's permission before entering into that license, right?

A. No.

Q. One last exhibit to show you. Let me show you what we've marked as Exhibit 227, Novell 227. And, Mr. Sontag, please feel free to look at any part of the exhibit, but I'm going to ask you about the e-mail on the second page in the middle of the page.

A. Okay. Just a moment.

Q. Sure.

A. Okay.

Q. Now, if you could take a look at that e-mail on the second page, in the middle of the page, it's an e-mail from Jeff Hunsaker at SCO to yourself, Mr. McBride and others at SCO. And it's sent on July 31, 2003, correct?

A. Yes.

Q. And what was Mr. Hunsaker's position -- his position at SCO was Senior Vice President of Worldwide Sales and Marketing, right?

A. I believe that to be the case.

Q. And Mr. Hunsaker currently is the president and

148

CEO of SCO, right?

A. I think at least the president of SCO Operations or something like that. I'm not sure what his exact title is now.

Q. And what he said in the middle of 2003, this e-mail followed a conference call about this SCOsource licensing program, right?

A. Yes.

Q. And the subject line there is: SCOsource issues and buyoff, correct?

A. Yes.

Q. And he wrote Darl, Chris, Kim and Kevin, correct?

A. Yes.

Q. And then he wrote: During our SCOsource con call today, we discussed and would like to propose the following. The official name of this program will be the SCO UNIX IP Compliance License Program. Correct?

A. Yes.

Q. And that's the name that was eventually used for this program of these contracts that we have just been through, right?

A. Yes, at least for a period of time.

149

Q. And then he wrote: This is not a Unixware 7.13 SKU, right?

A. Yes.

Q. And then he wrote: The license is called a SCO UNIX IP license for Linux. The only rights that this license provide is for Linux binary runtime copies. When we are ready to issue a similar license for AIX, it will be called the SCO UNIX license for AIX. Correct?

A. Yes.

Q. Then he followed up with these words: There is no connection between UnixWare, OpenServer and the SCO UNIX IP license whatsoever. Right?

A. Well, I wouldn't agree with that characterization. These licenses are based on the same underlying IP that is in UnixWare and OpenServer.

Q. He is the current president of SCO, Mr. Hunsaker, right?

A. Yes.

Q. And what he wrote, at the time this program was taking off, in July of 2003, is: There is no connection between UnixWare, OpenServer and the SCO UNIX IP license whatsoever.

150

Right?

A. I disagree with that characterization.

Q. And then he continued: They are independent. Correct?

A. Yes. That's what he put.

Q. And in 2003, that's what the Senior V.P. of Worldwide Sales and Marketing of SCO, how he characterized the SCOsource program, right?

A. They are not the same product, but they are -- the SCOsource license is IP based upon the UnixWare and OpenServer products.

MR. JACOBS: I don't have anything further, Your Honor.

THE COURT: Thank you. Mr. Normand, you may examine.

MR. NORMAND: Thank you, Your Honor.

CROSS EXAMINATION BY MR. NORMAND:

Q. Good afternoon, Mr. Sontag.

A. Good afternoon.

Q. Is it fair to say that, during your tenure at SCO, you used the terms UnixWare and System V interchangeably from time to time?

A. Yes.

151

Q. Why did you do that?

A. One of the primary reasons is that we were thinking about possibly renaming UnixWare to be System V, and that was under serious consideration until we determined there would be a lot of certification and a substantial amount of costs in renaming UnixWare, and so we determined that that was not possible. But, in terms of describing UnixWare, OpenServer, all of that, we would often use UNIX System V as the overall umbrella name for all of SCO's UNIX technologies.

Q. What was the point of using the phrase System V as an umbrella or a short name for all that technology?

A. It was just short for saying UNIX System V.

Q. Were you always careful to draw distinctions between the UnixWare trade name for the latest release and other uses of System V?

A. No.

Q. I want to start, Mr. Sontag, where Mr. Acker started, with Novell Exhibit 147. This was a document that referred to SVR 4 software libraries. Do you recall looking at that document?

A. Yes.

Q. This was the draft press release that you went through. Do you recall that?

A. Yes.

152

Q. Now, do you know what libraries are?

A. Libraries are a portion of an operating system that are used for applications to communicate with operating system.

Q. Do you know whether there are SVR 4 libraries in UnixWare?

A. I suspect that may be very well what those libraries are called. I don't specifically remember, but those libraries are referring to the UnixWare runtime libraries.

Q. Are libraries the same as releases of a software product?

A. No. Libraries are just a portion of an operating system release.

Q. OSR 5 libraries you refer to in this document as well. Do you know what that's a reference to?

A. I believe that's referring to the OpenServer Version 5 runtime libraries.

Q. And what was OpenServer?

A. OpenServer was a version of UNIX developed by Santa Cruz that was based on UNIX System V, Release 3.

Q. Let me take a step back, Mr. Sontag. When did you join SCO?

A. October of 2002.

Q. And with whom did you deal in acquiring an

153

understanding of the subject matter that has been discussed?

A. Of a lot of individuals inside of SCO, Bill Broderick, John Maciaszek, the attorneys, Jeff Hunsaker, a whole host of people.

Q. Had you worked at Novell previously?

A. Yes, I have.

Q. Turn to Novell 159.

THE COURT: What number?

MR. NORMAND: 159.

Q. This is the document, Mr. Sontag, in which SCO makes the statement that it is the developer and owner of SCO UnixWare and SCO OpenServer, both based on UNIX System V technology. Do you recall reading the document?

A. Yes.

Q. And do you recall Mr. Acker referring to the tree of a software system?

A. Yes.

Q. And what did you understand him to mean?

A. Well, what I understand it to mean is: When software is developed, you build a version. You build a release and then usually, if you're going to create a subsequent release of that software, you create a new branch of software, start again, and make modifications

154

to that version of software and so on and so on, just like when you're developing a document, a legal document, maybe, in a legal environment with a number of colleagues, you may create a first version of a document, circulate that, make modifications, you know, get the responses back, publish a new revision of that document and so on and so on.

Q. Now, you testified earlier about your understanding of the relationship between SVR 4 and UNIX System V, Release 4 and Unixware. Do you recall that testimony?

A. UnixWare is based on SVR 4. It's developed out of SVR 4 and actually the first version of UnixWare is based on SVR, I think, 4.1.

Q. Mr. Sontag, this is attachment 1 to the Sun agreement. Do you recall viewing this earlier today?

A. Yes.

Q. And do you see Section 2, a description of technology, additional technology?

A. Yes.

Q. And do you see the fourth line there, System V, Release 4.2 and products?

A. Yes.

Q. And then do you see the parenthetical there?

A. Yes. UnixWare 1, UnixWare 1.1, UnixWare

155

1.1.1.

Q. You took part in negotiating this agreement, correct?

A. Correct.

Q. What did you understand that reference in attachment 1 to mean, that parenthetical reference?

A. Well, that was previous releases of UnixWare.

Q. What is your understanding of when UnixWare was developed?

A. UnixWare was developed in the early '90's, primarily when Novell was -- had ownership for the UNIX intellectual property.

Q. And do you see the next line in this attachment, System V, Release 4.2 MP and products?

A. Yes.

Q. I take it your intent was the same, by using that parenthetical?

A. Yes.

Q. Okay. Will you pull up Novell Exhibit 173, and at the bottom of the third page. This is the document, Mr. Sontag, that the first paragraph at the top in the blowup, it says: In the past SCO's UnixWare and OpenServer license agreements did not allow these UNIX libraries to

156

be used outside of SCO's operating systems. Do you see that language?

A. Yes, I do.

Q. Do you know whether a Unixware license relates to technology that goes back to the days of AT&T?

A. Yes.

Q. Do you know whether SCO ever paid Novell any money for the technology going back to AT&T that was part of the UnixWare license?

A. No, I don't believe they did.

Q. Do you have a view as to whether the UnixWare license allowed the licensee to use the SVR 4 libraries?

A. I believe they would.

Q. And what's the basis for that understanding?

A. That was the libraries that were included with UnixWare.

Q. Now, at the time of the SCOsource agreements that you reviewed in some detail, were you concerned about the use of UnixWare and OpenServer technology with Linux?

A. Yes.

Q. In what way?

A. That any of that IP had been misappropriated in any form or fashion into Linux.

157

Q. Okay. Will you pull up SCO Exhibit 402. Mr. Sontag, SCO Exhibit 402 is SCO System V for Linux sales guide, internal use only. Are you roughly familiar with this document?

A. Yes.

Q. Could we go to the first page. And this is the executive summary of the document. I take it you've seen this before?

A. Yes.

Q. Who is Jay Peterson?

A. Jay Peterson was an employee of the SCOsource division. He worked for me.

Q. Do you see in the middle of the paragraph, it says: The first product is called SCO System V for Linux Release 1.0, SCO UNIX runtime libraries.

A. Yes.

Q. And the next sentence: It licenses the SCO OpenServer COFF static shared libraries. Do you see that?

A. Yes.

Q. What was your understanding of what that meant?

158

A. That the primary product of that first release of the SCOsource runtime library was the OpenServer COFF runtime libraries.

Q. And what is your basis for that understanding?

A. Because that's what I understood it to be at the time.

MR. NORMAND: Would you go to page 8 and blow up the top part of that.

Q. This paragraph, the first one in the section called SCO UNIX Applications, has the following sentence: ELF is the newer and current System V format and is used in UnixWare.

A. Yes.

Q. What does that reference mean?

A. That's referring to that the primary runtime libraries in UnixWare are also called ELF.

Q. Now, if you look at page 11, the bottom paragraph. If you would pull that up. The following language appears: Some of our existing OpenServer UnixWare customers may be considering a migration to Linux. If they are, the SSVL product may be attractive to them, since it can enable them to run existing OpenServer or UnixWare applications on Linux.

159

What does that language signify?

A. It's just saying, you know, that kind of a basis for actually starting this program was that we had some of our existing customers that came to us and said: Hey, we would like to be able to run our UNIX applications either for OpenServer or UnixWare on Linux. Can you help us, you know, come up with a method to be able to do that? And that was the basis for starting SCOsource. And the first product that was released was intended to provide that solution for those customers.

Q. One more snippet from this document. The next page, second full paragraph, contains the following statement: In some cases we believe they may be using our libraries already to run OpenServer or UnixWare applications. Do you see that language?

A. Yes.

Q. Is this reflective of a view that at the beginning of the SCOsource program, you were concerned about the use of OpenServer in UnixWare technology?

A. Well, we had customers that came to us and said that they were doing this very thing. They were using the runtime libraries on Linux, and their review of the

160

end user license agreement for OpenServer or UnixWare made them come to, I believe, the correct conclusion that that was not appropriate. They wanted to be able to accomplish that in an appropriate manner, and so they came to SCO asking for us to provide a method for them to license those libraries to use with Linux.

Q. And the date of this document is February, 2003, right?

A. I believe so, yes.

Q. Is it fairly early in the SCO program process?

A. Yes, it is.

Q. Novell Exhibit 194. This is a document you were asked about earlier, a letter to Fortune 1000 companies?

A. Yes.

Q. Do you recall going over this document? And this document contains a statement that there had been, in SCO's view, System V code copied into Linux. Do you recall that?

A. Yes.

Q. Was it your view, at the time, that the System V code that had been copied into Linux was part of UnixWare?

A. It very well could be. I mean, the vast majority of the code is, you know, identical to what is

161

in UnixWare, that we had concerns with.

Q. We have in the second paragraph from the bottom, the statement that we have evidence that portions of UNIX System V software code have been copied into Linux and that additional other portions of UNIX System V software code have been modified and copied into Linux. Do you see that statement?

A. Yes.

Q. Are there methods and concepts, in your view, that were developed by AT&T that are in UnixWare?

A. Yes.

Q. In your view, is there code developed by AT&T that is in UnixWare?

A. Yes.

Q. And, in your view, did you have the right to license that material to customers without submitting any payment for those rights to Novell?

A. Yes.

Q. Next page, top. You say: Consistent with this effort, on March 7 we initiated legal action against IBM for alleged unfair competition and breach of contract with respect to our UNIX rights. Do you see that sentence?

A. Yes.

162

Q. In your agreements with Microsoft, Sun SCOsource agreements, did you ever purport to license anything other than SCO's IP rights?

A. No.

Q. You were asked about Mr. -- or Dr. Cargill's expert report. Do you recall that?

A. Yes.

Q. 428, page 3. And if you would blow up that bottom paragraph. Dr. Cargill states in this report: Overall, Linux is a substantial copy of the UNIX SVR 4 operating system. Do you see that language?

A. Yes.

MR. NORMAND: And can you side-by-side that with page 12 of the Sun agreement?

Q. We went over, Mr. Sontag, this language in the bottom of the divided documents. System V, Release 4.2 and products, and then the parenthetical in UnixWare?

A. Yes.

Q. And Dr. Cargill is concluding that Linux is a substantial copy of the SVR 4 operating system. Do you see that?

A. Yes.

Q. You were told in your examination that

163

Dr. Cargill had concluded that Linux is substantially similar to SVR 4. Do you recall that?

A. Yes.

Q. Is it fair to say that one could equally accurately say that Linux is substantially similar to UnixWare?

A. Yes.

Q. Had you had occasion to read this report --

A. I had not.

Q. -- before it was presented or given to you today?

A. No, I had not.

Q. You're familiar with Malloc code?

A. Yes, I am.

Q. And how did your -- or SCO's reliance on Malloc code come to unfold?

A. I think it was in February or March or April of 2003, that we became aware of the Malloc code example of -- you know, kind of some fairly obvious and easy-to-see literal copyright infringement that had occurred, was code that was in a Silicon Graphics set of open source software that was part of Linux that was substantially the same as the UNIX System V, Release 4.2 ES code that it had licensed to Silicon Graphics. And it was very plain and apparent to see that

164

there was a substantial amount of direct, literal copying that had occurred, which was actually surprising to me that it would be so obvious and not munged up more than it was.

Q. The Malloc code is from UNIX System V, Release 3, is that correct?

A. The Malloc code is in many previous releases of UNIX and small modifications or additions made to that code with each additional release, but it's been substantially similar for many UNIX releases, and the code is substantially similar between UnixWare and many previous, you know, releases, at least through the last 10 or 20 years and.

Q. And in your view, when you were with SCO, did a license to UnixWare permit the licensee to use the Malloc code?

A. Yes.

Q. Novell 274. You were shown this letter from Mr. McBride to Lehman Brothers. Do you recall briefly reviewing this document?

A. Yes.

Q. And in the document, Mr. McBride makes reference to, quote, SCO's rights in UNIX. Do you recall that?

A. Yes.

165

Q. Again, in all these agreements we are talking about, did SCO purport to release or license any technology other than the ones that it thought it had rights to?

A. No.

Q. Page 2, towards the bottom. Do you recall looking at that long list of files and going through this language?

A. Yes.

Q. Is there ABI code in UnixWare?

A. Yes, there is.

Q. How do you know that?

A. I have been made aware of that through the course of our investigations, and so I was aware that there was ABI code in UnixWare.

Q. Let's look at Novell 57. Maybe SCO 57. Do you recall going over the Sun agreement with Mr. Acker?

A. Yes, I do.

Q. Can you take a step back and tell me how it came to be that there was a 2003 Sun agreement?

A. Back in the late fall of 2002, we had a business and engineering meeting with Sun; some of Sun's executives, some of SCO's executives, some our engineers, their engineers, trying to determine if there was, you

166

know, business opportunities working together, and I think at that time, we had told them that we had, you know, additional SCO intellectual property that we would be willing to discuss with them and license; that we were also interested in potential joint marketing opportunities and otherwise. And in early 2003, we started having discussions with Sun about licensing UnixWare into their products. Sun was -- had a substantial UNIX business in the form of Solaris that, at the time, only ran on a specialized version of a processor called a spark processor. They had a desire to be able to run their Solaris operating system software on a more general PC-type, Intel-compatible processors, which is the primary capability of SCO's UnixWare releases and all of the software drivers that we had available with UnixWare. So they became interested in taking a license for the UnixWare source code and the drivers in order to develop an Intel-compatible version of Solaris, and that was the primary motivation for the discussions and the ultimate license agreement that was entered into in 2003.

Q. You referred to drivers. What are drivers?

A. Drivers are additional pieces of code that allow peripherals, a network card, a keyboard, different components or portions of the computer hardware to be

167

able to interact and operate with the operating system. They are an important piece that if you don't have a broad array of software drivers available, that operating system will not work with a wide variety of hardware that's available out there, limiting your potential customer base.

Q. And did Sun get drivers?

A. Yes, they did.

Q. In the 2003 agreement?

A. Yeah. It was very important for them.

Q. Drivers for what?

A. For UnixWare.

Q. Did they get drivers for the older System V technology?

A. No, they did not.

Q. Do you think they could use the older System V releases as a stand-alone product without the drivers for them?

MR. ACKER: Objection. Calls for speculation.

THE COURT: I'll let him testify as to his understanding of that.

THE WITNESS: It wouldn't make sense. If you're developing a software product, you want to use the latest version of the source code of that software to

168

develop that product because it would have the latest bug fixes and features and capabilities. Same with being necessarily compatible with the hardware drivers that would be associated with that operating system product.

Q. You went through a couple of attachments to the 1994 Sun agreement and then the 2003 Sun agreement. Could we pull those up side-by-side? It's Novell 187 and Novell 5. And at 187, go to page 11, and in 5, would you pull up page 19. Do you recall going through these attachments, Mr. Sontag?

A. Yes, I do.

Q. And I think, although you haven't had time to pore over it, these are the same list of products, correct?

A. Yes. They appear to be basically the same.

Q. Now, as of 2003, Sun already had rights to all of these products, correct?

A. Yes. I believe so.

Q. And this will be a little bit redundant to what you've testified to, but in general, what did you understand those rights to be as of 2003?

A. As of 2003, Sun had the most substantial rights of any UNIX licensee. They had source code for, you know -- they had source sublicensing rights, very broad

169

source sublicensing rights that no other UNIX licensee had, which is why they had paid a substantial amount of money because they had the ability, without any involvement of Novell or SCO or whoever was in control of the UNIX contracts, to be able to license the Solaris source code to their customers who, in turn, could also sublicense the software. That was a substantial right.

Q. Sun had paid 82 1/2 million dollars for those rights, correct?

A. Correct.

Q. Could Sun, under that 1994 agreement, distribute its Solaris product to as many as a hundred licensees?

A. Yes.

Q. A thousand?

A. A thousand. A million. They, in turn, could sublicense that source code to their customers, so, it could -- Solaris could be very broadly distributed very easily, with the rights that Sun had in the 1994 agreement.

Q. Now, what do you recall discussing with Sun about whether there were confidentiality restrictions in the 1994 agreement?

A. I had raised that there were confidentiality provisions. They, as part of the negotiating, tit for

170

tat, kind of strongly stated that they believed that most of those confidentiality provisions had been undermined or waived by disclosures of the UNIX code over the years. They gave examples of the Lion's Book and some other examples to make their point. I, in doing my job, tried to press back and emphasize that I thought it was important that they, you know, had confidentiality provisions. Their position was that, with their broad licensing rights and what they were intending to do, they felt that they had the right to basically, in a, you know, Sun's sort of style, release an open source version of Solaris with the rights they had in 1994.

Q. And do you think that position by Sun bore on the price that was negotiated for the agreement?

A. For the 1994 agreement?

Q. The 2003.

MR. ACKER: Objection. That calls for speculation. He can't possibly know what's in Sun's mind.

MR. NORMAND: Mr. Sontag negotiated the agreement. He can recall parts of negotiations, inferences, and can make conclusions from what Sun was telling them how much they might be willing to pay.

THE COURT: Overruled. Go ahead.

171

THE WITNESS: Certainly Sun felt like they already had substantial rights and they had already paid a substantial amount of money for their -- you know, the UNIX rights that they already had in the 1994 agreement. Their primary interest was in being able to enable a Solaris-on-Intel version, and their primary interest was then the UnixWare rights that we would be licensing to them. And that was, I believe, where they viewed the preponderance of the value to lie.

Q. Would it be fair to say that, as of the 2003 agreement, Sun was already in the business of commercially licensing its derivative work, Solaris?

A. Yes.

Q. And the SVRX material therein?

A. Yes.

Q. Now, you mentioned, in response to one of Mr. Acker's questions, that there was an important restriction on what was described to you as open source rights in the 2003 agreement. Can you expand on that a little?

A. Well, this was one area that they wanted to be able to make sure they -- you know, that the open sourcing that they intended to do, which they believed they already had rights to do, that they had complete coverage for. So this is another kind of

172

belt-and-suspenders sort of addition they wanted in the agreement was to broaden the confidentiality provision to allow them to, you know, under a -- you know, a specific version of an open source license that was not Linux, that valued the software, they could, you know, with the addition of the 2003 agreement, open source in a manner that was, you know, defined by the 2004 agreement.

Q. This is the for-value language that you're talking about?

A. The for-value language, that it was intended that they could not release Solaris under the Linux GPL open source license that would not pass muster with the for-value provision in the 2004 agreement.

Q. And, again, a little redundant, but why did that matter to you, that restriction? A. Well, we wanted to make sure that Solaris was not just, wholesale, dumped into Linux, that that would be a problem, but we felt that Sun had substantial rights and that if they were doing another version of open source that met with the requirements in the agreement, that they had the rights to do so.

MR. NORMAND: Would you pull up Novell Exhibit 5 at page 20 -- let's do Novell 187.

Q. This is, when we get to it, the second page of the attachment to the Sun agreement that goes over the

173

technology that was licensed to them. Do you recall going over that?

A. Yes.

Q. And there were various SVR 4.1 and 4.2 releases listed on that second page. Do you recall that?

A. Yes.

Q. And do you recall being asked about releases identified in a schedule to the APA?

A. Yes.

Q. I take it you had occasion to review the APA during your tenure at SCO?

A. I did review it a number of times.

Q. And you were asked about the schedule that identified what you called products. Do you recall that?

A. Yes.

Q. And I wanted to ask you some questions about the similarity between that list of products and this list of products in attachment 2, page 2 of the Sun agreement. Page 2 of the Sun agreement -- I'll just read to you until we get this up -- lists the following two products as -- may I approach, Your Honor?

THE COURT: You may.

Q. As the most recent two new releases to which Sun gained rights under the 2003 agreement. Do you see that?

174

A. Yes.

Q. And could you read what those two releases are?

A. Open UNIX 8, also known as UnixWare 7.1.2, and System V, Release 5 and, parenthetically, UnixWare 7.0, 7.01, 7.1, 7.11, 7.1.1 plus LKP.

Q. At the top of the page are there SVR releases listed?

A. Yes.

Q. And what are those releases?

A. System V, Release 4.1 ES, 3B2; System V, Release 4.1 C2, 3B2; System V, Release 4.1 ES; System V, Release 4.2 and products; UnixWare 1.0, 1.1 and 1.1.1; and System V, Release 4.2 MP and products; UnixWare 2.0, 2.1 and 2.12.

Q. And what is the MP?

A. Multiprocessor.

Q. And what can you tell me about how that release of System V came about?

A. Different versions of UnixWare were released, some that would support a single computer processor, other versions that allowed for the software to be run across multiple processors at the same time, to allow more work to be accomplished at the same time, allowing the processing to occur more quickly.

MR. NORMAND: May I approach, Your Honor?

175

THE COURT: You may.

Q. I'm handing you, Mr. Sontag, a copy of the APA. Turn to the schedule that you were asked about earlier.

A. Schedule 1.1A?

Q. Yes.

A. Assets?

Q. Yes. And if you would blow up the bottom line, item 66. Now, with reference to attachment 1 to the Sun agreement that we were looking at earlier --

A. Yes.

Q. -- the most recent releases of System V that were included in the attachment to the Sun agreement, System V 4.1 ES/3B2, is that product included in the list in the APA?

A. Yes, it is.

Q. 4.1 C2/3B2, is that included in the list in the APA?

A. Yes.

Q. Do you see an ES/3B2 product listed?

A. I'm assuming that's it right there, but maybe I'm reading it wrong.

Q. Does that say ES/3B2?

A. No, it does not.

176

Q. Does it say ES/C23B2?

A. No.

Q. So those two most recent System V releases in the Sun agreement aren't listed in the APA as products, are they?

A. No.

Q. What have you understood the term "open source" to mean during your tenure at SCO?

A. Well, it varies. There's different open source licenses, but, in general, the high level, it is making the source code available to various parties, your customers or others, that they can then view or modify that source code. In some cases, there are requirements on returning the modifications back or making the modifications available to others.

Q. And your understanding of the 2003 Sun agreement is that such rights, at least in full, were not given to Sun; is that correct?

A. Prior to the 2003 agreement?

Q. In the 2003 agreement.

A. The 2003 agreement gave them limited open source rights. There were restrictions to what they could do in terms of open sourcing in the 2003 agreement.

Q. You were asked, Mr. Sontag, whether you knew

177

why two System V releases in the 1994 Sun agreement had been described as deliberately omitted. Do you recall those questions?

A. Yes.

Q. And do you recall what your answer was?

A. I do not.

Q. Do you know whether Sun had already had a license to those releases of System V before the 1994 agreement?

A. I do not know.

Q. Do you know whether they had already had a license and terminated the license?

A. Sun?

Q. Yes.

A. I do not know.

Q. Who, at SCO, might know the answer to that?

A. I suspect Bill Broderick, John Maciaszek would be the ones that most likely would know that answer.

Q. Now, to state the obvious, at the time of the 2003 Sun agreement, Sun was an existing licensee of UNIX; is that right?

A. Yes.

Q. And I think you testified earlier that part of what Sun obtained under the 2003 agreement was the right to obtain copies of the older versions of System V; is

178

that right?

A. Yes.

Q. This is from amendment number 1 to the APA. I take it you had occasion to review that amendment during your tenure at SCO?

A. Yes.

Q. This amends part of the APA to state as follows, paraphrasing of course: Buyer, Santa Cruz, shall be entitled to retain 100 percent of the following categories of SVRX royalties. And Rule 2 says that source code right-to-use fees under existing SVRX licenses and the licensing of additional CPU's, and from the distribution by buyer of additional source code copies. Do you see that language?

A. Yes.

Q. As of the 2003 agreement, Sun already had source code copies to all of the System V releases that were listed in the 1994 agreement, correct?

A. Yes.

Q. And when you were shown earlier, by Mr. Acker and by myself, the similarity of System V releases between the 2003 agreement and the 1994 agreement, what Sun is obtaining is additional copies of those same releases, correct?

179

A. Yes.

Q. You were asked by Mr. Acker, paraphrasing, whether, to your understanding, SCO had the right to license the prior System V products with the UnixWare license. Do you recall that question?

A. Yes.

Q. Mr. Sontag, I want to show you language from, again, amendment 1 to the APA, which provides as follows: Buyer, Santa Cruz, shall have the right to enter into amendments of the SVRX licenses as may be incidentally involved through its rights to sell and license UnixWare software. Do you see that?

A. Yes.

Q. And then, at the bottom, it says: Buyer shall not enter into new SVRX licenses except in the situation specified in little "i." Do you recall reviewing this language during your tenure at SCO?

A. Yes.

Q. Do you recall forming a view as to what it meant for SCO to have the right to license SVRX material incidentally to licensing UnixWare?

A. That was the basis of my belief that SCO had that right.

180

Q. You were shown this language earlier, Mr. Sontag -- well, the first paragraph, the letter in which Mr. Luehs, I think it is, says that the agreement between Santa Cruz and Novell requires prior written approval from Novell for all new agreements or changes to current agreements relating to System V. Do you see that language?

A. Yes.

Q. Is it your understanding that if Santa Cruz was executing a Unixware license that it didn't need to get Novell's approval to license SVRX material with that UnixWare license?

A. That was my understanding.

Q. Now, this document is dated May 20, 1996, correct?

A. Yes.

Q. This is a letter from Novell three days later, May 23, 1996, in which Novell says that it has transferred to SCO Novell's existing ownership interest in UNIX system-based offerings and related products. Do you see that language?

A. Yes.

Q. Was it your understanding, during your tenure at SCO, that SCO could license UnixWare however it wanted?

181

A. Yes. That was my understanding.

Q. And was it your understanding that SCO could license System V products with UnixWare? Was that your understanding?

A. Yes.

Q. You were asked about the Microsoft agreement. Do you recall that?

A. Yes.

Q. And, again, in summary, can you tell me how it came to be that you ended up in negotiations with Microsoft regarding that agreement?

A. In early 2003, we came in contact with Microsoft representatives who were interested in pursuing a possible license to UnixWare technologies to use in some of their, what they called UNIX-compatibility products within Microsoft Windows. It started a set of negotiations that occurred through the early part of 2003 culminating in the UnixWare license agreement with Microsoft.

Q. Now, in the time leading up to the beginning of those negotiations, had SCO made any public statements or assertions that there was any SCO IP in any Microsoft products?

A. I believe there had been some, you know, broad discussion that there might be IP issues, and not only in

182

Linux but other operating systems, including possibly Windows.

Q. And was that a focus of your discussions with Microsoft or was it more collateral?

A. It certainly was a portion of the discussion because they certainly wanted to have, you know, appropriate IP coverage for their products.

Q. Now, in Section 2 of the Microsoft agreement, SCO releases any claims it might have against Microsoft; is that right?

A. Yes.

Q. In that agreement, Section 2, did SCO purport to release any of Novell's claims that it might have against Microsoft?

A. No.

Q. Did SCO claim to have the right to release claims for IP that it didn't own?

A. No.

Q. Section 2.2 of the Microsoft agreement which you spoke about earlier is a license for Microsoft products.

A. Yes.

Q. Does that section pertain to any particular technology?

A. It pertains to UnixWare.

183

Q. Did you purport to license to Microsoft any intellectual property that you didn't have rights in?

A. No.

Q. This is the term sheet that was shown to you earlier. Can you tell me a little bit about how this came to be created?

A. I think there was a desire to -- that Microsoft wanted to know what we could possibly have available to license to them. They had, you know, certain things that they were interested in. And I, you know, with the help of others, put together a list of possible topic areas that could be of interest to Microsoft that was the basis for starting a discussion.

Q. Is that list of products in paragraph 3 in any particular order? A. No, they are not.

Q. The System V term that you assumed Microsoft would be familiar with?

A. I think they would be.

Q. Perhaps even more so than UnixWare?

A. Yes.

Q. Section 3 of the Microsoft agreement was a Unixware license, correct?

A. Yes, it was.

Q. Was it a full UnixWare license?

184

A. It was a limited UnixWare license to only a limited set of Microsoft products.

Q. Your understanding of this Court's August '07 order is that Novell owns the SVRX copyrights that are in UnixWare. Is that fair to say?

A. I do understand that.

Q. So, when you licensed Microsoft UnixWare, you were licensing the right to use Novell copyrighted material under the Court's order; is that right?

A. That would be a determination that you could come to.

Q. Did you pay Novell any money for that Section 3 UnixWare license?

A. No, we did not.

Q. Do you know if Novell is seeking any money from that Section 3 license?

A. I don't believe they are.

Q. Section 4 of the Microsoft agreement. Could you describe your discussions with Microsoft regarding that section.

A. Microsoft was interested in having a couple of options when they undertook the source code license for UnixWare. They wanted to be able to first evaluate the source code and determine if it would be useful to them. So that was provided to them under the initial agreement.

185

They wanted to have the option to be able to use the technology in a set of products, which was the first option or Section 3 of the agreement. And then they also wanted to have the rights to use the UnixWare source code and derivative products in all of their products, broadly across all of Microsoft products. And that was the primary component of Section 4. So that was a second option that they could obtain.

Q. In your discussions with Microsoft regarding this agreement, what did you say to them about the subject matter of the expanding UnixWare license in Section 4? What do you recall discussing with them?

A. That it was a significant expansion of their rights for how they could utilize that UnixWare source code, that it wasn't just a limited set of products that had a fairly small, you know, distribution footprint, but it was all of Microsoft's products and millions and millions of products. And that was a substantial expansion in how they could use that UnixWare technology.

Q. Now, in Section 4 you also licensed Microsoft OpenServer source code; is that right?

A. Yes.

Q. What do you recall discussing with Microsoft about the utility of that license?

186

A. That allowed Microsoft to also have the ability to have compatibility with a, you know, broad range of OpenServer applications that were out there for which it was a large installed base and large customer base of OpenServer so that it was another very big and substantial part of that, you know, Section 4 agreement was an OpenServer source code agreement. I do not believe there is anybody else that has ever been able to license the OpenServer source code.

Q. SCO had never licensed the OpenServer source code?

A. No. It was contemplated, I think, with a few possible customers but was never executed with any licensee. So OpenServer had never been licensed in source code before.

Q. OpenServer was the more profitable of the two main products at SCO, correct?

A. It was 2/3 of the business.

Q. Openserver had a larger installed base than UnixWare did, correct?

A. That's correct.

MR. ACKER: Objection. Leading.

THE COURT: Sustained. It is leading.

Q. When you were negotiating the 2003 Microsoft agreement, did you have a view as to the value of the

187

OpenServer license relative to the value of the expanded UnixWare license in Section 4?

A. I would view them both as, you know, substantial portions of the value of Section 4. How I would split between them, I'm not sure. I mean, the expansion of UnixWare distribution was significant. The source code, you know, license for OpenServer on its own was significant.

Q. And, in your view at the time, why was it relevant to Microsoft's business, for us lay people, that there was a large installed base of OpenServer users?

A. It provided Microsoft with potential opportunities to sell products to that large installed base of OpenServer customers, and so, in some cases, for the first time Microsoft Windows-based products to a set of customers that they may have never dealt with before.

Q. Now, having exercised the options in Section 3 and Section 4, and with the Section 4 license, Microsoft now had a full UnixWare license, correct?

A. That is correct.

Q. And Section 4 is also a license to older System V releases; is that right?

MR. ACKER: Your Honor, it's still leading, the last two questions. Every question ends with "correct"

188

or "is that right?" It's his witness.

MR. NORMAND: This is a cross examination, but if we want to do a hard and fast rule, I'll ask only open-ended questions.

THE COURT: It sort of is and sort of isn't.

MR. ACKER: I understand that, but, given the relationship between counsel and the witness, I think it's appropriate to be a non-leading question.

THE COURT: Try not to lead. I'll sustain the objection. Where are you? MR. SONTAG: You're asking where I am with the witness?

THE COURT: No, just on this last series of questions.

MR. SONTAG: As to the Microsoft agreement? Probably five minutes.

THE COURT: Just the last couple of questions.

MR. SONTAG: Do you want me to start over?

THE COURT: Just the last couple of questions. I don't know that he answered them. We got a leading objection.

MR. SONTAG: I'm sorry. I understand.

Q. By Mr. Sontag: I guess the question was: Why were you willing to enter into a license to prior releases of System V in Section 4 of the Microsoft

189

agreement?

A. Well, it was typical with a, you know, UnixWare and preceeding UNIX source code licenses, to provide a license to the prior products. The fact we broke it up and put it into the second release was just, in some ways a convenient place to put it. But it was not something -- the prior products was not something that Microsoft was viewing as highly valuable. I mean, we did not provide all the versions that -- of prior product. And we had told them that we may not be able to provide them all because they are very old, you know, source tapes that, in some cases, had turned to dust. But there was no objection on the part of Microsoft that they didn't receive all the versions that were listed on that schedule. We provided them with the ones that we were able to get, and that was sufficient for them, and there was no desire or need on Microsoft's part to alter the value of, you know, that agreement based on that.

Q. Did you have any understanding, at the time of the execution of the agreement, as to whether Microsoft was going to use those prior releases of System V as stand-alone products?

A. No. We had no expectation that they would use it. If you are developing a software product, again, as I've said a number of times previously today, you would

190

want to utilize the latest version of the source code for the development of a new product. And especially with a UNIX-based operating system product that has built into it a high degree of backward compatibility, you would want to use the latest to take advantage of all the new features and bug fixes, and you would still have that backward compatibility. There is no need to go to a prior release.

Q. Do you recall entering into an amendment 3 to the Microsoft agreement?

A. Yes.

Q. And can you recall -- Actually, can you bring it up? And blow up that paragraph B. Do you recall discussing and negotiating this paragraph in the agreement?

A. Yes.

Q. It says, and I understand it's hard to read: The parties recognize that, A, parts of the software, excluding material portions of the kernel, may be distributed by Microsoft by default in the majority of the editions. This is in section 3, right?

A. yes.

Q. Section 3 is a license for UnixWare, correct?

191

A. Yes.

MR. ACKER: Same objection, Your Honor. Leading.

MR. NORMAND: We are talking about the text of an agreement. We can take five minutes and walk through it.

THE COURT: You can answer that, which you did.

THE WITNESS: Yes.

Q. What is your understanding as to what rights Microsoft gained in this paragraph B of amendment 3?

A. That they would be able to license the UnixWare software into a majority of their, you know, Windows products.

Q. Did you have any view, at the time of the execution of the agreement or its amendments, as to whether Microsoft had any intention to use the older System V releases in its Windows products?

A. My understanding is they had no intention of using the older UNIX versions for anything other than a source analysis project that they were contemplating.

Q. Now, I asked you a similar question earlier as about Sun, as to whether you had a view as to whether they intended to use the older System V releases as a stand-alone product. Do you recall my asking you that question?

192

A. I kind of recall that.

Q. We discussed drivers. Do you recall that?

A. Yes.

Q. Did there come a time when you entered into a clarification agreement as to the Sun 2003 agreement regarding the subject matter of drivers?

A. Yes. There was an amendment to the agreement that was related to the drivers, binary and source code drivers for UnixWare.

Q. This is SCO Exhibit 189. I think you might have objected to it. Let me ask one foundational question. Were the drivers sent?

A. The drivers were --

Q. The drivers addressed in this agreement, were they sent to Sun?

A. Yes, they were.

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

MR. ACKER: No objection.

THE COURT: SCO 189 is received.

(SCO Exhibit 189 received in evidence.)

Q. And can you quickly summarize for me how this came about?

A. I don't recall the specifics, but I think it was very important to Sun that they receive all the

193

drivers that they possibly could to UnixWare that -- for which there were not restrictions that we could not provide them to them, and this amendment was just for them to ensure that they were receiving all of the drivers for UnixWare that we could provide them. And we did, in turn, provide those UnixWare drivers to them.

Q. Do you know whether Sun received the rights to OpenServer drivers?

A. I believe we provided those drivers to them as well.

Q. Do you know whether Sun received any rights under this clarification to drivers to older System V releases?

A. No. I believe they did not.

MR. NORMAND: Novell 422, if you could blow that up.

Q. Do you recall reviewing this document, Mr. Sontag, with Mr. Acker?

A. Yes, I do.

Q. And do you recall a reference -- I think it's on page 2. This is a reference to SCO IP. Do you see that reference?

A. Yes.

Q. And do you see, in the second line in the top paragraph, SCO's intellectual property ownership or

194

rights?

A. Yes, I do.

Q. In this agreement, did you purport to release or license anything other than SCO's intellectual property rights?

A. No, we not.

Q. Did you pruport to release or license any of Novell's rights?

A. No, we did not.

Q. There's a reference, I believe, in that agreement to UNIX-based code. Do you recall that?

A. Yes.

Q. Is UnixWare UNIX-based code?

A. Yes, it is.

Q. Is OpenServer UNIX-based code?

A. Yes, it is.

Q. To the best of your knowledge, did you ever pay Novell anything for the System V code or old SVRX code in any release of UnixWare or OpenServer?

A. No, we did not.

Q. There is a reference in Novell Exhibit 422 to, quote, SCO's standard commercial license. Do you recall that phrase?

A. Yes.

Q. Do you have an understanding as to whether,

195

under its standard commercial license for UnixWare, whether SCO licensed prior System V products?

A. I know that in the UnixWare source code agreement that was provided, up until the most recent versions of the UnixWare source code agreement, that the prior versions were specifically listed. In the most recent version of the UnixWare license, that was omitted only for the purpose of reducing the size of the agreement, but my understanding is that it was still provided to a customer if they requested it, and it was implicitly included.

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

A. Because that was the standard practice of SCO and its predecessors in terms of licensing the UNIX software, that source code licensees of different versions could interact with each other or share code in certain cases, if they were of a similar licensing level, and that was enabled by the fact that they would be licensed to all prior versions, depending on the version they licensed at that point. So, that was a standard practice that had been used by SCO, by Novell, by AT&T, USL and part of the licensing of the UNIX code, and it continued with UnixWare.

196

Q. You were shown a series of agreements towards the end of Mr. Acker's questions, and I think we can safely lump those together and call them SCOsource agreements. Do you recall doing that?

A. Yes.

Q. How did you come about arriving at a price for these SCOsource agreements?

A. I -- we determined that we wanted to price it basically at the same price as UnixWare, so a comparable capability of UnixWare, if it was a 1-CPU system, was priced at, you know, $1400, which was the same price for UnixWare.

Q. And who did you speak with on that issue?

A. Oh, I had gotten input from John Maciaszek and also from Jeff Hunsaker, who were more familiar with the UnixWare price list than I was.

Q. Now, was there any source code given to a licensee under a SCOsource license?

A. No, there was not.

Q. Could you describe, to the best of your view, what the license was in the SCOsource license?

A. It was primarily a release, aspects of a covenant not to sue and a Unixware license and SCO IP license.

Q. Now, you were shown the phrase in several of

197

the agreements, quote, SCO's IP rights. Do you recall that?

A. Yes.

Q. In these SCOsource agreements, did SCO purport to release anything other than its rights?

A. No, we did not.

Q. Did SCO purport to license anything other than its rights?

A. No.

Q. You were shown Novell Exhibit 227. This is the Jeff Hunsaker e-mail. Do you recall that?

A. Yes.

Q. And in that e-mail, Mr. Hunsaker's says that this is not a Unixware 7.13 SKU. Do you recall that?

A. Yes.

Q. Do you know what SKU is?

A. Stock-keeping unit or -- a box of UnixWare software, in this case.

Q. Were these SCOsource agreements simply UnixWare licenses for purposes of stock keeping?

A. No. They were a separate package and agreement and separate SKU.

Q. Now, you were asked further about Mr. Hunsaker's statement that -- If we could pull it up.

198

Mr. Hunsaker's says: There is no connection between a UnixWare OpenServer and the SCO UNIX IPC license whatsoever. Do you see that statement?

A. Yes.

Q. Now, taking it alone, just pulled out of that document, do you agree with it?

A. There is no similarity of the license? Yes. The licenses are not the same.

Q. Now, did Mr. Hunsaker negotiate these agreements, by the way?

A. No, he not.

Q. Who did?

A. I was involved in that, along with our attorneys.

Q. What was Mr. Hunsaker's position at the time that he made this statement?

A. I believe he was over worldwide sales for the UNIX business. He did not have responsibility for primary sales for SCOsource-related products. That was done by me through my own sales group.

Q. Did you ever speak with Mr. Hunsaker in conjunction with your negotiation of the SCOsource agreements?

A. No.

199

Q. Did you have discussions, Mr. Sontag, with Novell in late 2002?

A. Yes, we did.

Q. Can you describe the nature of those discussions?

A. We had a number of back and forth discussions between representatives from Novell and myself and, in some cases, with Darl McBride. In our case, we were interested in clarifying the language of the Asset Purchase Agreement related to excluded assets. In the case of Novell, they were interested in finding out or interested in SCO's involvement with United Linux. That was the overall nature of the conversations in late 2002.

Q. Can you recall who you had discussions with?

A. I had a number of conversations with Gregg Jones and at least one conversation with another gentleman from Novell, whom I can't remember his name at this moment.

Q. And did you have occasion to speak with Mr. McBride about his discussions with Novell?

A. I did.

Q. And what was the general nature of those discussions?

MR. ACKER: Objection. Hearsay, Your Honor, if

200

he's going to relate what Mr. McBride told him.

MR. NORMAND: This goes to state of mind, but we can cut it short if there are concerns, Your Honor.

THE COURT: He can answer the question asked, the general nature, without saying what somebody else said. So, talk about the general nature.

THE WITNESS: His discussions, as I understood it from Mr. McBride, were very similar to my discussions that I had primarily with Gregg Jones.

Q. Did you, in your discussions with Novell, ever ask Novell to partner in the SCOsource program that you were contemplating?

A. No, I did not.

Q. Did you, when you were speaking with Novell, ever ask Novell to participate in the SCOsource program?

A. No, I did not.

Q. Did you have a view, at the time of these discussions, as to whether Novell would have any right to any monies you might receive under the SCOsource program?

A. No. I did not believe they would have any rights.

Q. Did anyone from Novell suggest to you that they thought they had some right to the monies you might

201

receive under this program?

A. No.

Q. Did you have a view, at the time of these discussions, as to whether SCO had the authority to execute the SCOsource agreements it was contemplating?

A. I believed we had those rights.

Q. Did anyone, in your discussions with Novell, ever suggest to you that they thought they could limit your authority to execute these agreements that you were contemplating?

A. No.

Q. Did you ever have discussions with Novell about -- before the execution of the agreement -- your authority to excute the 2003 Sun agreement?

A. No, we did not.

Q. Did you have any trepidation about whether SCO had the authority to execute that agreement?

A. No. I had no concern.

Q. Now, the 1994 Sun agreement, that concerned a buyout; is that right?

A. Yes, it did.

Q. In what sense?

A. It was a buyout for Sun of their binary distribution of Solaris, so they would not have to make payment for every copy of Solaris that they sold.

202

Q. Do you know whether, at the time of the 1994 agreement, Sun was paying binary royalties?

A. Prior to the 1994 --

Q. Yes.

A. -- time frame? I believe they likely were making royalty payments.

Q. Do you know whether, as of the 2003 agreement, Sun was paying any binary royalties?

A. No. They would not be.

Q. How come?

A. Because they already had a buyout in the 1994 agreement.

Q. In the 2003 agreement, did you amend or change that 1994 buyout?

A. No, we did not.

Q. Can you explain what you mean?

A. The buyout related to -- you know, to Solaris for SVR code binary distribution and was taken care of by the '94 agreement.

Q. And did you have any understanding, as of the 2003 agreement, as to whether Sun was intending to use the UnixWare technology and license?

A. It was my understanding they were intending to use the UnixWare technology.

Q. Did you have an understanding, at the time of

203

that 2003 agreement, as to whether any of the code that was in Solaris was also in UnixWare?

A. There would be substantial portions that would be very much the same because Solaris was, you know, based on, you know, a previous version of UNIX System V, similar to UnixWare.

Q. Did you have a view, as of the time of the 2003 agreement, as to whether Sun would have paid UnixWare royalties for its distribution of Solaris if not for the terms of the 2003 agreement?

MR. ACKER: It calls for speculation and hearsay, Your Honor.

MR. NORMAND: It does call for speculation. I don't know that that's necessarily a basis for precluding him from answering.

THE COURT: I'll let him answer. Go ahead.

THE WITNESS: No. I don't believe Sun would have to be paying a UnixWare royalty for what they were doing with Solaris prior to the 2003 agreement.

Q. Now, what about what they would do with Solaris after the 2003, if all they had gotten was a Unixware license and if there was code in UnixWare that was also in Solaris? What kind of royalties would Sun be paying?

204

A. Similar to the royalties that we would have other UnixWare source code licensees pay.

Q. And can you explain what kind of royalties those were?

A. It would vary, but it would be on the order of tens to hundreds of dollars per unit shipped on an ongoing royalty basis.

Q. Now, at the time of the execution of the Microsoft agreement, what was your view as to the relative value of the SVRX component of that agreement?

A. Insignificant. It was licensed as a matter of course. I don't believe that Sun -- or Microsoft was valuing it at all. What they were valuing was the UnixWare source code, the UnixWare binary distribution rights and broad binary distribution rights and OpenServer source code distribution rights.

Q. And at the time of the 2003 Sun agreement, what was your view as to the relative value of the new SVRX-related rights that Sun had acquired?

A. They had almost all of those rights already. What they acquired were new rights to UnixWare, which is what they needed to develop their, you know, Solaris-on-Intel product offerings.

MR. NORMAND: No further questions, Your Honor.

205

THE COURT: Thank you. I assume your redirect will be more than three to five minutes?

MR. ACKER: Yes. That's a good assumption, Your Honor.

THE COURT: My hearing starts at 2:30 so we will take up again at 8:30 in the morning. If you want to leave stuff here, if you just push it aside a little, nobody is going steal it. I don't think they would want it. We'll see you at 8:30 in the morning. And you get to come back, Mr. Sontag.

MR. NORMAND: Thank you, Your Honor. (Whereupon the proceedings were concluded.)

206

REPORTER'S CERTIFICATE STATE OF UTAH ) )

ss. COUNTY OF SALT LAKE )

I, REBECCA JANKE, do hereby certify that I am a Certified Court Reporter for the State of Utah; That as such Reporter I attended the hearing of the foregoing matter on April 29, 2008, and thereat reported in Stenotype all of the testimony and proceedings had, and caused said notes to be transcribed into typewriting, and the foregoing pages constitute a full, true and correct record of the proceedings transcribed; That I am not of kin to any of the parties and have no interets in the outcome of the matter; And hereby set my hand and seal this 29th day of April, 2008.

_______________________________
REBECCA JANKE, CSR, RPR, RMR

207


  View Printable Version


Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )