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 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
Plaintiff and Counterclaim-
NOVELL, INC., a Delaware
Defendant and Counterclaim-
Case No. 2:04-CV-139 dak
BEFORE THE HONORABLE DALE A. KIMBALL
DATE: APRIL 29, 2008
REPORTER'S TRANSCRIPT OF PROCEEDINGS
||REBECCA JANKE, CSR, RMR
||KELLY BROWN HICKEN, CSR,RMR
||MORRISON & FOERSTER LLP
BY: MICHAEL A. JACOBS, ESQ.
EIRC M. ACKER, ESQ.
DAVID E. MELAUGH, ESQ.
||BOIES, SCHILLER & FLEXNER LLP
BY: STUART H. SINGER, ESQ.
EDWARD J. NORMAND, ESQ.
JASON CYRULNIK, ESQ.
HATCH, JAMES & DODGE, P.C.
BY: BRENT O. HATCH, ESQ.
|JOSEPH LA SALA
||Direct by Jacobs
||Cross by Singer
||Redirect by Jacobs
||Direct by Acker
||Cross by Normand
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
189 - 193
|APRIL 29, 2008
||SALT LAKE CITY, UTAH
* * *
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.
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
MR. JACOBS: Good morning, Your Honor.
THE COURT: Good morning. Mr. Eric Acker.
MR. AKCER:: Good morning, Your Honor.
THE COURT: Good morning.
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
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
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
MR. ACKER: We have agreed between SCO and Novell, but we
are prepared to keep track of time.
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
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
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
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
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
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.
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
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
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
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.
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:
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
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
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
They never said that, and they claimed that our contention to
own the UNIX System V copyrights had crushed SCOsource.
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.
Court's summary judgment ruling left that possibility open.
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
SCO said it was pointless for the arbitration
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
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
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
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
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.
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
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
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
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
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.
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.
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
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
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
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
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
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.
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,
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
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.
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.
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.
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.
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
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
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.
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 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
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
THE COURT: Thank you, Mr. Jacobs. Mr. Singer, you may
make your opening statement.
MR. SINGER: Thank you, Your Honor. If I might
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.
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
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
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
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
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
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
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.
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
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
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
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
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
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
Now, this is reflected in the history of
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
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
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
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
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
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.
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
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
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
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
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.
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.
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
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
MR. JACOBS: We do, Your Honor. We call Mr. Joe
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
THE CLERK: Thank you.
THE COURT: Go ahead, Mr. Jacobs.
BY MR. JACOBS:
Q. Good morning, Mr. LaSala. Could you
briefly introduce yourself and your background to the Court.
Yes. Good morning. My name is Joe LaSala. I was the general counsel
at Novell from July of 2001
through mid-January, 2008. Today I am, and since that time, I
have been the general counsel of Discovery Communications.
you involved in the dispute and the relationship between SCO and
Novell as the SCOsource campaign unfolded?
A. Yes, I was.
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?
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
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
MR. JACOBS: Your Honor, offer Exhibit 215 into
THE COURT: I thought we were going to put all these in by
MR. JACOBS: This one, I believe SCO has objected to, Your
MR. SINGER: We have no objection, Your Honor.
THE COURT: 215 is received.
(Novell Exhibit 215 received
Q. Mr. LaSala, could you explain to the Court,
please, what led up to the sending of -- or to the transmittal of
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.
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
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?
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.
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.
in paragraph C?
A. In paragraph C, we were requesting that SCO
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?
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
So the letters served those two purposes.
Did you work with with Mr. Brady on the transmittal of this
A. I don't recall specifically, but I'm quite sure that I
MR. JACOBS: Your Honor, we offer Novell Exhibit 220 in
MR. SINGER: No objection.
THE COURT: 220 is received.
(Novell Exhibit 220 received
Q. Now 220, Mr. LaSala, is dated July 11, 2003.
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?
Q. And why did Novell decide to
audit SCO's compliance with the the Asset Purchase Agreement?
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
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
A. Well, somewhere between furious and bemused. I guess I would
say it that way.
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
Q. Could you turn to the next exhibit, 234?
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
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
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
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.
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
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?
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.
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?
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
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
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
Q. Let's turn to 294.
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
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.
294, now, is the letter from Mr. Tibbitts at
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?
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
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?
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?
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
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
MR. JACOBS: I offer 297 into evidence.
THE COURT: Any objection?
MR. SINGER: No objection.
THE COURT: 297 is received.
(Novell Exhibit 297 received
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
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
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
Q. Let's turn to the last exhibit in your binder,
Mr. LaSala, Novell Exhibit 317.
Q. What is 317?
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.
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
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.
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?
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
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
operating system that they be aware of Novell's position.
you have -- aside from the legal concerns that you have referred
to, did Novell have a business concern about Sun's open sourcing
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
And the fact that Sun would take upon itself to
open source its Solaris operating system caused us some business
Q. Did you ever receive a response to your November
17, 2004 letter to Novell, Exhibit 317?
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?
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?
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?
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.
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?
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
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
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
complete understanding of it before we would make such a
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
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?
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
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.
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
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.
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
modifications to and derivative works of UNIX software exclusive
of any UNIX software included in those modifications or derivative
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.
Q. And you acknowledge that Solaris is a derivative work of
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?
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?
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
respect to the UnixWare royalty provisions of the APA?
Q. You had audits of SCO which would reflect that it
was receiving royalties on UnixWare, correct?
A. I don't know.
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?
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
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
Novell retained the royalty right?
A. So, just to be clear, are
you talking about the most recent audit or audits done prior to
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?
Q. And since the litigation has begun, has Novell taken any
further steps to continue the audit process outside of the
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
A. I don't know that that's -- I don't know.
Well, do you recall in your deposition -- and this is as a 30(b)(6)
witness. It's at page 169 in your
deposition that was taken May 16, 2007, page 169, line 5. Has
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?
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?
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
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?
And you have received information as to whatever amounts were paid
by Microsoft and Sun for other SCOsource licensees under those
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
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?
think that's probably correct.
MR. SINGER: Nothing further, Your Honor.
THE COURT: Thank you. Any redirect, Mr. Jacobs?
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?
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?
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
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.
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.
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.
BY MR. ACKER:
Q. Good morning, Mr. Sontag.
A. Good morning.
Q. You were formally employed at SCO; right?
A. That is
Q. And you joined SCO in 2002; right?
A. That's correct.
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?
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.
That review was being done about the time you started; is that
A. It was just started.
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?
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?
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
Q. That included billions; right?
Q. Now, let me show you what we have marked as
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?
Q. And you're quoted in
the press release; right?
Q. And you had a chance to read
that quote just now?
Q. Is it accurate?
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
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
Q. But SVR4 Version 4 was in existence before the APA;
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;
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.
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
know, SVR4 and predecessors. And it is a significant basis for
what was licensed with UnixWare going forward in the future.
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.
Q. Yes. If we could highlight the
section of the bottom, please.
A. Schedule 1.1(a)?
Q. Yes, sir.
Q. Do you have that?
A. I do.
Q. And you understand, don't
you, that Schedule 1.1(a) in the APA lists:
All contracts relating to SVRX licenses listed below for which
royalties must flow back to the Novell in the APA. Correct?
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?
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;
A. You're on Page 4 now?
Q. The following page.
Q. And you see on the following
page of Schedule 1.1(a) of the APA, UNIX System V Release 4.0 is
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?
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
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?
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.
you didn't say UnixWare; right?
A. It means the same thing.
you didn't say SVR5; correct?
A. No. In this case, we said SVR4.
Okay. Let me show you what has been admitted as Exhibit 143. If you
could take a look at that, sir.
Q. Exhibit 143 is an
analyst briefing that was prepared for Mr. McBride on or about
October 22nd, 2002; correct?
Q. And it was an analyst
briefing regarding the announcement of the SCO Tech program;
Q. If we could take a look at the third page in. It
announces you, Chris Sontag, joins the executive team; correct?
Q. It announces that you will be the senior VP of operating
systems with responsibilities for operating systems, SCO Tech and
corporate marketing; correct?
Q. And that was all true;
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?
Q. And what SCO said back in October of 2002 when SCO Tech was
starting is: Partners and customers wish to license our technology.
Q. And then you referred to specific technology;
Q. And the only release of SVRX that you referred to
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
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
that was prepared regarding SCOsource on December 11th, 2002;
Q. And if we could bring up the next highlight.
Down at the bottom, there's a description of what SCOsource is;
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.
Q. SCOsource, a new division within SCO, will
address the licensing of this software technology. Correct?
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.
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
purchased and acquired and was responsible for continuing and
continuing to license and to enforce the contracts with the
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?
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
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
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?
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
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
related to other technologies within the company.
Q. And that
technology dates back to Bell Laboratories in 1969; correct?
all of the technology.
Q. But some of it does; correct?
And that was with SCOsource?
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
A. That was my understanding of the intellectual property
body that we had rights to license.
Q. Going back to 1969; right?
Q. And this was what you hoped you would make millions
of dollars licensing; correct?
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?
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?
Q. With this
announcement, customers can now run these libraries from SCO for
use with Linux without having to license the entire SCO operating
Q. So that means you get access to this
core UNIX technology that SCO believed it owned without having
license the latest version in the entire operating system;
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
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
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
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
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
Q. And the second phase or the evolvement or the
evolution of this program was this right to license or right to
use program that you just mentioned; correct?
A. Could you repeat
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.
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?
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.
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
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
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?
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;
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;
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;
A. Again, I believe what is really being referred to
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
Q. And Mr. McBride sent this letter to 1,000 different
companies asking them to take a license under the SCOsource
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.
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
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.
A. I assume you don't want me to read all of this right now.
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
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?
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?
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?
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
Q. And you made those disclosures both publicly
and under nondisclosure agreements; correct?
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?
Q. And you gave it along with your
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;
A. No. Not laid out the infringing code. We laid out one
example, one very small example.
Q. And this example is the Malloc
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
Q. But the only examples of literal copying that
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.
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?
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
Q. And in the second page of the letter, he
gives, provides Mr. Fuld with a list of code; correct?
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.
Q. And it's true that that settlement was reached
between Berkeley and BSDI in February in 1994; right?
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.
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
Q. You testified under oath in deposition on
March 17th -- excuse me -- April 30th of 2007; correct?
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
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
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
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
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
Q. But you never told the Linux community, you're violating
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.
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?
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?
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?
Q. You were one of the principal negotiators for SCO; is that
Q. You actually signed this document for SCO?
Q. And you would agree that the Sun license is a SCOsource
A. It's a SCO intellectual property license
executed by the SCOsource division.
Q. Part of the SCOsource
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;
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
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
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
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.
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?
A. Yes, I believe so.
Q. And you're familiar with this document;
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?
Q. And Attachment 1 of the
original agreement lists that UNIX System V software that Sun
licensed in 1994; correct?
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.
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
me that those listing of 30 items of software, 30 pieces of code
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,
A. Again, they are substantially similar.
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?
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;
Q. And what is on the right, with an exception
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?
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?
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?
Q. And of those seven pieces of
software, five of them are System V Release 4.2 or earlier;
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?
Yes. And the primary license product was the UnixWare 7.1.3
Q. So just to be clear for the Court, if we drew a
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
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
A. Attachment 2?
Q. So you see there's
a section there in the early agreement that refers to deliberately
omitted software; right?
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?
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
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
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
A. Section 3?
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?
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
A. I know that they had -- the whole agreement allowed them
to broadly distribute the source code to their licensees
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.
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.
Q. And if we take a look at 3.2(B), this was
another requirement in the earlier license.
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?
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
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?
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.
you gave a number of depositions in this case and in the IBM
litigation including a deposition on December 21st, 2005; correct?
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.
Is the testimony accurate?
A. Yes. I would also add to that they
basically had the rights necessary to do that, anyways.
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?
Q. And Sun Solaris
operating system is a derivative work of UNIX System V; right?
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?
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
Q. Yes. They were able to do that as a result of the
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
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
Q. And the obligations under the contract were to provide
copies of all of the software; right?
Q. And that's what
SCO did; correct?
Q. And SCO was paid just under $10
million by Sun for this license; right?
Q. And not a single penny of that was paid to Novell;
Q. And before entering into the 2003 Sun license,
SCO did not obtain permission from Novell to do the deal; right?
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?
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.
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.
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
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?
Since Sun had a buyout of any royalty obligations, I would not
believe that would be necessary because there was no revenue impact
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
A. We did not believe we needed Novell's permission.
Let me show you what we've marked as Exhibit 27. I show you Exhibit
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?
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?
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 --
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
view that. This was a UnixWare license primarily with Sun, which
Q. Let me show you what we've marked as Exhibit 30.
Have you had a chance to read Exhibit 30, sir?
Q. Exhibit 30 is a letter from the management, law and
corporate affairs, Mr. Broderick of SCO on May 26, 1996, to Novell;
Q. And you know who Mr. Broderick is; correct?
Yes, I do.
Q. What his current position at SCO?
A. Very similar
position. He's in the --
Q. Management, law and corporate affairs
Q. -- currently of the company?
Q. And going to
testify in this trial?
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
written approval from Novell for all new agreements or changes
to current agreements relating to UNIX System V. Correct?
Q. And you don't have any reason to doubt Mr. Broderick's
understanding of the APA; correct?
Q. And you have no reason
to doubt the statement that Mr. Broderick made back in May of 1996;
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.
MR. ACKER: Thank you, Your Honor.
Exhibits 27 and 30 were received.)
Q. BY MR. ACKER: I show you what's been marked and admitted as
A. All right.
Q. Now, Exhibit 189 is the Microsoft
license entered into between SCO and Microsoft in April of 2003;
Q. And you were the principal or one of the
negotiators in this agreement, as well?
Q. And prior to the
execution of the agreement, there were term sheets that were
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?
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?
Q. And down below is a proposed term sheet of the
Microsoft deal with SCO; right?
Q. And in Paragraph 3 of
that, you set out what the license code would be; correct?
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?
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
Q. Well, you separately culled it out here, didn't you?
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
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;
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?
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?
Q. And so Microsoft was
concerned that there might be
some of SCO's intellectual property in their products; right?
Q. So in Section 2, they wanted a release that
included releases for all of SCO's IP and all of Microsoft's
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.
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
(A portion of the deposition was played.)
MR. ACKER: But Microsoft's --
MR. NORMAND: Your Honor, to complete this, I would like
to publish the remaining testimony from that portion of the
MR. ACKER: Well, he certainly will have that
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
THE COURT: You prefer that he do it when he does his
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;
A. That's a hypothetical because we never had that
Q. All right. Why don't we play your deposition at Page
163 Lines 16 to 20.
(A portion of the deposition was played.)
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
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.
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
(A portion of the deposition was played.)
Q. BY MR. ACKER: That testimony was accurate, wasn't it?
Again, I don't view that in conflict with what I'm saying right
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;
A. That was the license that was provided to them.
Q. So the license that was provided to them included both
protection against violation of UnixWare and also older UnixWare
A. Older UnixWare technology, yes.
Q. And for
this release in license, Microsoft paid $1 1/2 million; right?
Q. And none of that money was provided to Novell; correct?
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.
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;
Q. And Section 3 of the Microsoft agreement is
titled, if we could bring that up, "Option to Purchase UnixWare
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?
Q. And the license in Section 4
licensed the software listed in Exhibits A, B and C; right?
the primary component of Section 4 was an expansion of that
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?
Q. And Exhibit C
of the agreement contains UNIX System V Versions 1 through 4.2;
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;
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?
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?
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?
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
Q. So at this time when they entered in 2003, they didn't
have a license to any of this code; 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?
Q. And in order to obtain this license in Section 4, Microsoft
paid, initially paid an option amount of $250,000; right?
Q. And then they paid another $8 million; right?
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?
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.
you know of Microsoft ever distributing copies of UnixWare with
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.
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.
Q. And can you make out that chart on your screen?
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?
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?
And the largest portions of that were the Microsoft deal at
Q. And then the Sun deal at
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;
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?
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?
Q. Let me show you what we've marked as Exhibit 422. Again, this
has been admitted, Your Honor.
THE WITNESS: Okay.
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?
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?
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?
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?
And then you define for potential licensees what UNIX based code
shall mean; right?
Q. And you define it by saying: It is
both UNIX System V and UnixWare. Correct?
A. It says UNIX System V
Q. It's both of those things; correct?
when someone comes on line and clicks through and gets one of these
license, they're obtaining a license to
UnixWare System V and UnixWare; right?
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.
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.
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?
Q. And this was done as part of the SCOsource licensing
Q. The click-through program; right?
And you didn't ask permission of Novell before entering into that
Q. And you didn't remit any of those --
any of that $9,865 to Novell; correct?
Q. Take a look at
Exhibit 237. Exhibit 237 is a license agreement between Computer
Associates International, Inc., and the SCO Group; correct?
Q. And this one is a written agreement; correct?
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?
Q. That was the license that you were granting to Computer
Q. And for that license, Computer
Associates paid you -- paid SCO $20,000; right?
Q. And you
didn't ask Novell's permission before entering into this license;
Q. And didn't remit any of those funds to Novell;
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?
Q. And again, we have a
written agreement; right?
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
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 --
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?
Q. And the definition of SCO UNIX based
code was UNIX System V or UnixWare; right?
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?
Q. And none of that money went to Novell; right?
believe that to be the case.
Q. And you didn't ask Novell's
permission before entering into that agreement; correct?
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?
Q. And again, you signed
the agreement on behalf of
Q. And if we go to the definitions, we can again
see what it was that was licensed; correct?
Q. And what was
licensed was SCO UNIX based code; correct?
A. Well, UNIX System V
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?
And for getting this license, Everyones Internet paid SCO $534,444;
Q. None of that money went to Novell; right?
Q. And you didn't ask permission of Novell before entering into
that agreement; correct?
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?
Q. And this is a similar license. If we take a look at the
definitions -- well, what was licensed was something called SCO IP;
Q. And the definition of SCO IP is SCO UNIX based
Q. And that means UNIX System V or UnixWare;
Q. And HEB paid SCO a half million dollars, $500,000
for this license; correct?
Q. And none of that money went
Q. And you didn't ask Novell's permission before
entering that that agreement; correct?
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.
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?
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?
Q. Did Lane
Furniture pay SCO any money for this license?
A. I believe so.
Do you know how much?
A. I do not.
Q. Were any of those funds
remitted to Novell?
Q. Did you ask permission before
entering into this agreement with Lane Furniture?
Q. Would you take a look at Exhibit 332. This is another
SCOsource IP license, this time between OCE printing and SCO,
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?
Q. And the definition of what that is, SCO UNIX-based code, is UNIX
SCO System V or UnixWare, correct?
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?
Q. And you didn't seek permission before entering into this
Q. Take a look at the Exhibit 286. This
is another SCO group intellectual property license, correct?
Q. And this time it's entered into with Questar,
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?
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?
That's what the license grant was, correct?
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,
Q. And Questar paid SCO $19,125 for this license,
Q. And none of that money was remitted to Novell, correct?
Q. And you didn't seek Novell's permission before entering into
that license, right?
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.
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,
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
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
Q. And the subject line there is: SCOsource
issues and buyoff, correct?
Q. And he wrote Darl, Chris,
Kim and Kevin, correct?
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?
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.
Q. And then he wrote: This is not a Unixware 7.13 SKU, right?
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.
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?
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.
A. I disagree with that characterization.
Q. And then he
continued: They are independent. Correct?
A. Yes. That's what he
Q. And in 2003, that's what the Senior V.P. of Worldwide Sales
and Marketing of SCO, how he characterized the SCOsource program,
A. They are not the same product, but they are -- the
SCOsource license is IP based upon the UnixWare and OpenServer
MR. JACOBS: I don't have anything further, Your
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.
Q. Is it fair to say that, during your tenure at SCO,
you used the terms UnixWare and System V interchangeably from time
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
A. It was just short for saying UNIX System V.
you always careful to draw distinctions between the UnixWare trade
name for the latest release and other uses of System V?
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?
was the draft press release that you went through. Do you recall
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.
Are libraries the same as releases of a software product?
Libraries are just a portion of an operating system release.
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
understanding of the subject matter that has been discussed?
Of a lot of individuals inside of SCO, Bill Broderick, John
Maciaszek, the attorneys, Jeff Hunsaker, a whole host of people.
Had you worked at Novell previously?
A. Yes, I have.
Q. Turn to
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?
Q. And do
you recall Mr. Acker referring to the tree of a software system?
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
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?
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,
Q. Mr. Sontag, this is attachment 1 to the Sun agreement. Do
you recall viewing this earlier today?
Q. And do you see
Section 2, a description of technology, additional technology?
Q. And do you see the fourth line there, System V, Release 4.2
Q. And then do you see the parenthetical
A. Yes. UnixWare 1, UnixWare 1.1, UnixWare
Q. You took part in negotiating this agreement, 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
Q. And do you see the next line in this
attachment, System V, Release 4.2 MP and products?
take it your intent was the same, by using that parenthetical?
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
be used outside of SCO's operating systems. Do you see that
A. Yes, I do.
Q. Do you know whether a Unixware license
relates to technology that goes back to the days of AT&T?
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
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
A. I believe they would.
Q. And what's the basis for
A. That was the libraries that were included
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?
Q. In what
A. That any of that IP had been misappropriated in any form or
fashion into Linux.
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?
we go to the first page. And this is the executive summary of the
document. I take it you've seen this before?
Q. Who is Jay
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.
Q. And the
next sentence: It licenses the SCO OpenServer COFF static shared
libraries. Do you see that?
Q. What was your understanding
of what that meant?
A. That the primary product of that first release of the
SCOsource runtime library was the OpenServer COFF runtime
Q. And what is your basis for that understanding?
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.
Q. What does that reference mean?
A. That's referring to that
the primary runtime libraries in UnixWare are also called ELF.
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.
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?
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
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
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
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
A. Yes, it is.
Q. Novell Exhibit 194. This is a document
you were asked about earlier, a letter to Fortune 1000 companies?
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?
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
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
Q. Are there methods and concepts, in your view,
that were developed by AT&T that are in UnixWare?
your view, is there code developed by AT&T that is in UnixWare?
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?
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?
Q. In your agreements with Microsoft, Sun SCOsource agreements,
did you ever purport to license anything other than SCO's IP
Q. You were asked about Mr. -- or Dr. Cargill's
expert report. Do you recall that?
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?
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?
Dr. Cargill is concluding that Linux is a substantial copy of the
SVR 4 operating system. Do you see that?
Q. You were told
in your examination that
Dr. Cargill had concluded that Linux is substantially similar to
SVR 4. Do you recall that?
Q. Is it fair to say that one
could equally accurately say that Linux is substantially similar to
Q. Had you had occasion to read this report --
I had not.
Q. -- before it was presented or given to you today?
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
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
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?
Novell 274. You were shown this letter from Mr. McBride to Lehman
Brothers. Do you recall briefly reviewing this document?
And in the document, Mr. McBride makes reference to, quote, SCO's
rights in UNIX. Do you recall that?
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?
Q. Page 2, towards the
bottom. Do you recall looking at that long list of files and going
through this language?
Q. Is there ABI code in UnixWare?
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
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,
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.
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
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
Q. In the 2003 agreement?
A. Yeah. It was very important for
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
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
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
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
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?
Q. Could Sun, under that 1994 agreement, distribute its Solaris
product to as many as a hundred licensees?
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
A. I had raised that there were confidentiality
provisions. They, as part of the negotiating, tit for
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.
do you think that position by Sun bore on the price that was
negotiated for the agreement?
A. For the 1994 agreement?
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
THE COURT: Overruled. Go ahead.
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?
Q. And the SVRX
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
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
Q. This is the for-value language that you're talking
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
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
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
technology that was licensed to them. Do you recall going over
Q. And there were various SVR 4.1 and 4.2 releases
listed on that second page. Do you recall that?
Q. And do
you recall being asked about releases identified in a schedule to
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.
And you were asked about the schedule that identified what you
called products. Do you recall that?
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?
Q. And could you read what those two releases are?
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
Q. At the top of the page are there SVR releases listed?
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
Q. And what is the MP?
Q. And what can you
tell me about how that release of System V came about?
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?
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
A. Schedule 1.1A?
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
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
Q. 4.1 C2/3B2, is that included in the list in the APA?
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
A. No, it does not.
Q. Does it say ES/C23B2?
Q. So those two most recent
System V releases in the Sun agreement aren't listed in the APA as
products, are they?
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
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
why two System V releases in the 1994 Sun agreement had been
described as deliberately omitted. Do you recall those questions?
Q. And do you recall what your answer was?
A. I do not.
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
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
Q. Now, to state the obvious, at the time of the 2003 Sun
agreement, Sun was an existing licensee of UNIX; is that right?
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
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?
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?
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?
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
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
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?
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?
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
A. That was the basis of my belief that SCO had that
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?
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?
That was my understanding.
Q. Now, this document is dated May 20,
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?
Q. Was it your understanding, during your tenure at SCO, that SCO
could license UnixWare however it wanted?
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?
Q. You were asked
about the Microsoft agreement. Do you recall that?
again, in summary, can you tell me how it came to be that you ended
up in negotiations with Microsoft regarding that agreement?
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.
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
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?
Q. In that agreement, Section 2, did SCO
purport to release any of Novell's claims that it might have
Q. Did SCO claim to have the right to
release claims for IP that it didn't own?
Q. Section 2.2 of
the Microsoft agreement which you spoke about earlier is a license
for Microsoft products.
Q. Does that section pertain to any
A. It pertains to UnixWare.
Q. Did you purport to license to Microsoft any intellectual
property that you didn't have rights in?
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
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
Q. Perhaps even more so than UnixWare?
Q. Section 3 of
the Microsoft agreement was a Unixware license, correct?
A. Yes, it
Q. Was it a full UnixWare license?
A. It was a limited UnixWare license to only a limited set of
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
A. That would be a determination that you could come to.
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.
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.
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
Q. Now, in Section 4 you also licensed
Microsoft OpenServer source code; is that right?
Q. What do
you recall discussing with Microsoft about the utility of that
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
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.
OpenServer was the more profitable of the two main products at SCO,
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
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
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"
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
THE COURT: Try not to lead. I'll sustain the objection.
Where are you? MR. SONTAG: You're asking where I am with the
THE COURT: No, just on this last series of questions.
SONTAG: As to the Microsoft agreement? Probably five minutes.
THE COURT: Just the last couple of questions.
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.
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
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?
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
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
Q. Do you recall entering into an amendment 3 to the
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?
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?
Q. Section 3 is a license for UnixWare, correct?
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.
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.
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?
A. I kind of recall that.
Q. We discussed drivers. Do you recall
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
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
Q. And can you quickly summarize for me how this came
A. I don't recall the specifics, but I think it was very
important to Sun that they receive all the
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
A. I believe we provided those drivers to them as well.
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.
you recall reviewing this document, Mr. Sontag, with Mr. Acker?
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?
Q. And do you see, in the second line in the top paragraph,
SCO's intellectual property ownership or
A. Yes, I do.
Q. In this agreement, did you purport to
release or license anything other than SCO's intellectual property
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?
Q. Is UnixWare UNIX-based code?
A. Yes, it 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?
we did not.
Q. There is a reference in Novell Exhibit 422 to,
quote, SCO's standard commercial license. Do you recall that
Q. Do you have an understanding as to whether,
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
Q. Do you have an understanding as to why that
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.
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?
Q. How did you come about arriving at a price for these
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?
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
the agreements, quote, SCO's IP rights. Do you recall that?
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?
were shown Novell Exhibit 227. This is the Jeff Hunsaker e-mail. Do
you recall that?
Q. And in that e-mail, Mr. Hunsaker's says
that this is not a Unixware 7.13 SKU. Do you recall that?
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.
Mr. Hunsaker's says: There is no connection between a UnixWare
OpenServer and the SCO UNIX IPC license whatsoever. Do you see that
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.
A. I was involved in that, along with our attorneys.
What was Mr. Hunsaker's position at the time that he made this
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
Q. Did you ever speak with Mr. Hunsaker in conjunction
with your negotiation of the SCOsource agreements?
Q. Did you have discussions, Mr. Sontag, with Novell in late
A. Yes, we did.
Q. Can you describe the nature of those
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
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
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
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
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
receive under this program?
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?
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
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
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
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.
Q. Do you know whether, at the time of the 1994 agreement, Sun
was paying binary royalties?
A. Prior to the 1994 --
time frame? I believe they likely were making royalty payments.
Do you know whether, as of the 2003 agreement, Sun was paying any
A. No. They would not be.
Q. How come?
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
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
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
MR. NORMAND: It does call for speculation. I don't know
that that's necessarily a basis for precluding him from
THE COURT: I'll let him answer. Go ahead.
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?
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
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
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.
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.)
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