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Transcript from Day 3, May 1, in the Novell v. SCO Trial
Saturday, May 03 2008 @ 01:21 AM EDT

Here we are, the third day's daily transcript from May 1st, Thursday's session. Again, it's split into three parts, thanks to Chris Brown:
Part 1
Part 2
Part 3

And thanks to the extraordinary Steve Martin, we have the transcript as text already. Thursday's testimony was by William Broderick, Jean Acheson, Jeff Hunsaker, and Jay Petersen.

Yes, my friends, the old faithful chorus for SCO, some of the very ones who failed to impress Judge Dale Kimball already.

Broderick, Acheson, and John Maciaszek all supported SCO's Motion for Reconsideration or Clarification of Judge Kimball's August 10th ruling, to no avail. Reviewing all the reconsideration materials reminded me also that the troika of Broderick, Acheson and Maciaszek also testified up and down in that context about the prior products being thrown in to license deals, so that argument we can read about in this transcript we have heard before, and so has Judge Kimball. He wasn't interested in reconsidering his ruling, denied SCO's motion, and basically told SCO to look to the appeals court if they disagreed with his ruling, so that is what SCO says it wishes to do, and the three show up here essentially for that purpose, I suspect. If you want to read how Novell responded to SCO's argument then, here you go. Its main thrust was that witness testimony can't be considered if a contract is clear on its face. Another very telling paragraph, I thought, was this one:

SCO then cites testimony it claims establishes that Novell, Unix System Laboratories, and AT&T included licenses to old UNIX versions when licensing a new UNIX version. (Mot. at 7-8.) Whether or not that is true, SCO ignores the fact that Novell and its predecessors were never laboring under any obligation to split revenue attributable to various versions. They could therefore include prior versions without any concern. SCO, on the other hand, accepted a fiduciary obligation to properly apportion mixed revenue when it agreed to the APA, and if changes to typical practices were necessary, it was SCO's obligation to make those changes.

So, as you see, we've been around the block on all this before.

We get to see Judge Kimball's dry sense of humor again. After arranging to begin the trial on the following day a half hour later than usual, he says this at the very end:

THE COURT: You'll get an extra half hour of sleep or worry.

Indeed, trials are unbelievably stressful. You have to love that to be a litigator. You know how F. Scott Fitzgerald wrote in The Great Gatsby that "the rich are not like you and me"? Well, neither are litigators. They thrive on the kind of stress that would kill the rest of us. It's very impressive to watch a really good lawyer dealing with whatever happens live in a courtroom.

How did you enjoy watching a trial from beginning to end, almost in real time? Was it very different from what you anticipated? I would guess it was, from some of your comments. Any questions on what you saw happen? If so, ask away, but be aware that this makes 7 articles for me in 48 hours, and long, tedious editing of transcripts which aren't all completed yet, and I need to post the final day's transcript when we get it, and the transcript of the summary judgment motions, and the transcripts with line numbers, before I can relax a bit and recuperate. I'm a teensy bit sleep-deprived. And I haven't had a chance yet to even read the transcripts through sequentially and carefully, but I intend to after I sleep through at least one night, so I can tell you what stands out to me. But if you post questions now, I'll try to get to them later. I confess. I love this stuff.

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

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

________________________________

THE SCO GROUP, INC., a Delaware
corporation,

Plaintiff and Counterclaim-
Defendant,

vs.

NOVELL, INC., a Delaware
corporation,

Defendant and Counterclaim-
Plaintiff.

________________________________

Case No. 2:04-CV-139 dak

BEFORE THE HONORABLE DALE A. KIMBALL

DATE: MAY 1, 2008

REPORTER'S TRANSCTIPT OF PROCEEDINGS

TRIAL TRANSCRIPT

VOLUME III

Reporter: REBECCA JANKE, CSR, RMR

KELLY BROWN HICKEN, CSR,RMR

420

A P P E A R A N C E S

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

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

421

I N D E X

WITNESSESEXAMINATIONPAGE
WILLIAM BRODERICKDirect by Normand423
Cross by Melaugh482
Redirect by Normand503
Recross by Melaugh507
JEAN ACHESONDirect by Gonzalez510
Cross by Melaugh537
Redirect by Gonzalez542
JEFF HUNSAKERDirect by Cyrulnik544
Cross by Jacobs572
JAY PETERSENDirect by Cyrulnik598
Cross by Acker622

E X H I B I T S

NOVELL'SRECEIVED
444620
454620
457620
SCO'S
414465

422

MAY 1, 2008SALT LAKE CITY, UTAH

P R O C E E D I N G S
* * *

THE COURT: Good morning.

ALL ATTORNEYS: Good morning.

THE COURT: You may call your next witness.

MR. NORMAND: Yes, Your Honor. William Broderick

MR. NORMAND: May I approach, Your Honor?

THE COURT: Yes.

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

WILLIAM BRODERICK,

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: William Broderick. B-r-o-d-e-r-i-c-k .

DIRECT EXAMINATION BY MR. NORMAND:

Q. Good morning, Mr. Broderick.

A. Good morning.

423

Q. What is your current position with the SCO Group?

A. I'm the Director of Software Licensing.

Q. And how long have you held that position?

A. Since -- with SCO, since Caldera bought the business from the Santa Cruz Operation.

Q. And could you briefly describe your responsibilities in that position?

A. I'm responsible for all contract and licensing activities.

Q. And how long have you had those responsibilities at SCO?

A. Since I moved over to SCO from the Santa Cruz Operation.

Q. What did you do at Santa Cruz?

A. I did contracts and licensing.

Q. How did your responsibilities there compare to your responsibilities at SCO?

A. They are exactly the same. I just continued to do the same work with the same people.

Q. And what did you do before you were at Santa Cruz?

A. I was at Novell.

Q. And what were your responsibilities at Novell?

A. At Novell, when Novell first merged or bought

424

the UNIX business from USL, I was Manager of Sales Operations, but it was a month or two after Novell bought us, I moved to the contracts group, and then I was the contracts manager.

Q. And what were your responsibilities at Novell?

A. Contracts and licensing of the UNIX business.

Q. What did you do before you went to Novell?

A. I was at the UNIX Systems Labs.

Q. What did you do there?

A. I was Manager of Sales Operations.

Q. And what were your responsibilities there?

A. I reported to the Vice President of Sales, and I handled the sales compensation plan forecasting; sales compensation plan, forecasting. If issues came up with the sales force, a lot of times I was directed to try and solve those.

Q. How have your responsibilities in all those positions pertained to UNIX?

A. It was all UNIX.

Q. Why is that?

A. Well UNIX System Laboratory owned the UNIX technology and the business, and when they merged with Novell, Novell bought that business from Santa Cruz, and we worked in Novell's -- I'm not sure of the exact title.

425

It was the Novell UNIX Group. And then when Novell sold the business to Santa Cruz, we moved into Santa Cruz's legal department and worked contracting UNIX.

Q. You were part of the UNIX Group --

A. Yes.

Q. -- at Novell? What happened to the UNIX Group after the transfer of assets from Novell to Santa Cruz in 1995?

A. What happened to the UNIX Group?

Q. What happened to the UNIX Group?

A. The UNIX Group, I think in its entirety, went to Santa Cruz.

Q. How did your responsibilities change, if at all, when you went from Novell to Santa Cruz?

A. Santa Cruz was doing -- at that time, we were doing more of the packaged product, the binary business, so we were working with not only OEMs that were licensing source code, but we were dealing with distributors, a lot of resellers of the packaged products, and we were doing agreements for those also.

Q. What are OEMs?

A. OEMs are original equipment manufacturers. They are the computer manufacturers, Hewlett-Packard, IBM, Compac. The people that build the computers are OEMs.

426

Q. How did your responsibilities change, if at all, when the assets went from Santa Cruz to Caldera in 2001?

A. Well, at Santa Cruz, there were a number of people that did contracts related to the UNIX business, and when I went to Caldera, I won it all.

Q. And, at some point, Caldera changed its name to The SCO Group, Inc.; is that right?

A. Yes.

Q. How did your responsibilities change, if at all, upon that name change?

A. Not at all. But there was a period from August, 2002, until April of 2003 where I wasn't an employee of Santa Cruz, I went to another company, but I continued to do consulting with SCL on the contracts, but essentially my responsibilities changed not at all.

Q. You mentioned OEMs earlier. What kind of fees or payments did OEMs make for the UNIX products that you have been describing?

A. The source code products?

Q. Yes.

A. There was a one-time fee, right to use fee that paid for the source code, and that gave them the right to put it on an initial designated CPU. And a designated CPU, that's a computer. So they could put the source

427

code on one computer, and then they would -- there were extra fees related to if they wanted additional designated CPU's, if they wanted to put the source code on more copies. Generally, if they wanted the source code on more computers in their development lab, they would pay an additional fee for those.

Q. Was the one-time fee a recurring fee?

A. No. It was a one-time fee.

Q. What kind of recurring payments were made under these contracts the OEMs executed?

A. Once they created -- they had rights to modify the source code, and it was generally so the source code would run on their computers. They would -- the source code is human-readable code. It doesn't run a computer. You can see every line of code. You load the source code on to a computer, and you can see every line of code and interact with it and modify it.

Once you have got the source code where you want it, you run it through what's called a compiler, and that gives you a binary. And the binary is what will reside on the computer and run it. And that binary is just like if you were to go to an Office Max and buy a copy of Windows, that's a binary. You can't see the code. You can't modify it. You just use it.

And every time an OEM sold a copy of that

428

binary, they paid a royalty.

Q. And if you want some water, by the way, there's water there right there.

We have stopped bringing our own water, Your Honor. We used to do that.

THE COURT: I kidded you about that. I didn't mean to necessarily persuade you from doing that.

MR. NORMAND: I'm sensitive about that.

THE COURT: A sensitive lawyer.

Q. Now, in the course of your work at all these jobs, what was the general nature of the product that you were licensing?

A. It was UNIX.

Q. And any particular version or releases of UNIX?

A. When I started with Novell in the contracts, we were still licensing a source code product. I believe we were still licensing UNIX System V, 4.0, Release 4.1 ES, Release 4.2, 4.2 MP, and we started our UnixWare source code. And then, when we moved to Santa Cruz, we started licensing UnixWare in a binary format.

Q. What does that mean?

A. That's the -- Santa Cruz -- prior to that, we were licensing source code in the OEMs, and the OEMs would create the binary and distribute it. Santa Cruz, prior to buying the UNIX Group, had a UNIX license, and

429

they created their own binary of UNIX for the Intel platform.

Q. So, stop there. Santa Cruz had licensed from AT&T some UNIX source code previously?

A. Yes.

Q. And what had they done with that source code?

A. They created their flavor of UNIX, their binary, for an Intel computer.

Q. And then Santa Cruz, itself, subsequently came to own the UNIX business?

A. Yes.

Q. Go on. Sorry.

A. Where was I?

Q. You were talking about the nature of the products.

A. Oh, that's true. Novell was licensing some binaries of UnixWare towards the end of the time that we worked at Novell, and I wasn't involved in that binary side of the business. I got involved in the binary side of the business when we were sold to Santa Cruz. And then I continued to license the binaries to distributors and then the source code to the OEMs.

Q. And this SCO Exhibit 390, can you see that on your Monitor, Mr. Broderick?

A. Yes, I can.

430

Q. Do you recognize this document?

A. Yes.

Q. Can you describe what it is?

A. This is a -- with the OEMs, they would execute a software agreement which covered the general terms and conditions of their rights to use and protections of the source code product in general. And then, under that software agreement, they would execute supplements, which were the actual licenses to the source code product. And this is an example of Unisys licensing the source code product for UNIX System V For Multiprocessor, Version 1.

Q. And what is the number on the middle of the page toward the right under "fee?" What does that number represent?

A. That's the one-time source right-to-use fee that Unisys paid for the licensing.

Q. And the date of this document is 1991; is that right?

A. I don't see it. I don't see a date on mine.

Q. Turn to the next page.

A. October 31, 1999 -- 1991.

Q. So this is UNIX System Labs. This is before Novell even owned the UNIX business; is that right?

A. Yes.

431

Q. Now, I think you said earlier that Novell, itself, licensed UNIX in the same manner; is that right?

A. Yes.

Q. SCO Exhibit 27. Do you recognize this document, Mr. Broderick?

A. Yes, I do.

Q. Can you describe what it is?

A. It's a supplement and licensing order form. It's when -- it's for AT&T GIS. And they're licensing source code for UnixWare, Release 1.1

Q. And what is the date of this document on the lower Right?

A. July 13, 1995.

Q. And if we turn to page 27, do you recognize what these are, Mr. Broderick?

A. This is a listing of the prior products. It's the lineage of -- this would be the lineage of UnixWare 1.1. And when anyone licensed a current release of a source code product, they were given rights to access prior products. And the prior products is really, from this here, it starts off with all prior releases and versions of System V, Release 2.0, so it's all the UNIX releases, starting with AT&T, that went into the growth and development of each new release. So, every time there was a new release, we gave licensees rights to

432

access all the prior releases.

Q. Now, how did Santa Cruz's licensing practices compare to Novell's licensing practices?

A. Exactly the same.

Q. This is SCO Exhibit 371. Do you recognize this document, Mr. Broderick?

A. Yes.

Q. Would you describe what it is.

A. It's a supplement licensing order form where Unisys licensed rights to the source code for UnixWare 2.1.

Q. And what is the date of the document?

A. May 28, 1996.

Q. And at this point, Santa Cruz is the owner of the UNIX technology; is that right?

A. Yes.

Q. And do you recognize what is on page 24, Mr. Broderick?

A. Yes. This is the listing of the prior products that we were granting the licensee rights to.

Q. And did you say the license is for Unisys?

A. This license is for Unisys, and, again, it's the legacy of the UNIX products. In fact, this is UnixWare 2.1. So, from the previous document we looked at, you can see we added UnixWare 1.1 and UnixWare 2.0.

433

Q. And you said this date is 1996?

A. Yes.

Q. Do you recognize this document, Mr. Broderick, SCO 370?

A. Yes. Again, it's a supplement licensing order form where Novell licensed Unisys, the source code for UnixWare 2.01.

Q. And what's the date of this document on the lower left?

A. November 3, 1995.

Q. This is before the Unisys supplement that we just looked at?

A. Yes.

Q. And do you recognize what's reflected on page 26, Mr. Broderick?

A. Yes. This is another example of prior products that we granted rights to the legacy products in UNIX.

Q. So, why, in the 1996 supplement, did you list these same prior products?

A. It was the practice in all current releases to list the prior products because we didn't tailor make the schedules for everybody. And it's a possibility that somebody would take UnixWare 2.0 without having any prior products -- I mean prior licenses for a source code. And for each current release, we wanted to show what the

434

legacy products were that they were getting rights to.

Q. When you and the UNIX Group went to Santa Cruz in 1996, why did you use the same licensing approach that Novell had used?

A. We were directed to.

Q. Who directed you to?

A. When we went from Novell to Santa Cruz, we had transition meetings, and we had statements of works because from the time the APA, Asset Purchase Agreement, was signed in December of '95, it didn't close until, I believe it was, February 1, '96. Well, we were still Novell employees at that time, so we had transition team meetings, and they talked about how business was going to go forward and then what we were going to do after we left, when we became Santa Cruz.

And part of those transition meetings, there was a statement of works for the contracts people, and our direction was that the only thing we changed on any of the agreements or anything was the change of the name from Novell to Santa Cruz.

Q. This is SCO Exhibit 84. Do you recognize this document, Mr. Broderick, at least the first page of it?

A. Yes, I do.

Q. And is the reference to the SOW in the first sentence of that letter the statement of work you were

435

referring to?

A. Yes.

MR. NORMAND: Could we go to Bates number 1299956.

Have you seen that document before, Mr. Broderick?

A. Yes.

Q. It's a memo, attention to Steve Sabbath. Who was Steve Sabbath, as of November 22, 1995, what was his position?

A. Steve Sabbath was General Counsel for Santa Cruz Operation.

Q. And who was Kelly Hicks?

A. Kelly Hicks was the controller for Santa Cruz Operation.

Q. Would you go to the next page. Signed by Lou Ackerman. Who was Lou Ackerman?

A. Lou Ackerman was my manager when I was at Novell as a contract manager. He was Manager of the Contracts Group.

Q. Do you see this language at the bottom of the first page in the memo from Mr. Ackerman:

Would you also please confirm that SCO intends to use the standard software agreement and sublicensing agreement currently used by Novell, with exception to the

436

necessary name and address changes for any new customers.

Do you see that language?

A. Yes.

Q. How does that language compare to your understanding of what Santa Cruz was going to be doing in the transition?

A. Well, in the transition, all documents went from Novell to Santa Cruz. We kept all of our computers. We had all of the agreements in word processing on our computers, and all we did was go in and do a global change, Novell to Santa Cruz.

Q. I won't read those out loud, Mr. Broderick. You can see them. How do those directives from Mr. Ackerman compare to your understanding of what was to be done on the transition?

A. Again, it was the same idea. We had a UnixWare 2.0 schedule with Novell, with Novell's name in it, and we did a global change with the name from Novell to Santa Cruz and changed nothing else.

Q. Do you recognize this document, Mr. Broderick, SCO Exhibit 71?

A. Yes.

Q. What is the document?

A. It's amendment number 1 to the Asset Purchase Agreement.

437

Q. If we could go to page 6. This is the language, Mr. Broderick, in which the parties state that buyer shall have the right to enter into amendments of the SVRX licenses as may be incidentally involved to its rights to sell and license UnixWare software.

Do you see this language?

A. Yes.

Q. This provision goes on to state that buyer shall not -- shall have no right to enter into new SVRX licenses, except in the situation specified in little "i" of the preceeding sentence or as otherwise approved.

Do you see that language?

A. Yes.

Q. Do you recall discussing this language during the transition period from Novell to Santa Cruz?

A. Yes.

Q. And what do you recall about that?

A. Well, in the transition team, we were told that Novell was selling the business, but, as part of the purchase price, they were going to get the ongoing stream of royalties for what was defined as the SVRX products that were transferred from Santa Cruz to Novell. We couldn't do anything that jeopardized that revenue stream. It was essentially money in the bank for Novell.

And we couldn't enter into new licenses for the

438

SVRX products. And what that meant was -- what they didn't want Santa Cruz to do was -- you had a licensee who had an SVRX product from Novell. What we couldn't do is go to that licensee and say: You know, you're paying a hundred-dollar-royalty-per-copy fee. If you execute a new license with us, Santa Cruz, we'll charge you a $50-per-copy fee.

We couldn't do anything that took away that royalty stream that Novell was to get. What they said is but we could license the SVRX incidentally. And we said: Well, what's "incidentally?"

And they said: Well, the major part of this, if you take a look, if you license the source code, the source code license fees, from when they first started being used, always included prior products of the legacy products. You will continue to use those same types of licenses. You'll continue to include that legacy prior products. And that's an example of an incidental right

Q. And did, in fact, Santa Cruz continue to license prior products with its UnixWare licenses?

A. Yes, we did, because what we did is we changed the name from Novell to Santa Cruz. The rest of the license was to remain the same, and the licenses had prior products, and it's the way source code was licensed from the early '80's.

439

Q. When was this transition period completed?

A. I believe we became Santa Cruz employees on February 1, '96.

Q. Do you recognize this document, SCO Exhibit 141, Mr. Broderick?

A. Yes.

Q. And could you describe what the document is.

A. It's -- again, it's a supplement licensing order form, NCR Corporation, licensed UnixWare 2.1 source code from SEL, Santa Cruz.

Q. And if we go to page 24. And do you recognize this part of the document, Mr. Broderick?

A. Yes.

Q. And what is it?

A. It's the listing of the prior products where we granted rights to access the legacy products that UnixWare was ultimately built on.

Q. What supplement number is this, Mr. Broderick?

A. 112.

Q. And have you had occasion to go back and consider some of the other types of supplements that predated this supplement?

A. In my 15 years of doing licensing, I'm aware of how the supplements are numbered, how they worked.

Q. Specifically to NCR, have you had occasion to

440

go back and look at some of the other supplements they executed?

A. Yes.

Q. And can you describe what you found?

A. Well, the lion's share of the supplements for NCR and most other OEMs are for additional designated CPU's or CPU changes. AT&T -- well -- and all the subsequent owners were very protective of the source code. They didn't license the source code to an OEM and let them put unlimited copies of source code throughout their company where they could possibly loose control of the source code.

So, what they did is license it on a CPU basis, so when somebody licensed the source code, they paid the source code right-to-use fee, and they got it on one computer.

There were a lot of OEMs that wanted the source code on multiple computers, and you look at some of the supplements where they licensed source code, and they would list -- sometimes they would list 50 designated CPU's that we gave the rights to. So, if you take a look at NCR supplement 112, and you go in and take a look at their records, the lion's share of those supplements are either licensing additional designated CPU's, and even when they changed a computer they were putting it on,

441

like a computer got old and they wanted a computer with more power and they put the source code on that computer, they executed a supplement acknowledging a change from one computer to another computer.

So, if you look at a customer's records, 112 supplements of -- my guess is better than half of them are related to designated CPU's.

Q. Did your decision on whether to list the System V prior products in this supplement turn, in any way, on how many stand-alone licenses for a UNIX release NCR had previously entered into?

A. Absolutely not.

Q. Do you want a sip of water?

A. You are watching out for me.

Q. Is there any way for you to estimate how many UNIX licenses you have been a part of during your tenure in these companies?

A. That I have personally been involved in?

Q. Not in negotiating but that you've overseen in your roles?

A. By "UNIX licenses," you're talking about where they actually license a source code product?

Q. Yes.

A. Well, in one way or another, a few thousand.

Q. And, to the best of your estimate and your

442

experience of those number of licenses, how many include the list of System V prior products?

A. Virtually all of them.

Q. Now, with respect to UnixWare, in particular, to the best of your estimate, how many UnixWare licenses have you overseen or been responsible for in your tenure?

A. Forty-three.

Q. And of those, how many of those 43 licenses identify the System V prior products?

A. All but eight.

Q. And how come there are eight that don't list the System V prior products?

A. Well, one was a UnixWare 2.0 source code license that Novell did with a company called ALPS. And they intentionally omitted the prior products. The other seven were UnixWare 7 that we included as prior products just the UnixWare prior releases.

Q. And why was that?

A. When we were doing the UnixWare 7 license, I was directed by Steve Sabbath to make it simple, cut it down.

Q. And who is Steve Sabbath?

A. Steve Sabbath is the general counsel at Santa Cruz. He said -- I think the 2.1 license was 20-some, 28 pages, something like that. And he said: The sales

443

force complains that a customer is saying that it's too much to read. See what you can do to cut the thing down. And also, talking to John Maciaszek, who was the product manager, they wanted the focus to be on UnixWare.

So we went through the 2.1 license and started going through it, what needed to be changed to make it a UnixWare 7 license, and we substantially cut it down. And when when we got to the prior products, John said: You know, I want -- when we do a -- we have had UnixWare out there for awhile. When we go to a licensee, I want them to only see the word "UnixWare." I want them to focus on UnixWare.

If somebody is licensing the source code, we already have a binary that we distribute ourselves on Intel, so for somebody that has another computer that's not Intel -- they have different types of computers so, if that person licenses the UnixWare and puts it on their computer, we want them to focus on UnixWare, and we want that UnixWare to look and feel just like the UnixWare that we have. We don't want somebody to get a UnixWare license, put it on another computer, and not have the applications that run on our units that are run on that.

It's not good for the company. It wouldn't be good for UnixWare. It would give it a bad name if everything wasn't working. If people license UnixWare,

444

they want it to look the same.

So, we cut it down and we limited the prior products to UnixWare.

Q. And when did the UnixWare 7 licenses begin?

A. When we were in Santa Cruz. I don't know the exact date.

Q. Sometime in the late '90's?

A. Late '90's.

Q. If a UnixWare licensee had called you in 2000 and asked: Do I have any rights to use the System V prior releases?

What would you have said?

A. Well, I would have talked to John Maciaszek and, in all likelihood, we would have said: Sure, you can have them.

Q. And would you have charged them any fee for acquiring a copy of the source code for the prior product?

A. No. We never did.

Q. Did customers pay any additional fee, on top of the one-time fee we have talked about, for listing the System V prior products in their supplements?

A. No.

Q. Do you recognize SCO Exhibit 369, Mr. Broderick?

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A. Yes.

Q. And could you describe what it is.

A. It's a software agreement. What I talked about earlier, the software agreement covers the general terms and conditions for licensing source code. And this is a software agreement executed between our Japanese subsidiary Nihon SCO, and a company called ALPS Electric.

Q. Mr. Broderick, what does this Exhibit A represent?

A. Exhibit A is the -- lists the source code right-to-use fees for the UnixWare 2.0.

Q. What does the number 375,000 in Section 1.A represent?

A. That's our standard licensing fee to license UnixWare 2.0.

Q. And is this a number that has something to do with CPU's you mentioned earlier?

A. Yes. It's the fee to get the source code right to use it on the initial designated CPU.

Q. And what does this part of the supplement represent, Mr. Broderick ?

A. This is part of the ALPS license for UnixWare 2.0. It's the prior products section.

Q. And there's nothing listed?

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A. It says: This exhibit is intentionally left blank.

They did not include any prior products.

Q. ALPS is the licensee you mentioned earlier that I think you said had no interest in the prior products?

A. I contacted -- when I saw this, when I was reviewing the UnixWare licenses, I saw this and I contacted our Japanese office, and they said they didn't remember why, but they said ALPS said: Take it out. We don't care about it.

Q. We looked at this document earlier, Mr. Broderick. Do you recognize this document?

A. Yes.

Q. What is it?

A. It's providing to Unisys the license for UnixWare 2.0.

Q. And what is this part of the document, Mr. Broderick?

A. Again, this is the listing of the source code right-to-use fees.

Q. And what does Section 1.A, the $375,000 number represent?

A. That's the right-to-use fee for the initial designated CPU for UnixWare 2.0.

Q. And what does this part of the document

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represent, Mr. Broderick?

A. That's a listing of the prior products, and it includes all of the legacy products for UnixWare 2.0.

Q. So, not to belabor the point, but let's compare the two documents we just reviewed. For the ALPS license, there's a $375,000 charge for what?

A. The initial designated CPU for the source code product for UnixWare 2.0.

Q. And are any prior products listed?

A. No. In fact, they are intentionally left out.

Q. And for the UnixWare license we just looked at, what does this price represent?

A. That's the licensing -- the source code licensing fee for the additional designated CPU.

Q. And how does this price compare to the ALPS price?

A. Exactly the same.

Q. And were there any prior products listed?

A. Yes, all the legacy products for UnixWare 2.0.

Q. We looked at the NCR license earlier with the supplement number?

A. Yes.

Q. Can you recall any instances in which you entered into contracts with licensees whose first

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supplement listed System V prior products?

A. Sure.

Q. Could you describe any of those examples that you can recall?

A. Off the top of my head, there were two UnixWare licenses; one with a Company called Super Computer International, and one with a company called Lexus Software Corporation. They licensed, I believe it was, UnixWare 2.0, and that was the standard schedule that listed all of the legacy products for UnixWare 2.0 as prior products with rights to them.

Q. Did you charge either of those companies anything extra above the one CPU source code right-to-use fee for the listing of the prior products?

A. No.

Q. Why not?

A. Because we didn't charge for prior products. It was a right we granted to our licensees for the legacy products to the current release that they were licensing.

Q. Now, during your tenure at Santa Cruz and SCO, was it ever your view that you were obligated to remit to Novell any royalties for UnixWare licenses?

A. No.

Q. Why did you have that understanding?

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A. SCO owned UnixWare, and the APA stated that UnixWare gets all the fees -- SCO gets all the fees for UnixWare.

Q. Were you ever part of any audits that Novell conducted of Santa Cruz or SCO?

A. I wasn't part of it. I knew they were going on, but I wasn't part of it.

Q. And to what extent were you aware that they were going? How did you know that?

A. I work on a daily basis with Jean Acheson in the finance group, and she would tell me that Novell is coming in to audit.

Q. Who is Jean Acheson?

A. Jean Acheson is currently our controller. When the audits went on, she was either the manager of revenue or the director of revenue.

Q. What did Jean Acheson have to do with audits?

A. She was responsible for overseeing or preparing the royalty payments to Novell for the SVRX products under the Asset Purchase Agreement.

Q. During these audits, did anyone ever ask you to produce any UnixWare licenses to Novell or the evidence of any payments for UnixWare licenses to Novell?

A. No. And if Novell had asked for it, I would have been told they were asking for it.

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Q. Why is that?

A. Because they weren't supposed to get them.

Q. Why do you have that view?

A. Because Santa Cruz Operation, and then SCO, had full rights to UnixWare and the UnixWare royalties, so if Novell was asking for it, trust me, it would have gone through me and all the way upstairs.

Q. Now, you had some understanding that SCO was obligated to remit to Novell SVRX royalties; is that right?

A. Yes.

Q. What was your understanding on that front?

A. Again, it was -- the way -- the reason they told us when we were in the transition meetings was that Santa Cruz didn't have enough money to pay the asking price that Novell wanted, so what they negotiated was: Look, we've got these System V products. We'll identify them in the Asset Purchase Agreement, and for any of those System V products, if there's a licensee that has a current agreement with us that we transfer to Santa Cruz, we'll get those royalties on those SVRX-defined products.

Q. Now, during your tenure at Santa Cruz and SCO, did you or, to the best of your knowledge, anyone else ever try to distinguish between the UnixWare license

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payments and any payments for these System V prior products?

A. There were no payments for the System V prior products to distinguish.

Q. In your view, was the licensing of the rights to use the System V prior products a source of any royalties that would go to Novell?

A. No.

Q. Why not?

A. Because it was part of our licensing UnixWare and SVRX as an incidental component of licensing that UnixWare.

Q. Now, briefly describe, again, why it was that OEMs would license the UnixWare source code?

A. They wanted to -- they wanted to be able to get the source code so they could make some modifications to it. And a lot of the OEMs started out way back in the '80's with licensing UNIX, and they were building their UNIX offering on their computers. And the later -- and they licensed System V, every new release that came out. Virtually all the OEMs, major OEMs, every new release of UNIX System V that came out they grabbed because they wanted the new functionality.

If you stay on the old functionality and you don't do anything with it, you're not going to be in the

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business long. So, every new release that came out, they would license. And when we released -- when Novell released the first UnixWare release, which was their branded name for UNIX System V, OEMs licensed that, so they would continue to build their product.

A lot of the OEMs also entered into packaged product distributions with us. It saved them money on development. If they had an Intel box, they could take our packaged product and just ship it with their computers, and it was a substsantial cost savings to them. But they still had their operating systems where they were running their version of UNIX, and they would continue to license the source code so they could keep that up to date.

Q. What if the product the OEM created included massive amounts of System V source code and only a few lines of UnixWare source code? What kind of royalties did they pay in that instance?

A. UnixWare.

Q. Why?

A. Because we've also operated on the -- it was generally referred to as the one-line-of-code rule. If you have a derivative that you're paying royalties on and it's on a certain release of UNIX, say, UNIX System V, Release 4.2 MP, and you're paying royalties on it, if you

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license UnixWare, and you take one line of code from UnixWare and put it in your 4.2 MP product, that 4.2 MP product is required to be reported as UnixWare and report the royalties based on that.

And the reasoning for that is: We didn't want to get into -- it was just -- there is no way to get into an argument with an OEM of how much of UnixWare is in the product. Are you going to be paying -- like, well, I'm only using 5 percent of UnixWare, so I want to pay a 4.2 MP royalty on this and only a little bit --

That discussion was ended by AT&T years ago. If you take any of the later release, put it in your current derivative, that current derivative becomes the later release.

Q. Do you have an understanding as to whether Novell, before the APA was executed, used that same one-line-of-code rule?

A. Yes, because I was the licensing manager at Novell.

Q. And the answer is: They did, or they didn't use it?

A. They did. Absolutely.

Q. Now, we reviewed the Unisys licenses earlier today. Do you recall that?

A. Yes.

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Q. You reviewed one from 1991. Do you recall that?

A. Yes.

Q. And one from 1995. Do you recall that?

A. Yes.

Q. And one from 1996. Do you recall that?

A. Yes.

Q. Did there come a time when you contacted Novell with respect to issues that had arisen regarding Unisys?

A. Yes, there was.

Q. And could you describe those circumstances?

A. Yes. Unisys had -- Unisys came to us and said they have a product they call ClearPath, a computer they call ClearPath.

Q. ClearPath?

A. ClearPath.

Q. This was a computer?

A. Yes -- well, it was essentially more than a computer. It was really three computers in one package, so they had a box and then they had three computers in that box. And what they were doing was: One of the computers ran a Unisys proprietary operating system.

Q. What does that mean "proprietary?"

A. It was a -- before UNIX came out, all of the

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computer manufacturers developed their own operating system for their computers. The operating system worked with the applications, and that's how you get work done. So, they had their own proprietary operating system. When UNIX came out, the market demanded UNIX, so they also offered a UNIX solution. So, what the ClearPath product had was one computer running Unisys proprietary operating system. It had one separate -- and doing certain functions -- one separate computer running System V, Release 4 MP performing certain functions, and they had one computer running UnixWare performing certain functions.

And they wanted to know how they had to pay on it because they had a list price for that computer with the three -- for that box with the three computers in it.

Q. Now, what interest did you have in the price that Unisys was charging for this ClearPath product?

A. Their royalty is based on a percent-of-system list. So the OEMs would provide us their system list so we could track what royalty they were supposed to be paying.

Q. System list is, in layman's terms, the price for the computer?

A. It's their price book, you know, ClearPath, "X" dollars.

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Q. And to what end did you contact Novell?

A. Well, it involved System V, Release 4 MP and UnixWare. So --

Q. Now, was Unisys an existing SVRX licensee at the time of the APA?

A. Yeah. That's why I contacted Novell. And I contacted Cindy LaMont. I worked with her as a contract administrator at Novell. She had stayed with Novell and went to the finance group and was handling the royalties.

I sent her a letter and I said, essentially: Unisys is one of the -- I don't know if I exactly said this in the letter, but -- here is the deal. Unisys was one of the licensees that transferred to Santa Cruz from Novell. They've got a situation where they've got three operating systems on three separate computers in a box.

Here is how we propose to handle the royalties, so let's talk.

Q. And what was Ms. LaMont's response, to the best of your recollection?

A. What's your proposal?

And we said: The UnixWare 7 is on what Unisys called an SMP computer. I don't know the exact name, but it's SMP something. They had a list price --

Q. SMP is symmetrical multi-processing; is that right?

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A. You've got me.

Q. Okay.

A. I'm a contracts guy.

Q. I finally know something you don't.

A. You win. So they had a list price for that SMP computer of a hundred-thousand dollars. So we would say, like, okay. Irrespective of whether it's in this box with these other two things, if they are running UnixWare on this SMP computer, it's got a list price of a hundred-thousand dollars. You'll pay a royalty off your UnixWare license related to the list price of a hundred-thousand dollars.

What we told Novell was: Here's our proposal. The UnixWare, out of the ClearPath list price, we take a hundred-thousand dollars off that list price. Unisys pays the royalty based on the UnixWare license for that. We keep it. The 4. -- that leaves two processors left and part of the ClearPath list price.

I don't know what the total ClearPath list price was, but what we said was: You've got this bucket left after the hundred thousand is taken off the list price. What we're proposing and what Unisys has agreed to is that we cut that number in half, so half of that remaining list price, we will apply the royalties schedule under the 4.0 MP license, which was licensed

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under a specific supplement, and those royalties would go to Novell

Q. And what was Novell's response?

A. Fine.

Q. So, let me make sure I understand it. For the UnixWare 2.0 operating system --

A. Uh-huh.

Q. -- that Unisys was running its ClearPath computer, did you attribute any value or royalties to Novell for the System V prior products?

A. No. It was based on their supplement where they licensed 4.0 MP. It was a separate license for the UnixWare license.

Q. And at the time you wrote the letter to Ms. LaMont and had these discussions, had Unisys been paying SVRX royalties that were being remitted to Novell?

A. Yes.

Q. This is SCO Exhibit 409. Do you recognize that, Mr. Broderick?

A. It's my letter to Cindy.

Q. This is SCO Exhibit 386. Do you recognize this document, Mr. Broderick?

A. Yes, it is. This is where we agreed with Unisys on how the royalties would be treated.

Q. You say in the opening sentence of this letter:

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The agreement between Santa Cruz and Novell requires prior written approval from Novell for all the new agreements or changes to current agreements related to UNIX System V.

Do you see that language?

A. Yes.

Q. Do you recall why you wrote that?

A. It was a flag of Cindy's, related to Unisys, that, Cindy, we've got a deal coming up. It includes the SVRX product, so let's get together and talk about it.

Q. And why did you feel compelled to contact her with respect to that SVRX product?

A. Because that was Novell's -- Novell's right was to the royalty under the 4.0 MP license.

Q. And why did you have the view that that was Novell's right to have that money?

A. Because it was a license transferred to Santa Cruz under the Asset Purchase Agreement.

Q. Mr. Broderick, you've heard of the 2003 Microsoft agreement, I take it?

A. Okay.

Q. Have you?

A. I have reviewed it.

Q. You've heard of it?

A. Oh, I've heard of it.

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Q. Have you had occasion to review it?

A. I have read it.

Q. At the time of this 2003 license, was Microsoft an existing UNIX licensee?

A. No.

Q. Do you have any understanding, Mr. Broderick, as to whether, in Section 4 of this agreement, Microsoft obtained a license to the OpenServer source code?

A. Yes. My understanding in Section 4 is it loosened up some of the limitations or restrictions on what Microsoft could do with the UnixWare and also added OpenServer and some additional UnixWare releases, OpenServer releases and the prior legacy UNIX products. That's my understanding.

Q. Now, as of the time of this agreement in 2003, had Santa Cruz or SCO ever licensed the OpenServer source code for commercial use?

A. Absolute -- no.

Q. Why not?

A. OpenServer was their flagship product. It was the binary that ran on the Intel box. It had a huge installed base. I believe it's where most of the revenue came from, from the packaged product, and they just weren't going to release the source code and, essentially, create a competitor for them. It was -- if

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you want -- if you want a packaged product with UNIX on Intel, come to us.

Q. Did you have a view as to whether Santa Cruz or SCO was obligated to pay Novell anything's with respect to OpenServer licenses?

A. No. In fact, the APA is very specific that Santa Cruz doesn't owe any royalties to Novell for distributions under their software agreement, sublicensing agreement schedules they had prior to, you know, Santa Cruz buying the business.

Q. So -- I won't lead you. How was OpenServer created?

A. OpenServer was created under Santa Cruz's license for UNIX System V, Release 3.2.

Q. That was the license Santa Cruz had before it became the owner of the UNIX business; is that right?

A. Yes.

THE COURT: I'll probably let you lead him if you want to because you tried to led him about SMP, and he wouldn't be lead.

MR. NORMAND: Thank you, Your Honor.

THE WITNESS: I missed -- being what?

THE COURT: It's legal stuff. Don't worry about it. It was a compliment.

THE WITNESS: Well, thank you.

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Q. Have you heard the phrase "installed base" used with respect to OpenServer?

A. Yes.

Q. And, to you, what does that mean?

A. Installed base is the number of end users that are using the software product.

Q. And why is it relevant to talk about installed base?

A. Because it's adding up everybody that's using your product. In fact, if you take a look at a lot of marketing literature or industry reports on UNIX or any other product, they always refer to installed base as how successful a product is doing.

Q. What was OpenServer's installed base like?

A. My understanding, it was very large. In fact, I have seen reports which said OpenServer had the largest installed base of UNIX products.

Q. How did SCO's OpenServer business compare to its UnixWare business in the last few years?

A. OpenServer was doing more revenue.

Q. And would the same be true as of the time of the 2003 Microsoft agreement?

A. That's my understanding, yes.

Q. In your view, how would the value of a full OpenServer source code license compare to the value of a

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full UnixWare source code license?

A. I would say it's a lot more.

Q. Why would you say that?

A. Because UnixWare was licensed in source code format since it first came out. We were perfectly willing to have OEMs license the UnixWare source code to create their derivative. OpenServer, we guarded very close to the vest and never licensed the source code. So, if we had a point in time when we decided to license the source code, we would want a lot of money for it.

Q. You've also heard of the 2003 Sun agreement, I take it?

A. I have heard of it.

Q. Was Sun paying any royalties as of the time of that agreement?

A. No.

Q. This is Novell Exhibit 5, Mr. Broderick. Do you recognize this document, dated January 1, 1994?

A. Yes, I do.

Q. This is attachment 2, titled Deliberately Omitted Software, and the first two entries are System V 4.1 ES 3B2 and System V 4.1 C2 3B2. Do you see those?

A. Yes, I do.

Q. Now, at the time of this 1994 agreement, did Sun already have a license for those products?

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A. Yes.

MR. NORMAND: This is a document, Your Honor, that has not been agreed to be admitted.

THE COURT: What number is it?

MR. NORMAND: SCO 414.

THE COURT: Okay.

MR. NORMAND: It's not listed in our 26(a)(3). It's a document we believe rebuts a point that Novell has made in this case.

THE COURT: Mr. Melaugh?

MR. MELAUGH: I think this is fine. I'm generally reluctant to agree to exhibits I have never seen before, but I won't object to this.

THE COURT: It's admitted. SCO Exhibit 414?

MR. NORMAND: Yes.

THE COURT: It's admitted.

(Sco Exhibit 414 received in evidence.)

Go ahead.

MR. NORMAND: Thank you, Your, Honor.

Q. Mr. Broderick, what is SCO Exhibit 414?

MR. MELAUGH: Your Honor, could I at least get a copy of this, please?

THE COURT: Do you have it?

MR. MELAUGH: I do.

MR. NORMAND: He does.

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MR. MELAUGH: Thank you.

Q. What is SCO Exhibit 414?

A. It's a UNIX System Laboratories license with Sun Microsystems, where Sun Microsystems licensed the UNIX System V, Release 4.1 Enhanced Security Platform and the C2 Auditing.

Q. Do you have any understanding as to why, in the 1994 Sun agreement, these releases were identified as deliberately omitted software?

A. My understanding is they had a license for the 4.1 ES, but that code was not included in their Solaris product, so when they did the royalty buyout, when they did the agreement in 1994, it was specific to their Solaris product based on UNIX System V, Release 4.0. So they specifically excluded the 4.1 ES

Q. And, to the best of your understanding, was this 4.1 ES license in place as of the 2003 Sun agreement?

A. Yes. I can't find any record of it having been terminated. The licenses were perpetual unless you violated the agreement.

Q. Did their come a time, Mr. Broderick -- we're getting close to the end -- did there come a time during this litigation when you undertook to survey all of the UNIX licenses that you have been overseeing for all these

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years?

A. Yes.

Q. And, as painful as it may be, can you describe what you did.

A. I -- all the licenses were on an imaging system. They were -- when Novell bought us, all the licensing was done in Greensboro, North Carolina. They were all on hard copy. So, what Novell did to control this, what Steven Baker did, was he brought in a company, and what they did was they scanned all the documents. And it went into what we call the image system. And it was indexed by customer number and product and date.

So, instead of going through a file room and trying to find something, on your computer you could just take a look and see what a customer's number is, put that customer number in, and it would bring up all of their documents, and you could just go through on your screen and look at any documents they had.

I was the only one that had this computer. It was on an old Windows 95 computer. And I thought about: If I get hit by a truck for this, and this Windows 95 computer, in 2003, decides to give up the ghost, nobody, really has a record of the history of the licensing.

So I started going through the imaging system and, if what I've been told is true, there's 30,000

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records in the image system. And I probably agree with that because this project took me the better part of a year.

And what I did was I just brought up the customers and I started going through each customer and taking a look at what they had licensed, and I built a Word -- Microsoft Word table. I didn't know it was going to end up 400 pages. If I did, I would probably have gone to the our IP department and said: Can you give me a database or something?

But there was no way to scan this information in, so I had to type it all in. So I would just go by customer and take a look at what they licensed, and it took time because if I was looking at a licensee who had licensed UNIX System V, Release 3.0, there could be 25 different supplements. I had to look at the earliest supplement, bring it up, and if it was when they initially licensed the 3.0, I would print the page or the first couple of pages and move on looking for the next product that customer licensed.

I did this for all 30,000 records, and what I did is I would just print them out during the day, and I would take them home at night, sit down at the computer and type them in on this 400-page thing.

When I completed that -- we stopped using the

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imaging system in the late '90's, sometime in the late'90's. The scanner broke, and Steven Sabbath wouldn't buy us another one. So, after that, the documents were in hard copy. And when Caldera bought us, a short time after that all the documents were sent out to a central filing in Lindon, so on one of my business trips to Lindon, I went through the files out there, started with A, and looked at all of them. And if it came up with a source license or a non-disclosure or something related to UNIX, I checked my list. If I didn't have it on my list, I added it.

Then, when I was done with that, I sent the list off to our Japanese subsidiary and said: This is what I have so far. Do you know of anything that we should add to it or if there's any errors that you can see?

And Mikado Aso sent me back a huge spreadsheet, essentially from their financial -- I think it was from their financial -- that listed the licensees and what they had licensed and when they had licensed it. I also went through that, checking it against my list. And the long and the short of it is, after about a year, I had 420-some pages that is a listing of everybody who had licensed UNIX and when and under what agreement.

Q. This is --

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THE COURT: 367, Right?

Q. SCO Exhibit 367. Is this what you're talking about?

May I approach, Your Honor?

THE COURT: You may.

MR. NORMAND: May I have approached?

THE WITNESS: It is, yes.

Q. Now, you've had occasion to review that document, I take it, in the last few years?

A. Yes. I've used it on a number of occasions, and I passed it out to some people to use because I put a lot of work into this, and I wanted people to use it.

Q. Are you aware of any material inaccuracies in the document?

A. No. I found a couple. I recently went through this to find some information, and I found a few examples of, like, a UNIX System V, Release 4.2 MP that I had licensed in 1983, and I knew that was wrong, so I went to the image system and pulled it up, and it was 1993. And I just attributed that to the eight's next to the nine, and I'm human. But, I don't know. I put lot of work into this, and I didn't do it slipshod, so I think it's fairly -- I think it's pretty accurate.

Q. Now, you have seen this demonstrative before, Mr. Broderick?

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A. Yes.

Q. We worked on it together, correct?

A. Absolutely.

Q. In sum, what does this demonstrative represent?

A. This is taken from information I provided on the number of UNIX licenses for different System V groupings and when they were licensed. So, what it shows is the higher -- for each group, where it shows the higher graph, it's the higher number of licenses during that period that were granted.

Q. This is based on Exhibit 467?

A. Yes.

Q. Or 367. I'm sorry. So, describe to me what these SVR 1 columns represent.

A. Well, it shows -- it starts off with when the product was first introduced. There is a certain amount of interest and licensing. It shows the number of licensees that took licenses. And then it jumped up when, you know, more people started. During that time period, more people just started licensing the product.

And then, in time -- and it generally relates to our releasing of a subsequent release of the product, and it stands to reason, we have an operating system that people are licensing, and a lot of people are getting on board, and then, when we license a later release with

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more functionality, they jump on that. And you can see the older release starts to go down at the time the new release is going up.

Q. You're comparing these two columns?

A. Yes.

Q. What is this new functionality you're referring to?

A. Well, in the software industry, if you don't keep on improving you're product, you're going to go out of business. That's why you've got, you know, Microsoft Windows, Microsoft Windows 95, Windows 98, XP. You have to continually improve your software product to add more functionality so it can do more things; also to take advantage of improvements in the computers they are going to be running on.

So, as they come out with new computers and people are demanding more functionality, you have to upgrade your software.

Q. What does this demarcation represent between these two colors, the System 4 era and the UnixWare era?

A. What's that? The starting of the yellow?

Q. Yes.

A. Can you give me a hint?

Q. March 10, 1995, what does that date represent?

A. Oh. That's the last date that we licensed the

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UNIX System V 4.0 product.

Q. Now, do you recall when the APA was executed?

A. The APA was executed in December of 1995. It closed February 1, '96, I believe.

Q. And that's what you described earlier as the transition period?

A. Yes.

Q. I wanted to show you one other document about that period. This is SCO 50. This is an e-mail from Larry Bouffard. Do you know who Larry Bouffard is?

A. Yes.

Q. Do you recall what his responsibilities were at this point?

A. Well, I worked with him when I was at USL, and Manager of Sales Operations. And then, at Novell, I believe he was director of some sales area, I think the UNIX sales area of Novell.

Q. This is October 10 -- October 19, 1995. Mr. Bouffard says:

We are obligated to give SCO all information, contracts, assets, etc., pertaining to the UnixWare business and the old UNIX source code business. They have bought it lock, stock and barrel. Once the transition is closed, November or December, we will have no more involvement in this business. Therefore, if a

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contract is for UnixWare or UNIX, it will be SCO's.

Do you see that language?

A. Yes.

Q. And it says: If a contract is for UnixWare, and let's say Netware, the UnixWare part is theirs.

Do you see that lin.

A. Yes.

Q. How did Mr. Bouffard's statement compare to your understanding of what was happening during that transition period?

A. If not word-for-word, this is what we were told during the transition meetings when we were -- you know, from Novell to Santa Cruz.

Q. So, the APA was executed after the last license of SVR 4; is that right?

A. According to the records, yes.

Q. And I know you've alluded to this before, but let's just have you explain one more time, in your view, why did these sales erode over time in this way?

A. It's older technology. It's comparable to somebody coming out with a new PC and announcing to the world, you know: Hey, buy my new PC. It runs DOS.

These are old products. In fact, if you look at the System V, Release 2.0 products, there was a UNIX System V 2.0 VAX.

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Q. What is as VAX?

A. It was a -- Digital Equipment Corporation had a model number for their computer. The computer that that VAX ran on I was told was the size of a refrigerator and didn't have the functionality of your cell phone. So, computers increase in power. You used to have a room full of computers and now a laptop handles it.

So, as these computers got bigger, you had to improve the software to run on those computers, and the old software just goes by the wayside.

Q. So, are these SVR licenses that were in place as of the time of the APA, did SCO pay Novell royalties on those products?

A. The ones that were in place, if they were royalty bearing, and they were transferred to Santa Cruz from Novell, SCO gave Novell those royalties for the system -- for the SVRX-defined products.

Q. And did SCO pay Novell royalties on any of the UnixWare products?

A. No.

Q. I wanted to go to one other point with you, Mr. Broderick. We spoke earlier about the 1 CPU source code right-to-use fees. Do you recall that?

A. Yes.

Q. From your experience, do you have some

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familiarity with the actual prices charged for these releases over time?

A. Yes.

Q. What were the price -- what was the price charged for SVR 2? Do you recall?

A. SVR 2 -- the different releases of SVR 2; 2.0, 2.1, the different versions, they were $43,000 for the initial designated CPU license.

Q. How about SVR 3?

A. SVR 3, there were different versions. 3.0 started out at 65,000. 3.1 brought it up to 71,000. 3.2 brought it up to 77,000. Then there was a 3.0386 that was 50,000. It was 50,000 because you had to have one of the other licenses

So, if you took all those releases and averaged it together, you would get about $55,000 for the 3.X.

Q. Why don't we do it on paper and quickly create a record of this. Can you see that, Mr. Broderick?

A. Yes.

Q. The first entry on this piece of paper, which is from an attachment to the 2003 Sun agreement --

A. Okay.

Q. -- is 4.1 ES 3B2, right?

A. Uh-huh.

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Q. Do you know what the 1 CPU right-to-use fee is for that product?

A. A hundred-thousand dollars.

Q. Let me give you a copy of this, Mr. Broderick, and you can track of it with me. How about the next release, Mr. Broderick, 4.1 C2 3B2?

A. That was a security feature. That was $50,000.

Q. And the next?

A. That's a hundred-thousand dollars. I'm assuming that's the platform.

Q. 4.1 ES is a hundred?

A. Yes.

Q. And these were the prices paid at the time of the releases; is that right?

A. It's the additional -- that would be the CPU source right-to-use fee that is in the license.

Q. How about System V, Release 4.2?

A. 200,000.

Q. 4.2 MP?

A. 250.

Q. And the next releases are UnixWare releases, correct?

A. Yes.

Q. Now, you and I did this addition last night.

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Do you have a record of what that comes out to? Is it 700?

A. If you're talking about the -- all the UnixWare --

Q. Not the UnixWare releases. I mean the numbers I've written down I believe adds up to $700,000?

A. Yes, 250, 500. Yes, 700,000.

Q. I'll take that back from you now that it's coming up on the screen. It just confuses things.

Let's do the same thing, Mr. Broderick, with respect to Exhibit C for the 2003 Microsoft agreement. I take it you have seen this page before?

A. Yes.

Q. This one is a little more challenging.

A. Is there a focusing of it?

Q. It didn't work. Why don't we do this. We'll do it half and half.

A. That's good. I can see it.

Q. Yeah. Now, some of these documents are in italics. Do you see that?

A. Yes.

Q. Do you have an understanding of why they are in italics?

A. They were source code releases that we did not have copies to provide.

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Q. Now, let's start with the paragraph that says sCO OpenServer, Release 5.X. Do you see that?

A. Yes.

Q. What is the first System V release identified in that list?

A. System V, Release 4.2 MP.

Q. How much was that?

A. 250,000.

Q. What is the next release?

A. 4.2.

Q. There's a release for 4.2 MP international edition; is that right?

A. It's the same thing. The source code for 4. -- for all the source code products is you've got 4.2 MP and 4.2 MP international. It was the same fee. It was just whether it went international or not, and my understanding is that the only difference is that if it went internationally, there were some restrictions on encryption coding.

Q. You didn't charge any extra fee for the international edition?

A. No. Absolutely not. If a licensee licensed a product, the license schedule was titled 4.2 MP and 4.2 MP International.

Q. And what is the next product you see? 4.2 MP,

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you said?

A. Yes. This is V, Release 4.2.

Q. How much?

A. 200,000.

Q. What's the next you see?

A. 4.1 ES.

Q. How much?

A. 100.

Q. What's the next you see?

A. 4.0 MP.

Q. How much?

A. 150.

Q. What's the next you see?

A. Well, the italics is Release 4.0, Version 4.

Q. Let's hold off on the italics for now.

A. Okay.

Q. What's the next one down?

A. UNIX System V, Release 4.0.

Q. How much?

A. 100.

Q. What's the next?

A. 4.40, Version 2. That's also a hundred.

Q. What's the next, not in italics?

A. UNIX System V 386 3B2.

Q. Okay. And is the same true of its

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international edition?

A. Yes.

Q. How much?

A. That's the one that was 50,000 because you had to have another release with it that I talked about earlier.

Q. Okay. Next?

A. You need to raise it up.

Q. What's that?

A. Slide it up.

Q. You can't see it?

A. I can't see the next.

Q. Sorry, Mr. Broderick.

A. That's okay. UNIX System V, Release 3.2.

Q. How much?

A. 77. 3.1 is 71. 3.0 is 65. All of the 2.0's are 43.

Q. Now, you and I did this math last night. excluding the Italics, we came up with 1.249. Do you recall that?

A. Yes.

Q. Sounds good to you? And I think you did work on your own, and you came up with a number if you were to include the sum of the italicized releases, correct?

A. The sum of the italicized, yes. I believe that

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was 700.

Q. That's correct. Thanks for your patience, Mr. Broderick.

A. No problem.

Q. And, again, these are -- these prices represent what?

A. The source code right-to-use fees for the initial designated CPU.

Q. Paid at what time?

A. At the time of -- at the time of licensing.

Q. So, for example, using our number from 2.0, at the time of a 2.0 license, what was the one-time source code right-to-use fee for one CPU?

A. $43,000.

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

THE COURT: Thank you, Mr. Normand.

Mr. Melaugh, you may cross examine.

MR. MELAUGH: Thank you, Your Honor. Your Honor, may I approach?

THE COURT: You may.

MR. MELAUGH: There is a binder of some of the exhibits we may be using during the cross examination.

CROSS EXAMINATION BY MR. MELAUGH:

Q. Good morning, Mr. Broderick.

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A. Good morning.

Q. Now, let's start with SCO Exhibit 141. Let's go to the second page of that. You were asked a number of questions about this exhibit during your examination. You'll note here that it's supplement 112, correct?

A. Yes.

Q. Now, I believe it was your testimony that you looked over the history of the supplements with NCR; is that right?

A. Yes.

Q. And you found that something on the order of half of those supplements were additional CPU fees; is that right?

A. Not necessarily additional CPU fees. It could be changes in designated CPUs, assignment of designated CPUs. Roughly, that's the way it looked.

Q. So, it's fair to say, then, that during your -- during the course of your tenure as contracts manager, the particular CPU upon which the source code could be used is something you took very seriously?

A. Oh, yes. It was a control factor.

Q. And, in fact, to move it even from one CPU to another required its own supplement?

A. At a point in time, we stopped that practice, when we were at Novell. We started just tracking number

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of designated CPUs.

Q. And if a licensee wanted to use it on more CPU's than they had at the present, they needed to come to you and execute another supplement?

A. Correct.

Q. And you charged them a fee for that?

A. Correct.

Q. So, it's fair to say that the right to use code on a particular CPU is something that had commercial value, both to AT&T, USL, Novell, Santa Cruz and presumably the licensees themselves?

A. I'm not sure the -- I'm not sure the intent was to get commercial value out of it. The way it was explained to me when I started doing licensing, worked in licensing, was they wanted the licensee to really think about how many copies of the source code they wanted to have internally in their lab, so they wanted -- so they charged them a nominal fee.

I mean, if you're spending $200,000 for your source code license on an initial designated CPU and then you have to pay $3,000 for additional CPUs, that's not a great deal of value. It's more of a: Think about this, guys. You've got to write a check for three grand for each CPU. How many do you really want?

Q. So it was something that everyone was all just

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pretty careful about?

A. Yes.

Q. And if a company had come to you and said: We'd like to use this source code on any CPU we want, anywhere in the world.

It's not something that you would have have allowed under, at least the terms of the license as we see here under this supplement?

A. I'm sorry. What was that?

Q. If a licensee had come to you -- say NCR had come to you and said: We would like to use this code not just on the CPU we've designated in this supplement but on a CPU anywhere; anywhere in the company, anywhere in the world.

That's something they wouldn't have been able to do under this licensing regime; isn't that right?

A. Actually, we changed. If you're talking about they have got the designated CPU that's licensed, we changed the policy from tracking all the CPU's. And the reason we changed the policy is: When AT&T tracked all this stuff, they had 25 people in Greensboro doing it. With Novell it went down to three of us.

So we said: Look. You have a certain number of CPU's. We're not tracking it anymore. So, say you've got one CPU. You're licensed for one CPU. Taking into

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consideration export rules, you can use that CPU anywhere in the world. That was the policy.

Q. It's just one CPU, though?

A. Yes.

Q. And so if NCR had come to you and said: You know, I recognize that our supplement says one CPU. We want to use it on a hundred CPUs.

That's not something they could have done under this supplement?

A. They would have had to give us a purchase order for whatever the license said. Some licenses were $2,000, some were 3. But they would have to give us a purchase order for the number of additional designated CPUs they wanted to use.

Q. And under these supplements, the NCR supplements as an example, NCR couldn't pass along the source code to sublicensees, for example, could it?

A. No rights to distribute source code.

Q. Say again?

A. No rights to distribute source code.

Q. And you and I can agree, can't we, that the right to distribute source code is something that has commercial value?

A. Yes.

Q. And it's something that AT&T, USL, Novell Santa

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Cruz were pretty careful about?

A. Correct.

Q. So, when we saw this list of prices that you went through, the prices for all the 40 versions and 41 versions and 42 versions and 30 versions and 20 versions, none of those prices reflected a license that allowed the licensee to distribute source code; is that right?

A. Under those licenses that -- under the software agreement that governed those licenses, that is correct.

Q. And under the software agreement that governed the 40 license the 42 license, all of those licenses, none of those licenses gave the licensee the power to, say, open source the source code?

A. That's correct.

Q. And for every one of those licenses, again, the 42 licenses, the 41 licenses, the 40 licenses that we saw, if that licensee wanted to distribute binary code for those versions, they would have to pay AT&T, USL, Novell, Santa Cruz an extra fee for each copy; isn't that right?

A. A binary royalty, yes.

Q. So that fee is not incorporated into the figures that Mr. Normand was writing?

A. That's correct.

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Q. Let's take a look at Exhibit 30. I think this is something you have already been looking at. If you don't have a copy, I'm happy to give you one. It's a Novell exhibit. So you addressed this letter in your testimony -- in your direct testimony; isn't that right?

A. Yes.

Q. This is a letter dated May 26, 1996?

A. Yes.

Q. It's to Cynthia LaMont, correct?

A. Yes.

Q. And you have signed it at the end, Bill Broderick?

A. Yes, I did.

Q. And it lists your title as Manager of Law and Corporate Affairs?

A. Yes.

Q. And the first paragraph of this letter reads:

The agreement between Santa Cruz Operation, Incorporated, SCO, and Novell, Novell, requires prior written approval from Novell for all new agreements or changes to current agreements relating to UNIX System V.

Is that an accurate statement?

A. As it applies to Unisys here. This is a letter that was directed at the Unisys issue.

Q. And in the third paragraph of this letter, you

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talk through what Unisys is proposing to do essentially, correct?

A. Yes.

Q. Unisys is talking about shipping a product that combines, in some way, SVR 4.0, a Unisys proprietary system, and UnixWare 2.1; is that right?

A. I want to be clear. It doesn't combine those. They are talking about a box that has three separate and distinct computers, and each one runs one over these.

Q. So they are talking about making a distribution of each of those pieces of software?

A. On specific -- individually specific computers, yes.

Q. And what you propose here is essentially an apportionment of the value what Unisys is proposing to pay SCO between monies that SCO gets to retain and monies that Novell gets to retain?

A. Yes.

Q. And you are -- as your direct testimony indicated, you reasoned it through. I think there's even a spreadsheet attached to another copy of this exhibit. And you make a proposal to Novell. We think this much should be yours and this much should be ours.

That's a fair characterization?

A. Yes.

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Q. And, in the end, you seek Novell's approval for the arrangement?

A. Yeah.

Q. So, it's fair to say, from this letter, that you regarded Unisys -- Unisys' proposal to distribute a binary version of SVR 4.0 MP as something that SCO needed to remit royalties to Novell for; isn't that Right?

A. Yes. Because it was under a supplement that Unisys had executed, where they licensed the 4.0 MP, and in that license it had how to calculate the royalties. And it said that if you ship this product, you will pay royalties. So, under that license, if they were using the 4.0 MP on that specific computer, they had to pay the royalties, and those royalties went to Novell.

Q. That's despite the fact that, at the time, Unisys also had more frequent -- more recent supplements; isn't that Right?

A. Yes.

Q. And those supplements listed prior products?

A. Yes.

Q. But, nevertheless -- and those prior products included SVR 4.0 MP?

A. Yes.

Q. And, nevertheless, though, this was something that SCO regarded it had to pay Novell for?

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A. Because it was under a specific license that Unisys had for the 4.0 MP.

Q. Is this the existing-vs.-new license distinction?

A. I don't understand your question.

Q. I'm trying to see what you're getting at here. I'm not sure I understand why it is your saying that the SVR 4.0 MP fees are something that SCO had to remit to Novell. I take it, it's because, at the time of the APA, there was an SVRX license for 4.0 MP?

A. That was transferred from Novell to Santa Cruz.

Q. But that's the reason that SCO had to pay Novell for 4.0 MP?

A. Yes. Under that separately-licensed product, yes.

Q. So, the basis of your testimony is that the reason SCO had to pay for 4.0 MP is because this was an existing SVRX license?

A. At the time of the Asset Purchase Agreement, yes.

Q. All right. Let's take a look at SCO Exhibit 371. It's been pre-admitted. I think this is a license that we also addressed -- that you also addressed in your direct testimony; is that correct?

491

A. Yes.

Q. It's with Unisys Corporation?

A. Yes.

Q. It's supplement number 233?

A. Yes.

Q. It's dated May 28, 1996?

A. I don't have a date -- yes, it is.

Q. And, at the bottom, we see your signature on behalf of Santa Cruz Operation?

A. Yes.

Q. And if we turn to Exhibit I of this document, which is 140491, there's a listing of prior products that you have addressed in your direct testimony?

A. Yes.

Q. Now, isn't it true that, at the time Unisys entered into supplement 233, it already had the rights to every product listed on this list by way of its previous supplements?

A. I would have to check, but Unisys is a long time OEM, and they always licensed the latest release that was coming out, so if not all of them, a majority of them.

Q. Well, we can look. Let's turn to Exhibit 370. This is also an exhibit that you addressed in your direct testimony. I'm happy to give you a copy, sir, if it's

492

helpful.

A. What is 370?

Q. This is Novell Exhibit 370 -- I'm sorry, SCO Exhibit 370.

A. You have got to help me out here.

MR. MELAUGH: May I approach, Your Honor?

THE COURT: Yes.

THE WITNESS: Okay.

Q. And we see, from the second page of this, that this is another supplement executed with Unisys?

A. Yes.

Q. It's supplement 230; is that right?

A. Correct.

Q. And it's something that Novell executed?

A. Correct.

Q. And if we turn to the list of prior products on Exhibit J, for which the reference is 1039921 --

A. Okay.

Q. -- we see the prior products that are carried over into the next supplement; isn't that right?

A. Yes.

Q. And if we were to put them up side-by-side, which you can see on your monitor?

A. Uh-huh.

Q. Again, that indicates that in Exhibit 233 -- in

493

supplement 233, Unisys had already paid for all the rights that are listed in the prior product rights; isn't that right?

A. Unisys didn't pay for the products in the prior products. They paid for the source right-to-use fees on additional designated CPUs. The prior products came with no fee.

Q. When looking at supplement 233, isn't it right that, at the time Unisys executed this, they already had the rights to all of the versions listed in Exhibit I by way of their previous supplements?

A. More than likely.

Q. Let's turn to SCO Exhibit 141.

MR. MELAUGH: May I approach, Your Honor?

THE COURT: Yes.

Q. If you could turn to the second page of this exhibit. This is a supplement with NCR Corporation?

A. Yes, it is.

Q. It's supplement number 112?

A. Yes.

Q. It's something that you executed on behalf of Santa Cruz in March of 1997?

A. Yes.

Q. And, again, we see an example of a prior products listing at Exhibit I, which is 977766. And

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isn't it true, again, that, by way of previous supplements, NCR had all of the rights that you see listed here on Exhibit I?

A. The chances are, yes.

Q. Now let's turn to exhibit -- SCO Exhibit 392.

A. I'm sorry, could I take one second and stand? My knees are getting old.

THE COURT. Sure.

THE WITNESS: Thanks.

THE COURT: You can even answer questions while you stand if you speak up.

THE WITNESS: Okay. Let's go.

Q. Okay. Good for you. SCO Exhibit 392.

A. Okay.

Q. We're looking at the second page. This indicates it's a supplement with Stratus; isn't that right?

A. Yes.

Q. And it indicates it's supplement number 87?

A. Yes.

Q. And we see your signature at the bottom on behalf of Santa Cruz, Bill Broderick?

A. Yes.

Q. And if we turn to the prior products listing, we see another of these lists of prior products, UnixWare

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20 and down to earlier versions UNIX; isn't that right?

A. Yes.

Q. And, again, if we turn to SCO Exhibit 405, this is another of these supplements with Stratus?

A. Yes.

Q. And it's numbered 86?

A. Yes.

Q. So it comes just one before the one we just looked at?

A. Yes.

Q. And it's something's you signed, Bill Broderick, this time on behalf of Novell?

A. Yes.

Q. And, here again, when we look at the prior products, we see that by the time Stratus enters into supplement 87, the one we just looked at, they already have the rights to all the prior products that are listed in the prior products section?

A. Not necessarily. They didn't have rights to access the prior products under the 2.1 license unless they are listed in the 2.1 license. These are prior products that they are allowed to access under the 2.0 license, and if they access them, they have to be treated the same as a UnixWare 2.0.

When you go to the 2.1 license, we list prior

496

products which grants them rights to access them under the UnixWare 2.1 license. Two separate and distinct licenses. We're granting rights to access the prior products under UnixWare 2.1 and then under UnixWare 2.0. The fact that they have rights to the prior products under 2.0 doesn't give them rights to 2.1 unless we add them, unless we include them in the 2.1 license.

If you read this, it says they can access it as if they were part of the UnixWare 2.0 license. That means the access to the prior products on this 2.0 license are directly related to the 2.0 license. When we go to the 2.1 license, it will say the same thing, but they can access the prior products as though they were a UnixWare 2.1 product. You need them in each license.

Q. Let's talk that through. So, if we're looking at supplement 87 -- this is Exhibit 392 -- and if we look at the prior products list, we see SCO UnixWare 1.1, for example?

A. I'm sorry. Oh, here we go. Okay.

Q. So, this is supplement 87, which is the UnixWare 2.1 supplement?

A. Yes.

Q. And we see UnixWare 1.1 release on the prior products schedule?

A. Yes.

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Q. And this prior products schedule gave them the right to access that source code?

A. Correct.

Q. And it gave them the right to distribute binary copies of the source code if they paid Santa Cruz an extra fee?

A. It gave them rights to distribute -- which product, the 1.1?

Q. 1.1.

A. If it was -- if they didn't have a license for 1.1, and through the prior products they were able to access the 1.1, and they included some of that code into the 2.1 product, they could distribute the binary, but the binary would be a UnixWare 2.1 binary. The prior products don't give any licensee the right to create a derivative work of, say, UNIX System V, Release 3.2. This is just a grant of access. Any access they have and any use they would use of these prior products has to be done under the current and, in this case, the UnixWare 2.1 license.

Q. Let me make sure I understand your testimony. If I wanted to make a derivative work of UNIX System V, Release 3.2, that is not something I could do under supplement 87?

A. That's correct.

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Q. And so, if I wanted to use --

A. Well, let me clarify that. If you wanted to create a derivative work of UnixWare 2.1, that included some of the prior product, you could do that. But if you just looked at the prior products, the prior products grant access to it. It is not the same as having a full source license for that product, so there is no right, by virtue of the prior products, that you can distribute a stand-alone UnixWare 3.2 derivative work.

Is that clear?

Q. I think so.

A. Okay.

Q. Now, I believe it was your testimony that the inclusion of prior products was not something that was always done, either by AT&T or by USL or by Novell or by Santa Cruz?

A. As a general practice, it was always done.

Q. But there were exceptions to that?

A. One on the UnixWare 2.0 license, where they were specifically omitted, and then UnixWare 7, where a business decision was made to hone in on the UnixWare only as a prior product. But everything prior to UnixWare 7, all the thousands of licenses that were issued, I only found one that did not include prior products.

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Q. What was that one?

A. That was the ALPS one.

Q. If we could turn to SCO 8.

MR. MELAUGH: May I approach, Your Honor?

THE COURT: Yes. What is it? SCO what?

MR. MELAUGH: This is SCO Exhibit 8, Your Honor.

Q. This is a supplement with Sequent Computer Systems; isn't that right, Mr. Broderick?

A. Yes.

Q. And it's supplement number 4; is that right?

A. Yes.

Q. And it's something that USL entered into -- or I'm sorry -- AT&T entered into?

A. Yes.

Q. Now, I don't see any prior products listing here, Mr. Broderick, do you?

A. No, I don't.

Q. Take a look at SCO Exhibit 10. This is another supplement with Sequent Computer Systems; isn't that right?

A. Yes, it is.

Q. Supplement number 9?

A. Uh-huh.

Q. It's entered into by AT&T; isn't that right?

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A. Yes.

Q. And, again, I don't see any prior products listing in this supplement. Do you, Mr. Broderick?

A. No. But this is a 3.1 upgrade from 3.0. And it says that the -- in addition to the terms and conditions set forth in the attached upgrade schedule. For upgrades from 3.0 to 3.1 from the UnixWare 3.0, the terms and conditions of supplement 6 for 3.0 govern, and I believe if you go look at supplement number 6 for 3.0, you'll see prior products listed.

Q. We can agree, though, that this supplement does not list prior products; isn't that right?

A. Yes, but it references a supplement -- it ties to a supplement that does.

Q. Let's turn to SCO Exhibit 12. This is another of these supplements. It's again with Sequent; isn't that right?

A. Yes, it is.

Q. And it's supplement number 15?

A. Yes, it is.

Q. Entered into by AT&T?

A. Yes.

Q. And, again, we don't see any prior products listed in terms of this supplement, do you?

A. No. And, again, this is an upgrade

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supplement.

Q. So there's a class of supplements that you're calling upgrade supplements that do not include prior products rights?

A. Yeah -- well, no. When I reviewed the licenses, especially in the 3.0, because in 3.0, you license 3.0 and it was a main schedule that had a lot of these licensing requirements. But when they upgraded to 3.1 or 3.2, in a lot of cases it was just a one or two-page supplement that referenced back to the original 3.0. And in that original 3.0, I think you'll find that there are prior products listed.

THE COURT: Pick a good breaking point, Mr. Melaugh.

MR. MELAUGH: Your Honor, I think I have no more questions. I think I can end now.

THE COURT: Are you done with this witness?

MR. MELAUGH: I'm done with this witness.

THE COURT: Then let's take a break. We'll be in recess for about 15 minutes.

THE WITNESS: Is that it?

THE COURT: He might have some redirect.

(Short recess)

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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 May 1, 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 numbered 420 through 499 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 May 1, 2008.

_______________________________

REBECCA JANKE, CSR, RPR, RMR

THE COURT: Do we have a witness? You can resume the stand.

And you may proceed with redirect, Mr. Normand.

MR. NORMAND: Thank you, Your Honor.

REDIRECT EXAMINATION BY MR. NORMAND:

Q. Mr. Broderick, you've been asked by both counsel and myself about the Unisys ClearPath situation. Do you recall those questions?

A. Yes, sir.

Q. If the ClearPath computer contained only the CPUs that worked with UnixWare on the one hand and with the Unisys proprietary product on the other hand, would you have remitted any money to Novell?

A. No. I wouldn't have told them about it.

Q. Why not?

A. Because UnixWare was owned by SCO, and the APA was very clear that UnixWare money went to SCO.

THE COURT: Put the mike up and speak right into it.

THE WITNESS: I'm sorry.

Q. BY MR. NORMAND: You looked at the Supplement Number for the NCR license, I think it was 112. Do you recall that?

A. Yes.

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Q. I take it that every licensee at some point had to execute a Supplement 1; is that fair to say?

A. Correct.

Q. Now in those instances of UnixWare licensees who executed a Supplement 1, was there a list of prior products in that supplement?

A. Absolutely.

Q. And what were the two examples that we spoke about earlier of that, that you can recall?

A. I had two examples. One was Super Computer International, and one was Lexis Software Corporation. They license UnixWare 2.0 licenses with Novell. And the UnixWare license was Supplement Number 1. They had not licensed anything previously.

Q. Mr. Broderick, this is the Unisys UnixWare 2.0 license represented on the right. Do you recall going through this?

A. Yes.

Q. Now, to your understanding, was any of this System V material included in the UnixWare source code at the time of this license?

A. At the time we developed the UnixWare 2.0 source code product?

Q. At the time the Unisys UnixWare 2.0 license was executed, did you have an understanding as to whether this

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UnixWare source code included source code from these prior releases?

A. Source code from the prior releases, if it had any commercial usability or value would have continued forward into UnixWare. Each release is built on a previous release. And what they do is, say you're at 4.2 MP, you add new functionality to it. You may make some modifications, but you're adding new functionality to support market needs. That new functionality that was put in the 4.2 MP became UnixWare 2.0. And 4.2 MP has functionality from 4.0 conceivably to 3.0. If there is any commercial usability to it, it's carried forward.

Q. Now, at this point, the time of this license, did Unisys have an existing UNIX license?

A. Yes.

Q. And do you know whether they had an existing operating system that was derived from their previous UNIX licenses?

A. If they had -- well, Unisys had a derivative work that was based on UNIX System V Release 4 MP.

Q. Was that your understanding?

A. That's a fact.

Q. As to that operating system under this UnixWare 2.0 license, was Unisys entitled to use any part of these prior products in building that derivative work?

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A. For --

THE COURT REPORTER: I'm sorry?

THE WITNESS: I'm clearing up the question.

Q. MR. NORMAND: For Unisys' existing UNIX derivative operating system --

A. Yes.

Q. -- once Unisys acquired this UnixWare license, were they entitled to use any material they wanted from this System V releases in that existing operating system?

A. Yes. They just had to treat it as UnixWare 2.0 and pay the royalties based on the 2.0 license.

Q. Was there any scenario in a case of a UnixWare licensee like Unisys in which they would be paying royalties based on the System V products?

A. Not solely based on the fact that they're listed as a prior product and they have access to them. They would pay royalties if they had executed a separate supplement for that specific release of UNIX.

Q. If you had a licensee who had never before been a UNIX licensee, brand-new, UnixWare licensee of the sort that we discussed earlier, for simplicity, let's pick a name, Super Computer, was that a UnixWare 2.0 licensee?

A. Yes.

Q. Is there any scenario in which Super Computer would be paying System V royalties based on the list of System V

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products with its UnixWare license?

A. Absolutely not. It's very clear in the prior products section that says you can access these prior products pending any code you might use has to be treated as though it's UnixWare. So no. If you access prior products under UNIX -- for 2.0 schedule, it's 2.0.

Q. In the case of Super Computer, first-time UnixWare licensee --

A. Uh-huh (affirmative).

Q. -- to your understanding, was there System V material in its UnixWare source code that it had a license?

A. Well, yes. UnixWare is a System V product. It's just a brand naming. So -- and it's built on prior releases of UNIX System V. So UnixWare clearly has System V coding.

Q. And under its license, it can use System V technology consistent with its rights to use UnixWare; is that fair to say?

A. Absolutely.

MR. NORMAND: Thank you, Your Honor.

THE COURT: Thank you, Mr. Normand.

Any re-cross, Mr. Malaugh?

MR. MALAUGH: Yes, Your Honor.

RECROSS-EXAMINATION BY MR. MALAUGH:

Q. When you and I were looking at that NCR supplement

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and I asked you whether that supplemental loan, it was a 2.1 supplement, gave NCR the right to make derivative works from the prior products listed, I think your answer was no; isn't that right?

A. As a standalone derivative work, my answer is no.

Q. Is that answer also true -- and isn't that answer also true if it had been Supplement 1?

A. That's correct. They can access the code, but it has to be treated as though it would be a UnixWare 2.0 product.

Q. And they don't have the right to make derivative works and distribute derivative works as standalone products for products listed in the prior products list of that Supplement 1?

A. Well, it's kind of hypothetical. If somebody took a 2.0 license and they accessed the prior products, and they built a derivative by accessing the prior products on a UnixWare license, then they could distribute derivative work, but they would pay off a UnixWare -- they would pay off of the UnixWare license.

Q. I thought you had said that the prior products license did not convey the right to make a derivative work of those products.

A. That's true. But it's -- it doesn't grant rights to create a derivative work, like UNIX -- you have UNIX

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System V 3.2 listed as prior products.

Q. Uh-huh (affirmative).

A. You can't access that from a -- say you get from a licensee that has a SCO license created derivative work on that 3.2 and distribute that derivative work as a 3.2 license.

Q. And that's true regardless of whether it's Supplement 112 or Supplement 1.

A. That's correct.

Q. You've answered my question. Thank you very much.

THE COURT: Thank you.

Anything else, Mr. Normand?

MR. NORMAND: No, Your Honor.

THE COURT: Thank you. You may stand down, Mr. Broderick.

I assume this witness may be excused.

MR. NORMAND: Yes, sir.

THE COURT: And you may call your next witness.

MR. GONZALES: Your Honor, SCO calls Jean Acheson.

THE COURT: You are Mr. Cyrulnik; is that correct?

MR. GONZALES: No. I wish I were. I'm Mr. Gonzalez. Mr. Cyrulnik is a few years younger than I am.

THE COURT: All right. Thank you.

MR. GONZALEZ: May I approach, Your Honor?

THE COURT: Yes. Thank you.

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Come forward and be sworn, please, right here in front of the clerk of court.

Do we need these posters up still?

MR. GONZALEZ: No. I'll take them down.

THE CLERK: Please raise your right hand.

JEAN ACHESON,

called as a witness at the request of SCO Group,

having been first duly sworn, was examined

and testified as follows:

THE WITNESS: I do.

THE CLERK: Thank you. Please take the witness stand over there.

THE WITNESS: Thank you.

THE CLERK: Please state your name and spell it for the record.

THE WITNESS: My name is Jean Acheson. That's spelled J-E-A-N A-C-H-E-S-O-N.

THE CLERK: Thank you.

DIRECT EXAMINATION BY MR. GONZALEZ:

Q. Good morning, Ms. Acheson.

A. Hello.

Q. What is your current occupation?

A. I'm the controller at SCO.

Q. And when did you began?

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THE COURT: Excuse me. Pull the mike down a little and speak right into it. Thank you.

THE WITNESS: Okay.

Q. BY MR. Gonzalez: When did your tenure as controller begin?

A. Last September.

Q. And in that role, do you have responsibilities that are related to UNIX revenues?

A. Well, all of the financial functions report into me including the recording of the UNIX revenues.

Q. And have you had prior experience related to UNIX -- the UNIX licensing business and its revenues?

A. Yes. I started back with AT&T UNIX Systems Laboratories '90, '91. Basically at that point I started in the accounts payable and moved over into the revenue as a contract administrator working for Carolyn Kachinsky in UNIX Systems Laboratories. And there I processed the OEM and other company quarterly reports for the SVR binary royalties.

Q. And did you then leave USL?

A. Well, not really, because Novell purchased USL, and I continued in the same function with Novell. And then later when Santa Cruz Operations was purchasing the product line from Novell, my boss at that time Carolyn Kachinsky moved into another position at Novell, and I took over management for the binary royalties. And then with Santa Cruz Operation, I

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continued as the manager of the binary royalties taking on all the binary royalties for the company, whether it was the SVRX, UnixWare, OpenServer or other products. And later making the worldwide revenue manager for Santa Cruz and then moved into that that same position when Caldera later known as SCO purchased the UNIX product line, as well.

Q. Thank you. Is it fair to say, therefore, that since 1991 when you started at USL you have been continually involved with tracking and reporting of UNIX revenue?

A. Yes.

Q. And within those functions, did you come to be involved with the reporting and tracking of what are known as SVRX royalties under the agreement between Novell and Santa Cruz in '95?

A. Yes.

Q. And what function did you play with respect to those royalties?

A. Well, either myself directly or my direct report would review the quarterly royalty reports that were sent in by the OEMs and the other customers. We would review them for correctness under the various product schedules to make sure they were calculating correctly, you know, just adding and subtracting correctly. We would record these revenues, well, not as revenue, to SCO or to Santa Cruz or to SCO, but we would record the transactions. We would segregate the cash,

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and then on a monthly basis prepare a report that we would give to Novell for the cash from the preceding month.

Q. And did you continue performing those functions once you moved over to Caldera SCO?

A. Yes.

Q. So again, it's fair to say that with respect to SVRX royalties, you had been on the front line of tracking and reporting and remitting those royalties?

A. Yes.

Q. And what exactly -- what is your understanding of what these SVRX royalties are?

A. Basically as identified in the APA, you know, as SVRX royalties it's various products where the revenue stream was, you know, maintained administratively by Santa Cruz for Novell.

Q. And that administration has continued with SCO?

A. Yes.

Q. And are you aware of any interest under the APA that Novell had with respect to UnixWare royalties?

A. Novell didn't have any interest in UnixWare under the APA.

Q. Was there a section of the APA that provided for any interest that Novell would have in UnixWare royalties if certain benchmarks were reached?

A. Yes, that's correct. The APA provided that if

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Santa Cruz reached in their total UnixWare sales more than 40 percent of projections that were laid out in the APA, then Santa Cruz would have had to have paid an additional fee, royalty fee to Novell for the UnixWare product line. These benchmarks were never reached, and that calculation ended in 2002.

Q. By that, do you mean that Novell's interest expired in 2002?

A. Yes.

Q. And in your work with -- in your work in the UNIX business that you were describing, did you become familiar with the licenses that generated the UNIX revenues that you tracked?

A. Yes. We had to review them from the financial viewpoint.

Q. And please describe the licenses under which licensees paid these SVRX royalties that you've been talking about.

A. Well, basically it was a product schedule that described, you know, from the technical view point it described a lot about the product and the licensee's rights for the product. And then it also -- the section I was more interested and concerned with was how to calculate the royalties and when royalties were due.

Q. Going back to your earlier testimony about the

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interest that Novell had with respect to UnixWare royalties that expired in 2002, did you have a shorthand name for that interest?

A. Yeah. We called it the 40-percent calculation.

Q. So going back to the line of questioning on which we were, were the licenses that you were describing that are identified under the APA that generated SVRX royalties, were those for a particular release of a System V product?

A. Well, each product schedule was for a release. So you would have -- you know, a customer would purchase licensing rights for SVRX or System V Release 3.2 or System V Release 4.0, et cetera.

Q. Are you familiar -- having seen and worked with these UNIX licenses, are you familiar with the concept of prior products under these licenses?

A. Yes. I've seen that.

Q. And can you describe for us your understanding of what prior products are?

A. Usually when licensee would sign up for the next -- for a release of a product, it would include, there was usually a section in it, a schedule that would list all of the prior releases or most of the prior releases of the predecessor products. So if they were taking System V Release 4.0, it would give them rights to 3.2, 3.0, 2, et cetera.

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Q. Now, you've just testified that you work for SCO's predecessors. In the UNIX licensing business; correct?

A. Yes.

Q. Which of the companies that you worked for in the UNIX business before SCO include prior products in their UNIX licenses?

A. UNIX -- well, AT&T because we inherited the agreements from them, UNIX System Laboratories, Novell and Santa Cruz.

Q. Did any of those companies charge a separate additional fee for the prior products?

A. No.

Q. So the licensee only paid royalties on the current Release V license?

A. Yes.

Q. Do you know of any instance in which a licensee paid a separate fee for the prior products?

A. No, not under the schedule.

Q. And that would be true for any of the companies that you have worked for before SCO?

A. That is correct.

Q. Ms. Acheson, did you play any role in the transition of the UNIX business from Novell to Santa Cruz?

A. Yes.

Q. And what role did you play?

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A. Well, basically I was on various committees with Novell and Santa Cruz personnel to, you know, discuss the various clauses of the APA and, you know, how to execute the transition smoothly between the two companies. My major focus, especially later on in the transition, was on how to report and how to administer the SVRX administration arrangement under the APA with Novell.

Q. And during this period of transition of business, how often did you have an opportunity to meet with Novell on the issues that you are describing?

A. Well, first, of course, the meetings were almost daily, and later on, especially around the reporting, it was probably more on a monthly basis with the reports. And then, of course, telephone conversations in-between if we had questions on other things for the transition.

Q. I'd like to now show you what has been admitted as SCO Exhibit 331. And can you tell us what that document is?

A. Well, it's the cover sheet of a report that we would have sent to Novell for the January -- for the cash collected during January of 1997.

Q. And can you briefly walk us through some of the major items there on that chart?

A. Well, basically we're stating that there was -- that adjusted revenue was approximately -- sorry. It's pretty blurry. I think it's 5.6 million. And that after the

517

administrative fees and other royalties are deducted, that the total payment due to Novell for the period is 4.5 or 6 million.

Q. And if you turn the pages, what do the underlying documents reflect?

A. Well, you know, sometimes our licensees aren't the quickest on remembering who to pay what. And so consequently, we sometimes -- the licensees would direct the cash to the wrong company. So that next page was just returning cash to Novell that belonged to Novell directly.

Q. And the next two pages, what do they reflect, the spreadsheet?

A. That page is simply just the detail of the fees that we administered under the agreement for the month of January.

Q. How was the form at of this report developed?

A. During the transition, Cindy Lamont, who had worked for me in Novell as a contract administrator, and -- or I'm sorry. Cindy Lamont was a contract manager and Barbara Cavalla, who was the contract administrator, they remained with Novell. And what happened is for the first time that we needed to do a report for them, I sat down and figured out a format that looked right. And then we reviewed it in light of the clauses within the APA.

Q. Do you have a view as to how familiar Ms. Lamont

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and Ms. Cavalla were with the UNIX business?

A. Well, quite familiar, because Cindy Lamont was a contract manager. She had worked on developing many of the schedules and the agreements and had worked with the negotiations with the OEMs and other customers on these. And Barbara Cavalla had worked directly for me as a contract administrator actually reviewing many of the quarterly reports.

Q. So if I understand correctly, these representatives of Novell that you were meeting with were the colleagues who just a few days before you had worked with intimately within the Novell business?

A. That is correct.

Q. So the meetings with Novell developed the report that we are looking at. Did Novell at any time say that you would be reporting UnixWare royalties?

A. In this report? No.

Q. Or in any report?

A. No. None.

Q. Did Novell say to you that would you be reporting royalties for any prior products listed in a UNIX license?

A. No.

Q. Did the reports that you, in fact, sent Novell every month after that point in time ever contain any information about royalties paid under UnixWare licenses?

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A. No.

Q. After the transition period ended, did you have further interactions with Novell representatives?

A. Yes. Each month as we sent this report in, you know, they would call to discuss it. If they had questions about certain of the revenues because, as I stated, Barb and Cindy were pretty familiar with the OEMs and knew how to ask the various questions in regards to it.

Q. I'd like to now show you what has been admitted as SCO Exhibit 98. And this is a letter that you wrote to Cindy Lamont of Novell whom you've testified about.

A. Uh-huh (affirmative).

Q. And as you can see, it's dated April 26, 1996.

A. Uh-huh (affirmative).

Q. And can you tell us who the people copied on this e-mail?

A. Basically those were my co-workers at SCO. So T. Dulin was my boss, Terry Dulin, Kathy Sensor was one of my contract administrators. Burt Lavine was an attorney who had come from AT&T and through Novell and out to Santa Cruz Operations.

Q. And if you look at the very last paragraph where if says:

We have given the pertinent Cray letter

agreements to Burt.

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Who is Burt?

A. That was the Burt Lavine.

Q. So that was the same person that is copied on this e-mail?

A. That is correct.

Q. And if you can focus on the subject matter, you see that it says "Cray source"; right?

A. That's correct.

Q. Can you briefly describe what the issue that you were discussing with Ms. Lamont on this issue of Cray source?

A. Yeah. Cray had been given a special right to actually distribute source code. And during the review of one of the monthly reports, I believe it was Barbara Cavalla brought up because she was -- you know, knew the details of the Cray reporting, that Cray had reported source code. And since it was a reporting, she thought that possibly those revenues would belong to Novell. I disagreed, and this was why I disagreed. This was my argument for it.

Q. So is it fair to say that you are setting forth the issue of the question in the first couple lines where you say:

Dear Cindy, we have looked in the ownership of

the revenues generated by Cray Research, Inc.'s

right to distribute source code products.

A. Yes.

Q. And then later on I believe you're expressing a

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position that Santa Cruz came to with respect to those source code sublicenses fees where you state:

SCO has a right to retain 100 percent of

the revenue.

A. That's correct.

Q. And there's a last paragraph where it says:

We have been given the pertinent Cray letter

agreement to Burt -- I'm sorry -- we have given

the pertinent Cray letter agreements to Burt, and

it is his opinion that these source revenues do

belong in full to SCO.

Do you see that?

A. Yes.

MR. MALAUGH: Objection, Your Honor. I think this is a leading line of questioning.

MR. GONZALEZ: I'm asking about the document. I can ask her what it says. It makes it more efficient.

THE COURT: Overruled. Go ahead.

Q. BY MR. Gonzalez: So you do see that language; right?

A. Yes.

Q. And do you understand that to mean that you had consulted with Mr. Lavine on this issue, and you were copying him so that he would be aware of your communications with Novell on the issue?

522

A. Yes.

Q. And what was Novell's response to the position that Santa Cruz had taken with respect to Cray's source of licensing fees?

A. After their review, they agreed.

Q. And I'd like to now show you what has been marked as Exhibit 126.

THE COURT: SCO 126; right?

MR. GONZALEZ: Pardon me?

THE COURT: SCO 126.

MR. GONZALEZ: I'm sorry. SCO Exhibit 126.

Q. BY MR. Gonzalez: Is this an e-mail in which Novell communicated to you its position?

A. Yes. They actually sent it to my boss, Terry Dulin.

Q. And this is dated a few months later in August of 1996; correct?

A. Yes.

Q. So this is actually an e-mail that Terry Dulin, your boss, sent to you?

A. Right. Forwarded it to me from Cindy Lamont.

Q. What was she forwarding to you?

A. Basically stating that Cindy stated that Novell agreed that the source code fee paid by Cray did belong to Santa Cruz.

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Q. And would that language be reflected where it says:

This is to let you know -- Terry, this is to

let you know that Novell agrees that the fees that

Cray pays pertaining to their source sublicensing

provisions -- and we can skip down a little bit --

can be retained by SCO as a source code right to

use fee under Amendment Number 1 of the APA.

A. That's correct.

Q. Is that the position that Novell took, as you understood it?

A. Yes.

Q. And we can go back to the prior exhibit, I believe it was SCO Exhibit 98. In the second paragraph, do you see a reference there to the Novell SCO agreement, section E?

A. Yes.

Q. Do you see that? Is that a reference to Amendment Number 1?

A. I believe it is.

Q. And that's why Ms. Cindy Lamont communicated and relied on the same position in her response?

A. Yes.

Q. Thank you.

Did Cray pay these sublicensing source fees to Novell before the APA?

A. Oh, yes.

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Q. Why do you say "oh, yes"?

A. Because it's been a relationship that's been going -- went way back into the AT&T premie.

Q. Were the fees substantial?

A. It was a few 100,000 a year, at least afterwards. I think it had been more substantial back in the AT&T days.

Q. Did Cray continue to pay these source sublicensing fees to Santa Cruz?

A. Yes.

Q. And for how long did that occur?

A. I believe for several years thereafter. They would still be obligated to pay today if they had the situation arise.

Q. We can briefly go back to Exhibit, SCO Exhibit 126. I meant to highlight for you in Ms. Lamont's e-mail to your boss Terry Dulin, a Michael Gennaro was copied in that e-mail; correct?

A. Yes.

Q. Who was Michael Gennaro?

A. He was the controller of Novell at that time.

Q. So Ms. Lamont was conveying Novell's position and making Mr. Gennaro aware of the position they had taken; right?

A. Yes.

Q. So going back to the history of Cray paying the

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source sublicensing fees, you said he continued to pay Santa Cruz a few years after the APA; correct?

A. Correct.

Q. Did I understand that correctly?

A. Yes.

Q. Did Novell ever ask later on for those fees?

A. No.

Q. Did Novell ever deviate from the position it took in its 1996 e-mail that I've just shown you?

A. No.

Q. Did SCO or Santa Cruz, in fact, remit such sublicensing fees to Novell at any time?

A. No.

Q. Do you recall we were talking about prior products a little bit earlier?

A. Yes.

Q. What versions of UNIX did Novell license when it was the owner of the UNIX product line?

A. Well, there was what we classified as the SVRX products, which went up through, I think like Release 4.2 MP. And then there was in what was classified as UnixWare, UnixWare 1.1 and 2.0.

Q. Did Novell's UnixWare licenses include the list of prior products?

A. Yes.

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Q. Did those prior products include SVRX products that are identified under the APA?

A. Yes.

Q. Let me show you now what has been marked as SCO Exhibit 27. And as you can see, this is a license between AT&T GIS and Novell executed July 1995. Do you recognize the signature of the person who signed this at the bottom for Novell?

A. Russ Holt.

Q. Are we looking at the same thing?

A. For Novell. I'm sorry. Bill Broderick. For AT&T is Russ Holt.

Q. And what do you understand this document to be?

A. This was a licensing form that when both parties had signed gave AT&T the right to use the UnixWare Release 1.1.

Q. And if you turn to the next page, I take it this is a table of contents for what the schedule includes?

A. Correct.

Q. And where do we find the prior products?

A. It's in Exhibit J, prior products, Page 27.

Q. And again, this was a license granted by Novell in 1995 for UnixWare 1.1; correct?

A. Yes.

Q. So we look at Exhibit J on Page 27. Is that the

527

list of prior products that you've been testifying about?

A. Yes, it is.

Q. Did Novell charge an separate fee for the prior products?

A. No, they did not.

Q. How did you book the revenues from Novell's UnixWare licenses?

A. As UnixWare and then whatever the release was. So in this case, it would have been booked as UnixWare 1.1 or UW 1.1.

Q. Did you book any part of the revenue from UnixWare licenses at Novell as SVRX revenue to account for the prior products?

A. No.

Q. To your knowledge, did anyone at Novell do that?

A. No.

Q. Did Santa Cruz later release its own versions of UnixWare?

A. Yes.

Q. And do you recall what those versions were?

A. I believe it was the UnixWare 2.1 and then all of the UnixWare 7 family.

Q. So let me show you what has been marked as SCO Exhibit 371. And you see about three quarters of the way down where it says, UnixWare 2.1 technology?

528

A. Yes.

Q. So what is this document?

A. It's also a licensing order form executed giving Unisys the right to UnixWare 2.1 technology.

Q. Who are the parties of this license?

A. Unisys as the customer and Santa Cruz Operation.

Q. And do you see on the next page that there's also a list of prior products?

A. Yes.

Q. At least an item for that identifying --

A. Yes.

Q. -- a page where the prior products are listed?

A. Yes. Exhibit I, Page 24.

Q. Turn to that, Exhibit I. Do you see the list of prior products that you've been testifying about?

A. Yes.

Q. And did you book royalties under licenses for UnixWare that Santa Cruz granted as UnixWare revenues?

A. Yes.

Q. Did you ever seek to break out those revenues as UnixWare and prior products in any way?

A. No.

Q. Did Novell transfer its UnixWare licenses to Santa Cruz?

A. Yes.

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Q. Did Santa Cruz continue receiving royalties paid under those licenses?

A. Yes.

Q. Did Santa Cruz remit any of those royalties to Novell?

A. No.

Q. Did Santa Cruz remit to Novell any royalties for prior products?

A. No.

Q. Did Santa Cruz remit any royalties paid under its own UnixWare licenses to Novell?

A. No.

Q. Did Santa Cruz ever remit to Novell royalties for the prior products in its UnixWare licenses?

A. No.

Q. Did Santa Cruz transfer its own and Novell's UnixWare licenses to SCO in 2001?

A. Yes.

Q. Did SCO continue receiving royalties under those UnixWare licenses?

A. Yes.

Q. Did SCO remit those royalties to Novell?

A. No.

Q. Ms. Acheson, have you had experience with audits?

A. Yes.

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Q. How deep is your experience with audits?

A. Well, as a finance person in public companies, of course, we have quarterly audits and the annual, you know, major audit. Additionally, in a revenue group where we deal with binary royalties, we had an audit group that audited many of our customers or we worked through independent CPA firms to audit customers. Additionally, we have been audited by companies who have granted us licensing rates, such as Microsoft and Mrs. Novell audited us twice.

Q. Did Novel audit the administration of the SVRX royalties?

A. Yes.

Q. When did that take place?

A. One time in 1998 and then again in 2003.

Q. Who was audited in 1998?

A. It would have been Santa Cruz Operation in '98.

Q. What role did you play in the 1998 audit?

A. Well, my boss Terry Dulin at that time did the majority of the negotiation of the auditors for timing and scope. I worked with them as far as supplying the information and data to them that they required.

Q. And based on your experience with auditing, how thorough and detailed do you think Novell's auditors were in that 1998 audit?

A. They were extremely detailed.

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Q. Did Novell's auditors ask Santa Cruz for any information or documents regarding SVRX licenses or royalties?

A. No; except for the 40-percent calculation which they reviewed with my boss Terry Dulin.

Q. With that exception aside, did they ask for any information about anything regarding royalties or licenses?

A. No, they did not.

Q. Did Novell at that audit request Santa Cruz to pay UNIX for royalties?

A. No.

Q. Under UnixWare licenses?

A. No, they did not.

Q. Did Novell request any share of those royalties for the prior products that were listed in the UnixWare licenses?

A. No, they did not.

Q. What role did you play in the 2003 audit of SCO -- I'm sorry. Was SCO audited later, you said?

A. Yes, it was SCO.

Q. In 2003; right?

A. Correct.

Q. What role did you play in that audit?

A. By that time, I had the direct negotiations with the auditors, and, you know, working with -- my contract administrator supplied them with the details that they required under the audit.

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Q. Did Novell's auditors ask SCO for any information about Novell's or Santa Cruz' UnixWare licenses?

A. No, not from those.

Q. The licenses of those companies have executed?

A. No.

Q. As part of the audit did Novell request payment for royalties from those licenses?

A. No, they did not.

Q. Did Novell request any share of those royalties for the prior products listed in the UnixWare licenses?

A. No.

Q. To the best of your knowledge, Ms. Acheson, did Novell ever ask to assign any value to the prior products in UnixWare licenses and pay Novell for the licensing of those products?

A. No, they didn't.

Q. To the best of your knowledge, did Novell ask the same thing of SCO? I meant to say Santa Cruz before. But I guess your answer applies to both Santa Cruz and SCO?

A. Well, with one exception.

Q. What --

A. No. They only asked auditing for the Sun and Microsoft agreement.

Q. And no new information about UnixWare licenses granted by Novell or Santa Cruz?

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A. No.

Q. Do you recall a licensee called Unisys?

A. Yes.

Q. And so let me show you what has been marked as SCO Exhibit 370.

And it's been admitted, Your Honor.

If you look at the second page, correct me if I'm wrong, but I think I understand this to be a Unisys 2.0 license executed in 1995 between Unisys and Novell. Do you read that document to be that?

A. Yes.

Q. And if you look at Paragraph -- Page 26 we find a list of prior products; is that correct? On Page 26?

A. Yes.

Q. Was this license transferred to Santa Cruz for the sale of the UNIX assets?

A. Yes, it was.

Q. Did Santa Cruz receive royalties from Unisys under this particular license?

A. Yes, we did.

Q. Let me show you, then, what has been marked Exhibit 387, SCO Exhibit 387. And this document was produced by Novell in this litigation. Can you, please, briefly describe or explain what this report reflects.

A. Basically it's one of the pages of the quarterly

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reports submitted by Unisys to document the payment of their various royalties under their various products schedules. What they're doing on this report is they are summarizing for about nine quarters the gross amounts due for both UnixWare 2.0 and the SVRX 4 product. The net amount due after discount is taken on the third matrix down basically shows the geographic breakout of the UnixWare sales activity, and the fourth segment of the report shows how they calculated their discount.

Q. And how often did Santa Cruz receive this report?

A. Quarterly.

Q. Did Novell receive this report?

A. Yes.

Q. When it was the owner of the UNIX business?

A. Well, yes. When it was the owner, yes.

Q. And if I wanted to focus on the royalties that Unisys was paying on their 2.0 license from Novell that we just saw, where would I look within these tables?

A. The third table down would probably be the easiest. It's basically breaking out the UnixWare 2.0 binary royalty fees by geographic region, and the second column is the total. The other columns are just the regions within Unisys.

Q. So if I look, for example, at the very last item, it says first Q '99, how much did Unisys report and pay to Santa Cruz under the 2.0 license?

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A. $152,966.

Q. Do you know how Novell came into possession of this document?

A. More than likely through their audits of us.

Q. Did Novell at any time ask for the royalties that Santa Cruz was collecting under the 2.0 license between Unisys and Novell?

A. No.

Q. Did Novell ever ask for a share of those royalties corresponding to the prior products?

A. No.

Q. Did Novell ask for any royalties under this license even in its 2003 audit?

A. No, they did not.

Q. Just a couple of discrete questions, and we're done.

Ms. Acheson, are you familiar with OpenServer?

A. Yes.

Q. What is OpenServer?

A. OpenServer is, well, Santa Cruz Operation's flavor of UNIX.

Q. And is that a SCO product?

A. Now it is, yes.

Q. And how do SCO's UnixWare royalties currently compare with SCO's OpenServer -- I'm sorry. How does SCO's

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UnixWare revenues currently compare with SCO's OpenServer revenues?

A. I believe in 2007, it was about 70-percent OpenServer and 30-percent UnixWare.

Q. And how did those revenues compare in 2002?

A. At that point it was about two-thirds OpenServer and one-third UnixWare.

MR. GONZALEZ: Nothing further. Thank you.

THE COURT: Thank you, Mr. Gonzalez.

Mr. Malaugh, you may cross-examine.

MR. MALAUGH: Thank you, Your Honor.

If I may approach?

THE COURT: Yes.

MR. MALAUGH: It's the list of exhibits that we may be using during cross-examination.

CROSS-EXAMINATION BY MR. MALAUGH:

Q. Good morning, Ms. Acheson.

A. Hello.

MR. MALAUGH: If I may approach the witness, Your Honor.

THE COURT: You may.

Q. BY MR. MALAUGH: Ms. Acheson, I'm showing you what's been pre-marked as Novell Exhibit 187. It's been admitted. Do you recognize this document? This is the

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agreement --

A. Yes.

Q. -- with Sun SCO entered into in 2003; is that correct?

A. Yes.

Q. If I can ask you to turn to Attachment 1 of that document. And the second page. This is SCO 1287219.

You see there's a list of SVRX versions here and then OpenUNIX 8 release. Do you see where I'm pointing to?

A. Yes.

Q. And my first question is about the first version listed here System V 4.1 ES/3B2. In the ordinary practice of royalty remission, was this one of the SVRX versions that SCO was under an obligation to remit royalties as to?

A. When it was separately licensed by the licensee, yes.

Q. And the same is true of the next version listed here, 4.1 C2/3B2?

A. Yes.

Q. And same is true of the next three lines, in fact, 4.1 ES, 4.2 and 4.2 MP?

A. Well, as long as it was the standalone version, not -- not that which was included in UnixWare.

MR. MALAUGH: If I may approach.

Q. BY MR. MALAUGH: I'm showing you what's been marked

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as SCO Exhibit 141. I think you may have actually seen this during your direct testimony. This is a license supplement with NCR. I'm sorry. SCO Exhibit 141. This is a license supplement with NCR; is that right?

A. Yes.

Q. And it's listed as Supplement 112?

A. That is correct.

Q. And it's signed by Mr. Bill Broderick of the Santa Cruz Operation?

A. That is correct.

Q. Let's turn to the prior products listing that we've heard some testimony on today. I believe it is Exhibit I in this document. It's on SCO 9776.

Now, I take it, it's your testimony and it's SCO's position that once NCR had entered into this UnixWare 2.1 supplement with Santa Cruz, Santa Cruz was non-obligated to pass along royalties on account of these prior products listed in Exhibit I?

A. That's correct. NCR was purchasing UnixWare 2.1.

Q. So if we were to look at the royalty reports that Santa Cruz was issuing and you've testified about --

A. Uh-huh (affirmative).

Q. -- we shouldn't see any royalties for the versions listed here being remitted from Santa Cruz to Novell?

A. As long as it was -- as long as they were reporting

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under the UnixWare schedule we would not have.

Q. I'm not sure what you mean by that. So if NCR is out there using its System V Release 3.2 rights, is it SCO -- and paying money for using those rights, is it SCO's position that because of this supplement SCO doesn't have to pay any money to Novell?

A. Okay. No, that's not correct. Basically the customers paid under the product schedule of which their software release was. So if NCR had an older, it's just like if you have Windows, you know, one of the older releases of Windows versus a later or Vista, it's two separate products. So, too, would NCR. They would have an older release. And if that was under the standalone schedule for 3.2, then they would pay royalties under that schedule. However, if they upgraded their product to the UnixWare 2.0, then their new releases they would pay under the UnixWare of 2.30.

However, customers still use the old products. They want upgrades. They want new installation, so they would continue paying under the 3.2. If that case happened, you know, we would record the 3.2 as SVRX 3.2 and the UnixWare 2.0 as UnixWare 2.0.

Q. So let me see if I understand your testimony, thank you. If NCR is out there, it's got derivative work. It's made some changes to the source code, and the source code is a derivative of it is 3.2 that we've been discussing. And it's

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distributing that derivative work, the money for all of that is still Novell's despite the fact that there's this new supplement for 2.1.

A. Right. As long as they were distributing under that original product supplement for 3.2.

Q. And that's the case despite the fact that they've got this list of prior products rights in Supplement 112?

A. Yes.

Q. In fact, if we look at SCO Exhibit 387, which was one of the last exhibits you testified about.

A. Uh-huh (affirmative).

Q. This was the Unisys reporting history. We see a significant amount of money that's coming in for SVR4. There's some entries at the top, and there's some entries down at the bottom. Those all fees that SCO is continuing to remit to Novell; is that right?

A. Yes.

MR. MALAUGH: I have no further questions of this witness.

THE COURT: Thank you, Mr. Malaugh.

Mr. Gonzalez, any redirect?

MR. GONZALEZ: Yes. I have brief redirect, Your Honor. // //

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REDIRECT EXAMINATION BY MR. GONZALEZ:

Q. Ms. Acheson, Mr. Malaugh just asked you about a scenario in which a licensee took out, for example, a UnixWare license, and at the same time had a derivative product based on an earlier license, for example, for System V Release 3.2. Do you recall that discussion with Mr. Malaugh?

A. Yes.

Q. And when you said the licensee would report under the newer license for that product and then you pointed out it would report royalties for the earlier license, the 3.2 license, are you referring to source code fees or binary fees?

A. Binary fees.

Q. And so when the licensee who took out the later license pay any source code fees for the prior products listed in that license?

A. Well, they were buying the UnixWare what -- they're buying whatever the latest and greatest version is in that product schedule.

Q. And they would pay the source code fees for what?

A. For whatever that product was. So if the product schedule is UnixWare 2.30, then they would be purchasing UnixWare 2.30.

Q. And they would pay the fees just for that later release?

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A. Correct.

Q. And just to be clear, there would not be any fees for the prior products?

A. No.

MR. GONZALEZ: That's all, Your Honor.

THE COURT: Thank you.

Any recross?

MR. MALAUGH: No, Your Honor.

THE COURT: You may step down.

I assume this witness may be excused?

MR. MALAUGH: Yes.

MR. GONZALEZ: Yes, Your Honor.

THE COURT: You may call your next witness.

MR. NORMAND: Jeff Hunsaker, Your Honor.

MR. SINGER: Your Honor, we're going to have another one of our attorneys put on Mr. Hunsaker. His name is Jason Cyrulnik, and he'll be with the witness in a moment.

THE COURT: All right.

Come forward and be sworn, please, right here in front of the clerk of court.

THE CLERK: Just right up here. Please raise your right hand.

JEFF HUNSAKER,

called as a witness at the request of SCO Group,

having been first duly sworn, was examined

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and testified as follows:

THE WITNESS: I do.

THE CLERK: Thank you. Please take the witness stand over there.

MR. CYRULNIK: Good morning, Mr. Hunsaker.

THE COURT: Hang on just a minute.

THE CLERK: Please state your name and spell it for the record.

THE WITNESS: Jeff Hunsaker. J-E-F-F H-U-N-S-A-K-E-R.

THE COURT: You may proceed.

MR. CYRULNIK: Thank you, Your Honor.

DIRECT EXAMINATION BY MR. CYRULNIK:

Q. Mr. Hunsaker, are you currently employed?

A. Yes.

Q. And what is your current employment?

A. I work for the SCO Group. My title is president and chief operating officer of SCO Operations.

Q. And what is the relationship between SCO Operations and the SCO Group?

A. It's a wholly-owned subsidiary of the SCO Group.

Q. How long have you been president and chief operating officer of SCO Operations?

A. Since December of '07.

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Q. And when did you first start working for SCO?

A. I started in January of 2000 with Caldera SCO.

Q. And can you briefly describe your prior positions at SCO starting in January 2000?

A. Yes. I started as director of sales, and over subsequent years I was over sales for the Americas division. I was vice-president of worldwide marketing, vice-president of worldwide sales, general manager of our UNIX division and also general manager of our mobile business until recently president, chief operating officer.

THE COURT: Until recently what? Excuse me. I didn't hear you.

THE WITNESS: Until recently president and chief operating officer of SCO Operations.

THE COURT: Thank you.

Q. BY MR. CYRULNIK: Mr. Hunsaker, did your responsibilities generally remain the same during the course of your time with SCO?

A. Yes. Primarily focussed on sales, marketing, business development activities.

Q. Can you briefly describe your employment prior to joining SCO in 2000?

A. In 1989, I started with a company called WordPerfect Corporation in sales and marketing capacity. And for the next seven, eight years until I believe it was 1998, I

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was with the same company, but we were acquired by Novell and Corel Corporation. And then in 1998, I worked for a company called Baan, B-A-A-N, enterprise resource planning company in a sales capacity until 2000 when I joined SCO Caldera.

Q. And what was the nature of your work at WordPerfect and Baan?

A. I was a product marketing, regional sales manager, so fairly consistent always focussed on sales marketing, business development.

Q. So would it be fair to say you've had almost 20 years of experience in the sales or marketing aspects of the computer industry?

A. Yes.

Q. Can you briefly summarize your educational background for the Court?

A. Bachelor of Arts degree in business from Utah State University.

Q. And when was that?

A. In 1989.

Q. Mr. Hunsaker, I'd like to go back to the 2002-2003 time period for the moment. And can you describe generally your role during those particular years?

A. Yeah. During that time frame, I was vice-president of worldwide marketing, also during that time vice-president of sales.

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Q. And what were your responsibilities as vice-president of sales and marketing?

A. Generally in terms of marketing and sales, you're focussed on the customers, products, making sure that your product are messaged properly, they're priced properly, that there's a way to distribute those products, that your sales teams are out selling and talking to customers, the administrative side, you know, of quotas and so forth. So it's just generally driving those activities.

Q. What products was SCO primarily selling or marketing during the 2000-2003 period?

A. We were selling UnixWare and OpenServer is our primary flagship products.

Q. What was UnixWare?

A. UnixWare is an operating system that runs on hardware that serves up applications, business applications, that allow companies to function. And UnixWare comes, you know, from the early days of AT&T, USL, Novell and through SCO. And so that was that product.

Q. And what was OpenServer? That was the second product you mentioned.

A. OpenServer is also an operating system, same scenario. Runs on hardware required, and also serves up applications for various customers. And we started in the early days with SCO back in I think late '80s.

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Q. Mr. Hunsaker, I believe you testified that UnixWare and OpenServer, I think you used the term --

THE COURT REPORTER: I'm sorry?

MR. CYRULNIK: Sorry.

Q. BY MR. CYRULNIK: I believe you used the term they were SCO's flagship products during that period?

A. That is correct.

Q. What percent of SCO's annual revenue do UnixWare and OpenServer account for approximately?

A. At that time and still today, almost 100 percent of our revenue. I mean, 95-plus, 98 percent of our revenue comes from those two products as it relates to products.

Q. And are you familiar with the term installed base as it's used with respect to an operating system?

A. Sure.

Q. Can you generally describe the size of OpenServer's install base?

A. Well, we've stated for many years over the history of this company we've sold approximately 2 million servers that have been deployed with, you know, various installations. And OpenServer has accounted for approximately two-thirds of the overall installed base and revenue for our company.

Q. In your various sales and managerial positions, did you have occasion to use the term UNIX?

A. Yes.

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Q. Did you have occasion to use the term System V?

A. Yes.

Q. And how often did you use those terms?

A. You know, fairly frequently with customers, with employees discussing our UNIX and System V technologies.

Q. Mr. Hunsaker, when you use those terms, what did you mean to convey?

A. UnixWare and OpenServer. We're talking about our products. And so when I use the term UNIX or System V, I'm referring to the brand of UnixWare and/or OpenServer.

Q. Were you referring to a particular release when you would use those terms?

A. Well, yeah. Release version of UnixWare or version of OpenServer, yes.

Q. If you heard the term UNIX or System V being used by a customer in the year 2000, for example, what product, if any, would you have in mind that that customer was referring to?

A. I don't recall exactly which version, but it would be UnixWare Version 7, 7.1, perhaps.

Q. And that was the current release?

A. It was the current version at that time, yes.

Q. Mr. Hunsaker, was the latest release of UnixWare, UnixWare 7, referred to by any other names?

A. Yeah. We referred to it as System V Release 5,

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SVR5. It's synonymous with UnixWare 7.

Q. And is that same SVR 5 used internally?

A. Yes.

Q. Is it used externally?

A. Yes.

Q. Do you have any technical training or expertise?

A. No.

Q. Your expertise is in sales and marketing?

A. Correct.

Q. From a sales and marketing perspective, Mr. Hunsaker, did you have an understanding as to the relationship between the latest release of UnixWare, say UnixWare 7, and the prior release UnixWare, say UnixWare 2?

A. Well, the relationship is -- we have always understood from the sales and marketing perspective we're selling the latest release of our products, UnixWare 7.13 or whatever the version was at that point in time, which incorporated the prior release technology and brought forward any of the technology that was commercially valuable that obviously was important to bring forth into the next version of our products to sell to our customers.

Q. How about the relationship between that prior release of UnixWare, say, UnixWare 2, and the proceeding release System V, say SVR4.2?

A. Same scenario. Once again, it's all based on

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whenever the time was we would be selling the latest version of our product where it included the System V technology, and we would bring forth and forward earlier technologies that were relevant, that were commercially valuable, that were needed by customers based on their requests and their input and deliver this into a new product.

Q. Mr. Hunsaker, when you say that you understood the latest release of UnixWare to include the commercially valuable technology from the prior release, would you explain to the Court what you mean by commercially valuable?

A. Well, I'm referring to, first of all, technology that is current, that it runs and is supported by the latest hardware, latest drivers, that is based on features and functions that our customers need to run their products and their application within their environment. And so it obviously needs to incorporate relevant current technology that we bring forth and then add to that technology for new versions of our product.

Q. And how would SCO go about determining what technology fit that description, what technology was commercially valuable?

A. Well, from a sales perspective --

MR. ACKER: Your Honor, I object to this line of questioning. The witness has testified he does not have technical expertise. He has no involvement in the development

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process, and we're really just asking the witness to speculate now how the development process works.

THE COURT: Mr. Cyrulnik?

MR. CYRULNIK: Your Honor, I'm specifically asking the witness about his sales perspective, and I believe the witness has now testified his sales team was intricately involved in determining the commercially valuable technology being included in the next release.

THE COURT: I'll let you ask. Overruled. You can go ahead.

THE WITNESS: Yes. Once again, from a sales marketing perspective, which has always been my world, we meet with our customers. We talk to them face to face, and we have, whether it's user conferences or annual forum events, we have webinars, just obviously, you know, need to need discussions with customers to understand from them what's relevant and what's important, what they need in terms of their solutions for an operating system.

And we take this information, and we move it forward. We talk to our engineers. And we convey to them, you know, this technology is not needed or required. They're looking for new technologies, new functions. And we have what's called product meetings. The product managers and the system engineers and our sales teams communicate updates from the customers upon a weekly basis.

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Q. BY MR. CYRULNIK: So the process of determining the commercially valuable technology was a process that involved the sales side of SCO and the engineering side together?

A. Yes; because the sales teams' responsibility was to focus on the customer and understand their needs and then convey that to the engineers who would then develop the products and the applications.

Q. And with whom did you interact on the development side, on the engineering side to convey the information feedback that you were getting from the marketplace as to what was commercially valuable?

A. Well, during that time frame, we spent time talking to our product managers and engineering leads, Andy Nagle, John Maciaszek, Wolf Bauer, Sandy Gupta and others in terms of these meetings.

Q. And did you have an understanding as to what they would do with the information you would to provide them?

A. Well, they would -- they're smart individuals, and they understand the importance of customer feedback. And so they would take the latest technology, and they -- functions and technology that is relevant and current and move that forward and then add new features and functions that the product needed at that time to deliver that solution to a customer so we could sell it.

Q. Were you involved in that process at all, the

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engineering process?

A. Not the engineering process, but I was involved in the sales communication process to the engineering teams. That was my focus and my team's focus.

Q. Mr. Hunsaker, in addition to the various releases of UnixWare and OpenServer that you said you were marketing and selling during your tenure, were there other, any other UNIX products that you were marketing or selling during that time?

A. Yeah, there were other products. But once again, almost exclusively and primarily our revenues were made up of OpenServer and UnixWare. We had products such as SCOofficer Server, as I recall, and Merge and a few others that don't come to mind.

Q. That's fine.

During your tenure, did you or your sales team ever market or sale older pre-UnixWare releases of UNIX? And I'll call those SVRX for short.

A. No.

Q. Why didn't you ever market or sale to customers pre-UnixWare releases of System V?

A. It doesn't really make sense to me. Our customers weren't asking for old technology. They want the latest and greatest technology. And so from the sales perspective, we're focusing on selling our most current technology. You know,

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the System V Release 5 technology at the time with UnixWare 7, which once again incorporates all of the technology that's commercially valuable over many years of work. And so that's what they ask for, and, of course, that's what we're focusing on selling.

Q. Mr. Hunsaker, did you have direct contact with SCO's customers?

A. Yes.

Q. In the context of that contact, do you recall any instance in which a customer or sales rep requested a license, either source or binary, to a pre-UnixWare release of UNIX System V?

A. No.

Q. Never?

A. Never.

Q. Do you recall any instance in which you personally tried to sell or market or in which you told members of your team to sell or market a pre-UnixWare version of UNIX System V?

A. No. I wouldn't even know how.

Q. Mr. Hunsaker, you testified earlier that you were working at SCO in the 2002-2003 time period in particular?

A. Yes.

Q. Are you familiar with the SCOsource program?

A. Yes.

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Q. And can you generally describe what the SCOsource program was?

A. This program was put in place to provide a licensing mechanism for Linux customers that were perhaps unknowingly using our intellectual property, our UNIX technology. And it provided a way to make them whole or clean, if you will.

Q. Were you involved in the administration of the SCOsource program?

A. I was involved in the overall program based on my responsibilities and sales in marketing, but I didn't run the program.

Q. Who did run the program?

A. That was -- the general manager of that division was Chris Sontag.

Q. And do you have a recollection as to how the SCOsource program unfolded, how it came to be?

A. I do. I remember being in a sales call in the 2002 time frame, late 2002, as I recall, in Tennessee with a customer, and they were, we found out, moving from our UNIX platform to a Linux platform. And they -- in the course of these discussions and so forth, we realized that they were unbundling our libraries from our SCO UNIX technologies and using those within Linux to allow for their Linux application to run easily on Linux.

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And, you know, a big flag went up and said, well, you can't do that. Our licensing agreement, our ULA, UNIX licensing agreement, does not allow customers to unbundle technology to be put in Linux.

And so that's kind of the genesis for these discussions. And we then developed a licensing program to allow those customers that wanted to use those libraries, we allowed them through this licensing program which they would pay for.

Q. I'd like to show you what's been marked as Novell Exhibit 387.

And, Your Honor, can I approach?

THE COURT: Yes.

MR. CYRULNIK: A book that contain all of the exhibits that I intend to use.

THE COURT: All right.

THE WITNESS: Yes.

Q. BY MR. CYRULNIK: Mr. Hunsaker, do you recognize Novell Exhibit 387 generally?

A. It looks like a presentation, a PowerPoint presentation.

Q. And were you involved in creating PowerPoint presentations of this sort?

A. Yeah. I was involved and reviewed and had, you know, some say clearly in presentations that were communicated

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out to our employees and customers.

THE COURT: This is Novell 387?

MR. CYRULNIK: Novell 387, yes.

THE COURT: Thank you. Excuse me. Go ahead.

Q. BY MR. CYRULNIK: Mr. Hunsaker, if you could turn to Page, I believe it's 4 or 5. It's marked as 4267 in the bottom right-hand corner as a Bate stamp. Once again it's Novell 387. You can also access it on your screen. It's easier.

A. I'll just look at it on the screen.

Q. Okay. And do you recognize this part of the SCOsource presentation?

A. Yes. It looks like it's talking about what I just described, the System V for Linux license.

Q. Do you recall being involved in creating this presentation about SCOsource?

A. I recall being -- and reviewing these presentations. I didn't author all of those documents.

Q. And the text of this slide reads:

SCO shared UNIX libraries from OpenServer and

UnixWare for use of Linux.

Is that correct?

A. Correct.

Q. Was SCO licensing libraries in any prior versions of UNIX to its customers?

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A. No. Once again, we're focusing on our latest technologies of UNIX and OpenServer, which included all of the commercially valuable technology from prior releases.

Q. Does SCO continue with SCOsource after those initial concerns about the libraries, OpenServer and UnixWare?

A. Yes. We realized after a period of time that it was more than just the libraries that were being used within Linux and recognized there was additional code. And so we furthered this program and instituted what is called, I believe, the SCO IP license program, which included more of our UnixWare code and technology that was found in Linux.

Q. Mr. Hunsaker, what was the nature of the agreements that were used to license this technology?

A. To license the SCOsource technology?

Q. The SCOsource agreements.

A. Well, these agreements were based off of our UnixWare technology. And it was simply a license that a customer would use and to register, and then they would be made clean, meaning we would not come out after them and sue them, if you will, for using our code inappropriately. It was obviously different from a UnixWare license because once again, with the UnixWare license itself, you could not unbundle, the ULA, the UNIX License Agreement didn't allow you to unbundle the technology. So it was a new license, a new product, if you will.

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Q. So with respect to, say, the libraries just as an example, the traditional type of UnixWare license would allow you to use those libraries in what context?

A. Well, you would use those libraries on a Linux deployment for those customers that were trying to migrate UNIX applications to Linux. So they would purchase a license in order to run those Linux -- those applications, UNIX applications on Linux.

Q. And just to clarify that, what was allowed under the SCO source license?

A. Correct.

Q. And under a pre-SCOsource license, UnixWare license, would that be allowed?

A. No. No. Once again, you couldn't unbundle the technology. And so that's why we developed the SCOsource IP license.

Q. I believe you characterized these agreements in your answer, a couple of answers ago, as types of UnixWare licenses. Was that always your understanding of the SCOsource agreements?

A. Yes.

Q. I'd like to show you what's been marked as SCO Exhibit 236. And again, it's in your binder and will be on the screen in a moment.

Do you recognize SCO Exhibit 236?

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A. Yes. A press release that we issued in July regarding UNIX and our copyrights and so forth. Yes.

Q. And again, were you involved in issuing these press releases or creating or reviewing these press leases?

A. Primarily reviewing the press releases for content. Did not author every word of the documents, no.

Q. I'd like to zoom in on the bottom third of the press release that begins:

Following the distribution of our letter.

A. Uh-huh (affirmative).

Q. And press release quotes Mr. McBride saying:

Today we're delivering a very clear message to

customers regarding what they should do.

Intellectual property is valuable and needs to be

respected and paid for by corporations who use it

for their own commercial benefits. The new

UnixWare license accomplishes that objective in a

fair and balanced way.

Is that an accurate reading?

A. Yes.

Q. And does the language of that press release, is that consistent with your recollection that you had always termed this UnixWare license?

A. Yes, absolutely. The SCOsource program was all built on our UnixWare licenses built around a UnixWare

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license.

Q. Now, Mr. Hunsaker, you had testified -- well, I think you said it was UnixWare license. It was different from the traditional UnixWare license. Can you elaborate on the specific difference between the UnixWare license, traditional UnixWare license and the SCOsource UnixWare license?

A. Well, one is the target audience, I mean, for the traditional UnixWare license, it was sold to SCO customers and other SCO customers and new SCO customers that we wanted to run our UnixWare technology on, our OpenServer technology on their hardware. And it included a packaged product. It included a manual. It included CDs. It included registration, cards. It included a license agreement. And so it was physically a packaged product that was delivered and installed and it was ready to use.

On the other hand, a SCOsource IP license, while it's based on the same technology of UnixWare, it was focussed for Linux customers that just wanted to be made clean and one against ensured them that we were not going to sue them. And it didn't have anything to install. There was nothing physical to it. It was simply a license that allowed them to run this in that instance. There was no manual or other things that I've talked about.

Q. Let me direct you to Novell, what we've marked as Novell Exhibit 227. And if you'll briefly review that.

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Do you recognize this document?

A. Yes.

Q. And the document appears to be a series of e-mail exchanges that involved either you sending or receiving e-mails?

A. Correct.

Q. Could you turn to Page 2, please, of the document, Novell 227. And I'd like to focus in on the e-mail that you sent on July 31st of '03. Do you see that second half of the page?

A. Yes.

Q. And if you can specifically look at the line that begins, Item 1.

A. Okay.

Q. You were the author of this e-mail?

A. Yes. It says my name. Yes.

Q. And, Mr. Hunsaker, you wrote on July 31st of '03:

The official name of this program will be the

SCO UNIX IP compliance license program. This is

not a UnixWare 7.1.3 SKU.

A. Yes.

Q. Mr. Hunsaker what's an SKU?

A. SKU or SKU is defined as a stock keeping unit. It's more of a manufacturing operational term designed to categorize or name a particular product. It's a unique

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identifier for products that we deliver.

Q. And what did you mean when you were writing that, this is not a UnixWare 7.1.3 SKU?

A. Well, it's not. It's different. And once again, my mindset is always from a sales marketing perspective. I mean, that's my focus. But from a -- so from a product perspective, this was a different SKU than the SCO IP license. It had a different part number. It had -- you know, like I described earlier, it had a manual and CDs and disks and license agreement that were unique to that.

Whereas, the SCO IP license was based on the same technology. So if you look at the technology perspective, it's the same. But from a pure product perspective, it requires a unique identifier and different package.

So it's -- if I could -- perhaps let me just give a quick analogy here. The way I view this is if you were looking at an automobile, for example, a Chevrolet or a GMC truck, they're very different in terms of products and customers that they focus on, in terms of the brand. And so -- but the underlying technology is pretty much the same. I mean, it's based on the same engine, the same chassis. But if you look at the product managers that are responsible for the GM Division versus the Chevrolet Division, they're very different.

As a customer, I'm a GMC guy. That's the truck I

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prefer. And others like Chevy. So they're different from a product perspective, but the technology is essentially the same.

Q. And you were talking about from a technology perspective or a product perspective?

A. I'm talking about it from a product perspective, they were unique. From a technology perspective, they're pretty much the same.

Q. Continue on in the e-mail. Pick up where we left off:

The license is called the SCOUnix IPC license

for Linux. The only rights that this license

provides is for Linux binary run-time copies.

When we are ready to issue a similar license for

AIX, it will be called the SCOUNIX IPC license for

AIX. There is no connection between

UnixWare/OpenServer and the SCOUnix IPC license

whatsoever. They are independent.

Did I read that accurately?

A. Yes. I mean, that's what I wrote at the time.

Q. Mr. Hunsaker, can you explain once again what you meant when you wrote this language?

A. Well, once again, you've got to remember the perspective that I authored this from. I'm thinking of things more in terms of binaries, in terms of a product. And this is

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different. The SCO -- the IP license is different in terms of a product, if you will, than it is from a SCO UnixWare license. And so in that respect, they're very much different. But in terms of the technology, it's the same technology.

Q. And were you involved from the technology perspective at all, the licenses? Were you involved in defining the technology?

A. Just providing feedback from what our customers requested.

Q. Mr. Hunsaker, if you could turn to Page 1 of that exhibit. I'm if following the chain of e-mail correctly, it's a response to you're e-mail from someone named Kim Jenkins at the bottom of the page?

A. Yes.

Q. Who was Kim Jenkins?

A. I believe Kim was a consultant for the company.

Q. And if you look at the response he gives, he writes:

Item 1, name is fine by me. Separation from

UW 7.13 is also fine with me. I like the

simplicity but defer final decision to Chris.

Do you have any understanding as to what Mr. Jenkins meant when he said he likes the simplicity of separation of 7.13?

A. I don't know exactly what his intent was, but I

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think it's similar to what I described previously.

Q. Mr. Jenkins continues:

Also as a clarification to your last sentence

Item 1, this license does not allow users to run

Linux legally. The license allows Linux end users

to be clean with SCO.

Did I read that correctly?

A. Yes.

Q. Mr. Hunsaker, do you have any understanding as to what Mr. Jenkins meant when he said that?

A. I think as I previously testified, the license allowed the infringing Linux customers to be clean with SCO. We were not going to sue them because they had a license that covered the technology that we owned. And they were clean with SCO.

Q. And is Mr. Jenkins' understanding consistent with your understanding?

A. Yes.

Q. And, Mr. Hunsaker, was it your understanding at the time that you were offering SCOsource licenses that Linux users were free from claims from any other company aside from SCO if they bought the IP license from SCO?

A. Yeah. This related to our technology, and they're clean with SCO. Others could make other claims if need be. But once again, this is focused on our technology, our

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UnixWare systems allowing them to be clean by licensing this from us and from SCO. Others could do whatever they chose.

Q. Mr. Hunsaker, you just described a number of differences between this license and the last, this UnixWare license and the other UnixWare license. Do the differences that you just described have any impact on how the SCOsource program was administered or managed?

A. Well, yes; in that we created a new division. And we had a general manager, Chris Sontag, that ran that business. They focused on a different set of customers, a different target market and its own products and revenue. And so that's the difference from setting up a new division.

Q. So SCO had a new division to run this particular type of license?

A. Correct.

Q. I'd like to show you what had been marked as Novell's Exhibit 159. Do you recognize Exhibit Novell's 159?

A. Yes.

Q. And can you generally describe what Novell 159 is?

A. Well, it states:

SCO establishes SCOsource; New Division Created

to Insure and Protect Intellectual Property in Linux

Environments.

So it's announcing the creation of this business division.

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Q. And do you recall the creation of that new division?

A. I do.

Q. And can you explain to the Court why a new division was necessary to run this particular license?

A. Well, as I've described previously, the product was being focused on the Linux customers, the Linux installed customers. And so there was a new sales organization that was focused on selling these licenses to that audience. And we had a general manager running that business with the unique, you know, SKUs and parts numbers for those products in the SCO UNIX division. Once again, while the technology is consistent across both, we were focused on selling to our installed base and to new UNIX customers that wanted to employ our UnixWare and OpenServer technology.

Q. Mr. Hunsaker, did you charge customers for a SCOsource license?

A. Yes.

Q. Do you recall what you charged?

A. Yeah. We charged the same price as we charge for a UnixWare 7.13 license. It was 1399.

Q. I'd like to show you what's been marked as Novell's Exhibit 245.

THE COURT: Pick a good break point, Mr. Cyrulnik.

MR. CYRULNIK: Sure. I only have a couple

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questions left, if Your Honor would like me to finish up with this witness.

THE COURT: Go ahead.

Q. BY MR. CYRULNIK: Do you recognize Novell 245 as an e-mail from John Maciaszek to a bunch of recipients that attaches the document that begins on the second page of that document?

A. Yes.

Q. What's that document that is attached?

A. It is the SCO IP compliance program for Linux.

Q. And I believe it's labeled, Internal Product Announcement?

A. That's correct.

Q. And did you participate in drafting internal product announcements?

A. I did not draft the announcements, but I reviewed the announcements.

Q. If you would turn to the next page for a moment, third paragraph. The internal product announcement writes:

Pricing of the Linux IP licenses is based on

standard pricing for the UnixWare 7.1.3 using the

business edition, which is 1-CPU as the starting

point.

Did I read that correctly?

A. That is correct.

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Q. So you priced the SCO IP license, the SCOsource agreement, the same based on the pricing of the UnixWare 7.1.3?

A. Yes.

Q. And it's exactly the same price?

A. Yes.

MR. CYRULNIK: Nothing further. Thank you.

THE COURT: Thank you. We'll take a 15-minute break.

(Recess.)

THE COURT: You may cross-examine, Mr. Jacobs.

MR. JACOBS: Thank you, Your Honor.

CROSS-EXAMINATION BY MR. JACOBS:

Q. Good afternoon, Mr. Hunsaker.

A. Good afternoon.

Q. You've spent by my calculation about over 10 years in the computer business?

A. More than that. Since about 1989.

Q. Selling products?

A. Correct.

Q. Going to customers and saying, we've got a value proposition for you?

A. Yes.

Q. And it's in the functionality of our software or hardware, that value proposition?

A. Yes.

Q. It will do good things for your business. It will allow you to perform functions better than you were performing them before?

A. Are you saying generally speaking or in a certain context?

Q. In selling the kinds of products you've sold in your career in the computer industry.

A. Sure. You're trying to provide value for value to

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the customers.

Q. But the value is value to the customer and actually enhancing the operation of their business?

A. You want to improve, absolutely sell something that they will need, that they'll use and add value to what they will use.

Q. Have you ever done anything like SCOsource before?

A. No.

Q. Pretty usual product, isn't it?

A. I don't know in terms of how unusual it is. I just know it's important for people to protect their intellectual assets.

Q. That's what it was about it; right? It wasn't about offering customers functionality to drive their business; it was about SCO's efforts to protect what it believed were its intellectual property assets; correct?

A. That's partially true. I mean, clearly some customers wanted to and chose to use Linux, and so we offered them a way to be clean, if you will, by using infringing SCO technology.

Q. You actually stopped selling Linux; right? You got out of the Linux business, and your relationship with Linux was as asserter of intellectual property and licensor; correct?

A. Yeah. Over time we stopped selling and

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distributing our Linux release.

Q. Was UNIX System V Release 4, UNIX System V Release 4 code commercially valuable in the context of SCOsource?

A. It was commercially valuable as it related to -- we were offering the latest versions of our UnixWare product in our System V Release 5 technology. So as the commercially valuable code that was found in prior versions of System V, whatever version or release it was that came forward, that technology and the latest version was commercially valuable.

Q. Different question. Now we're shifting over to SCOsource, which you were involved in selling; correct?

A. I was involved absolutely in those activities. I was not responsible for selling SCOsource licenses. That was done by Chris Sontag and his own sales team. I was not responsible for that sales organization, and frankly did not sell the licenses myself.

Q. Well, let me ask it this way. When you were examining the question of what's commercially valuable under the direct examination of SCO's counsel, were you asking that question -- were you answering that question in the context of SCOsource?

A. I'm not sure I follow the question.

Q. Were you answering the question of whether older code is commercially valuable, did you have in mind SCOsource

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campaign when you were answering that question?

A. Once again, the focus that we put forth at the time when we entered the SCOsource licensing was to develop a licensing program based on our UnixWare technology, our latest System V code. And we offered that to our customers and Linux users to indemnify them, so to speak, based on our technology.

Q. Is it your testimony that System V Release 4 code, whether or not it was carried forward into the latest release of UnixWare but SCO believed was found in Linux, was not commercially valuable?

A. What I'm saying is commercially valuable is the technology that moved forward into at the time the UNIX System V Release 5 code. And whatever code that was that came forth was what we determined at that time commercially valuable because that's what customers were willing to pay for. People weren't interested in old technology that didn't run on certain hardware or wouldn't work and function with drivers or other -- or applications. They were looking for our latest and greatest technology that was found in System V Release 5. And that was the impetus of the SCOsource licensing program. It was derived based on that technology.

Q. And that is a determination that you recall having been made in the context of SCOsource?

A. I didn't have to make that determination. It was -- and from my viewpoint, once again in sales and

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marketing, I don't reflect back on old technology and old products. It's just -- our customers don't look back at old technology and old products as, yes, that's what I want. They want the latest technology, the relevant technology that works with their hardware and applications. And so that's what we derive the program based on is the current version of the time of our UnixWare technology. So it's based on that.

Q. But you weren't selling technology or product and SCOsource to customers; you were selling immunity from intellectual property lawsuits; correct?

A. We were selling a license that was based on our latest technology, our UNIX System V technology.

Q. Do you know for a fact, Mr. Hunsaker, that the code that SCO alleged was found in Linux was also found in UNIX System V Release 5?

A. I'm not a legal expert. I'm not an engineer. I don't know all the technical ins and outs. All I know is that the code that was found in our UNIX System V or latest UNIX products was what we found to be infringed upon in Linux. And so that's what we focused our IP program around.

Q. And when did that become clear to you, sir?

A. Well, I think that's all I talked about. We started learning about this in the late 2002 time frame based on our libraries, and then in 2003 with other instances of our technology.

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But, you know, I think others could talk more about that than myself. Once again, I was focussed on our products and our product business and realized talking to customers that, all right, there's some issues here.

Q. You understood that the SCOsource campaign had another dimension that made it different from your traditional product sales, which was that it was heavily -- heavily involved lawyers; correct?

A. Well, I'm not sure I follow your question.

Q. By March 2003, SCO's in litigation with IBM; right?

A. Yes. I think it was about that time frame.

Q. And you knew there was a lot of legal activity surrounding the SCOsource campaign?

A. I don't know if there was legal activity around the SCOsource campaign or if there was legal activities around the lawsuits that were going on at the time.

Q. And you're separating those from SCOsource?

A. Well, I'm just saying that the issue -- and once again, I'm not an expert. I know there's a contract dispute. It was one of the issues that relates to IBM, but I don't think we're here to talk about that.

MR. JACOBS: Your Honor, may I approach?

THE COURT: Yes.

Q. BY MR. JACOBS: Mr. Hunsaker, I've handed you Novell Exhibit 270. Would you take a look at that for a

577

minute, please.

A. Uh-huh (affirmative).

MR. JACOBS: This has been pre-admitted, Your Honor.

Q. BY MR. JACOBS: Mr. Hunsaker, Novell's Exhibit 270 is an e-mail that you sent to the -- an e-mail that's called execgroup. Do you see that?

A. Yes.

Q. And that's the senior executives of SCO?

A. Yes.

Q. And you were one of them?

A. Yes.

Q. And you attended a meeting on December 11th, 2003, and you were responsible for taking notes that day.

A. I don't know if I was responsible for taking notes, but it appears that I summarized some of the discussion points of that day.

Q. And you were -- it's December 2003. SCOsource has been under way for about a year. You're looking ahead to 2004 and you're laying your plans; correct?

A. It seems to be what we were discussing.

Q. And you had some revenue goals at SCO 48485. Do you see that?

A. Yes.

Q. And that was discussed at that meeting?

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A. Sure.

Q. And by the way, "OPS Council," what does that mean?

A. Operations.

Q. And you were part of the operations council?

A. Yes.

Q. And the operations council had various strategy meetings around SCOsource?

A. This wasn't around SCOsource. This was around our overall business.

Q. SCOsource was discussed at many OPS committee OPS council meetings?

A. Well, as you can see here, we're talking about we're running a company. So the operations council gets together to discuss all aspects of running a business, setting goals for the company, motivating employees, setting strategy, direction, trying to create, you know, the next phase of our business, yes.

Q. And the answer to my question is "yes"?

A. What was your question?

Q. The OPS council discussed SCOsource on various occasions?

A. Yes.

Q. And if you go down among the goals for 2004, it says, "emerge as industry leader for IP." Do you see that?

A. Uh-huh (affirmative).

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Q. And then, "gain Linux justice." Do you see that?

A. Uh-huh (affirmative).

Q. And that was something that was discussed at the meeting, "gain Linux justice"?

A. I don't recall specifically, but it is documented here.

Q. And down at the next heading, the heading is SCOsource, and is refers to Chris Sontag as the general manager; correct?

A. Yes.

Q. And among the activities of SCOsource that's being discussed there is litigation. Do you see that?

A. Yes.

Q. And litigation against IBM. Do you see that?

A. Yes, I see that.

Q. And end users and others. Do you see that?

A. Yes.

Q. So litigation was part of the SCOsource activities that were contemplated when you were discussing SCOsource in this meeting; correct?

A. Not necessarily. I mean, clearly there was litigation going on at the time. So that was part ongoing litigation as I believe at this time. I don't know if all my days are correct. But, sure. That's a relevant discussion when you're involved in litigation with other companies in OPS

580

council.

Q. And then there's a reference to the licenses that SCOsource might offer. Do you see that?

A. Yes.

Q. And RTU, the right to use. That's the SCO intellectual property license for Linux as you understood it; correct?

A. Yeah. The right to use our intellectual property in Linux.

Q. And then SCOx actually is about product development; correct?

A. Yeah. It was a name we used for a certain period of time to describe our general UNIX business.

Q. I'd like to scroll down, I'd like you to look down and we will scroll down to the bottom fifth of the e-mail. You took the following notes:

What is our business model for SCOsource and

SCOx? SCOsource. Take 1500 penguins and create a

room in Lindon and line them up and place the

company brand on each one of them. We then send

out a letter within the next few weeks which takes

our code claims and demonstrates to customers what

we have found to date. We let the end user know

that, "if they want to be safe, they need to

remove the offending code from Linux in order to

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continue to use legally. Once you have cleaned up

your system, you will be clean."

Do you see that?

A. I do.

Q. That was something discussed at this meeting as a undoubtedly humorous way of discussing the SCOsource ideas at the time; correct?

A. I do not recall that discussion, but I see it here in this document.

Q. And then it refers to the codes. It says:

Code such as JFS, Malloc, RCU, et cetera.

Do you see that?

A. Yes.

Q. And that was the code in this discussion SCO was thinking about making clear to customers is contained in Linux; correct?

A. Based on what it states here, that's what it's referring to. I'm not going to testify specifically what code is or is not found in Linux. That's not my area of expertise. I don't understand all the technology.

Q. And you don't know whether JFS is found in System V Release 4 code?

A. Once again, you're talking to the wrong guy about those types of issues. I was focused on sales and marketing activities.

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Q. If JFS was found in System V Release 4, would you agree that it is commercially valuable in the context of the SCOsource as represented by this discussion?

A. Well, I'll repeat. Once again, what we do, if it was valuable it would be found in our latest versions of our UNIX System V technology. And that's where it would be found because that's where we were focusing on licensing and selling. So I can't recall -- I can't talk about older technology.

Q. So let me understand the basis for what you've said because you said it several times.

Do you recall a specific discussion in the context of SCOsource in which it was represented to your satisfaction that all the code that was the focus of the SCOsource campaign was found in the latest release of SCO's software?

A. You know, once again, I don't know if I'm the -- have the technical understanding of all the codes, so I'm not going to pretend to know that. All I know is that we were selling and marketing our latest versions of our products to our UNIX customers. And then when it came to our SCOsource IP agreements, it was a license based on our latest technology of our products and all the commercially valuable technology that was found in our latest releases. You'll have to talk to other experts about specific codes. I don't know. I just know that we sold what customers wanted, and it was the latest

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and greatest stuff.

Q. And then the notes recount the discussion around what would happen next after the penguins were released, I suppose:

We will require the CEO and CIO to respond to

this letter call to action.

Do you see that?

A. Yes.

Q. And then you describe what the letter -- or the meeting -- in the meeting there was a discussion of what the letter needs to state. Do you see that?

A. I do.

Q. And it says:

We will state the facts and the demands, the

timeline and the consequence.

Do you see that?

A. I do.

Q. And the consequence is the license cost of, gee, only $700 or $1400 a server, and litigation, $$$. Do you see that?

A. I do.

Q. And that was part of the discussion that the license would be cheaper than the litigation; right?

A. I don't know what it means. I don't remember this document, frankly.

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Q. And then there was some analysis in the meeting about who might take what course of action. Do you see that?

A. Uh-huh (affirmative).

Q. And that there was a plan that was described including, if you go -- scroll down a little bit, lawsuit 1 and lawsuit 2. Do you see that?

A. Yes.

Q. And then scrolling up a little bit. Item 2, letters send December 17th. Do you see that?

A. Yes, I do.

Q. So let me ask you about an exhibit we saw here previously. Novell Exhibit 274. Novell Exhibit 274 is a letter sent on December 19th, two days after the December 17th date referenced in the plan of action that we just discussed. Do you see that?

A. Yes.

Q. And if you -- if we scroll down on the letter now, and illuminate that paragraph. And do you see that it refers to AT&T binary interfaces down there?

A. Could you highlight that for me?

Q. Yes. That paragraph right there.

A. Okay.

Q. Do you see it's referring to AT&T binary interfaces?

A. I see where it states that, yes.

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Q. Could you take a look at this letter and tell me whether it says anywhere anything about SCO's latest and greatest technologies?

A. No. I didn't author this letter. I don't remember any details in the letter. And so once again, I'm not able really to testify specifically about the contents and the timeframe in which it was written.

Q. I want to ask you about OpenSolaris. What do you know about OpenSolaris?

A. Not a whole lot. I do know that that it's a Sun product.

Q. What kind of Sun product? Is it a word processing --

A. It's an operating system.

Q. So you know it's an operating system. You know that OpenSolaris is open source operating system; right?

A. Yes.

Q. And you know that it's based on System V code that predates the asset purchase agreement in 1995?

A. I don't know what it's about. Again, my focus has not been in the technology as much as selling and marketing.

Q. Did you have selling and marketing concerns around the release of OpenSolaris?

A. I remember I had questions at the time, but I don't remember anything specifically.

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Q. All right. Let's take a look at your questions.

May I approach?

THE COURT: Yes.

Q. BY MR. JACOBS: We're looking at Novell exhibit 327. And Novell Exhibit 327 is an e-mail from you to -- an e-mail that's called "Darlstaff." Do you see that?

A. Yes.

Q. Is that another e-mail for the executive team?

A. It was an alias for the directed course of Darl McBride.

Q. And you labeled it, "internal confidential." Do you see that?

A. I do.

Q. And it attaches -- it attaches several articles, but it attaches an article about SCO having given the green light to OpenSolaris. Do you see that?

A. Yes.

Q. And let's go through the article first so we can see the context of your question. So if you can scroll down. And this is an article that came out in April 15th, 2005. Do you see that?

A. Yes.

Q. And it reports an announcement by SCO that it won't raise legal challenges to Sun's plan to open source the Solaris UNIX operating system. Do you see that?

587

A. Yes.

Q. And then it goes on to talk about the fact that SCO is in litigation with IBM. And then if we scroll down a little bit more. And the article reports:

Sun plans to release OpenSolaris under its own

open source common development and distribution

license this summer. And SCO's chief executive

Darl McBride said SCO has no problem with that.

"We believe we have a pretty good idea of what Sun

is trying to do, close quote.

Do you see that?

A. I see it.

Q. And then he goes on to say:

After reviewing what their plans are and

reviewing what our agreements with them are, we

feel comfortable with the direction they're going,

he added. Sun took out a fresh UNIX System V

license from -- there's a typo there. It must

mean SCO -- in February 2003 joining Microsoft

Corp. as one of only a handful of SCO source

licensees.

Do you see that?

A. Yes.

Q. And then you read this letter, and then you ask to Darlstaff:

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Do you really give the green light? Are

we as confident in Sun's position with OpenSolaris

as this article intimates? I personally still have

my doubts. I think we should discuss.

Do you see that?

A. I do.

Q. So this got your attention, this announcement.

A. Apparently so.

Q. Different from Sun's release it and refresh it of the regular Solaris system; correct?

A. I don't know specifically.

Q. Well, something about these plans caught your attention. It wasn't the fact that it was a new release; it was the fact that it was open source, wasn't it?

A. I think I was trying to ask, since I had nothing to do with any license agreements to Sun or others, that I was wanting to understand what this means. And so I was posing a question here. Help me understand this so I can then convey what I need to my team.

Q. Well, you said:

I personally have my doubts.

What do you mean by that?

A. I don't know what I meant by that. I just wanted more clarification. I needed to understand asking some questions. Once again, I was not involved in those

589

transactions. I just needed to understand some specifics if I needed to answer any questions.

Q. Well, do you think you would have written that e-mail if you had concluded this was a minor blip in the evolution of operating systems software?

A. Well, I would hope as a responsible sales manager that represents employees and customers that I would need to understand the specifics about such announcements so I would ask questions. It doesn't mean things weren't right or wrong. It's just part of a process you go through in day-to-day sales or marketing management. Help me understand. You know, digest the information and move forward.

Q. I think I'm not asking simple enough questions, so let me ask a very simple one.

Did you consider the announcement of OpenSolaris, an open source version of Solaris operating system to be significant?

A. I didn't know the significance because I didn't understand what it meant. So that was why I was asking the question.

Q. As you sit here today, do you think it's significant?

A. It's relevant. I don't know how significant it is.

Q. Let's take a look at Exhibit 227. You have that in front of you from before. But if it's not right there, I have

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another copy. This is the e-mail that you were asked about on your direct examination.

A. Uh-huh (affirmative).

Q. Do you have it handy?

A. The one from the previous?

Q. No. No. Sorry. I'll give you another copy.

May I, Your Honor?

THE COURT: Yes.

Q. BY MR. JACOBS: Now, just to set the context, Mr. Hunsaker, this e-mail is being written in the summer of 2003; correct?

A. That's what it says, yes.

Q. And litigation is already under way between SCO and IBM; correct?

A. I believe so. I don't recall the exact date.

Q. And you're aware by this time of the significance of litigation to the preparation of documents and e-mails; that is, that what you write is likely to be discovered in litigation; correct?

A. I don't recall if I was fully aware of all those items.

Q. Did you have an understanding by this time that you could continue on as normal and write casual e-mails?

A. Well, I hope, you know, I wouldn't write casual e-mails. I want to write e-mails that make sense and reflects

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thought at that time.

Q. Now, you've testified probably between half a dozen and a dozen times that SCOsource was selling the latest and greatest technology; correct?

A. Yes.

Q. And how do you square that, sir, with what you wrote in this e-mail? That is, that UnixWare has nothing to do with SCOsource?

A. Once again, you must remember I'm not an engineer. And from the perspective that I had at the time and I have today, it's based on a product, a specific deliverable, a SKU that was called UnixWare and/or OpenServer. And it is different because that's how we think in the sales and marketing world. We're selling and marketing a particular product to our customer. And as I stated, it has its part number and materials and CDs and so forth.

And so in that respect, it was absolutely different. And it's very clear to me. There's nothing here that I'm hiding, if you will, because in my mindset, it was different in terms of the product. But as it relates to the technology, the underlying technology, it's based off of our UnixWare 7.1.3 technology.

Q. And we just explored that, sir. And I believe you testified that you weren't really the right person to ask about whether the SCO intellectual property license for Linux,

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what technology was implicated in that. Isn't that what you told me a few minutes ago?

A. What I said is understanding all the technical bits and bites within the operating system, I'm not one to testify on that. All I know is that we sell the latest technology that we have that is relevant to customers that has what they need in the product.

Q. So let me ask you again, sir. Do you recall a specific discussion in which it was represented to you that with the SCO intellectual property license for Linux, SCO is licensing its customers to its latest -- the Linux licensees to its latest and greatest technology?

A. Sure. Yes.

Q. And when you recorded notes at this meeting in December, you believe that JFS, Malloc and RCU were SCO's latest and greatest technologies?

A. Once again, I'm not going to comment about the technology code that you've talked about. If it was relevant and needed by our customers, it would still be found and contained in the latest version of our UNIX System V technology.

Q. And who represented that to you, sir? Who represented to you that what is at issue in the Linux operating system and the accusations SCO was making about it is in SCO's latest and greatest technology?

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A. It seems pretty obvious to me just in the course of discussions that we're developing a license based on UnixWare. You've seen evidence of that, and we priced it accordingly. Once again, we don't sell old stuff that is irrelevant; we sell our latest technology and bring that forward. So it was 1 plus 1 equals 2.

Q. Do you believe, sir, that whatever was incorporated or that you believed, you institutionally, SCO, the company believed was incorporated in the Linux from UNIX was commercially viable?

A. Can you repeat the question?

Q. Yeah. It's not a very good one. Let me start over.

You had a belief about methods and concepts and codes from UNIX having been incorporated into Linux; correct?

A. That's my understanding.

Q. Do you believe that those methods and concepts and codes are commercially valuable?

A. Yes.

Q. And why do you believe that?

A. It's how -- based on how the product has been developed and the intellectual property that we've created as a company and how we derived our releases, it's spent years and years developing that technology. And someone takes your stuff, you're going to protect and fight for your rights.

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Q. In fact, you believe, sir, that that code and those methods and concepts converted Linux into a hardened enterprise quality operating system, don't you?

A. Well, once again, I'm not sure I'm the best one to testify on those issues. I did not -- was not responsible for the SCOsource business. I did not sell the SCOsource technology. We had a separate division and team, sales team that focussed on those areas. We were just focussed on protecting our intellectual property and selling the latest and greatest technologies to our customers, whether it be to our Linux or IP license.

MR. JACOBS: Your Honor, I would like to publish Mr. Hunsaker's transcript in the IBM case dated November 10, 2005. And I'd like to read from that transcript.

THE COURT: Tell us pages and lines.

MR. JACOBS: Yes. Page 45 Line 3 through 46 Line 1.

THE COURT: Go ahead.

Q. BY MR. JACOBS: And you have a copy of that transcript in front of you, sir, if you would like to follow along.

A. Sure.

Q. Question. Let's first take from a

business perspective.

Answer. Well, the relationship clearly

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over time waned in terms of the relationship as

they were looking to migrate their solutions to

a Linux platform. So, therefore, as a result of

that, our revenues declined. And the relationship

has become, you know, very stagnant, if anything

at all. And once again, we attribute that. And

had this not all occurred with the rise and support

from IBM and other companies, you know, using

SCO's intellectual property and disclosing methods

and concepts that, you know, Linux from the outset

was always viewed as a hobbyist operating system

mainly for desktops for scale and architecture, not

at the enterprise, not hardened, not ready to

run mission critical applications like you'll

see within Sherwin Williams, within AutoZone,

within these customers.

UNIX and SCO was the de facto standard for the

Intel architecture. And through various initiatives

and breach of contracts, Linux was given a huge

boost through various, you know, code and methods

and information such as it would cause extreme

damage to SCO's business.

Did you give that testimony in response to that question?

A. I don't recall. I spent 30 hours in depositions.

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I don't recall just a slice of that. But if that's what was stated, yes.

Q. And, in fact, didn't you believe, sir, that the contribution of what you believed to be SCO intellectual property to Linux converted Linux from a hobbyist desktop system into a hardened enterprise ready to run mission critical applications operating system?

A. Clearly there was a direct correlation between the code that was found within our technology, within SCO UNIX that was placed in Linux illegally, we believe, through a breach of contract that did propagate the Linux operating system through our latest technologies.

Q. Did the alleged contribution of code and methods of concepts -- and methods and concepts from what you believed to be SCO UNIX into Linux convert Linux from a hobbyist desktop operating system to an enterprise hardened ready to run mission critical applications operating system?

A. As I testified there, that is part and parcel to what went wrong and how we believe and I believed at the time Linux did advance through the use of our technology.

Q. Thank you, Mr. Hunsaker.

MR. CYRULNIK: No questions.

THE COURT: Thank you, Mr. Jacobs.

I assume this witness may be excused.

And you may call your next witness.

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MR. CYRULNIK: Your Honor, we call Jay Peterson.

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

THE CLERK: Come right up here, please. Raise your right hand.

JAY PETERSEN,

called as a witness at the request of SCO Group,

having been first duly sworn, was examined

and testified as follows:

THE WITNESS: I do.

THE CLERK: Thank you. Please take the witness stand.

Please state your name and spell it for the record.

THE WITNESS: Jay Petersen. J-A-Y P-E-T-E-R-S-E-N.

THE CLERK: Thank you.

THE COURT: Go ahead, Mr. Cyrulnik.

MR. CYRULNIK: Thank you, Your Honor.

DIRECT EXAMINATION BY MR. CYRULNIK:

Q. Good afternoon Mr. Petersen. Are you currently employed?

A. Yes, I am.

Q. What is your current employment?

A. I'm director at UNIX Engineering at SCO Group.

Q. How long have you held that position a director for

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SCO?

A. Since 1997.

Q. And when did you first start working for SCO?

A. 1995 when SCO acquired the UNIX business from Novell.

Q. And were you involved in the UNIX business prior to joining SCO?

A. Yes, I was. I joined Bell Labs in 1980, did systems engineering for five years. In 1985, I joined the UNIX development group in Bell Labs, worked there that until 1990. At that point, I left and went to a Windows startup software company for a few years. I came back to Novell, again came back to UNIX in 1993 and stayed there through the transition desk of SCO.

Q. So with the exception of the three-year period when you joined the startup company, you were involved in the UNIX companies for almost 20 years?

A. Right.

Q. And before you began with Bell Labs in 1980, can you briefly describe your employment?

A. Yeah. Before that I had a career in academia as a physicist. I worked at the University of Minnesota and the last five years at Yale University. I did a lot of programming in the course of that work.

Q. And so it's fair to say you've almost got 35 years

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worth of programming experience?

A. Yes.

Q. And can you briefly summarize your educational background for the Court?

A. Yeah. I have a bachelor's degree in math from the University of Michigan in 1969; a master's degree in 1971 and a PhD in physics in 1974.

THE COURT: Could you pull the mike down just a little bit?

THE WITNESS: Sure.

THE COURT: Thank you.

Q. BY MR. CYRULNIK: Mr. Peterson, I'd like to go back to the 2000 period, 2000 to 2003 time period for the moment. And can you generally describe your role with SCO during that period?

A. Yeah. At that point I was involved in the development of new releases of the UnixWare, probably 7.12 in that time frame.

Q. And what were your responsibilities?

A. I was managing a group of engineers that were building that product.

Q. And you say you were involved in developing UnixWare 7.12, I believe it was?

A. Right.

Q. At that time?

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From an engineering perspective, did you have an understanding as to how a new release of UnixWare was developed?

A. Yes. I'd seen that going on for 20 years and was involved in that process at that point, too.

Q. And can you explain to the Court what your understanding was as to how a new release of UNIX System V was developed?

A. Yeah. We would, of course, start with the previous lease, work with our customers to understand what new things needed to be added, what other things could be taken out. This is a commercial product, of course, so that was all driven by the value, either value had to be added to that system or there were parts that were no longer any commercial value, and we dropped those out.

Q. And Mr. Peterson, during your 20 years in the UNIX business, were you personally involved in that process of designing a new release?

A. Yes, I was. Often my role involved working with some of our major customers, hardware vendors, for example. They were the ones most interested in giving us requirements for new features. As they developed new hardware, the operating system had to reflect those new features or it wouldn't be useful, and the hardware wouldn't be fully taken advantage of.

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Q. And can you give the Court an example or some examples of features or technology that would not have been carried forward to the next release of UNIX System V?

A. Yeah. A lot of that was driven by the evolution of the hardware itself. Either the core processor or the devices that are connected to the computer. Simple examples are some kind of devices just became completely obsolete and wouldn't be recognized today, things like paper tape readers and teletypes, any special support we had in the operating system for those things is long gone at this point.

Q. So there was specific codes in the operating system that dealt with interfacing with those things that you mentioned, tapes or floppy disks?

A. Right. Drivers in those cases and other hardware aspects. Typically everything new about hardware or not had some analog or supporting code in the operating system.

Q. So with respect to that specific code that dealt with a piece of hardware, for example, a floppy disk, would you carry that piece of code forward when replacement of floppy disks came out, for example?

A. No, we wouldn't. We would want to simplify our code base. And our customers would tell us they didn't want that in there. They didn't want to struggle with supporting things, old devices, either. So we were both decided to move old code out.

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Q. And code related to hardware that was still in use and wanted in the marketplace, what did you do with that code?

A. We carried it forward. You know, for example, if we added something new in a particular release and that kind of hardware continued. USB is an example of that. We added that in the late '90s, and, of course, USB has gotten more and more important. So that code has been carried forward and further evolved.

Q. Mr. Peterson, I'd like to now turn to a little later in the time period 2002-2003 and focus in on then for a moment. Were you involved with any agreements that SCO entered into during that time period?

A. Yes, I was.

Q. And which agreements were those?

A. We had a source license agreement with Sun and another one with Microsoft.

Q. Let's begin with the Microsoft agreement. I'd like to show you Exhibit SCO 237.

MR. ACKER: Can I have a copy of that, please?

MR. CYRULNIK: Sure.

Your Honor, may I approach?

Q. BY MR. CYRULNIK: If you can flip approximately to the sixth or seventh page of that Exhibit SCO 237.

Do you recognize this document, Mr. Peterson?

A. Yes, I do.

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Q. And is this a document that memorialized the agreement of Microsoft that you said you were involved in in 2003?

A. Yes, it is.

Q. Were you involved in negotiating the Microsoft agreement?

A. A little bit, yes.

Q. Who was the lead negotiator of that agreement?

A. Chris Sontag.

Q. What was the primary involvement that you had with that agreement?

A. As I said, a little bit while it was being drafted, but most of the work I did on this was delivering technology that was licensed by Microsoft from us.

Q. And which sections of this agreement relate to the technology that you delivered to Microsoft?

A. I think Section 3 is a licensing UnixWare and is a delivery of UnixWare code, and Section 4 gives further rights to the UnixWare code and also adds OpenServer code and prior products.

Q. And I believe you stated --

MR. ACKER: I'm sorry. The exhibit is on the screen. What exhibit is it?

MR. CYRULNIK: It's SCO 237.

(Discussion held off the record.)

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THE COURT: Did you want that on the record? Because she couldn't hear you if you did.

MR. CYRULNIK: Sorry about that.

MR. ACKER: No, Your Honor. It's just the copy of the agreement that he's given me has the amendment in front so I'm confused, but I think I found where I am. Thank you.

Q. BY MR. CYRULNIK: Mr. Petersen, I believe you testified that Section 3 of the Microsoft agreement related to an option to purchase UnixWare license?

A. Yes.

Q. And then you said Section 4 of the agreement, I believe you testified, related to an option to purchase a full UnixWare license, an OpenServer license and you said older technology, as well?

A. Yes.

Q. And did you have an understanding as to the difference between the UnixWare license under the first option, Section 3, and the expanded UnixWare license under Section 4 that you referenced?

A. Yes, I did. And in Section 3 there were some limitations on the way Microsoft could use the code it was licensing. It could only use it in a subset of the products it sold, and I think it had to appear in something called the SFU, services for UNIX. So it kind of restricted the amount of places that they could sell this code.

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Q. And if you could turn to Section 3.7 of the agreement. Are those the license limitations that you were referring to when you said the Section 3 license had limitations?

A. That's right. Yes.

Q. And as an engineer or based on your involvement in the negotiations of the agreement, did you have an understanding as to why Microsoft would want the restrictions in Section 3.7 lifted?

MR. ACKER: Objection; calls for speculation as to what Microsoft thought.

THE COURT: Well, he asked if he had an understanding.

Did you have one?

THE WITNESS: Yeah, I had an understanding.

THE COURT: You can ask him how he obtained it.

MR. CYRULNIK: Sure.

Q. BY MR. CYRULNIK: What was the basis for that understanding?

A. Well, the way that the license was structured and the conversations that I had in particular about this section, Microsoft was concerned about how it could use this technology to provide compatibility through this SFU feature. And the negotiations about 3.7 involved what was the scope of that, how many systems, what kind of limitations they could have on

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that, so....

Q. Did you have an understanding at the time as to the significance of that restriction?

A. Yeah. It was my understanding was what they were doing was this license was so they could add better compatibility to UNIX into Microsoft. And that's why they wanted this.

Q. And, Mr. Peterson, under Section 4 under the Microsoft agreement, under the option delineated in Section 4, were the restrictions or those that you just described, were those lifted?

A. Yeah. It basically gave them broader rights to use this compatibility, take this compatibility approach with every version of Windows if they wanted to. And it kind of broadened their ability.

Q. I believe you testified, look at Section 4 now, that there were in addition to the expanded UnixWare license there were other under Section 4 there was an OpenServer license?

A. Right.

Q. And there was also Legacy UNIX product that were provided under Section 4?

A. That's right.

Q. And I believe you testified, were you involved in collecting the deliverables, the source code that was

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ultimately provided to Microsoft under this agreement?

A. Yes, I did collect that and deliver it to Microsoft.

Q. I'd like to direct your attention to SCO Exhibit 391. And if you'll take a look at that document. Tell me if you recognize it.

A. Yes, I do.

Q. And this document appears to be a series of e-mail exchanges between you and someone named Doug Miller or Rich Wickham?

A. That's right.

Q. Who's Doug Miller?

A. Doug Miller was a UNIX -- or rather a Microsoft technical director.

Q. And did you interact with Doug Miller during the 2003 time period?

A. Yeah. Through e-mails like this.

Q. Turn to Page 2 of that exhibit. And I believe there's an e-mail dated September 2nd, 2003, to you from Doug Miller. Do you see that on the back of the page?

A. Yes, I do.

Q. And will you zoom in on the bottom lines? You write:

As was suggested in Exhibit C, there are a few

older items, items that we no longer have. These

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are noted as not available on the spreadsheet.

Regards.

A. Right.

Q. Do you recall writing that?

A. Yes.

Q. Mr. Petersen, did you collect all the source code that was ultimately delivered to Microsoft?

A. Yes, I did.

Q. You were personally in charge of that?

A. Yes.

Q. And did you provide Microsoft with all the UnixWare source code?

A. Yes.

Q. Did you provide Microsoft with all the OpenServer source code?

A. Yes.

Q. And did you provide Microsoft with all the older UNIX technology source code?

A. No. We didn't provide them everything on that list. And that's why I sent this e-mail and also had a spreadsheet that kept them apprised of what we could or couldn't find.

Q. In response to this e-mail, do you recall Mr. Miller ever communicating to you that Microsoft had a problem with SCO's inability to provide some of the older

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legacy code?

A. No.

Q. Did Microsoft ever ask for an adjustment of the price that they paid under Section 4?

A. No.

Q. Were you surprised that Microsoft didn't demand any adjustment for the price after writing this e-mail?

A. No, not at all.

Q. And as an engineer, do you have an understanding as to why Microsoft didn't demand any adjustment for the price?

MR. ACKER: Same objection; calls for speculation. Calls for hearsay. It's based upon a conversation.

THE COURT: Sustained.

MR. CYRULNIK: I'll rephrase.

Q. BY MR. CYRULNIK: Did you ever have any conversations with Mr. Miller with respect to the inabilities of SCO to provide older legacy technology to Microsoft?

MR. ACKER: Objection; calls for hearsay.

THE COURT: Well, he can answer that yes or no, so we don't know whether it does or not.

MR. ACKER: All right. I agree.

THE WITNESS: No.

Q. BY MR. CYRULNIK: Okay. Would you turn to Page 1 of the document that you're looking at, it's a subsequent e-mail nine days later, September 11th. And it's an e-mail

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from you again to Doug Miller. And focus in on the bottom Number 2. You write:

CD number 2 in the OpenServer source product

contains restricted third party source, the

OpenServer analogs of Exhibit B restricted source

for UnixWare. Since the focus of the contract was

on UnixWare technology, we never addressed the

restricted source that is in the OpenServer

product.

Is that a fair reading of what you wrote?

A. Yes.

Q. Can you explain what you meant by, "since the focus of the contract was on the UnixWare technology," when you wrote that in 2003?

A. Well, Section 3, of course, was all about UnixWare. The discussions that we had was providing compatibility for the latest version of UNIX, which was UnixWare. So my assumption, then, was what they were most interested in was UnixWare compatibility. That's why we had all this detail about the parts of UnixWare that they could use. This was a question about, did they require the same thing for OpenServer? And they didn't. And that's why they were interested in that product.

Q. I'd like to now turn to the other agreement you said you were involved in. I believe you testified you were

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involved in the Sun agreement in 2003, as well?

A. Yes.

Q. Let me show you SCO Exhibit 185. Do you recognize that document, Mr. Petersen?

A. Yes, I do.

Q. What is that document?

A. This is the license that we negotiated with Sun.

Q. Were you involved in the negotiating the Sun agreement?

A. No, I was not.

Q. Who did negotiate that agreement?

A. Chris Sontag.

Q. What was the extent of your involvement with the Sun agreement?

A. I was given a copy of it after it was signed and told to deliver the technology that we -- Sun had gotten rights to in this agreement.

Q. I'd like to -- if you can flip on SCO Exhibit 185 to Attachment 1, which is towards the end. Page 11 of the agreement.

A. Okay. Yep.

Q. Mr. Peterson, when you say you were involved in the technology, is this the technology that you were providing Sun under the 2003 agreement?

A. Yes, that's right.

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Q. And can you briefly review for the Court the deliverables that SCO provided to Sun under this agreement?

A. I'm sorry. Repeat that.

Q. Sure. Can you briefly review for the Court the deliverables that SCO provided to Sun under the 2003 agreement?

A. All right. There was a current UNIX source code described here. Drivers for UnixWare and for OpenServer and then prior UNIX products.

Q. And that current UnixWare source code, that was listed under Page 12 on Number 2?

A. Right. That was open UNIX 8 UnixWare 7.1.2, 7.1.3.

Q. And before that list, I think you said the other older technologies that you provided to Sun?

A. Right.

Q. And under Number 3 on Page 12 of the agreement, are those the drivers that you were referring to?

A. Yes, that's right.

Q. I'd like to start with the UnixWare on the old UNIX source code that you provided Sun. Did you collect that code personally?

A. Yes, I did.

Q. And did you provide Sun with all of the older releases of System V?

A. No. We couldn't find all the releases on this

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list. So I had to tell them we couldn't deliver everything.

Q. And did Sun ever communicate to you it had a problem with the fact that you weren't able to deliver all of the older releases of System V?

A. No.

Q. Did it ever ask for a price adjustment?

A. No.

Q. Were you able to provide Sun with all of the UnixWare source code?

A. Yes.

Q. And I believe you said the other aspects of what you provided in addition to UnixWare and the older UNIX source code were their drivers?

A. Right.

Q. Mr. Peterson, what are drivers?

A. That's software that's added to the operating system to support a particular device, a special kind of disk drive or some other thing that gets connected to a computer.

Q. All right. Are drivers important it an operating system?

A. Yes, they are. Typically when a person buys a computer they want to have peripherals added to it. Most of those are supported by drivers.

Q. Did you personally collect and deliver to Sun the drivers that were required to be provided to Sun under this

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agreement?

A. Yes.

Q. And where were those drivers from? Which operating system?

A. UnixWare and OpenServer.

Q. Do you remember how many drivers you provided?

A. It was hundreds.

Q. I'd like to show you SCO Exhibit 19. I'd like to ask you if you recognize the document?

A. Yes, I do.

Q. And it's entitled, Clarification of License Grant to UnixWare and OpenServer Drivers; is that correct?

A. That's correct, yep.

Q. And what role did this document play in your collecting and gathering the drivers that were required to be provided to Sun under the 2003 agreement?

A. Well, we needed to provide Sun. The OpenServer and UNIX were drivers, but there was a difference in the rights we had and the rights we could transmit to Sun. So this document explained that. Most of the drivers, you know, we had the source code and we could provide the source and Sun could use the source. In some cases the drivers had come from third parties, and there were restrictions associated with those drivers. And this document explained those.

Q. Mr. Peterson, did you provide Sun with any

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non-UnixWare or OpenServer in particular any pre-UnixWare System V drivers?

A. No.

Q. And as an engineer, did you have an understanding as to what Sun would be able to do with drivers in conjunction with the operating system it was getting?

A. Yeah. We would let them produce a version that would support this hardware. In the case of Sun, Sun had a Solaris for Intel products, and these drivers could be used or modified to provide support for those hardware devices in Solaris.

Q. Did Sun ever request any older drivers?

A. No.

Q. I'd like to direct your attention to SCO Exhibit 391, please. And if you could turn to the middle of that exhibit. I apologize. It's not numbered in an easy fashion. But if you turn to the middle of the exhibit, there's a page labeled 74 at the bottom. It appears after Exhibit D. And the top of the page it's an e-mail.

A. Okay. Yes, I have it.

Q. I think we have it on the screen over here. I'd like to zoom in on the top half. And do you recognize what that e-mail exchange was?

A. Yes, I do.

Q. And I believe it says it's an e-mail from you,

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Jay Petersen, to Andy, A-N-D-R-E-W-R, at Sun, dated Monday, the 21st of April 2003?

A. Yes.

Q. Who is Andy?

A. Andy was Andy Roach. He was a technical director in the UNIX development group at Sun. He's the person that I delivered all the code to.

Q. Okay. You wrote to Andy in the second paragraph of that e-mail:

I have a question about older binary drivers.

There are binary drivers in some of the earlier

versions of UnixWare. In some cases, these are

just earlier versions of the latest binary

drivers. And in other cases, they may simply be

obsolete. The vendor may be out of business, et

cetera. Do you think we need to list all the

binary drivers in all the earlier versions of

UnixWare that we have shipped you? My feeling is

that if you wanted to use any driver, the version

you would want would be the one from the latest

version of UnixWare or OpenServer, parentheses,

the list in the letter, end paren.

Do you see that, Mr. Petersen?

A. Yes.

Q. Can you explain the background of what prompted you

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to ask Andy Roach that question?

A. Yeah. We'd done a lot of research on the current drivers so we knew what our rights were, and we knew what we could tell Sun about. There were older drivers and older versions of UnixWare. And this was really a question whether we had to do all that hunting down to find out whether, you know, exactly what the situation was with the older drivers. I don't think they were important to Sun. That's why I wrote this e-mail.

Q. And those old drivers were from the older versions of UnixWare. Those were a couple years old. How old were the versions of UnixWare?

A. Yeah. It would have been the oldest 1995. And some of the other ones would have been in the late '90s.

Q. Did you ask Andy whether he wanted you to provide him with the even older drivers of pre-UnixWare releases?

A. No. That didn't come up.

Q. Why not?

A. Well, he didn't ask for them, and it wasn't spelled out in the agreement. And the focus really was on the latest drivers, again, because they were the most valuable and useful things.

Q. Okay. Mr. Petersen, I'd like to show you one other series of exhibits. And they're in your booklet. They begin with Novell Exhibit 440. And I'm just going to list them for

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the record. It's Novell Exhibits 440, 441, 442, 443, 444, 445, 446, 447, 448, 449, 450, 451, 452, 453, 454, 455, 456, 457, 458 and 459.

A. Right.

Q. And can you briefly look at those exhibits, Mr. Petersen?

A. Yes, I have.

Q. The let's take the first one as an example. Exhibit, Novell Exhibit 440. Can you describe what that is?

A. Yeah. It's a comparison of a file called diskusg.c in OpenSolaris on the left-hand side; and on the right-hand side, it's a file with the same name taken from the source code tree of System V Release 4-386.

Q. As an engineer, have you had occasion to review source files such as these?

A. Yes, I have.

Q. And this particular document, 440, is comparing, like you said, two source files?

A. Right.

Q. And it was a source file from OpenSolaris on the left-hand side and AT&T SVR4 on the right-hand side?

A. Yes.

Q. What does the comparison show?

A. It shows there is code in the OpenSolaris file that is the same code in the SVR4 file. The two files aren't

619

identical. There's more code usually on the Solaris side, but there are exact matches on many lines.

Q. So would you say these are similar?

A. Yes.

Q. Mr. Petersen, do you know whether the file that's identified over here from OpenSolaris, the source file from OpenSolaris, whether that also appears in UnixWare?

A. Yes, it does.

Q. It does.

A. UnixWare 1.1 in particular, that's the one that I looked at, has the same file with the same name.

Q. I'd like to turn to Novell Exhibit 441. This is the second of 21 exhibits that Novell has introduced on this front.

Can you briefly describe the relationship between in exhibit and the previous one?

THE COURT: While he's finding that, I don't know what Kim's list shows, but mine shows that 444 and 454 and 457 were not admitted. They're your exhibits, though, so I assume you're going to use them and you don't care.

MR. ACKER: They're fine.

MR. CYRULNIK: I will move to admit them.

THE COURT: 444, 454 and 457 are received.

(Whereupon, Novell Exhibits 444, 454 and

457 are received.)

620

Q. BY MR. CYRULNIK: I'll repeat the question. I'm just asking if you can briefly describe to the Court what this Exhibit 441, Exhibit 441 depicts?

A. Yeah. This is the same format as the previous exhibit, except it's now talking about a file called dispadmin.c. And again, there's a Solaris version and there's a SVR4-386 version. And once again, OpenSolaris lines superset, that is, many of the lines in the right-hand side are present in the left-hand side.

Q. I'd just like to ask you the same question that I asked you with respect to the previous exhibit. Mr. Petersen, do you know whether the OpenSolaris source file on the left-hand side of the page also appears in UnixWare?

A. Yeah. The same case as before, there's a file of exactly the same name and UnixWare 1.1, and it's substantially similar to both of these files.

Q. And I'm not going to bore everybody with all the exhibits. But did you do a similar exercise in terms of researching the 21 exhibits, the 21 source filings?

A. Yes.

Q. That are OpenSolaris and SVR 4?

A. Yeah. I looked at every one of these and found the same file in UNIX 1.1.

Q. Every one of the 21 filings in OpenSolaris are in UnixWare, as well?

621

A. Yes.

Q. Thank you, Mr. Petersen.

No further questions, Your Honor.

THE COURT: Thank you, Mr. Cyrulnik.

Mr. Acker, you may cross-examine.

MR. ACKER: Thank you, Your Honor.

CROSS-EXAMINATION BY MR. ACKER:

Q. I hand you a copy of your prior testimony. It's crowded up there.

Good afternoon, Mr. Petersen.

You testified a bit about your impressions regarding the Sun and Microsoft license on direct; correct?

A. Yes.

Q. Is it fair to say that you were not involved in the negotiation of the Microsoft license; correct?

A. No. I was involved a little bit in the negotiation of the Microsoft license, the wording in Section 3.

Q. Okay. Why don't we take a look at your deposition. It's your IBM deposition on February 27th, 2006. And it's at Page 150, Lines 1 to 10.

THE COURT: Has that been published?

MR. ACKER: If I could, Your Honor.

Q. BY MR. ACKER: And you provided this testimony back in 2006.

622

Okay. Do you know how many source code

licenses were sold during that time frame?

That's the question.

Answer. Two that I'm aware of.

Question. Two from October 2002 to fall

2003?

Answer. Right.

And who were those sold to?

Answer. Sun and Microsoft.

Question. And were you involved in the

negotiations for these source code licenses?

Answer. No.

A. Yes.

Q. Is that testimony accurate?

A. Yes, it was. If you read a little further, you'll see that I modified that testimony.

Q. Well, what you modified when you testified further was that you were involved in collecting and delivering source code pursuant to the licenses; correct?

A. No. But I think if I read starting from Line 12, it says:

Chris Sontag was. I don't know who else was

in both cases -- well, let me clarify that. I was

not involved at all in the Sun license. I was

involved in negotiating some of the details in the

623

Microsoft license now that I think about it.

Q. And those details related to the amendment of the license; correct?

A. No. They related to the wording in Section 3.

Q. As to the Sun license, you never sat down with anyone from Sun and engaged in negotiations with them about the license; that is correct?

A. That's right. With Sun, no.

Q. So when you testified in direct that you made certain assumptions about the Sun licenses and Microsoft licenses, those were just that, assumptions; correct?

A. Yes.

Q. And that's not based on any interaction you had during the negotiation process with anyone from Sun; correct?

A. I didn't negotiate with anyone from Sun during that, yeah, during the contract negotiation, that's right.

Q. And you were actually part of the SCOsource program; correct?

A. Yes. I worked for Chris Sontag at that point.

Q. You were Chris Sontag's deputy beginning the fall of 2002 in the SCOsource program; correct?

A. That's right.

Q. But you were not involved in the negotiation of the Sun license; correct?

A. That's right.

624

Q. And you were only minimally involved in the negotiation of the Microsoft license?

A. Right.

Q. And any testimony that you've given of either of those licenses are simply assumptions; right?

A. That's right. Based on my technical understanding of what was going on.

Q. But not based on discussions with anyone at Sun or Microsoft during those negotiations; right?

A. The only exchanges I had were e-mail exchanges clarifying things we could or couldn't do. So I got an impression of what they were thinking about doing from that. But, you're right. Nobody from Sun said precisely, this is what we're going to do.

Q. And no one from Sun precisely said, this is why we entered into this license; right?

A. That's right.

Q. And similarly, for Microsoft you talked about what might or might not be delivered after the license was executed; correct?

A. That's right.

Q. Now, as I mentioned, you were asked late in 2002 to join Mr. Sontag to run the SCOsource licensing campaign at SCO; correct?

A. Right.

625

Q. And you were brought in to help with SCOsource in order to generate more revenue from SCOsource code licenses or to generate new source code licenses; correct?

A. Well, to generate more revenue from SCO's intellectual property, not necessarily limited to source licensing.

Q. All right. Why don't we take a look at your deposition 2-27-08, IBM deposition. At Page 117 Line 16 to 24.

If I could publish that, Your Honor.

THE COURT: Yes, you may.

THE WITNESS: I'm sorry. What page was that again?

Q. BY MR. ACKER: Sure. 117.

A. Okay.

Q. Line 16 to 24.

MR. CYRULNIK: You said 2-27-08. Did you mean 2-27-06?

MR. ACKER: I did.

Q. BY MR. ACKER: Do you have that page, sir?

A. Yes, I do.

Q. And we have it up on the screen for you. And you were asked the following questions and provided the following answers:

And why don't you then help me explain

that. You said you were brought on to help

626

generate more source code license sales; is that

correct?

There's an objection and you answered:

No. Yeah, I was brought on to explore new

ways of generating revenue from our source code

licenses or generating new source code licenses.

Correct?

A. Right.

Q. And that's why you were asked to join -- that's why you understood why you were asked to join SCOsource; right?

A. Right.

Q. And the source code that was going to be licensed in the SCOsource program was SCO's UNIX source code; correct?

A. Right.

Q. And after you were assigned to SCOsource, you soon met with lawyers including Darl McBride's brother Kevin McBride to map out the strategy for the SCOsource campaign; correct?

A. Yes. I was involved in that, yes.

Q. So you come on in October, and immediately you're meeting with lawyers including Mr. McBride's brother in order to map out how SCOsource is going to work; right?

A. Yes.

Q. And that included working out a litigation strategy; right?

627

A. There was some discussion of litigation at that point, I think. Yeah.

Q. And it's true, isn't it, that the SCOsource licenses and the SCOsource program are broader than the traditional AT&T licenses and give broader source code rights? Isn't that right?

A. Well, I'm not an expert in licensing. My impression is, yes, they do give broader rights.

Q. And the SCOsource licenses were licensing the, quote, same materials as the traditional AT&T source code licenses; right?

A. I'm not sure I understand what you mean by the same materials.

Q. Okay. Let's take a look at your deposition again at Page 315 Line 24 carry over to 316-7.

If I could publish that?

THE COURT: Yes.

Q. BY MR. ACKER:

Question. What's the difference, then? Why

were some of them SCOsource licenses as opposed to

just source code licenses?

And your answer:

As much as anything it's the time when

they sign the license. The licenses are broader,

give broader source code rights than some of

628

the -- than the traditional AT&T licenses. But

nonetheless, they're licensing the same materials.

The rights are just different.

Correct?

A. Okay. That's what I said, yes.

Q. That's a true statement; right?

A. Yes. And this -- yes. And what I meant here by it was the same materials, meaning the source code, the intellectual property and that source code.

Q. And when you referred to that, you were referring to the UNIX, the SCO UNIX source code; correct?

A. Yes.

Q. And the source code rights under the SCOsource licenses were broader than other SCOsource codes licenses -- strike that.

And the SCOsource licenses under the SCOsource program were broader than other SCO regular code licenses because they had fewer restrictions on sublicensing and distribution and exposure of the source to the licensing customers; correct?

A. That's right. Given as shown by the two examples that we've already seen, the Sun and the Microsoft license.

Q. And in both the Sun and the Microsoft licenses, they obtain broader rights, that is, Sun and Microsoft did, to sublicense the code they got to their customers; correct?

629

A. Yes.

Q. And that was the SCOsource program; right?

A. Yes. That was part of it.

Q. Both were part of the SCOsource program; correct?

A. Yes.

Q. Let me show you an exhibit. Exhibit 233.

Have you had a chance to look at that exhibit that we marked as Exhibit 233?

A. Okay.

Q. Why don't we start at the bottom. And if you could highlight -- this is an e-mail. In the middle of the document is an e-mail from you, and you've attached to the bottom a snippet from an article or it looks like a link to an article regarding Sun OpenSolaris; right?

A. Right.

Q. And you sent the e-mail to Chris Sontag on the 6th of August 2003; right?

A. Yes.

Q. And what the article is talking about is that, Sun takes a crack at desktop Windows, eWEEK. Do you see that?

A. Yes.

Q. And it says:

A Sun Microsystem executive told a Linux world

audience that its new Mad Hatter product, a

unified desktop offering based on Linux, will be

630

priced at half of the Microsoft charges for a

Windows environment. Sun's chief software

engineer, Jonathan Schwartz, also said that Sun

would protect its customers from any potential

Linux-related legal action from SCO.

Do you see that?

A. Yes.

Q. And you were the deputy of the SCOsource program --

A. Yes.

Q. -- at this time?

A. Yes.

Q. In July of 2003?

A. Yes, I was.

Q. And the purpose of that program was to give -- take licenses or get licenses of people who are using Linux; correct?

A. No, not necessarily. The licenses we've just talked about are for Sun and Microsoft, and they didn't use Linux.

Q. But the focus of the SCOsource program was to -- 1,000 letters went out from Mr. McBride to Linux users all over the country; correct?

A. That was one of the aspects of that program.

Q. And in that letter, Mr. McBride told those users of Linux, Hey, we think our IP is in Linux; correct?

631

A. That's correct.

Q. And he told them, you better take a license from us or you're going to get sued; correct?

A. I don't remember exactly how he said that. But, yes, that was the impression.

Q. And that was the SCOsource program; right?

A. Yes.

Q. And when you see this, you become concerned; correct?

A. Yes. Yeah.

Q. And why don't we take a look at your e-mail up above.

You wrote to Chris Sontag, your boss, head of SCOsource:

Hi, Chris. Looks like Sun intends to use its

broader license to protect its Linux customers.

Do you see that?

A. Yes, I do.

Q. And then you wrote:

That's fine. But I hope they don't decide to

go after the rest of the market.

Do you see that?

A. Yes.

Q. What did you mean when you wrote that?

A. Well, I knew that Sun had broader rights and that

632

they could sublicense some of those rights. And I was wondering whether they were going to -- whether that was the interpretation. What they were talking about here was their Linux stuff, their Linux program. And I wondered whether they would try to take that and do anything more than that.

Q. You were worried that they were going to provide indemnity to all of these Linux users out there; right?

A. I didn't know if they could or not, but I wondered if whether that was an issue.

Q. And that was a concern for you as a deputy at SCOsource; correct?

A. Yes.

Q. And that would have been a commercial -- that would have commercial value for Sun if they could provide indemnity to customers that were using their OpenSolaris product; right?

A. It would.

Q. It would be valuable, extremely valuable; right?

A. Yes.

Q. And it would seriously undermine the SCOsource program; correct?

A. It could, yes.

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

THE COURT: Thank you, Mr. Acker.

Any redirect, Mr. Cyrulnik?

MR. CYRULNIK: No, Your Honor.

633

THE COURT: You may step down Mr. Petersen.

I assume this witness may be excused?

MR. ACKER: Yes. On behalf of Novell, Your Honor.

MR. CYRULNIK: And on behalf of SCO.

THE COURT: You don't want to do another witness today? You better tell me where we are and whether we need to come in at 8 o'clock to get out at 1:30.

MR. SINGER: Your Honor, we only have one remaining witness. It will be a short witness, Mr. Nagle. I think the direct will be 10 or 15 minutes. I don't know about cross.

THE COURT: Do you have any rebuttal?

MR. JACOBS: I don't think we'll have a rebuttal case, Your Honor. The last thing we need to do is there are a few exhibits we need to move in.

THE COURT: So you only have one more witness, and the witness won't take very long?

MR. SINGER: That's right, Your Honor.

THE COURT: Well, let's come in at 9:00, then.

How long will your closing arguments?

MR. SINGER: I think 30 minutes would be sufficient.

MR. ACKER: 30, 45, Your Honor.

THE COURT: So maybe an hour and a half total.

All right. So let's see. We'll see you at 9 o'clock in the morning.

634

MR. SINGER: Thank you, Your Honor.

THE COURT: You'll get an extra half hour of sleep or worry.

Thank you. We'll be in recess.

(Whereupon, the court proceedings were concluded.)

* * * * *

635

STATE OF UTAH )

) ss. COUNTY OF SALT LAKE )

I, KELLY BROWN HICKEN, 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 May 1, 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 number from 503 through 636 constitute a full, true and correct report of the same.

That I am not of kin to any of the parties and have no interest in the outcome of the matter;

And hereby set my hand and seal, this ____ day of _________ 2008.

______________________________________
KELLY BROWN HICKEN, CSR, RPR, RMR


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