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Reports from the Final PreTrial Hearing: SCO v. Novell - Updated- Minutes, Pretrial Order
Thursday, February 25 2010 @ 03:37 PM EST

I have Chris Brown's initial report from the SCO v. Novell final pretrial hearing today, and he'll send more details later. There are lots of interesting tidbits already. We have a drawing, showing the seating today, so you can get a feel for the day, and Chris says everyone was in a very upbeat mood, like everyone was building up to the big game. That was the mood. All the lawyers were friendly with one another, and he spoke briefly some pleasantries with quite a number of them, including Darl McBride, who was there and expressed how glad he is it's really time for trial. Do we not all feel like that?

Without further ado, then, here's his report:
Pamela,

I got back from the hearings about an hour ago, but got tied up in "work stuff".

It was a good hearing. I've gained an appreciation, to some extent, for Judge Stewart. He certainly seems sharp and is very much more interactive during the attorney's arguments than Judge Kimball was.

No rulings on the Daubert motions were made from the bench, but there were decisions made on other issues. He seems very much inclined on each issue, including the Daubert motions (655, 657, and 659) to either "put the two party's experts toe to toe" or to allow the opposing party to, politely, handle the concerns on cross-examination. At this point he gave the impression he just wants to put everything in front of the jury.

Speaking of jurors, 54 (count 'em) [potential jurors] will be in the court room that Monday morning. The judge is concerned that there may be problems finding people that have not heard of this case already. Sadly though, in my opinion, not enough people do. I doubt I could find one person in 20 off the street who have heard of the lawsuit.

Anyway, (having had a long discussion of the process involved) they will select 13 jurors, with the 13th tentatively being the alternate. The jurors themselves will not know who the alternate will be. At the end of the trial the judge in discussion and full agreement of both parties, will determine if the 13th will be the alternate or if there was a different juror they will let go for, say, inattention.

Full house today. For SCO was Brent Hatch, Stuart Singer, Ed Normand (all speaking) along with Ryan Tibbitts and others. Novell had Michael Jacobs, Eric Acker, Sterling Brennan (all speaking) along with some others.

Seated in the 'audience', representing no-one in particular, was Darl McBride.

Groklaw was brought up during the status conference several times. The judge determined that the parties can refer to Groklaw or other websites, but should not allow the jurors to hear the name or URL of the website in question. The other website mentioned by name was the "Yahoo Board".

Along the same lines, niether party is to mention that SCO is in bankruptcy nor (should he be present) identify Judge Cahn or Bonnie Fatell's positions. Also, both sides will have an expert in juror selection with them while in conference with jurors; they will be introduced by name but not further.

I'll get started on writing my full report now.

Update: We have the minutes now from the hearing, and they are fascinating:

02/25/2010 - 731 - PRETRIAL ORDER: 3 Week Jury Trial set for 3/8/2010 08:30 AM in Room 142 before Judge Ted Stewart. Signed by Judge Ted Stewart on 02/25/2010. (asp) (Entered: 02/25/2010)

02/25/2010 - 732 - Minute Entry for proceedings held before Judge Ted Stewart: Motion Hearing held on 2/25/2010 re 657 MOTION for Daubert Hearing to Disqualify Dr. Gary Pisano filed by Novell, Inc., 655 MOTION for Daubert Hearing to Disqualify Dr. Christine A. Botosan filed by Novell, Inc., 659 MOTION for Daubert Hearing to Disqualify G. Gervaise Davis III filed by Novell, Inc.. The Court hears argument on the 3 daubert motions filed by defendant, and takes the motions under advisement. Attorney for Plaintiff: Brent Hatch, Stuart Singer, Edward Normand, Jason Cyrulnik, Attorney for Defendant Sterling Brennan, Eric Acker, Michael Jacobs. Court Reporter: Patti Walker. (slm) (Entered: 02/25/2010)

02/25/2010 - 733 - Minute Entry for proceedings held before Judge Ted Stewart: Final Pretrial Conference held on 2/25/2010. Defendant asks for judicial notice regarding Judge Kimball's and the 10th Circuit's prior findings on this case. The Court asks counsel to avoid reference to these findings without prior notice to the Court. The parties report that they do not agree on specifically what should be decided by the Court, and what should go to the jury. The Court asks counsel to submit their understanding of the issues referred to in the pretrial order by Tuesday, March 2; with responses due by Thursday, March 4. The Court outlines its preferred trial procedures and deadlines. Counsel are asked to review the section of "Courtroom Conduct" in the Court's trial order. Counsel raise 1st amendment issues, and they are instructed to submit any motions regarding this issue by Tuesday, March 2, with responses due Thursday, March 4. Attorney for Plaintiff: Brent Hatch, Stuart Singer, Edward Normand, Jason Cyrulnik, Attorney for Defendant Sterling Brennan, Eric Acker, Michael Jacobs. Court Reporter: Patti Walker. (slm) (Entered: 02/25/2010)

Hahahaha: "The parties report that they do not agree on specifically what should be decided by the Court, and what should go to the jury." Did I tell you? Or did I tell you? These two can't agree on today's date. Kidding, but check the prior stats. So: "Counsel are asked to review the section of "Courtroom Conduct" in the Court's trial order."

Update 2: We have a report from a second eyewitness:

Today's proceedings started out with the Daubert hearings. They did the three motions in parallel: first, Sterling Brennan argued Novell's motion to exclude Dr. Botosan's expert testimony; then Eric Acker argued both the motion to exclude Dr. Pisano, and the motion to exclude Mr. Davis.

Following those arguments, Brent Hatch provided a rebuttal on Dr. Botosan, Stuart Singer argued for Dr. Pisano, and Ted Normand for Mr. Davis.

After the rebuttals, Brennan and Acker got to reply; in conclusion, Judge Stewart then gave Hatch, Singer and Normand each 30 seconds for a concluding statement.

The themes in all three were pretty consistent: Novell stating - very harshly - that the three experts were inadmissible and prejudicial; SCO's rebuttals almost conciliatory, saying that if there are flaws in the testimony, it only "goes to the weight" of the evidence, not admissibility, and that the jury could sort out anything they felt was unconvincing.

Judge Stewart thanked both sides, and said that they had both been very helpful to the court.

Following the Daubert hearings, we had a short break. "15 minutes?" asked one counsellor. "10 minutes", replied Stewart. I think it was closer to 15 before we got started again, though.

Following the break, Judge Stewart reviewed the items that were still to be cleared up before trial.

He mentioned the judicial notice items, which I didn't get a chance to see on Groklaw last night / this morning, so I was probably the only person in the room who didn't know what that was all about.

It led to a funny moment, though. Judge Stewart asked Mr. Acker a question, but then commented that he'd been pronouncing Mr. Acker's name differently than the plaintiff's counsel had, and he wondered which was correct. Eric explained that his German relatives pronounce it "ah-ker", but his local family in California say "acre" [like an "acre of land"].

Stewart: "Ah, so I've been getting it right?"

Acker: "Your honor, you have it right, and plaintiffs are wrong."

Stewart: "I'll take judicial notice of that."
(laughter all around)

Judge Stewart says he is very hesitant to allow reference to any of Judge Kimball's or the 10th Circuit's rulings. He wants the jury to be focused on this trial, not on other proceedings.

Speaking of the jury, Judge Stewart turned to the Courtroom Deputy and asked, "How many jurors can we fit in here if we use *all* the seating?"

"52 - no, 54" she replied.

"OK, make arrangements for 54 jurors to be here on the morning of the 8th. There will always be a couple who just don't show up."

He went on to explain that there would be a questionnaire for the jurors to fill out. Some of the questions would be answered only in private to the judge (particularly those where the answers might affect other jurors.)

So Judge Stewart will be asking questions, as recommended by both sides, but I gather he may also see fit to add some of his own. He will handle all the dismissals for cause. This process should (hopefully) result in 19 prospective jurors; then the plaintiffs and defendants get to exercise their peremptory dismissals, by turns: plaintiffs first choose one for dismissal, then the jury list is passed to the defendants, who get to see who was marked off, and select another, back and forth until each side has dismissed 3. The 13 who remain make up the 12 member jury with 1 alternate (the two sides agreed this morning to have a single alternate). However, no particular juror will be "the alternate", until the end of the trial. At that point, if there is any juror who gave the impression of not having paid attention, doesn't want to be there, or whatever, that person becomes the alternate, leaving the other 12 to be the jury.

Judge Stewart also commented that by local rule, they are permitted to go as low as 10 jurors, but he would prefer not to have that happen.

He also commented that He Does Not Like Evidentiary Surprises.

(Another thing that he does not like: being interrupted. Mr. Hatch had the misfortune this morning of discovering that as being something that is Just Not Done. Ouch.)

Judge Stewart doesn't like sidebar conferences. He admits that sometimes they are necessary, and that his courtroom has been outfitted with a state-of-the-art white noise system, which, he says, "I am told it works very well, so that the jury doesn't end up hearing everything we say," but he'd still prefer to have any conferences before court, after, or during breaks.

Isn't this getting exciting? And here's Chris Brown's promised longer report, part 1:
Judge Stewart asked Novell to argue all three Doubert motions then SCO would respond to all three. Both parties had more than one attorney argue the motions. He also asked if it was OK if the Status Conference occur after a 15-minute break at the end of the hearing. Both parties were fine with that.

On Novell's motion 655 to disqualify Dr. Botosan, Sterling Brennan said that as an initial point the court has already ruled that the change in stock price will not be considered damages; that the event study's regression analysis does not provide a sustainable, reliable, predictor that Novell's statements resulted in the dip in SCO stock price. He particularly focused on the R2 reversed engineered, as it were, by Novell's experts was significantly below levels which other courts have ruled inadmissable. He said the p-value of 0.14, 14%, indicates that there is an 86% chance that it's wrong. Notes how the data used was cherry-picked. Also he argued that SCO is using Dr. Botosan's report as a conduit for parroted testimony. Judge Stewart asks, isn't this a matter of the expert's opinions and the two experts can go toe-to-toe before a jury? Mr. Brennan sid they could, but this is in the realm of "junk science" and other courts have rejected studies with higher R2s as part of the gatekeeper's function.

Next Eric Acker argued Novell's motion 657 to disqualify Dr. Pisano. Mr. Acker says that Dr. Pisano relied on a Yankee Group study which he doesn't know anything about. Judge Stewart asked if it wasn't so that it's not just that study, but that the expert relied on others too. Mr. Acker said yes that's true. But that he likewise didn't know about the other studies. Judge Stewart asked, isn't this about reliability instead of methodology? Mr. Acker said that their point is about methodology of the study.

Eric Acker then argued Novell's motion to disqualify Gervaise Davis. He said Davis is making legal conclusions. That he should not be allowed to give his legal opinion on the law, ursurping the court's role. He cites several case rulings, focusing on a 10th circuit ruling noting significant concerns about lawyers serving as experts. Judge Stewart asked what if he wasn't an attorney, what if he was just an expert? Isn't this just an objection to being a lawyer? Mr. Acker answered that Mr. Davis' testimony being proffered is a legal conclusion. Judge Stewart asks what if he directs only opinon as an expert and no conclusions at law? Mr. Acker repeated that Mr. Davis' testimony will be based on making a legal conclusion.

SCO's Brent Hatch, arguing against Novell's 655 motion, said that Novell is not challenging Dr. Botosan's expertise or overall methodology. Judge Stewart interjected that it's his understanding that they are challenging the specific methodology of the data. Mr. Hatch replied yes, the data input, but not the analysis. Judge Stewart replied that Novell's argument is that when the data is so out-of-line then it must be rejected. Mr. Hatch agrees, cites cases, and points to where in Dr. Botosan't report concerning damages that she used conservative numbers: where SCO had used $1,400 unit price and Deutsche Bank had made a study where they found $100-$300 unit price, and Dr. Botosan chose $100 for her calculations. He said she doesn't cherry-pick the 'best' numbers. He said she's a PhD accountant; she's an expert. Regarding the event study Mr. Hatch said that Novell made a classic error. They open with the stock price not being relevant to damages, claiming that it's a 'straw man.' Novell is saying, you're not using it for damages, so throw it out. The study shows causation... what happened when Novell slandered SCO's title.

He further said the report's p-value is compelling. He read a report which says not to throw a survey out soley based on the R2. He used a chart of that day's falling stock prices, concluding that the results showed that there's a fraction of one percent chance that the dip in stock price was a result of something other than Novell's statements.

Regarding Novell's concern about Dr. Botosan being a conduit for parroted testimony, he said that she used those individuals' statements and lots of other sources in her analysis. Mr. Hatch says they should go to trial and cross examine.

SCO's Stuart Singer then argued against Novell's 657 motion. He said Novell's challenge is based on the Yankee Group survey and Dr. Pisano reportedly not knowing the methodology. He then read from some judicial guidelines, some requirements, and for each item he showed how it was met. He argued that we know the number-- 1000 business -- the method -- a web poll -- the questions -- they're right there etc. He stated that each requirement is met, that Novell's issues go to the weight of the testimony, not its admissibility. He said this is fair grounds for cross-examination.

Judge Stewart directed a question to Novell's Mr. Acker: he asked if Novell was challenging based on Dr. Pisano's qualifications in software and running a company and asked if that was part of what it was still challenging? Yes, was the answer, as applied to what is required to run a company.

SCO's Ed Normand, regarding Novell's motion 659, said that Mr. Davis is a well-qualified expert and can speak to his own understanding of the law. He asserted that the 10th remanded on what copyrights were required. Mr. Davis can speak to custom and practice in the industry. Mr. Davis reported that in 40 years, he has never seen an implied license for a sophisticated software business. He can testify to why the custom and practice is the way it is. He can testify why, in his understanding of the law, implied licenses are not used in this context.

Judge Stewart than opined that if SCO had instead presented an expert who was not lawyer, Novell would challenge that, that it was like a "Catch-22". (Apparently at this point Mr. Normand seemed like he had to defend himself) Judge Stewart then said, Don't worry, once you think about it, you'll see I'm supporting your testimony. Mr. Normand then said, Ok, I'll sit down then.
(General laughter) Novell's Mr. Brennan then provided rebuttal on 655. He held up the chart Mr. Hatch had used. He said that on that day SCO's stock had already dropped more before Novell's statement than it fell after Novell's statement. He said there is no correlation shown between (potential) licensee motivation and stock price and Novell's statements. If Novell's statement was suppressing licensee motivation, and it was reflected in stock price, one would expect a long term impact. Indeed on the following day SCO's stock price rebounded and, though highly dynamic, went higher. If Novell's statements harmed SCO, the price would stay low. Regarding Deutche Bank's projections, he pointed out that Dr. Botosan made no analysis of the data.

Eric Acker countered SCO on 657 saying Dr. Pisano came to his conclusions without knowledge of the survey methodology. His sworn statements are that he had no knowledge. The 10th Circuit, in "Sprecht", additionally, he said, made very clear that lawyer witnesses/experts should not be allowed to inform the jury on the law of the case.

Judge Stewart asked the parties to respond again if they had anything. Brent Hatch, rising in place (as do the others in turn), said that the p-value indicated that there was a .2 of 1% chance anything else would explain the drop. The R2 is not controlling. He asked that the jury decide.

Mr. Singer, quoting some of Dr. Pisano's report, said he did know the relevant facts about the survey.

Judge Stewart said he believes the Motions in Limine are taken care of, and if that's all, the court will be in recess for a 15-minute break Next up was the status conference report. It'll be a bit shorter, reporting what's not in the already-posted pretrial order.

Here's a chart on Google, and the date May 28, 2003 is at the letter J. Just so you can see what they are talking about. On this page, you can see who acquired and who sold SCO shares around that same time period and thereafter. I'm no stock guru, as you know, but back then, we figured that the total value of shares sold by insiders from March 2003, when activity first began to pick up, to August 11, 2003 was $1,375,654. Bloomberg News mentioned it, if you old timers recall:
SCO Group executives have sold about 119,000 shares of their company since it filed a lawsuit against IBM in March and the stock price increased more than fourfold.

Chief Financial Officer Robert Bench began the $1.2 million in executive share sales four days after Lindon -based SCO filed its lawsuit against Armonk, N.Y.-based IBM on March 6. Before Bench's sale, SCO insiders had not sold shares in more than a year, according to the Washington Service, a firm that tracks insider transactions.

"Insider sales picking up is a negative sign," said Richard Campagna, who helps manage $750 million as director of research for Cleveland-based Shaker Investments. Shaker, which owns no shares of SCO, has stakes in computer-related companies including Flextronics International.

That's from Wayback, originally published in August of 2003. My point is, I fail to comprehend their complaints about Novell's May 28 statement. For one thing, if the stock took a brief dip, if it did for part of a day, couldn't they acquire more shares at a lower price, and then sell when the stock went back up? Isn't that what players in the market dream about? Well, what do I know? I know one thing. If I read that report, chances are I'd think twice about buying a SCOsource license, if I saw the executives selling their shares like that.

Update 3: Here's the final installment of Chris's report, this time on the status conference segment of the hearing:

I'm abbreviating this report to exclude details already noted in the court's pre-trial order issued today. Mostly dates/times etc.

The status conference started with discussion of the parties not having come to an agreement on what will be sent to the jury. Dates and times were set for parties to submit their understanding to the court as well as opposing party's responses thereto.

On discussion Judge Stewart said that the parties are not to make reference to prior decisions either by Judge Kimball or the 10th circuit. Should counsel believe such is required, bring it to the Judge's attention in sidebar, or before or after each day's trial.

Judge Stewart stated that the trial is scheduled to start Monday, March 8th and proceed for 15 days. Then he asked if both parties believe this is adequate. Novell's Mr. Acker replied that it was. Judge Stewart asked if he's been pronouncing his name correctly. Mr. Acker said that his German relatives pronounce it "ah-ker" while his local relatives say "acre." Judge Stewart "So I've been getting it right" to which Mr. Acker replied that that *you* have it right, *they* have it wrong.

Mr. Acker went on to say that the two parties will divide the trial time equally. He inquired of the Judge whether the parties track the clock or the court. Judge Stewart replied the parties do. He then confirmed with the judge that the times will be 8:30am to 1:30pm with two 15-minute breaks. The Judge also asked that on the first Monday that counsel be there at 8am to go over jury selection.

Judge Stewart noted that he does not like surprises, like unexpected evidence. If the parties have something, they should discuss it in sidebar. He noted that his courtroom received a recent upgrade that includes a white noise generator for the jurors. While he has been very reluctant to have sidebars before, he is less reluctant now, as the jury cannot hear. (He's been told it "works very well").

SCO's Mr. Singer requested the name "Groklaw" and "Yahoo! Boards" (sic) not be used before the jury. Judge Stewart agreed, saying he does not want to make it any easier or tempting for jurors. He related an experience he had in the past with a KMart case that ended in a mistrial because of a juror researching on their own.

On jury selection he asked the parties how many alternate jurors were required and both said one is sufficient. He asked if the parties were aware that locally as few as 10 jurors are sufficient. He said the jurors will not know who the alternate is until the end. He asked if the parties are OK if at the end he, in discussion with counsel, may switch juror 13 for, say #2, if the juror is inattentive or such. Both parties were OK with that provided they were both in full agreement. Otherwise, with no objections, juror 13 will be the alternate.

He inquired of how many people he could seat in the courtroom, then directed that 54 potential jurors be there that Monday.

Trial briefs are due Monday. On juror questions the judge will decide the questions to be asked based on the questions submitted to him as well as the courts 'standard' questions. Then afterwards he will have a sidebar to determine if additional questions are required.

The judge requested a copy of all exhibits in DVD form so he can review them on his monitor during the trial. When asked, he responded that he does not need hard copy. Judge Stewart noted that the two party's technicians will be there this coming Monday to go over the court's system. (Mr. Hatch?) asked if the court has objections to counsel having laptops at counsel's table, and Judge Stewart said he didn't. However he said he's seen people have big projected displays to the audience and that they are not to do that. He said this trial has the "possibility of becoming a circus" and he wants to avoid that. (I noted earlier that the jurors have monitors built into their furniture, 1 for every two jurors. I suspect Judge Kimball expects all exhibits to be shown only on in-house monitors for jurors, counsel, and Judge Stewart).

Mr. Hatch said that SCO's trustee, Judge Cahn or his representative, may be present in court. He asks that they not introduce him to the jury and also avoid mention of bankruptcy. Judge Stewart agreed.

There was a discussion of the juror selection method. Judge Stewart will ask questions and those that "stand up" at the end will meet with him in his conference room in chambers. At the end of that he will present a list of names remaining. If I understood properly, the parties, in the conference room, will then review jurors.

One of the lawyers, (Mr. Hatch?), said they'd have another person with them. Judge Stewart asked if they were "jury selection experts" and both SCO and Novell's Michael Jacobs said they were. He said each party may have one person with them. (Mr. Hatch?) asked if they would be able to not introduce them to the jurors. Judge Stewart said to introduce them by name so they are not some mysterious person sitting there. The list of jurors are to be passed back and forth between parties where each will strike one party, total of three. Those top 13 will form the jurors and alternate.

Novell's Mr. Brennan asked, regarding the 1st Amendment issue if motion is due by Tuesday. Yes, with response by SCO by Thursday.

Mr. Hatch asked if they may use two lawyers for their opening. Judge Stewart said due to the nature of this trial, two lawyers will be permitted for both opening and closing. Mr. Hatch asked how long of an opening is permitted. The Judge asked how long he was contemplating. Mr. Hatch said one hour. Judge Stewart, after asking Novell if one hour was sufficient, said that it was OK. He said the time for closing will be more interesting, but that will be decided at the end of the three weeks.

Mr. Acker asked if the parties will be opening on the 8th or 9th. Judge Stewart said it depends on jury selection. If selection is completed by 11:30, then opening will be on the 8th, but that there must be time for both parties to go together, as it's "only fair." He said he was concerned about the jurors' time, that they are already being asked to be here for three weeks, and he doesn't want to send them home early because some witness was unavailable. He would like to use their time well.

With no further questions, court was recessed until 8am Monday, March 8th.

Interesting that SCO mentioned Yahoo. That's the only place I know of where SCO supporters, paid or otherwise, hang out. And they are a disgusting bunch.

Please join me in saying thank you to our reporters. I don't know about you, but I have a clearer picture of what to expect at trial. And to put the cherry on top, here's what the courtroom seating is like:

Also, it occurs to me you might want to read the experts' reports, so you know what they are discussing. Christine Botosan's is here [PDF], for example, and if you read the comments on this article, you'll find some who work in this field have explained what they are discussing. I had no clue. Here's a good place to start.

Here's the text of the order, minus the header and list of attorneys, for speed:

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

PRETRIAL ORDER

This matter having come before the Court on February 25, 2010, at a pretrial conference held before the Honorable Ted Stewart, pursuant to Fed. R. Civ. P. 16; and Brent O. Hatch, Stuart H. Singer, and Edward Normand, having appeared as counsel for plaintiff, and Sterling A. Brennan, Michael A. Jacobs, Eric Acker, and David Wright having appeared as counsel for defendant, the following action was taken:

1. JURISDICTION. This is an action for slander of title, specific performance and breach of contract. Jurisdiction of the Court is invoked under 28 U.S.C. 1331 and 1338(a). The jurisdiction of the Court is not disputed and is hereby determined to be present.

VENUE. Venue was determined by the Court to be proper pursuant to 28 U.S.C. 1391(b), and is laid in the Central Division of the District of Utah. 28 U.S.C. 125.

2. GENERAL NATURE OF THE CLAIMS OF THE PARTIES

(a) Plaintiff's claims: SCO contends that Novell transferred the copyrights in the UNIX and UnixWare operating systems to SCO's predecessor-in-interest The Santa Cruz Operation, Inc. in 1995, pursuant to an amended Asset Purchase Agreement ("APA"). SCO contends that in publicly claiming to own the copyrights in the UNIX and UnixWare operating systems since 2003, Novell has acted recklessly and with the intent to gain a pecuniary advantage for itself and to harm SCO, and therefore has slandered SCO's title. SCO claims that Novell's claims of copyright ownership have been a substantial factor in harming SCO and its business. SCO had a licensing program, called SCOSource, to grant rights to use its copyrights. As a result of Novell's claims that it, rather than SCO, owned the UNIX and UNIXWARE copyrights, potential customers declined to purchase a license from SCO. (SCO claims in the alternative that if Novell did not transfer the copyrights in 1995, it must do so now under the APA.) SCO further claims that Novell has breached the implied covenant of good faith and fair dealing under the APA both in claiming to own the copyrights and in directing SCO to waive certain rights it had asserted against third parties for breaching rights owed to SCO. SCO also contends that Novell's attempted waiver of SCO's rights against IBM was outside the scope of its contractual authority.

(b) Defendant's claims: Novell contends that when it sold portions of its UNIX business to Santa Cruz in 1995, it retained (1) the UNIX copyrights, (2) the ongoing right to receive royalties from SVRX licenses, and (3) the right to direct SCO to amend, supplement, modify, or waive any rights under SVRX licenses. Amendment No. 2 to the APA did not effectuate a transfer of the UNIX copyrights to Santa Cruz. Novell's public statements regarding its ownership of the UNIX copyrights were truthful and based on Novell's good-faith interpretation of the APA and Amendment No. 2, as already determined by the Court. SCO's claims for slander of title and specific performance should, therefore, fail. SCO's claim for breach of the implied covenant of good faith and fair dealing also fails, because Novell has the right under the APA to direct SCO to waive its claims against IBM.

2

Novell asserts a counterclaim against SCO for slander of title. SCO made public statements claiming ownership of the UNIX copyrights with knowledge that title to the copyrights remained with Novell. SCO's slander of Novell's title has resulted in special damages, including Novell's costs and fees in preparing and filing copyright registrations and declarations correcting SCO's erroneous ownership claims and in prosecuting this action. Novell also seeks declaratory relief clarifying Novell's right under 4.16(b) of the APA to direct SCO to waive claims against IBM and other SVRX licensees, Novell's right to waive such claims on SCO's behalf, and SCO's obligation to recognize such a waiver.

3. UNCONTROVERTED FACTS. The following facts are established by admissions in the pleadings, by order pursuant to Fed. R. Civ. P. 56(d), or by stipulation of counsel:

The SCO Group, Inc. is a Delaware corporation with its principal place of business in Linden, Utah. It has been in the business of developing and selling software products.

Novell, Inc. is a Delaware corporation with its executive offices in Waltham, Massachusetts, and its principal product development facility in Provo, Utah. Novell is also involved in the development and sale of software products.

UNIX is the name of a computer operating system originally developed in the late 1960s by engineers at AT&T's Bell Laboratories. Different versions of UNIX are in widespread use around the world.

In September 1995, Novell, Inc. and The Santa Cruz Operation, Inc. entered into an Asset Purchase Agreement, or "APA." The APA was signed on September 19, 1995, and was amended in December 1995 and October 1996.

The parties to the Asset Purchase Agreement were Santa Cruz and Novell, but SCO is now a party to the agreement in lieu of Santa Cruz. That is because several years ago SCO acquired from Santa Cruz all of the UNIX and UnixWare assets that Santa Cruz had acquired from Novell.

3

In March 2003, SCO filed a lawsuit against International Business Machines Corp. ("IBM"), alleging that (among other things) IBM had breached contracts that SCO has the right to enforce. SCO subsequently terminated those contracts for the alleged breach.

Linux is the name of a computer operating system that was published as open-source software in the early 1990s.

Novell submits that the following statements should be included on the list of uncontroverted facts because they are factual findings made by the Court and affirmed by the Tenth Circuit or not appealed. SCO objects to these proposed statements which are not agreed facts. Some are not facts at all, others are not relevant, several are inaccurate, and all of them are unduly prejudicial. If the Court determines to include some or all of the following statements, SCO reserves the right to propose a similar list of legal conclusions that this Court and the Tenth Circuit previously, and recently, have reached.

[SCO breached its contractual obligations under the APA by failing to comply with the terms imposed by Amendment No. 2 relating to buy-outs. SCO was therefore without authority under the APA to enter into the 2003 Sun Microsystems agreement.

The APA created a fiduciary relationship between Novell and SCO whereby SCO was required to "collect, administer and deliver to Novell" SVRX royalties. SCO breached its fiduciary duty and was liable for conversion based on its failure to pay Novell a share of the SVRX royalties that SCO collected under its agreement with Sun Microsystems.

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Although Novell may have initially intended to sell the complete UNIX business, both parties agree that Santa Cruz was either unwilling or unable to commit sufficient financial resources to purchase the entire UNIX business outright.

The APA itself -- without regard to Amendment No. 2 -- unambiguously excludes the transfer of copyrights.

Even if SCO owned the copyrights, there is no evidence that Novell's public statements were based on anything but its good faith interpretation of the contracts.

There is no evidence that Novell's position that it owns the UNIX copyrights was contrary to its own understanding of the contractual language or that Novell's position was objectively unreasonable.

SVRX licenses are not limited to pre-APA agreements.]

4. CONTESTED ISSUES OF FACT. The contested issues of fact remaining for decision are:

1. Did the amended APA transfer the UNIX and UnixWare copyrights from Novell to SCO?

2. Did Novell assert after May 28, 2003, that it and not SCO owned the UNIX and UnixWare copyrights?

3. Did Novell know that its statements regarding copyright ownership were false? Did Novell act recklessly in claiming that it owns the UNIX and UnixWare copyrights?

4. Did Novell act with the intent to harm SCO in claiming that it owns the UNIX and UnixWare copyrights?

5. Did Novell's statements regarding copyright ownership cause SCO special damages?

6. Did Novell have the authority to direct SCO to waive contract rights with respect to the contracts with IBM, and then to waive those rights on SCO's

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behalf? Did Novell act fairly and in good faith in directing SCO to waive the contract rights SCO asserted against IBM, and then waiving those rights on SCO's behalf?

7. Did SCO publicly assert in 2003 and thereafter that it and not Novell owned the UNIX and UnixWare copyrights?

8. Did SCO know that its claims to copyright ownership were false? Did SCO act recklessly in claiming that it owns the UNIX and UnixWare copyrights?

9. Did SCO act with the intent to harm Novell in claiming that it owns the UNIX and UnixWare copyrights?

10. Did SCO's factual assertion(s) to own the UNIX and UnixWare copyrights cause Novell special damages?

5. CONTESTED ISSUES OF LAW. The contested issues of law, in addition to those implicit in the foregoing issues of fact, are:

1. Does SCO have to prove under the First Amendment that Novell made its public statements concerning ownership of the UNIX and UnixWare copyrights with constitutional malice?

2. Did SCO inject itself into the public controversy about SCO's alleged UNIX rights and thus become a "limited purpose public figure" for First Amendment purposes?

3. Are certain of Novell's statements regarding ownership of the UNIX and UnixWare copyrights subject to an absolute litigation privilege? Did Novell abuse its privilege?

4. Are certain of Novell's statements concerning ownership of the UNIX and UnixWare copyrights, subject to qualified privileges? Did Novell abuse its privileges?

5. Is Novell liable for punitive damages?

6. Does Novell have to prove under the First Amendment that SCO made its public statements concerning ownership of the UNIX and UnixWare copyrights with constitutional malice?

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6. EXHIBITS. The parties are exchanging objections to their respective exhibits lists on February 24, 2010.

(a) Exhibits received in evidence and placed in the custody of the clerk may be withdrawn from the clerk's office upon signing of receipts therefor by the respective parties offering them. The exhibits shall be returned to the clerk's office within a reasonable time and in the meantime shall be available for inspection at the request of other parties.

(b) Exhibits identified and offered that remain in the custody of the party offering them shall be made available for review by the offering party to any other party to the action that requests access to them in writing.

(c) Except as otherwise indicated, the authenticity of received exhibits has been stipulated but they have been received subject to objections, if any, by an opposing party at the trial as to their relevancy and materiality. If other exhibits are to be offered, the necessity for which reasonably cannot now be anticipated, they will be submitted to opposing counsel at least five (5) days prior to trial.

7. WITNESSES.

(a) In the absence of reasonable notice to opposing counsel to the contrary:

(i) plaintiff will call as witnesses:

1. Christine Botosan
2. William Broderick
3. Ed Chatlos
4. Gervaise Davis
5. Robert Frankenberg
6. Jeff Hunsaker
7. John Maciaszek
8. Darl McBride

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9. Jack Messman (as adverse witness)
10. Paul Moxley
11. Gary Pisano
12. Chris Sontag
13. Duff Thompson
14. Ryan Tibbitts

(ii) plaintiff may call as witnesses:

1. Jean Acheson
2. Tom Cargill
3. Troy Keller
4. Kimberlee Madsen
5. Ty Mattingly
6. Doug Michels
7. Andy Nagle
8. Michael Olson
9. Ralph Yarro
10. Lee Johnson

(iii) plaintiff may use the following depositions:1

1. Aaron Alter
2. Mike Danaher
3. Larry Gasparro
4. Greg Jones
5. Philip Langer
6. Joe LaSala

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7. Burt Levine 8. Alok Mohan
9. Greg Pettit
10. Steve Sabbath
11. Chris Stone
12. Maureen O'Gara
13. Jim Wilt

(b) In the absence of reasonable notice to opposing counsel to the contrary:

(i) defendant will call as witnesses:

1. Aaron Alter
2. Allison Amadia
3. David Bradford
4. Tor Braham
5. Gregory Jones
6. Joseph LaSala
7. Jack Messman
8. Terry Musika
9. Chris Stone
10. James Tolonen

(i) defendant may call as witnesses:

1. Jean Acheson
2. Michael Anderer
3. Mike Bready
4. Kellie Carlton
5. Greg Collier
6. Robert Frankenberg
7. Sandeep Gupta

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8. Cindy Lamont
9. Bruce Lowry
10. James Ludwick
11. Robert Marsh
12. Patrick McBride
13. James McKenna
14. Steve Sabbath
15. Duff Thompson
16. Steve Welker
17. David Wright
(iii) defendant may use the following depositions:
1. Edward Chatlos
2. Michael Danaher
3. Michael DeFazio
4. Larry Gasparro
5. Samuel Greenblatt
6. Scott Handy
7. Burt Levine
8. Greg Pettit
9. Steve Sabbath
10. Blake Stowell
11. Jim Wilt

(c) In the event that witnesses other than those listed are to be called to testify at the trial, a statement of their names, addresses, and the general subject matter of their testimony will be served upon opposing counsel and filed with the Court at least five (5) days prior to trial. This restriction shall not apply to rebuttal witnesses whose testimony, where required, cannot reasonably be anticipated before the time of trial.

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8. REQUESTS FOR INSTRUCTIONS. Requests for instructions to the jury and special requests for voir dire examination of the jury shall be submitted to the Court pursuant to DUCivR 51-1. Counsel may supplement requested instructions during trial on matters that could not reasonably be anticipated prior to trial.

9. AMENDMENTS TO PLEADINGS. There were no requests to amend pleadings.

10. DISCOVERY. Discovery has been completed on the claims that the parties agreed, and the Court ordered, are to be resolved prior to certain claims that the parties agreed, and the Court ordered, are not stayed. Discovery may commence on the stayed claims depending on the resolution of the instant trial and any appeal(s) therefrom.

11. TRIAL SETTING.

The case was set for trial with a jury on March 8, 2010, at 8 o'clock a.m. in Salt Lake City. 28 U.S.C. 1404(b). The case is set for trial for three weeks from 8:30 a.m. to 1:30 pm. The parties have agreed that the hours available for trial shall be split evenly between them with each party's arguments, direct examinations and cross-examinations counting against its share of the allotted time. The parties further agree that the jurors may take notes during the trial.

With respect to SCO's claim that Novell breached the implied covenant of good faith and fair dealing by directing SCO to waive certain claims against IBM, Novell believes that the jury should decide this claim. SCO contends that the claim should be resolved by the Court.

With respect to Novell's request for declaratory judgment regarding Novell's rights under 4.16 of the APA, Novell contends that the underlying factual issues are to be resolved by the jury, but the questions of whether declaratory judgment should issue and its precise language are

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for the Court to resolve. SCO contends that the underlying factual issues, including the third and fourth issues identified in the Tenth Circuit's mandate, should also be resolved by the Court.

With respect to SCO's claim for specific performance, the parties agree that the Court should resolve that issue, if necessary, following the jury verdict.

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12. POSSIBILITY OF SETTLEMENT. Poor.

DATED: February 25, 2010

BY THE COURT

_____[signature]___________
UNITED STATES DISTRICT JUDGE

The foregoing proposed pretrial order (prior to execution by the court) is hereby submitted by all counsel of record this 23rd day of February, 2010.

_______

1 Plaintiff reserves the right to designate deposition testimony of witness whom Plaintiff plans to call as live witnesses but who become unavailable to be called. Exhibits referenced in designated portions of depositions may be presented along with the referenced testimony.

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