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Day 4 of the Trial in SCO v. Novell - Novell's Petition for Certiorari - Updated 5Xs - Messman, Levine, Mohan, Michaels, Wilt
Thursday, March 11 2010 @ 08:11 PM EST

They played videos in court today, day 4 of SCO v. Novell's jury trial. SCO claims it has a surprise witness, like that surprises anyone that has been following SCO's legal ways. There was a dispute about that, but I gather it will happen eventually. And Novell has filed its notice that it has filed its Petition for Writ of Certiorari with the Supreme Court, asking them to take a look at what the Appeals Court did. We have the document now for you as well.

Update 4: With all the reports now in, what happened today in court becomes clearer: SCO continued its presentation, with video depositions played, of Jack Messman, Doug Michaels, Burt Levine, Jim Wilt, Alok Mohan, and some live testimony by Bill Broderick. And the surprise witness looks like it will be one of the lawyers who drew up the APA, perhaps Aaron Alter, who you may recall worked on the same team as Tor Braham, but Braham was the lead attorney for Wilson Sonsini. He will be testifying for Novell. As you noticed in opening argument, Novell pointed out they had lawyers who drafted both the APA and Amendment 2, and SCO had no lawyers to testify for them. So I gather SCO would like to remedy that. However, it's not certain. One witness thinks the name mentioned was Troy Keller.

First, here's the notice:

03/11/2010 - 789 - Letter from US Supreme Court re: Notice of Petition for Writ of Certiorari re 567 Notice of Appeal. Supreme Court Case Number 09-1061. (jmr) (Entered: 03/11/2010)

Update: Here are the deposition and declaration of Duff Thompson, exhibits 10 and 11 in the PDF collection of exhibits. Alok Mohan's depostion is exhibit 6 in this collection [PDF]. Bill Broderick in exhibit 16, Doug Michaels is exhibit 17 and 18, and Jim Wilt is exhibit 19 in this collection [PDF].

And here is the Petition [PDF]. The question Novell asks the court to please consider:

QUESTION PRESENTED

Section 204(a) of Title 17 of the United States Code provides: “A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” The question presented is:

Whether Section 204(a) requires a writing that specifies which copyrights were conveyed, or whether, as the court of appeals held, requires only that the written instrument could be construed to convey some copyrights, leaving the factfinder to determine which, if any, copyrights were conveyed.

Stripping out the legalese, it's asking: can SCO really parade in a bunch of people after the fact, more than a decade later, claiming they *thought* this or that or they *intended* this or that because a clause is ambiguous? Or does ambiguity mean copyrights don't transfer? Don't you need a writing that says what copyrights were conveyed, or can this jury decide all of that based on this loony list of not-there, didn't-read-it, not-precisely-in-the-loop people?

After just a few days of trial, would you say that it's the right question? How would you like to own a copyright, have some SCO-like folks a decade and a half later tell a jury that "no copyrights" means "some copyrights" and then let them decide which copyrights aren't yours any more?

That doesn't mean the Supreme Court will accept the case. Numbers are against any petition. But here's why Novell hopes they will and thinks it important that they do:

INTRODUCTION

This case presents an important question of statutory interpretation that will affect billions of dollars in copyright transactions across the country.

The 1976 Copyright Act significantly overhauled copyright law, in part to enhance predictability and certainty in copyright ownership and transfer. Section 204(a) of the act provides that a consensual transfer of copyright ownership is “valid” only if made through an “instrument of conveyance” or a “note or memorandum of the transfer” that is “in writing and signed by the owner of the rights conveyed.” 17 U.S.C. § 204(a). This provision furthers the Copyright Act’s goal of promoting certainty in copyright transactions by requiring that any transfer of copyright ownership be in a writing that memorializes the transaction. Among other things, that writing serves as a guidepost for subsequent disputes between parties and their successors.

In this dispute, respondent The SCO Group, Inc. claims that petitioner Novell, Inc. transferred ownership of certain valuable copyrights to the UNIX operating system—copyrights that have been licensed to the world’s leading businesses, institutions, and governments and are critical to the nation’s Internet infrastructure. Respondent’s ownership claims are based on an ambiguous writing that fails to specify which, if any, copyrights were actually subject to the transaction between the parties. The court of appeals held that such an ambiguous writing could effect a valid transfer under the Copyright Act. Under that decision, it is enough to satisfy Section 204(a) if the writing could be construed to convey some copyrights. In the court of appeals’ view, a jury can then be left to determine—from extrinsic evidence and oral testimony of “partisan witnesses whose recollection is hazy from passage of time and colored by their conflicting interests”—which specific copyrights, if any, were transferred. App., infra, 28a (quoting Trident Center v. Connecticut Gen. Life Ins. Co., 847 F.2d 564, 569 (9th Cir. 1988)).

The effect of this ruling could not be more profound, not only on petitioner and the millions of users of the copyrights at issue in this dispute, but on every individual, company, or institution that uses copyrighted works and thus exposes itself to copyright liability to the works’ true owners. The court of appeals’ ruling undermines certainty and predictability in copyright ownership, and creates a significant likelihood that parties will be subject to claims that they inadvertently transferred copyright ownership in vague writings that set forth no terms of any agreement and do not specify which copyrights, if any, were conveyed. In this digital age, companies investing in innovative ways to bring media to consumers—through mobile devices, tablet computers, or other e-readers—rely on licenses to provide content. Especially given the increasing new uses of older works, that content often comes with long chains of title attached—some as long as a cen- tury or more—that the ruling below will cloud. Organizations that have obtained, or are seeking to obtain, copyrights have an interest in confirming precisely who owns the copyrights. The ruling below will frustrate that search for certainty.

This is of particular concern given that copyrights survive for 70 years after the death of the original author. Copyright ownership disputes thus often arise long after the memories of key percipient witnesses have faded, or the key witnesses have died, making it difficult or impossible to resolve such disputes based on extrinsic evidence.

Not surprisingly, the ruling below cannot be reconciled with the decisions of several other courts of appeals. Absent this Court’s review, the nation’s intellectual property will be subject to great uncertainty and will be at risk of unintentional transfer by ambiguous writings. And disputes over ownership will be governed by divergent standards, which will lead to forum shopping.

The petition is 229 pages long, because attached are earlier rulings. The part that I was quoting from is, however, just 38 pages. We'll work on complete text version.

But I know you are drooling to know what happened today in Utah's Wonderland, where copyrights are up to everyone's fading memories and current agendas.

We had at least two observers there today in court, but both were there part of the session, so we will jigsaw their reports together. Here's our first report, and he's sending us more after he types it up:

I arrived a little late, about 8:35. Court was already in session. I noted it was not as 'grand' a court as Judge Kimball had. However the jury had not been seated. There was some discussion regarding SCO's expert, Mr. Davis. They said (if I understood correctly), he will not testify (or perhaps it was today). Stewart mentioned that he was elderly and one of SCO's attorneys said he was not in good health.

[For future reference my observations will be in brackets]

Toward the end of my being there, they talked about having a 'live' witness to fill the balance of the day (that could have been Davis - I don't know). The jury came in and they began video depositions (Messman deposition was first, although they said he would also be a 'live' witness [I couldn't understand why they had the video deposition if he testifies later, but, then IANAL]. He recited his history and how he came to Novell. He said he hired Ray Noorda. Later he discussed a merger and said that he was a Board member when the Novell -> SCO sale happened - the Board approved.

[I noted that at this time Messman sat with crossed arms - did not look happy] They discussed the APA Amendment 2. Established that Novell found it in their Finanace Department. He said that no one knew they had a signed copy.

SCO offered Exhibit SCO-1 into evidence - Objection [While they discussed the point I noted there seemed to be more attorneys than either jury members or gallery]. SCO-1 was approved and entered. Singer then read from Section A [I am not attempting to describe or recreate any documents]. They then continued with Messman deposition. Listed 'excluded assets'. Singer put before jury 28 May 2003 letter [I believe exhibit 94] and asked they "publish to jury" - No objection. Directed him to page 2 last paragraph. Messman sent Darl a letter. Singer asked if he approved it - Yes.

He said that SCO did not own the copyrights, and he did not investigate SCO's claim. I'll send more later.

Our second reporter picks up with his impressions:
I attended part of today. It was hard to keep up. The public benches were pretty much open. I noticed 12 people at first in the audience, during one of the breaks I noticed that all the people were pretty much a part of the counsel as they all gathered and talked to each other. All in all there were probably only about 3 real public audience members.

The jury had 6 women and 6 men. Mostly alert and attentive with notebook and pen in hand.

Hatch was wearing maroon bow-tie.

Normand spoke for SCO -- soft spoken and pleasant voice. Jacobs for Novell was taller. I think a Mcbride was there but either he looked younger than Darl or it was his brother or something. I am not sure, but he had the McBride look.

I heard 2 and a half depositions. 2 were recorded and one was in person.

The 1st deposition was a CEO of Santa Cruz I believe. Didn't get the name (Doug Michaels?), but pretty much he wasn't relying on his memory, but just mainly stated that the intent was that with buying the business, the copyrights were pretty much guaranteed to be transferred. But he couldn't remember anything specific about the APA and didn't even know about Amendment 2 when asked! and when asked to remember things he would blow it off like that was so long ago. He would joke about it, but the lawyer would just restate the question seriously and politely. The jury even smiled and laughed to themselves quietly. It seemed to me the guy was just saying the intent was there, but he couldn't remember anything specific. I don't think the guy was that credible.

The next deposition was the most interesting. It was Burt Levine. Started at USL in 1991 and he was a lawyer. He was involved with drafting the APA. When Novell bought USL he transferred to Novell. Then after a few months of the sale to Santa Cruz he transferred to Santa Cruz. He again testified that the intent was to convey everything. Intent was used many times.

Novell asked what specifically in the agreement points to the conveyance. Levine can't point to anything specific. Novell asked him about the Excluded Assetts. It turns out that the initial draft had some mark-ups that he had faxed to Novell. Something related to the Excluded Assetts. Levine asked what excluded assets means. There were 8 items on excluded list. IP specifically excluded. I don't remember all the details, but the point was that he took out some language after drafts, but the excluded language remained. So he had a chance to reflect on the language and didn't change it, so it adds weight to Novell's argument.

There was an email from Levine to Chatlos and they read from it. Something about the language of waiving rights. It had something to do with HP agreements.

Last deposition was Bill Broderick. He was sworn in. He was orginally at USL and transferred to Novell after the sale. He said when Novell decided to focus on NetWare and sell the Unix stuff, he wanted to go to Santa Cruz. He worked on the software license contracts. Binary and source code licensing.

Novell objected to questioning along the line of did Bill ever hear anyone say that the copyrights were transferred. Novell said that Bill had no direct involvement so he can't testify about it. The judge said SCO could continue as long as the questioning didn't get specific. Well, a few questions later Novell objects again. Normand and Jacobs had about a 15-second exchange back and forth with the judge. Normand can talk fast, (he spoke faster than normal) and I couldn't understand what he was saying, but the judge sided with Normand and let the questioning continue.

Basically Broderick said that from his perspective the licensing for Unix was part of the business, and he showed emails sent out about the Novell/Santa Cruz changes to the customers. He didn't finish his deposition and will be back in the morning at 8 :30.

The court recessed at 1:30. The judge admonished the jury to not watch or read any media related to the case. He also told them not to start judging or deciding who is right or wrong. There will be a lot more evidence in the future.

The jury left, and then the lawyers for the sides talked for a few minutes with the judge regarding a witness that Novell wasn't aware of. SCO said they will have the witness testify "out of turn" so that Novell can be prepared.

Jacobs brought up something he said in the opening statements that wasn't right. The phrase "to this day" in the context that Novell to this day refutes SCO's claims of copyright ownership. Anyway the judge told him to put something in writing and get it to him.

Normand spoke then about who would testify tomorrow. Mattingly, Maciaszek, and a video tape recording of Maureen O'Gara. Sorry if the names are spelled wrong I just wrote how they sounded. Anyway there was a point of controversy relating to the O'Gara tape. No doubt it probably deals with the slander of title claim. It wasn't resolved about the O'Gara tape yet.

Here's how SCO described Burt Levine and Bill Broderick and Doug Michel's depositions when it unsuccessfully moved for summary judgment on Novell's claim of slander of title in April of 2007:
15. As he testified at his deposition in this matter, Burt Levine was an attorney at Novell at the time of the APA. (Ex. 14 at 15-23.) Mr. Levine reviewed and revised drafts of the APA. (Id. at 163-64.) After the Business was transitioned to Santa Cruz in February 1996, Mr. Levine worked as an attorney for Santa Cruz. (Id. at 22-23.) Mr. Levine testified that under the APA the "intention was to convey all of these ownership and auxiliary ownership rights to the asset including copyright." (Id. at 68.) He further testified:
Q. Mr. Levine, from the time of the APA in 1995 until you left Santa Cruz in 2000, did you ever hear anyone whether inside or outside of Santa Cruz or inside or outside of Novell say that Novell had retained the UNIX or UnixWare copyrights?

A. No.

Q. If you had heard anyone make such a statement, would that have been a surprise to you?

A. Very much so, yeah.

Q. And why do you say "very much so"?

A. My personal experience with the couple of years that I spent at Novell was that it was a very ethical company and I, I was very impressed with that.

Q. And how does that fact bear on your answer, the fact that you had the view that Novell was an ethical company?

A. Was ethical and I believe that being an ethical company in its dealings with its partners or transferees or whatever it is that they would not resort to withholding information or trying to withhold something that the transferee in this case would be entitled to.

(Id. at 154-55 (emphasis added).)
Q. In looking at the first paragraph Roman I of Schedule 1.1(a) of the Asset Schedule, and that language says, quote, All rights and ownership of UNIX and UnixWare, including, but not limited to all versions of UNIX and UnixWare, and all copies of UNIX and UnixWare, including revisions and updates and progress, dot, dot, dot, including source code, dot, dot, dot, such assets to include without limitation the following, and then there's a list of source code products, binary product releases, products under development and other technology, do you see that language?

A. I do.

Q. How does that language bear on your understanding at the time of the APA and today that the UNIX copyrights and UnixWare copyrights were among the assets transferred under the APA?

A. Do you mean the fact that these are listed specifically as categories?

Q. I mean to ask you about the scope of Roman I.

A. Oh, the scope of Roman I with or without this listing, all rights and ownership of UNIX and UnixWare, that gives all the components of the business, including physical components and intellectual components, to my mind will carry with it the transfer of any copyrights that apply to them.

(Id. at 156-58 (emphasis added).)

16. Bill Broderick was a contract manager in the UNIX licensing group at Novell and Santa Cruz. (Ex. 15 ¶¶ 6-7.) He was also a member of the Novell APA Transition Team. (Id. ¶ 10.) Mr. Broderick states:

My understanding of the sale of the UNIX assets from Novell to Santa Cruz was that the UNIX copyrights were transferred. To the best of my knowledge, from the time of the closing of the APA in 1995 until after SCO asserted legal claims concerning its Linux- related rights in 2003, Novell never contested SCO's ownership of the UNIX copyrights.
(Id. ¶ 7 (emphasis added).)

17. In his recent deposition, Mr. Broderick testified that his understanding is based on (among other things) Novell's explanation of the transaction during "company-wide meetings" as well as discussion in "contracts transition team," including discussion about "changing the copyright notices in the source code to Santa Cruz Operation, Inc." (Ex. 16 at 48-51.)...

19. Doug Michels founded Santa Cruz and was its Senior Vice President at the time of the APA. (Ex. 17 ¶¶ 2-3.) He states:

In connection with the 1995 purchase from Novell, the parties agreed that (as is accurately explained by both Mr. Wilt and Ms. Madsen) Novell could retain the existing binary royalty stream even though the entire UNIX business, source code and related assets, including copyrights, were transferred to Santa Cruz.
(Id. ¶ 9 (emphasis added).) In his recent deposition, Mr. Michels repeatedly confirmed that the parties to the APA intended for Novell to transfer and for Santa Cruz to acquire the UNIX and UnixWare copyrights:
Q. To the extent that you did, what did you mean by that?

A. Well, I meant that the only way that I know of, and anyone on my team knew of to buy a software business is to buy the copyrights, and there's no way we would have ever done a deal to buy a software business where we didn't get the copyrights and all the other intellectual property. That's what you're buying. And especially in the case of UNIX, with its convoluted intellectual property history, and whatnot, to not get that stuff would be to not do the deal. And so it was implicit in everything we did, everything we thought. Every single person on my team understood that. The lawyers understood. The business development people understood it. The people at Novell understood it. I mean, it — it's just so essential. It's -- you know, it's like breathing oxygen, you know, I mean, you just — there's no way that deal could have happened without getting the copyrights.

* * * *

A. I know that everybody involved in this negotiation knew the copyrights were being transferred. I know that.

Q. How do you know that?

A. Because I was there and I know it. That's -- I -- I know what -- I know there were discussions. I know there was shared vision. I know we all understood what it meant to buy a software company. You know, I've known these people for many years. It -- it just wasn't ambiguous. It wasn't something that was ambiguous.

(Ex. 18 at 134-38 (emphasis added).)
Likely this is pretty much what the jury heard today. Perhaps Mr. Michels has forgotten Xenix. Santa Cruz, after all, never owned the copyrights to Xenix. They still don't, as they belong to Microsoft, despite Santa Cruz building its business at first around Xenix. And notice what Judge Dale Kimball wrote about these witnesses, starting with Burt Levine:
Novell submitted evidence demonstrating that during the negotiations, David Bradford, Tor Braham, Aaron Alter, and Burt Levine all reviewed and approved the language in the Excluded Assets Schedule 1.1(b). Id. ¶ 16. SCO has not provided evidence from witnesses on the Santa Cruz side of the transaction with respect to their review of the asset schedules. In fact, there is no evidence from any of Santa Cruz's outside counsel and very little evidence from Santa Cruz's in-house legal department regarding the drafting of the APA.
And that is what was brought out today, evidently, that he had the opportunity to focus on the "no copyrights" language, and he made no changes. Kimball noticed this also:
Burt Levine, a former Novell in-house attorney who went to work for Santa Cruz after the APA, testified that he worked on some early drafts of the APA but cannot remember which specific provisions. Levine did testify, however, that during APA negotiations, he reviewed and marked up drafts of Schedules 1.1(a) and (b). Decl. Mark James Ex. 14 ("Levine Dep.") at 72-74. He revised the list of included assets but did not add copyrights. Id. at 74. He then faxed his markup to outside counsel, who passed on his comments to Santa Cruz's outside counsel, Brobeck Phleger. Id. at 72-73, 77-80. However, he testified that he would have been surprised to hear that Novell retained the UNIX and UnixWare copyrights. Assuming, however, that the copyrights were excluded from the APA, he testified that SCO would have an inherent license to use those copyrights in the business. Id. at 89.

William Broderick, a contract manager and member of the Novell APA transition team who is now the Director of Software Licensing for SCO, testified that his understanding of the sale of assets was that the UNIX copyrights were transferred. Decl. Mark James Ex. 15 ("Broderick Decl.") ¶¶ 1, 6, 11. Although SCO claims that Broderick testified that his understanding was based on Novell's explanation of the transaction during company-wide meetings and meetings of the transition team, he testified in his deposition that he did not recall any specific discussion about the transfer of copyrights. Id. Ex. 16 ("Broderick Dep.") at 49-51.

Here's something from Kimball on Michels:
Doug Michels, Senior Vice President of Santa Cruz at the time of the APA, stated in his deposition that "the only way that I know of, and anyone on my team knew of, to buy a software business is to buy the copyrights, and there is no way we would have ever done a deal to buy a software business where we didn't get the copyrights and all the other intellectual property." Decl. Mark James Ex. 18 ("Michels Dep.") at 134. Michels testified that he was very involved in the initiation of the APA, but that he was only involved in two or three meetings with Novell after the initial discussion about the deal. Id. at 11-12. He did not draft any language of the APA or review drafts of it. He does not recall "even vaguely" any debates in which he participated regarding the drafting of the APA. Id. at 12-13. He also does not recall any discussion by anyone either at Novell or Santa Cruz regarding the transfer or retention of UNIX copyrights. Id. at 50-52.
I gather the jury picked up on the vagueness too. And from footnote 6, a tidbit about Bill Broderick:
6 Even if this court were to consider SCO's extrinsic evidence, it does not uniformly support SCO's interpretation as SCO claims. If the contract language was susceptible to SCO's interpretation, SCO's evidence would, at most, create only a question of fact for the jury.

Prior to this litigation, SCO had publicly announced that its administrative duties under the APA extend to "customers who deploy SVRX technology." SCO did not report that its administrative duties are limited to a more narrow set of SVRX customers licensing binary SVRX products. In addition, in May 1996, Bill Broderick of Santa Cruz wrote a letter to Novell recognizing that the APA "requires prior written approval from Novell for all new agreements or changes to current agreements relating to UNIX System V."

It's easy for a witness to breezily make a claim on the stand. But *proving* it is a different kettle of fish. I think you can see why Novell raises the question it does with the US Supreme Court. Because this is no way to run a business.

Update: Our first reporter sends the rest of his notes now:

Here is the rest, oh and I talked with a CS student taking a law class - he said he would submit a report as well.

[Picking up:] Backing up a few lines, Messman said that Section A excluded assets. He indicated that SCO didn't own copyrights. He indicated that he didn't talk about intent: only the document. He did not investigate claims [up to that time].

Singer entered Exhibit 525 into evidence (a press release). No Objection. It was the 28 May 2003 press release. The release challenged SCO's claims. Messman: used PR to get (Novell's) message out. Singer asked if PR caused a 30% decline in SCO stock – Messman: Cannot (Did not) recall any given day's stock change.

Singer entered SCO-96 (a letter) into evidence. No Objection. It was a Joseph LaSala letter 6 Jun 2003 – the same day Novell issued the press release. Video deposition continued: Did Messman approve LaSella letter: Yes, and sent it to Darl. Entered SCO-105: 4 AUG 2003 letter (or press release). No Objection – Singer read the whole exhibit. Messman deposition continued.

Messman said that Novell sold so that oldSCO could continue development and unify Unix. They didn't need copyrights to do that. Entered SCO-133 (Wall Street Article) 20 Sep 1995. Asked if he read the article, and he replied that he may have – yes.

Asked if he challenged Journal article he replied “I don't know of any steps” (to correct article). Asked if he saw the Chris Sontag to Greg Jones letter, he replied No. Something about 'all rights title and interest in copyrights' in letter, and he said he just became aware of the letter (at deposition time).

He retired 21 Jun 2006. Is he a stockholder? Yes. He indicated that Novell began a Linux strategy late 2002. NetWare was to run on top of Linux – Novell was not engaged in Linux distribution.

Something was said about Novell's relationship with IBM, and how IBM, HP, and Dell would sell it (NetWare on Linux). Did IBM pay Novell $50M? Messman said that IBM investment was to give him some comfort that IBM would support the product. Novell had $750M in bank and purchase was $120M, so Novell could afford it without the $50M. He called IBM to see if they would sell the product and buy stock. Discussion took place 2003.

Messman contends that copyrights did not transfer from APA (in fact, copyrights and patents both did not transfer), according to David Bradford, General Counsel at the 1995 Board Meeting. They were selling (to Santa Cruz) certain AT&T assets, not selling copyrights and patents. Amendment 2. Messman said that SCO did not need copyrights to do what they wanted to do.

Exhibit 1021 (faxed letter - if I recall, from SCO to Novell). I can't read some notes, but Messman began an investigation after receiving this letter. Asked why Novell published (the press release), Messman said the stock market was in a 'feeding frenzy'. Asked if he wanted to dampen newSCO's price, he indicated that he had no opinion as to what releasing PR would do. He did not personally participate in investigation.

Novell asked SCO to identify infringing code. It would be a tremendous effort to verify SCO's claims without their identifying code.

Asked if Darl asked Novell to admit SCO owned copyrights, he said No. Asked if he talked to IBM about copyrights, he said No. Asked if he talked to IBM about Linux, he said No. Some discussion regarding an unsigned Amendment 2 copy. Messman said that Amendment 2 appeared to support SCO's claims that copyrights transferred. Only limited rights transferred. Novell sold code to evolve and unify Unix – SCO didn't need copyrights to do that.

SCO bought right to develop code to unify Linux and Unix and to compete with NT. (End Messman Deposition)

Next was Jim Wilts Deposition: 26 Jan 2007. VP business development, Sr. VP products, President Consultation Services. Had limited discussions with Caldera/SCO. [It was somewhat confusing not knowing what depositions were scheduled and if we were talking oldSCO or newSCO] He just assumed that copyrights transferred, As one would assume if you “go out the door, your head goes with you.” Didn't recall specifically saying copyrights were included or not. He indicated that they wouldn't buy the 'business' if copyrights did not transfer. Discussed that they couldn't afford outright purchase – and the royalty payments went to purchase price, they retained 5% to cover their collection costs.

Jury left.

SCO prosented a structural foundation to support Mohan deposition. Novell: squarely on motion in limine. Stewart said Davis is uniquely qualified; no decision. Stewart to rule after recess.

RECESS

Attorneys held discussions during Recess. [Spent some time in hallway and noted Normand walking its length in thought – I guess rehearsing what he would say – he primarlily handled matters following recess] Stewart returned and ruled that SCO video deposition for (didn't catch the name) was not allowed.

Mohan deposition: 23 Feb 2007:

Mohan -- was Santa Cruz Organization's CEO at time. Engaged in 'high level' discussions, not details; reviewed did not author writings; had some discussions with Duff Thompson and Frankenberg. He looked at APA but did not participate in strategy; he signed APA. He reviewed details – Yes, he read it. Did he read it cover to cover? Yes. He believed it complete – nothing jumped out as unclear.

Could they sell UnixWare: absolutely. He was on SCO Board when they agreed to sell to Caldera: the whole business, but could not afford “UnixWare income stream”. Asked what assets Novell retained, he said that oldSCO “bought business”. Novell wanted to protect its 'income stream'; bought whole business. Copyrights included: absolutely. Asked if copyrights were included in documents; he was not aware. Didn't list one item as a time: bought whole business: “to me, business includes copyrights”. Looked at the entirety (Frankenberg and Thompson). “Business included all the assets, and that includes copyrights”. That was value of what they were buying. Less value to SCO if copyrights did not transfer.

Entered 526 1995 Press Release (10/28) Mohan – did anyone from Novell say they retained copyrights: “I thought we bought the business”.

Attorney (don't remember which side) requested sidebar: Stewart came down from bench and they met in northwest corner, white sound – rather unpleasant, louder than I thought necessary.

Exhibit 180 allowed, 18 Apr 1996: Frankenberg to Mohan; Novell did not grant IBM additional rights, no right to sub-license was granted, except to make small changes or corrections. Asked if both sides were well represented, he responded affirmitively. Asked if it was an arms-length transaction, he said Yes. Did either side have an unfair advantage, he thought they were equal.

Asked if the contract was the most important thing, he said Yes. In a dispute, he was asked, should you look to the contract? Yes; even if the disput is many years down the road? Yes. APA gave right to business. Asked if a contractural provision (should prevail), he didn't answer directly. Normand stopped video – asked for a sidebar: granted.

[I noted that Hatch sat at the far left of table – seemed to be uninvolved with the other attorneys – as if sitting there by himself – there are 13 jurors: 6 women and 7 men; mostly younger I identified two I would classify as middle-age or older.]

(Some time after sidebar, Stewart called an in-court recess: more white sound. Afterward Stewart asked if jury could hear what was said or if they could read lips – satisfied that they could/did not, he continued).

Video continued: Novell retains certain (assets) → does not agree with APA 1.1a -- believed they bought entire business. Proxy Statement (sent to SCO investors.

Entered NOV-J-10 (pgs 132-133) (Jacobs did not read the document as Singer had, said that he thought jurors could read faster). Mohan asked to read 132-133: Section regarding 'Intellectual Property' Mohan could not identify word: Copyright. Novell didn't tell me they kept it (copyrights), did not tell me they gave it.

Michaels Depostion: 28 Mar 2007

[At this point, I misread the clock and left for my appointment – when I reached the exit I saw that it was 11:30, not 12:30 so I went back.]

Michaels said they bought the whole business, that it was purely a financial transaction. They only wanted SCO to talk to their customers, they didn't want Novell talking to them. (Apparently, there was a time when Novell talked to a customer): “I'm talking about their actions, not their words”.

[He was very arrogant, dismissive, superior, and did not well tolerate the examaination]

He didn't review drafts, only 'Term sheets” which were in English – not legalese. Asked if he was involved with Term Sheets, he said Yes. They intended buying business begun at AT&T, through Novell, and licensed (something) back to Novell.

What copyrights did that include: [he was not as glib answering this question]. He basically said 'we bought the business, we were in the intellectual property business' [I wondered how they continued in business if the copyrights were in question] He had no idea what people said ten years ago.

Stewart called a 20-minute recess – since I needed to leave I left at this point because I would only get about another ten minutes, before I had to leave.

[I was struck that SCO talked about people's memories, what they thought (albeit some time later) was transferred, but have no documentation for those transferred assets: copyrights. Their documentation is comprised of press releases, newspaper articles (we all know how reliable they are), and letters. OldSCO seemed to be a 'fly by the seat of the pants' operation, since they could not produce any documented evidence, unless there is some other explanation. I hope the jury sees that as well.]

End of Report

Update 2: We have a third observer, who stopped in for an hour and offers his general impressions:

I'm in SLC for a meeting this week and had an hour free between sessions so I stopped in to see a bit of the trial. I was there from about 12:30 until recess at 1:30. I didn't take any notes, but I did see a couple of "civilians" making notes on the back bench where I was sitting.

I'll describe the scene visually, since that's about all I can contribute of substance:

I enter Room 142 from a door at the back left corner of the room and sit on the back row bench. In front of me is a room paneled in honey-gold oak, about 70x40 feet. At the front of the room sits the judge, and on the left side of the room the jury sits in two rows facing to my right. Across from the jury sit four lawyers at a table, representing Novell. Across the width of the room, with their backs to me, sit the lawyers for SCO. At each location is an LCD screen that displays video depositions or documents, and a person on the distant end of the Novell bench seems to be in control of what is shown. The documents may be magnified and highlighted as discussions ensue. Each of the jurors has a screen as well, at knee-height.

The jury seems to be a mix of folks, younger overall than I'd expected. They all seemed to be paying attention, and some were taking notes.

There aren't many spectators, and most of those who are there appear to be lawyers. A couple of them seem to be fairly busy, going in and out of the back door a half-dozen times during the hour I was there. I couldn't tell which side they were on. There were a couple of non-lawyer-looking-types sitting on the back bench where I was. One was taking notes...perhaps a Groklaw reader? Or a reporter? Don't know. (I was the guy in the brown wool jacket.)

When I walked in there was video testimony running, from a guy who was involved in marking up the APA. I won't comment on what he said. The testimony was occasionally stopped as various documents were introduced into evidence and certain portions were highlighted as his video testimony commented on them.

After the video testimony, the next witness was called by SCO's attorney, Mr. Singer. I didn't note the name, but he's the guy who is now in charge of licensing for SCO. He was sworn in, gave us an outline of his educational background and work history, and then the examination from SCO started. That went on until adjournement for the day, with a "cliffhanger" bit of testimony to conclude. That got a chuckle. He'll be back tomorrow.

At that point the judge reminded the jury, in a very forceful tone, that they were not to do any independent research, nor to read about the trial in any form including the Internet. Further, they were not to discuss it with others, nor allow anyone to discuss it with them, and if anyone did so they were to report it to the judge immediately. We all stood and the jury was then dismissed.

There was then some discussion between the judge and the attorneys regarding admission of certain things, and they agreed to submit some arguments in writing this afternoon and to contact the judge if they needed a pre-trial conference tomorrow morning. Otherwise, they'd all meet at 8:30 to continue the show.

And I headed back to do my presentation, so that's all I know.

Thank you all so, so much for this composite view of the day and the feel of the event. I'm enjoying your reports very much. Here, too, once again, is Chris Brown's drawing of the courtroom, so you can visualize:

Update 3: Our final reporter of the day now reports in, and it's nicely detailed because he was there for the entire day. I gather SCO intends to present one of the lawyers involved in the APA drafting after all, which considering how things are going for them so far, may be their only hope:

Thursday March 11th 2010

I will give a little background and mostly give a play by play, much of the conversation was fast enough it was hard to get it all down, I did not know what documents would be available outside of the courtroom. This was my first time ever taking notes in a courtroom.

Layout of the room, the jury box sits to the right of the judge and the Novell table is to the left, with SCO directly across from the judge forming a square with a lecture in the center, the gallery of three or four pews sit behind the SCO table, the room is not very large.

SCO lawyers were in the room first setting up a collection of boxes. A man entered later that was not Darl but I bet he would answer to the name McBride based off his looks.

When all the lawyers came in there were, from my count, 5 people at the Novell table and 5 at the SCO table, I didn't get the names of the Novell table (so any action by them will be referred to as Novell), but the SCO table sat as follows: (left to right) Mr. Hatch (bow-tie of course), Mr. Singer (shorter gentleman), Mr. Normand, another gentleman who did not speak, and then another referred to as “Calvin” who handled the AV for SCO.

Various others were seated in the gallery. All told I counted 11 for SCO based on their dress and interactions during recess.

There were 13 jurors seated in the jury box, many of the jury looked younger than average, and dressed mostly casual.

Order of witnesses: Messman, Wilt, Mohan, Michaels, Levin, Broderick

J.S. Asked about Davis, suggested his health was an issue, Singer responded that his health and the schedule was the reasoning that he would not be called, just depositions.

Levin is in dispute. Two objections, not sure who or what they were but J.S. stated he would look them during the first break.

Video deposition – Jack Messman:

Background:
1981 V.C. Safeguard Scientific
Cambridge Tech CEO
Chairman of the Board / CEO of Novell

Talked about change in Novell strategy during his time there, mentioned hiring Ray Noorda and Eric Schmidt. He was involved in the Board approval of APA, otherwise no other involvement. He was asked about the May 28th 2003 letter from Darl about the APA.

Amendment #2 Sec A. is mentioned and the video is stopped, Singer stands and wants to place in front of jury, Novell objects and wants deposition played “as is”, they are overruled and Singer is allowed to read the document to the jury while they view it on the screen. Video then resumes.

SCO Exhibit 96

Joseph A. LaSala (Novell General Counsel) letter to Darl June 6 2003

Response to McBride letter, pretty much cease and desist.

Spoke of June 6 2003 Novell press release which read “amendment appears to support SCO...” found here
http://www.sco.com/company/legal/update/Novell_Press_Release_20030606.pdf

SCO Exhibit 105

Aug 4th 2003

Another letter from Lasala to Darl

Disputes claims

At this point, I think there was an objection but I missed it.

There were statements that APA copyrights only transferred if SCO demonstrated in Unix System 5 that it was required for SCO to exercise rights under the APA.

Messman, to develop UNIX “they didn't need the copyrights to do that”

Feb 03 SCO to Novell letter request to transfer of copyrights/ clarification.

Nov 2003

NetWare was going to be used on top of Linux and sold by Dell, HP, and IBM. They bought SUSE. Messman spoke of an agreement where IBM would invest 50 million as an assurance of their investment into Linux, versus selling SUSE exclusively.

Something about Bradford (David?) General Counsel.

Copyrights, Patents were not being sold....

SCO was buying the right to bring different flavors of UNIX to compete with NT.

There was a discussion about a signed versus unsigned Amendment 2 and whether Novell had a copy during the period, Messman pretty much ended up saying that it was in finance and not in legal’s files all along.

End of Jack Messman Deposition

Begin Jim Wilt Deposition:

Background:
SVP Business Products
Pres, Consulting Services during Caldera Transaction

Did not recall but assumed the APA transferred the copyrights.

In 1st declaration Aug/Sept 1995 paragraphs 7, 12, 16 referred to, transfer entire UNIX business.

2nd declaration is also mentioned.

End of Wilt Deposition

Jury leaves.

J.S. Question to Singer/Normand.

Personal involvement of Levine

Novell→ did not have involvement beyond witness personal knowledge.

SCO makes an argument about him reading the document

J.S. Worried it becomes expert testimony.

Novell → states that any lawyer that reads could then testify, they have many lawyers they could use....

Part of Levine will not be admitted

Return of Jury

Discussion about witness order and possibility of adding a live witness if time permits.

Begin Alok Mohan Deposition:

Background:
SCO CEO/President 95-98

Mohan stated he had only “high level” experience with the APA. Did review the APA but was there for “strategy”. Did say he interacted with Duff Thompson. Around Sept 19, 1995 during the APA negotiations.

Questioned what did Novell retain? A: “Believe” we bought the “whole business” with no rights left behind.

Stated they could not afford the SVRX revenue stream and that this was a transaction bridge for buying the business, “includes all kinds of stuff”.

Question: are copyrights part of the business? A: Absolutely.

Question: besides Frankenberg, who else did you deal with? A: Duff Thompson.

Regarding paragraph 4 of declaration: would not agree to terms where copyrights were retained by Novell or waived material breeches.

Stopped tape.

Exhibit SCO 526, Normand introduces Sept. 20, 1995 SCO press release.
*“*Purchase Unix Business...’ Frankenberg is quoted from the document.

Exhibit SCO 180, by Normand.

Jacobs calls for sidebar.

Wonderful hissing sound is played while they gather at opposite side from jury. Jury looks annoyed a little and smirking at noise, but most still stare at the judge and the conversation they are having. Later in the day J.S. asked if any of them were able to hear, and they replied that they did not.

April 19th 1996, Frankenberg to Mohan.

Discussing not granting IBM rights anything beyond allowing minor things such as hardware fixes.

At this point in Mohan's deposition the jury is looking a little bored. Two are staring off or at the clock, others are yawning.

Mohan talks about reading the document “in its entirety” and how that leads to what they were “trying to do” and their “intent”.

Jim Wilt and Steve Sabbath Declarations

Pg 6 paragraph 11: Novell retains significant UNIX system 5 rights, list all copyrights, trademarks.

Normand request sidebar (on record)

(Hissing played over speakers)

Exhibit Novell J10 p132 133, Letter from Steve Sabbath.

Proxy statement

P132 description of SC IP.

J.S. asks if Jacobs wants to read it.

Jacobs: rather not use the time for that. (Jury reads the document displayed to them).

Just a note here on the difference between the lawyers, SCO has read the documents aloud to the jury each time the video depositions are stopped, Jacobs has chosen not to read this aloud.

Mohan is asked about the document and he quips that he can “read English” and can see it is without the word “copyright”.

Some jury members smirk at this.

Two questions asked of him in the video at the end.

Did anyone from Novell tell you UNIX copyrights would transfer?

Did anyone from SCO ask for the copyrights?

A: “I would not know that.”

Doug Michels Deposition:

Purpose of APA? A: Buying UNIX which was originally AT&T's.

Michels stated he negotiated the deal, pretty much “who got what”, did not care what agreement went where. No memory of anything specific in the agreements, he was responsible for negotiation only. “We bought the whole business” except revenue stream. SCO would deal with the customers; Novell would have no contact with them, he said. He acted as if he would have nothing to do with the legal part of the deal, and spoke of term sheets that were in “English”. He asserted that they could not run a business without IP; it was “like oxygen”.

20 min recess

J.S. asked SCO why they have no captions on the depositions (to this point all of Novell’s video had captions at the bottom but SCO does not, and I believe it caused the jury to pay more attention since they were reading it as the person spoke.) J.S. did however mention the bars might be distracting too.

Hatch speaks for the only time today, concerning a pretrial order someone not on the list that SCO wants as a witness, no name yet; it is stated he is a lawyer.

J.S. asks whether his name was read at the beginning.

Unclear if the name was read.

*Later the name “Keller“ from Huntsman Corp. is mentioned, the 3rd week is when he will appear apparently;( possibly Troy Keller but not confirmed).*

Continue of Michels

He keeps stating he negotiated all but no specific recollections of any of it.

When asked about #1 and #2 he states “no idea what #2 is” says things like “not a lawyer”, did not read it then, never read the APA, glanced at it, never read any of them cover to cover, not prior to declaration.

Questioned: did anyone at SCO say that they owned the UNIX copyrights A: “ I don’t know.”

Jacobs states that is the end of Michels deposition.

Begin Levine:

March 23rd 2007

Doesn’t remember specifics

1.1b is mentioned, all copyrights, trademarks except UNIX, UnixWare

Integration clause

Makes statements such as “intent of the parties” “inconceivable to me” “I can’t point to the agreement, recollect only in discussions”

Mention of 4.16b

Bradford question about Novell, retaining the rights

Questioned would you be surprised? A: very much.

Stated transfer of business including physical business and IP would include copyrights.

Exhibit 1 APA

Questioned what involvement in draft/contribution of the document. A: some of the provisions, cannot recall which, at the request of Novell.

Discussion of P950 1.1a assets Roman numeral 5 IP

Trademarks UNIX and UnixWare

Do you recall schedule of excluded assets?

P954 1.1b excluded asset schedule

P995 8 listed items

1 all copyrights excluding UNIX and UnixWare Trademarks

2 all patents

Shown a fax from USL Levin to Aaron Alter. It is a draft of the 1.1a document, shows Levin’s handwritten comments and changes made.

Did not add copyrights/patents.

Memo attached was 1.1b-excluded assets

Actually reviewed before APA was executed, deleted a reference to patent licenses.

In reference to 4.16b question: anything that limits to only the revenue stream? A: No

Novell enters I5 exhibit with no objections

Jacob reads this document after J.S. asks if he would like to.

Concerns Novell directing SCO to offer HP licenses, SVRX any term we choose.

End of Levine Deposition

Bill Broderick as a live witness, questioned by SCO's Stuart Singer:

2 more lawyers(?) come in with Broderick.

Employed at SCO as director of licensing

Education
1966 HS Missouri
Army for 2.5 years with 101st Vietnam
1973 William Patterson Business
1975 Santa Clara MBA
5 years at Trans World Airlines
Dec 1991 USL Manager Sale Operations (responsible from sales compensation, revenue/ expense projections
Until 1993
Novell Sales operations for a short while then to contract and licensing
SCO, continued with contracts and licensing

Described binary product as like Windows, where you can go to the store and get windows with a computer; the difference between Novell, source code only, while SCO is offering both.

SCO asks if he recalls any discussion of retaining copyrights?

Objection by Novell hearsay

Overruled.

Answers yes.

Recall needing to change copyright notice?

Objection by Novell hearsay.

Overruled

Answers yes.

More is said about whether the witness can go into details. Objection (I assume hearsay) asks, “Who is making these statements?”

J.S. agrees.

SCO exhibit 580 (5A?) no objections

Novell transferred ownership interest

Amendment A:

Objection by Novell hearsay

Overruled

Normand – heard from Novell employees

Broderick – letter states they sold all the product told to replace nothing in the code but the word Novell to SCO.

SCO exhibit 4 Software agreements, Broderick goes into detail about the point of such an agreement, how licensing does not give product.

At this point Singer mentions Keller from Huntsman Corp and 3rd week’s out of order placement.

Order for tomorrow:

*Broderick (continued), Ty Mattingly (some background, see Novell's motion in limine #17), John Maciaszek (some background), O’Gara (some background), and one more*

There was talk that tomorrow could start early if there are issues that need to be attended to before the jury arrives.

Jacobs talks about Duff Thompson “to this day..” In addition, informing jury of past, J.S. asks for it in writing.

Singer: O’Gara disputes, will also submit in writing in the afternoon of the 11th.

J.S. signifies the judge, Judge Stewart. So, now it's much, much clearer, don't you agree? Our deepest thanks to all. And in case you are curious, here's the list of all the lawyers who worked on the APA and Amendment 2, from Novell's appellate brief to the Circuit Court of Appeals:
SCO offered testimony from various witnesses that, despite the explicit exclusion of "all copyrights" from the APA, the parties intended to transfer UNIX and UnixWare copyrights to Santa Cruz. None of these witnesses was familiar with the drafting of the actual APA language, and none had any familiarity with Amendment No. 2. (12000-05; 07738,07709,07706(Chatlos); 07720, 07723(Frankenberg); 07745,8778(Levine)3; 07842-43,07846(Madsen); 0772729,07733(Mattingly); 07801-02,07805(Michels); 07792,07789-90,0779697(Mohan); 07667-69,07664-65,07730-31(Thompson); 07817-18,07741, 07816(Wilt).)

It is undisputed that the APA language was negotiated and drafted by Novell's inside and outside counsel (David Bradford, Tor Braham, Aaron Alter, and Shannon Whisenant); and SCO's inside and outside counsel (Steven Sabbath, Edward Leonard, Scott Lester, and Jeffrey Higgins). (06100-01(¶¶5-6); 06260;06269;10718.) It is also undisputed that Amendment No. 2 was negotiated and drafted by Allison Amadia and James Tolonen, Novell's in-house counsel and CFO, respectively; and by Steven Sabbath, Santa Cruz's in-house counsel. (06063(¶5);06097(¶¶13-16).)

Update 5: There is a filing about the Messman et al deposition videos, a letter from SCO's attorney Brent Hatch, regarding the playing of depositions:

03/10/2010 - 788 - DOCUMENTS LODGED consisting of Letter from Brent Hatch. (asp) (Entered: 03/10/2010)

Specifically, the following depositions were scheduled to be played for the jury: Jack Messman, James Wilt, Alok Mohan, and Douglas Michels. But Novell has also filed a letter [PDF] with the court, in which it protested SCO's request that either Novell be ordered to produce Mr. Messman to testify during the first week of trial, or alternatively that SCO be allowed to play the video of the deposition AND call him to the stand as an adverse witness live when he is scheduled to appear March 24. Both requests, Novell said, are improper and contrary to the Federal Rules of Civil Procedure.

What is the back story? Mr. Messman is out of the country and can't appear until the 24th. The court can't subpoena him, because he's out of the court's jurisdiction, Novell says. And anyway, SCO hasn't tried that route. So Novell suggested that SCO hold its case open until the 24th, or it could play the video first, and then Novell will call him to the stand on the 24th and SCO can have at him then. SCO rejected both proposals. It wants to use him as an adverse witness and play the video. "SCO is not entitled to present Mr. Messman twice," Novell states. And if it goes ahead and plays the video, the rules require it to play Novell's counterdesignations.

So that was the argument. I'm not certain who won, from our reports, but the why of it is this: you can ask different questions and in different ways depending on whether the witness is yours or a hostile witness. Hostile here means the testimony is adverse to your side. And Novell's complaint was that SCO wanted it both ways, to put the deposition on as part of its presentation of its witnesses and then later use Messman live as a hostile witness, with the more relaxed rules on what they can ask him.

At least that is my best explanation after three days of working into the wee, small hours of the morning or even all night through. I'm about ready to start dancing on tables on adrenaline alone, or to fall down in a stupor of exhaustion instead, one of the other, with nothing in between as a viable choice. Happily, there is only one more day of trial this week, and then the week-end, when I will sleep it off, and then it begins again.


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