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No Verdict Today, the Final Day, in SCO v. Novell - Deliberations Begin Again Tuesday - Updated
Friday, March 26 2010 @ 06:47 PM EDT

SCO v. Novell went to the jury today. Judge Ted Stewart said, after the jury left to begin to deliberate, that in all his years on the bench, he's never seen such fine lawyering as in this case. Chris Brown reports that the jury says they will not reach a verdict by today:
I've just received word that the jury does not expect to be done by 5pm (it was 4:30 when I got the call, it's 4:45 now).

They will be going home at 5pm and resume on Tuesday morning.

If you recall, one juror is on vacation through Monday, so that's why it's not resuming until Tuesday. What it means is either that there is at least some disagreement on something, or that they just can't get through all the check boxes in time.

Update: From Chris: "I've just received word that the jury has, in fact, left the building."

cpeterson and Chris were just two of our reporters there today. So, we'll start with their initial reports, beginning with cpeterson:

Judge Stewart read instructions to the jury this morning. Then Stuart Singer gave the main part of the closing argument for SCO, followed by Brent Hatch who spoke about the damages portion.

Then a break, followed by a sidebar, with white noise, and no jury present. Following the sidebar, Judge Stewart informed the gallery that if there were any audible reactions, those responsible would be removed.

Sterling Brennan gave the closing argument for Novell, followed by a rebuttal by Singer.

Then the jury - minus the alternate, who was excused - retired to consider their verdict.

Now, it seems is the time to wait... and if you're a lawyer, take bets, I guess. (I was asked by several, including Mr. Hatch, how I was handicapping it.)

Say, how was he handicapping it? I guess we'll have to wait.

And here's Chris's report:

I got to the courtroom at about 11:45am and found it standing-room only.

Novell's Sterling Brennan was just winding up his last fifteen minutes of an impassioned, even patriotic, summation to the jury.

I heard SCO's Sterling Singer provide his last rebuttal, a strongly argued request to rule in their favor.

Judge Stewart gave some final direction to the jury, including announcing to them that Juror 13 was the alternate and would not have the privilege of deliberating. When Judge Stewart opined that she'd be sorry to do so, she vigorously shook her head no (drawing a laugh from everyone).

A marshal affirmed an oath to protect the jury, and they left in good spirits.

After they'd departed, Judge Stewart said in his ten years on the bench he's never had a finer, more talented, professional set of lawyers in the room. He thanked them sincerely for their fine work and demeanor.

He thanked Mr. Lee and Mr. Grant for their deft handling of the courtroom technology, saying it almost made it worth its money.

He said if anyone has children at home and is interested in buying their own noise system, to contact Ms. Malley.

He then adjourned the court.

All the lawyers and audience were in high spirits, spending a lot of time chatting in groups before they left.

I chatted with a number of Groklaw people afterwards who'd attended all or part of the day and who promised to get reports in.

I don't know about the jury, but my plan is to sleep until Tuesday.

Nah. Kidding. I'll let you know the minute I get more reports.

Update 2: And here they come. Lots of folks were there today, so let's start with MSS2:

Sorry this took me so long. Rather than come straight home, I hung around the courthouse until after 4:00, chatting and hoping that there would be a verdict. When we got the word that there wouldn't be, I headed home and started typing.

The morning started with a conference. They agreed on how to handle presentation of materials in the closing arguments. (I believe that the issue here was that SCO wanted to show videos, and Novell argued against. They agreed not to.)

SCO filed a motion on three issues (see two articles ago). Stewart said he was going to agree with SCO on all three points. First, the demonstratives. Second, Novell can't argue that the APA only meant Unix, not UnixWare. Novell said that they would argue that they owned the pre-APA code and SCO owned everything SCO had written post-APA. Stewart said that would be all right. Third, the motion said that Novell couldn't argue anything contrary to the law (perhaps this meant contrary to the law of the case). Novell could not argue that the copyrights did not transfer based on the lack of a 204A writing. Novell said that they would argue based on the contract.

There was some discussion about a footnote in the 10th Circuit ruling. After looking at the wording, Stewart said that Novell could argue based on intent. Judge Stewart said that Novell's slander claim against SCO had been dismissed. Both sides' proposals for findings of fact and conclusions of law are due on April 16th.

Then the jury came in. The jury will get a copy of the jury instructions in the jury room. Judge Stewart read them to the jury.

The first few points were about following the law. If the jury doesn't follow the law, they will be violating their oath as jurors.

Statements by counsel, he told them, are not evidence.

Novell's slander of title claim is gone. The jurors should not worry any further about it.

SCO has the burden of proof, he explained. They need to show that the preponderance of evidence is in their favor. This is not the same as showing that they have the higher number of witnesses. This is based on probabilities, not certainty.

For constitutional malice, SCO has a higher burden of proof. The standard is clear and convincing evidence, meaning that there is no substantial doubt.

The jurors are allowed to use notes, but should not use them as anything but a personal memory aid.

Evidence can be either direct (testimony or exhibit) or indirect (chain of reasoning). Both are acceptable.

The charts and illustrations presented to the jury are illustrations, not evidence.

The prior rulings in the case that the jurors heard about were without benefit of the evidence presented to the jury and were overturned unanimously. They are relevant only to the determination of special damages.

It was mentioned that SCO was bankrupt. That's not relevant to the case. They heard about the 2008 trial. That was about other matters than what is before the jury.

Finding that Novell committed slander of title requires four elements. First, it requires that Novell made statements disparaging SCO's title. They must have been made to someone other than SCO. They must convey the idea of a statement of fact. Don't consider words or even sentences in isolation. Second, slander requires falsity, either a statement that is directly untrue or which conveys a false impression. This means that the jury must determine who owns the copyrights.

The APA and the amendments must be taken together to make this determination. The amendments supercede parts of the APA. The jury must determine what the intent was at the time of the contract. They may consider extrinsic evidence such as testimony of intent and the course of conduct of the parties. (I think this means that SCO lost a small battle here; if I recall correctly, they wanted Stewart to say "should" instead of "may".)

To be valid, the transfer of copyrights must be in writing.

Third, slander requires constitutional malice. This means either knowledge that the statement was false, or reckless disregard of the truth. This means a high degree of awareness that it was probably false. It takes more than recklessness or spite.

Finally, slander requires that the statements caused special damages such as lost sales. The slander has to be a substantial factor in loss of specific purchases, or else it has to be widely disseminated. A decline in stock price is not special damages.

If ill will was involved, punitive damages may be awarded.

Regular damages must be real damage, not speculation.

The issues related to 4.16 are for the court, not for the jury, but may be used to help the jury interpret the APA.

And then came an instruction that I thought was rather odd: The jury is not to write on the copy of the instructions in the jury room.

Finally, Stewart said that the jury needed to reach a unanimous verdict. They need to come to conclusions together without doing violence to each other's opinions.

And here is his report on SCO's closing arguments:
SCO's closing argument, by Stuart Singer:

This is an important case. It's important to SCO. It's important to individuals who work at SCO.

There are two questions for the jury. Did the copyrights go to SCO? And was there slander? And if so, what are the damages?

He talked about consistency. I think his point was that you had to build a consistent picture out of all the evidence presented, but he used it to point out a couple of inconsistencies, as he saw it, in Novell's testimony. Some said that the waiver in the IBM case was without input from IBM, but LaSala said Marriott asked for it. Also, Stone said that he was asked to leave Novell, but Messman said that he was not.

Did the amended APA transfer the copyrights? The amendment replaced language that was inconsistent with the intent. The plain language of the APA with Amendment 2 says that the copyrights transferred.

Novell admits that Amendment 2 transfers the copyrights. In the June 6 press release, they said that it "appears to". And Amadia's testimony said that whatever SCO needed to exercise their rights transferred.

And the copyrights were needed. He quoted from Frankenberg, Jim Wilk, Sabbath, and Broderick. It all makes sense with Amendment 2.

There was too much money for it not to be a sale of the whole business (he included the royalties here).

The license back makes no sense without the purchase of the copyrights.

This all makes sense in light of the witness testimony. He cited Michaels, Sabbath, Madsen, Mohan.. (He specifically noted that Madsen has no interest in the outcome of the case.) And Novell's people agreed, too: Frankenberg, Duff Thompson, Ed Chatlos, and Ty Mattingly. He noted that Frankenberg had no interest in the outcome. You have to believe that all ten of their witnesses are mistaken or lying in order to believe Novell.

Tor Braham was only involved in the last two weeks of the negotiation. He ignored the intent of the negotiators in a "forced march" to get the deal done.

No pushback from SCO at the time of the sale means that the copyright transfer was missed, not that it was accepted.

At the Novell board meeting, the copyrights were not mentioned in the overview, but only in the resolution. Messman says he remembers, but then he's the one who approved the slander.

This was done by mistake, or by overzealous lawyers. It was fixed by Amendment 2.

That this was the intent is supported by the press release. It's supported by the summary reported to the federal government. IBM recognized that SCO had the copyrights.

What was the course of performance of the parties? Broderick had letters sent to the customers. Nagle had the code changed to reflect the copyright change.

So, yes, the copyrights transferred.

Did Novell slander SCO? If SCO owns the copyrights, there's not much question. After June 6, Novell's statements were made with actual knowledge that they were false.

Novell's May 28 statement was reckless - Novell already had found Amendment 2, though unsigned. On June 5, they got a signed copy. On June 6, they made a clear statement of SCO's ownership. But on March 14 (next year), Stone said "we still own Unix".

Chatlos and Levine said that it would have been unethical to do the deal without transferring the copyrights. So Novell's allegations must have been knowingly false.

Special damages are the damages to SCOsource. They have claims that their source code was found in Linux, but that's not an issue before the jury.

The companies getting SCOsource licenses were sophisticated companies. He quotes Laura Didio and two others. (I'm a bit unclear on what point he was trying to make here.)

Punitive damages are based on malice, on intent to injure. Two slanders on the same day as SCO's earning announcements. That's intent to injure. (There was lots of anger and outrage in his voice here.)

O'Gara's testimony about Stone shows intent to injure. Messman said that Novell's intent was to publicise their statement as widely as possible.

Novell waived SCO's rights against IBM at the same time as IBM's investment in Novell.

(Reporter's note: My overall impression of Singer's statement is that he had lots of logical gaps where his facts didn't add up to his conclusions, papered over with rhetoric.)

Then Brent Hatch took over. He was wearing a maroon (or burgundy?) bow tie.

SCOsource had real sales, in the tens of millions of dollars. HP was looking at a contract worth $30 million. Then Novell inserted themselves and said that they would re-assert copyright ownership. The deal went away. Google has over 500,000 servers. That would have been a large deal. Novell was a substantial factor in why the deal fell apart. A deal with Dell died after Novell's December 22nd announcement.

He quoted testimony from SCO's salespeople. Gasparro had $50-60 million of opportunities, but they dried up after Novell's claims. Novell was a major factor why. Langer had more than $3 million worth of deals in the pipeline, but they dried up after Novell made their claims. There was a third salesman, named Peck or Pettit, that he talked about.

He talked about the standard specified in the jury instructions to show that it lined up with the evidence he was reviewing.

Musika said that people disliked SCO. It's just a small Utah company standing up for its rights. But it's hated.

Botosan and Pisano took all this into account. They came up with 19 to 45%. Pisano's hard, scientific data took into account all the factors that Musika used to say that the figure was zero.

The special damages are the vendor licenses that SCO didn't sell. The damage figures are conservative.

Musika didn't do any calculations; he just highlighted the risks. He didn't use a "but for" analysis, even though he admitted that it was the correct method.

Punitive damages are at the discretion of the jury. Hatch points out that Novell is worth about $1 billion. The jury is allowed to consider that in determining the amount of punitive damages.

Hatch closes by saying that Novell knew with certainty that it didn't own the copyrights by the time of their second anouncement (December 22).

We also had in the audience a new reporter, his first time sending us a report from the trial, and here are his impressions of the two Fridays he was in attendance, today and the morning of March 12:
Here is my summary impression of the part of the Novell vs. SCO trial I witnessed.

I attended two morning portions of the trial: Friday March 12 and Friday March 26. On the 12th, I think Ty Mattingly had pretty good command in delivering his testimony (whether it has bearing or not) and that tended to carry the morning. This morning, on the 26th, my impression is that Singer started with a pretty strong closing but then Brennan gave a masterful presentation that carried it home.

Singer came back at the very end for 12 minutes but it seemed he was fishing for something to equal it, talking quickly and not being as organized as he was in his first segment of closing.

At the end, Judge Stewart stated that he had never had so much legal competence in the room over the last 10 years as he did this day. It was fun to see them in action!

Other notes:

Judge Stewart's instructions to the jury:

The jury only needs to decide based on a preponderance of the evidence, i.e. that it is more likely true than not true. In the case of a “tie” (my own words), they should rule in favor of Novell.

SCO's evidence must be clear and convincing.

Even though the judge let the jury take notes (not allowed by the judge in some cases), the jury's memory should take precedence over their notes (i.e. their notes are a tool only, as they aren't evidence).

Acts and omissions by the actors of corporations are the acts and omissions of the corporations.

The Kimball ruling (not referred to by Stewart as the Kimball ruling) should have no bearing on the jury's finding.

The jury should view the contract and Amendment 2 as the contract, with Amendment 2 taking precedence in the event of any conflicts.

Also the jury should look at the “course of performance” subsequent to the signing of the contract to resolve any ambiguities.

Something about exclusive licensee.

Slander of title has to have “constitutional malice.”

A drop in value (of what was sold) is not a damage.

Singer closing:

Amendment 2 replaces the asset purchase agreement and is the “rest of the story” (to use a phrase Paul Harvey was known for that Brennan used earlier).

It wouldn't make sense to get the Unix and UnixWare business without the copyrights.

Consideration of 40 to 50 million plus royalties having four components was given.

The license back to use wouldn't have been given to Novell unless the copyrights were transferred.

10 SCO witnesses said SCO got the copyrights, plus Sabbath, Madsen, Mohan, Wilt et al [incomplete].

Some Novell executives agree with the SCO witnesses.

Frakenberg — the most important witness — says the copyrights didn't transfer.

Amendment 2 was a fix applied a year later to clarify the intention of the parties.

How did the mistake happen in the first place? The original APA was screwed up due to time pressures in getting the business transacted.

No push back doesn't make sense.

Attorneys operated on cover documents without details. Or we have a case of overzealous lawyers.

Press articles confirmed the nature of the deal.

Novell told the federal government such (something consistent with SCO's viewpoint).

With regard to course of performance:

Novell gave notices to customers stating ownership had transferred.

SCO put copyright notices in the code.

With regard to Novell slandering SCO:

Singer referred to the 2003 statements by Novell.

Messman conceded ownership after being confronted with Amendment 2. Singer said Messman couldn't get the decade right to otherwise damage the reliability of his testimony.

Novell announced on SCO's earnings statement days -- on two occasions -- their assertion of ownership to damage SCO.

Then Hatch on Singer's team got up. I had to feed the meter as it was now about 10:15 and so I missed most of Hatch's argument on how much the damages should be.

Hatch stated HP was told by Novell that they (Novell) would assert and that killed the licensing deal. Then a licensing deal with Google was killed, then a deal with Dell (McBride had met with them).

Hatch states something to the effect that the jury should “fill in the blank” on the amount of punishment (for punitive damages).

Brennan closing:

When growing up he had heard the phrase “let's not make a federal case out of it” but here we are in federal court, and this is a federal case. It's not trivial. It's very important.

Open source has been threatened.

This is the entry (i.e., beginning) to many cases if there's an adverse verdict.

The sanctity of contracts and being able to rely on what they say is at stake here.

Contracts are not determined by hindsight or what we would have wanted to do.

At question here is whether people are free to speak what they believe (in reference to the slander part of the case).

Novell minutes are what appear in the contract.

The agreement (i.e., contract) has three months for review and nobody objected to the language as written. Other provisions were modified but the asset transfer provisions were not modified.

The bill of sale refers to the APA; therefore, one has to look at the APA to determine what transferred.

SCO could not represent to Caldera that they had chain of title.

Enter McBride. Notwithstanding the above, he chose a course of litigation. (This was stated more than once).

Mike Amber said the contract excludes everything.

The term sheet produced by Ty Mattingly, late and initially only to SCO counsel, was preliminary.

The press release was SCO's statement only.

The “license back” provisions referred only to assets transferred.

Jim Tolonen testified he wrote the contract the way Novell has stated it is constructed.

Also Tor Braham, the lawyer who wrote it.

I believe he stated the two prior individuals had no financial interest to gain.

Alison Amedia drafted Amendment 2.

Sabbath under sworn testimony said that Novell retained IP.

Chatlos — he and his wife stand to make money if the outcome is favorable to SCO.

Ryan Tibbitts and McBride had no involvement with the contract and stand to gain if the outcome is favorable to SCO.

Novell had business reasons to exclude transfer of the copyrights: 1) to protect Novell's interests, and 2) Novell didn't get sufficient money to transfer them.

There's a great void of evidence. None of SCO's hired attorneys are testifying [directly or through deposition] that the copyrights transferred.

On Amendment 2 that Steve Sabbath drafted, he stated something about the copyrights that SCO “had acquired” and that language was struck out — intentionally.

What copyrights were required to conduct business?

To give copyrights to SCO would have required that signers of Amendment 2 get approval from the board of directors, but they did not get that approval because they knew they weren't transferring copyrights.

Was transfer of copyrights required for SCO to conduct business? McBride testified something to the effect that “we could run our business without it” though he also knew he couldn't sue the heck out of everyone without it.

So was the exclusion snuck into the APA? This was not the case.

Let's look now how people believed what they had transacted (course of performance). SCO only put their copyright notice on new code. The letters Novell sent to customers did not say Novell transferred ownership. It directed customers to SCO for help with the software.

About the slander part of the case — Novell had a first amendment right to say what they believe.

Santa Cruz stated that SCO was in a protection racket [akin to extortion is how I took it].

Messman was there, at the board meeting, and despite SCO trying to embarrass him when he failed to place some events in the right decade, he specifically stated that the APA excluded transfer of the copyrights.

Maureen O'Gara is not credible.

On June 6, 2003 in a private letter Novell disputed SCOs claim. McBride knowing this, still publicly claimed that Novell would state that SCO had the copyrights.

On slander: 1) the transfer didn't occur (so that is the end of it), 2) [oops I didn't write this one down quick enough], 3) there was no constitutional malice.

Linux does not infringe Unix.

A judicial ruling (Kimball) at a minimum calls into question that SCO had copyrights.

Note: Brennan waxed really eloquent at the end. I liked the way he treated the jury . . . like they were smart thinkers. At one point he requested them -- in support of the point he was making -- to refer to an exhibit when deliberating that he in the interest of time wouldn't be able to cover. He also referred to the painting in the hall about the signing of the Constitution, and that the right to free speech was something that protected Novell, himself, and the jurors. It was much better than I am describing here and at one point he -- Brennan -- choked up when talking about these things and I was feeling a little choked up myself! Good going Brennan!

Singer — final words:

The book Brennan was holding up in his closing remarks and with which he was visually making his point doesn't contain Amendment 2.

“It's not an extortion” (in reference to the licensing scheme of McBride). I didn't editorialize much in my notes, but I couldn't help but write the words “I am not a crook” on my note pad. Those words dogged Nixon much of his life. I did behave, though, and I didn't show what I had written to McBride — he was sitting nearly directly behind me on the back row. I believe it was him because he said "Darl" when he was checking past security (we both arrived at the same time, at about 8:20am).

Singer then refers to the 10 witnesses — they are credible. He then uses exclamatory excerpts and phrases from their testimony like “copyrights are like oxygen to the business” etc. & etc.

He mentions others agreeing to their position as well. I believe.

That's what I've got! I wish you could have been there, maybe you were.

Me too. I wish. Isn't it lovely, though, to have multiple pairs of eyes and ears? Losat was there today again as well, and here is his report, part 1:
Here's part 1 of my notes from today: jury instructions and first hour of closing (Singer and Hatch):

Next up: Brennan's closing and Singer rebuttal.

It was a full courtroom today. I’m not familiar with the faces, but I was told there were several of the usual SCO supporters. Groklaw was well represented. I spoke with 4 fellow Groklaw frequenters, and I think there was at least one other.

MSS2 remained at the courthouse in case there’s a quick verdict. He urged others of us to post information as soon as possible because there are 10000 geeks waiting. :)

[PJ: more than that.]

I had thought I might mostly listen to the closing arguments as if I were on the jury, not taking extensive notes. But, I ended up taking lots of notes anyway. I didn’t try to catch every word by any means, but I wrote down things that seemed interesting or important.

First, the judge asked if there were disputes over closing. There were no objections.

He then indicated that SCO had filed a motion today with 3 points: Judge Stewart said the first is no longer relevant. The second: that Novell should not argue “Unix not UnixWare.” Jacobs agreed “with regard to closing.” Third, there should be no attempt to argue contrary to law. He stated his assumption that nobody would do that. Jacobs said that was correct. They would not argue the bill of sale under section 204 of copyright act. They may argue that there was only a “promise to assign” under contract law, which the 10th Circuit did not address.

Singer stated that arguing contract law equivalent to section 204, contrary to 10th circuit. Jacobs referred to a footnote in the 10th circuit ruling (not a holding); he offered to hand it to the judge.

Judge Stewart: I should probably look at it.

Singer made an argument, to which Judge Stewart replied that was a good argument for his reply. He allowed Novell to go there if not arguing pure legal but the intent of the parties.

Singer will go first. SCO will reserve 15 minutes for the end. Hatch will share time: 45 minutes Singer then 15 Hatch. Brennan will close for Novell.

Proposed Findings of Fact and Conclusions of Law will be due in 20 days.

Jury is brought in. Judge Stewart delivers jury instructions. There was a lot of typical stuff, which I didn’t take notes of. Only the items particular to this trial are described below.

SCO burden of proof, mostly preponderance (which he describes including the phrase “probability not possibility”). The constitutional malice requires clear and convincing evidence. He uses the phrase “no substantial doubt.”

He comments about notes taken by jurors, which he has allowed while some courts do not. He cautioned: don’t compare notes, don’t give extra weight to things written in your notes.

He mentioned direct vs. indirect/circumstantial evidence (both acceptable under the law).

He mentioned the earlier rulings: did not have benefit of the evidence you’ve heard. “Reversed”, why you’re here. No bearing. But they may be considered for special damages and punitive damages, if any. He also mentioned the bankruptcy and 2008 trials.

Slander of title requirements: lists the 4 requirements then provided detail on each:

1. Publication
Not private, not in pleadings; not slanderous if clear it’s opinion, not fact; but couching purported facts as opinions doesn’t excuse; don’t consider in isolation – context of statement, surrounding circumstances must be considered.

2. Falsity
Directly untrue or untrue inference; need not be absolutely, totally, or literally accurate. Substantially true, “the gist”.

In order to answer this, must decide who owns the copyrights (“Unix and UnixWare”).

APA: interpret: taken together, as single document; what the terms mean; the intent of the parties.

Where clear, ordinary meanings. Whole agreement, not isolated portions. Extrinsic evidence as to intent. Intent of those negotiating; performance of the parties after the agreement, before the dispute.

May consider nature of copyright (lists rights: reproduction, derivatives, distribution)

“Owner”: author, assignee, or *exclusive licensee*.

Possession of registration certificates immaterial to ownership but may be considered for other purposes.

Transfer must be in writing.

Exclusive license, transfer, sale, conveyance must be in writing.

Implied may be non-written, can only be non-exclusive.

3. Constitutional Malice
Clear and convincing evidence

1. Knowledge of falsity; or

2. Reckless disregard

High degree of awareness that probably false; or substantial doubt that it was true.

Not enough: negligence; carelessness; sloppy; not researched; reliance on one source, even if others would be available or one might think should reasonably be consulted; spite, hate, evil purpose, or intent to harm.

Unless you find constitutional malice, there is no liability.

3. Caused Damages:

Special Damages
No lost sale, no damage.
Loss in value not sufficient.
Proof of specific person or group not possible to identify individually.
Slander is substantial factor, not exclusive or predominant factor; had substantial weight on decision.
Stock price is not special damages.

Punitive Damages
If statement is false, and:
Hatred, intent to injure
Reasonable and proper punishment … and wholesome warning to others.
Caution. Only for reason just mentioned.

The fact you were instructed on damages does not indicate you should award any. Damage award must have reasonable basis – without speculation or guesswork.
Burden of proof as to damages and cause
Not speculative

Section 4.16 issue is for the court to decide. May consider the section in interpreting the amended APA.

Lawyers have a duty to object. Don’t show prejudice.

Foreperson selection. Collective judgment. Unanimous. Consult without “violence to individual judgment.”

(There was no break between instructions and closing.)

Singer:

Depends on copyright ownership.

(I noticed the jury was very attentive at this point and seemed to remain so through closing arguments.)

Credibility: Stone vs LaSalla contradiction regarding IBM asking Novell to waive.
Another: Stone vs Messman about whether Stone was asked to leave Novell.

Amendment 2 “replaces old language.” Novell in opening referred to “the rest of the story”: the rest of the story is the copyright exclusion language doesn’t exist any more. “That’s really the rest of the story on this.”

“All rights and ownership.”

Novell admitted in June 6 2003 press release “appears to support SCO claim.”

2nd time admitted: March 23rd. Allison Amadia. (Cites Normand cross, question about the “required for SCO” language -- Q: if required, copyrights transferred? A: Yes)

No real dispute … that copyrights are required. “Ludicrous” to exclude. Like “breathing oxygen.” “Walk out the door and your head goes with you.” “Couldn’t go after pirated software.”

With Amendment 2, APA makes sense. (Suggest car without engine, house without roof, sundae but you only get the cherry.)

It’s consistent with the intent.

(Shows Novell slide from opening statements)
40-50M – a lot of money: wouldn’t even receive that if copyrights weren’t included.

Sale of business, not agent.

License-back: no sense if Novell kept the copyrights.

TLA: ownership of licensed technology is with SCO.

Made sense in light of testimony of witnesses.

Novell’s intent is not the issue: look at the intent of both parties.
Santa Cruz said “copyrights are like oxygen.”
“We put copyright notices in every software module we wrote.”
An executive: if suggested SCO had to ask Novell, I’d have laughed them out of my office.

Kimberly Madsen (at Apple now): clear to me intent was to transfer copyrights.

Numerous execs with Novell agree.

Frankenberg -- the most important witness in this trial. The term “stand up guy” – I think of him. He said it was clear to him the copyrights went to SCO.

There was an error that had to be fixed a year later.

Chatlos' wife “has a little stock.”

You’d have to believe 10 people remembered wrong or were lying – half of them Novell’s people.

Braham ignored months of negotiation from before his involvement. He ignored the term sheet. The term sheet’s list of rights lines up well with the copyright rights listed in the jury instructions.

No pushback from SCO about copyright exclusion in contract means it was just missed.

Executive’s copy of draft APA had *no* schedules [neither the included nor exclude assets schedules]. [PJ: Not to interrupt, but a draft of a contract would often not have the schedules, just because of the way drafting works. In my experience, drafts get passed back and forth a lot and then the schedules referenced get added. So this is the worst argument made so far, to me.]

Messman didn’t even know which decade the agreement was from (‘81 or ‘83). It isn’t even in the board of director’s meeting minutes that the discussion took place.

Either by mistake or overzealous lawyers. Mistake corrected in Amendment 2.

Press release at the time said “intellectual property.”

Novell’s version can’t be squared with this.

Even IBM recognized that SCO had the copyrights. “You can show us the source code because you have copyrights to protect you.”

Course of performance: 3 individuals' testimony. Nagle [didn’t catch other 2 names]. Virtually undisputed. Letters were sent (Prentice Hall) by Novell. “ownership”

Nagle: changed copyright notices in UnixWare.

Novell could have kept registrations, but they’ve been sitting with Santa Cruz.

Next question: slandered? If SCO owns the copyrights, there’s not much question. It was a “campaign.”

Constitutional malice: Reckless disregard. After June 6, knowledge of falsity.

Balance of free speech.

Knew about unsigned Amendment 2. Didn’t do checking. Could easily. Could have called Sonsini. Could have called Frankenberg. Recklessness.

After that, not just reckless. They “turned upside down” looking for signed Amendment 2 – know it was very important.

June 5: signed Amendment 2 faxed by SCO. MkBride says Messman admitted copyrights transferred. Press release next day.

June 6: not just casual statement. Amendment 2 language was in one paragraph. Didn’t take months to analyze. It took them months to turn it around.

Stone’s “We still own Unix” – outrageous! This was echoed by Messman.

Falsity proven by Novell witnesses. “So absurd” … would be unethical to take that position. Deal I negotiated included copyrights. Chatlos similar. “unethical”

Damages: special (to compensate SCO), damage to SCOsource.

“Certain Unix libraries being used to run Linux.” Obtain a license. Unix in Linux not issue.

Protection against infringement, “a number of these individual companies” took licenses after seeing “code room”

Press citations “readible” “If everything SCO showed me today is true, then Linux [users] should be concerned.”

Sent letters with examples of code. Not issue in this trial.

Percentage of users would license; others wait and see; others never.

Members of Open Source community viciously attacked. Submit Novell has brought some of them here. [ ?! ]

If no threat to Novell’s Linux activities, there would have been no slander.

(Compare to house: no title) Deadly. That type of slander killed SCOsource.

Punitive: “personal malice” – intent to injure. No shortage of evidence.

Same day as earnings announcement. Not a coincidence. Intent to injure. Malice.

OGara: Stone admitted timing was planned. [PJ: Shame. Even she didn't say that. She inferred.]

[statement trying to dismiss] “why don’t you take a jab at PJ?”

“while chortling”

Messman published as widely as possible.

Waiver was because of IBM. Consider as evidence of intent. Consider 50M investment. Not telling the truth about IBM’s involvement the first time asked.

Singer turns time over to Hatch.

Hatch:

SCOsource had begun to make sales. Tens of millions of dollars.

Next: HP deal (shows draft contract): redlines typed in by HP: $30M deal. Sudden change. McBride said “Novell inserted itself” to reassert copyright ownership.

Google (500K Linux servers): pulled out of deal, Novell a substantial factor.

Dell. Primary reason: Novell.

Testimony of 3 SCO salespeople:
Potential buyers can’t buy because there’s not clear title.

Referred to jury instructions.

People hated SCO: “It was a small Utah company standing up for its IP rights”

Some of largest companies – Sun, Microsoft -- had done deals. Understood the risk yet took licenses. [PJ: If they understood, why did Microsoft say they licensed a patent from SCO, when SCO had no Unix patents?]

3 studies (not one): 19-45% range. “Taking into account every one of the risk factors” “hard, scientific data”

Verdict form question 3: amount of special damages, if any:
Best and proper measure: Expert helped you.

Botosan cherry picked the low numbers to be conservative. “conservative on top of conservative”

Novell offered no calculations. Agreed it was the correct “but for”

Answer for #3: 115-200M range from Botosan.

Malice / bad acts: punitive. Additional. “Teach them a lesson.”

Timing of press release was to maximize damages. 2nd time, again to maximize damages.

And here's Losat's part 2:
One thing of note I forgot to mention on the jury instructions: when he told them they wouldn't be deciding the Novell counterclaim of slander of title, he instructed them not to infer anything from this, not to speculate.

Disclaimer: the actual closing arguments on both sides were much, much smoother and effective than my poor notes might suggest.

Now, on to Novell's closing arguments:

Brennan:

I promised to tell you "the rest of the story."

Burden is on SCO. I don't get to speak to you again after Singer. Please anticipate what you think Novell would say.

When I was a kid I was told "don't make a federal case out of it." (Don't make something minor into a big deal.) Here we are in a federal case. This is a big deal.

SCOsource intent: "extract" fees

Huge uproar

It was beyond Novell. Novell felt compelled to respond.

There are other cases out there waiting to be heard. Other suits. This hangs over all Linux users.

3rd:
Very important fundamental question: meaning, sanctity of contract.

Contract carefully drafted and meticulously written.

If we go look not at the language but at what we should have, the whole reliability of contracts is threatened. Chaos would result! Challenged by outside thoughts. Rely upon written contract.

4th:
Free speech. (Businesses are comprised of individuals.) Stand and state position without fear of monumental damage claims.

Recommended result *for you to consider*:
Did the copyrights transfer? No.

How do we know? Intent. BOD resolution. Very language of the resolution appeared in the contract. List of assets. Clearly excluded copyrights. 1.1(b).

Regarding suggestion that this was "passed by quickly": it did not go without review. Almost 3 months before closing of the deal.

Exhibit T5, Amendment 1: 10-12 pages of modifications. 1.1(a) not modified to include copyrights. 1.1(b) with exclusion not modified. No credible argument can be made that there was any pulling the wool over eyes

December 5 actual transfer: APA just a promise to transfer. Bill of Sale transfers.

What does the bill of sale say? It's straightforward and clear.

Novell acquired *entire* Unix business from AT&T. SCO deal was only a limited transfer of some assets.

Santa Cruz sold to Caldera, now SCO. The agreement disclaimed: could not represent to SCO that it had a chain of title that includes copyrights.

McBride joined in 2002: see whether they can change the business. Existing business: UnixWare + even servicing Linux! New: try to turn on customers. Go after rather than aid them.

SCO counsel advised McBride far less transferred. Excludes. Need to be careful -- might be less than you think.

Term sheet? (Ty Mattingly found in his garage -- not final agreement -- preliminary sketch of possible agreement.) Final APA is what was agreed and signed.

Press release back at time of deal was not joint. Logo was SCO's.

Theory that maybe TLA transferred copyrights: sleight of hand maybe taking license back. Argument was: Why take license back if you retained the copyrights? License back was to the assets that had been transferred which didn't include copyrights (1.1(b)). Sleight of hand? I think you'll see past that quickly.

Witnesses presented by SCO were not involved, haven't read the APA, or misinterpreted. Look at those who actually were involved: Tolonen: not mistake. Sleight of hand? Tolonen was the one who actually signed Amendment 2. No financial interest in the case. Should you rely on him? Frankenberg said he did. He would expect that Mr. Tolonen would be able to accurately state the agreement.

Bradford knew.

Lawyer who actually wrote the agreement: if anyone knew, Braham know.

Carefully crafted to protect license revenue.

Tor stated the client was the board of directors -- the governing body.

No financial interest.

Thompson more interested in SCO interests. Mattingly and Chatlos not involved in final negotiations.

Amadia: she drafted Amendment 2. No financial interest.

Compare SCO: Thompson: not at Novell long (since coming from WordPerfect). No good place for him at Novell. Already decided to leave Novell ("checked out"). Already planned to go to SCO. Owns 100,000 shares of SCO.

Michaels actually said no specific memory. Didn't know what Amendment 2 was. Hadn't read APA. Whatever wishes, hopes, and dreams he might have had, he was not involved in APA.

Mattingly owned SCO stock. Not drafting. Not Amendment 2. No mention of board meeting.

Sabbath: (what he actually said) in declaration (from IBM litigation):
Q: recall executing deal? A: Yes

Paragraph 11: under APA, Novell retains -- 1.1B provides much would not be transferred. [Not sure where Q ends and A begins here]

And Amendment 2 -- Novell retained certain IP.

Frankenberg, the "most important witness in the case" repeatedly asked about board --- what approved. Was agreement consistent with the BOD? Q: Acting beyond authority? A: of course not.

Yesterday:

Q: express exclusion APA minutes: You thought you saw or heard something different?

A: Yes.

Imagine what would happen -- heard the words, had something else in mind. From most important witness in case!

Chatlos' wife works for SCO and will make money if they win. He wasn't involved with BOD.

Kim Madsen: no specific memory of intent of Amendment 2. Did not remember. Or even remember discussion with Sabbath.

SCO former CEO [McBride]: millions of dollars he'd make -- financial interest.

Darl had no involvement in Amendment 2. Can't know intent.

Tibbitts: financial interest. No involvement in preparation and agreement.

Parade of witnesses who weren't there, not involved in BOD decision, personal financial interests.

Why exclude copyrights? Sounds one-sided? Could just as easily ask why did SCO agree?

Valid reasons:

- Defazio: "Q APA intended to transfer copyrights? A: No." Designed to protect Novell. Implement bulletproofing. (Bankruptcy concerns.) (Also concerns about MS.)

- Novell paid 330M, SCO paid 50M [stock]. Novell retained license fees. If SCO succeeded with merged product, additional royalties to Novell. (But didn't reach that level.)

Back to Frankenberg ("most important witness in the case"): "Q: Possible copyrights were excluded? A: Yes, a possibility. Q: board agreed to? A: Yes." You heard about Novell outside counsel that negotiated/drafted the APA. SCO had outside counsel, too. Brobeck. You didn't hear from Brobeck. None of them appeared in this case. None of them appeared by deposition. Empty chairs. Tells you something. SCO should have presented. They have burden of proof to substantiate "mistake"

Amendment 2 (agree it's of critical importance).

1st draft resulted from Sabbath claiming "clerical error"

(Shows comparison of language between draft and final Amendment 2) Red: stripped out by Novell: which pertained to and which SCO has acquired hereto

had been transferred -- APA very clearly contradicts.

except for *required*

What was required?

Tolonen (CFO): did not intend to transfer copyrights. Sabbath's suggestion was *rejected*

Amendment 2 clearly not intended to transfer copyrights. Did not go back to BOD. To change exclusion of copyrights would be material. BOD would have to have been involved.

Amidia: Q: Positive not intended to transfer copyrights? A: I am. Q: How can you be so sure? A: I drafted it. I didn't have the authority to change that.

Were copyrights required? We need to get an answer to that question. McBride: Q: didn't you tell them you could run that part of your business without copyrights?

A: We could run our business. Just like HP and others

We'll come back to that.

HP, IBM, and others had license. They built and sell. None owns Unix copyrights. That's the business SCO was in. They did not need the copyrights to do that. Darl acknowledged.

Not the business SCO wanted to get into in 2003. He wanted to turn on his customers. Infringing Unix. New and different business. (McBride) Q: A: unable to run the business on the licensing side, which was the future of the company.

Q: You could operate business but outside SCOsource, correct? A: affirmative

Recall what SCO was doing. First 1000 letters sent out [including to licensees]. Were they prohibited from these actions? 4.16B: cannot, no right to enter into new licenses. They were violating contractual obligation.

Re: "Ludicrous" to operate without copyrights?

Tibbitts: Q: Aware of proposed transaction where SCO would sell its Unix business and retain the copyrights? A: Correct. Q: SCO to sell product business and retain copyrights? A: Yes

Messman: They didn't need copyrights to run the legitimate Unix and UnixWare business.

Displays Legos

Small block on left, Unix. Rights under APL to build on top. SCO owns copyright on its own block on top.

For 8 years, this was not a problem.

Re: suggestion that exclusion was "snuck" in or hidden "in a corner"

Levine (worked at AT&T, went to Novell, then moved to SCO) On 1.1A and 1.1B: His draft of 1.1B excluded all copyrights.

This was not a last-minute invention. SCO's guy wrote that language.

Document was reviewed:

[someone]: I'm sure that I did see/read it.
Mattingly: Q: chance to read? A: Yes
When Mattingly appeared, he brought documents with him and showed SCO. Novell hadn't received them. He had a draft APA which includes the exclusion of copyrights.

See how people behaved. (All SCO employees):

Copyright notices. We didn't go back and change prior versions, only current or going forward.

You can obtain copyright protection on new work performed [on old files, no need to own the original copyright]

Nagle: copyright on box. Acknowledged what's on box doesn't establish ownership -- look to the legal agreements.

Regarding letters suggesting transfer: You'll have a chance to look and see. Mr. Nagle stated the letters were [something like just rough descriptions?], included something about contacting SCO if recipient had questions. Answering questions is one of the things SCO has to do for the 5% they retain of the royalties.

1st Amendment: Fundamental protection of civil liberties. Novell has the right to speak.

Jury instruction 3rd element required proof by clear and convincing evidence (not preponderance, which is little more than tip the scales). Constitutional malice. To protect constitutional rights to free speech, avoid chilling effects. Imagine the consequence: fear of speaking if you can be held accountable for monumental damages.

[He repeats standard for slander from jury instructions here]

That's the standard. You must be convinced -- clear and convincing. If reckless, all these other factors.

No substantial doubt in your mind. Highly probable.

Spite, hatred, evil purpose, intent to harm do not mean constitutional malice.

Exhibit I11. SCO in business of licensing Linux. They were encouraging Linux use, reaching out to Linux users. Then turned on them!

The motivation for their new and different business: financials were down.

Hail Mary? Yes. Looking for ways to improve declining finances.

What did Santa Cruz think of SCO? "Guys that run protection rackets occasionally make a profit -- but not long term success."

There was backlash to SCO.

Feb 2003: Recognizing they did not own the copyrights, SCO proposed to Novell and agreement to "clarify" the transfer. If indeed SCO owned the copyrights, why ask for written confirmation?

Novell rejected this proposal and did not sign it.

Threats. Linux infringes our Unix IP and rights. The threats were made to Fortune 1000 companies. Public uproar! Novell itself was sent one of the letters.

The response: Linux: doubt validity of claims. GPL violation.

Linux is an alternative to MS. Who benefits from this? MS.

Ultimately, Novell had to respond. They did report to McBride that Novell owned the copyrights.

The response came May 28th. Novell has the APA (Messman recalled no copyrights transferred). McBride acknowledged it was a reasonable reading (without Amendment 2). It's important to respond publicly. No idea of the timing (coincidence).

Suggestion of Malice: Sole witness: O'Gara. In fact, she confirmed to SCO she wanted "war pay." Asked by SCO to send a jab PJ's way. Hardly evidence of detached journalist. Attempt to create words Stone never said. Q: What were the words? (Pressed repeatedly.) She could not.

Public statements.

(SCO's earnings were preannounced before May 28.)

Amendment 2 was sent to Messman.

Singer suggested that in searching for signed Amendment 2 earlier, Novell should have reached out to Sonsini. Sonsini was not involved in Amendment 2. It was handled by in-house counsel Amidia.

Should have reached out to Frankenberg. He left the company before Amendment 2.

Novell, trying to act responsibly did release statement about "appears"

Novell then, with some time, undertook to review the matter more carefully. (They made the June 6 response because of pressure from SCO.) After looking more closely, Novell sent private communication to SCO that Novell believes the copyrights did not transfer.

SCO, in the face of this, stated publicly "if you go ask Novell today, they'll tell you" SCO has the copyrights.

Novell sent another private letter to SCO. (2 private letters).

Public statement from Darl: "regarding Novell's recent claim it still owned the copyrights -- took just 4 days to press the eject button"

Nov. 8. SCO: once we had copyright issues resolved had clarity

Novell had been *privately* talking to SCO. SCO was publicly stating the contrary.

With all that brewing, Novell did make a public release. Its form: copies are here. SCO is well aware of our position. See the letters and judge for yourself. We invite you to look at it.

Claim of slander:
1st no false statement
2nd not believe they were false
3rd not requisite level of malice

Damages: (for these "atrocious acts" [sarcastically])
What did the marketplace do in reaction in the real world?

People dispute to this day Linux infringement. Hotly debated. Contested. Indemnifications offered (from Novell and others)

GPL issue: provides protection for Linux users.

Quickly adapt, design around.

Will not pay "license extraction fee."

Tremendous public anger.

Looking in "but for"
What *really* happened.
2004 Ruling at minimum raised substantial question. Ruling is available to the public. People can see for themselves.

Summary judgment in favor of Novell. As a matter of law, Novell did not transfer copyrights. (based on APA with Amendment 2)

Yes it was reversed; you're here today. But what could consumers know from this judgment?

HP: I *urge* you to take a look at exhibit D20. Why? -- for so many reasons.
I *urge* you to take a look at it.

Verdict form #1: Did APA transfer copyrights?
No. Look at agreements themselves. Look at the words.

If you answer no as the contract compels, that's the end of deliberation.

My plea: Mark No. If you get past that point:

Whether Novell slandered:
When you get to the jury room, see if any of you have questions in your mind as to whether copyrights transferred. You're reasonable people. If reasonable jurors can have questions, how can Novell [be found to meet the standards for slander]?

In this courthouse is a painting of the signing of the Constitution. [Very impassioned, patriotic speech here, almost to tears] The constitution protects us. Novell is entitled to rely on it. [Sorry, there was a little bit more to the speech, but my notes are poor and illegible here. Something about at very heart, wasn't slander. Constitutional protections.]

While we wait for the next parts to arrive, Chris was asking me a question:
In Mr. Singer's rebuttal (and possibly in his summation) noted the lack of information from SCO's side regarding the APA + A2.

(Lamlaw: "And where is the attorney for Santa Cruz that can testify that the agreement was that the copyrights were transferred? No show. Na da. Not there.")

You've mentioned that absence before too.

Mr. Singer said it's because that law firm is no longer in business, and that Novell knows that.

As the other Groklaw reporters and I discussed afterwards, it's as if SCO's asking us to believe all those lawyers were shot and their files burned.

I thought in situations where law firms go out of business, it's not really the end.

Isn't there some plan for the handling of their files?

And the lawyers themselves can still be tracked down. Novell got Tor Braham from Deutsche Bank, Alison Amadia from her company (see also http://www.infertilitylawyer.com/ )

So does their being out of business claim hold any water at all?

The answer is simple, in that as he points out, Tor Braham was no longer with Wilson Sonsini, but they found him at Deutsche Bank, Allison Amadia was no longer at Novell but was found, etc. It does sometimes happen that a lawyer stops practicing and old cases can't be traced any more because you can't find the lawyer or he died, but SCO not only found one lawyer, Troy Keller, they insisted on his deposition during the trial, and then SCO *still* didn't put him on the stand after the deposition. What does that tell you? It tells me that sometimes when a party doesn't put a lawyer on the stand, it isn't because they can't find him.

Now, the jury doesn't know about all that Troy Keller stuff, so SCO said what it said.

Would you like to know why I think they didn't put him on the stand? I think it's maybe because he said in his declaration that he and all the other lawyers working on the deal between Caldera and Santa Cruz in 2001 reviewed the APA *and Amendment 2* in 2001. But Darl McBride and all the SCOfolk that testified swore on the Bible and to the media in 2003 that they didn't know about Amendment 2 until the paralegal allegedly found it in a file cabinet that year, just after Novell claimed to own the copyrights. So... which is it?

See what I mean? Anyway, the lawyer for Caldera on that later deal was John E. Hayes III, then with the Brobeck, Phleger law firm, which went out of business in 2003. Would this not be he? That took two minutes. The name on the APA was Edward M. Leonard of Brobeck, representing Santa Cruz. If it were me, I'd just ask Mr. Hayes III where Mr. Leonard is. Or let's ask Google: Mr. Leonard, I presume.

And now sit back and enjoy MSS2's next segment:

There was a break after SCO's closing argument. After that, there was a sidebar discussion. That white noise really is pretty annoying, at least at the volume that they had it at.

Judge Stewart cautioned the spectators that audible response to closing arguments is inappropriate, and that he would have spectators removed if necessary.

Then Brennan gave Novell's closing argument:

The SCOsource license was to extract payment from Linux users. This case is of great significance to people beyond Novell. It's a gateway to other litigation. It's a threat hanging over all Linux users.

A big issue here is the reliability of contracts. Changes based on what people hoped or wished threatens the reliability of contracts. Can you really rely on a written contract?

It's also about the free speech right to speak freely on issues of public interest without fear of reprisal or monumental damage claims.

The first question before the jury is, did the copyrights transfer? No, they didn't. How do we know?

We know by intent. It's in the board minutes. They match the contract. Sections 1.1a and 1.1b are clear.

There was three months of review to the APA - it wasn't a case of the wool being pulled over anyone's eyes. Amendment 1 fixed the issues that were found in those three months. It made no changes to sections 1.1a or 1.1b.

The APA does not transfer anything, the bill of sale does. What does it say? It says see the APA.

Novell bought the whole business from AT&T, in a merger. It sold some of it to Santa Cruz in an APA. They sold what they got to Caldera, which became SCO. Santa Cruz said that they could not establish chain of title to the IP. This was not unknown to SCO.

McBride came in to SCO in 2002. In January 2003, he decided that maybe they could turn on their own customers. Mike Anderer told him that far less transferred than McBride thought.

SCO relies on the wrong documents. The term sheet is not the final agreement, just a summary of the current idea of the deal. The press release was not a joint statement - it did not have the Novell logo or something else (maybe contact information).

The technology license agreement licensed back the assets that transferred. What were they? Not the copyrights - see section 1.1b.

SCO's witnesses were not involved in the APA. They were uninformed. But Tolonen said that the copyrights were purposely excluded. And note that Frankenberg said that he relied on Tolonen. Bradford gave instructions to keep the copyrights. Braham crafted the document to protect Novell's interest. His client was the Novell board of directors. Amadia drafted Amendment 2 and knew what the intent was. Brennan emphasised that none of these witnesses had a financial interest in the outcome of the case.

Compare that with SCO's witnesses. Thompson had "checked out" and had an interest in the outcome. Michaels was entertaining, but what did he say? He didn't remember what happened, and he never read the APA. Mattingly admitted that he was not involved in the details, and he has no memory of the board of directors meeting. What did Sabbath actually say? That under the APA, Novell retained the IP, that under Amendment 2 Novell retained the SysV IP (he prepared Amendment 2 from the Santa Cruz side). Frankenberg admitted that the APA was consistent with the board of director minutes. Chatlos' wife works for SCO, and he wasn't at the board of directors meeting. Madsen has no specific memory of Amendment 2. McBride has lots of money on the line. He also had no involvment in the APA or Amendment 2. Tibbitts has an interest in the case, and was not involved with the APA or Amendment 2.

In summary, SCO's witnesses weren't there, don't remember, weren't involved, and have a lot of money on the line in the case.

Why didn't copyrights transfer?

DeFazio was the general manager of Unix at Novell. He said that no copyrights transferred, and that was deliberate. It was bullet-proofing their asset stream against a SCO bankruptcy, and also against Microsoft.

Was the whole business sold? Novell bought it for $300 million. They sold what they sold to SCO for $50 million. SCO bought the right to develop UnixWare.

Frankenberg said that it was possible that the exclusion was deliberate, and that it was what the board approved.

In the case, we never heard from the SCO lawyers. SCO wasn't willing to call the people who negotiated the APA from the Santa Cruz side. And SCO has the burden of proof.

Turning to Amendment 2, Sabbath asked Amadia for language that said that the copyrights transferred. She replaced his proposed language with "copyrights required for".

Tolonen did not intend for Amendment 2 to transfer the copyrights. It was suggested by SCO and rejected by Novell. He didn't go back to the board of directors, and he would have if Amendment 2 transferred copyrights, because that would have significantly altered the deal.

Amadia negotiated Amendment 2. She didn't have the authority to transfer the copyrights.

Sabbath was asked who negotiated Amendment 2 from the SCO side. He said he didn't know.

Were copyrights required? McBride said that he could run the Unix business without the copyrights, like HP, IBM, and all the others did. All those guys built flavors of Unix without the copyrights. That business was to create derivatives; they didn't need the copyrights for that.

But that business wasn't the business that McBride tried to get into in 2003. That was a new and different business. McBride said SCO couldn't run the licensing (SCOsource) part without the copyrights.

When SCO sent the SCOsource "threat" letters, that was a violation of section 4.16b of the APA.

How could a software company operate without the copyrights? Within the last year, SCO tried to do so. They tried to sell the business but keep the Unix copyrights.

Messman said that SCO didn't need the copyrights in 2003.

Novell does not dispute that SCO has rights to the code that it wrote after the APA.

People had time to look at the APA. It did not sneak in at the last minute. Levine (a Santa Cruz guy) wrote the 1.1b exclusion language. Mattingly's draft had the exclusion language.

How did people behave? Copyright changes to source code were consistent with owning the copyright to newly-written code. Nagle admitted that the copyright on the box means nothing. The letters sent don't say that the copyrights transferred, and the letters were simplifications of the transaction.

(I note that Brennan spent most of his time on copyright transfer. It seemed to me that he spent a larger fraction of his time there than SCO did.)

Then he turned to slander. He read the First Amendment. It's a fundamental protection for all of us. The heavier burden of proof for constitutional malice is to protect our constitutional rights.

What was going on in the marketplace at this time? SCO was in the business of licensing Linux. This was the type of customer that SCO turned on.

Santa Cruz - the ones Novell originally sold to - called SCOsource a protection racket.

SCO came to Novell looking to "clarify" that SCO owned the copyrights. Novell rejected the paper that SCO wanted them to sign.

SCO made very public claims, including to Novell (Novell received the "threat" letter). The public response was very hostile.

Novell had to respond. What was Novell thinking at this time? They had the APA. McBride admitted that the APA could be read to conclude that no copyrights transferred.

O'Gara is the only witness as to malice. And she wanted "war pay". SCO wanted her to "send a jab PJ's way". She's not objective. She also doesn't know what Stone said specifically.

Brennan lays out the timeline:

- May 12: The "threat" letter.
- May 14: SCO preannounces earnings.
- May 28: Novell's public response to SCO. At this point, SCO's earnings have been known for two weeks.
- June 5: SCO sends the signed copy of Amendment 2 to Novell. (During Singer's closing argument, he asked, Why Novell didn't ask Wilson Sonsini if they had a copy? Why didn't they ask Frankenberg? Brennan responds now: Wilson Sonsini didn't negotiate Amendment 2. And Frankenberg was gone before it happened.)
- June 6: Novell says Amendment 2 "appears to" give copyrights to SCO. They had to respond to public pressure from SCO. They sent a private letter to SCO saying they still didn't agree that copyrights transferred.
- June 23: McBride publicly claims that Novell doesn't claim copyright ownership.
- August 4: Novell sends another private letter disputing that copyrights transferred.
- August 18: McBride publicly says that it took SCO four days to "press the eject button" on Novell's claim to own the copyrights.
- October 14: Novell registers the copyrights.
- November 14: SCO CFO Bench says publicly "once we had the copyright issue resolved" (not meaning that once it was settled and now it's not, but that it has been settled since some point in the past).
- December 22: Novell publicly claims copyright ownership, and releases the correspondence between Novell and SCO.
This wasn't slander. It wasn't slander because it wasn't a false statement - the copyrights didn't transfer. It wasn't slander because Novell didn't believe that it was false. And it wasn't said in malice.

In terms of damages, what did the market do in reaction to all this in the real world? Infringement wasn't proven. There were indemnification programs from Novell and RedHat. The GPL gave protection. Linux would design around the issue. And people were unwilling to pay $699.

As evidence from the real world, at a minimum, the 2004 judicial ruling cast doubt on SCO's claims. The 2007 summary judgment said that no copyrights transferred. It was reversed. But at the time, consumers had reason not to buy.

Exhibit D-20 says that HP didn't buy for many reasons, none of which are Novell.

The copyrights didn't transfer. Look at the contract. Look at the agreements.

But if you have to talk over the first question, whether copyrights transferred, if it takes some work to reach that decision, then slander fails. The jury is composed of reasonable people. If you have questions about whether the copyrights transferred, then it's not clear enough for slander of title.

That was the end of Brennan's closing argument. There was a pause to stretch, then SCO got the last word.

And here's his report on Singer's rebuttal to the end of the day:
SCO got the final word. It was given by Singer, who had 12 minutes to work with:

Amendment 2 is part of the contract. It fixed the agreement.

"Except for required". Novell admitted they transferred on June 6. And Amadia admitted that if they were required, they transferred.

Were they required? Yes. SCO couldn't protect their IP without them.

SCOsource is gone. It can't be resurrected.

Slander is reckless, deliberate, knowing.

The court decisions were reversed.

It was only an implied license.

The law firm that negotiated SCO's end of the APA no longer exists, and that's why SCO can't call them as witnesses.

Santa Cruz transferred to Caldera everything they got from Novell.

The term sheet that Mattingly found was the real, final term sheet.

You'd have to disbelieve ten witnesses to buy Novell's position.

Amadia said that if the copyrights were required, they transferred.

Frankenberg is the one witness that Novell can't impeach.

SCO presented two credible witnesses as to damages.

Consider what SCO has had to go through for seven years, not having clear title to their crown jewels.

Yes, he really hit all of that in 12 minutes (he went half a minute over by my watch). When he finished, Stewart told him, "You can breathe now."

One juror was dismissed as the alternate. Stewart asked her if she was disappointed. She shook her head, and many laughed.

A marshall was sworn in to protect the jury (specifically to protect their sequestering). Then the jury was dismissed.

Judge Stewart thanked the attorneys for supplying him with at least one motion a day. Without them, Copeland (his assistant?) would have been "an aimless wastrel somewhere" for the last three weeks.

Then he really thanked the attorneys. He said that they were the finest attorneys that he's seen in ten years on the bench. He specifically mentioned that the opposing sides had worked well with each other.

MSS2 also sent some final thoughts:
Final thoughts, comments, and handicapping:

I thought Singer's tapdancing was more obvious in his reply close. For many of his points, I thought that the rebuttal was obvious. I hope it is to the jury.

Singer is incredibly effective at tapdancing, though. I'd hate to see him when he had a case to work with.

I met several other Groklaw folks there. I met cpeterson. I sat next to Losat. Met another guy who was in town on vacation and, finding himself in Salt Lake on the day of the closing arguments, talked his wife into letting him attend.

And I finally met Chris, the man, the myth, the legend, the reporter with the iron bottom and the lightening-fast pen. Chris, thanks immensely for all the reports on this trial.

Handicapping: I don't think there's any way that a twelve-person jury is going to unanimously agree to slander of title. I think that's dead. The copyright transfer is harder. I could see the jury hanging on that one. If they don't hang, then I think the odds favor Novell. But I won't give any odds on whether they'll hang.

So his wife let him go! Thank you. Thanks to all our reporters and their long suffering wives/SO's, too. If anyone had expenses, like parking, or whatever, please let me know.

Update Monday: He not only attended, he has sent us his impressions, and will be sending more as he is able. Here's zenock's report, after I asked him about Stuart Singer's closing remarks:

The impression I got is that Singer could talk a dog off a meat wagon and leave him convinced he was a vegetarian.

Singer mentioned Amadia twice. Having not heard her testimony I can't be sure, but I would say he was spinning what she said pretty wildly. When he first spoke (and I didn't write this down and my memory may not be accurate) he indicated that she testified that it wasn't the intent to transfer copyrights but under the persistent cross examination by Normand he got her to admit that the copyrights had in fact transfered.

He created the impression that she was a recalcitrant witness but that due to Normand's ability in cross examination he got her to crack and tell the truth.

When he spoke again in his 12 minute sprint, I did write down what he said however I can not attest to it being a direct quote as I was writing pretty fast and I may have only caught my impression of what he said rather than what he actually said. Anyway, this is what I have... he (referring to Brennen's closing arguements) did not address the issue of Miss Amadia under cross admitting if the copyrights were required they transferred. Are the copyrights required? ... Even if you can sell under license you can not protect ...

I found the closing remarks disturbing, which is why I inquired as to what he saw. I'm looking forward to reading the transcripts. Soon.

On handicapping, I'll just tell you straight up that no one can figure out what a jury will do. So while it's fun to try, nobody knows, and that includes me.

Updated, Monday March 29:

Here's Losat's segment on Stuart Singer's final remarks to the jury and the judge's final remarks:

Singer again (12 minutes left).

Something about credibility.

May I borrow that book? (Bound APA)

Sanctity of contract: Amendment 2 fixed the contract.

We aren't saying to use unwritten language. Amendment 2. Which is not found in this book.

"Except required..."

June 6 admission. You decide.

Not addressed by Braham. Amadia: if required, they transferred.

Virtually every witness said copyright is required. [PJ: Except the ex-CEO, who said they were not required for UNIX or UnixWare business.]

Even if there was a license, no express license. This could not protect SCO. Novell admitted.

"Extract license fee." I suppose Novell's license fees are not extraction. IBM's not extraction? It was not extraction; it was opportunity to purchase. Except that market is now gone. [PJ: Opportunity to purchase. Heh heh. In the same way that a root canal is an opportunity to chat with your dentist.]

Regarding other litigation in the waiting: Constitutional right to go to court. They tried to block. A right IBM and Novell used.

1st Ammendment. Interesting that Brennan said "now we get to the important question." That's because the copyrights are with SCO. So he wants to lead to a finding of no slander.

Recklessness. Reckless is not finding out if there was a signed Amendment 2.

The court decisions were reversed. Nothing to do with damages anyway. But for the slander, lawsuit would never have occurred. Sleight of hand.

Only implied license. Implied license is nonexclusive, covered in jury instructions.

"Empty Chairs": Brobeck firm no longer exists. [PJ: But the people who were at the firm survived the firm's closure, and I found them on the internet in about two minutes. My logical brain tells me that this means SCO could have found them and invited them to testify.]

They stated their position in an exhibit [something for European governmental agency; states something about transfer of rights] [PJ: I believe this is likely a reference to the Santa Cruz letter in 1997 to the EU Commission complaining about having to pay Microsoft royalties for old code from Xenix they didn't want that forced "unwilling parties to license MS software under circumstances where it is not wanted and increase[d] the financial cost of any non-Windows operating system alternative". Say. Sort of like SCOsource, if you ask me.]

Amendment 2 specifically transfers copyrights.

Copyrights -- oxygen.

Response from McBride regarding not required: "can't protect property".

Lego: [According to Novell's view of what transferred] brick on top that represents SCO property would be a very small sliver instead of full-size brick. Would undermine products SCO wants to sell.

Have to have copyrights?

Alleged term sheet. Testimony was that it was the term sheet actually used. It was provided before Mattingly brought his copy -- by Novell. Actual term sheets.

Witnesses: You'd have to disbelieve 10. Half of them from Novell.

Shots at witnesses. Examples: Steve Sabbath: stated deposition was not his testimony.

Someone else reviewed copyright language and said it was "intended to apply to Netware".

Bulletproofing:
Amadia: Final Amendment 2: if required, SCO gets copyright.

Braham: Why something put in at last minute? Got fixed by Amendment 2.

Can't take shots at Frankenberg. His testimony clearly says intent was to transfer.

The deal Chatlos et al negotiated called for transfer.

Damages:
Novell's expert has been paid to testify too many times.
No number but zero.
You decide who's reasonable.

How important! Title to Crown Jewels.

(end of rebuttal/closing)

Judge: Thank you, Mr. Singer, you can breathe now. (Laughter in the court)

(After a few moments, Singer replies "didn't want to go over my time." (more laughter)

Judge Stewart dismisses Juror 13 (the alternate). "Not allowed to deliberate with jury. That will be some disappointment to you." Much laughter at her reaction. It's apparent she's not disappointed. Judge continues about if you were disappointed, know that your presence was important. Thanks her for her part.

Oath to Marshall to guard jury. (Judge asks jurors to listen to the oath because, though it's with the marshall, it's applicable to them.)

Jury departs.

Judge Stewart explains that if the jury asks questions, he'll call counsel in. Both sides must agree with responses. If it's something simple, he can do over the phone. (Example: if they ask if they can have a dictionary, the answer will be "no"; no need to bring counsel here to discuss that.)

Judge Stewart jokingly delivers a compliment on behalf of a lawyer: if you hadn't met your quota of at least one motion per day he'd [something like have had to wander aimlessly, only funnier].

Then he delivers a serious compliment to both legal teams. Something about the biggest collection of legal talent he's had in his court room. Compliments on their professionalism. Finally, "sincere gratitude of this court."

Now the waiting for jury to deliberate.


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