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SCO v. Novell Trial, Day 5, Friday, March 12, 2010 - as text
Monday, September 13 2010 @ 03:32 PM EDT

Now that SCO has filed its appeal brief in SCO v. Novell, let's get back to the trial itself. We've already done the first four days' transcripts, and here is the transcript of day five, as text, of the SCO v. Novell trial. The trial began on Monday, March 8, 2010 and ran for 15 days, Monday through Friday, for three weeks, with the Hon. Ted Stewart presiding. This transcript is for Friday, March 12, and the witnesses that day were Ty Mattingly and Bill Broderick. Here is Groklaw's eyewitness report from the trial for that day. And now I'll share with you what I see as the highlights of the day.

I know what you're saying, "Aw, on day four, they promised they would play Maureen O'Gara's deposition today" and you'd be right. They did. But you'll have to be patient, because these two witnesses used up the entire day. Mattingly showed up with documents that he had shared with SCO but not Novell, so that took some time to deal with. But she appears in spirit, as there are discussions about what parts of her deposition video can be played, both before the day began and at the very end of the day. SCO expresses worries and tries to keep the jury from hearing the dreaded G word.

Yup. Groklaw is fear inspiring, to hear SCO talk. SCO didn't want the jury to hear about Groklaw for fear they'd come here and read something.

Because there is a lot to tell you about the day, for those who'd like to jump right to the transcript itself, here you go, a link to jump to the transcript Part 1, Part 3, Part 2. The transcript of this day is in three parts: part 1 [PDF] [Text], part 3 [PDF] [Text] and part 2 [PDF] [Text]. Pacer put parts 2 and 3 in reverse order, and we've turned that around, so you can follow along without confusion. The rest of the trial transcripts are here, so you can click on any date that interests you:

March 2010
M Tu W Th F
08 09 10 11 12
15 16 17 18 19
22 23 24 25 26

The day before, the parties' lawyers said they'd put their concerns about the O'Gara deposition in writing to the judge, and you can read both letters they filed, as well as the O'Gara deposition transcript, here.

Maureen O'Gara:

The day opens with the discussion about her video deposition. The judge says he's ready to rule on it. The lawyers are allowed to speak, but he's decided to let the parts SCO objected to be played for the jury. From what is said, it's clear that SCO wanted to remove any reference to Groklaw.

SCO's lawyer says that his concern is that the jury will get curious and come and visit. But the judge has more confidence in the jury than SCO does. He's told them not to read about the case, he points out, and they've been good, and when playing the video, they are making sure that the reference in the scrolling text says Groklaw, not Groklaw.com, so chances are they've never heard of it and won't even know it's on the Internet.

By the way, it's never been Groklaw.com. It's Groklaw.net. I own both domains, but Groklaw.com has never been used for anything. I got it because I didn't want anyone else to use it. But when did SCO ever care about facts with specificity?

SCO says the danger is that if you Google for SCO, up pops Groklaw. But the jury has been told not to do that, so that's that. I mean, I have found that logic isn't SCO's strong point, but if the jury went to Google and typed in SCO, whether or not I was mentioned in the trial, they'd still get to me and pretty much every other news outlet in the world. So the issue is obedience to instructions, not what might occur if the jury disobeys.

Here is what I think it was really all about, since what SCO said makes no sense to me: I think SCO didn't want it out there that Maureen O'Gara was asked by SCO's PR man at the time, Blake Stowell, to "send a jab PJ's way". Which she then immediately did. She claims it was not connected. Heh heh.

As my beloved granny used to say, though, if you're kicked by a donkey, just consider the source. I do find it amusing that SCO was suing Novell because it told the world it owned the copyrights on the very day SCO announced its financials, with SCO tying the two events together as if no one but a fool would think it a coincidence, yet O'Gara in her deposition pretends that her article attacking me was not in any way related to the SCO request to send a jab my way. It's all a coincidence.

I love covering these people.

But as it turns out, despite SCO's promise to play her video today, they don't. So you either have to wait or just click on the number in the calendar above, and it will take you to the day they did play it.

You know *I* jumped ahead.

You'd think the matter was settled. But at the end of the day, SCO's lawyer Brent Hatch stands up and raises the issue again. Here's how it goes:

THE COURT: Counsel, do you have anything before we recess?

MR. HATCH: Your Honor, we have one thing.

THE COURT: Go ahead, Mr. Hatch.

MR. HATCH: Um, I would like to ask Your Honor to revisit at least a small portion of the ruling earlier today on the Groklaw. And the only thing I would ask is if Your Honor would reconsider allowing at least the striking of the text, I mean the part of the deposition that would start at Page 64 Line 23 through 65 line 3.

I think that they end up getting everything that they need in, what Your Honor intended to have them get in, and this would take out one of the references. And I think those lines don't add anything because the person is mentioned elsewhere in the testimony you have allowed. So we would ask that you reconsider at least striking those.

THE COURT: Again Line 23 on Page 64 --

MR. HATCH: Starting on -- I guess you would start on the question so line 22.

THE COURT: Line 22.

MR. HATCH: Through Line 3 on the next page.

THE COURT: Who wishes to respond?

MR. BRENNAN: Your Honor, I would be happy to. Just let me take a quick look. Just so I'm clear, the suggestion is Page 64 Line 22 through what Mr. Hatch?

MR. HATCH: Line 3 on the next page.

MR. BRENNAN: Well, Your Honor, here is the issue with it. It gives context to the suggestion above regarding who PJ is. And it indicates, as well, that what PJ is doing is operating a website that in essence is a source or place of news information that Ms. O'Gara is essentially competing with. The real issue here, and the reason for the testimony, is as the court may be aware, that Ms. O'Gara makes a claim that Mr. Stone made a certain statement based on a telephone conversation. Novell believes that it is entitled to present evidence to the jury that Ms. O'Gara is not an objective journalist and that she has a certain relationship with SCO that led her to be less than objective in her report of this conversation with Mr. Stone. This fits in with that. We have already agreed to take out other matters that would be extraneous, but this particular reference gives context to who PJ is. He is essentially a competing journalist.

MR. HATCH: Your Honor, it does that. We haven't taken that out. If you note, the very next clip identifies PJ as Pamela Jones and it goes on from there. The reason he has given is some of the exact reasons why he shouldn't be here because, you know, he wants to mention this cite which they'll go to. And, you know, we think that is inappropriate because we think it is inconsistent with what Your Honor has ordered and been concerned about in the past. And these couple sentences really don't add any of the flavor that he has already got from the other designations that Your Honor has allowed.

THE COURT: Um, go ahead, Mr. Brennan.

MR. BRENNAN: Well briefly. Your Honor, what this does is first of all the argument assumes that the jury is going to disregard the court's very careful instructions that have been repeated every day of trial. Second of all, there are other publications that have been referenced and will be referenced during the course of trial and one is the Wall Street Journal. A juror having heard reference to a particular publication could just as easily go to the Wall Street Journal or any other source.

Third, the reason for this particular reference is that it mentions it is a website that follows the SCO case. Now, we have to assume that the jury is going to disregard the court's instruction for this to be an issue, but it gives that very context as to why Ms. O'Gara may have lost her objectivity and thus her statement is not credible.

THE COURT: The court has to presume that the jury is going to follow the instructions that the court gives to it. Otherwise, we are in very serious trouble. And so the court is going to deny the request of Mr. Hatch that those additional lines be excluded. The court believes that the jury should be trusted to that extent. But more importantly, again, the probative value of this testimony is very important. There is a slight possibility of there being something that would stick in a juror's mind that may lead them to disobey the court and go home and look up the website but I just think that it is so highly unlikely I cannot allow the probative value to be ignored.

MR. HATCH: Can I raise one last suggestion? I know I am trying your patience. But could we at least have the scrolling turned off during this playing of this deposition so they don't see the spelling?

THE COURT: I think that would be reasonable.

MR. BRENNAN: Very well.

THE COURT: If nothing else in the scrolling leave it blank where the name is referred to.

MR. BRENNAN: We'll do that, Your Honor. Thank you.

THE COURT: All right. Are you happy now?

MR. HATCH: I got a crumb. You know as long as I leave for the weekend with a crumb, I'm happy.

To know what part SCO wanted to get removed, we need to go to the PDF, to find the line numbers. So, if we go to page 64, which is on page 11 of the PDF, you'll find a handwritten note that says "Contested" in the margin. That is the spot. And what is on page 64 line 23 through page 65 line 3? It's Blake Stowell's May 20, 2005 email to Maureen O'Gara, with the subject line: "We need you to send a jab PJ's way." Then she is asked who PJ is, and she says "PJ is the purported author of the Groklaw site." And asked what Groklaw is, she says, "It is a website that follows the SCO case -- I should say cases maybe, but...."

So that's what SCO didn't want the jury to hear. Can you blame them for not wanting their role highlighted to the world? Not only does it undermine Ms. O'Gara's testimony by showing her up as a member of the SCO team, so to speak, not an independent journalist, but it makes SCO look terrible, willing to arrange for a journalist covering their litigation to be harmed for no good reason, except that SCO wanted me to be harmed, to damage my credibility and smear my good name.

It's an admission of an abnormal relationship with a journalist, such that their PR executive felt able to make a request like that. I'd so love to read the rest of that email. Someday, maybe. It explains why she was always so nasty when writing about me, I guess, which puzzled me at the time, since I'd never met her or had any dealings with her in any fashion. And I can't help but wonder why SCO listed her on its bankruptcy as being a creditor. Why would SCO owe her $10,000? Perhaps she was asked about that in parts of the deposition we didn't get to see in public. Not that I'd mind if she got stiffed for this piece of commissioned work, as I view it. One does enjoy when the universe is balanced. That's rare in the SCO universe, so it makes it especially satisfying when it happens. All right. Just kidding around.

Oh, and I can speak with some authority on this next point. I am the *actual* author of Groklaw. And I'm very proud of my work, which is probably more than some journalists can say. One reason I am proud of my work is because no one has ever sent me an email like that. No one tells me what to write. No one pays me to write what they want written. That has never happened in the history of Groklaw. And I have never sent a deliberate jab anyone's way, either, on commission or on my own initiative, just to be mean. I've never tried to harm anyone or undermine their credibility unjustly.

And speaking of balance in the universe, the end result of their calculated cruelty was that Ms. O'Gara's credibility as a witness was seriously undermined. Novell was able to use that incident to demonstrate that her testimony was not believable, since she was not independent but rather a SCO ally willing to do something that probably not a single juror would ever consider doing to anyone ever. So while, all things considered, I'd have preferred to skip that event, the jab they sent my way ended up boomeranging right back at them. Funny how life works out sometimes.

Not that SCO meant for that to happen. I doubt Stowell ever expected that dirty little email to see the light of day in a courtroom. Any executive in 2005 ought to have known that emails are discoverable, but apparently not these SCOfolk. Of course, for all we know, the email came out in discovery because O'Gara still had it, while Stowell had deep-sixed it. Who knows which one was the careless conspirator, but here we are in 2010 reading the email. Like I often say, truth is like a weed. It will push through concrete to get to the light. And here they are, in a very bright light indeed.

Ty Mattingly:

One reason the two witnesses that do take the stand take all day is because Ty Mattingly, Darl's buddy, shows up with documents he claims to have found in his garage, which as it turns out, he gave to SCO earlier but about which nobody told Novell about until this very day, at trial.

Birds of a feather flock together, I've read, and life's experience seems to bear it out. But if this was supposed to be SCO's Perry Mason moment, it falls flat. Instead we learn that someone has informed Mr. Mattingly of a prior witness being on the stand already, which is exactly what the judge has told everyone he doesn't want them doing.

Maybe that's why SCO worries the jury won't follow his instructions. Mattingly's excuse for not telling Novell? He feels Novell is in the wrong. When you read Mattingly's testimony, I think you'll see that Novell's lawyer, Sterling Brennan, feels indignant. His destruction of Mattingly's credibility, despite Mattingly being obviously quick-witted and his lawyerly awareness of what Brennan is trying to achieve, is worthy to be used in classes on handling hostile witnesses.

Here's one example, near the end of Mr. Brennan's cross:

Q. Now, the other documents in addition to those that you brought, you still have those, right?

A. I do.

Q. And those are at your home?

A. They are.

Q. Would you be willing to provide those documents to Novell's counsel to look at?

A. Absolutely.

Q. We would ask that you do that as well. Um, when do you think you might be able to do that?

A. Whenever you guys come down.

Q. Okay. I am sure we will come tomorrow. Now just a few more questions, Mr. Mattingly, I do appreciate your patience with me today.

I believe you said earlier that in response to a question by Mr. Singer that you thought that a majority of the UNIX business had been sold by Novell. Did I hear that correctly?

A. I don't know if I said a majority but yes.

Q. And so if one were to want to find out what assets were sold and which ones weren't, where would you recommend one look to make that determination?

A. I would say you could look at the contracts and all amendments to the contracts that clarify that.

Q. So you believe that in order to find out what assets Novell actually transferred to Santa Cruz Operation one should look to the contract, right?

A. That would be the first place.

Q. Can you think of any other source other than the contract?

A. Sure. If ambiguity showed up, then you would probably talk to the deal team to understand what the spirit and intent of that contract was.

Q. So if one wanted to talk to the deal team, one would first talk to those who wrote the deal, right?

A. Depends on who you know. You might talk to them, you might talk to Ed Chatlos.

Q. And you know that one of the persons involved in writing the deal was Tor Braham; right?

A. Yes.

Q. Did you ever ask Mr. Braham about this transaction?

A. I have not spoken with Tor about this.

Q. Have you gone to him and said I would like to understand what this transaction meant in terms of assets that were transferred?

A. No.

Q. But you do believe that he would be one that you would want to ask that about to find out what was really meant by the written word, right?

A. Yes.

MR. BRENNAN: Thank you. I appreciate your time Mr. Mattingly.

Brennan has gotten this witness to state Novell's main theme: that if you want to understand a contract, so as to know what did and did not pass under the deal, you look to the writing. That's exactly what SCO is trying to say isn't where you should look. SCO's Stuart Singer tries in redirect to fix the damage, but the damage was done.

Boies Schiller's Stephen Zack, whose name appears on the SCO filings, said recently that he hopes to use his year heading up the ABA to develop a program for lawyers to teach civics classes to high school students. He could use this Brennan cross examination, I think, for those students, to show them why it's very important to tell the truth, the whole truth, and nothing but the truth on the witness stand. Law students obviously can also benefit by watching a master at work. Note especially how Brennan uses Mattingly's earlier deposition to show inconsistencies in the live testimony with what he had stated under oath in the deposition. As a helpful aid, I've marked the spot where he begins to unravel Mattingly's testimony Brennan's class in cross examination technique. Here is is [PDF], Exhibit 9 in the collection, if you'd like to follow along even more closely.

William Broderick:

Broderick retakes the stand, another live witness, and SCO begins direct examination. He actually went before Mattingly in time, but I'm dealing with his testimony last, because it is more significant. The first exhibit used is the 1985 software license agreement between AT&T and IBM [PDF]. Keep in mind something SCO will not be stressing, I imagine, which is that the agreement was amended and added to over time. This agreement isn't all there is. You can find all the additions and amendments on Groklaw's Contracts page, under the heading IBM.

Broderick explains the 1985 agreement [PDF] like this:

A: Well, when you -- everybody who wants to get source code has to execute a software agreement. That's our umbrella. That's really our protections agreement. That's where we get our protections.

Q: How is it your protections?

A: Well, it's provisions for confidentiality and what rights of restrictions to a source code product that they license.

Q: What do the confidentiality restrictions mean, in your experience? What is the point of them?

A: Well, we're giving them our source code. It's our family jewels. It's restricted to only people that, you know, have a need to know. It's the developers in-house, they have to protect that. They can't distribute the source code out to anybody else. They can't tell anybody. It also provides confidentiality for the methods and concepts in it. So they can't use our source code and then go out and tell their friends how the source code works. It's pretty heavy duty protection of our family jewels.

In addition, he says, beside the umbrella agreement, a licensee needs a product license. But then they go on to the AT&T Technology Sublicensing Agreement, SUB-00015A [PDF], and he explains:
A: They would contact us, salespeople directly, and say they wanted to take a license. If they already had a software agreement in place, we would prepare a supplement product license for them, numbered sequentially, and send it out for execution. If they didn't have a software agreement in place, we would send them a software agreement to execute. And then when they executed that, we would send them the supplement.
The judge then asks a question, and remember he can do this in particular in this case, because while the jury is assigned to judge certain facts, he was given the task to decide a list of issues as well. Here's his question:
THE COURT: Mr. Broderick, let me ask you a question. This may show my great ignorance here, but there has been fairly constant reference to a flavor of UNIX during the course of this trial. Would it be accurate to say that the license agreement and the software agreement together allow the licensee to create a flavor of UNIX and then the sublicense agreement allows them to market that flavored UNIX product?

THE WITNESS: Well, they couldn't take a license for a software product until they had a software agreement. And it's that product license that allows them to create a flavor. And then they could not distribute their binary of that flavor until they had executed a sublicensing agreement.

Normand then takes Broderick through a letter that went out, he says, to whose with contracts that included a right to approve any transfer, a letter from Burt Levine that said "Novell has transferred to The Santa Cruz Operation, Inc. Novell's existing ownership interest in UNIX System-based offerings and related products, collectively transferred products". Of course, the *products* did transfer, just not the copyrights. The letter doesn't say that, Normand brings out, but then, why would it?

And then there's another letter [PDF] to Broderick, then at Santa Cruz, from Novell in 1997 about Cray Research, that Normand describes as "an instance in which SCO is authorizing Novell to undertake to deal with SGI with respect to Cray." But notice something in this SCO exhibit, please. It acknowledges that Santa Cruz has authorized Novell to negotiate with Cray without Santa Cruz being involved. Cray had bought SGI, so it wanted to be under the SGI license, because SGI had bought out its license and so had no further payments due. So on its surface, you might describe it as Normand does. But look more closely at what the last paragraph says:

This is intended to enable Novell to negotiate directly with Cray on the issue of Cray's intention to operate under the SGI Agreements for all SVRX royalty-generating binary shipments without requiring direct involvement from SCO. The only alternative would be for Novell and SCO to jointly negotiate with Cray, a situation which SCO has already indicated would unacceptably tax its legal resources.
The only other alternative was not for SCO to negotiate alone. That is what I see. And if SCO bought everything, why would that be? Why would Novell be in the picture at all? SCO was in the picture because it was supposed to collect those royalties for Novell, obviously. But if there was an issue, Novell had to be involved, or so Santa Cruz at the time believed.

Yet, despite Normand reading to him the part in the APA that says Novell could waive anything, Broderick insists that Novell did not have the right to waive, that it couldn't or shouldn't have the right to waive. Here's what Normand reads:

In addition, at seller's sole discretion and direction, buyer shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX license to the extent so directed in any manner or respect by seller.
Black and white. Yet note this exchange:
Q: In your view and your experience, if Novell had the right to waive or modify SCO's rights under the software agreement, what would be the consequences?

A: It would destroy our business.

Q: Why?

A: Because of the provisions -- that's where all our protections lie, the provisions of confidentiality, the rights on -- limited rights for them not to just use the source code to modify it, not to distribute the source code. If they could waive those rights, Santa Cruz bought the business from Novell, Novell could just turn around the next day and destroy the business.

Q: Now did there come a time you learned that Novell had directed SCO to waive its claim that IBM had breached IBM's software agreement?

A: I have heard that.

Q: What was your reaction?

A: They're nuts.

Q: What was the basis for that reaction?

A: They had no rights to do that. They had a right to protect their royalty binary stream, not to waive -- if they had the rights to waive provisions under the software agreement, that would have put us out of business, destroy the entire value of our company.

Nuts or else they actually could and did read the APA, which Normand has just read to Broderick, which says in black and white that Novell had the right to waive. SCO's argument always comes down to the same thing: that logic tells you that this was not a good deal. OK. But that's not the same thing as saying that's not what the deal was.

Broderick testifies without choking that "the royalty stream [w]as part of the purchase price". But if Novell already had the royalty stream, how could it be payment for it to continue to have it?

And he testifies that if you license something, you call the document a license agreement. If you buy or sell, it's a purchase agreement or a sale. The APA, he says, was a purchase, not a license. Wait. APA means Asset Purchase Agreement. That doesn't say sale of everything. It says sale of some things but not everything. Which is what it did and that's what the jury eventually ruled.

Santa Cruz already had a UNIX software agreement with AT&T. Guess how much it cost in 1995 for a source license? $375,000. The judge then asks a sensible question:

THE COURT: Mr. Normand, before you do. This agreement is with AT&T. Was this agreement, to your knowledge, still in effect even though AT&T had sold the UNIX business to Novell?

THE WITNESS: Yes, it was still in effect.

And the obvious question would have to be, why would Santa Cruz need it, if they bought everything lock, stock and barrel?

Interestingly, Broderick also testifies that a "SVRX licenses referred to the source code licenses for the products for -- all of the products that we licensed, excluding UnixWare." No footnotes about pre-existing or binary or any of the stories SCO has tried to tell over time.

So, that's the level of quality of this testimony. The jury obviously didn't buy it, and neither did the judge, who eventually ruled that Novell has the right to waive. SCO, being SCO, is now appealing that ruling. It complains that the court failed to discuss the testimony by Mr. Broderick, among others, or to credit various SCO arguments based on his testimony, along with that of others. Here's their argument, so you can have it in mind as you read Broderick's testimony:

After the trial, the district court entered its own findings on SCO's alternative claim for specific performance for transfer of the copyrights and on Novell's counterclaim that it had the authority under Section 4.16(b) of the APA to force SCO to waive its claims against IBM for alleged breach of the restrictions on disclosure of UNIX technology. The court found that Section 4.16's language regarding "SVRX Licenses" applied to any "contract" concerning SVRX and therefore applied to all software development agreements or licenses. The court did not address SCO's argument that the "Software Agreement" and "Sublicensing Agreement" subject to which IBM obtained access to UNIX source code, and which imposed limitations on IBM's disclosure of such code, are included among the "Software and Sublicensing Agreements" referenced in Item III.L of Schedule 1.1(a), and is not an "SVRX License" as to which Novell had unrestricted waiver rights.

The district court also did not expressly discuss witnesses, including former Novell employees, who testified that in order to make sense, Novell's "waiver" rights under Section 4.16(b) of the APA extended only to the terms of the Product Schedule Licenses through which particular UNIX products were licensed. Those witnesses included Messrs. Broderick (A2331-2332), Frankenberg (A2188), Chatlos (A2254-56), Thompson (A2223-2224), Wilt (A2276), Mohan (A2282), Michels (A2288-90), Sabbath (A2396), and Ms. Madsen (A2382;A2392-93). The court also rejected SCO's argument that such a broad waiver right would permit Novell to undermine the UNIX and UnixWare business SCO had acquired. (A2392-93:892-93; A2315:593-94; A2316:599-600.)

Finally, the district court did not find persuasive the parties' own conduct shortly after the APA, when SCO disputed Novell's effort to unilaterally grant IBM a buyout of its binary royalty obligations and expanded source code rights, and "began to institute a law suit" against Novell. (A3433-34;A2600-2601:1690- 95.) The court found no significance in the fact that during the months of negotiations between Novell and SCO over this issue, Novell did not once assert ownership of the UNIX copyrights or the broad Section 4.16(b) rights it now claims....

Given the technological reality of UnixWare's development and ancestry, without copyright ownership, SCO does not have the right to enforce in court the copyrights at issue in the UNIX and UnixWare technology, and thus to protect the core technology in UnixWare. The need for the copyrights to enforce SCO's rights was supported by unequivocal testimony of witnesses who have been involved in the various aspects of the UNIX and UnixWare business, including former Novell and current SCO UNIX Contracts Manager William Broderick (A2333:666; A2334:667-68); Santa Cruz General Counsel Steven Sabbath (A2398:913-15); former SCO CEO Darl McBride (A2421:997); former Novell and current SCO UNIX Product Manager & OEM Relations Manager John Maciaszek (A2599:1686-87); and former Santa Cruz Manager of Law and Corporate Affairs Kimberlee Madsen (A2364:780; A2369:802-03; A2386:865, 866; A2388:875; A2390-91:884-85)....

The district court read the relevant contractual provisions as applying to "any SVRX License" (A2982 92), but that begs the question of what constitutes an SVRX License. In finding support from the language that Item VI of Schedule 1.1(a) refers to "all contracts relating to the SVRX Licenses listed below," the court ignores that the definition of an SVRX License in Section 4.16 is not all of Item VI, but only the licenses supposedly listed within Item VI. The language of Item VI that "All contracts relating to the SVRX Licenses listed below" reflects that the term "all contracts" is separate from the term "SVRX Licenses," which are to be listed below. The reference to "all contracts" thus is not part of any definition of "SVRX License" as such. The SVRX Licenses to which the waiver rights apply are clearly a subset of "all contracts," SCO, 578 F.3d at 1223-24, and all contracts are not SVRX Licenses.

The district court also gave no weight to the extensive extrinsic evidence that Novell's waiver rights did not extend to such agreements. This evidence included direct testimony not only from the SCO (Santa Cruz) executives and negotiators involved in the transaction, but also Novell executives, including its former CEO. Those executives included Frankenberg (A2188), Chatlos (A2254-56), Thompson (A2223-24), Wilt (A2276), Mohan (A2282), Michels (A2288-90), Broderick (A2331-32), Sabbath (A2396), and Madsen (A2382;A2392-93). These witnesses cogently testified that the waiver provision was intended to protect Novell's interest in the royalty stream in SVRX Licenses which it would continue to receive post-closing, and was no broader than that. The IBM Software Agreement was not the source of SVRX royalties (A3231-36; A2303-04); the product supplement schedules for specific binary products provided those royalties (A3409-10; A2314), and in addition, in 1996 IBM had completely paid-up the royalties even under those agreements and was no longer paying any SVRX royalties that were passed through to Novell. (A2668:1948-49.)

The district court discounted this testimony, saying that one SCO witness, William Broderick, was not involved in the negotiation or drafting of the APA, and that many other SCO witnesses acknowledged that the language of Section 4.16 of the APA was not limited to product supplement schedules. (A298089.) Broderick, however, worked at Novell (and at USL before that) and offered evidence as to how Novell, and later Santa Cruz, actually interpreted these provisions. (A2303-04; A2310-12.)...

Given the technological reality of UnixWare's development and ancestry, without copyright ownership, SCO does not have the right to enforce in court the copyrights at issue in the UNIX and UnixWare technology, and thus to protect the core technology in UnixWare. The need for the copyrights to enforce SCO's rights was supported by unequivocal testimony of witnesses who have been involved in the various aspects of the UNIX and UnixWare business, including former Novell and current SCO UNIX Contracts Manager William Broderick (A2333:666; A2334:667-68); Santa Cruz General Counsel Steven Sabbath (A2398:913-15); former SCO CEO Darl McBride (A2421:997); former Novell and current SCO UNIX Product Manager & OEM Relations Manager John Maciaszek (A2599:1686-87); and former Santa Cruz Manager of Law and Corporate Affairs Kimberlee Madsen (A2364:780; A2369:802-03; A2386:865, 866; A2388:875; A2390-91:884-85).

So now as you read the transcript, you'll understand what SCO was trying to achieve with the questions they asked Broderick, a strategy which failed at the District Court in Utah but which is now before the US Court of Appeals in Colorado.

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

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

THE SCO GROUP, INC., a Delaware )
corporation, )
Plaintiff, )
vs. )Case No. 2:04-CV-139TS
NOVELL, INC., a Delaware )
corporation, )
Defendant. )
_________________________________)
AND RELATED COUNTERCLAIMS. )
_________________________________)

BEFORE THE HONORABLE TED STEWART
---------------------------------
March 12, 2010
Jury Trial

REPORTED BY: Patti Walker, CSR, RPR, CP
[Address] Salt Lake City, Utah [Zip]

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A P P E A R A N C E S

For Plaintiff: Brent Hatch
HATCH JAMES & DODGE
[Address]
Salt Lake City, Utah [Zip]

Stuart Singer
BOIES SCHILLER & FLEXNER
[Address]
Fort Lauderdale, Florida [Zip]

Edward Normand
BOIES SCHILLER & FLEXNER
[Address]
Armonk, New York [Zip]

For Defendant: Sterling Brennan
WORKMAN NYDEGGER
[Address]
Salt Lake City, Utah [Zip]

Eric Acker
Michael Jacobs
MORRISON & FOERSTER
[Address]
San Francisco, California [Zip]

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I N D E X
Witness Examination By PAGE
William Broderick Mr. Normand (Direct cont.) 574
Mr. Acker (Cross) 620
Mr. Normand (Redirect) 655
Mr. Acker (Recross) 668
Ty Mattingly Mr. Singer (Direct) 671
Mr. Brennan (Cross) 695
Mr. Singer (Redirect) 759
Mr. Brennan (Recross) 759

568


EXHIBITS RECEIVED INTO EVIDENCE PAGE
Plaintiff's:
167
3
592
22
213
706
487
488
168
570
83

Defendant's:
N-13 and T-13 628
L-7 648
H-6 651
G-4 691
O-45 723

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SALT LAKE CITY, UTAH; FRIDAY, MARCH 12, 2010; 8:30 A.M.

PROCEEDINGS

THE COURT: Good morning.

Counsel, I am prepared to rule on the O'Gara deposition designations unless one of you feels you need to address it here orally.

MR. BRENNAN: Your Honor, it depends on what the ruling is. Perhaps I should wait.

THE COURT: So do you want me to give you my ruling and then let you argue it?

MR. BRENNAN: Perhaps your sense, and if I need to say anything after that, I'll raise my hand, if that's fair.

THE COURT: I don't think you need to stand.

MR. BRENNAN: Thank you.

THE COURT: Mr. Normand, Mr. Singer, Mr. Hatch, do any of you?

MR. HATCH: As I understand it, we're down to just the third set of designations and, of course, one is that they be able to -- again, back to the discussion that's already there. You know, the jury is going to be able to draw its conclusions. Any prejudice from what has already been agreed to could be in there. So it's just cumulative, for that matter. We're obviously very concerned about the mention of specific sites. I think not having the .com doesn't really improve that. It makes it easy to see, and

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it is a particularly sensitive matter, as we discussed previously with Your Honor and Your Honor indicated as well.

THE COURT: Thank you, Mr. Hatch.

Counsel, the Court is going to allow providing to the jury those designated portions of the O'Gara deposition that are in dispute and found at pages 64, 66, 67 and 69. The Court will note that, in its opinion, the probative value of this testimony does far outweigh the prejudicial value. There is prejudicial value. I understand your argument and I also understand the reference to Groklaw would be of some concern, but the Court is more concerned that they are looking at The Salt Lake Tribune or some other source. I don't believe making reference to an obscure Web site name without it being designated necessarily as a Web site, per se, is going to somehow or another draw attention to this jury to go look at, particularly in light of the instructions the Court has given. I think this jury is being very careful and I believe that the risk is rather small that that is going to result in any type of violation of the instructions of the Court.

Mr. Hatch.

MR. HATCH: Yeah. My only comment to Your Honor would be I think, on this matter, that is hardly an obscure site because I think if you type in the names of the

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parties, it's one of the first things that comes up with pretty much any search engine.

THE COURT: I understand that, but, again, they could be looking at much more readily available sources than that.

So, counsel, I do have to ask you, we received yesterday -- well, I guess it was -- it was received yesterday, the petition for writ of certiorari in the above entitled cases filed on March 4th, 2010, and placed on the docket of the United States Supreme Court on March 8th. Do you have any sense for whether or not this matter is going to be taken by the Supreme Court, thus make this trial moot?

MR. SINGER: Your Honor, it's our view that it's remote that the Supreme Court is going to take writ certiorari from the Tenth Circuit's opinion. First of all, it's a nonfinal decision -- not in the sense that it isn't a final decision of the Tenth Circuit, but just for the reason that this case has simply been remanded for trial, and after that trial the issue will go forward, if necessary, to the Tenth Circuit and parties have the rights to go beyond that.

But, second, this is a case where there was no dissent on the Tenth Circuit panel. There was a motion made by Novell to stay the mandate. That was denied. There was a motion to the Tenth Circuit for en banc reconsideration. That was denied with apparently no judge in active service

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thinking that it should be reconsidered. We do not believe that there is a circuit court conflict on this issue.

And for all those reasons, we think the odds of the Supreme Court will take this case are low, and, of course, the odds that the Supreme Court takes any case are very low.

THE COURT: Thank you, Mr. Singer.

Mr. Jacobs.

MR. JACOBS: Your Honor, I certainly agree with the last point Mr. Singer made, the odds of any certiorari petition being granted are low. On all the other points, we have the opposite view. We set them forth in your certiorari petition. We haven't moved for a stay because, frankly, I think I would have a hard time persuading the Court just, given the odds, that the Court should stay this trial pending the writ -- petition for writ of certiorari.

SCO's response is due I believe April 8th to the petition, sometime in April, so the Supreme Court's consideration of this is going to take into April or May.

MR. SINGER: We would likely, Your Honor, seek an extension of time. Novell sought two extensions of time that were granted by the Court in filing its petition. I think, given that we're sort of tied up for the next few weeks, the court might deem a short extension of time to be reasonable.

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THE COURT: So neither one of you are saying we ought to quit and go home then?

MR. SINGER: That's certainly our position, Your Honor.

MR. JACOBS: That's correct, Your Honor. We're enjoying ourselves.

THE COURT: Do either of you have anything else before we bring the jury in?

MR. SINGER: Not from the plaintiffs.

MR. BRENNAN: No. Thank you, Your Honor.

Ms. Malley.

Counsel, I'm assuming that these rather intimidating white packages over here are the depositions that will be read today; is that correct?

MR. ACKER: No, Your Honor. I think those are Mr. Broderick's prior trial testimony and deposition testimony. It's just potential for purposes of impeachment of Mr. Broderick.

THE COURT: Okay. Thank you.

MR. NORMAND: Your Honor, do you want us to bring in Mr. Broderick now?

THE COURT: Yes. Have him come in, but don't have him yet take the witness stand, please.

(Jury present)

THE COURT: Good morning, ladies and gentlemen of

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the jury. I would remind you that we, yesterday, had Mr. Broderick as a witness. We'll continue with his examination.

And, Mr. Broderick, if you would please come forward and re-take the witness chair. I will remind you that you are still under oath.

DIRECT EXAMINATION (Cont.)

BY MR. NORMAND:

Q Good morning, Mr. Broderick.

A Good morning.

Q When we left off yesterday afternoon, you were talking about what you described as the umbrella software agreement. Do you remember that?

A Yes.

MR. NORMAND: Mr. Calvin, would you put that up.

BY MR. NORMAND:

Q Do you recognize this document, Mr. Broderick?

A Yes, I do.

Q And can you briefly describe what it is?

A This is the software agreement that was executed between AT&T Technologies and IBM.

Q What does the number on the top right of the first page of this document signify?

A It says SOFT-00015. Each licensee, when they license a software agreement, were assigned a specific number.

575

MR. NORMAND: Could we go to page 2 of this document. And bring out section 2.01.

BY MR. NORMAND:

Q The beginning of this paragraph, Mr. Broderick, says, AT&T grants to licensee a personal, nontransferable and nonexclusive right to use in the United States each software product identified in the one or more supplements hereto. Do you see that language?

A Yes, I do.

Q Let's go to section 1.04 on the same page. Is this a definition of software product that was just referred to in that grant of rights?

A Yes.

Q It says, software product means materials such as computer programs, information used or interpreted by computer programs and documentation relating to the use of computer programs. Do you see that language?

A Yes.

Q Let's go to section 1.02 on the same page. Is this a definition of computer program that was just used in the definition we went over?

A Yes.

Q It states, computer program means any instruction or instructions, in source-code or object-code format, for controlling the operation of a CPU. Do you see that

576

language?

A Yes.

Q Can you, when we add this all up, explain what's going on with the software agreement? What rights are being potentially given? What rights are potentially at issue?

A What it's doing is it's granting the rights. If you take the supplement -- if you execute a product schedule license, it gives you the rights to source code, to source code computer programs. It's the instructions in source-code format that you can use and you can modify -- a CPU is a computer. It tells you that you can use the source code on a computer and develop a product.

Q You referred to a product schedule license or a supplement. What is that?

A Well, when you -- everybody who wants to get source code has to execute a software agreement. That's our umbrella. That's really our protections agreement. That's where we get our protections.

Q How is it your protections?

A Well, it's provisions for confidentiality and what rights of restrictions to a source code product that they license.

Q What do the confidentiality restrictions mean, in your experience? What is the point of them?

A Well, we're giving them our source code. It's our

577

family jewels. It's restricted to only people that, you know, have a need to know. It's the developers in-house, they have to protect that. They can't distribute the source code out to anybody else. They can't tell anybody. It also provides confidentiality for the methods and concepts in it. So they can't use our source code and then go out and tell their friends how the source code works. It's pretty heavy duty protection of our family jewels.

MR. NORMAND: Now will you pull up SCO 167.

BY MR. NORMAND:

Q I don't believe this is yet in evidence. It should be on your screen, Mr. Broderick. Do you recognize this document?

A Yes. This is a product license that IBM took out. It's numbered number 47, and it is for a UNIX System V Release 3.0.

MR. NORMAND: Can we highlight that language on the top right?

BY MR. NORMAND:

Q How are you familiar with this document?

A I worked with -- anybody who licenses a source code ends up with a -- first, before they get the source code, they have to execute a product license.

Q How are you personally familiar with this document?

A I worked with IBM in their licensing. I did not -- I

578

didn't do this one. This was before I did. But I worked with IBM and I knew the licenses that they had.

MR. NORMAND: Your Honor, I move SCO 167 into evidence.

THE COURT: Any objection?

MR. ACKER: No, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 167 was received into evidence.)

MR. NORMAND: Mr. Calvin, can you pull out and show the title of this document to the jury.

BY MR. NORMAND:

Q So explain briefly, once again, what purpose this document serves in relation to the software agreement that we just looked at?

A This actually licenses a software product. The software agreement is the general terms and conditions to be able to do this. It has the overall protections.

MR. NORMAND: Let's pull out the top right of that document, Mr. Calvin, with the number.

BY MR. NORMAND:

Q Now is this agreement number the same as the one we looked at, the software agreement, earlier?

A Yes.

Q How do those two correspond?

579

A Everything is -- everything is done -- since it's so important to be able to keep track of who is licensed, everything is done by a licensing mechanism. It's almost like a library decimal system. So if IBM has a software agreement SOFT-00015, and then every time they license a new software product or a new designated CPU, new computer to use it on, they execute a new supplement and they would get a new number so we can reference -- when we talk with them about a license they have, we can reference, you know, under your software agreement X, Y, Z, we're looking at these supplement numbers, and we're both talking about the same thing.

Q Now you referred also yesterday to a sublicensing agreement. This will be the last in our three issues we're talking about in this lecture.

MR. NORMAND: Can you pull up SCO Exhibit 3.

BY MR. NORMAND:

Q Do you see that document on your screen, Mr. Broderick?

A Yes.

Q What's it titled?

A AT&T Technology Sublicensing Agreement.

Q How are you personally familiar with this document?

A I've worked with it. It's, you know --

MR. NORMAND: Your Honor, I, frankly, don't recall if this is in evidence. If it's not, then I'll move it in.

580

THE COURT: Number 3?

MR. NORMAND: Yes, Your Honor.

THE COURT: Any objection?

MR. ACKER: No objection.

THE COURT: Exhibit 3 will be admitted.

(Plaintiff's Exhibit 3 was received into evidence.)

BY MR. NORMAND:

Q Now this language on the top right, once again, Mr. Broderick, what is the significance of that number on the top right of this document?

A Well, you lost the first letter I think from a two-hole punch, but it's SUB-00015A, and that was the number assigned to the IBM sublicensing agreement, and each licensee would have.

MR. NORMAND: Can we go to the second page of this document and highlight 2.01(a).

BY MR. NORMAND:

Q This document says, AT&T grants the licensee personal, nontransferable and nonexclusive rights: To make copies of sublicensed products. Do you see that language?

A Yes.

Q Let's go to section 1.04 on the same page. And this says, sublicensed product means, computer programs in object-code format based on a software product.

581

Now taking those two definitions, can you explain the purpose and operation of a sublicensing agreement?

A That granted the overall rights to distribute a sublicensed product. A sublicensed product is -- I talked yesterday about if you went to the store and you bought Microsoft Windows. That's a binary product. A binary product is an object code form. You can't change it. You can just use it. So what this is granting them is rights, if they have a license for a specific software product, to take that software product and distribute a binary. It's the same thing as allowing somebody to distribute Microsoft Windows. You can't modify it at that point, just use it.

Q Now with all of this in mind, let's go back to an exhibit we looked at yesterday, SCO 580. This was the Prentice-Hall letter. Do you recall discussing that?

A Yes.

MR. NORMAND: Can you bring up the first paragraph of the text.

BY MR. NORMAND:

Q This was a letter, Mr. Broderick, in which Novell was explaining that it had transferred to the Santa Cruz Operation, Inc. its existing ownership interests in UNIX System-based offerings and related products as listed in attachment A of this letter. Do you recall this?

A Yes.

582

MR. NORMAND: And can we go to attachment A of this letter. Let's bring out that full set as well as we can, Mr. Calvin.

BY MR. NORMAND:

Q Mr. Broderick, what are these lists comprised of? What are these things?

A These are all the different software products -- part of the list of the software products that we licensed under product licenses.

MR. NORMAND: Can we go to the next page. The next page, and the next page.

BY MR. NORMAND:

Q So all of those products, it's your understanding, had been transferred by Novell to SCO?

A Yeah, that's what they say.

Q How was it that a company would go about licensing products such as those listed here?

A They would contact us, salespeople directly, and say they wanted to take a license. If they already had a software agreement in place, we would prepare a supplement product license for them, numbered sequentially, and send it out for execution. If they didn't have a software agreement in place, we would send them a software agreement to execute. And then when they executed that, we would send them the supplement.

583

Q In your experience -- you took over that business after you transferred to Santa Cruz following the APA?

A Yes.

THE COURT: Mr. Broderick, let me ask you a question. This may show my great ignorance here, but there has been fairly constant reference to a flavor of UNIX during the course of this trial. Would it be accurate to say that the license agreement and the software agreement together allow the licensee to create a flavor of UNIX and then the sublicense agreement allows them to market that flavored UNIX product?

THE WITNESS: Well, they couldn't take a license for a software product until they had a software agreement. And it's that product license that allows them to create a flavor. And then they could not distribute their binary of that flavor until they had executed a sublicensing agreement.

THE COURT: Okay.

MR. NORMAND: Thank you, Your Honor.

BY MR. NORMAND:

Q Now, Mr. Broderick, did there come a time when --

A Kind of makes my job sound boring, doesn't it?

Q I didn't say that.

THE COURT: I was afraid you were going to be offended that I used the term flavor. At your level, that

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probably is not the phrase that you would use.

THE WITNESS: We use that all the time.

BY MR. NORMAND:

Q Did there come a time when the entire UNIX business transferred from Santa Cruz to the company that's now known as SCO?

A Yes.

Q And do you recall when that happened?

A The official date was May of 2001.

Q Did your responsibilities and obligations with respect to overseeing the entire UnixWare business, contract aspects thereof, change in any way when they were transferred from Santa Cruz to SCO?

A At Santa Cruz I handled primarily U.S. domestic business. When we transferred to SCO, I won the whole world.

Q Congratulations. We're going to show you SCO Exhibit 592. I don't think that's in evidence. This is another category of the letters that Novell sends out. Do you recognize this document?

A I recognize the contents of the letter. It was similar to a lot of other letters that went out. I don't remember specifically this customer.

Q Why do you recognize the document at all?

A Well, when we were in the transition teams, we had to

585

notify the licensees that Novell was selling the business. Burt Levine was assigned the job of drafting up the letter. And he did it -- when he drafted it up, he sent it around to some of us for a second set of eyes to see if he got everything correct in it. We said yes. Then what they do is -- a standard licensee, where there was no requirement for them to approve an assignment, they just got blanket letters. They had a form letter that was signed by -- I believe Stu Adamson, who was our controller at the time, they did one of those things in Microsoft Word where they throw the addresses in and they sent them out. Then we had to go through the files and we had to find third-party suppliers and people we had special agreements with that required them to approve any assignment. We had to modify the letter a little bit telling them that, okay, Novell sold the business to Santa Cruz, your agreement is being assigned to Santa Cruz, talk with them from now on, please sign this as your approval.

MR. NORMAND: Your Honor, I move SCO 592 into evidence.

MR. ACKER: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 592 was received into evidence.)

586

MR. NORMAND: Mike, can you pull up the first paragraph.

BY MR. NORMAND:

Q This states in the letter from Novell, as you may have heard, Novell has transferred to The Santa Cruz Operation, Inc. Novell's existing ownership interest in UNIX System-based offerings and related products, collectively transferred products. Do you see that language?

A Yes.

Q From your work, following the transition, do you know, approximately, how many such letters Novell sent out to these licensees and partners?

A My guess is about 3,000. I've got copies for all of them and there were boxes filled in my office for a long time.

MR. NORMAND: Can we pull up the signature, Mike.

BY MR. NORMAND:

Q Who signed this letter, Mr. Broderick?

A That's Burt Levine. He's a lawyer at Novell. He's the sole lawyer of the UNIX group. He came from USL with us.

Q Now where was Mr. Levine located?

A In our offices in New Jersey. The UNIX developers and finance people and contracts people that were with Novell were all located in Florham Park, New Jersey, and Burt was located there with us.

587

Q From your work following the transition from Novell to Santa Cruz, are you aware of any letter saying that any customers should deal with Novell concerning copyright issues?

A No.

Q Are you aware of any letter saying Novell retained any copyrights?

A No.

Q Let's do one more of these, Mr. Broderick. Turn to SCO Exhibit 22. Do you recognize that document?

A I've seen this one, yes.

Q I take it you recognize it on the same basis that you have recognized these earlier letters?

A Yes.

MR. NORMAND: I move SCO 22 into evidence, Your Honor.

MR. ACKER: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 22 was received into evidence.)

MR. NORMAND: Now, Mike, let's pull up the top left to show who this letter is to.

BY MR. NORMAND:

Q Did you have occasion in your work to deal with Microsoft Corporation, Mr. Broderick?

588

A Not a lot, but I have had some dealings with them.

MR. NORMAND: Let's pull up the first paragraph of the letter, Mike.

BY MR. NORMAND:

Q So this is another one of the letters with the following language, as you may know, Novell transferred to The Santa Cruz Operation, Inc. its existing ownership interests in UNIX System-based offerings and related products. Do you see that language?

A Yes.

Q In the next paragraph, this letter also contains, in the second sentence, similar language to what we saw earlier, it makes immeasurably more business sense for SCO, as the owner of the software in which the components may be included, to handle directly with Microsoft any matters that may become relevant under the subject agreement. Do you see that language?

A Yes.

Q How does that language comport with your understanding of Santa Cruz's responsibilities and rights following the transition?

A Well, Santa Cruz bought the business of technology. They had all the contracts. Microsoft -- it was a product that Microsoft had that Santa Cruz had used in the UNIX operating system. And by buying the UNIX operating system,

589

they got all the contracts for all the third-party suppliers, and this is just one of those letter to a third-party supplier.

Q Let's look at the next page and the signature.

MR. NORMAND: Can you bring that up, Mike.

BY MR. NORMAND:

Q Who was Michael DeFazio?

A He was a Novell senior vice president in charge of the UNIX business. He was located with us in New Jersey.

Q Now following this transition and during the course of your work at Santa Cruz and SCO, did you have any understanding of what rights Novell had retained with respect to the APA?

MR. ACKER: Calls for speculation, Your Honor. Also, there is no foundation.

BY MR. NORMAND:

Q Did you have in your month-to-month work while at Santa Cruz and SCO occasion to deal with Novell with respect to any rights it had retained under the APA?

A Yes, I did.

Q How so?

A Well, when we had the transition meetings, we were still all Novell employees. They identified people who were going to Santa Cruz and people who were staying Novell. And they pulled up contracts binding these people together, and

590

we went through portions of the asset purchase agreement because it had some ongoing requirements.

Q When you say they pulled?

A Novell management pulled us together. And part of those ongoing requirements, they showed us sections of the asset purchase agreement. One of them was section 4.16 which talks about Novell's retaining some binary royalty rights. As part of the purchase price, you know, they got stock and they got these ongoing royalties for the older UNIX System V products. And in the asset purchase agreement, there were some restrictions that, as employees who were going to SCO, we had to follow and the employees staying with Novell had to make sure we followed them. One of them was we couldn't do anything to jeopardize that royalty stream. It was money in the bank to them. We weren't allowed to touch it. We talked about it, and what we couldn't do was, once we became Santa Cruz Operation, we couldn't go to the licensee and say, look, you're paying $100 per copy on a royalty for this product, take a license with us, we'll charge you $50 a copy, and then beat Novell out of their royalty stream. We weren't allowed to do that. There were restrictions on our entering into new licenses.

Q Mr. Broderick, going back to what we started today, in your experience and your view, what was the source of the

591

royalty streams? Where did those come from?

A They came from the product schedules. When you license -- when you license a product, the product schedule has the royalty listing, you know, what you had to pay.

MR. NORMAND: Now, Mike, let's go to Section 4.16 of the APA. Bring out (a).

BY MR. NORMAND:

Q Now, Mr. Broderick -- I'm sure the jury appreciates our patience as we go through this -- this is the language in which the APA refers to all, quote, SVRX licenses, as listed in detail under item VI of schedule 1.1(a) hereof. Do you see that language?

A Yes, I do.

MR. NORMAND: Mike, can you go to schedule 1.1(a) and item VI.

BY MR. NORMAND:

Q Mr. Broderick, have you had occasion to review item VI of schedule 1.1(a)?

A Oh, yes.

BY MR. NORMAND:

Q So the previous page, at the bottom --

MR. NORMAND: Let's first highlight for the jury, Mike, the top. This is schedule 1.1(a), and highlight number VI at the bottom. //

592

BY MR. NORMAND:

Q It says, all contracts relating to the SVRX licenses listed below. Now in your experience, Mr. Broderick, what are actually listed below in item VI? What are those things?

A These are the source code products that we had product schedules for and we issued licenses for.

Q Now going back to section 4.16, following that transition meeting and based on your experience at Santa Cruz and then SCO, what was your understanding as to what SVRX licenses referred to?

A SVRX licenses referred to the source code licenses for the products for -- all of the products that we licensed, excluding UnixWare.

Q And let's look at section 4.16(b). This is the language that says, buyer shall not, and shall not have the authority to amend, modify or waive any right under or assign any SVRX license without by the prior written consent from seller. In addition, at seller's sole discretion and direction, buyer shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX license to the extent so directed in any manner or respect by seller. Do you see that language?

A Yes, sir.

Q Now in the course of your work, did you develop an

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understanding of what rights Novell had with respect to waiving or modifying SVRX licenses?

A Sure. I actually worked with Novell on some of those.

Q What was the understanding you had as to the scope of those rights?

A They had rights to tell us to modify or have approval for modifications of changes to the licenses, the product schedules.

Q Did you have an understanding as to why they had the right to do that?

A Because that's where the royalties came into play. They were continuing to get the royalty stream as part of the purchase price, so they had the right to manage that royalty stream.

Q Now at the start of the day we were talking about what we call the umbrella software agreement. Do you remember that?

A Yes.

Q In your view and your experience, if Novell had the right to waive or modify SCO's rights under the software agreement, what would be the consequences?

A It would destroy our business.

Q Why?

A Because of the provisions -- that's where all our protections lie, the provisions of confidentiality, the

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rights on -- limited rights for them not to just use the source code to modify it, not to distribute the source code. If they could waive those rights, Santa Cruz bought the business from Novell, Novell could just turn around the next day and destroy the business.

Q Now, Mr. Broderick, I want to show you SCO Exhibit 213. It's going to come up on your screen. It's not yet in evidence. This is a letter to you. Do you recognize this document?

A Yes, I do.

Q It's from Novell; is that right?

A Yes.

Q And did you have occasion to receive this letter during your work at Santa Cruz?

A Yes.

MR. NORMAND: Your Honor, I move SCO 213 into evidence.

MR. ACKER: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 213 was received into evidence.)

BY MR. NORMAND:

Q Now before we start to highlight this letter for the jury, could you briefly describe the background with respect to this company Cray that gave rise to this correspondence?

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A Sure. Cray Research had a license going back to UNIX System Laboratories. They licensed UNIX. And Cray built super computers, those multimillion dollar computers mostly used by the government. They were very high powered computers. They sold for sold multimillions of dollars. They had a special license with us where they not only had the right to distribute the binaries with their products, but they were given a special right to deliver source code with that computer.

Q And did there come to be some dispute or discussion with Cray about its rights?

A No. Actually the discussions slash dispute came with SGI. Silicon Graphics bought Cray Research. They contacted me. And Silicon Graphics had been given a binary royalty buyout by Novell, so they didn't have to pay royalties anymore. They had paid a lump sum up front. When they bought Cray Research, they said we're putting Cray underneath our buyout provisions. And I had said, nice try, but no. And we discussed this back and forth for a while.

Q And what was the result of the discussions?

A The discussions weren't going anywhere. So I went to my boss and I said, you know, we get five percent of these binary royalties. I've been spending about that much talking with them. This is a binary royalty deal. Why don't we turn this over to Novell and say, look -- under the

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APA, we have to take reasonable efforts to protect and collect their royalties. I have expended that. So we went to Novell and said, you know, here's the situation, you deal with it as it applies to the binary royalties. You can't touch any of the source code fees, rights or anything else, but you do the binary stuff, I'm done.

MR. NORMAND: Mike, let's pull up the signatures at the bottom.

BY MR. NORMAND:

Q Do you have an understanding, Mr. Broderick, as to why this is signed by two people?

A It was signed by -- it was signed by Steve Sabbath and Ryan Richards. Ryan Richards sent the letter to Steve Sabbath, who was our general counsel at Santa Cruz, sign it saying, yep, we agree to this.

MR. NORMAND: Mike, pull up the middle paragraph.

BY MR. NORMAND:

Q This language says, by signature below, SCO authorizes Novell to negotiate and conclude with Cray the issue of Craig's intention to operate under the SGI agreements for all SVRX royalty-generating binary shipments. Do you see that language?

A Yes.

Q This is an instance in which SCO is authorizing Novell to undertake to deal with SGI with respect to Cray; is that

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right?

A Yes.

Q Now, Mr. Broderick, when you were part of the UNIX group at USL and Novell, did those companies amend and modify rights under product schedule licenses?

A Certainly, often.

Q How so?

A There were hundreds of them. Most of them had to do with --

Q When you say hundreds of them, what do you mean?

A Hundreds of license agreements. Any time we modified a product schedule -- generally a product schedule that we did, it had to be in writing. The software agreement says any modifications to product schedules or anything, we both have to sign it. So what they would do --

Q Why did those companies have occasion to amend and modify the product schedule licenses with frequency?

A It generally had to do with royalties they would pay. A lot of the companies would come and say, I'm only using a portion of the UNIX I have embedded in my product. I only need these sections, so I don't want to pay the full royalty. Let's negotiate a lower royalty. We would do a letter agreement modifying the product license so they would pay the lower royalty.

Q When you were at USL and Novell, did those companies

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sometimes waive rights under product schedule licenses to cut a licensee a break, for example?

A By waive rights, you mean -- they do letter agreements waiving -- if somebody licensed a source code product, there was a one-time, up-front fee for the source code. And depending on the source code product, if it was an operating system, it would be anywhere from $100,000, to UnixWare, which is $375,000. If they were a current licensee and we wanted them to move to the next release that we were coming out with, we would do a letter agreement and offer them a lower one-time fee for the source code. So that was essentially a waiver of something under a license.

Q Did all those activities relate to and surround the product schedule licenses?

A Absolutely.

Q Now after the APA, did Novell direct SCO and Santa Cruz to amend or modify the product schedule licenses from year to year?

A Yes, they did.

Q How so?

A In each product schedule there is a provision for the royalties to be increased. What they could do is -- when you sign a license, you have to -- you agree to pay royalties. And there are a lot of people that have taken -- there are people that are still shipping a product based on

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UNIX System V Release 3.2. That was licensed back in the 1980s, which they continue to develop and they continue to ship. So in the product schedule there is a provision that we can increase their royalties based on an increase in the consumer price index, and we can increase it annually. After we went to Santa Cruz, the finance person at Novell directed me each year to notify the licensees that we were increasing the royalties by this consumer price index.

Q Was it your understanding, after this set of transition meetings concerning the APA, that Novell had sought to preserve for itself the same rights of waiver and modification that it had before the APA was executed?

A I'm sorry. Could you repeat that?

Q Yes. The question is, was it your understanding, following the transition meetings, that Novell wanted to retain that same waiver of rights, same rights to modify product schedule licenses after the APA that it had before the APA?

A As it related to the binary royalties.

Q Was that your understanding?

A Yes.

Q Now, until 2003, to your knowledge did Novell ever direct Santa Cruz or SCO to waive its rights under or to amend or to modify any software agreement?

A No, but that's not where the royalties are generated,

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so that wouldn't be a right they retained.

Q To your understanding?

A To my understanding.

Q Now did there come a time you learned that Novell had directed SCO to waive its claim that IBM had breached IBM's software agreement?

A I have heard that.

Q What was your reaction?

A They're nuts.

Q What was the basis for that reaction?

A They had no rights to do that. They had a right to protect their royalty binary stream, not to waive -- if they had the rights to waive provisions under the software agreement, that would have put us out of business, destroy the entire value of our company.

Q Now did there come a time when you learned that Novell was claiming that under the APA Santa Cruz had obtained only a license?

A I heard that.

Q What was your reaction to that?

A They're nuts.

Q Why?

A Well, first of all, I have been in contracts for almost 20 years. If I license something to somebody, I call it a license. If I sell something to somebody, I call it a

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purchase agreement or a sale.

Q Please continue.

A The agreement between Santa Cruz and Novell is an asset purchase agreement. It's a purchase agreement. Also, throughout the agreement, Novell was referred to as the seller, not the licensor. Santa Cruz is referred to as the buyer, not the licensee. And I've never done a license where I've transferred all right, title and interest in an asset.

Q Now, Mr. Broderick, as of the fall of 1995 -- it may take a couple minutes to explain this, but as of the fall of 1995, totally apart from the APA, did Santa Cruz already have a UNIX license?

A Yes, they did.

MR. NORMAND: Mike, can we pull of SCO 706.

BY MR. NORMAND:

Q Do you recognize this document, Mr. Broderick?

A Yes.

Q On what basis do you recognize it?

A It's a letter to Santa Cruz Operation from O.L. Wilson. He used to be in charge of the licensing group at AT&T.

Q What is your personal knowledge of this document?

A It's among the documents that I worked with and have seen.

MR. NORMAND: Your Honor, I move SCO 706 into

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evidence.

MR. ACKER: Your Honor, I don't think that's a sufficient foundation. This document predates his work at Novell and/or SCO. He doesn't seem to be able to identify where and when he used it or saw it.

BY MR. NORMAND:

Q Mr. Broderick, in your personal experience, did you have occasion to review and consider the terms of Santa Cruz's license during your work at Novell, Santa Cruz and SCO?

A Yeah. I went through the licenses when we were told we were going to be working for them to find out what they were doing and who they were.

Q Did you do that as part of your job responsibilities?

A I did that out of curiosity and trying to stay employed.

THE COURT: Would your review have included this agreement that you would have reviewed?

THE WITNESS: I'm sorry?

THE COURT: Would your review have included review of this agreement?

THE WITNESS: I pulled out all of Santa Cruz's documents, licenses. I don't remember specifically seeing this document. But I looked at everything Santa Cruz had.

MR. ACKER: Same objection, Your Honor.

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MR. NORMAND: Could we go to the next page of the document, Mr. Calvin. The next page.

BY MR. NORMAND:

Q Do you recognize this document, Mr. Broderick?

A Yes, I do.

Q On what basis do you recognize it?

A It's Santa Cruz's software agreement.

Q Is this the agreement you were referring to earlier that you referred to and reviewed in the course of your job responsibilities?

A Yes, I did.

Q Do you now recall reviewing this document?

A Yes.

MR. NORMAND: Your Honor, I move SCO 706 into evidence.

THE COURT: Mr. Acker.

MR. ACKER: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 706 was received into evidence.)

MR. NORMAND: Now, Mr. Calvin, can we pull up the first three paragraphs, including the title.

BY MR. NORMAND:

Q This document is titled AT&T Information Systems, Inc. Software Agreement. The first paragraph identifies the

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Santa Cruz Operation, Inc. Do you see that reference, Mr. Broderick?

A Yes, I do.

Q Now what would be the point -- let me start this way. Summarizing what we started the day with, what is your understanding of what -- as of 1995, what is your understanding of what the scope of Santa Cruz's rights were under this license and the corresponding sublicensing or product schedules?

A Under this license -- under this license, it's like every other license --

Q You say license?

A Well, I mean under this agreement. Sorry.

Q I should be clearer. Do you know whether Santa Cruz executed a product schedule license under this operating agreement?

A Yes, they did.

Q Taking these together, what was your understanding of what Santa Cruz's rights were as of 1995 under the software agreement and license?

A Well, under the software agreement, they had rights to acquire source code products.

Q Do you know if they did?

A Yes, they did.

Q Do you know if they built a UNIX business around the

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software agreement and license that they took?

A Yes, they did.

Q How do you know that?

A I know that because they were a licensee and we knew what our licensees were doing. They paid royalties. And they actually distributed a binary. They were the only company I knew of -- the reason I got to know them is because when we were talking about the business, it was mostly OEM computer, original computer manufacturers that license our software and they put the UNIX on their computer. Santa Cruz had a different business model, which is why I got to know them when I was working at USL and Novell. Santa Cruz wasn't a computer manufacturer. They took the UNIX operating system and they created a UNIX binary similar to Microsoft Windows, but it was a UNIX operating system.

Q Is that a flavor?

A That would be a flavor. And they distributed that. They distributed it to distributors. They would sell it to companies like Dell or Compaq, who had personal computers, and instead of putting Microsoft Windows on the computer, they put Santa Cruz's UNIX on the computer.

Q Now in the fall of 1995, based on your experience, if Santa Cruz had wanted to license the most recent version of UNIX, if it had wanted to license UnixWare, all it wanted

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was a license to UnixWare, about how much would it have paid for that kind of license?

A The standard unit for a source license was $375,000, but current licensees that licensed UnixWare were generally given a break in the price. You know, it was the effort to move them to the next release and keep them current with what we were doing. So they probably would have paid less than the $375,000.

Q Now, Mr. Broderick, I want to show you a slide that Novell used in its opening argument.

THE COURT: Mr. Normand, before you do. This agreement is with AT&T. Was this agreement, to your knowledge, still in effect even though AT&T had sold the UNIX business to Novell?

THE WITNESS: Yes, it was still in effect. All the agreements just transferred through. The agreements were, essentially -- the agreements were, essentially, a perpetual for source code. The reason that was was the companies that license the source code, the large IBM, Hewlett-Packard, they expended a lot of money and a lot of resources to create their flavor, and they wouldn't -- they wouldn't sign an agreement that said, okay, after you spend all this time and all this effort, we're going to cancel your agreement. //

607

BY MR. NORMAND:

Q Were there circumstances in which these UNIX companies did retain the right to terminate a licensee's rights under the software agreement?

A The licensee could terminate any time they wanted. We could terminate the license if they breached a provision of the agreement.

Q I see.

A Absolutely, if -- you know, as I said before, this was our family jewels we were letting these people have. If they were doing something wrong with the source code, we were going to shut them down.

Q Okay.

MR. NORMAND: Thank you, Your Honor.

BY MR. NORMAND:

Q I had asked Mike to put up the slide that Novell had used in its opening argument, and I wanted to ask you some questions about this slide, Mr. Broderick.

A Sure.

Q Do you see the top half of the exhibit reflects the sale of the UNIX business from AT&T to USL and then from USL to Novell?

A Yes.

Q Do you see the bottom half of the slide lists Hewlett-Packard, HP, Sun and IBM?

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A Yes.

Q In your experience, what was the nature of HP's, Sun's and IBM's involvement with UNIX?

A They were a licensee.

Q Now let's start with HP. Did you have any involvement in the licensing of UNIX to HP?

A Yes.

Q When did that occur?

A Through my time at Novell and Santa Cruz.

Q Did HP create its own flavor of UNIX called, as indicated here, HP-UX?

A Yes, they did.

MR. NORMAND: Mike, can you bring back up schedule 1.1, please. Let's put up the first paragraph.

BY MR. NORMAND:

Q Now, Mr. Broderick, when HP licensed UNIX, did Novell or its predecessor also transfer to HP all copies of UNIX and UnixWare?

A No, they did not.

MR. NORMAND: Let's bring the slide back up, Mike.

BY MR. NORMAND:

Q When HP licensed UNIX from Novell, did Novell transfer all of its employees in the UNIX licensing group to HP?

A No, they did not.

Q So you remained at Novell along with the rest of the

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employees in the UNIX licensing group after that HP license?

A Yes, I did.

Q Let's move on to IBM. Did IBM license UNIX from Novell or its predecessors?

A Yes.

Q That's the agreement we started the day with, right?

A Yes.

Q Now when IBM licensed UNIX, did the parties execute a license purchase agreement?

A No. They executed a license.

Q When IBM licensed UNIX from Novell or its predecessors, were the UNIX engineers instructed to go into the UNIX source code and add copyright notices?

A No, they were not.

Q Let's move on to Sun, also indicated in the slide. When Novell licensed UNIX to Sun, did Novell or its predecessor license back the UNIX technology so it could use that technology in its own products?

A No, it did not.

Q Did Novell send out letters to its customers and partners informing them that Novell had transferred its existing ownership interest in UNIX to Sun?

A No.

Q So returning to the slide that Novell created for the jury, in your view, where does SCO fit into the diagram?

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A On the same level, directly to the right of Novell.

Q Why do you say that?

A Because Santa Cruz bought their business, just like Novell bought the business.

Q Now, Mr. Broderick, with all of this in mind -- we're getting close here -- let me return to your participation in that transition process in 1995. As part of that process, did you separate materials that Novell was keeping from the materials that Santa Cruz would take possession of?

A Yes, I did.

Q Why did you do that?

A Because Novell was -- Novell was retaining certain products that were part of the -- the Novell UNIX group had not only the UNIX operating system, but they had some other products and they had some agreements related to those products that were not going to Santa Cruz. So we had to go through all of the legal and financial files, intellectual property files and pull out the files that were related to products that are -- business that was not going to Santa Cruz and was staying with Novell.

Q Did you receive any direction from anyone in this regard?

A Yes, we were told.

Q Who told you?

A Novell management. At the time we were all Novell

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employees. We had just been designated you're going to Santa Cruz, you're staying with Novell. So we went into the file room and we were told what to look for. Obviously all the NetWare agreements and files have to be pulled out. So what we did is we put a couple of tables in the center of the file room, and anything related to NetWare was put on the table. Then we looked -- there was the tuxedo product and some kind of data management product, and Novell was retaining that. That was not getting sold to Santa Cruz. So any files relating to this tuxedo product were pulled out. And then also there was a product called documented workbench. It is an old product from AT&T, USL, but Novell also was not selling that to Santa Cruz. So any files we found relating to the documented workbench were pulled out. What we did is we tried to isolate all the files that Novell needed to retain. Then the resulting files were going to be Santa Cruz's files. So we went through all these files and pulled them out and said, okay, Novell, here's, you know, what you asked for, these are all the files you need. They said, yes. We said, okay, take them.

Q Now, Mr. Broderick, as part of that process, which company took possession of the UNIX and UnixWare copyright registration certificates that were in New Jersey?

A I'm assuming Santa Cruz because we have them now.

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Q How do you know we have them now?

A They are in Lindon.

Q Lindon?

A Utah.

MR. NORMAND: May I approach, Your Honor?

THE COURT: You may, and you don't need to ask, Mr. Normand.

MR. NORMAND: Thank you, Your Honor. I ask for Mr. Broderick's sake.

BY MR. NORMAND:

Q Do you recognize those materials, Mr. Broderick?

A Yes. I saw these when we were -- there was a point in time after Caldera bought us that we shipped also the legal files to Lindon, and on one of my trips out to Lindon, we were organizing the files and came across this and we made a decision on where to file it.

Q What do you understand those materials to be?

A These are copyright registrations related to UNIX.

Q What do the green tabs on the side of those say, Mr. Broderick? Are there exhibit numbers?

A The first one here says Exhibit 487.

Q What does the second one say?

A Exhibit 488.

Q Now before we get into those in a little more detail, I want to show you and the jury, Mr. Broderick, a schedule to

613

the APA. Let's start with the seller disclosure schedule.

MR. NORMAND: Go to page 1 of that, Mike. The page before that, I believe.

THE COURT: Mr. Normand, Mr. Broderick asked if he could stretch for just a second.

MR. NORMAND: Of course.

THE WITNESS: I'm getting old.

BY MR. NORMAND:

Q We're going to show you the seller disclosure schedule in the APA. This appears at the end of the APA. And the second page of the seller disclosure schedule refers to -- let's start at section 2.10, bring all that out. This refers to intellectual property. There is a reference at the bottom, attachment E to this schedule contains a listing of seller's copyright registrations covering products related to the business. Do you see that?

A Yes.

Q So let's go to the first page of attachment E to the APA.

THE COURT: Just one second, Mr. Normand. The jury should be seeing this, correct?

MR. NORMAND: That's right, Your Honor.

THE COURT: He's doing the APA.

MR. NORMAND: I'm sorry.

THE COURT: You need to back up because they

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didn't see that last one.

MR. NORMAND: Mike, let's go back to the seller disclosure schedule. Let's highlight that top language of the first page of the seller disclosure schedule so the jurors can see what it says. This is in the APA, schedule to the APA. Let's go to the second page of this schedule. Highlight that section 2.10 language. See the reference to intellectual property, and there is a reference at the bottom, attachment E to this schedule contains a listing of seller's copyright registrations covering products related to the business.

So now let's, in turn, go to attachment E, page 1. Bring up the title. Attachment titled Selling Copyrights in Products of Business. Let's go to page 8. Let's highlight those bottom three references.

BY MR. NORMAND:

Q Mr. Broderick, do you have an understanding of what, with respect to this first reference, UNIX Operating System Edition 6 is?

A Yes.

MR. ACKER: Object. He needs to read the whole line, and instruction manual.

MR. NORMAND: I'm asking him if he understands what the first part of the line is. //

615

BY MR. NORMAND:

Q Is the instruction manual separate from the UNIX Operating System Edition 6?

A The instruction manual tells you how to use the Operating System Edition 6.

Q Now we're going to put on your screen, Mr. Broderick, what's been marked as SCO Exhibit 486.

THE COURT: 486 or 487?

MR. NORMAND: 486, Your Honor.

THE COURT: This the jury should not see.

MR. NORMAND: That's correct. In fact, I'm not sure 487 and 488 are in.

THE COURT: 485, 486, 487, 488 have not been admitted yet.

MR. NORMAND: Correct, Your Honor.

BY MR. NORMAND:

Q Do you recognize Exhibit 486, Mr. Broderick?

A It's a copyright registration.

Q Let's go to 487. Let's go to page 3 of 487. Now can you tell, Mr. Broderick, if the exhibit on the screen corresponds to 487 in your book?

A It looks like it corresponds.

Q Are you familiar with these copyright registration certificates?

A I've seen them, yes.

616

Q On what basis have you seen them?

A When we were filing out in Lindon, Utah, I believe I thumbed through them. When we were doing the filing out in Lindon, Utah, I was doing that filing with a woman named Joanie Bingham, B-i-n-g-h-a-m, and we were deciding how to file. We were doing the customers and the licensees alphabetically, and I told her she should set up a separate area for those things, like the copyright registrations. I looked through the binders at that time and saw what they were and said, put them in a file called copyrights.

Q Have you maintained ultimate control of these materials since that time?

A They did in Lindon, yes.

Q And did they do so at your direction?

A I told her to file them and not throw them out. That's my direction.

Q Apparently she did that.

A She did a good job. She didn't throw them out.

MR. NORMAND: Your Honor, I move SCO 487 into evidence.

MR. ACKER: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 487 was received into evidence.) //

617

MR. NORMAND: Now, Mike, can you highlight the language in number one were it says title of this work.

BY MR. NORMAND:

Q It says UNIX Operating System Edition 32V and Instruction Manual. Do you see that language, Mr. Broderick?

A Yes.

MR. NORMAND: Bring that down, Mike, and pull up the top right. Actually, you can get rid of the operating system reference. Can we pull that, Mike, up side by side or top to bottom with the corresponding number in attachment E of the APA.

BY MR. NORMAND:

Q Now, Mr. Broderick, what is the number on the top right of the certificate of copyright registration? Can you see that, the registration number?

A TXu 516 704.

Q Do you see a corresponding number in the attachment to the seller disclosure schedule in the APA?

A Yes, I do. Same number.

MR. NORMAND: Let's bring up for Mr. Broderick SCO Exhibit 488. Let's go to page 3.

THE COURT: 488 has not yet been admitted.

MR. NORMAND: Correct, Your Honor. //

618

BY MR. NORMAND:

Q Can you see, Mr. Broderick, the document on your screen, the right side of your screen --

MR. NORMAND: Let's do SCO 488, Mike.

BY MR. NORMAND:

Q The question is going to be whether the document that comes up on your screen corresponds to 488 in the book that's in front of you.

MR. NORMAND: Let's go to page 3.

THE WITNESS: The two documents correspond.

MR. NORMAND: Your Honor, I move SCO 488 into evidence.

MR. ACKER: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 488 was received into evidence.)

MR. NORMAND: Mike, can you do the same comparison.

THE COURT: Mr. Singer, you can be heard in that microphone.

MR. SINGER: I'm sorry.

BY MR. NORMAND:

Q Do you see the number on the copyright registration, Mr. Broderick, top right?

A Yes, I do.

619

Q Can you see if that corresponds to the number in the attachment to the seller disclosure schedule in the APA?

A They are the same.

MR. NORMAND: Let's bring those down, Mike. Actually take them out. We'll just look at page 3 of the registration. Highlight the first half of the language 1 and 2.

BY MR. NORMAND:

Q Do you see, Mr. Broderick, the reference in 2, in sort of the middle of that highlighted where it says nature of authorship?

A Yes.

Q What does it say?

A Computer program.

Q Is it your understanding that UNIX Operating System Edition 7 is a computer program?

A Oh, yes.

MR. NORMAND: Just a moment, Your Honor.

Your Honor, we would like to move into evidence as well the other copyright registration certificates, and I don't have the list handy. Maybe I can do that on redirect or with some other witness. Just to flag that issue for the Court.

THE COURT: All right.

MR. NORMAND: Thank you, Mr. Broderick. No

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further questions.

THE COURT: Mr. Normand, thank you.

Mr. Acker.

THE WITNESS: Do you want your books back?

MR. NORMAND: I'll take them.

THE COURT: Will you be using those books, Mr. Acker?

MR. ACKER: We'll put them on that table over there.

CROSS-EXAMINATION

BY MR. ACKER:

Q I'll give you these, Mr. Broderick, just in case. Good afternoon.

A Good afternoon.

Q How are you?

A Pretty good.

Q Where do you currently work, sir?

A The SCO Group.

Q And do you have any equity interest in the company?

A I do. I have a little over 6,000 shares of stock that I purchased through the stock purchase plan and I have a number of options that are -- I think because we're in Chapter 11 are frozen.

Q How many options do you have, sir?

A About 30,000.

621

Q So you have shares of stock that if SCO's stock price rises, you will gain financially, correct?

A That's true.

Q And you also have shares -- 30,000 shares of stock. Do you know what the strike price is for those shares of stock?

A Anywhere from 24 cents. Better than 50 percent of them are around nine, $10.

Q So if those shares with a strike -- options of strike price of 24 cents, if SCO's stock price was to go up to $10, you would make $10 per option, correct?

A That's true, but on half of them I would make about 30 cents.

Q So if SCO's stock price were to rise, you would gain financially, correct?

A Sure.

Q Now you were not involved in the negotiation of the asset purchase agreement; is that right?

A That's true.

Q And you were not present at the Novell board meetings in September of 1995 when the asset purchase agreement was approved, correct?

A That's true.

Q And you had no involvement with any of the amendments to the asset purchase agreement, correct?

A That's true.

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Q Now you're a contract guy, right?

A I'm a contracts guy.

Q Let me ask you a little bit about contracts. You would agree with me, wouldn't you, that a written contract provides a written record of what the parties agreed to?

A That's the intent of a contract, yes.

Q And in a written contract, you want to be as clear as possible in case there are misinterpretations in the future about what the parties intended, correct?

A That's the intent of the contract, yes.

Q And the reason for putting it in writing is so there is no misinterpretation years down the road about what the parties agreed to, right?

A That's correct.

Q You want a written record so people in the future cannot say the contract said one thing when it actually said another, correct?

A That's the intent, yes.

Q You also want a contract so people don't forgot what they agreed to years after it's put in writing, right?

A Correct.

MR. ACKER: Could we bring up SCO 04, please.

BY MR. ACKER:

Q We looked at this when Mr. Normand was taking you through your direct examination. This is a software license

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agreement between AT&T and IBM, right?

A Correct.

Q And this is one of the contracts that was first purchased by Novell and eventually went to Santa Cruz; is that right?

A Yes.

Q And you actually administered, at times, this contract, correct?

A Correct.

Q And the reason that the words and the clauses are put in the contract is so that both parties know what their rights and obligations are, right?

A That's the intent, yes.

Q The reason that the words are put in the contract is so that years after the contract was executed, you can pick up the written document, you can look at it, you can read it, and you can know what the rights and the obligations are of each side, correct?

A Correct.

Q And when you enter into these sorts of agreements with a party, you expect that party to comply with and abide by the written terms of the agreement, right?

A Yes.

Q And you don't expect somebody on the other side of a contract to, years later, just tell you orally, well,

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despite what the words in the contract say, that is not what we meant and therefore we're not going to abide by the written contract, right?

A That's always been my intent.

Q That's your practice, right?

A Yes.

Q That's the way it works, right?

A Yes.

Q So, for instance, if we take a look at the third page of this agreement, paragraph 2.05, this is a license agreement, and this 2.05 excludes certain rights, in other words, it says, no right is granted by this agreement for the use of software products directly for others, or for any use of software products by others, right?

A Yes.

Q In essence, back when this agreement was executed years ago, AT&T was telling IBM you can't give these rights to other people, they are just for you, right?

A Yes.

Q And they put it in writing, right?

A Yes.

Q They put it in writing so that 15 or 20 years later someone from IBM couldn't say, well, we think when we made this agreement, we really thought we had the right to give these rights to other people, right?

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A Yeah.

Q So you put it in writing so both parties know what the agreement is, right?

A Yes.

Q What you can and can't do, right?

A Yes.

Q Despite that somebody may come years later and say what they thought or hoped or wished the contract was, they are stuck with what the language is? You would agree with me, wouldn't you?

A In most cases, yeah, I agree.

Q Because that's the way contracts work, right?

A Yes.

Q Let me ask you about SCO Exhibit 03, please. Now I got a little confused, but let me see if I can clear it up. You talked about three types of licensing agreements you entered into. This umbrella agreement that you enter into with an entity sort of sets the general terms and conditions of the relationship between the parties, correct?

A Yes.

Q Then there would be a first layer of agreement, which would be a source code license where the licensee could take a source code, could develop code on top of it, could make their own flavor of UNIX; is that right?

A Yes.

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Q And below that would be another licensing agreement, which is what this one is, which is a sublicensing agreement that allows the person who developed the new flavor of UNIX to then turn around, put it into binary code, then license to a customer, correct?

A Yeah. I wouldn't say it's below the -- you know, I don't know if you are talking about hierarchy of priorities. You have the software agreement, general terms and conditions for licensing a software product. The sublicensing agreement is the umbrella for distributing a binary. Then you have the licenses where you actually license a product and you can work with it, and that just determines the royalties. So the hierarchy isn't a product schedule under the sublicensing agreement.

Q I didn't mean to say that one was more superior to the others, simply there are three types of licenses.

A Okay.

Q They are all related and they all work together, they are all integrated, correct?

A Yes.

Q If you would take a look at paragraph 4 of SCO Exhibit 3.

MR. ACKER: If you would go there, Tom, an highlight, please. //

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BY MR. ACKER:

Q It reads -- this is the agreement, again, where the producer of the flavor of UNIX who has licensed the source code rights is now sublicensing the binary code, and this sublicensing agreement, together with the software agreement and its supplement, sets forth the entire agreement and understanding between the parties as to the subject matter hereof. What that is saying is that these three agreements that you've talked about, the umbrella agreement, the source code agreement and the sublicensing agreement, are all interrelated, correct?

A Yeah. You have to have a software agreement in order to have a sublicensing agreement. And you have to have a software agreement in order to license a product.

Q It's those three agreements together that form the relationship or define the bounds of the relationship between the licensor and the licensee?

A Correct.

Q You talked about licenses with Sun and Microsoft. Do you recall that testimony?

A Yes.

Q If we could -- let me show you a couple of agreements. Let me show you what we've marked as Exhibit N-13 and T-13. Have you had a chance to look at those, sir?

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A I see them. How much detail do you want me to look at them?

Q Just take a look, and start with N-13. It's a license agreement that was entered into between SCO -- new SCO, the plaintiff in this case, and Sun in 2003, correct?

A Uh-huh. (Affirmative)

Q You have to answer yes or no.

A Yes.

Q You also have T-13, which is an agreement that was entered into between SCO, the plaintiff in this case, and Microsoft in, again, 2003, right?

A Yes.

Q You are familiar with these licenses, correct?

A I'm familiar with them, yes.

Q Now as part of the APA, you understood that --

THE COURT: Mr. Acker, do you want these admitted?

MR. ACKER: Yes. I move to have N-13 and T-13 admitted, Your Honor.

THE COURT: Any objection?

MR. NORMAND: No objection.

THE COURT: They will be admitted.

(Defendant's N-13 and T-13 were received into evidence.) //

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BY MR. ACKER:

Q These two agreements, N-13 and T-13, they were entered into between SCO, the plaintiff in this case, Sun and Microsoft, correct?

A Yes.

Q After the APA was signed, first Santa Cruz, and then SCO, had the ability to develop their new version of UnixWare, correct? That was part of the APA?

A They owned the technology. They could do with it what they want.

Q So they had the ability to the source code rights and they could take that source code and build a new version of UNIX on top of it, correct?

A They didn't have source code rights, they had ownership of the source code.

Q I understand that's your opinion. But they had the ability to build new code on top of the old UNIX code, correct?

A Correct.

Q And they built different versions of UnixWare on top of that, correct?

A Correct.

Q And that took place from 1995 until 2003, they were continuing new versions of UnixWare coming out, right?

A Yes, correct.

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Q They call these different revs or different versions of it the new improved version of software, correct?

A Correct.

Q And in your business you have this one line of code theory, correct?

A Correct.

Q The one line of code says that if you purchase the most -- even one line of code of the most recent version of the software, you pay that price for the software, right, the price for the most recent version?

A No, that's not correct. The one line of code rule is if you have a release of a software that you have developed a derivative work and you are releasing a binary, you license a later release of the code and you use one line of code in your current binary release, then you have to pay the royalties for that later release. It's not if you just license it, you have to use it.

Q Use it and use it by creating -- building on top of it and sublicensing it in binary form?

A Yes.

Q It's true, isn't it, that in these two agreements, N-13, the Sun agreement, and T-13, the Microsoft agreement, that what was being licensed in both of these agreements was the most recent version of UnixWare, correct?

A Correct.

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Q And so the jury understands, in 2003, when SCO entered into a license agreement, the Sun agreement, N-13, what it was licensing and what the value that Sun was paying for was the most recent version of UnixWare, correct?

A Okay. Yes.

Q Is that true?

A True.

Q And then similarly for the Microsoft agreement entered into, again, by SCO and Microsoft in 2003, what Microsoft was paying for and the value they were getting was for the most recent version of UnixWare, right?

A Well, Microsoft was also getting some release from some claims. They were also getting a release that SCO wouldn't sue them for certain things. Microsoft included more.

Q But you would agree with me that the vast majority of what it was that Microsoft was paying money for in T-13, the Microsoft license entered into in 2003, was for the rights of the most recent versions of UnixWare?

A I don't know that for a fact.

Q Well --

A I'm familiar with the agreement. I don't know how you parse out the amount of money that -- the value of the agreement, whether it was for the release or whether it was for the technology that was licensed. That's something somebody else should probably answer.

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Q But take a look at T-13. You see there is a --

THE COURT: T-13?

MR. ACKER: Yeah, T-13.

BY MR. ACKER:

Q If we go to Exhibit A of T-13, and if we could highlight the top line, SCO UnixWare 7 Release 7.1.3. That was the most recent version of UnixWare in 2003, correct?

A Correct.

Q And below that there are a number of additional releases, correct, earlier software and other items?

A Yes, but I'm not sure what all of them are. I'm about as technical as a doorknob.

Q But the real value and what really Microsoft was paying for, setting the release aside, the release portion of this agreement, getting the rights to the software, what they were really paying for was the ability to use the most recent version of SCO UnixWare 7, right?

A Yes.

Q Similarly, if you take a look at Exhibit C, you see at the top there is Open UNIX 8 Release 8 and UnixWare 7 Release 7.0? Do you see that?

A Yes.

Q Those are the most recent versions of UnixWare and Open UNIX, right?

A Yes.

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Q And down below there is a bunch of older code, right, on the schedule?

A Correct, but the SCO Open Server Release 5, that was just as current as the UnixWare 7. That was just another product.

Q But the real value, what Microsoft was paying for, other than the release in the agreement, was the most recent version of software of UnixWare, right?

A That's my opinion. You would have to ask Microsoft, though.

Q But that's your opinion as the contracts guy at SCO, correct?

A Yes.

Q Is that right?

A Yes.

Q And all of the older code listed below, that's simply just added to the schedule as a routine practice, but that wasn't what Microsoft was paying to get, right?

A I don't know.

Q Isn't it true that it's your normal practice that when you license the most recent version of software, you also provide licenses to the older versions just as a matter of course?

A We provide the right to access, and that's because every release is built on a preceding release.

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Q But the real value in what the customers or licensees are paying for is the most recent version of software, right?

A Correct.

Q That was true both for Sun and Microsoft in 2003, right?

A Yes.

THE COURT: Mr. Acker, would you please look for an appropriate time for the morning recess?

MR. ACKER: It's an appropriate time.

THE COURT: It would be. All right.

Ms. Malley.

(Jury excused)

THE COURT: Do you have anything, counsel, before we take the recess?

MR. NORMAND: Not from us, Your Honor.

MR. ACKER: No, Your Honor.

THE COURT: We'll take 15 minutes.

(Recess)

***** Part 3 *****

(10:15 a.m.)

THE COURT: Are you ready, counsel?

MR. ACKER: Yes, Your Honor.

THE COURT: If you would, please, Mr. Broderick.

(jury present)

THE COURT: Go ahead, Mr. Acker.

MR. ACKER: Thank you, Your Honor.

Q (BY MR. ACKER) Before we broke -- or actually Mr. Normand was sort of asking you questions about a couple of schedules that were attached to the APA, and I want to ask you about those as well. So why don't we start with section 2.0 of the Seller Disclosure Schedule in the APA. Highlight that, please. Now, this section 2.10 of the Seller Disclosure Schedule describes those -- that list of copyrights that you were talking to Mr. Normand about; correct?

A I assume so.

Q Let's take a look at it. The heading first is Intellectual Property. Do you see that?

A Yes.

Q So this is a disclosure in the APA by the seller, Novell, of its intellectual property; correct?

A Yes.

Q And then Attachment C to the schedule contains the most current listing of pending and issued applications for

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trademarks covering products of the business. Do you see that?

A Yes.

Q And then Attachment D to the schedule contains a listing of pending and issued applications for patents covering products of the business. Do you see that?

A Yes.

Q And then, finally, the attachment that Mr. Normand asked you about was Attachment E, and it says attachment E of this schedule contained a listing of seller's copyright registrations covering products relating to the business. Do you see that?

A Yes.

Q So this is -- in the APA this is Novell's description of intellectual property; correct?

A Yes.

Q And you've done asset purchase agreements, and you know in an asset purchase agreement there will be a section of the agreement that says what gets transferred and what does not get transferred; correct?

A Yes.

Q Why don't we go to Schedule -- or Section 1.1(b) of the Asset Purchase Agreement. And Schedule 1.1(b) of the Asset Purchase Agreement, sir, you understand is the section of the Asset Purchase Agreement that says what assets were excluded;

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correct?

A Correct.

Q So, in other words, if we take a look at Roman Numeral V of the excluded asset section, it says what intellectual property is excluded from a deal that is not transferred; right?

A Correct.

Q And so what this is is this is a subset of what is disclosed later on in those disclosures we looked at, and this is saying what is not going in the transaction; right?

A Correct.

Q And what the deal was was intellectual property, including all copyrights and trademarks, except for trademarks Unix and UnixWare were not being transferred; right?

A It makes no since to use this language because it's been replaced. This language does not exist in the APA.

Q Well, this was the language that was approved by the Board of Directors; correct?

A But it does not exist in the APA. It was -- it was replaced with wording in Amendment 2.

Q My question was was this wording, "All copyrights and trademarks, except for the trademarks Unix and UnixWare," as intellectual property excluded from the Asset Purchase Agreement, was that approved by the Novell Board of directors?

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A I would assume so.

Q And you also see there's all patents are excluded; correct?

A Yes, but I don't believe -- AT&T didn't transfer any Unix patents to Novell, so I don't think Novell had any patents to transfer.

Q So these lists that we see, the disclosure lists that we see at the end of the agreement that list patents and patent applications and that list a bunch of copyrights, that's simply a list of what exists, but you have to look to the excluded assets section to see -- and the included assets section to see what actually went and what actually did not go in the transaction; right?

A That would be true.

Q So now if we could take a look at -- well, let me -- first of all, you mentioned Mr. Burt Levine. If we could bring up his photograph, please. Is that the Burt Levine that you were referring to as the one that gave you these letters that went to customers?

A Yes.

Q And were you aware that Mr. Levine was an in-house lawyer at Novell during 1995?

A Yes.

Q And were you aware that Mr. Levine actually reviewed and edited the included and excluded asset schedules of the APA?

638

Were you aware of that?

A I didn't know that.

Q And were you aware that Mr. Levine approved and agreed with those included and excluded asset sections, including the section that excluded copyrights? Are you aware of that?

A No.

Q Let's go back to Schedule E if we could. Schedule E, yes -- Attachment E. Now, this is a list that goes on for one, two, three, four, five, six, seven, eight pages; is that right?

A Okay. I'm only looking at the section of one page --

(voices overlapping)

THE COURT: Just a second. Just a second. Don't talk over each other. Mr. Acker, if you'd ask your question again.

MR. ACKER: Yeah, I'll ask him another question.

Q (BY MR. ACKER) You see in Attachment E it says page 1 of 8?

A Yes.

Q And you've looked at the APA, and you and Mr. Normand have spent time looking at this together; correct?

A Correct.

Q And when you walk through these eight pages of these copyrights, the first seven-and-a-half pages are all manuals, instruction guides; right?

A Okay.

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Q It's not code; right?

A Okay.

Q Do you agree with that? You want to look at it?

A I would agree with that.

Q So the only code listed, again on this disclosure, is in the last four items; right? If we go to page -- I'm sorry, Thomas. Go to page eight, please. Highlight those last four. And do you know what year that code was written?

A I'd say the late 70's.

Q And there was many, many improved or added on or new versions of Unix after the 70's before the Asset Purchase Agreement in 1995; correct?

A Absolutely.

Q And none of those are listed in this schedule; right?

A No, they're not.

Q And in fact these copyright registrations -- if I can hand those back to you, sir -- 487, if you could bring up 487, please. And the first page you see there's a section there in -- three in the front page?

A Yes.

Q The code is written in 1978; right?

A Yes.

Q And the named owner of the registration or the copyright

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in this document that was being testified about was AT&T; right?

A Yes.

Q And SCO or Santa Cruz or Caldera never made any effort to change this; right?

A I don't know.

Q And all of that code that was improved on, the new Unix code that was written between 1978 and 1995, that's not anywhere in this attachment to the APA; correct?

A Correct.

Q And similarly, if you go to -- and I'm sorry. It's 488, the next copyright registration. You see the date that that code was written?

A Yes.

Q 1978?

A Yes.

Q And you see also that the name of the registrant is AT&T?

A Yes.

Q Now, when there was a switch, when the Asset Purchase Agreement was finalized in the end of '95 and you moved from Novell to Santa Cruz, you actually stayed in the same physical building in New Jersey; right?

A Correct.

Q So, in other words, it wasn't as though the moving trucks came and all of the folks, former Novell people who are now

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becoming Santa Cruz people, got moved to another location. You actually stayed in the same building; right?

A For a period of time, yes.

Q And if you take a look actually -- if we could bring up SCO exhibit 580. So this letter was the letter that you talked about that Mr. Levine gave to you. And this was a form letter, wasn't it? In other words --

A Pretty much so, yes.

Q So you talked about thousands of these letters going out, but this same paragraph was in every single letter; right?

A Well, this letter was a little different because it was addressing a specific agreement that needed approval, but, yes, there was a form letter that went to standard licensees.

Q And if you take a look at -- this is March 25th of '96, so about four months after the -- or three months after the close of the deal, the address for -- well, I'm sorry, wrong letter. Give me a minute. Bring up SCO -- or rather Novell H6, please. Now, H6 is a letter that was sent in March of 1996 from SCO to Novell. Do you see that?

A Yes.

Q And do you see the address at the top for SCO and the address at the top for Novell, same address; right?

A Yes.

Q And so how was it that you -- did you simply move

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those -- the Santa Cruz people over to cubicles on the right and the Novell people to cubicles on the left, or did you all just keep sitting in the same seats?

A I think for the most part we just kept staying in the same offices. They did firewalls on I.P. computer systems, but if I remember, we pretty much stayed in the same offices.

THE COURT: Are you going to offer this exhibit?

MR. ACKER: I'm going to ask him about it. Yeah, let me back up and I'll come back to this one.

THE COURT: All right.

MR. ACKER: Take that down.

Q (By MR. ACKER) Now, you -- there was some testimony you gave to Mr. Normand about HP, Sun and IBM being able to develop their own flavors of Unix. Do you recall that testimony?

A Yes.

Q And what you said was that if and because HP, Sun and IBM had a license, they had the ability to take Unix code and build on top of it and develop their own flavor of Unix; right?

A Yes.

Q And they did that, but they did not have ownership of the copyrights; right?

A Well, yes.

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Q And so it's true, isn't it, that you certainly can have the rights to develop your own version of Unix on top of old Unix and not own the copyrights; correct?

A That's true.

Q There's nothing surprising about that; correct?

A No.

Q Now, you also mentioned that Novell engineers changed some of the language on the copyrights after the APA; is that right?

A In the status meeting at one of the transition meetings it was reported that the Novell engineers were changing -- were changing the copyrights from Novell to Santa Cruz.

Q Did you ever actually look at the code and see what those changes were?

A No.

Q Let me show you what has been marked as SCO 641.

THE COURT: 641?

MR. ACKER: Yes, Your Honor.

Q (BY MR. ACKER) I'm going to ask you about the third page in in the document. Now, if you take a look at Roman -- or number six of what we've -- on the third page of what has been marked as SCO 641, you see there's -- what is listed there is changes that were made to the Unix code after the APA; correct?

MR. NORMAND: Your Honor, the document is not in

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evidence. We shouldn't be speaking to the substance of it.

MR. ACKER: I'm just trying to lay a foundation if he even knows what actually got changed or what didn't get changed.

THE COURT: Could you perhaps have him look at it. And try to avoid referencing the content of the document, Mr. Acker.

Q (BY MR. ACKER) Well, you're saying that you didn't actually see what changes were made; correct?

A That's correct.

Q And so you don't know that in fact what happened is that the engineers left on for Novell the ownership from 1984 to 1995. You don't know that; right?

A I have no idea what was changed.

Q And you don't know that the only time Santa Cruz is mentioned as the owner of any copyrights is for UnixWare with a registration after the APA of 1996? You just don't know that; right?

A No, I don't.

Q And as far as you know, that's exactly what happened is that the engineers left the Novell registration for the period before the APA, and they only changed it for UnixWare after the APA. You simply don't know that; right?

A No. The only thing I know about it is when they said they were changing the copyrights, I asked if they were going

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back into old, old versions of Unix, and they said no, they only do what is on a current software product. So that's all I know about it.

Q But in terms of what dates were put on there for who owned -- who owned the old Unix code from 1984 to 1995, you don't know that the engineers left Novell on, do you?

A I have no idea.

Q Now, between the period of the end of December of 1995 and October of 1996, that ten month period, you were at Santa Cruz; correct?

A Yes.

Q And Santa Cruz was issuing licenses during that period, during that ten month period; correct?

A Correct.

Q Let me show you L7. Have you had a chance to look at what we've marked as Novell Exhibit L7?

A Yes.

Q And the first agreement is a Supplement and Licensing Order Form that was executed by SCO in March of 1996; correct?

A Yes.

Q And this is a license agreement in which Unix is being licensed in March of 1996; correct?

A Correct.

Q And then if you go back into the document, do you see

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there's a second licensing agreement in May of 1996?

A I've got -- where do you want me to look? Up on the screen I've got a June 25, '96.

Q Let me show it to you.

THE COURT: Mr. Acker, you need to know that the L7 identified in the list you gave us is not the same as the one you're referring to. We can correct that easily.

MR. ACKER: We'll fix that.

THE COURT: That's based on the assumption you ultimately will be asking for submission, which you have not been doing, so I'm not going to worry about it until you do.

Q (BY MR. ACKER) Do you see that, sir, May 10th Software License Agreement, SCO for Unix System V, release 4.0?

A Yes.

Q These were license agreements that were executed by SCO in March and May of 1996; correct?

A Yes.

MR. ACKER: I move for admission of L7, Your Honor.

MR. ACKER: No objection, Your Honor.

THE COURT: L7 will be admitted.

MR. ACKER: And we may need to amend that.

THE COURT: But just so that I -- for our records, these are license agreements. You said that they were dated.

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MR. ACKER: There's two of them, Your Honor. One is dated March of 1996 and one is dated May of 1996, executed by SCO licensing Unix software.

THE COURT: My dilemma is that the one -- the first sheet of mine is the May 1996.

MR. ACKER: Right.

THE COURT: There's a subsequent one in here somewhere?

MR. ACKER: No, I'm sorry, you're right. They're both May.

The Court: Okay. That was why I was confused. So license agreements from May of 1996 is how we can identify them; correct?

MR. ACKER: Yes, Your Honor.

THE COURT: All right. And they're not objected to, so they will be admitted.

(Defendant's Exhibit L7 received in evidence)

Q (BY MR. ACKER) So it was true that after you -- the APA was executed and you went to work for Santa Cruz, you and your team were issuing license agreements during the period of time from December of '95 until October of '95; correct?

A Yes.

Q And did anybody during that period of time from Novell say, "Hey, you can't do that. You don't have the rights to issue license agreements"?

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A No.

Q Did anyone during that period of time from December of '95 until October of '95 say, "You don't have the rights -- you, Santa Cruz, don't have the rights to build a new version of UnixWare on top of the old Unix code"?

A Well, Novell knew we were doing this because this is a reference license. This is a read only right to look at the source code. We did them at Novell. We continued to do them at Santa Cruz. This was ordinary course of business. So I don't see why I should have had to have asked Novell for permission to do this.

Q And exactly right. That's my point. Novell knew you were doing this, issuing licenses between December of '95 and October of '96, and no one said, "Hey, you can't do that, Mr. Broderick," correct?

A Correct.

Q Because that was your rights under the APA; correct?

A Correct. We owned the technology. We could do with it what we wanted.

Q Why don't we take a look at Section 4.16(a) of the APA. Now, this is -- Section 4.16(a) is the section regarding the royalties that you were to collect, you being Santa Cruz, were to collect and funnel 95 percent back to Novell; correct?

A Yes.

Q And it's your -- as I heard your testimony, was that your

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belief was that the only royalties that had to go back to Novell were royalties for the binary licenses; is that right?

A That's -- that's correct.

Q Now, can you show me where in 4.16(a) it says that the obligation to pay back to Novell 95 percent of the SVRX revenue is limited to binary licenses?

A That's covered in Amendment No. 1 where they clarify -- they realized when they did this that they had forgotten about the source code and support fees. So Amendment 1 was executed at the time of closing, and in Amendment 1 they carve out source code right to use fees, support fees, and they carve out everything, leaving only binary royalties.

Q But the deal that was approved by the Novell Board of Directors, you'll agree with me that 4.16(a) doesn't say anything about limiting it to binary code or binary licenses; right?

A You have to know the contract's value. When I look at a contract, I look at the whole contract, including amendments. So when I look at the APA, in my mind I have to consider all the amendments.

Q Ane we'll take a look at that. But you actually wrote letters to people describing this -- these obligations; correct? Letters were written by SCO describing what their Obligations were under 4.16(a); correct?

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A I -- we had some dealings. I think there was an issue with Unisys and probably with Cray and SGI where I sent a letter to Novell saying under the APA we need to talk about this.

Q And I apologize. I don't think you wrote it, but someone I think at SCO did. If you'd take a look at H6.

A Okay.

Q Now, this is a letter written on March 12, 1996 by Mr. James -- is it Machi?

A Jim Machi?

Q Jim Machi? What was his job in '96 at Santa Cruz?

A He was a Product Manager.

MR. ACKER: Your Honor, I move for admission of H6.

MR. NORMAND: No objection, Your Honor.

THE COURT: It will be admitted.

(Defendant's Exhibit H6 received in evidence)

Q (BY MR. ACKER) And if you take a look again at the top, you see we have the same addresses, that Novell is residing in the same location as Santa Cruz; correct?

A Yes.

Q And if you take a look, if we could highlight the first paragraph down to the end of the parenthetical, you see that -- is it Machi, Mr. Machi?

A Machi.

Q That Mr. Machi wrote, just three months after the APA was

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executed, he wrote, "Under the December 6, 1995 Asset Purchase Agreement, APA, between SCO and Novell, SCO has an obligation to collect and pass through to Novell certain SVRX royalties that are due under SVRX licenses listed in item six of schedule 1.1(a) and assigned to SCO under the APA. Such royalties are payments of the type that prior to December 6, 1995 accrued to Novell under standard customer licensing agreements" -- and then he gives two examples of those sorts of agreements. And he writes, "For example, source code and sublicensing agreements". Do you see that?

A Yes.

Q And so at least Mr. Machi believed as of March of 1996 that what Santa Cruz was obligated to pass through to Novell was fees from both binary licenses and source code licenses; correct?

A Up to December 6, 1995 I think -- it was up to the closing date. Novell got all the fees associated with the business up to the closing date. After the business closed, they only got the binary royalties.

Q No. But what he says is that under the Asset Purchase Agreement, those royalties were source code royalties and binary royalties that used to go -- that used to be -- go to -- that Novell collected before the APA, now Santa Cruz collects and gives 95 percent back to Novell?

A Not source code.

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Q Well, he says source code, doesn't he?

A Well, he's talking about such source code royalties are payments of the type prior to December 6, 1995 accrued to Novell under standard licenses, source code and sublicensing. If you're trying to say that he's saying he's getting -- they're getting the source code fees, he's wrong, and we never gave Novell source code fees and they never asked for them.

Q So three months after the APA was signed in December of 1995 and it went into effect, Mr. Machi believed that 4.16(a) required Santa Cruz to pass through the source code royalties; correct?

A I don't know if he believed that, but he was a product manager, and --

Q That's what he wrote; right?

A That's what he wrote.

Q Take a look at the APA again, 4.16(b). Now, you said it in direct, and I think it's accurate, that you, SCO, could do nothing that would jeopardize the revenue stream for these SVRX licenses; is that correct? Do I have that testimony right?

A That's correct.

Q And you also said it was essentially money in the bank for Novell; correct?

A That's correct.

Q So after December of '95, after the APA went into effect,

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Santa Cruz, and subsequently SCO, the plaintiff in this case, could take no action that jeopardized that SVRX royalty stream back to Novell; correct?

A Yeah. What we were told is as -- as of the closing, if a licensee was paying royalties that were going to Novell, we had to continue to collect those royalties and Novell got them. We couldn't do anything. That's the example I gave about going to a licensee and saying, "You're paying a hundred dollars a copy for a royalty. Sign a license with us and we'll only charge you 50." We couldn't do something like that.

Q But you'll agree with me that what your testimony was is that first Santa Cruz and then SCO couldn't take any actions that would impact or affect that money in the bank for Novell from those SVRX licenses; correct?

A Yeah. For the binary royalties they were receiving, we couldn't screw that up.

Q Well, I understand we have a difference of opinion regarding binary and source code, but it's true, isn't it, that you couldn't take any actions, you SCO, Santa Cruz, couldn't take any actions that affected that royalty stream for SVRX licenses; right?

A True.

Q And if you take a look at 4.16(b), the language of the contract regarding this waiver provision, there's no language

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in there that limits this waiver provision simply to binary royalties; right?

A Yeah, but you only have to consider the amendments.

Q But in the contract approved by Novell Board of Directors, it doesn't say anything about binary royalties; right?

A No, it doesn't. That's why it was amended.

MR. ACKER: I don't have anything else.

REDIRECT EXAMINATION

BY MR. NORMAND:

Q Mr. Broderick, you testified you're a contracts guy?

A I'm a contracts guy.

Q And what does that mean exactly?

A I work contracts and licensing for the SCO group. I've been doing it since Novell purchased us from U.S.L. If a customer wants to license a source code product, get rights to distribute a product that we have, or if we want to license a third-party product, some company may have developed something that we'd like to use in our product, I work with them.

Q Have you spent a lot of time thinking about how contracts operate in the course of your work?

A Close to 20 years.

Q Now, as a contracts guy, is it your view that perfect clarity in a contract is always the goal?

A That is the goal.

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Q Is perfect clarity in a contract always achieved?

A No, it is not.

Q In your experience are contracts ever ambiguous?

A Yes, they are.

Q In your experience are contracts ever amended?

A All the time.

Q In your experience, when a contract is amended, is the amended language of the contract, the old language, relevant to you anymore?

A The old language does not exist anymore. When we amend something, the old language is gone and the new language goes in. In fact what I do in a lot of cases, if we have a contract that we amend, I will -- we have all the contracts in word processing. What I'll do is I'll take that contract in word processing. If we amend it, I will go in and put the amended language in it so I'm sure to make sure I'm always looking at the current state of the contract, the original contract with the amended language.

MR. NORMAND: Mr. Calvin, could you bring up Roman Numeral V.

Q (BY MR. NORMAND) Do you see this language, Mr. Broderick, that Mr. Acker spent several minutes asking you about?

A Yes, I do.

Q Do you know whether this language has been amended?

A That language was replaced.

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Q And in your experience as a contracts manager in reviewing the APA, would this language be relevant to you anymore?

A Not at all. It's been replaced.

Q What language would you look to in your experience?

A The amended language in the -- the language that's included in the amendment.

Q Which amendment is that?

A This was replaced in Amendment No. 2.

Q Now, in your experience in working with contracts, has there ever arisen an occasion where if you interpret a contract very literally, you can create an absurd outcome?

A Oh, I can come up with some really absurd outcomes.

Q Now, in your experience, if you read a contract literally, and it would create an absurd outcome from reading it literally, do you take the language literally?

MR. ACKER: Objection. That calls for a legal opinion, Your Honor.

MR. NORMAND: Your Honor, this goes to the first ten minutes of Mr. Acker's examination of Mr. Broderick as a contracts guy.

THE COURT: I'll overrule the objection.

Q (BY MR. NORMAND) Are there times, Mr. Broderick, when interpreting a contract literally would create an absurd result?

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A Yes.

Q And when that happens in your experience, how would you go about determining the intent of the parties under the contract?

A I would talk to the parties -- both parties of the contract, find out what they really intended the contract to be, and then we would do an official amendment to the contract to make it clear to everybody.

Q In your experience, when a contract is ambiguous, would you look to the way the parties had performed under the contract as relevant?

A Absolutely.

MR. NORMAND: Mr. Calvin, can you bring up 4.16(b).

Q (BY MR. NORMAND) Mr. Broderick, do you remember being asked about this literal language in 4.16(b) of the APA?

A Yes.

Q Do you have an understanding as to whether this language was subsequently amended?

A Yes, I believe it was.

Q And if it were amended, would this language be relevant to you anymore in your work as a contracts guy?

A No. I'd look at the amended language.

Q Now, Mr. Acker asked you about the types of agreements that you've overseen in the course of your work. I think they included the software agreement, sublicensing agreement, and

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what you described as the product license schedules. Do you recall that --

A Yes.

Q -- series of questions and answers? In your experience in your time at Santa Cruz and SCO, what is an SVRX license?

A It's --

Q How would you use that term?

A A product license. Anytime -- anybody, whether we were at USL, Novell, Santa Cruz Operation or SCO, if a salesperson was dealing with a customer and the customer wanted to go to a latest release, he would call us up and say they need a license for "X" product. If a -- if the finance people wanted to check the royalties that a customer was supposed to pay, they would call us up and say, "Can I get a copy of this company's license for "X" product?" And that would be the product schedule because that's what the royalties are.

MR. NORMAND: Mr. Calvin, could you bring up schedule 1.1(a). Go to the next page, and the next page. Now, could you bring up, Mr. Calvin, the top half.

Q (BY MR. NORMAND) Mr. Broderick, do you recall what purpose Schedule 1.1(a) of the APA served?

A It was a listing of all the assets that were going to Santa Cruz.

Q Now, do you see item L in this description of the list of assets that are being transferred?

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A Yes.

Q And it says, "Software and sublicensing agreements. This includes the source code and sublicensing agreements that seller has with its OEM, end user and educational customers. The total number of these agreements is approximately 30,000." Do you see that language?

A Yes.

MR. NORMAND: And now, Mr. Calvin, can you bring out item six. I think it's at the bottom. And could you put on top of that the paragraph we just read?

Q (BY MR. NORMAND) Now, Mr. Broderick, in this asset schedule the APA separately identifies in item six SVRX licenses; is that right?

A That's correct.

Q Now, as a contracts guy, in your experience, would there be any reason to make these two provisions redundant? Would there be any reason to think that SVRX licenses refers to something that has already been identified in the asset schedule?

A Well, they're different. Up in L, software and sublicense agreement, that's why I talked about the umbrella agreements that really cover the general terms and protections of the company for our software. And item six here, the SVRX licenses, those are the actual products that we will grant licenses for.

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Q Now, Mr. Broderick, we're going to put on the screen -- Mr. Calvin, let's go to Exhibit 168. Is this document, Mr. Broderick, among the ones that made their way into your files and under your purview?

A Yes, I'm aware of this.

Q And you've seen this document before, of course?

A Yes.

MR. NORMAND: Your Honor, I move SCO Exhibit 168 into evidence.

MR. ACKER: No objection.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 168 received in evidence)

MR. NORMAND: And, Mr. Calvin, can we pull out the paragraph two in the middle of the page.

Q (By MR. NORMAND) Now, Mr. Broderick, what is this document?

A This document relates to a binary royalty buyout by Hewlett Packard.

Q And this language states in paragraph two quote, "Purpose: Novell retained or has acquired all rights to outstanding and future HP binary code royalty and licensee fee payments, but not source code royalties." Do you see that language?

A Yes.

Q Now, was it your understanding over the course of your

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work at Santa Cruz and SCO that those companies had any obligations to pay source code royalties to Novell?

A No, they didn't. And Novell had a number of audits that they performed to the royalty payments at Santa Cruz and the SCO group. The people doing the audits were aware of our business. They knew we were doing source code licensing, and not once did they say, "But what about the source code?" All they did was review the binary royalty reports.

Q Now, Mr. Acker asked you some questions about the Sun and Microsoft agreements that he showed you. Do you recall that?

A Yes.

Q Do you know whether those were part of the SCOsource program?

A Yes, they were.

Q And did you negotiate those contracts?

A No. I had -- I didn't really have anything to do with the Sun agreement. The Microsoft agreement, I participated in some reviews of the documents as they were negotiating them.

Q Do you have any view or understanding as to the individual value of the individual components of those agreements?

A No, I don't, except for the fact that some of the values are highlighted in the agreement. The values that anybody placed on them, I'm not aware of.

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Q Now, as a matter of practice in 2003 and 2004, around the time these contracts were executed, did SCO license all of the old Unix source code with the most current version of UnixWare?

A The most current -- UnixWare was licensed with prior products.

Q What are prior products?

A Prior products are the prior -- it's the -- sort of the family tree or hierarchy of all of the development of the products through time. The example I used, I gave a house two bedrooms and a bathroom, and you add a room and add a bathroom, and you end up down the road with UnixWare. They listed prior products. But when we came to UnixWare 7, I believe they took a lot of the older prior products out and only included UnixWare because the product people at the time made the decision that they wanted the customers to focus on UnixWare and not look at the prior stuff.

Q Now, in 2003 and 2004, when SCO licensed any prior products with any UnixWare product, did they charge the customer anything extra for those prior products?

A No.

Q You were asked some questions about the copyright registration certificates that we discussed. Do you recall that? Do you know whether all of the copyrights in the Unix computer programs are registered, whether certificates exist

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for all of the copyrights in those programs?

A What I've been told is they're not all registered.

Q And so in your view do certificates exist for all of the computer programs that are identified in the APA?

MR. ACKER: Your Honor, That calls for speculation given his prior answer.

MR. NORMAND: Well, he testified to his understanding, and this is an issue that's come up --

THE COURT: I'll sustain the objection.

MR. ACKER: Speculation.

Q (BY MR. NORMAND) And who told you that copyright registration certificates do not exist for all of the computer programs for Unix and UnixWare?

A I believe it was Ryan Tibbitts.

Q Now, as to the older computer programs that have been registered, who holds the copyright certificates? Who has physical possession of them?

A The SCO group.

Q You were asked about HP, Sun and IBM, and you were asked the question whether Santa Cruz and SCO have been able to operate their Unix businesses in the years after the APA. Do you recall those questions?

A Yes.

Q And you were asked whether they quote, "Needed the copyrights to have done that." Do you recall that?

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A Yes.

Q Now, I want to ask you about your understanding of how this would work. When you're involved in your work at Santa Cruz and negotiating contracts, does a copyright registration number play any particular role in any of the work you do?

A No.

Q Do you look to see if there are copyright registration numbers and contracts that they're executing?

A No.

Q To your understanding, do programmers, when they're making copy of source code, do they have to enter a copyright registration number or some sort of password?

A Not my knowledge.

Q To your knowledge, can a programmer copy the source code without knowing what the corresponding copyright registration number is?

A I would assume so.

Q So is it your testimony that in the 10 or 15 years after the APA, programmers have been physically able to copy the source code, and you have been physically able to sign contracts that license the source code?

MR. ACKER: Objection, leading, Your Honor.

THE COURT: Overruled.

MR. NORMAND: It's an open-ended question.

THE COURT: Overruled.

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MR. NORMAND: With a lot built in.

THE COURT: Why don't you try it again.

The Witness: Thank you.

Q (BY MR. NORMAND) Have you been physically able to sign contracts with third parties since the execution of the APA?

A Yes.

Q Has anything stopped you from doing that?

A No.

Q When you do that, in the last 15 years has it been your belief and understanding that Santa Cruz and SCO owns the Unix copyrights?

A Well, yes. In our agreements we provide an indemnification for infringement of a third-party product. Somebody licensing our software, we would -- we would give them an indemnification. So if somebody else came along and said, "The product you're using infringes this, and I'm suing you for $1,000,000," we indemnify them and say, "Since we've licensed you the software, we'll protect you from that." We wouldn't protect them from that unless we owned the software. And the copyright -- in software a copyright is how you own the software.

Q Let me ask you another question, Mr. Broderick. I think we spoke earlier about the fact that IBM has a Unix license with what is now SCO; is that right?

A Correct.

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Q And in your view as a contracts guy, if IBM were to give away the Unix code that it licensed from SCO and it gave it away to a third party, as a contracts guy do you think you'd have an ability to sue that third party for breach of contract?

A I'd have to sue IBM.

Q What could you do as against that third party in your experience as a contracts guy?

A I think the only thing you could do is get an injunction against them using the software.

Q And how would you do that if you didn't have a contract with them?

A If somebody is using something that belongs to you and they're not authorized to use it. The only recourse we have would be against a person with a contract.

Q And do you have a view as to whether if you own the copyrights you would have any recourse against that third party?

A We have ownership of the product, therefore, we could press the issue. Copyrights is how you own a -- how you show your ownership and protect your software is by copyright.

Q Now, in your view is the ability to enforce prescriptions against third parties integral to the operation of SCO's business?

A Oh, absolutely. If we couldn't protect our software,

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we'd be out of business. You know, if we couldn't protect our software, the first person that we licensed the software could go into business for themselves and we'd be out of business. We have to be able to protect our software, and you do that through copyrights. That's how all of the companies have done it.

MR. NORMAND: Your Honor, I had mentioned that I wanted to move into evidence all of the copyright registration certificates that we had identified. I can do that now. It's a fairly long list, or we can do it however Your Honor pleases.

THE COURT: Have you discussed this with --

MR. ACKER: We're going to have to take a look at each of those, so maybe we can do it over a break.

MR. NORMAND: We'll do it that way, Your Honor.

THE COURT: All right.

MR. NORMAND: I have no further questions.

RECROSS-EXAMINATION

BY MR. ACKER:

Q Mr. Broderick, in response to Mr. Normand's questions you said that sometimes, and in your -- your opinion is that the language of the APA was ambiguous. Did I hear that right?

A There's language in the APA that's confusing.

Q And when language is confusing, it's the case, isn't it, that two reasonably minded people can take a look at the

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language and come to different opinions about what it means; correct?

A Yes, they could.

Q And so two people might look at language that's ambiguous, and one person might say copyright's transferred, and another person might look at that language and say the copyrights do not transfer; correct?

A They could, but that wasn't the case. They looked at the copyrights transferring and executed Amendment 2, which transferred the copyrights.

Q And my question was if the language is ambiguous, two reasonably minded people can look at the same language and come to different conclusions; correct?

A If they take all the facts into consideration, that's a possibility.

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

THE COURT: May this witness be excused, counsel?

MR. NORMAND: Yes, Your Honor.

MR. ACKER: Yes, Your Honor.

THE COURT: Mr. Broderick, that means you do not need to worry about being recalled as a witness. You may go about your business. But I do have to instruct you to please not discuss your testimony with any other witness in this case or in the presence of any other witness or in any other way communicate the nature of your testimony broadly. All right?

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MR. NORMAND: Your Honor, I hope to reach agreement with Novell on the issue, but I suppose I should mention that if we need to have Mr. Broderick technically on the stand to get in the remaining registration certificates, maybe we shouldn't let him go.

THE COURT: That means you may come back after all. Forget everything I just said. No, that's not true.

THE WITNESS: Does that mean I get to sit out there or I have to go back in the box?

THE COURT: I think you ought to stick around until at least the end of the next break, all right, which will be approximately an hour from now.

MR. NORMAND: I think his question, Your Honor --

THE COURT: Whether he can stay in the courtroom?

THE WITNESS: Can I watch or do I go in the closet?

THE COURT: Counsel, do you oppose if he stays in the courtroom, Mr. Acker?

MR. ACKER: No, Your Honor.

THE COURT: You may stay here if you would like. But, again, the instructions about discussing your testimony with any other witness or in the presence of any other witness --

THE WITNESS: No problem. Thank you very much.

THE COURT: -- Survives, whatever you may do in the next hour, okay?

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THE WITNESS: Thank you.

THE COURT: Go ahead, Mr. Singer.

MR. SINGER: Your Honor, our next witness is Ty Mattingly.

The Clerk: Mr. Mattingly, do you want to come forward and I'll swear you in.

THE WITNESS: Sure.

(Ty Mattingly, Plaintiff's witness, sworn)

The Clerk: Thank you. Please be seated. And if you would please state and spell your name for the court.

THE WITNESS: Ty D. Mattingly. It's T-Y, D., M-A-T-T-I-N-G-L-Y.

THE COURT: Thank you.

DIRECT EXAMINATION

BY MR. SINGER:

Q Good morning, Mr. Mattingly. I'm Stuart Singer, one of the attorneys for the SCO group. Would you briefly describe your educational background.

A Sure. Graduated, and came up to Brigham young university in 1980, and graduated from B.Y.U. in '87 with a degree out of the college of Engineering in the design engineering world. And then took a job with IBM after that, and spent 14 months going through IBM's advanced education program, where basically spent 14 months learning about computers and

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information technology, etcetera.

Q And after that?

A Educationally?

Q In business?

A You know, on and off would go to postgraduate types of courses, education.

Q Could you briefly summarize where you went to work after school, after college.

A Sure. I worked for IBM for just under five years, and then left and joined Novell in 1992, about February of '92, and then worked with Novell until 1987.

Q 1987 or '97?

A '97.

Q Can you describe what you worked at after you left Novell in 1997?

A Sure. I started some companies up that were in the consulting world, and built some internet types of businesses there that we later sold. And then I've just been an investor since about 19 -- excuse me -- since about 2004.

Q Has your investments focused on the technology business?

A Correct.

Q Was one of the companies that you invested in sold to SCO group?

A It was.

Q Do you recall when that was?

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A I don't recall exactly what the time frame was, but it was a company by the name of Voltis, and it was a real small company, very small transaction.

Q As a result did you receive certain stock in the SCO group?

A I did.

Q Do you know approximately how much?

A It was a little more than 9,000 shares.

Q And do you still have it?

A I do.

Q Are you good friends with certain members of the SCO group?

A I am.

Q Such as Mr. Tibbitts? How do you know Mr. Tibbitts?

A Ryan and I met in 1980. We were teammates at B.Y.U. I attended B.Y.U. on a football scholarship. And Ryan was an upperclassman and one of my teammates, so I have known him for 30 years.

Q In fact were you an All-American at B.Y.U.?

A Well, I was an Academic All-American, so it's a little bit of a combination of the school room as well as the playing field.

Q Do you also have good friends at Novell?

A Sure.

Q And does that include David Bradford, General Counsel?

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A Yeah. David Bradford is the person that I approached when I wanted to leave Novell -- excuse me -- IBM and go to Novell, and he actually set up my interviews with Jim Bills back in those days and really helped me get into Novell and mentored me a lot through Novell.

Q Let's go back to the time when you joined Novell.

A I also know Dana Russell over there, who is their C.F.O.

Q You're friends with Mr. Russell as well?

A Yes.

Q Going back to the time when you joined Novell, can you describe your responsibilities?

A Sure. When I first joined Novell, I was a product manager working in the marketing group.

Q Did your responsibilities change at some point?

A Yeah. After about a year Ray Norda, who was the Chairman and CEO, grabbed me and asked me to start working for him. So I spent the next couple of years working in the Chairman's Office on various projects.

Q When Robert Frankenberg became CEO, did you continue in that role working closely with the Chairman?

A Yes, I had. I had the same role and stayed working with Bob Frankenberg for probably a year-and-a-half.

Q Was that your position at Novell in 1995?

A No. I'd left working for the Chairman's Office and took a role as Vice-President of Corporate Development Strategic

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Relationships.

Q Who did you report to at that time?

A Duff Thompson.

Q Were you involved in the sale of the Unix business to Santa Cruz in 1995?

A Yes.

Q Do you recall who the principal negotiators were in that transaction?

A Sure. The principal negotiators on the ground and living in California for, you know, two months were myself and Ed Chatlos, with me having the relationship and kind of the high level strategy aspects of it, and Ed Chatlos, who was very detailed oriented, assigned from the business unit, to work out all of the details.

Q Did you attend negotiation sessions during those two months that you were living in California?

A Sure, daily.

Q Was that the reason you were in California?

A Correct.

Q How personally involved was Mr. Bradford, the General Counsel, in the negotiations?

A Well, Dave was the General Counsel of Novell at the time, but he was not involved on the daily basis and was not on the ground in California.

Q Are you familiar with a gentleman named Tor Braham, who

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is an attorney from the Wilson Sonsini firm?

A Sure. Tor did a lot of work for us, very good guy.

Q How involved was Mr. Braham in the negotiations?

A You know, I don't recall that Tor was that involved on the ground with the negotiations. When we finished coming to a meeting of the minds, then docs were turned over, and that's when the legal team took over for the last period of time, and Tor would have been a key component in that.

Q When the lawyers came in to document the transaction, had the principal business terms of the deal been agreed upon?

A Yes.

Q What was your Understanding from the negotiations as to how much of the Unix business was being sold?

A Well, it was the majority of it. I mean we sold the business. We acquired it from USL, and we were selling the business to accomplish some very high level strategic objectives for Novell and hopefully for the greater industry.

Q What was not being sold?

A Oh, certain functions, like SCO was acting as Novell's agent to collect some of the existing SVRX binary royalties, and so that was retained, and SCO acted as the agent to collect it, and I think the distribution was 95/5 towards Novell.

Q Other than that, was the remainder of the business, the

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Unix and UnixWare business, sold --

A Absolutely.

Q -- To Santa Cruz?

A Absolutely.

Q During the months of negotiations that you attended, did anyone from Novell ever say that we are selling the Unix business but we are retaining the copyrights?

A No.

Q Would that have been consistent with your understanding of the deal which you negotiated, holding back the copyrights?

A Holding back the copyrights would not have been consistent.

Q Let's advance to the time of the Board of Directors Meeting to approve the sale in September of 1995. What responsibility, Mr. Mattingly, did you have in connection with Board of Directors meetings at Novell?

A Well, prior to that time I had attended all of the meetings when I worked for Ray Norda and Bob Frankenberg. At this time where I worked for Duff Thompson I did not go to all of the Board meetings, but I did present at a number of them when they involved transactions that I was involved with.

Q Who was responsible for preparing Board materials for the Board of Directors to review prior to the meeting?

A Dave Bradford as the General Counsel and Corporate

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Secretary usually prepared and presented all of that information.

Q Like to show you exhibit 570. It's on the screen. I'm going to show you a hard copy. Can you identify exhibit 570, Mr. Mattingly, as a memorandum sent to the Novell Board of Directors from Mr. Bradford on September 15, 1995?

A Yes.

Q And was this in connection with the Santa Cruz transaction that we've been discussing?

A Yes.

Q Did you receive a copy of this yourself?

A I did.

MR. SINGER: I move the admission of exhibit 570.

MR. BRENNAN: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit 570 received in evidence)

MR. BRENNAN: Your Honor, just one point. There are some highlights that have been apparently -- excuse me -- apparently placed on the document, and we don't have the source of that. Perhaps I should withhold the acknowledgment of admission until we have an establishment as to the source of that.

THE COURT: I think these traditionally, as I've observed, these are the things that will be highlighted now, but the document that will go to the jury will not include

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these highlights; is that correct?

MR. SINGER: That's correct. These can be removed and will be removed.

THE COURT: All right.

MR. BRENNAN: Your honor, just so we're clear, the submission of the exhibit has the highlights, so --

THE COURT: Again, the one I have on my computer also has those highlights, as have others. Again, I will say to you, Mr. Singer, that none of the exhibits that will actually go to the jury should contain the highlights.

MR. SINGER: We understand that, your honor.

The Court: Okay. Are you all right then, Mr. Brennan?

MR. BRENNAN: Subject to that clarification, Your Honor, thank you.

The Court: Exhibit 570 again will be admitted.

Q (BY MR. SINGER) Now, was this provided to the Board on Friday, September 15th?

A Yes. It's very typical to provide information ahead of Board meetings.

Q And was this for the Board Meeting at which the Santa Cruz deal was up for approval?

A Yes.

Q Do you recall how soon after this September 15th meeting

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the Board was to have its meeting to consider the transaction?

A Well, you know, I can recall by looking at it that it was -- I think the transaction took place around the 19th, and so we had the Board Meeting on the -- I think the 18th.

Q And that would make -- do you recall if you were -- looking at the last sentence on the second page where it talks about weekend review, do you know whether September 15th, 1995 was a Friday?

A I don't know that, but I assume that it was a Friday. We'd have it for Saturday, Sunday and then a Board Meeting Monday, and then close the transaction sometime after the Board Meeting.

Q And do you see the reference on the first page to a term sheet for the proposed transaction?

A Yes.

Q I'd Like to show you exhibit 83. Mr. Mattingly, can you identify exhibit 83?

THE COURT: Excuse me. 83 should not be shown to the jury. It's not there, is it?

The Clerk: It's not.

Q (BY MR. SINGER) Can you identify exhibit 83?

A Yes. It's the Novell/SCO term sheet that's referenced as letter "E" under the memo from Dave Bradford.

Q So this was part of the memorandum that we've just been

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looking at from Mr. Bradford dated September 15th, 1995?

A Yes.

MR. SINGER: I move the admission of exhibit 83.

MR. BRENNAN: Your Honor, subject to the qualifications that were given previously, we have no objection. But, again, we're going to have to clean up the highlighted portions.

THE COURT: All right. Exhibit 83 will be admitted, understanding again that it will be cleaned by the time it goes to the jury.

MR. SINGER: Yes, Your Honor.

(Plaintiff's Exhibit 83 received in evidence)

Q (BY MR. SINGER) Was this the term sheet that -- did you receive this term sheet along with the memorandum to the Board that's marked as exhibit 570?

A I did.

Q These documents were together at that time?

A Correct.

Q Can you review what is stated in item one, "Novell transfers to SCO."

A You want me to just read it?

Q Well, can you give us your understanding of what is meant by transfers to SCO the Unix technology assets and UnixWare technology assets?

A Well, the Unix technology assets is the Unix business.

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UnixWare technology assets was the binary version of that that Novell shipped that had some integrations with Novell's network product offering.

Q Now, under the second item, item number two, does that indicate what Novell was going to retain --

A Yes.

Q -- after the transaction closed with Santa Cruz Operation?

A Yes.

Q And do you see that patents are listed as being retained by Novell?

A Yes.

Q Do you see that there's a license back to Unix and UnixWare for internal use and resale in bundled products?

A Yes.

Q Do you have an understanding of what that was?

A Well, sure. I mean Novell had some other product offerings that were bundled with UnixWare, you know, such as Groupwise or some of our network management products, various other products. So Novell was retaining a license back from SCO so that they could actually use those products bundled with Novell's products internally and for resale as bundles.

Q Do you have an understanding of what Tuxedo was?

A It was a transaction processing monitor.

Q And that wasn't being sold?

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A It was not.

Q Do you see any mention under item two of Novell retaining the Unix and UnixWare copyrights?

A No.

Q So if Mr. Frankenberg -- well, let me ask this. If Novell was retaining the copyrights, would you expect to have found that listed here under item two?

A Yes.

Q So if a member of the Novell Board of Directors was looking at the package that went to them the Friday before the Board Meeting, with the term sheet pertaining to the deal, would they have seen anything that would indicate that Novell was retaining copyrights in this term sheet?

A That's a pretty material omission, so it would have to be listed here on Novell's retained assets.

Q So if Mr. Frankenberg, for example, was reviewing this term sheet provided by Mr. Bradford, the General Counsel, the weekend before the Board Meeting, would it have alerted him in any way to Novell retaining copyrights?

MR. BRENNAN: Objection, Your Honor. This calls for speculation as to the mind of Mr. Frankenberg.

THE COURT: I'm going to overrule the objection.

MR. SINGER: Yes.

THE WITNESS: Yes. And I think it would have also alerted any of us that were on the business team. You know,

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you'd have to put this in perspective. At that point you're in the 11th hour and 59 minutes into this process, and to have something as material as the copyrights excluded from this Asset Purchase Agreement, it would have alerted everyone in the room.

Q (BY MR. SINGER) Would it have -- were you at the Board Meeting on September 18, 1995?

A Yes.

Q Would it have alerted you that there's a problem here that someone thinks that the copyrights are being retained?

A Yes.

Q And that didn't happen, did it?

A Did not.

Q Does the term sheet indicate what Novell expected to receive from Santa Cruz Operation in exchange for the business?

A Yes.

Q And does that include a number of different forms of compensation?

A Yes.

Q Was the first of that the stock equal to 16.6 percent of Santa Cruz Operation's stock?

A Yes.

Q Was the second 95 percent of all royalties received by SCO on the existing Unix business?

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A Yes.

Q Now, for fiscal year 1995 alone, was that estimated to be 47.65 million dollars?

A Yes.

Q And would you continue then to get those royalties in future years from Santa Cruz?

A Yes.

Q And that would be part of the compensation that Santa Cruz would be paying Novell for the business?

A Yes.

Q In addition, was there also a possibility of Novell receiving additional royalties based on the UnixWare shipments by SCO in the future?

A Yes.

Q And is that covered in item C --

A Yes, it is.

Q -- of what Novell would receive? And it says, "If SCO hits our business forecast, which is admittedly aggressive, royalties on future UnixWare shipments by SCO through the year 2002, those royalties could have a net present value of 50 to $60,000,000," correct?

A Yes.

Q And then also if there was NetWare technology included in UnixWare products, you would have rights to royalties on those as well?

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A Correct.

MR. BRENNAN: Objection, Your Honor. We're leading the witness.

THE COURT: Sustained.

Q (BY MR. SINGER) Would you have contained -- would you have received any royalties on NetWare technology included in the UnixWare products that Santa Cruz would sell?

A Sure, since its says continuing royalties on NetWare technology.

Q Now, I'd like to turn to the minutes for the Board Meeting that was held on September 18th, 1995, which has already been admitted into evidence as Novell's exhibit Z3. If we look at these, you recognize these as the Board minutes for that meeting?

A Yes.

Q And if you go to the top page, do you see that in addition to the members of the Board itself, also present by invitation were Dave Bradford, yourself, and Jeff Turner of Novell?

A Yes.

Q And you attended this meeting; is that correct?

A Yes.

Q If we turn to -- you understand the first part -- do you have an understanding as to whether the first part of the Board minutes seek to summarize what was actually discussed at

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the meeting before the Board of Directors?

A Yes.

Q Do you see any reference in that part, which runs from the beginning of the minutes all the way down to the resolutions, of any discussion at the Board over the copyrights of the Unix and UnixWare systems specifically?

A No.

Q Do you on your own recollection recall any discussion at the Board Meeting of the copyrights?

A No.

Q You then get the resolution which -- by which the Board of Directors approved the sale. Do you know whether there was any time that's typically spent at that point in the Board Meeting reviewing in detail documents which are being approved by the resolution?

A No, I don't think that would be typical with the Board of Directors to get into the details of a asset purchase agreement.

Q And if we compare for a moment what was listed on the term sheet that was circulated on Friday before the Board of Directors Meeting, and then this resolution of what was summarized in the Board minutes, if we go back to the term sheet, exhibit 83 -- And I don't know, Mr. Calvin, if it's possible to split the screen and put one up on one half and one on the other.

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If so, that would be helpful. So on the right-hand side of the screen we have the term sheet that we have been looking at, and if on the left-hand side we can have page two of exhibit Z3, the minutes.

The Court: Ladies and gentlemen, can you read that?

A JUROR: Not really.

MR. SINGER: We're going to need to highlight.

Q (BY MR. SINGER) We'll go back and forth then between the two. If we can go to the term sheet for a moment. Do you see under Novell term sheet, Novell SCO term sheet item one the reference to Unix technology assets, UnixWare technology assets being transferred to SCO?

A Yes.

Q We turn now to page two of the minutes, which I think Mr. Calvin has now successfully put on the right-hand side of the screen. And if you can highlight the resolution. Do you see a reference here in the resolution that pursuant to the Asset Purchase Agreement, Novell will transfer to SCO its Unix and UnixWare technology assets?

A Yes.

Q And if you keep reading it says, "A portion of the employee base in New Jersey and equipment used in the UnixWare business." Do you see that?

A Yes.

Q And if we turn back for a moment to exhibit 83, do you

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also see under item one the reference to Novell transferring to SCO the portion of the employee base in New Jersey and the equipment used in the UnixWare business?

A Yes.

Q And that's under the category of Novell's transfers to SCO; correct?

A Correct.

Q Can we now look at what Novell was retained. If we turn back to exhibit 83, do you see on the term sheet that was in the Board package the reference to patents, the license back to Unix, UnixWare and Tuxedo and other miscellaneous technology?

A Yes.

Q Can we now look at the Board minutes, and where it says -- do you see where it says here that, "Novell will retain all of its patents, copyrights and trademarks, except for the trademarks Unix and UnixWare, a royalty-free, perpetual, worldwide license back to Unix and UnixWare for internal use and resale in bundled products, Tuxedo and other miscellaneous, unrelated technology"?

A Yes.

Q Now, is that -- the term copyrights that's in the minutes, that's not in the term sheet, is it?

A It's not.

Q Do you have an understanding of why it -- well, let me

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ask you this. Are you able to reconcile the reference in the minutes to Novell retaining its copyrights with no mention of Unix copyrights being included on the term sheet?

A Sure. I mean Novell bundled its products with Unix and UnixWare, and so the copyrights being referred to as well as the trademarks are the Novell copyrights pertaining to the Novell products that they retained, not those that they sold to SCO.

Q So would you understand the reference to copyrights here, where Novell will retain all of its copyrights, as pertaining to the Unix copyrights being sold to Santa Cruz?

A Yes.

Q I'm sorry. Let me read back that question. Do you understand --

MR. BRENNAN: Your Honor, I think the answer was clearly heard.

THE WITNESS: Well, no. Say it again.

Q (BY MR. SINGER) My question is does the reference here of Novell retaining its copyrights mean the Unix copyrights or does it mean copyrights other than Unix copyrights?

A It's the Novell copyrights not the Unix copyrights. Those were sold with the business to SCO.

Q You see the reference to the worldwide license back to Unix and UnixWare?

A Yes.

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Q Would that have made any sense if Novell was retaining the copyrights to Unix and UnixWare?

A No, because they would have already had those copyrights.

Q I'd like to show you what is marked as Defendant's Exhibit G4. Is this a memorandum on September 19th, '95 from Ed Chatlos -- excuse me -- from David Bradford to Ed Chatlos, copied to you?

A Yes.

Q And is this a document which transmitted the final Asset Purchase Agreement between Novell and SCO?

A It looks like it is.

MR. SINGER: I move the admission of G4.

MR. BRENNAN: No objection, Your Honor.

THE COURT: It will be admitted.

(Plaintiff's Exhibit G4 received in evidence)

Q (BY MR. SINGER) So if we look at the -- and I'm going to ask Mr. Calvin to highlight the text of the memorandum that says, "Dear Ed." Now, the Ed here, is this Ed Chatlos, the person you mentioned was out in California with you for two months negotiating the deal?

A Yes.

Q And since this is not the clearest, can you read out loud the language which Mr. Bradford put into this memorandum?

A From the beginning?

Q Please.

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A Sure. "Dear Ed, I am now in receipt of the final Asset Purchase Agreement between Novell and SCO. Simultaneous to my receipt of this contract, you have been faxed an identical copy. The purpose of this memorandum is to let you know that I have reviewed the final document and find the same to be an accurate reflection of the business and legal terms and conditions negotiated between the parties. I therefore approve this asset purchase agreement for final signature by Bob Frankenberg. You have indicated that you will let him know of my approval. Let me also congratulate you for the effort you have expended in putting this deal together. Your attention to detail and long hours were invaluable to Novell throughout this process. Regards, David R. Bradford."

Q Was Mr. Bradford telling Mr. Chatlos that the final agreement was an accurate reflection of the business and legal terms negotiated between the parties?

MR. BRENNAN: Objection, Your Honor. In that regard the document speaks for itself.

THE COURT: I'll sustain the objection.

Q (BY MR. SINGER) Is the General Counsel, Mr. Mattingly, supposed to make sure that the legal documentation faithfully implements the business terms negotiated between the parties?

A Yes.

Q Do you and the other business executives rely on the

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General Counsel to document the deal accurately?

A Yes.

Q And did anyone to your knowledge at Novell ever authorize the lawyers to seek in the documentation to hold back the copyrights for Unix and UnixWare in this transaction?

A No.

MR. SINGER: I have nothing further. Thank you.

THE COURT: Mr. Brennan, would it be a disadvantage to you if we were to take a break before you do your cross?

MR. BRENNAN: Certainly not, Your Honor.

The Court: We'll go ahead and take a 20 minute recess.

The Clerk: All rise for the jury, please.

(Jury excused)

THE COURT: Do you have anything, counsel, before we recess?

MR. SINGER: Not from us, Your Honor.

MR. ACKER: No, Your Honor.

THE COURT: We'll take 20 minutes.

(recess at 11:39 a.m.)

* * *

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***** Part 2 *****

(12:05 p.m.)

THE COURT: Are you ready, Mr. Brennan?

MR. BRENNAN: Yes. Thank you, Your Honor.

THE COURT: Ms. Malley, if you would.

Mr. Singer, when will you be getting the court a response to defendant's motion about the door that you have opened?

MR. SINGER: Well, I believe yesterday Your Honor requested it by Monday morning and it was our intent --

THE COURT: All right.

MR. SINGER: -- to comply with that.

THE COURT: Thank you. Have you had a jury instruction meeting since the court requested it?

MR. JACOBS: Your Honor, we have. We had probably an hour long discussion last night. We talked about the prospect of trying to put in a joint submission either today or Monday.

THE COURT: All right.

MR. JACOBS: We decided that, um, given your action -- unfortunately we decided that we wouldn't be able to do that. We thought we would still have SCO put in submissions this afternoon and Novell will respond to it. We tried very hard to come up with a format that would be helpful to the court and the court's clerk, but we ended up thinking this would still be the more --

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THE COURT: So you will respond with your own set of instructions today and then Novell by Monday?

THE CLERK: All rise for the jury, please.

(Whereupon, the jury returned to the courtroom.)

MR. ACKER: Yes, Your Honor.

MR. NORMAND: Yes, Your Honor.

THE COURT: Go ahead, Mr. Brennan.

MR. BRENNAN: Thank you, Your Honor.

CROSS-EXAMINATION

BY MR. BRENNAN:

Q. It is now good afternoon, Mr. Mattingly. My name is Sterling Brennan. Have we met before?

A. Did you do my deposition here?

Q. Do you think I did?

A. I don't know. You answer the question for me.

Q. Actually, no. Do you think you and I have met before?

A. I don't think so.

Q. Well, I am a little disappointed since you and were classmates together at BYU.

A. Now, I remember. You used to cheat off of me.

Q. Well, I was an economics major and never made it over to the engineering building. But the answer to your question, no, I did not take your deposition. But that does lead me to an important question. Do you recall that your

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deposition was taken in this case on January 19th, 2007?

A. I do.

Q. Do you remember who did take your deposition?

A. I don't remember, but it was -- he had similar features to you, he was a little bit darker.

Q. He must have been very good looking, no doubt.

Well, let me ask you this, do you recall that your deposition was taken in this case on January 19th, 2007, and that you were asked questions by Mr. Normand who is sitting at counsel table here today?

A. Yes.

Q. Okay. And that deposition was more than two years previous to today's date, right?

A. Correct.

Q. And did you remember facts and circumstances involving the 1995 timeframe better a little more than two years ago, than you do today?

A. Very likely.

Q. And that is because, of course, that would be two years closer to the events than would today, right?

A. Correct.

Q. Since your deposition was taken on January 19th, 2007, have you had occasion to meet with any of SCO's attorneys?

A. I have.

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Q. Who have you met with?

A. I met with Ryan Tibbitts.

Q. When did you have that meeting or meetings?

A. You know, not meetings but, um, I was cleaning my garage last year and came across some folders and they had Sleigh Ride and Rhine River on them which were the code names for these divestitures. So when I found those documents there, I contacted Ryan.

Q. Now you say these code names, Sleigh Ride was the code name for the transaction that ultimately came about between Novell and Santa Cruz Operation; right?

A. Yes.

Q. And Rhine River was another transaction involving Hewlett-Packard, right?

A. Yes.

Q. And so you came across some documents; is that correct?

A. Yes.

Q. And you brought those with you today?

A. I did.

Q. May I have them, please? At least see them?

A. Sure. You want to see them again? I should them to you ten minutes ago.

Q. You did. Thank you. I did a quick read. And the documents that you brought here today, are these all of

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the documents that you found in your garage?

A. No. I found a big folder that had Sleigh Ride and Rhine River documents.

Q. What did you do with those other documents that you didn't bring with you today?

A. I just have them.

Q. Did you ever give them to Mr. Tibbitts or any other representatives of SCO?

A. No.

Q. What is in those other documents?

A. You know, a lot of legal docs, some MOU drafts, a lot of power point presentations, just typical deal collateral.

Q. So why did you decide to bring to court today the folder of documents that you brought but not the other ones?

A. Well, I think that that one had some information at this September 15th board memo that is interesting, and it also has kind of what the final executable documents were on the 19th.

Q. In addition to -- let me back up. You say that you found some documents in your garage and you then contacted Mr. Tibbitts and said I found some documents?

A. Yes.

Q. And when did you have that discussion with Mr. Tibbitts you have identified?

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A. My guess would be it would have been probably in the fourth quarter of last year sometime.

Q. So that would have been sometime October, November, December of --

A. Yeah, possibly.

Q. -- 2009?

A. Yes.

Q. Now just so we are all clear, Mr. Tibbitts is this handsome man to my left, is that right? Right next to Mr. -- Mr. Tibbitts, do you mind standing for just a minute? Is this Ryan Tibbitts?

A. Yes, it is.

Q. Thank you. Did you meet with Mr. Tibbitts in person to talk about this case?

A. He came to my office and I just showed him the documents.

Q. And how long did your meeting last with him then?

A. Probably 15, 20 minutes.

Q. And since then, have you had any other communications with any attorneys representing The SCO Group?

A. Just Ryan.

Q. And when was your last meeting with Mr. Ryan Tibbitts?

A. I think we probably went to lunch sometime this

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year.

Q. Sometime in 2010?

A. Yeah.

Q. And during that lunch meeting, did you talk about the case?

A. A little bit. Ryan is pretty -- just look at him, he doesn't say much, he is pretty stuffy. But it was kind of some old teammates, we kind of got together for a lunch.

Q. And during this lunch meeting you talked about this case that brings us here today?

A. No. No, we had a mixed group of former athletes.

Q. So just so I'm clear, at any time this year prior to your appearing in court this morning, have you had any discussions with Mr. Tibbitts about this case?

A. Yes.

Q. Tell me what you and Mr. Tibbitts have talked about regarding this case?

A. Well, we have had some phone conversations regarding these documents that you have in your possession, and kind of their interest level to me, and whether they would be of interest to Ryan and the SCO case.

Q. Now, at any time this year have you had any communications with any Novell attorneys?

A. I have not.

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Q. Have you had any communications with any Novell attorneys since your sworn testimony was taken on January 19th, 2007?

A. You know, probably superficial meetings or crossings with someone like Jim Lundberg who is in the room. That would probably be the only attorney that I would have crossed with from Novell. Maybe Greg Jones, if he is still a Novell attorney, over at the gym.

Q. Have you ever talked with Mr. Lundberg or Mr. Jones about this case?

A. No.

Q. Okay. Now I want to ask you a little bit about your relationship with -- with The SCO Group. You indicated in response to Mr. Singer's questions that you're a SCO stockholder; right?

A. Yes.

Q. And I think you told me you have 9,000 shares of SCO Group stock?

A. A little north than that.

Q. How much north of that?

A. I am not sure. I mean there was 9,000 and some change probably in here somewhere exactly how many shares I got through the Voltis transaction.

Q. And when you talk about this Voltis transaction, this was a situation where The SCO Group was going to buy

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this other company called Voltis; right?

A. Yes.

Q. And your role in that transaction was essentially as a business broker essentially?

A. No. I was on the board of Voltis at one point. And so, um, then when the Canopy Group did an investment in Voltis, I am not sure if I was still on the board or not but I had an equity position in Voltis.

Q. And in connection with that transaction you dealt with an individual by the name of Darl McBride; right?

A. Yes.

Q. Who do you understand Darl McBride to be in connection with the SCO Group?

A. He was the CEO of The SCO Group.

Q. Did you have any form of dispute with Mr. McBride regarding how The SCO Group was treating the shares that you hoped to get out of the Voltis transaction?

A. Um, yes. Basically the SCO stock had, if I can recall, had some appreciation. And so the number of shares that you are getting in consideration goes down if the stock price goes up. And when you -- when we had structured some type of an arrangement there, um, as the stock went up, of course SCO was trying to present less shares to the Voltis shareholders.

Q. So let me see if I understand what you're telling

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me. When you thought that Voltis and The SCO Group had entered into some form of an agreement, you thought that the compensation should be fixed based on the number of shares when you reached the agreement, right?

A. Right.

Q. And The SCO Group stock increased, and as you understood it, SCO was claiming well the stock is worth more so we shouldn't have to give you as many shares; right?

A. Correct.

Q. You disagreed with that, right?

A. Yes.

Q. You didn't think that was fair, did you?

A. No.

Q. You thought that was contrary to the agreement that you had reached with Mr. McBride at The SCO Group, right?

A. Well, I didn't reach that agreement with McBride. It was the company that was negotiating with SCO, I don't know, general counsel or employees.

Q. So you thought that -- thank you for correcting me. So you thought that The SCO Group was in essence welching on an agreement that it had entered into with Voltis relative to the number of shares that not only Voltis would get, but that you would get in SCO, right?

A. No, I wouldn't say welching is the correct

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characterization of that. But in negotiation, if you have a, you know, if you establish a collar, then shares can float within that. But I don't recall if they had a collar or anything as sophisticated as that. And so absent something like that, it comes down to if you can negotiate something that inures to your benefit.

Q. Explain that answer to me, please.

A. I think it is pretty explanatory. Well, if you don't have a collar and the price goes up, you can go to them and still say hey, look, we cut this deal on this date so the stock was at this price that date so you should give me X number of shares instead and not take advantage of the appreciation. If the stock had gone down, um, I wouldn't be here telling you you got to give me a lot more.

Q. So the way to avoid that sort of dispute is if The SCO Group and Voltis had had a written agreement, right?

A. Correct.

Q. So if in that transaction before this dispute arose, if Voltis and the other principals that you were involved in and representing had a written agreement with The SCO Group, then you wouldn't have had to have a fight over what had been agreed to or not agreed to, correct?

A. Depends on how -- how definitive that written agreement was.

Q. How well the agreement was written, right?

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A. Correct.

Q. So would you agree with me that having a clearly written agreement is important to make sure that later on when there is a dispute you could look back to the written agreement to see what had actually been agreed to?

A. As long as it is consistent with the intent and spirit of what the transaction relationship was.

Q. Now you have been involved in investing in other business ventures for a number of years, right?

A. Yes.

Q. You have been a party to written contracts, right?

A. Yes.

Q. And the reason that you have been a party to written contracts in your business dealings is for some of the reasons we have talked about here today. You wanted to make sure that there was a clear understanding regarding what the actual terms of the agreement were so that when later on, there may have been a change of circumstances, or a question about what people agreed to, or maybe a loss of memory, you could go back to the written agreement and you could look at what the parties had agreed to at the time they reached their agreement, right?

A. Yes.

Q. So you recognized the importance of written

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agreements, fair?

A. Yes.

Q. Now, with respect to your -- your business dealings, I would like to pick up from what you told Mr. Singer. You left Novell in 1997, correct?

A. Correct.

Q. Do you remember the month that you left Novell?

A. I don't. Probably summertime.

Q. And what was your first source of employment or business venture immediately upon leaving Novell?

A. A joint venture between NetScape Communications and Novell.

Q. And that joint venture was called Novonyx, N-O-V-O-N-Y-X?

A. Novonyx.

Q. Thank you. And what was your connection with Novonyx?

A. Well, I authored the idea and completed that joint venture between NetScape and Novell.

Q. And in connection with your involvement with Novonyx, you became involved in a dispute with Novell; right?

A. Yes.

Q. In fact, you and Novonyx threatened to sue Novell, right?

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A. I don't know if we threatened to sue them. We retained counsel when we disagreed about their valuation.

Q. Did the counsel that Novonyx retain, did they threaten to sue Novell?

A. I don't think anyone threatened to sue Novell. I think it was about trying to get representation to make sure that the valuation process by which Novell, the majority shareholder in a small little company, valued the small amount of shares that they didn't own and how they valued those shares and therefore bought them.

Q. Now, you indicated that you and others at Novonyx retained legal counsel, right?

A. Yes.

Q. That is what you told us here, right?

A. Yes.

Q. And the purpose for retaining legal counsel was to make sure that your legal rights could be protected, correct?

A. Correct.

Q. You're not a lawyer, right?

A. No.

Q. And so you would look to legal counsel to make sure that your interests were best advocated and protected, right?

A. Reasonably, yes. I mean, when you say that, you

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know, I think when you look at something like that you can -- you can take that legal representation a long way and actually get into litigation. But that is not what we were trying to do. We actually had -- we had legal counsel that represented us to make sure that, you know, if there is any give and take inside of their rights under the agreements, that we could try and maximize those.

Q. Now, in your business career, including the Novonyx situation that you have described and other settings, you have been around lawyers, right?

A. Yes.

Q. And let's take your time at Novell. You understood that Novell hired lawyers, both in-house corporate lawyers and outside legal counsel, to best protect the interests of the corporation, right?

A. Right.

Q. And did you understand when you were at Novell that the best interests that were to be protected were those of the shareholders?

A. Yes.

Q. That is the owners of the business?

A. Yes.

Q. And so while you are at Novell working with Mr. Frankenberg, I think you told us about, or Mr. Noorda?

A. Yes.

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Q. Both of whom had been at one point in time the chairman of the Board of Directors of Novell, you understood that those individuals as chairman of the board, their first obligation was to protect the interests of the shareholders of Novell, right?

A. To create shareholder value for the shareholders of Novell.

Q. And in order to create shareholder value?

A. When you say protect, you're taking a legal approach. The idea -- the idea is that, you know, they're supposed to maximize shareholder value. That is their charter.

Q. Thank you. And you're right, I am taking a legal approach it is an occupational hazard. I apologize.

A. Yes, it is.

Q. But as you have worked with lawyers, you have understood as they have represented to the corporation that their role is, I suppose as you have put it to, to best represent shareholder value, right?

A. Correct.

Q. You mentioned David Bradford. You said that he, at a point in time, was the general counsel of Novell, right?

A. Yes.

Q. And you understood that his role was to best

709

protect shareholder value from Novell, right?

A. Yes.

Q. Now, you said that you're, I think, a friend of Mr. Bradford, right?

A. Yes.

Q. You respect him?

A. Yes.

Q. You admire him?

A. I do.

Q. You believe him to be an honest man?

A. Yes.

Q. From your observation do you think he was a good lawyer?

A. I don't know. I am not a lawyer.

Q. So you don't know how to judge that?

A. I don't know how to judge that.

Q. In your role while you were at Novell, you observed Mr. Bradford work with the Board of Directors of Novell?

A. Yes.

Q. Now, I want to ask you a few questions about the transaction that brings us into court today. And I would like to have you focus on the time period of 1995. You are familiar in 1995 that Novell had some negotiations with a company called The Santa Cruz Operation; right?

710

A. I am.

Q. And your involvement was not focused on the details on that transaction, was it?

A. No, I was more the high level strategy guy.

Q. Now, when you say high level strategy guy, you were not involved in any of the negotiations of any particular provision of what ultimately became the Asset Purchase Agreement signed by Novell and The Santa Cruz Operation on September 19th, 1995, were you?

A. Well, I don't agree with your characterization of that. I mean I was heavily involved with the MOU phase of that, that is why we had, you know, six to eight weeks on the ground negotiating face-to-face with their team.

That document is the input to the legal process where they kicked out the Asset Purchase Agreement not the Licensing Agreement.

Q. You used an acronym MOU. That sounds for memorandum --

A. Memorandum of understanding.

Q. So your suggestion here today in court is that you were involved in the drafting of the memorandum of understanding?

A. No, not in the drafting, in the input into the drafting. So we had a team out there, Ed Chatlos that you have referenced, and clearly he has been up on the stand.

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Q. Let me pause you right there. How do you know that Mr. Chatlos has clearly been up on the stand?

A. Well, because you guys have talked with him.

Q. How do you know that?

A. I am just sure he has.

Q. Has somebody told you that Mr. Chatlos has been a witness in this trial?

A. Yes.

Q. Who told you that?

A. A friend of mine.

Q. Who?

A. Lee Johnson.

Q. Do you know what Mr. Chatlos' testimony has been?

A. I don't.

Q. What did Mr. Johnson tell you about Mr. Chatlos?

A. Just that he was up on the stand.

Q. Anything else?

A. No.

Q. Now, back to this memorandum of understanding, you said that you did not actually draft any provisions, you provided input, right?

A. Correct.

Q. But let's set a time reference here. Do you understand that the Asset Purchase Agreement dated September 19th, 1995 was signed both by Novell and The Santa

712

Cruz Operation on September 19th, 1995?

A. Yes.

Q. Did you observe the signature of that document?

A. I don't think so.

Q. But it is your understanding that it happened; right?

A. Yes.

Q. So let's use that as a point in time. How further in advance of September 19th, 19 -- excuse me, September 19th, 1995 were you involved in the process of this memorandum of understanding?

A. Well, all the way until the point where we reached a meeting of the minds and agreement around the substantive business terms and that is when it was kicked over to the legal teams. Whether that was one week, two weeks, I don't recall.

Q. Well, it was several weeks before the Asset Purchase Agreement was signed at a minimum, right?

A. If you say so.

Q. Well, I'm asking you?

A. I don't recall.

Q. Do you recall answering that question at your deposition?

A. I do not.

Q. Well, we will turn to that in a minute.

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In your own words you were not the detail contract guy in connection with the Asset Purchase Agreement, right?

A. As I have previously stated, yes.

Q. And your role in the discussions concerning the transaction between Novell and The Santa Cruz Operation related only to a high-level business strategy, right?

A. Well, the business strategy and the whole purpose of why we were engaging in this transaction with SCO.

Q. You weren't involved in the details of the actual legal document that was created that set forth the terms and conditions of the parties agreement, namely, the September 19th, 1995 Asset Purchase Agreement, right?

A. That is correct.

Q. You didn't help write or craft any of the provisions of that referenced Asset Purchase Agreement; did you?

A. No.

Q. You didn't participate in any of the so-called wordsmithing or specific language that was used in the Asset Purchase Agreement, did you?

A. No.

Q. You didn't make any contribution whatsoever to the terms or conditions of the September 19th, 1995 Asset Purchase Agreement, did you?

A. No.

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Q. In fact, your so called high-level strategy involvement with respect to what ultimately became the transaction, that is the September 19th, 1995 Asset Purchase Agreement, took place at least two to three weeks before that agreement was signed, right?

A. That sounds reasonable.

Q. And, in fact, your observation, although you have been involved in some high-level discussions, it was at least two to three weeks after your involvement ended before the Asset Purchase Agreement was finalized, right?

A. Well, other than the fact that I presented at the board meeting the day before it was finalized some of the substantive terms.

Q. And during this two to three week period between when your involvement ended and when the Asset Purchase Agreement was signed, you were generally aware that there was a back and forth of many drafts of the Asset Purchase Agreement, right?

A. Yes.

Q. And who did you think that those various drafts were being passed back and forth between?

A. Well, the legal teams was Ed Chatlos being the detailed business guy that remained there for continuity.

Q. Now Ed Chatlos was at that point a Novell person, right?

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A. Yes.

Q. And who were the lawyers who were involved for Novell during that two week period or three week period of sending drafts back and forth?

A. Well, there was a, you know, I don't remember everyone's name. There was a Michael Hoffman who was the -- one of the primary attorneys that was out there in California on the ground and unfortunately he has passed away. I don't recall who all of the other attorneys were.

Q. Well, you knew, for example, that the law firm of Wilson Sonsini was involved, right?

A. Sure. You said Novell, so if there were outside counsel, he is Wilson. And so yeah, Tor Braham would have been one of the main guys there, or the main guy.

Q. When you say "the main guy," you mean that he was the primary first drafts person of the Asset Purchase Agreement, right?

A. I don't know if he was the primary drafter. But Tor Braham was the senior attorney from Wilson Sonsini and did a lot if not all of Novell's transaction.

Q Let me ask you about that. During the time period that you worked for Novell from 1992 to about 1997, to your observation the law firm of Wilson Sonsini was Novell's primary outside counsel on corporate matters, right?

716

A. Yes.

Q. And Tor Braham was the lead attorney for Novell in those various transactions, right?

A. Yes.

Q. Tor Braham essentially was the lawyer that Novell turned to to document corporate transactions; right?

A. Yes.

Q. He was a trusted attorney?

A. Yes.

Q. And to your observation, Tor Braham was the key component to the drafting of the actual terms and conditions of the Asset Purchase Agreement, correct?

A. You know, I don't know. Again, as I stated, I don't know if he was the key draftsman, if he had some of his other people drafting. He was the senior attorney so he may have looked at it from a high level and had others doing the drafting work or the detail work.

Q. We referenced your deposition a bit earlier. There is a transcript of your deposition. I would ask you if you would like to turn to page number 89 of your deposition. Again, this was taken on January 19th, 19 -- excuse me, 2007.

And Your Honor, with the court's permission, I would like to display the lines and pages that I'll now state on the record.

717

THE COURT: Do you have any objection to that, Mr. Singer?

MR. SINGER: I do not, Your Honor.

Brennan

THE COURT: All right. You may go ahead, Mr. Brennan.

MR. SINGER: I would only ask that he tell us what lines he plans to --

MR. BRENNAN: I am about to do that. Thank you, Mr. Singer.

Q. (By Mr. Brennan) I'm going to be reading from Page 89 Line 23 through page 90 line five. Do you have that in front of you or you can see it on the screen, either way.

A. Yes.

Q. Question, "is it your understanding that Tor Braham from Wilson Sonsini was actually drafting the, what became this September 19, 1995 Asset Purchase Agreement?" Your answer, "I don't know that he was drafting the APA. I think he was -- he was certainly a key component there, so I would think he would be working with the Novell legal team, which was Michael Hoffman and someone from New Jersey, I would assume."

That was your understanding when you gave this testimony?

A. Yes.

Q. Do you now agree with me that by your own previous testimony Tor Braham was the key component to the

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drafting of the Asset Purchase Agreement?

A. You know, I am reading where it says I don't know that he was drafting the APA, so I don't know what you're wanting me to agree to.

Q. I'm simply want you to agree --

A. I think it is consistent with what he said there with what I just verbally stated which is he was the senior guy. Does that mean that he is the guy drafting the agreement? I don't know.

Q. Now during -- during the preparation of the Asset Purchase Agreement, you understood that Mr. Braham took the lead role in drafting that agreement, fair?

A. Well, being responsible for the drafting, sure.

Q. Well, don't you think that he took the lead on drafting the definitive ultimate agreement between the parties?

A. We're disagreeing on semantics and definition. When I hear you say drafting, I don't believe he was sitting there at a keyboard typing stuff in, do you?

Q. You know --

THE COURT: Mr. Mattingly, you don't get to ask questions.

THE WITNESS: Okay.

THE COURT: You answer the questions.

THE WITNESS: We're just kind of rat-holing on this

719

one.

Q. (By Mr. Brennan) I can only take you at your previous word. Let's look now at Page 91 of your deposition and I will be reading from lines two through nine on Page 91. May I proceed, Your Honor?

THE COURT: You may.

Q. (By Mr. Brennan) Question, "does reviewing that paragraph refresh your recollection as to Tor Braham's involvement in drafting the agreement? Answer, yeah. According to this, it looks like Tor was the lead on drafting the definitive and -- which would still be consistent with what I suggested that, you know, he would doing that with input from the team, including potentially Michael Hoffman, as well as attorneys from Summit."

Do you see that?

A. Yes.

Q. Would you agree that Tor Braham took the lead on drafting the definitive Asset Purchase Agreement?

A. Well again, definitionally, I think consistent with at that time I am still consistent that he was primarily responsible for the drafting. But I don't believe that he was actually typing on the keyboard.

Q. And you understand that what we're reading into the record is your previous words under oath. You understand that, right?

720

A. Yes.

Q. I'm not quoting somebody else, I'm quoting you.

A. I think I understand that.

Q. Okay. Now, you were not a member of any transition team that was formed after the Asset Purchase Agreement was signed, were you?

A. No.

Q. In fact, you had no further involvement with the Asset Purchase Agreement after it was signed, did you?

A. I did not.

Q. Now, did you ever read the Asset Purchase Agreement?

A. Um, I probably read it. I'm sure that I have a copy of it in the folder that you have and was sent that so I would have read it slash, perused it, skimmed it, either before or after the close.

Q. When did you first skim or peruse or glance at the Asset Purchase Agreement?

A. I would imagine when it showed up in my inbox sometime ago.

Q. Now when would that have been?

A. I don't know, sometime in that two to three week period prior to the close.

Q. I'm going to -- I am going to select from the documents you brought today, one of them is a document

721

entitled Asset Purchase Agreement By and Between The Santa Cruz Operation, Inc. and Novell, Inc. dated as of September, then it has a blank, 1995. This is one of the documents you brought with you to court today?

A. I believe so if you pulled it out of that manila folder that I had.

MR. BRENNAN: I will represent to you that that is where it came from. Your Honor, with your permission, I would like to have this labeled for identification as Novell's Exhibit 045.

THE COURT: Mr. Singer?

MR. SINGER: I have no objection to it being labeled for identification.

MR. BRENNAN: Your Honor, with permission of the court, I would like to display this on the ELMO projector?

THE COURT: Well, you asked for it to be marked.

MR. BRENNAN: Yes.

THE COURT: You have not asked for it to be admitted.

MR. BRENNAN: That is correct.

THE COURT: Are you going to seek its submission?

MR. BRENNAN: I will in just a moment. Thank you, Your Honor.

Q. (By Mr. Brennan) Now, do you recall, Mr. Mattingly, whether this document that I have identified which has been marked as Defendant's Exhibit 045 is a

722

document that you received previous to the Asset Purchase Agreement being signed?

A. If it is a draft, then that would have been previous to it.

Q. Is this the copy of the draft that you looked at?

A. It would have been a paper or online to an electronic format.

MR. BRENNAN: Your Honor, I do move the admission of Defendant's 045.

MR. SINGER: No objection.

THE COURT: It will be admitted.

(Whereupon, Defendant's Exhibit 045 was received into evidence.)

MR. BRENNAN: May I now present it on the ELMO, Your Honor?

THE COURT: You may.

MR. BRENNAN: Thank you.

Q. (By Mr. Brennan) Now, we have just displayed to the jury through this technology the first page of Defendant's Exhibit 045. And I would now like to turn to a portion of that document which is entitled Schedule 1.1(b) Excluded Assets and in particular, I will show that first, I'll try to keep my fingers out of the screen, but do you see that page there?

A. Yes.

723

Q. And on the version of the document that you see, it says, let me lower it just a little bit, do you see where it says "draft" stamped on the top?

A. Yes.

Q. I know it is a little difficult to see but there appears to be a handwritten date to the right 9/16/95; do you see that?

A. Yes.

Q. Is that your handwriting?

A. I don't think so.

Q. Does this suggest to you that you had possession of this document at least as early as September 16th, 1995?

A. That would be reasonable.

Q. And so did you understand that in this draft at least that what is set forth in this schedule Excluded Assets were Novell assets that would not transfer to Santa Cruz Operation under the Asset Purchase Agreement then being considered?

A. Yes.

Q. I'm now going to turn to Page 2 of that draft Schedule 1.1(b). Excuse my big hands there. You will see, I know it is a little difficult, but there is a Roman numeral five Intellectual Property. Are you able to make that out on the screen?

A. Yes.

724

Q. And it has three parts; correct?

A. Yes.

Q. One is labeled capital letter A and it says patent licenses, parenthesis, i.e. Pike and all others associated with the UNIX System, in parenthesis, do you see that?

A. Yes.

Q. Did you understand that the draft under consideration several days before the Asset Purchase Agreement was signed was to exclude all patent licenses?

A. Sure.

Q. That is what it says, right?

A. That is what it says.

Q. And the draft that you had in your possession several days before the final agreement was signed had that exclusion, right?

A. That is correct.

Q. And September 16th, 1995 would have been before the Novell Board of Directors meeting that was held on September 18th, 1995, correct?

A. Yes.

Q. So you would have had in your possession at least two days before the Novell Board of Directors meeting a draft of the Asset Purchase Agreement that listed at least these proposed exclusions from transfers of assets by Novell

725

to Santa Cruz, correct?

A. Yes.

Q. Let's then look at Item B, all copyrights and trademarks, except for the trademarks UNIX and UnixWare. Do you see that?

A. Yes.

Q. So is it correct then that as with the patent licenses you had in your possession a draft of the Asset Purchase Agreement at least two days before the board meeting that listed as excluded assets, that is assets that would not be transferred to Santa Cruz Operation, a document that showed all copyrights and trademarks except for the trademarks UNIX and UnixWare?

A. If that was delivered to me on the date that the -- somebody wrote 9/16 then I would have had it at least two days before the board meeting.

Q. So even before you went into the board meeting, you would have had access to a draft of the Asset Purchase Agreement that clearly stated that -- no, let's put it back just so we have no mistake here, clearly would have stated that contemplated to be excluded are all copyrights and trademarks except for the trademarks UNIX and UnixWare; right?

A. As long as it wasn't delivered at the board meeting and actually copied on the 16th.

726

Q. When did you tell me you got this document?

A. I don't know. You just said that it was on the 16th.

Q. Now, just so that we're clear here, I showed you the previous page that had a date?

A. Written.

Q. I asked you and we can go back to that, we're back to the first page of the draft and I asked you about the reference to the date 9/16/95, and unless I misheard you, I thought you told me that you believed that was the date that you got this. Did I misunderstand?

A. That is the date it was written. I don't know -- you asked me if I wrote that and that is not my writing. So I wouldn't have written 9/16/95 there. So someone did it on that date, I assume. And whether it was delivered to me on a Saturday, or whether I received it Monday as part of the board package, I don't know the answer.

Q. I am going to show you the original that I have in front of you. I would like you to look at the date. Does that appear to be written in handwritten ink?

A. Yes.

Q. That is not a photocopy, is it?

A. It is not. But if you look at the fax date on the bottom, what does the fax date on the bottom say?

Q. There is a fax date on the bottom, it says

727

September 18, 1995, right? Now, are you saying you got this by fax?

A. I don't know. I am just saying it has that written on the bottom so, you know, you're trying to establish whether I got it on the 16th, I don't know. Does it have 9/16 written in handwriting? Yes, it does.

Q. In original ink, right?

A. Well, I don't know. Well, I don't know if that is original ink, original or a photocopy.

Q. Let's take a look, I apologize. I thought we cleared that up. Let's go back and have another look at it.

A. But my point is, is whether I got it on the 16th or the 18th as part of the board meeting, I don't recall.

Q. If you would like to take another look, Mr. Mattingly, does that appear to be original ink rather than a copy or a facsimile?

A. No, it looks to me like it is a photocopy of original ink.

Q. That is your best observation?

A. Yeah.

Q. Now, before you -- before you entered the board meeting you had access to this document, right?

A. Well, or at the board meeting. As I stated, I don't know if it was before or if it was at the board meeting.

728

Q. Let's take a look at what has been marked as defendant's, excuse me, SCO Exhibit 570. This is the September 15th, 1995 package.

And is it your testimony that you received a copy of this document?

A. Yes.

Q. And when did you receive it?

A. Well, again, it is dated September 15th, so I would assume that that being a Friday, I might have received that on the 15th.

Q. And did you review that document at the time you received it?

A. I'm sure I did.

Q. Let's look at the -- now you were not a member of the Board of Directors of Novell, were you?

A. No.

Q. Never were?

A. No.

Q. You weren't a voting member of the board, right?

A. No.

Q. And in the board meeting that you attended on September 18th, 1995 it was not your purpose to vote on any resolution, right?

A. No.

Q. So let's look at this package that you were given

729

a copy of. It says, if we can highlight the first full paragraph, "dear board member" and then the first full paragraph. It says quote, "we are in the process of negotiating long-term business relationships with SCO and Hewlett-Packard for the purpose of strengthening UNIX on the Intel Platform."

Now let me just pause right here. Did you believe as of September 15th that it was the intention of Novell to sell its entire UNIX and UnixWare business to SCO?

A. Yes.

Q. Let's go back then to Exhibit 570, the next sentence. Quote, "one of the key steps in this process is the sale of a portion of our UnixWare business to The Santa Cruz Operation."

Now certainly when you read this document you understood that what was being considered was a sale of a portion of the business, right?

A. Well, yes, because we were retaining the royalty stream from the SVRX royalties.

Q. In fact, that is referenced in the next sentence, right?

A. Yes.

Q. And that next sentence which is a parenthetical reads, "for example, we will be retaining our traditional royalty stream from UNIX SVRX source code which we -- which

730

was approximately $50,000,000 for FY 1995;" correct?

A. Yes.

Q. And that suggests that the Novell royalty payments that it received for UNIX SVRX source code alone was about $50 million; is that right?

A. For that year.

Q. Fiscal year 1995, right?

A. Correct.

Q. So you understood going into the board meeting, that Novell had a very keen important interest in maintaining that royalty stream; right?

A. To an extent, yes.

Q. Well, that was critical to Novell, right?

A. Well, the revenue was clearly critical, right.

Q. And so you understood, for example, Mr. Bradford and other members, excuse me, Mr. Frankenberg and other members of the board in order to maintain and enhance shareholder value would have felt a duty and obligation to do everything that they reasonably could to protect that royalty payment stream, right?

A. That is what you would assume if you didn't understand what we were trying to accomplish from a higher level strategic initiative.

Q. Let me see if I understand what you're saying. By your own testimony you believe that one of the things

731

that was a part of the transaction between Novell and SCO, excuse me, Santa Cruz, was a provision whereby the royalty payments that Novell was receiving, $50 million according to this fiscal year in 1995, after the Asset Purchase Agreement would continue to come to Novell, right?

A. Yes.

Q. That was very important to Novell, right?

A. Yes.

Q. And so back to my question, that was a fundamental part of the transaction, right?

A. It was.

Q. And so Novell and its officers and directors, including its general counsel, Mr. Bradford, in your estimation would have been acting within the scope and duty of their offices in taking whatever reasonable and appropriate steps were available to them to protect that royalty stream, right?

A. Within the framework of the strategic objectives. If you would like for me to elaborate on that, I would be happy to briefly --

Q. Just answer my question. That is all I need.

A. Well, then the answer would be no.

Q. So it is your testimony under oath that it was not within the purview of the members of the Board of Directors of Novell and its officers, including its general

732

counsel, to take all reasonable steps to protect Novell's interest in that royalty stream? Is that your testimony under oath here today?

MR. SINGER: Objection, that is a compound question.

THE WITNESS: I'm trying to answer your question so quit badgering me.

MR. BRENNAN: I did not intend to badger you.

THE WITNESS: The intention here and the strategic realm of what we're trying to do is to establish a common UNIX operating environment on Intel processors. So while we absolutely wanted this $50,000,000 in revenue and it's very important to Novell because it was very heavy margin, that is almost 50,000,000 that goes right to the bottom line, very important, but more importantly for Novell was to try and get a common UNIX platform out there on Intel so that there was a viable alternative to what Microsoft was offering that was eroding NetWare away aggressively.

So in the greater context of things, okay, sometimes short-term sacrifices for long-term gains have to take place. And so the purpose here is there would have been nothing better for Novell than if SCO had been very successful with this UNIX business that they had acquired in successfully unifying the entire industry around their UNIX offering on X86 architecture.

If they could have done that, that would have eroded

733

our revenue streams here from this SVRX old royalties. But in the greater strategic contest, that would have been a fantastic tradeoff for Novell.

Q. (By Mr. Brennan) Now let me --

A. So that is what I'm referring to when I say they're trying to look after shareholder value. You can't take a rifle shot of an isolated thing and try to badger me on that.

Q. Well, I apologize if you think you're being badgered.

A. I was being badgered.

Q. I do hope that you can answer my questions. Now, in terms of the business objective that you understood of SCO, excuse me, Santa Cruz Operation when this transaction was being contemplated, what did you think Santa Cruz Operation was going to do with the development of the UNIX or UnixWare code?

A. They were going to create a merged product. They were going to try and establish an opportunity for all of the other OEM's that were out there, some of which were paying royalties that counted into this 50,000,000, to entice them to adopt this new version of an operating environment for their hardware platform and unify UNIX on Intel.

Q. Your basic understanding was that what Santa Cruz

734

Operation would do is take whatever rights they got to UnixWare and seek to further develop it and develop a product that would be a benefit to its customers; right?

A. Well, to their customers and the industry.

Q. The industry.

A. And therefore, we established this agreement in a fashion that NetWare components would be part of this future merged UNIX. So if you could get HP and Sun and Fujitsu and Hitachi and everyone using that version of UNIX that had NetWare in it, then all of a sudden we could, you know, drag in and be the de facto networking standard inside of these UNIX operating environments.

Q. You did not understand that the purpose of the transaction was so that Santa Cruz Operation or any of its successors could turn on users of Linux, right?

A. Well, that wasn't -- that wasn't even discussed at that point.

Q. Now, let's go back to what we were looking at, namely Exhibit 570. The next line in this board memo that Mr. Bradford says we are currently finalizing the terms of an Asset Purchase Agreement which would result in Novell owning, on a post transaction basis, about 16 percent of SCO. Do you see that?

A. Yes.

Q. And then it says, SCO's current market cap is

735

$300,000,000 at $10 a share. Do you see that?

A. Yes.

Q. Now, when you were involved back in 1995, did you think that this transaction that was being discussed was one where SC -- excuse me, Santa Cruz Operation, abbreviated SCO here, would be paying Novell about $125,000,000 in cash?

A. Well, I don't know about cash but consideration. In my mind, it seemed like it was about $125,000,000 deal that came in various forms of consideration of which I think we looked at earlier.

Q. Well for example, 16 percent of SCO's stock at $10 a share, how much would that be?

A. I don't know.

Q. Far less than 125,000,000, right?

A. Sure. But there were multiple components that added up to what I recall to be that amount.

Q. Do you recall at your deposition you thought that the deal was such that SCO would be paying Novell $125,000,000 in cash? Do you remember being asked that?

A. Yes.

Q. And you told the answer I think it is 125,000,000 in cash?

A. Yes, I probably volunteered the 125. I didn't stay in cash.

Q. Then you asked at you deposition are you even in

736

the ball park? Do you remember that?

A. Yeah, I do.

Q. So when your deposition was taken two years ago, you didn't even know what the financial terms of the agreement were, right?

A. I don't recall what it was that built up to what in my mind seemed like it was about $125,000,000 transaction.

Q. Now, you were asked about the meetings of the Board of Directors. I would like to turn back, if you could, to what has been entered into evidence as Exhibit Z3. Now, let me ask you a question while you're looking at that. Who was present in the board meeting?

A. Those listed in the first paragraph.

Q. Do you recall each of those individuals being present?

A. Um, well yeah, they were all pretty good about showing up for the meetings.

Q. My question is, do you recall each of those individuals being present?

A. I don't.

Q. Did Larry Sonsini speak at the meeting?

A. Well, Larry usually speaks at any meeting he participates in. So is he here?

Q. Let me ask you this. Without reading the minutes

737

themselves, are you able to answer my question as to whether Mr. Sonsini spoke at the meeting?

A. I'm sure he spoke at the meeting.

Q. What did he say?

A. I don't remember.

Q. Did David Bradford speak at the meeting?

A. I'm sure he did.

Q. What did he say?

A. I don't remember.

(Whereupon, the reporter requested the attorney to slow down.)

Q. (By Mr. Brennan) I'll slow down. Did Robert Frankenberg speak at the meeting?

A. I'm sure he did.

Q. What did he say?

A. I don't remember.

Q. Did Jack Messman speak at the meeting?

A. I'm sure he did.

Q. What did he say?

A. I don't remember.

Q. Did Elaine Bond speak at the meeting?

A. I'm sure she did.

Q. What did she say?

A. I don't remember.

Q. Did Alan Ashton speak at the meeting?

738

A. Alan Ashton? I don't think so. Was he there?

Q. Well, let me ask you. Do you remember whether he was even there?

A. I don't. It looks like it was a telephonic conference call.

Q. Well, you're aware that Mr. Ashton was a participant in the meeting, right?

A. I am now. He was a member of the board member but at some point he got off of the board and --

Q. So without looking at the minutes, are you able to tell me whether Mr. Ashton was even a board member at the time?

A. Sure. I think he was a board member until we divested of WordPerfect.

Q. Thank you. Do you remember anything about Mr. Ashton or his participation at the meeting?

A. I don't remember. He did not necessarily participate a lot verbally at meetings.

Q. Okay. You're familiar with a board member by the name of Ian Wilson, right?

A. Yes.

Q. Did Mr. Wilson speak at the meeting?

A. I don't remember.

Q. Are you familiar with a board member by the name of John Young, right?

739

A. Yes.

Q. Did Mr. Young speak at the meeting?

A. I'm sure he would have spoken.

Q. What did he say?

A. I don't remember.

Q. You just don't remember what any of these individuals said?

A. I do not.

Q. Are you aware that at the Board of Directors Meeting, that David Bradford and Larry Sonsini reviewed the terms of the Asset Purchase Agreement?

A. I am sure they would have.

Q. So they --

A. That was the purpose of the meeting.

Q. They would have gone through the terms of the agreement, right?

A. Yes.

Q. And so to your recollection, the Board of Directors would have had the benefit of two attorneys, Larry Sonsini and David Bradford going through the terms of the Asset Purchase Agreement; right?

A. Correct.

Q. And the Asset Purchase Agreement that was before the board included the exclusions of all copyrights and trademarks except the trademarks UNIX and UnixWare, right?

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A. That is what the document states.

Q. Well, do you remember that?

A. I remember that as I read it.

Q. So now looking at the minutes of the Board of Directors Meeting, your memory is refreshed, and you recall that Mr. Bradford, general counsel, Larry Sonsini, a member of the board, and also a senior partner at Wilson Sonsini went through with the board the terms and conditions of the Asset Purchase Agreement, right?

A. Well, I think that they would have reviewed the high-level terms and conditions in the Asset Purchase Agreement. They would have not gone through the agreement and gone on a line-by-line basis.

Q. Well, do you remember one way or the other?

A. I don't, but I guarantee you they wouldn't have done that.

Q. You guarantee it, but you just don't remember?

A. I don't remember. But we would never take a 50, 60 page document and review that on a line-by-line basis.

Q. Now --

A. Never in the four years that I attended board meetings would we do that.

Q. Would the most important aspects of the transaction be reflected in the resolution of the board?

A. They should be.

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Q. So to your understanding, the most critical parts of the Asset Purchase Agreement put before the board would have been those that the board reached specific resolution on, right?

A. Yes.

Q. So then let's look at the actual resolutions reached by the board. They're on Page 2. And we're going to focus on the third paragraph where it says, "Novell will retain." If I could have that highlighted. Our patient jury has seen this language several times. "Novell will retain." So if I understand your testimony correctly, the most important parts of the transaction would be part of the resolutions, right?

A. Yes.

Q. It says here as part of resolved, quote, "Novell will retain all its patents, copyrights and trademarks (except for the trademarks UNIX and UnixWare)" right?

A. Yes.

Q. And that -- that is almost verbatim if not exactly the language that was in the draft Asset Purchase Agreement that you and other people attending the board meeting received in advance of the board meeting, right?

A. Correct.

Q. There was no surprise, right?

A. Well, I think once again, as I talked about when

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you were trying to badger me about the $50,000,000, you can't take a rifle shot in a two month negotiation and a 60 page document and try and zero in on that. This is referring to the fact that Novell bundled a number of its products that it retained that weren't part of this Asset Purchase Agreement. And Novell obviously would retain that intellectual property, those copyrights and trademarks with those products that they retained. That is what this is stating.

Q. What I'm trying to find out from you is the following. First, there was -- there was no surprise foisted on the board with language that would appear in the ultimate signed Asset Purchase Agreement that would state that the excluded assets would include all copyrights and trademarks except the trademarks UNIX and UnixWare. Would you agree with that?

A. In a perfect world that should be the case.

Q. But would you agree with me that the members of the board and other participants in the meeting, including yourself, were provided with the draft of the asset purchase agreement before the board meeting that included the very language I have been focusing on?

A. Yes.

Q. So would you agree with me then that there was no attempt by Mr. Bradford or anyone else to try to somehow

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surprise or trick the board?

A. I don't believe it would have been their intention, but I want to emphatically state that at this point in time, this is the eleventh hour, 59th minute and 59th second to all of the sudden assume that the UNIX copyrights weren't part of this transaction that we had been selling for two months would have definitely raised eyebrows. That is not inconsistent with this because Novell is going to retain its patents and copyrights for NetWare, for Groupwise, or any of those products that they bundled with UnixWare.

Q. Well, again, just so we can be very clear on these minutes, one of the resolutions was that the explicit exclusion that we have talked about was a part of the resolution by the board, right?

A. Well, on the Novell patents or the Novell patents, copyrights and trademarks pertaining to Novell's retained products.

Q. Now --

A. I disagree with you saying that that applies to UNIX.

Q. Well I -- I appreciate the fact that that is your argument here today. My question is --

A. It is not my argument. It is what I spent two months out in California negotiating with SCO, with 12 other

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people from Novell and 12 from SCO.

Q. Now do you know whether --

A. There was never confusion in my mind.

THE COURT: Mr. Mattingly, please. If you have something more that you would like to say, you will be given an opportunity with Mr. Singer who will have another opportunity to ask you questions. Please just answer Mr. Brennan's questions as directly as you can.

THE WITNESS: I apologize.

Q. (By Mr. Brennan) Now, there was also additional resolutions. If we could go down to the resolution on the bottom of page 2 where it says reserve -- excuse me, resolved further?

A. Uh-huh (affirmative).

Q. Next one down. Next one. So there was an additional resolution, quote, "That the terms and conditions of the Asset Purchase Agreement as set forth therein are hereby approved, subject to such changes and modifications of a non-material nature as the proper officers of Novell may consider appropriate or necessary." Do you see that?

A. Yes.

Q. Now do you know whether the language that appeared in the Asset Purchase Agreement, excluding all copyrights and trademarks except the trademarks UNIX and UnixWare were changed prior to the signing of the Asset

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Purchase Agreement by either Novell or Santa Cruz Operation?

A. I don't know.

Q. Did you have any involvement whatsoever in any amendments to the Asset Purchase Agreement?

A. I did not.

Q. You played no role in any of that; right?

A. No.

Q. You have no personal knowledge about any of that, right?

A. No. Well personal knowledge, I do have the knowledge that there was an Amendment 2 that tried to clarify some of the ambiguous legal work.

Q. Somebody told you that?

A. Sure, it was front page news.

Q. But you don't -- you weren't involved in any of that, right?

A. No.

Q. Now, I would like to ask you a bit about an individual I think that Mr. Singer asked you about, Duff Thompson. You're familiar with Mr. Thompson?

A. You bet.

Q. Mr. Thompson became your boss after you stopped working for Bob Frankenberg; right?

A. Yes.

Q. And you had a chance in your role working for

746

Mr. Thompson to observe his work habits?

A. Yes.

Q. You began working for Mr. Thompson when?

A. I'm not sure exactly what the time frame was, but after I stopped working for Bob Frankenberg then I took a job with him as vice-president of corporate development and strategic relationships.

Q. In that role, you would have had that position with Mr. Thompson before you engaged in any discussions with Santa Cruz Operation; right?

A. Yes.

Q. And you would have continued working with Mr. Thompson until he left the company; right?

A. Yes.

Q. When did Mr. Thompson leave Novell?

A. I am not sure exactly. It would have been after the WordPerfect divestiture.

Q. Sometime in 1996?

A. That sounds reasonable.

Q. Okay. So is it fair to say that from the time period at least before any discussions were had with Santa Cruz Operation and until at least when Mr. Thompson left in 1996 you worked with and for him?

A. Yes.

Q. Now based on your observation of him, would you

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agree that Mr. Thompson was not really involved with the details of the Novell Santa Cruz transaction?

A. No. Duff had specific responsibilities as the senior executive overseeing that and participated in all of the high-level senior executive type meetings. He was not on the ground for two months out in California day-to-day like the rest of the team was.

Q. If we could go back to your deposition, let's look, again this is your deposition taken more than two years ago on January 19th, 2007?

A. Yes.

Q. If you would turn with me to Page 70 and counsel we're going to read from Line 17 through 22 on Page 70. Do you have that, Mr. Mattingly?

A. Yes.

Q. The question, "Is it fair to say that, based on your personal knowledge, that Duff Thompson was not really involved in the details of the Novell, Santa Cruz transaction?" Do you see that question?

MR. SINGER: Your Honor, I would ask that the entire answer be shown to the witness and blown up on the computer screen.

MR. BRENNAN: Well, I'm happy to do that. That is not a problem.

THE COURT: All right.

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Q. (By Mr. Brennan) And then we'll see your answer that does spill over to the top of Page 71.

Your answer, "you know, I would say that that's probably a fair statement because the real detail guy in this was Ed Chatlos, and of course, Ed and I were peers and reported to Duff. But he was a general counsel and formerly with WordPerfect and was the senior or executive vice president of Corporate Development at Novell."

So would you agree with me today, as I believe you agreed with Mr. Brakebill who asked you this question, that Mr. Thompson was not really involved with the details of the transaction?

A. Well, as I stated there in my deposition and as I earlier stated today, he was the senior executive overseeing the transaction, but that doesn't mean that he is the detail guy that is negotiating every aspect of the transaction. So I think it is all consistent with what I said back then. It is consistent with the dialogue you and I had about whether Tor was drafting the APA or whether he was just focussing --

THE COURT: Mr. Mattingly, thank you.

THE WITNESS: -- overseeing the drafting.

THE COURT: Thank you.

Q. (By Mr. Brennan) Is it true that in fact to your observation Duff Thompson was quote "checked out" unquote from Novell during this time period?

749

A. No.

Q. Did you ever hear anyone suggest that?

A. Yes.

Q. So just so I understand, you have heard people at Novell suggest that Duff Thompson was checked out during that time frame; right?

A. Yes.

Q. And to your observation, was it commonly known at Novell during this timeframe, that is discussions about the Novell Santa Cruz Operation transaction, that Mr. Thompson was checked out?

A. No.

Q. Okay. Let's look at your deposition, again, if we might. This time we'll turn to Page 71. And if I could direct your attention, I'll be reading from lines 18 through 23.

Question, "would you say it was commonly known amongst the people who were working on the Novell, Santa Cruz transaction that Duff was checked out? Answer, yeah. I would think that -- I would think that generally people would have agreed with that sentiment."

MR. SINGER: Your Honor I would ask the prior question and answer also be presented to the witness.

MR. BRENNAN: Your Honor, they certainly will have that opportunity on their redirect, but if he would like I'm

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happy to do the same thing.

MR. SINGER: I think this falls under the completeness rule, Your Honor.

THE COURT: I think we probably ought to have you do it now.

MR. BRENNAN: I'm happy to do it right now.

Q. (By Mr. Brennan) So let's look on Page 71 the question at line seven through the answer that continues to line 17.

Question, "and what was your understanding of what that meant, Duff was checked out during this period of time preceding the Novell -- during the Novell, Santa Cruz transaction? Answer, well, Duff came into Novell and assumed that position of, you know, senior executive over corporate development, but he was not in the office that often and participated in the senior executive level meetings inside of Novell, as well as the senior executive level meetings when we had high level meetings with, you know, maybe Alok Mohan and Doug Michels." Do you see that?

A. Yes.

Q. Now, were you also aware of a circumstance during the course of discussions over The Santa Cruz Operation where you yourself believed that he had checked out?

A. No.

Q. Do you remember an all hands meeting held in

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California where Mr. Thompson didn't show up?

A. Yes.

Q. And you considered that to be in your own mind evidence that he had checked out?

A. No. Um, time frame wise, you asked if that was during that SCO transaction and I don't believe that was during it. I think it was after.

Q. So you thought that Mr. Duff Thompson was checked out after the SCO transaction?

A. Well, I think that is what people understood him to be.

Q. Now, you believed that under the Asset Purchase Agreement all UNIX related patents transferred to Novell, right, excuse me, from Novell to Santa Cruz Operation, right?

A. Say that again, please.

Q. Yes. You believed that under the Asset Purchase Agreement that all UNIX related patents transferred from Novell to Santa Cruz, right?

A. Well, as I stated, I think it was relevant because I think Novell retained -- well as we read earlier, Novell retained patents but they were some specifically that we referenced like the Pike patent that were pretty significant that Novell retained.

Q. Let me see if I understand what you're telling

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me. You believe that under the Asset Purchase Agreement Novell retained patents, right?

A. Yes.

Q. Did it transfer any patents?

A. I don't believe so unless there were some that were possibly relevant to UNIX.

Q. And your -- the basis for your belief that Novell retained patents and didn't transfer any is premised on what?

A. Well, I knew that we had acquired this patent from USL around overlapping windows. And if we had that patent, there was a company by the name of Microsoft that had a pretty nice business in overlapping windows that I felt like we should have executed our rights against that.

Q. Well, were you aware that under the Asset Purchase Agreement signed on September 19th, 1995 that one of the excluded assets was all patents?

A. I am now.

Q. What do you mean you are now?

A. We just read that earlier.

Q. Well, just so we're clear, what we looked at earlier was a draft unsigned version of the Asset Purchase Agreement. Let's actually look at the final version of the Asset Purchase Agreement signed on September 19th, 1995 and we'll look in particular at the final version of Schedule

753

1.1(b) that was entered into by the parties on September 19th, 1995.

Here it says, and again I'll represent to you that this is from the executed version of the final Asset Purchase Agreement signed on September 19th, 1995. And under intellectual property it says, "all copyrights and trademarks except for the trademarks UNIX and UnixWare," do you see that?

A. Yes.

Q. And that is exactly the same language that appeared in the draft that you got before the board meeting; right?

A. Yes.

Q. But there also is an exclusion of all patents; right?

A. Correct.

Q. So is this what tells you that no patents transferred?

A. Yes.

Q. Isn't this also what tells you that no copyrights or trademarks except for the trademarks UNIX and UnixWare transferred?

A. Well, once again, in a rifle shot you would assume that.

Q. Well, are you aware of any other provision that

754

one would look to in the Asset Purchase Agreement signed on September 19th, 1995 to show that some copyrights or trademarks did pass to Santa Cruz Operation?

A. No.

Q. Did you have any involvement in the preparation of the schedule of either included or excluded assets?

A. No.

Q. Do you know who did?

A. I do not.

Q. Do you believe, based on the role that you played as compared to the role that, for example, Tor Braham played in the preparation of the Asset Purchase Agreement, that you or he would better know what was actually written in the final version of the agreement?

A. It would be Tor.

Q. Now, we have talked earlier about the documents that you brought with you to court today as well as other documents that you found in your garage?

A. Yes.

Q. And that upon finding those, you immediately called Ryan Tibbitts at SCO, right?

A. I don't think it was immediately, but I did talk with him.

Q. And these were documents that you obtained during the course of your employment at Novell; right?

755

A. Yes.

Q. These are documents that you would have obtained while you were vice-president of Novell, right?

A. Yes.

Q. Why didn't you call Novell and tell Novell that you found some documents?

A. SCO is the company that actually subpoenaed me and drove this entire deposition process. And as I stated earlier, I have a 30 year relationship with Ryan Tibbitts as a former teammate.

Q. So because of your relationship with Mr. Tibbitts, you thought you would call him?

A. Well, that would be part of it. Clearly he is a friendly face. But I absolutely -- you asked the question, I absolutely believe that Novell is wrong in what they're trying to allege here.

Q. Do you have any concern about our holding the documents that you brought today to give us a chance to look at them?

A. No, as long as I get them back.

Q. Um, and after we have a chance to look at them, if we have any further questions would you be willing to return so we could ask you about those?

A. Sure.

Q. Now, the other documents in addition to those

756

that you brought, you still have those, right?

A. I do.

Q. And those are at your home?

A. They are.

Q. Would you be willing to provide those documents to Novell's counsel to look at?

A. Absolutely.

Q. We would ask that you do that as well. Um, when do you think you might be able to do that?

A. Whenever you guys come down.

Q. Okay. I am sure we will come tomorrow. Now just a few more questions, Mr. Mattingly, I do appreciate your patience with me today.

I believe you said earlier that in response to a question by Mr. Singer that you thought that a majority of the UNIX business had been sold by Novell. Did I hear that correctly?

A. I don't know if I said a majority but yes.

Q. And so if one were to want to find out what assets were sold and which ones weren't, where would you recommend one look to make that determination?

A. I would say you could look at the contracts and all amendments to the contracts that clarify that.

Q. So you believe that in order to find out what assets Novell actually transferred to Santa Cruz Operation

757

one should look to the contract, right?

A. That would be the first place.

Q. Can you think of any other source other than the contract?

A. Sure. If ambiguity showed up, then you would probably talk to the deal team to understand what the spirit and intent of that contract was.

Q. So if one wanted to talk to the deal team, one would first talk to those who wrote the deal, right?

A. Depends on who you know. You might talk to them, you might talk to Ed Chatlos.

Q. And you know that one of the persons involved in writing the deal was Tor Braham; right?

A. Yes.

Q. Did you ever ask Mr. Braham about this transaction?

A. I have not spoken with Tor about this.

Q. Have you gone to him and said I would like to understand what this transaction meant in terms of assets that were transferred?

A. No.

Q. But you do believe that he would be one that you would want to ask that about to find out what was really meant by the written word, right?

A. Yes.

758

MR. BRENNAN: Thank you. I appreciate your time Mr. Mattingly.

THE COURT: Mr. Singer?

MR. SINGER: Thank you, Your Honor. I only have a couple of questions.

REDIRECT EXAMINATION

BY MR. SINGER:

Q. Mr. Mattingly, who do you think has a better understanding of what this deal constituted, specifically with whether the UNIX copyrights were being sold, you and the other individuals who negotiated the deal for two months in California, or Mr. Braham, Tor Braham, and the lawyers who were supposed to document what you negotiated?

A. I think collectively the business team would understand what the strategy and the implementation of that strategy should have been better than Tor Braham.

MR. BRENNAN: Okay. Thank you very much.

THE WITNESS: Collectively.

MR. SINGER: Thank you.

MR. BRENNAN: Your Honor, that just invites a question or two, if I might.

THE COURT: Go ahead.

RECROSS-EXAMINATION

BY MR. BRENNAN:

Q. Now Mr. Mattingly, there were two parties to this

759

transaction, right?

A. Yes.

Q. Novell on one hand, correct?

A. Yes.

Q. Santa Cruz Operation on the other, right?

A. Yes.

Q. And they both had lawyers representing them, correct?

A. Yes.

Q. We have talked about Wilson Sonsini. You have been asked questions about Mr. Braham.

A. Yes.

Q. Who was representing Santa Cruz Operation?

A. Um, I can't remember the name. Was it Brobeck or --

Q. Well, you're doing pretty well. I will go back to the file of documents you brought with you today. And one of them is a fax cover sheet dated September 18th, 1995 and it is on the letterhead of Brobeck Phleger, P-H-L-E-G-E-R and Harrison. Does that refresh your recollection as to who the lawyers were that were representing Santa Cruz Operation?

A. Yes.

Q. Do you know how large the law firm of Brobeck Phleger & Harrison was in September of 1995?

760

A. No, but they were a large credible firm.

Q. Did you understand that they had more than 500 lawyers at that time?

A. I did not know how many they had.

Q. And did you ever have any dealings with the Brobeck firm?

A. No.

Q. Did you understand that Santa Cruz Operations had both in-house lawyers and a very sophisticated large law firm representing it in this transaction?

A. Sure, yes.

Q. Would you have expected that Santa Cruz Operation officers, directors and in-house counsel and in particular outside lawyers would have reviewed the Asset Purchase Agreement before it was signed?

A. Yes.

Q. And you would expect that if Santa Cruz Operation believed that there was a provision in the Asset Purchase Agreement signed by Alok Mohan, the chairman of its Board of Directors on September 19th, 1995, that those lawyers would have protected the interests of Santa Cruz just as Novell's lawyers would have been represented?

A. To the best of their abilities, yes.

Q. And would you expect that if there was a problem in the agreement, particularly with respect to what the

761

included or excluded assets were, that the Brobeck firm would have been well-equipped to advise and protect Santa Cruz against a mistake?

A. They should have been.

Q. Any reason to believe they didn't?

A. Well, just because it is -- we're here today. Pretty good evidence that the legal work on both sides was sloppy and did not represent the intent of the business agreement.

Q. Now, you say the work was sloppy. Just so we can perhaps end here, when we looked at the minutes of the Board of Directors, the resolution of the Board of Directors was that the Asset Purchase Agreement that was signed by Robert Frankenberg was one that was in the best interest of the shareholders of Novell, right?

MR. SINGER: This is way beyond.

THE COURT: I'll sustain the objection.

MR. BRENNAN: Thank you, Your Honor. No further questions.

THE COURT: Mr. Mattingly, it is possible that you may be recalled. So if you would keep yourself available for that eventuality. And I do have to instruct you specifically please do not have a conversation with any other witness in this case, either someone who has been called or will be called, and please do not discuss your

762

testimony with anyone who will be a witness in this case.

THE WITNESS: Yes, Your Honor.

THE COURT: All right. Thank you, Mr. Mattingly.

THE WITNESS: Thank you. We're done?

THE COURT: You're done, yes.

Ladies and gentlemen, we're going to go ahead and recess for the weekend. I do want to, because of its importance, read to you again the instruction that you were given the very first day of trial about your conduct.

First, I again instruct you that during the trial you are not to discuss the case with anyone including fellow jurors or permit anyone to discuss it with you. Again, I stress if anyone attempts to make any conversation about this case with you, you need to bring it to my attention very, very quickly.

Until you retire to the jury room at the end of the case to deliberate on your verdict, you simply are not to talk about this case. Not talking about this case means not talking about it in any way including by internet, e-mail, text message and instant communication devices or services such as cell phones, blackberries, I-phones, social networking websites including Facebook, Twitter, et cetera.

Second, do not read or listen to anything touching on this case in any way. Do not watch or listen to any news reports concerning this trial on television or on the radio.

763

And do not read any news accounts of this trial in the newspaper, on the internet or on any instant communication device including again Facebook, Twitter and so on.

Third, and perhaps most importantly right now because you have heard a week of testimony, do not form any opinion until all of the evidence is in. Keep an open mind until you start your deliberations at the end of the case. And finally, do not do any research or make any investigation about the case on your own.

I hope you all have a nice weekend. I hope that you have some basketball teams left that you can at least watch basketball. If you want to cheer for Utah State, by the way, I won't mind that.

Ms. Malley, would you please assist the jury to the jury room.

THE CLERK: All rise for the jury, please.

(Whereupon, the jury left the courtroom.)

THE COURT: Counsel, do you have anything before we recess?

MR. HATCH: Your Honor, we have one thing.

THE COURT: Go ahead, Mr. Hatch.

MR. HATCH: Um, I would like to ask Your Honor to revisit at least a small portion of the ruling earlier today on the Groklaw. And the only thing I would ask is if Your Honor would reconsider allowing at least the striking of the

764

text, I mean the part of the deposition that would start at Page 64 Line 23 through 65 line 3.

I think that they end up getting everything that they need in, what Your Honor intended to have them get in, and this would take out one of the references. And I think those lines don't add anything because the person is mentioned elsewhere in the testimony you have allowed. So we would ask that you reconsider at least striking those.

THE COURT: Again Line 23 on Page 64 --

MR. HATCH: Starting on -- I guess you would start on the question so line 22.

THE COURT: Line 22.

MR. HATCH: Through Line 3 on the next page.

THE COURT: Who wishes to respond?

MR. BRENNAN: Your Honor, I would be happy to. Just let me take a quick look. Just so I'm clear, the suggestion is Page 64 Line 22 through what Mr. Hatch?

MR. HATCH: Line 3 on the next page.

MR. BRENNAN: Well, Your Honor, here is the issue with it. It gives context to the suggestion above regarding who PJ is. And it indicates, as well, that what PJ is doing is operating a website that in essence is a source or place of news information that Ms. O'Gara is essentially competing with. The real issue here, and the reason for the testimony, is as the court may be aware, that Ms. O'Gara

765

makes a claim that Mr. Stone made a certain statement based on a telephone conversation. Novell believes that it is entitled to present evidence to the jury that Ms. O'Gara is not an objective journalist and that she has a certain relationship with SCO that led her to be less than objective in her report of this conversation with Mr. Stone. This fits in with that. We have already agreed to take out other matters that would be extraneous, but this particular reference gives context to who PJ is. He is essentially a competing journalist.

MR. HATCH: Your Honor, it does that. We haven't taken that out. If you note, the very next clip identifies PJ as Pamela Jones and it goes on from there. The reason he has given is some of the exact reasons why he shouldn't be here because, you know, he wants to mention this cite which they'll go to. And, you know, we think that is inappropriate because we think it is inconsistent with what Your Honor has ordered and been concerned about in the past. And these couple sentences really don't add any of the flavor that he has already got from the other designations that Your Honor has allowed.

THE COURT: Um, go ahead, Mr. Brennan.

MR. BRENNAN: Well briefly. Your Honor, what this does is first of all the argument assumes that the jury is going to disregard the court's very careful instructions

766

that have been repeated every day of trial. Second of all, there are other publications that have been referenced and will be referenced during the course of trial and one is the Wall Street Journal. A juror having heard reference to a particular publication could just as easily go to the Wall Street Journal or any other source.

Third, the reason for this particular reference is that it mentions it is a website that follows the SCO case. Now, we have to assume that the jury is going to disregard the court's instruction for this to be an issue, but it gives that very context as to why Ms. O'Gara may have lost her objectivity and thus her statement is not credible.

THE COURT: The court has to presume that the jury is going to follow the instructions that the court gives to it. Otherwise, we are in very serious trouble. And so the court is going to deny the request of Mr. Hatch that those additional lines be excluded. The court believes that the jury should be trusted to that extent. But more importantly, again, the probative value of this testimony is very important. There is a slight possibility of there being something that would stick in a juror's mind that may lead them to disobey the court and go home and look up the website but I just think that it is so highly unlikely I cannot allow the probative value to be ignored.

MR. HATCH: Can I raise one last suggestion? I know I

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am trying your patience. But could we at least have the scrolling turned off during this playing of this deposition so they don't see the spelling?

THE COURT: I think that would be reasonable.

MR. BRENNAN: Very well.

THE COURT: If nothing else in the scrolling leave it blank where the name is referred to.

MR. BRENNAN: We'll do that, Your Honor. Thank you.

THE COURT: All right. Are you happy now?

MR. HATCH: I got a crumb. You know as long as I leave for the weekend with a crumb, I'm happy.

THE COURT: All right. Counsel, let me point out something. Let me ask something first of all. Are we back on schedule?

MR. SINGER: Not quite. We were planning to be at the end of the day, but we thought we would get through Mr. Mattingly much quicker than we did. So we have Mr. Maciaszek and some depositions that didn't come in today that will be put into next week.

THE COURT: But Mr. Davis is not going to be testifying so you --

MR. SINGER: That saves some time. I am sure that would not have been a short examination.

THE COURT: Yeah, that is what I would have thought as well.

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MR. JACOBS: Could we have an indication for Monday and Tuesday?

MR. SINGER: Yes. And the first witness that we will call is Kimberly Madsen. She is traveling from --

MR. JACOBS: After Mr. Maciaszek?

MR. SINGER: No. No, before Mr. Maciaszek. Ms. Madsen will be our first witness. We will then go to -- probably to Steve Sabbath's deposition and then pick up with either Mr. Maciaszek or Mr. Nagel in some order.

MR. JACOBS: And after that?

MR. SINGER: Um, well, if we get beyond that, there is several other depositions which we haven't played and, you know, Mr. McBride would be probably the next witness after that.

MR. JACOBS: So am I to understand, I'm sorry to being doing this in front of Your Honor, am I to understand that Mr. Maciaszek will not be called?

MR. HATCH: He just listed him.

MR. SINGER: I thought I listed him. We're talking in terms of live witnesses on Monday. Ms. Madsen, Mr. Maciaszek, Mr. Nagle. If we get through that, then we would also go through Mr. McBride. That is optimistic.

THE COURT: There are no hearings this afternoon so you can leave here what you want to. And if you would please retrieve these three Broderick depositions the court

769

would appreciate it.

MR. BRENNAN: Yes, Your Honor.

THE COURT: We will be in recess until 8:30 Monday morning.

MR. ACKER: Have a good weekend, Judge.

(Whereupon, court adjourned for the day at 1:30 p.m. The jury trial will continue on Monday, March 15th at 8:30 a.m.)

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