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SCO v. Novell, Day 15, Friday, March 26, 2010 - as text
Saturday, October 23 2010 @ 08:12 PM EDT

This is the text transcript of day fifteen of the SCO v. Novell trial that began on Monday, March 8, 2010 and ran for 15 days, Monday through Friday, for three weeks, with the Hon. Ted Stewart presiding.

This day is Friday, March 26, with the closing arguments. Here is Groklaw's eyewitness report from the trial for that day.



Jump to actual transcript start, Part 2.

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

The transcript of this day is in two parts: part 1 [PDF] [Text] and part 2 [PDF] [Text].

2596


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 26, 2010
Jury Trial

REPORTED BY: Patti Walker, CSR, RPR, CP
[address]

2597


A P P E A R A N C E S

For Plaintiff: Brent Hatch
HATCH JAMES & DODGE
[address]

Stuart Singer
BOIES SCHILLER & FLEXNER
[address]

Edward Normand
BOIES SCHILLER & FLEXNER
[address]

For Defendant: Sterling Brennan
WORKMAN NYDEGGER
[address]

Eric Acker
Michael Jacobs
MORRISON & FOERSTER
[address]

2598

SALT LAKE CITY, UTAH; FRIDAY, MARCH 26, 2010; 8:30 A.M.

PROCEEDINGS

THE COURT: Good morning.

Let me ask, first of all, whether or not you have any disputes over closing argument demonstratives or slides, or whatever else?

MR. BRENNAN: Your Honor, we had a chance to look at one another's. I think with some modifications that were just made, we should be in agreement, at least in terms of presentation of the material.

THE COURT: I'm not sure that I understand what you mean at least in regards to the presentation of materials.

MR. BRENNAN: We don't have an objection to the use of the demonstratives.

THE COURT: Do you have an objection to any of Mr. Brennan's?

MR. SINGER: No, Your Honor.

THE COURT: SCO today filed a motion regarding three issues about closing, and I would agree with their request. I am going to assume the first one is no longer relevant because the parties have agreed as to the demonstratives.

MR. SINGER: That's correct.

THE COURT: The second is SCO objects to any

2599

attempt by Novell to argue to the jury that Novell's assertion to ownership applied only to UNIX and not to UnixWare copyrights. Do you wish to address that, Mr. Jacobs?

MR. JACOBS: We do not quarrel with that in the context of the closings, Your Honor, but we will be making clear the delineation between the pre-APA UnixWare and post-APA UnixWare.

THE COURT: I think the jury instruction now reflects that better than it did before as well.

The third has to do with an attempt, frankly, by either side to argue something contrary to law. My assumption is that neither of you will have done that in any event; is that correct?

MR. JACOBS: That is correct. Just to avoid confusion during the openings themselves, SCO's motion is drawn to section 204(a) of the Copyright Act, which was the subject of the Tenth Circuit ruling. The Tenth Circuit ruling was that there is no per say requirement under 204(a) of the Copyright Act for something that represents specifically or in substance a bill of sale. We're not arguing that issue under the Copyright Act. We will be arguing that the asset purchase agreement was a promise to a assign, not an assignment, that Amendment No. 2 is dated October 26th, I think, 1996, and that as a matter of

2600

contract law, just as in the purchase and sale of a house, there was no subsequent evidence of an actual transfer. So we'll be arguing it as a matter of contract law, which the Tenth Circuit did not address.

MR. SINGER: Your Honor, this is exactly the type of argument that we filed this motion because we were concerned they might make. The Tenth Circuit specifically held they didn't see anything to this date issue. I think it's expressly in one of the footnotes on this section when this argument was made. There is no difference between making this argument in the context of the Copyright Act or making it in the contract section. The Court of Appeals specifically ruled that Amendment 2 would be sufficient to transfer title, that that was the intent of the parties.

So I think, with all due respect, Mr. Jacobs is in the teeth of that decision.

THE COURT: Mr. Jacobs.

MR. JACOBS: Your Honor, footnote 2 is the footnote I think Mr. Singer is referring to and it's a footnote in the context of the discussion of section 204(a), it is not a holding that the contract could not be interpreted in the way that we're proposing to interpret it. There was no such briefing or argument before the Tenth Circuit. The footnote itself is not definitive at all on the question that we propose to argue as a matter of

2601

contract interpretation. I could hand it to Your Honor if it would be convenient, you could look yourself.

THE COURT: I probably need to look at it.

MR. SINGER: We would also submit that this would just be confusing to the jury because there's been no evidence here that they would be drawing any conclusions from that.

THE COURT: Mr. Singer, I think that is probably your best argument, that this ought to be handled by you in your reply. But I do want to look at the footnote.

MR. JACOBS: Sure. Just for the avoidance of doubt, Ms. Amadia did say had she intended to transfer, there would have been additional documents that would have been required.

May I, Your Honor?

THE COURT: Yes.

If you are not arguing a pure legal issue about the bill of sale or something akin to it but rather the intent of the parties, I believe that footnote would not preclude you from doing so.

MR. JACOBS: Thank you, Your Honor.

THE COURT: Counsel, let me again remind you, it would be my intent to dismiss juror 13 as the alternate.

MR. SINGER: We understand, Your Honor.

THE COURT: I am going to hold you to your one

2602

hour and 15 minutes. My intent will be to instruct the jury and then to have your initial presentation and closing.

Will that be by you, Mr. Singer, or Mr. Hatch, or will you be splitting it?

MR. SINGER: We will be splitting it, but I plan to reserve 15 minutes for rebuttal.

THE COURT: Who will go first.

MR. SINGER: I will be going first, Mr. Hatch will be taking over at about the 45-minute mark.

THE COURT: All right.

Mr. Brennan, will you making the closing?

MR. BRENNAN: Yes, I will, Your Honor.

THE COURT: Again, after your initial hour, then we'll take a break and come back to Mr. Brennan, and then your rebuttal.

MR. SINGER: Would it be possible to have a few minutes break after the reading of the instructions just to set up?

THE COURT: Certainly.

MR. SINGER: One final question, given that the Court has granted SCO's 50(a) motion and dismissed Novell's counterclaim, and that's been raised in opening and otherwise, will the Court make some mention of that?

THE COURT: There is a specific jury instruction that will state, and I'll read it to you, if you've not seen

2603

it, the claim of Novell that SCO slandered Novell's title is no longer before you and will not be decided by you. Do not concern yourselves with this development and do not speculate about it.

MR. SINGER: Thank you.

THE COURT: Counsel, let me remind you that the Court will expect proposed findings of facts and conclusions of law as to those issues reserved for the Court on the 16th of April, which is 20 days plus. Okay.

All right. Is there anything else before we bring the jury in?

MR. BRENNAN: Not from Novell, Your Honor.

MR. SINGER: Not from SCO.

THE COURT: Ms. Malley.

(Jury present)

THE COURT: Good morning, ladies and gentlemen.

Let me begin by reassuring you that a copy of the instructions that I'm about to read to you will go with you into the jury room, so I do not expect you to memorize this as I go through it. All right.

Members of the jury, now that you have heard the evidence, it becomes my duty to give you the instructions of the Court as to the law applicable to this case.

It is your duty as jurors to follow the law as stated in the instructions of the Court, and to apply the

2604

rules of law to the facts as you find them from the evidence in the case.

You are not to single out one instruction alone as stating the law, but must consider the instructions as a whole.

Neither are you to be concerned with the wisdom of any rule of law stated by the Court. Regardless of any opinion you may have as to what the law ought to be, it would be a violation of your sworn duty to base a verdict upon any other view of the law than that given in the instructions of the Court; just as it would be a violation of your sworn duty, as judges of the facts, to base a verdict upon anything but the evidence of the case.

You are to disregard any evidence offered at trial and rejected by the Court. You are not to consider questions of counsel as evidence. You are not to consider the opening statements and the arguments of counsel as evidence. Their purpose is merely to assist you in analyzing and considering the evidence presented at trial.

The Court did not by any words uttered during the trial or in these instructions give or intimate, or wish to be understood by you as giving or intimating, any opinions as to what has or has not been proven in the case or as to what are or are not the facts of the case.

The claim of Novell that SCO slandered Novell's

2605

title is no longer before you and will not be decided by you. Do not concern yourselves with this development and do not speculate about it.

SCO has the burden of proving its claim by a preponderance of the evidence.

To prove by a preponderance of the evidence means to prove something is more likely so than not so. It does not mean the greater number of witnesses or exhibits. It means the evidence that has the more convincing force when taken on a whole compared to the evidence opposed to it. It means the evidence that leads you the jury to find that the existence of the disputed fact is more likely true than not true.

Any finding of fact you make must be based on probabilities, not possibilities. A finding of fact must not be based on speculation or conjecture.

When I say in these instructions that the party has the burden of proof on any proposition or use the expression if you find or if you determine, I mean that you must be persuaded, considering all the evidence in the case, that the proposition is more probably true than not true.

In determining whether any disputed fact has been proven by a preponderance of the evidence you may, unless otherwise instructed, consider the testimony of all witnesses, regardless of who may have called them, and all

2606

exhibits.

If a party fails to meet this burden of proof, or if the evidence weighs so evenly that you are unable to say that there is a preponderance on either side, you must resolve the question against the party who has the burden of proof on that issue and in favor of the opposing party.

In this particular civil case, one of the elements of the claim made by SCO, the showing of constitutional malice, has a different burden of proof called clear and convincing evidence. That means that SCO has a higher burden than preponderance of the evidence, but it does not require proof beyond a reasonable doubt. Clear and convincing evidence is evidence that shows it is highly probable that what is claimed is true. It is evidence that produces in your mind a firm belief as to the fact at issue. For such evidence to be clear and convincing, it must at least have reached a point where there remains no substantial doubt as to the truth or correctness of the claim based upon the evidence.

You have been chosen and sworn as jurors in this case to try the issues of fact presented by the allegations of the complaint of SCO, and the answer thereto of Novell. You are to perform this duty without bias or prejudice as to any party. Our system of law does not permit jurors to be governed by sympathy, prejudice, or public opinion. Both

2607

the parties and the public expect that you will carefully and impartially consider all the evidence in the case, follow the law stated by the Court, and reach a just verdict, regardless of the consequences.

During the trial I have permitted you to take notes. Many courts do not permit note-taking by jurors. And as instructed at the beginning of trial, a word of caution is in order. There is always a tendency to attach undue importance to matters which one has written down. Some testimony which is considered unimportant at the time presented, and thus not written down, takes on greater importance later in the trial in light of all the evidence presented. Therefore, you are instructed that your notes are only a tool to aid your own individual memory and you should not compare your notes with other jurors in determining the content of any testimony or in evaluating the importance of any evidence. Your notes are not evidence, and are by no means a complete outline of the proceeding or list of the highlights of the trial. Above all, your memory should be your greatest asset when it comes to deliberating and rendering a decision in this case.

Both SCO and Novell are corporations and, as such, can act only through their officers and employees, and others designated by them as their agents.

Any act or omission of any officer, employee or

2608

agent of a corporation, in the performance of the duties or within the scope of the authority of the officer, employee or agent, is the act or omission of the corporation.

Unless you are otherwise instructed, the evidence in this case consists of the sworn testimony of the witnesses, regardless of who may have called them; and all exhibits received in evidence, regardless of who may have produced them; and all facts which may have been admitted or stipulated; and all facts and events which may have been judicially noticed.

Any evidence as to which an objection was sustained by the Court, and any evidence ordered stricken by the Court, must be entirely disregarded.

Unless you are otherwise instructed, anything you may have seen or heard outside of the courtroom is not evidence and must be entirely disregarded.

There are, generally speaking, two types of evidence from which a jury may properly find the truth as to the facts of a case. One is direct evidence, such as the testimony of an eyewitness. The other is indirect or circumstantial evidence, the proof of a chain of circumstances pointing to the existence or nonexistence of certain facts.

As a general rule, the law makes no distinction between direct and circumstantial evidence, but simply

2609

requires that the jury find the facts in accordance with the burden of proof in the case, both direct and circumstantial.

You, as jurors, are the sole judges of the credibility of witnesses and the weight their testimony deserves. You may be guided by the appearance and conduct of the witnesses, or by the manner in which the witness testifies, or by the character of the testimony given, or by evidence to the contrary of the testimony given.

You should carefully scrutinize all the testimony given, the circumstances under which each witness has testified, and every matter in evidence which tends to show whether a witness is worthy of belief. Consider each witness's intelligence, motive and state of mind, and demeanor and manner while on the stand. Consider the witness's ability to observe matters as to which he or she has testified, and whether he or she impresses you as having an accurate recollection of these matters. Consider also any relation each witness may bear to either side of the case; the manner in which each witness might be affected by the verdict; and the extent to which, if at all, each witness is either supported or contradicted by other evidence in the case.

Inconsistencies or discrepancies in the testimony of a witness, or between the testimony of different witnesses, may or may not cause you to discredit such

2610

testimony. Two or more persons witnessing an incident or a transaction may simply see or hear it differently and innocent misrecollection, like failure of recollection, is not an uncommon experience. In weighing the effect of a discrepancy, always consider whether it pertains to a matter of importance or an unimportant detail, and whether the discrepancy results from innocent error or intentional falsehood.

After making your own judgment, you will give the testimony of each witness such weight, if any, as you may think it deserves.

Witnesses who, by education, study and experience, have become expert in some art, science, profession or calling, may state opinions as to any such matter in which that witness is qualified as an expert, so long as it is material and relevant to the case. You should consider such expert opinion and the reasons, if any, given for it. You are not bound by such an opinion. Give it the weight you think it deserves. If you should decide that the opinions of an expert witness are not based upon sufficient education and experience, or if you should conclude that the reasons given in support of the opinions are not sound, or that such opinions are outweighed by other evidence, you may disregard the opinion entirely.

In resolving any conflict that may exist in the

2611

testimony of experts, you may compare and weigh the opinion of one against that of another. In doing this, you may consider the qualifications and credibility of each, as well as the reasons for each opinion and the facts on which the opinions are based.

In determining the weight to be given to an opinion expressed by any witness who did not testify as an expert witness, you should consider his or her credibility, the extent of his other her opportunity to perceive the matters upon which his or her opinion is based and the reasons, if any, given for it. You are not required to accept such an opinion but should give it the weight to which you find it entitled.

During the trial of this case, certain testimony has been presented to you by way of a deposition, consisting of sworn recorded answers to questions asked of the witness in advance of the trial by one or more of the attorneys for the parties to the case. The testimony of a witness who, for some reason, cannot be present to testify from the witness stand may be presented in writing under oath or on a videotape. Such testimony is entitled the same consideration, and is to be judged as to credibility, and weighed, and otherwise considered by the jury, insofar as possible, in the same way as if the witness had been present and had testified from the witness stand.

2612

Certain charts, graphs and illustrations have been shown to you. Those charts, graphs and illustrations are used for convenience and to help explain the facts of the case. They are not themselves evidence or proof of any facts.

You have heard evidence that there were earlier rulings by this Court concerning the ownership of the UNIX and the UNIX copyrights existent as of the date of the asset purchase agreement. In making these rulings, the Court did not have the benefit of the evidence that you have now heard. These prior rulings have been reversed in a unanimous ruling by the Court of Appeals, which is why these issues are being presented to you in this trial. You must decide this case solely on the evidence presented to you in this trial. The earlier rulings should have no bearing on your determination of which party owns the copyrights at issue in this case. However, the existence of these prior rulings may be considered by you in your determination of special damages and punitive damages, if any.

You heard reference to a SCO Group bankruptcy. That is a reorganization proceeding which is pending in another court. SCO continues to operate its business in reorganization and the existence of that proceeding should have no bearing on your consideration of this case.

You have also heard reference to a trial involving

2613

SCO and Novell in 2008. That trial concerned other issues that are not before you.

In this case, SCO has alleged that Novell has slandered its title regarding ownership of copyrights over the UNIX and UnixWare computer operating systems.

Slander of title requires you to find that: First, there was a publication of a statement disparaging SCO's title; second, the statement was false; third, the statement was made with constitutional malice; and, fourth, the statement caused special damages. I will now explain these four elements in more detail.

The first element requires SCO to prove that Novell published a statement that disparaged SCO's title or ownership of the UNIX or UnixWare copyrights existent as of the date of the asset purchase agreement. SCO alleges that Novell made several slanderous statements in 2003 and 2004. The allegedly slanderous statements do not include statements made in pleadings and filings made by Novell in connection with this litigation, which began in January 2004. Novell may not be held liable for making such statements made in pleadings and filings.

For the statement to have been published, it must have been communicated to someone other than SCO.

A statement is not slanderous if the context makes clear that the speaker is expressing a subjective view or an

2614

interpretation or theory, rather than an objectively verifiable fact. You may determine, however, that the speaker intended to convey a statement of fact even if the speaker has couched its statements in the form of an opinion or belief.

In deciding whether a publication disparaged SCO's title, you should not view individual words or sentences in isolation. Rather, each statement must be considered in the context in which it was made, giving the words their most common and accepted meaning. You should also consider the surrounding circumstances of the statement and how the intended audience would have understood the statement in view of those circumstances.

The second element of a claim for slander of title is falsity of the statement that disparages title. False means that the statement is either directly untrue or that an untrue inference can be drawn from the statement. You are to determine the truth or falsity of the statement according to the facts as they existed at the time the statement was made.

The statement, to be true, need not be absolutely, totally, or literally true, but must be substantially true. A statement is considered to be true if it is substantially true or the gist of the statement is true.

In order to determine whether the statements at

2615

issue were true or false, you must determine which party owned the UNIX and UnixWare copyrights, existent as of the date of the asset purchase agreement, at the time the statements were made.

To determine which party owned the UNIX and UnixWare copyrights, existent as of the date of the asset purchase agreement, you should consider the asset purchase agreement and the amendments thereto. I will now provide you instructions on how you should interpret these agreements.

Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together. The contracts need not have been executed on the same day to be parts of substantially one transaction.

Where contracts are made at different times, but where the later contract is not intended to entirely supersede the first, but only modify it in certain particulars, the two are to be construed as parts of one contract, the later superseding the earlier one where it is inconsistent with the earlier.

Here, the amendments, including Amendment No. 2, must be considered together with the asset purchase agreement as a single document. The language of the amendments, including Amendment No. 2, controls whenever its

2616

language contradicts the asset purchase agreement.

In deciding what the terms of a contract mean, you must decide what the parties intended at the time the contract was created. You may consider the usual and ordinary meaning of the language used in the contract as well as the circumstances surrounding the making of the contract.

With respect to your consideration of the agreements at issue here, where contract terms are clear, they should be given their plain and ordinary meanings.

In deciding what the words of a contract meant to the parties, you should consider the whole contract, not just isolated parts. You should use each part to help you interpret the others, so that all the parts makes sense when taken together.

You should assume that the parties intended the words in their contract to have their usual and ordinary meaning unless you decide that the parties intended the words to have a special meaning.

With respect to who owns the copyrights at issue, you may consider what is called the extrinsic evidence of the intent of the parties to the amended asset purchase agreement. Extrinsic evidence is the evidence of what parties to a contract intended apart from the language they used in the contract.

2617

One type of extrinsic evidence is testimony or documents showing what the people who were negotiating the contract said or did or understood at the time of the transaction.

Another type of extrinsic evidence is called the parties course of performance. Course of performance is how the parties interpreted and applied the terms of the contract after the contract was created but before any disagreement between the parties arose.

In determining which party owns the property at issue, and your consideration of the amended asset purchase agreement, you may consider the nature of a copyright.

Copyright is the exclusive right to copy. The owner of a copyright has the exclusive right to do and to authorize the following: One, to reproduce the copyrighted work in copies; two, to prepare derivative works based upon the copyrighted work; three, to distribute copies of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease or lending.

The term owner includes the author of the work, an assignee, or an exclusive licensee. In general, copyright law protects against production, adaptation, distribution, performance, or display of substantially similar copies of the owner's copyrighted work without the owner's permission.

A copyright owner may enforce these rights to

2618

exclude others in an action for copyright infringement. Even though one may acquire a copy of a copyrighted work, the copyright owner retains rights and control of that copy, including uses that may result in additional copies or alterations of the work.

Possession of certificates of copyright registrations is immaterial to ownership of the copyrights, but may be considered for other purposes, such as the intent of the parties.

A copyright owner may transfer, sell, or convey to another person all or part of the copyright owner's property interest in the copyright. A property interest in a copyright includes the right to exclude others from reproducing, preparing a derivative work, distributing, performing, displaying, or using the copyrighted work.

To be valid, the transfer, sell, or conveyance must be in writing. The person to whom a right is transferred is called the assignee. The assignee may enforce this right to exclude others in an action for a copyright infringement.

The copyright owner may also transfer, sell, or convey to another person any of the exclusive rights included in the copyright. To be valid, the transfer, sell, or conveyance must be in writing. The person to whom this right is transferred is called an exclusive licensee. An

2619

exclusive licensee has the right to exclude others from copying the work to the extent of the rights granted in the license and may bring an action for damages for copyright infringement.

Nonexclusive licenses, on the other hand, do not transfer copyright ownership and can be granted orally or implied from conduct. An implied license can only be nonexclusive. A nonexclusive licensee cannot bring suit to enforce a copyright.

An implied nonexclusive license may arise when, one, a person, the licensee, requests the creation of the work, two, the creator, the licensor, makes the particular work and delivers it to the licensee who requested it, and, three, the licensor intends that the licensee-requestor copy or distribute his work.

The third element of slander of title requires SCO to prove by clear and convincing evidence that Novell's statement disparaging the ownership of the UNIX and UnixWare copyrights, existent as of the date of the asset purchase agreement, was made with constitutional malice. That is, SCO must prove that the statement was published with: One, knowledge that it was false; or, two, reckless disregard of whether it was true or false, which means that Novell made the statement with a high degree of awareness of the probable falsity of the statement, or that, at the time the

2620

statement was transmitted Novell had serious doubts that the statement was true. Clear and convincing evidence leaves no substantial doubt in your mind that the constitutional malice is highly probable, as previously explained in Instruction No. 13.

In determining whether Novell published the statement knowing the statement to be false or with reckless disregard for the truth, you should take into account all the facts and circumstances. You should consider whether the statement was fabricated or the product of the party's imagination. You may also consider whether the party knew about the source of the information and whether there were reasons for the party to doubt the informant's veracity, whether the information was inherently improbable, or if there were other reasons for the party to doubt the accuracy of the information.

In determining whether there was knowing falsehood or reckless disregard for the truth, however, it is not enough for you to find that the party acted negligently, carelessly, sloppily or did not exercise good judgment in researching, writing, editing, or publishing the statement. An extreme departure from the standards of investigating and reporting ordinarily adhered to by responsible publishers does not, standing alone, constitute knowledge of falsity or reckless disregard for the truth. The reliance on one

2621

source standing alone does not constitute knowing falsehood or reckless disregard for the truth, even if other sources would be readily available, and even if, in applying reasonable reporting of care, you believe those other sources should have been contacted.

Spite, ill will, hatred, bad faith, evil purpose or intent to harm does not alone support a finding of constitutional malice.

The mere fact that a mistake may occur is not evidence of knowing falsehood or reckless disregard for the truth. Reckless disregard for the truth or falsity requires a finding that the person making the statement had a high degree of awareness that the statement was probably false, but went ahead and published the statement anyway. The test is not whether the person acted as a responsible publisher under the circumstances. While exceptional caution and skill are to be admired and encouraged, the law does not demand them as a standard of conduct in this matter.

Unless you find by clear and convincing evidence, under all the circumstances, that Novell acted knowing the statement to be false or with a high degree of awareness of its probable falsity, there can be no liability.

The final element of a claim for slander of title requires a showing that the statement disparaging SCO's ownership of the UNIX of UnixWare copyrights, existent as of

2622

the date of the asset purchase agreement, caused special damages to SCO.

This requires SCO to establish an economic loss that has been realized or liquidated, as in the case of lost sales. Special damages are ordinarily proved in a slander of title action by evidence of a lost sale or the loss of some other economic advantage. Absent a specific monetary loss flowing from a slander affecting the salability or use of the property, there is no damage. It is not sufficient to show that the property's value has dropped on the market, as this is not a realized or liquidated loss. The law does not presume special damages.

Special damages in the form of lost sales may be shown in two ways: A, proof of the conduct of specific persons or, b, proof that the loss has resulted from the conduct of a number of persons whom it is impossible to identify. There is a separate test you must apply for each.

First, when the loss of a specific sale is relied on to establish special damages, SCO must prove that the publication of the disparaging statement was a substantial factor influencing the specific, identified purchaser in his decision not to buy.

In order for the disparaging statement to be a substantial factor in determining the conduct of an intending or potential purchaser, it is not necessary that

2623

the conduct should be determined exclusively or even predominantly by the publication of the statement. It is enough that the disparagement is a factor in determining his decision, even though he is influenced by other factors without which he would not decide to act as he does. Thus many considerations may combine to make an intending purchaser decide to break a contract or to withdraw or refrain from making an offer. If, however, the publication of the disparaging matter is one of the considerations that has substantial weight, the publication of the disparaging matter is a substantial factor in preventing the sale and thus bringing financial loss upon the owner of the thing in question.

The extent of the loss caused by the prevention of a sale is determined by the difference between the price that would have been realized by it and the salable value of the thing in question after there has been a sufficient time following the frustration of the sale to permit its marketing.

Second, in the case of a widely disseminated disparaging statement, SCO need not identify a specific purchaser and recovery is permitted for loss of the market. This may be proved by circumstantial evidence showing that the loss has in fact occurred and eliminating other causes.

A decline in stock price is not an appropriate

2624

claim for special damages.

You are entitled to award punitive damages if you deem them to be appropriate.

Before any award of punitive damages can be considered, SCO must prove by clear and convincing evidence that Novell published a false statement knowing it was false or in reckless disregard whether it was true or false, and that Novell acted with hatred or ill will towards SCO, or with an intent to injure SCO, or acted willfully or maliciously towards SCO.

If you find that SCO has presented such proof, you may award, if you deem it proper to do so, such sum as in your judgment would be reasonable and proper as a punishment to Novell for such wrongs, and as a wholesome warning to others not to offend in a like manner. If such punitive damages are given, you should award them with caution and you should keep in mind they are only for the purpose just mentioned and are not the measure of actual damage.

The fact that I have instructed you on damages does not mean that I am indicating that you should award any. That is entirely for you, the jury, to decide.

Any damages you award must have a reasonable basis in the evidence. They need not be mathematically exact, but there must be enough evidence for you to make a reasonable estimate of damages without speculation or guess work.

2625

The burden is upon the party seeking damages to prove the existence and amount of its damages and that its damages were caused by the acts of the opposing party. You are not permitted to award speculative damages.

You have heard evidence concerning specifics about the parties' rights and obligations under section 4.16 of the amended asset purchase agreement. You are instructed that those issues of specific rights and obligations under section 4.16 are for the Court to decide and you are not to concern yourself with them. You may consider section 4.16, as well as all other provisions, in interpreting the amended asset purchase agreement.

It is the duty of the attorney on each side of the case to object when the other side offers testimony or other evidence which the attorney believes is not properly admissible. You should not show prejudice against any attorney or his or her client because the attorney has made an objection.

Upon allowing testimony or other evidence to be introduced over the objection of any attorney, the Court does not, unless expressly stated, indicate any opinion as to the weight or effect of any such evidence. As stated before, the jurors are the sole judges of the credibility of all witnesses and the weight and effect of all evidence.

When the Court has sustained an objection to a

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question addressed to a witness, the jury must disregard the question entirely, and may draw no inference from the wording of it or speculate as to what the witness would have said if he or she had been permitted to answer any question.

During the course of the trial, I may have occasionally asked questions of a witness, in order to bring out facts not then fully covered in the testimony. Do not assume that I hold any opinion on the matters to which my questions may have related.

A copy of these instructions will also accompany you to the jury room. Do not write on the instructions.

You will notice during are deliberations that there may be gaps in the numbering of the instructions. The instruction numbers are for the convenience of the Court and the parties, and you are not to be concerned by them.

Upon retiring to the jury room, you must select one of your members to act as your foreperson. The foreperson will preside over your deliberations and will be your spokesperson here in court.

The verdict must represent the collective judgment of the jury. In order to return a verdict, it is necessary that each juror agree to it. Your verdict must be unanimous.

It is your duty, as jurors, to consult with one another and to deliberate with a view to reaching an

2627

agreement if you can do so without violence to individual judgment. Each of you must decide the case for yourself, but do so only after an impartial consideration of the evidence in the case with your fellow jurors. In the course of your deliberations, do not hesitate to reexamine your own views and change your opinion if convinced it is erroneous. But do not surrender your honest conviction as to the weight or effect of evidence solely because of the opinion of your fellow jurors for the mere purpose of returning a unanimous verdict.

Remember at all times, you are not partisans. You are judges, judges of the facts. Your sole interest is to seek the truth from the evidence in the case.

Your verdict must be based solely upon the evidence received in the case. Nothing you have seen or heard outside of court may be considered. Nothing that I have said or done during the course of this trial is intended in any way to somehow suggest to you what I think your verdict should be. Nothing said in these instructions and nothing in any form of verdict prepared for your convenience is to suggest or convey to you in any way or manner any intimation as to what verdict I think you should return. What the verdict shall be is the exclusive duty and responsibility of the jury. As I have told you many times, you are the sole judges of the facts.

2628

The Court has prepared a verdict form for your convenience. You are instructed that your answers to the interrogatories on the verdict form must be consistent with the instructions I have given you and with each other.

When you have reached a unanimous agreement as to your verdict, your foreperson will fill in, date and sign the verdict form upon which you have unanimously agreed. When you have reached unanimous agreement as to your verdict, the foreperson shall inform the bailiff and you shall return to the courtroom.

If it becomes necessary during your deliberations to communicate with the Court, you may send a note by the bailiff. But bear in mind that you are not to reveal to the Court or to any person how the jury stands, numerically or otherwise, on the question before you, until after you have reached a unanimous verdict or agreement.

The attitude and conduct of jurors at the outset of their deliberations are matters of considerable importance. It is rarely productive or good for a juror, upon entering the jury room, to make an emphatic expression of his or her opinion on the case or to announce a determination to stand for a certain verdict. When one does that at the outset, his or her sense of pride may be aroused, and he or she may hesitate to recede from an announced position if shown that it is wrong.

2629

During your deliberations, you are able as a group to set your own schedule for deliberations. You may deliberate as late as you wish or recess at an appropriate time set by yourselves. You may set your own schedule for lunch and dinner breaks.

However, I do ask that you notify the Court by a note when you plan to recess for the evening.

You have now been instructed on the law, ladies and gentlemen. Again, a copy of the instructions, what I just read to you, will accompany you to the jury room.

It is now time for closing statements, and we'll begin with SCO. And because SCO is the plaintiff in the case and, as I just instructed you, has certain burdens to carry by way of the weight of evidence and such, the plaintiffs have the opportunity to go both first and last in their closing statements, meaning that SCO will go ahead now with part of its closing. We'll then hear from Novell, and then SCO will be given the last word.

Mr. Singer, if you would like to proceed.

MR. SINGER: Thank you, Your Honor.

Ladies and gentlemen, it's been a long three weeks and we appreciate your close attention to this case. I know it's not been the most exciting case at times, but I assure you it's a very important case. It's very important to SCO, it very important to individuals like Bill Broderick, John

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Maciaszek, and Andy Nagle, men who have been with the company for 20 years, going all the way back to AT&T, and they are still there at SCO turning out UnixWare, providing products for companies all over the country and the world, and trying in a difficult situation to have the company proceed.

These individuals and the customers, and some of these have been long time or current customers, McDonald's, NASDAQ, BMW, that business depends on the copyrights, depends on having ownership of intellectual property that is at the heart of their business.

You are going to be asked in this case two basic important questions. It will be your responsibility to decide, first, to declare that the UNIX, UnixWare copyrights that existed back at the time of this transaction went with the rest of the business, except for this royalty stream, and belonged to SCO. That is very important and critical on its own. And, second, you will be asked to determine, if you agree with us, that there's been a slander on SCO's title, to determine that and award a reasonable amount of damages to compensate SCO in connection with that slander.

Now as the Court has instructed you, you are the judges of the facts and, in doing so, you must determine credibility. And credibility is, in part, a question of the consistency of witnesses with one another. And I would like

2631

to give you an example of one of the things you can look at.

You'll recall Mr. Stone when he was testifying here about whether or not when they waived rights of SCO that benefited IMB, whether that was done unilaterally or whether it was done at IBM's request. Mr. Stone answered no, it wasn't at IBM's request. We acted on our own. No input from IBM at all.

Then a few days later you heard from Mr. LaSala, the former general counsel of Novell who admitted on the stand that, in fact, Mr. Marriot, a lawyer for IBM, specifically asked Novell to assert those rights to waive SCO's claims; in fact, said it was urgent. You also learned that even internally, with Mr. LaSala's testimony, there was an inconsistency because when he was first asked about that in February 2007, he denied it. Only later in May, when we pursued the issue, he admitted it. That's credibility. That's an issue you can consider in determining who to believe in this case.

Another example, Mr. Stone again, on a basic point. This is not something people can be confused about. Were you asked to leave the company. Yes, I was. I asked Mr. Messman the same question, was Mr. Stone asked to leave Novell. Answer, no. Someone is not telling the truth.

Now the questions that you will need to answer in this case will be set out in the verdict form that you will

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receive along with a copy of the instructions and the evidence, and the very first question will be did the amended asset purchase agreement transfer to UNIX and UnixWare copyrights from Novell to SCO. I would like to address that question at the outset.

Amendment No. 2, we submit, is the key to answering that question. Amendment No. 2 replaced the language that was inconsistent with what was the intent of the transaction, the intent of the parties who put this deal together that those copyrights would be transferred with the UNIX and the UnixWare business. Amendment 2 replaces the old language, which is gone, and that is the operative language.

Now Judge Stewart read you an important instruction that makes that clear, which is the instruction I have on the screen, and it makes clear that it is the language of the amendments, including Amendment No. 2, controls wherever its language contradicts the asset purchase agreement.

Of course you knew that from the face of it, that it says it replaces the old language. It took out this copyright exclusion and put in language that, we submit to you, is consistent with what the parties intended, that the copyrights required for the business were now part of what were the included assets.

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Now you might remember about three weeks ago Novell's counsel telling you that it was important to listen for the rest of the story. I think he invoked Paul Harvey. I was thinking about that statement all during the first week of this trial, and I was doing that because it seemed that all during that week Novell was focused on this language in the schedule of excluded assets, excluding copyrights, when the rest of the story was that language didn't exist anymore. That language was replaced by Amendment No. 2. So the language that they have spent more hours in this trial on than anything else is simply not in the agreement and hasn't been in there since 1996. That's really the rest of the story on this because under the plain language of the asset purchase agreement with Amendment 2, it is very clear that the assets, the copyrights transferred.

You have a schedule of included assets, which you've seen many times and you will be able to look at when you deliberate, it says, all rights and ownership of UNIX and UnixWare on all these products, including the UnixWare products, and you haven't heard any evidence there are any products on there that -- products missing from that list. This includes what we're talking about, that all rights and ownership of UNIX and UnixWare are transferred.

And then you had the old language that excluded

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copyrights and trademarks. Now you have the current language replaced by Amendment 2 which says that Novell gets to keep copyrights, except for the copyrights and trademarks owned by Novell as of the date of the agreement required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. That really is the heart of this case. With Amendment No. 2, it is clear that those copyrights were transferred.

Now I would submit to you that Novell has admitted the fact that SCO, in light of Amendment No. 2, owns those copyrights, and they did that on two occasions. The first occasion that that was admitted goes back to June 6th of 2003 when Novell issued the press release, when they -- of course, you've heard about Amendment No. 2 when they said they didn't have it and it turns out they did have it. They didn't know it was signed. They claimed they had a signed copy in the files. But the important point here on copyright ownership is their recognition that it appears to support SCO's claim that ownership for certain copyrights of UNIX did transfer to SCO in 1996. So that's the first time.

The second time that that was admitted was in front of you a few days ago on March 23rd, and that was when Allison Amadia admitted -- and certainly she started out in her testimony being adverse to SCO and in favor of Novell. Then under Mr. Normand's cross-examination, listen to what

2635

she said. She was asked, now you agree that under the plain language of Amendment 2 Novell has included in the transfer of assets the copyrights required for SCO to exercise its rights in UNIX and UnixWare. Her answer was, the way I wrote and intended Amendment No. 2 to be read is that this language was saying that whatever copyright rights Santa Cruz needed in order to exercise the rights it was given, then they would have those rights.

Then a little bit later near the end of her cross-examination she was asked, so if there are copyrights that are required for SCO to exercise its rights, like the UNIX and UnixWare trademarks, they were transferred, correct. Her answer was yes.

Now there is no real dispute, ladies and gentlemen, that the copyrights are required for the UNIX and UnixWare business. You have heard a lot of evidence on that. It has included Bob Frankenberg, the Novell president and CEO, who said it was ludicrous to think about selling software without selling the copyrights.

Doug Michels, the SCO founder and vice president, equated it to breathing oxygen, that it's so essential. There is no way this deal would have happened without getting the copyrights.

Jim Wilt, who was the lead negotiator for Santa Cruz, says that, you know, when you walk out the door, I

2636

assume your head goes with you. That's how he equated it. And, of course, the copyrights have to go with the company.

Steve Sabbath was asked, if you didn't own the copyrights, how could you go after somebody that's pirating your software, how could you enforce your rights to the technology.

Bill Broderick said, if we couldn't protect our software, we'd be out of business. This is how you protect your software.

Now with Amendment No. 2, the APA makes sense. Without it, the agreement doesn't make sense. The software business without the copyrights, well, I would suggest to you that's like a car without an engine, or maybe a house without a roof, or maybe even suggest that it's an ice cream sundae where you only get the cherry and not the ice cream, as Mr. Braham suggested a couple days ago. It doesn't make any sense.

Now with Amendment No. 2 all of the things fit together and makes sense, beginning with the very recital at the beginning of the document that says that this is the sale of a business, the UNIX and UnixWare business, the support of those products, all of that is what it being sold. It is the intent that all of the business relating to that be transferred. So it's consistent with the overall intent of the deal.

2637

There's been some discussion about the consideration received. I suggest to you that it makes sense because of the amount of money which Novell received. Back in the opening you might remember seeing this slide from Novell, the first one on the left-hand side, where it suggests the purchase price was just the stock. The stock itself was worth a lot of money, 40, $50 million. You wouldn't even receive that if you weren't transferring the copyrights. But if you look at the entirety of that section of the asset purchase agreement, you see that there was another part to the payments which included the royalty stream that would occur in the future, both from the existing UNIX products and the UnixWare products.

If you look at Mr. Bradford's memo to the board right before Novell approved this transaction, he identified those four royalty streams, which turn into a lot of money. The stock is worth about 40, $50 million, $50 million a year in the UNIX royalties, the estimated present value of $60 million or so in the UnixWare royalties. So this was a sale of a business. This wasn't simply serving as an agent, as Mr. Braham suggested, to collect for someone else.

For instance, you've got here all the title to the UNIX licenses. If you have a real estate agent handle your house, you don't give them title to sell it. I don't know of any real estate agents who would pay me something like

2638

$100 million to handle a transaction. This agency was very limited to the collection of royalties that Novell was going to keep, and the rest of this was the sale of a business.

Now Amendment 2 also is needed to make sense of something you've heard me refer to and my colleagues refer to throughout the trial, the license back provision, and that's because -- and Novell has never been able to explain this, it makes no sense for Novell to have kept the copyrights and then the license back right to use them. If they kept them, they wouldn't need the license back. That is clear evidence that this was intended to be a sale of the copyrights.

The license back of assets appears right in the asset purchase agreement in section 1.6. Now Novell tries to say, well, it only applied to the new products, so that's why you had the license back. But the plain language of the license back says, all of the technology included in the assets, which means they are getting a license back to the assets being sold. They wouldn't need a license to use that if it wasn't for the fact they were selling the copyrights.

And, in fact, if you look at the technology license agreement, it says specifically, as between Novell and SCO, ownership of licensed technology shall reside in SCO. We think that makes it very clear, and you have heard a lot of witnesses say when I asked them or Mr. Normand

2639

asked them that does it make any sense to have a license back if you retained the copyrights, and everyone agreed with that.

Now Amendment 2 -- with Amendment 2, the agreement also makes sense in light of -- let's see, there we are. With Amendment 2, the agreement also makes sense in light of the testimony of the witnesses that you've heard. Now I told you a few weeks ago in the opening, pointing to this chart, that you would hear from ten witnesses drawn from both the Santa Cruz and the Novell side of the transaction who would agree that it was intended that the copyrights were sold. All ten of those witnesses, either through video deposition or through live testimony here, have so testified.

I would like to start with the Santa Cruz side because there's been a lot of attention here paid to what Novell intended and what was going on at Novell's board meeting. That's really not the issue before you. The issue before you is what the two parties to a contract intended. So you have to look at both parties' intent and how they expressed that to each other. And there is no confusion at all on the Santa Cruz side there. All of these executives and negotiators testified consistently that this deal required the transfer of the copyrights.

You remember Doug Michels. I think that was

2640

pretty memorable videotaped testimony, wasn't it? He was perplexed that anyone could even raise the issue. Copyrights are like breathing oxygen. I'm going to read you a little bit of his testimony. He says, I guarantee you, we put copyright notices in every document we wrote. How could we do that if we didn't own the copyrights? We put copyright notices in every module of source code we wrote. They all said we own the copyrights. We own the intellectual property, and every action we took represents that. I don't do a very good imitation of him.

THE COURT: Mr. Singer, remember, if you read too fast, the court reporter will have difficulty.

MR. SINGER: I will try to read slower as well.

Michels also said, we took over the business. We were in the business of selling intellectual property. We were in the business of supporting the intellectual property. We were in the business of providing marketing materials. We couldn't do any of that without owning the copyrights.

He was asked if any attorney from Santa Cruz ever told him that Novell was asking for -- that he had to go to Novell and ask them for the copyrights. He said, I think I would have laughed them out my office.

Now you recall that you also heard testimony from Steve Sabbath who said, when we bought the UNIX business

2641

from Novell, all copyrights came with the product and Amendment No. 2 was meant to confirm that, and he testified to that.

In addition, you had Kimberlee Madsen. Ms. Madsen has no interest in this litigation. She works for Apple. She came here and testified clearly to you that the copyrights were going with the assets. She was asked, do you have a view, as you sit here, as to whether the parties intended that the copyrights would be retained by Novell. Answer, no. The intent was clearly to be that the copyrights for the UNIX and UnixWare were to be transferred to The Santa Cruz Operation.

And you heard Mr. Mohan, Mr. Wilt also. So there is no question on the Santa Cruz side of the equation that everyone agrees that the copyrights were part of the deal.

Now in a typical case you would expect to see the Santa Cruz executives and attorneys saying one thing and the Novell executives and lawyers saying something completely different. The incredible thing about this case is that you have numerous senior executives and lawyers who were with Novell at the time who agree with Santa Cruz, who agree that the copyrights were intended to be sold.

Now you have heard from Robert Frankenberg, the chief executive officer at the time, on the first day and again on the last day of testimony. I think he's probably

2642

the most important witness in this trial. Ladies and gentlemen, in the future, when I think of a stand-up guy, I'm going to be thinking of Bob Frankenberg. He has no financial or other interest in this. A lot of CEOs would simply duck something like this and say they don't remember, it's a long time ago. He didn't do that. He has given you forthright testimony, both on the first day of trial and yesterday, that this was a deal to sell the copyrights along with the rest of the business.

He acknowledged that he missed that line item in one part -- one word in a board resolution that he thought was probably referring to the NetWare copyrights, but that it was clear, because he was the guy at the top, that this was a sale of the business, including the copyrights. That's why the error had to be fixed a year later with Amendment No. 2.

His testimony is consistent with the testimony of Duff Thompson, of Ty Mattingly and Ed Chatlos, the people most involved in the negotiation of the deal. They were the people out there in California for months negotiating this. These were the people who looked at Alok Mohan and the other Santa Cruz people across the table and said, you are getting the business lock, stock and barrel, except, of course, for those royalties which were going to help pay for it. These were the people who came here and testified that there had

2643

never been any suggestion made in that process of Novell holding back the copyrights.

Now Novell suggests some of these witnesses, who, remember, are their own executives, should be discredited because some of them later went to the business and therefore had a financial interest in SCO. What I would submit to you, though, is their testimony is consistent with individuals who have no such interest, Mr. Levine, Mr. Frankenberg. I think they insulted Mr. Chatlos, their senior director, by suggesting because his wife had a little stock that somehow he isn't telling the truth when he said this was the deal he negotiated. And Mr. Thompson, who you can judge, was a forthright witness.

Basically, what Novell is telling you is that you would have to believe that all ten of these witnesses, all ten, half of whom are former senior executives, were either mistaken or lying in order to agree with what Novell would have you believe in this case.

Now how did this happen? How did the problem happen that required Amendment 2? I think we have gotten a little more insight into that over the last several days. I think you see what happens when you have a set of lawyers rushing to document a deal under a lot of time pressure. This is Tor Braham's forced march. Mr. Braham ignored months of negotiations between the parties that preceded the

2644

last two weeks, which is when he got involved, as simply discussions about a potential transaction that he didn't really have to pay attention to.

He also ignored the term sheet which I asked him about, a term sheet which, if you look at it when you look at all the evidence, he had, which, before he got to work on 9-11-95, or within that period he got to work, said what the business people had negotiated, and it says, UnixWare and SVRX, the intent is to provide all rights to SCO including rights to modify, rights to sublicense binary copies, rights to distribute source code. And, ladies and gentlemen, if you compare that to the instruction that Judge Stewart read and you'll have with you, you'll see that lines up very closely to what the rights are that an owner of a copyright has.

Now going back to Mr. Braham's forced march, what are the other things that indicate how this problem happened? The excluded assets schedule, which has originally had this exclusion of copyrights, it wasn't even provided until the week before the signing. The fact that he testified to you that on a big issue like this there was no push back from Santa Cruz shows that this wasn't discussed, it was missed. Can you believe a situation where Novell pops up a few days before the closing and says, we're going to sell you the business, but we're going to hold the

2645

copyrights, and Santa Cruz says, yeah, that's fine, it doesn't push back? It doesn't make any sense. This was just missed in a schedule.

Mr. Bradford's September 18th, 1995 board memo didn't mention that either, which explains why Mr. Frankenberg and other people on the board who aren't looking at the minutia of the resolution but are looking what their general counsel sent to them in advance of the meeting, it didn't mention anything about retaining the copyrights.

And then there was one more piece of evidence that was interesting. When Mr. Braham testified, I asked him about this copy he made notes on during the board conference call and, interestingly enough, as you'll see, because that's in evidence as Exhibit V-3, even that copy that their lawyer was making notes on during the call, supposedly supporting the exclusion of copyrights, had no copies of the schedules at all attached to them. So if that's the same copy people were looking at at the time, they wouldn't have even had the schedule that had this erroneous copyright exclusion on it.

Now you do have someone who says I remember exactly that at the board meeting they said the copyrights were excluded. You will have to determine the credibility of that, because that was Jack Messman, the chef executive

2646

officer who approved the slanderous statements.

I put his testimony up here to draw attention to the fact that while he remembers that clearly when I asked him about that in his deposition, he didn't even know which decade this meeting occurred in. He says I think in the board presentation they made to us in, whenever it was, '81 or '83. But yet he has a distinct recollection of this one point, which, by the way, isn't reflected in the board minutes as having been discussed, and he recalls nothing else, the same Mr. Messman who you could judge his credibility for when he was here before you.

So I think this is how the error was made, and I think you can see that in the rush of those last few days, excluded asset schedule had a term that was inconsistent with the intent of the deal, either by mistake or perhaps even accepting you have some overzealous lawyers who acceded that, and then it was fixed with Amendment No. 2. And not only does that bring everything in the asset purchase agreement together and make sense, it also makes the deal sensible in light of what was told to the public.

Novell's version of the events can't be squared with the official press release it issued jointly with Santa Cruz. And while it says it's a SCO press release, Mr. Frankenberg said and was quoted in there that this was the approved joint release. They are the acquiring party. They

2647

said, SCO will acquire the UnixWare business and UNIX intellectual property. That's the core intellectual property.

The Wall Street Journal, which said, the deal includes the purchase by Santa Cruz Operation of most trademarks and intellectual property associated with UNIX software. A lot of people read The Wall Street Journal at Novell. No one popped up, never heard anyone say The Wall Street Journal has this wrong. That didn't happen either.

Novell's version can't be squared with the report to the United States government in Novell's Hart-Scott-Rodino filing. True, they put the schedules in the APA attached to the back of the document, but they were summarizing the deal for the United States government in the text. When they summarized it, they said, the assets to be acquired by Santa Cruz were all rights and ownership of UNIX and UnixWare. This is a big thing, the copyrights. If that was excluded, don't you think they would have put in the text we keep the copyrights, except the copyrights. Mr. Braham had no explanation for that whatsoever.

Even IBM recognized that SCO had the copyrights, an irony there. The documents that you've seen in the last few days, including yesterday, are documents where IBM, in certain positions it was taking in this dispute that came up a year later, said, SCO is protected by copyrights. You can

2648

show us the source code because you have copyright protection. So none of what the outside world was looking at would be consistent with what Novell would have you believe.

Now, ladies and gentlemen, you have also been instructed by the Court that you should consider the course of performance. How a party acts is sometimes more important than anything else. It's an indication of their intent. And the instructions said that the course of performance is something that you can look at to determine by their actions whether the copyrights were intended to stay with Novell or to go Santa Cruz.

And what have we heard about that? This has virtually been undisputed testimony from three different individuals, three individuals who have been with the UNIX business all the way back to the 1990s. Bill Broderick, Andy Nagle and John Maciaszek. You've heard Bill Broderick say, we sent letters out to all these customers. This is an example of the Prentice-Hall letter. Novell sent it out, a lot of different people signed them, and it said, as you may know, Novell transferred to SCO its existing ownership in the UNIX System-based offerings, that included all releases of UNIX and all the UnixWare releases at the time. It doesn't make sense if it wasn't true you tell the customers that.

2649

You heard Mr. Nagle talk about how during the transition period they actually changed the code on the software, not just on the outside of the box but in the software itself, the code that reflects who owns those programs, and they did that for the UnixWare program that was being built at the time at Novell. They didn't have any new code after the sale in it. That only makes sense if you are transferring the ownership of that old code as of the time of the deal. There's no refutation of that.

Of course, you can also look for intent at what happened with the copyright registrations. You'd think that Novell would have kept them. That's sort of important. They were with Santa Cruz. They have been sitting on that desk during the trial. You saw them in the testimony through Mr. Maciaszek.

Now all of this testimony shows that the answer to question number one should be yes, that under the amended asset purchase agreement, the transfer of the UNIX and UnixWare copyrights from Novell to SCO occurred.

The next question you will need to answer -- and let me, before I move onto the next question, say that first question is very important because it will mean if you answer that yes, that SCO can go about rebuilding its business with the ownership of the copyrights it needs for that business.

2650

The next question you'll need to answer is whether Novell slandered SCO's ownership of the UNIX and UnixWare copyrights. Now if you agree that SCO owned the copyrights, there is not much question here that a slander occurred. In fact, you have multiple slanders. You have what could be characterized as a campaign of slander.

It started on May 28th, 2003 with the statement that SCO is not the owner. There is the one moment of truth on June 6th, and then a resumption in letters in August of obtaining copyright registrations by filing with the United States Copyright Office they own the copyrights. Other statements in December and January. Mr. Stone's statement on March 16th publicly that we still own UNIX. There is no question those statements are false. They are definitive statements by Novell.

So the question, then, is whether or not these statements were made with what is called constitutional malice. You've been instructed on that. We submit that you will find that they were made with reckless disregard for the truth and, after June 6th, with actual knowledge of their falsity.

Now we call this constitutional malice because this is what takes into account the concerns of the First Amendment. There is a right to engage in free speech. But there is not a right to make statements that are false, that

2651

are made recklessly or with knowledge that they are false. That's the difference. That is the balance of the free speech that we hold dear in our constitutional system with the protection against slander, defamation and falsehoods.

Now the instruction shows that we have to prove, and we believe we have, that the statement was made with knowledge that it was false or with reckless disregard of whether it was true, which means that there was a high degree of awareness of the probable falsity or that at the time the statement was made Novell had serious doubts that the statement was true.

And we think that fits to a T what happened with the May 28th slander, because let's think about the statement that went out in the press release. You heard testimony that they knew there was an unsigned Amendment 2 in their possession, but in a rush to get this out on May 28th, they didn't do their checking to see whether or not that Amendment No. 2 had, in fact, been signed. They went ahead. They could have easily determined that it was signed. Do you think they could have called Wilson Sonsini, the lawyers who negotiated the deal, to determine if it was signed? Do you think Mr. Messman could have called Bob Frankenberg, his predecessor? There are a lot of ways they could have determined that was signed. Could they have checked their files a little more clearly? We submit that

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that constitutes recklessness, making the statement on May 28th, 2003.

However, the statements after May 28th, 2003 were not just reckless, and one more point about that. Mr. LaSala said he turned the company upside down for a signed version. I suggest that submits they knew this was a very important document. This would determine the issue.

So they get the document from SCO on June 5th, and all during this period they never ask SCO -- they're about to put out a statement, they are talking to them for months, did they ever say we have this unsigned copy of Amendment No. 2, do you happen to have a signed version? No word of it. They just go public on May 28th.

June 5th they receive from SCO a copy of the signed Amendment No. 2. Mr. McBride testified before you, and I think you will find it credible when he says Mr. Messman, when confronted with the signed version, admitted that SCO owned the copyrights. It's credible, we believe, because the very next day he said that publicly in this press release where, on June 6th, the amendment appears to support SCO's claim that ownership of the copyrights did transfer in 1996.

Now they want you to believe they didn't mean what they said on June 6th. Ladies and gentlemen, the June 6th statement was not just a casual statement. You heard it was

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reviewed by Joe LaSala, general counsel. It was written by him. This is not a complicated amendment. It's about one paragraph long. They had the unsigned version for some time. It didn't take Novell months to figure out what it meant. It took Novell months to try to turn it around to figure out a way to suggest that it doesn't mean anything so they could go back to a campaign of slander, which was launched later in 2003. And this is then done, because of the June 6th, 2003 press release, with knowledge of falsity.

They were cautious at first with the internal letters on June 26th and August 4th. And then later, for reasons that you can conclude were coincidental or otherwise, they went public again on December 22nd. And, in fact, the claim that they made in March, we still own UNIX, an outrageous claim, not even limited to the copyrights, but we still own UNIX, was echoed by Mr. Messman on that witness stand. We still own UNIX, when the company had been sold, the business had been sold eight years earlier. So these statements were false, knowingly false, and we submit to you were made with constitutional malice.

Indeed, the falsity of the claim, which includes the copyrights that they registered with the United States Copyright Office saying they owned them and which includes Mr. Stone's statement on March 14th sarcastically saying, sorry, Darl, we still own UNIX, all of these are knowingly

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false because we know what they thought. We know on June 6th they recognized the ownership of these copyrights were with SCO.

But the falsity of this is proven by another piece of evidence that I think is very important. There are Novell witnesses, people who work for Novell, who have stated that it is so absurd to claim to own the copyrights while having sold the business that it would be unethical to take that position.

Ed Chatlos in his testimony when he was asked did you ever get the lawyers' authority to hold back the copyrights, absolutely not, no. And he said, the deal I negotiated with SCO included the copyrights, so we modeled it to include the copyrights. From a personal standpoint, it would have been unethical to exclude them.

Burt Levine, an in-house counsel involved in drafting of the operative agreements, he said, well, I believe that being an ethical company, you couldn't resort to withholding something that the transferee in this case would be entitled to. If it is that clear that it causes internal Novell lawyers and negotiators to say it would be unethical to suggest that you're holding back the copyrights while selling the business, then these types of allegations made by Novell have to be concluded to be knowingly false.

Now if you find a false statement and you find

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constitutional malice, we submit that you will have found, then, that Novell is liable for slander of title and you should then consider whether we have proven damages. And there are two types of damages that you need to be concerned with, special damages and punitive damages.

Special damages are the damages that are intended to compensate SCO. Here, the damage done to SCO is damage to SCO's SCOsource program. It was started by Darl McBride after he was told by Linux supporters within his own company that certain UNIX libraries were being used to run Linux and that some companies had call him and wanted to see if they could get a license to do that. As time progressed, SCO found more of its intellectual property in Linux.

They decided, rather than trying to stop people from using Linux, they would want to obtain a license, a fee in the marketplace, that they had the right to do, for their intellectual property. Now how much UNIX is in Linux will be decided in the courts. That is not an issue that you will need to decide in this case.

A lot of companies, as Professor Pisano told you, have expressed that they wanted protection against infringement, at least the risk of infringement. You'll recall Mr. Tibbitts told you that when they were selling the SCOsource program, that they had a code room that people could come to and see the code. And after looking at that,

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a number of those individuals and companies decided to take a license.

We're not talking about unsophisticated companies here. You had licenses entered into with Microsoft and Sun and Computer Associates, actually demanded a license as part of another deal. If there was nothing to those claims, they wouldn't be out there doing that.

After looking at that proof -- and some of that SCO presented to customers. An example of what SCO presented to customers was shown early in the trial. These were comments from industry analysts who had visited the code room. One of them, Information Week, stated that, my impression is that SCO's claim is credible, says Laura DiDio, a Yankee Group analyst who was shown the evidence by SCO Group earlier this week. It appears to be the same code. According to EE Times in June 2003, if everything SCO showed me today is true, then the Linux community should be very concerned, said Bill Claybrook, research director for Linux and open-source software at Aberdeen Group in Boston. Computer Weekly, from what I've seen, I think people should be taking the SCO accusations seriously.

Now there is also evidence that Mr. Tibbitts testified to that he obtained from IBM's Web site which indicated that Linux was derived from UNIX, which is no surprise and just sort of the start of the issue, and he

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sent letters in December of 2003 with examples of code. And some of that code you've heard, the Malloc code from Silicon Graphics, essentially admitted had been infringed.

So the important point here is this isn't an issue that's going to be decided in this trial. The marketplace can decide that issue of whether or not individual companies want to obtain a license from SCO or whether they want to wait further and see how that issue is resolved, or simply decide never to do that. You heard Mr. Pisano, based on the surveys, indicate what percentage of people fell into which buckets. That's the way a licensing program works.

Now you've also seen, however, that members of the open source community have viciously attacked SCO for trying to protect its intellectual property. I would submit to you that Novell has brought some of those attacks into this very court proceeding here. It remains that SCO has valuable business relationships with business partners, big companies like McDonald's, NASDAQ. It entered into, as I mentioned, agreements in 2003 with Microsoft, Sun, Computer Associates. And so while there are elements in the community that really hated SCO for saying that Linux, which they thought was free, incorporates intellectual property of UNIX, that would not have prevented the SCOsource program from making sales. Indeed, I would suggest to you, ladies and gentlemen, if there wasn't any real competitive threat to Novell's Linux

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activities, this campaign of slander would never have been embarked upon.

There is a difference -- you heard Professor Pisano testify about this, there is an important difference between a slander that goes to ownership and simply expressing views that there is or is not infringement or how much infringement exists. One is opinion. The other is fact. If someone says that I sold you this business and you didn't get the copyrights, that is just as much a slander on title if the person who sold you your house says you didn't get title to the house when you bought it. That, when it comes from such a credible source, the former owner of the business, is deadly. That type of slander killed the SCOsource business.

Now Mr. Hatch will talk to you in a few minutes about the customers that were lost and the amount of damages that were inflicted, but I would like to say a few words first about punitive damages, because there's another type of malice called personal malice that's important for punitive damages, and that is the intent to injure. The intent here to injure SCO. Unfortunately, there is no shortage of evidence of that type of intent. Unfortunate for SCO in the sense this is what they were dealing with back in 2003.

The defendants, we submit, issued two of these

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slanders on the same day as SCO's earnings reports. Now Novell and its witnesses suggest to you that this is a coincidence. They are entitled to argue that. And you're entitled to reject that and to say it is not a coincidence when there are only four days during the entire year that SCO announces its earnings and Novell makes two public announcements of its assertion that it owns the UNIX and UnixWare copyrights, and both of those public announcements occur on two of the four days when SCO was announcing its earnings. I would submit to you that that is not coincidence, that that is an intent to injure. That is malice.

That is before you even get to Maureen O'Gara's testimony that Chris Stone admitted to her that the press release was timed for May 28th to damage SCO's stock price. Sure, the PR people at SCO, they had one journalist who was willing to take on some of this community hate, said why don't you take a jab at PJ and things like that, but there is no reason to believe she invented this. It's consistent -- it's consistent with what actually happened on May 28th the same day as the earnings release, they issued this slander, and they did it to, quote, confound SCO's stock positions. And Chris Stone did it while he was chortling, I think was the word. That's malice, ladies and gentlemen.

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There's also Jack Messman's admission that they tried to publicize this press release in May as widely as possible. That exhibited intent to harm SCO. It's not enough to say, well, we wanted to make money, we wanted to get our story out there. That's not a defense for spreading a falsehood as widely as possible. There is evidence that these acts were made to injure SCO because of SCO's taking on of IBM.

Novell's attempted waivers of SCO's legal rights, while they are an issue that the Court will deal with in terms of whether those were proper, you can consider the fact that they made those waivers as elements of intent, that those were made in the same year, at the same time that a $50 million investment in Novell's Linux purchase was made by IBM. You can consider the attempt by Mr. Stone and Mr. LaSala to cover up the fact that these were done at IBM's request by not telling the truth about it the first time around. And that is also evidence of malice and effort to hurt SCO in order to help a third party.

So thank you for your attention, ladies and gentlemen. I'll have the opportunity to address you for a little bit at the end of the closing arguments, but at this time I would like to turn the podium over to Mr. Hatch.

MR. HATCH: As Mr. Singer just talked about, the SCOsource licensing program began to have sales. There was

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testimony of sales to Sun, Microsoft and other companies. These were real sales, tens of millions of dollars. SCOsource was off to a strong start. Now I would like to talk about what happened next.

Now you heard Mr. McBride testify about the Hewlett Packard deal. You were shown the contract, which is here on your screen, and this deal was near completion. Now you were shown a red line here, markings, because Mr. Byers of Hewlett Packard, he personally had typed in these changes, and this was his offer on behalf of Hewlett Packard to contract with SCO for $30 million. You will notice here it's six separate payments of $5 million each.

Now Novell showed you some e-mails that said that Hewlett Packard was weighing the pros and cons of doing this deal. They were looking at the risk factors that were out in the community. But the bottom line, even with all those risks, they were still considering this deal, and they made a $30 million offer. The negotiations continued, and then all of a sudden that changed.

Mr. McBride told you that Novell had inserted itself into this deal. Why? They told HP that they were going to reassert copyrights ownership, and with that this $30 million contract was gone.

Mr. McBride testified, we went deep into the discussions here, and ultimately Mr. Byers came back and

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informed me that it was difficult for Hewlett Packard to complete the transaction as long as Novell was out there saying they still owned the UNIX copyrights.

Likewise, SCO had begun negotiations with Google. You heard that testimony. Google was the largest Linux user in the world with over 500,000 servers. That would have been a significant contract as well. Google pulled out of that deal referencing that Novell's slander was a substantial factor in not doing that deal.

Mr. McBride also testified that he personally met with Michael Dell. Michael Dell is the CEO of Dell Computers, another large company. After being excited about that partnership, the deal died shortly after Novell's December 22nd, 2003 reassertion of its ownership rights in these copyrights. Now that was the primary reason that that deal died.

You also heard testimony from three of Novell's -- excuse me, SCO's salesforce, Mr. Later Gasparro, Mr. Phil Langer, and Gregory Pettit. You may remember that was the day that Mr. Normand got to play two of those individuals for us. Mr. Gasparro, you will recall, he had testified that he had actually made earlier SCOsource sales. He actually had concrete sales of product. He talked about EBI Web hosting and others. He testified that he had somewhere between 50 and $60 million of licensing opportunities in the

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first six months of the program, Ford Motor, Google, Cisco. But after Novell's claims of ownership, the salespeople started getting negative feedback, as he described it, and the results of the SCOsource program after Novell's claim of ownership was dramatically affected in a negative way.

Mr. Gasparro told you that he visited with a large number of corporate Linux users. He said that in calls, letters and e-mails, he would be told that Novell's claim of ownership was a major factor why customers didn't sign deals with SCO.

Mr. Phil Langer, he is another SCO salesman, he testified that he had over $3 million in the sales pipeline. After the Novell slander, there was a strong negative impact on sales and sales dried up. He specifically talked about one deal with Regal Entertainment who wanted to do a deal between 300 and $350,000, but then told SCO, we can't go forward, we can't buy your intellectual property because there is not clear title on it like we do when we buy movies that we have clear copyright title to.

The third salesman was a man named Gregory Pettit. He was a regional salesman. He said he had the exact same problems as all the other salesmen. You may recall that he was -- he said he was negotiating deals with other major companies like Raytheon and Cisco. He specifically testified as to Merrill Lynch, but that deal couldn't be

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done while SCO was being faced with Novell's claim of ownership.

Now the judge has instructed you that evidence -- that specific customers didn't do deals with SCO is one of two ways that SCO can prove special damages in this case. Consistent with the Judge's instructions, we have shown through these three salesmen, Mr. McBride and others, that Novell's conduct was a substantial factor in these customers' decisions not to go forward with the deals.

Now Novell's conduct doesn't have to be the only reason, as the Judge has talked about. There can be other reasons. There are always lots of reasons a customer doesn't do things. Novell's conduct must simply be a substantial factor for the customer's decision not to do a deal with SCO. That was certainly true here.

Now the second way the Judge instructed you that you could find damages is by proving -- using the type of analysis that Dr. Pisano and Dr. Botosan used. I'm going to discuss their calculations in just a minute. But just for a moment, I want to talk to you about the things you heard from Mr. Musika. He recited pretty much every nasty remark -- Mr. Singer talked about that, almost every nasty remark that people were out making about SCO in an effort to say that sales were lost for some reason other than Novell.

Now we've acknowledged from day one that people

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dislike SCO. It was a small Utah company that was standing up for itself with property rights. It was trying to protect its business from larger, more powerful competitors. That's it's right. But here's what you need to remember about the bad things other people claimed about SCO.

Dr. Pisano and Dr. Botosan both took all of those factors into consideration. They never said, ever, that 100 percent of the people who were potential customers would buy SCOsource products. That would be unreasonable. That wouldn't be conservative. You heard them testify that the numbers were somewhat less than that, taking all of these factors into consideration.

Now what Mr. Musika didn't want to admit, because it didn't clearly fit his zero damages model, is that despite some of these factors, some of the largest companies in technology, Sun, Microsystems, Microsoft and others, had actually done deals knowing all these things that Mr. Musika talked about. Of course, these companies understood the risks, that they took a license. That speaks volumes about what other companies would have done if Novell hadn't slandered the title.

Now that's exactly what Dr. Pisano found. You remember his chart. He's taking all things into consideration. He said there would be between 19 and 45 percent of the total potential market of likely buyers of

2666

SCOsource products. That was him taking into account, as you can see here, not just one independent study, but three of them. You will notice that all of them came in this 19 to 45 percent range.

Now you heard Dr. Pisano's testimony. He was here. He listed in his discussion in a pretty dramatic fashion that he had taken into account every one of the risk factors that Mr. Musika claimed, and he showed clearly through hard scientific data that this 19 to 45 percent of potential customers were there. His number wasn't zero.

Now as Mr. Singer pointed out, you will be given this jury verdict form. In question number three you will be asked what is the amount of special damages, if any, that you award SCO as a result of Novell's slander of SCO's title to the UNIX and UnixWare copyrights. You'll be asked to put a number on that line. So what is the best and proper measure of those damages?

Dr. Botosan and Dr. Pisano came here to help you with that, to help distill some complex business economic concepts into real numbers. Now Dr. Pisano -- excuse me, Dr. Botosan did her calculations in front of you. I told you at the beginning I would have her come here and show you exactly how she made her calculations. She did that for you. She calculated two streams of revenue, vendor licenses -- and you'll recall, those were the larger

2667

licenses that even independent analysts said there were probably a sale of at least 15 of those in the time period we're talking about, at $10 million each. That would have been $150 million, just that. But you recall that Dr. Botosan said, I want to be conservative and I'm going to -- consistent with the internal forecasts, I'm going to estimate somewhat less than that. And you'll recall that her number was just a little bit more than half of what the independent analysts are saying.

For right to use licenses, she used several internal, independent forecasts to reach her conclusions. And then she showed you that she double-checked her work with Dr. Pisano's numbers, remember, using one of the independent forecasts, and then she went back and she used Dr. Pisano's numbers of potential sales to double-check her work. She did the calculations in front of you, and her number was not zero, but her numbers were consistent when she double-checked it.

Now Dr. Botosan's estimates were conservative. Growth, remember she chose a flat growth number. She used a number of licenses that was much lower than even the independent analyst was going to use. You'll recall that on price, she could have used higher prices. We've heard testimony that there were sales as high as $1399 for some of these, $695. Deutsche Bank said going forward prices would

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come down, they would be selling somewhere between 100 and $300. They said $200 per unit would be the most likely price. Dr. Botosan said I'm going to be very conservative. I'm not here to give some giant number. She picked the lower of those numbers.

So to the extent she cherry-picked, she cherry-picked conservative. That's why she said I'm building conservatism on top of conservatism. I'm starting with a low base and I'm not letting it grow. So there are two levels of conservatism buried in those numbers, and her numbers reflect that.

Well, when Novell's turn came to talk about damages, Mr. Musika did not do any calculations for you. Even though his task was the same as Dr. Botosan, to show if Novell had slandered what would the damages be to SCO, he just highlighted the risk factors that Dr. Pisano had already told you that he had taken fully into account.

Now you heard Musika admit that Dr. Botosan used the correct "but for" analysis. There was a lot of issue about that. But when he finally came to her, he admitted not only that it was correct, but he personally had used it in other cases, used the "but for" analysis. But then in this case he didn't use it. He didn't make a single calculation. He refused to admit that even $1 was lost. You will have to decide whether that was really likely,

2669

whether that's reasonable or whether that's fair.

He rejected Dr. Pisano's analysis of the market completely and found zero lost licenses. Is that reasonable? Is that fair?

Now Dr. Botosan put her numbers up, and this is the same as on the board. She had a lower range, as you'll recall, just short of $114 million, and an upper range of $215 million.

If you will go to the next slide.

We ask you to award our client somewhere in that range, that would be fair, and that would be the number you would put here in number three on the verdict form.

Now you are going to have one more task. Mr. Singer, you heard him talk about malice, you heard him talk about the bad acts of Novell, and consistent with what the judge has instructed you, you are allowed to award punitive damages.

Now punitive damages are an additional and special type of damages that are intended to keep a party from doing bad acts again, to teach them a lesson. So let Novell, in this instance, know that it can't conduct business this way in the future.

You are going to see -- and these are pages from Novell's most recent filing with the United States government, their 10-K, and this exhibit has been admitted

2670

during trial, you will have access to that, you can see Novell has a worth of about a billion dollars. And you are allowed to consider that when you make a decision to make an appropriate award.

Mr. Singer has discussed in detail the evidence that Novell recklessly and knowingly asserted its ownership on that May 28th day, the time that SCO was going to issue its earnings statement, and they announced it in that way to maximize the damages to SCO.

Now Novell later knew for a certainty, as Mr. Singer pointed out, that it didn't own the copyrights, that SCO did, and yet it reasserted to the world through a press release, with malice, its false claim of ownership on December 22nd, 2003. That was the second time. It was the second time designed to maximize the hurt to SCO, on the day of their annual earnings report.

You are able to send a message through an award of punitive damages, and the message and the amount are up to you.

Could you go back to the verdict form.

Number four is where you do that, it says, what is the amount of punitive damages, if any, that you award SCO as a result of Novell's slander of SCO's title to the UNIX and UnixWare copyrights. We leave you to take into account Novell's worth. We leave that number to you.

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Thank you very much.

THE COURT: Ladies and gentlemen, we'll now take our recess and we'll return and have Mr. Brennan.

Ms. Malley.

(Jury excused)

THE COURT: Mr. Singer, you'll have 12 minutes in your rebuttal.

MR. SINGER: Thank you.

THE COURT: We'll take 15 minutes.

(Recess)

***** Part 2 *****

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(Recess)

(WHEREUPON, a sidebar conference was begun.)

MR. BRENNAN: Your Honor, just two items. We observed during the opening closing argument that there were a number of sounds coming from the gallery, and we could hear a specific individual laughing and making certain comments. I wonder if it is appropriate to perhaps encourage the gallery not --

THE COURT: Absolutely. I did not hear that or I probably would have stopped it. Thank you for bringing that up.

MR. BRENNAN: The second is, and we probably should have brought this up before, but particularly with the fact that we're near the end and we will have the alternate excused, what are the rules of engagement that ought to be observed by the parties in terms of contact with jurors?

THE COURT: I always tell the jury that they are permitted to discuss the case with counsel, but they are not required to. I leave it up to them.

MR. BRENNAN: We just wanted to make sure that we were both operating on the same --

THE COURT: That is what I will tell them.

MR. BRENNAN: That is agreeable.

THE COURT: Thank you.

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(WHEREUPON, the sidebar was concluded.)

THE COURT: Ladies and gentlemen, and this is addressed to those of you in the courtroom, not counsel, it was just brought to my attention that during the closing argument thus far that there has been some response, audible and otherwise, to the arguments that have been made. I need to tell you that that is very inappropriate. If I had heard that I probably would have stopped the argument and I would have instructed the court security officer to remove you from the courtroom.

So just by way of a caution, do not react in any way to especially anything that might be observed or heard by the jury. That is totally inappropriate. Okay.

Ms. Malley, if you would please bring the jury in.

(WHEREUPON, the jury enters the proceedings.)

THE COURT: Go ahead, Mr. Brennan.

MR. BRENNAN: Thank you, Your Honor.

Ladies and gentlemen, I also wish to thank you for your attention during this three-week period. No doubt there has been sacrifice and difficulty in arranging your schedules to be here. On behalf of Novell we appreciate it, and we comment that this system of justice that we have in this great land is entirely dependent upon people like you who are willing to make the sacrifice, to endorse an inconvenience, to hear a dispute and hear it fully and then

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to make a decision.

It is true at the outset that I asked you to wait for the rest of the story, and I do hope to sum up today what the rest of that story is.

I should also indicate, that as the judge has shared with you, because the burden of proof falls squarely and heavily on the plaintiffs, SCO in this case, I will not have a chance to address you a second time, and so I'll have to simply ask you if there is any further argument that is made by SCO's counsel, at least to anticipate what you think Novell might say in response, since I won't have that opportunity.

I am the first and I may be the last lawyer in my family. We'll see how that turns out. But when I grew up there was often a statement that was used, and sometimes I used it myself, something like don't make a federal case out of it. The suggestion was was that if there was a minor or trivial disturbance, that that paled in comparison to a federal case.

Well, here we are in federal court, this is a federal case, and unlike some of those minor annoyances or disturbances that I saw as a child, this really is a big deal. It is a big deal for a couple of reasons. I would like to suggest a few of those to you.

First of all, what you have heard during the

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course of this trial is that was something known as the SCOsource license program. What that program was intended to do was to reach out to users of the Linux operating system and extract from them a payment. And that SCOsource program has threatened many, many, many Linux users across the world, and because of that a huge uproar has resulted.

It has been highly publicized. There have been many comments made about it. This case has been closely followed. This is of great significance to people beyond Novell. The threat to the open source community is presented by this case. And for that reason Novell, as I will share with you, has felt compelled to respond in the public marketplace with its view and opinion and position regarding this case.

Now, secondly, this case is frankly a gateway to other litigation. You heard and saw in the presentation of some of the evidence that there are other cases out there awaiting to be heard. If SCO is successful in this case, and there is some determination of ownership of copyrights, contrary to what we believe the evidence is, then there will be other suits filed. At least of threat of suit hangs over all Linux users, particularly in the marketplace. So this is the entree to many, many other cases if there is an adverse determination made here in this one.

The third point is this case presents a very

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important fundamental question regarding the meaning and sanctity and reliability of contracts. When I mentioned it the first day I held up for you the contract at issue in this case, carefully drafted, meticulously written, lawyers on both sides representing their clients to the best of their ability. But if we're going to disregard the words of the contract, and we're going to look to some other source other than that which the parties wrote, and, in particular, if we're going to try to devine what people might have thought or hoped or wished in hindsight that they had put in the agreement but didn't, to gain an advantage now 15 years later, then the whole reliability of contracts it threatened.

It does not a take a broad imagination to consider the chaos that would result if two parties, ably represented, were to reach an agreement and express their agreement in writing and then later, much later, have that written agreement challenged by outside thoughts or improvications. This case represents the fundamental question as to whether a party can rely upon the written contract.

Now, there is also a fourth issue here. This case, and it is a unique one, and in some ways it is a thrill to be a lawyer in this case, because although this case has come to you in a commercial transaction it involves

2677

a fundamental constitutional right, and that is the right of free speech guaranteed to all citizens, including corporations, to speak freely their position on a matter of public interest.

The First Amendment guarantees the right that individuals and businesses and, of course, as the instruction suggests, that businesses are comprised of individuals, and a corporation is a collection of many who work for it, and its shareholders, and so these really are individuals, and whether or not an individual, whether through a corporation or acting on his or her own, has the freedom in the marketplace when there is a matter of public controversy to stand and state their position without fear of reprisal or monumental damage claims because of speaking what one believes. This case presents that question.

Now, with that in mind, and in the limited time that I have, I am going to try to walk through and distill three weeks of evidence as briskly as I can and highlight some of the important points that I think will help and guide and assist you in making these very important weighty decisions. I recognize I cannot compress three weeks of evidence into the hour that I have. I'll do my best. I'll rely upon your ability to recall some of the evidence that you have heard and witnesses that I am not able to touch upon.

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At the conclusion I too will turn to the verdict form that you will receive, and suggest to you what I would recommend on behalf of Novell would be the appropriate result for you to consider and make as you deliberate.

Now, the first question that is presented is this fundamental point of whether or not the amended asset purchase agreement, this contract, transferred the UNIX and UnixWare copyrights as of the date of the asset purchase agreement from Novell to SCO. The answer is it did not. How do we know that? Well, first of all, we do need to look at the parties' intent. There are two parties to this contract.

You saw time and time again, and I apologize for the repetition, but you saw the minutes of the board of director meeting where Novell, governed by its board of directors, met and considered the asset purchase agreement before it was signed, and very clearly presentations were made to the board, and there is a resolution which states without equivocation that Novell will retain all of its patents and copyrights and trademarks. That very language, and you'll see it in Exhibit Z-3 when you have a chance to retire to the jury room and look at it, that very language is what actually appears in the contract.

I hold this book up again, and you'll have a chance to look at Schedule 1.1-A which sets forth in four

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short pages the list of assets that were sold. The contract speaks very clearly that only the assets listed in that schedule were the ones being sold. This was not the sale of an entire business, it was the sale of specified assets, and that is what the contract tells us.

You'll also have a chance to then turn to Schedule 1.1-B, which is the express list of excluded assets. Over and again you have heard that all copyrights and trademarks except for the trademarks UNIX and UnixWare were excluded.

Now, one of the things that was passed by us quickly in the early presentation, but I trust it didn't get past you, is that this asset purchase agreement signed on September 19, 1995 did not go without review. There was almost three months from the time it was signed until the time that the deal closed on December 6, 1995 where everyone involved had a chance to review it. If somebody somehow thought the wool had been pulled over their eyes, or they didn't understand or there was a mistake or a misrepresentation or an omission, both sides had full opportunity to review it.

In fact, they did. You'll see when you retire to the jury room and you can look at Exhibit T-5 which is the amendment number one to the asset purchase agreement. It covers in a span of some ten or 12 pages modifications made to the initial asset purchase agreement. Importantly,

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Schedule 1.1-A which identified the assets was not modified to include copyrights, and significantly Schedule 1.1-B, which expressly excluded copyrights, was not changed either.

There can be no suggestion, no credible suggestion that somehow the wool was pulled over somebody's eyes. Both sides had a full chance to review it and both sides had a chance to make suggested revisions, and there was not even a suggestion, let alone an agreement, that the excluded copyrights ought to be modified.

Now, in addition, on December 6, 1995 there was a document that was entered into that actually transferred the assets. The asset purchase agreement itself transfers nothing. Instead, it is a promise that Novell would transfer assets, but the actual document that accomplishes that was the bill of sale. The bill of sale that you saw, Exhibit W-5, references the transfer only of the assets. The assets are, again, described in the asset purchase agreement, so to really understand what was sold one would have to look to the bill of sale and say what does the bill of sale say? The bill of sale tells us that to understand what was sold we look to the asset purchase agreement, the assets, Schedule 1.1-A. So that is straightforward and clear.

Now, there is also something that was passed by, and you'll recall that Novell acquired the entire UNIX

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business from AT&T, not an asset purchase agreement, but a full merger, and Novell held those assets for about two years and then there was a limited transfer of some of the assets in 1995. Then a couple years after Novell sold some of the assets to the Santa Cruz Operation, and Santa Cruz Operation turned around and decided to sell whatever it acquired from Novell to a company called Caldera, now known as SCO.

Well, if we were to look at the agreement that Santa Cruz Operation entered into with Caldera or SCO, we would see in Exhibit 010 that the seller, Santa Cruz Operation, could not represent to SCO that it had a chain of title with respect to all of the intellectual property. That includes the copyrights. So when Santa Cruz Operation sold what it had to its buyer, SCO, Santa Cruz Operation realized it could not make an entire sale.

Now, was this a mystery? Was this something unknown to SCO? Absolutely not. Let's fast forward to January 4th, 2003. You may recall this. Mr. McBride, who was not involved in any way with the asset purchase agreement or either of the amendments, does join SCO in 2002. One of the first things that he does is he wants to see whether he can change the business. The business that SCO had been engaged in up to that date was it was selling UNIX and UnixWare in particular, and it was even servicing

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the Linux world and helping Linux users and customers.

The business was not going well, and so Mr. McBride said is there something different that we can do? Is there another business we can pursue contrary to the one we have been engaged in? The idea came to him, well, maybe we can try to turn on our customers, our Linux users, and we'll go after them and try to extract payments. We'll go after the open source community rather than aid them. So he employed consultants, and one of them was Mike Anderer, who advised Mr. McBride in no uncertain terms in January of 2003, that there was far less that had been transferred to SCO than Mr. McBride would have hoped. In fact, it is an asset purchase that excludes all patents, copyrights and just about everything else. We need to be really clear on what we can license. It may be a lot less than we think.

Well, SCO relies on the wrong documents. Let's take a quick look at some of the things that SCO has suggested to you. First of all, what was presented was the so-called term sheet. First of all, where did that term sheet come from? It was presented first in court when Mr. Ty Mattingly came, and you'll recall that he found some documents in his garage, not previously presented during the course of the trial, and one of the documents in his garage was this term sheet. The term sheet wasn't the final agreement. The term sheet didn't represent what the parties

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signed off on. If anything, it was a preliminary sketch of a possible agreement, but it has been suggested to you that the term sheet was the final agreement. Not so. The final agreement was what the parties agreement to and signed.

Well, also suggested to you as evidence that the parties, contrary to what they said in their agreement signed, was that there was a press release, a joint press release. Well, of course, it was not a joint press release, it was one issued by SCO and it has its logo and Novell is not even a party to it.

And then it was suggested to you that, well, maybe what indicates a transfer of the copyrights is the technology license agreement, which is one of the exhibits to the asset purchase agreement. This slight of hand was performed. The suggestion was that, well, maybe what Novell was doing was it was taking a license back of the assets that it sold, and that means certainly the copyrights might have transferred because otherwise why would Novell take back that which it retained? That was the argument. The fact of the matter is that when you look at the technology license agreement, which you'll have a chance to do in the jury room, the license back provision related to assets that had been transferred. Clearly Novell and SCO agreed that when Novell transferred assets, Novell would have a license back to those assets. But the assets that were transferred

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didn't include the copyrights. That is what Schedule 1.1-B clearly said. So that was a slight of hand. I think you'll see past that quickly.

Now, in terms of the witnesses that were presented, there was a board put up in front of you about various witnesses, but if one looks carefully and listens carefully one will quickly devine as well that the witnesses that were presented to you either were not involved in the final negotiations, had not even read the asset purchase agreement, or were misinformed.

Well, let's look at who the actual witnesses were who were involved in the asset purchase agreement. You heard no mention of Jim Tolonen. He came here in court. He supervised the preparation of the asset purchase agreement as the chief financial officer of Novell. He testified that Novell had purposefully excluded the copyrights from the transfer. It wasn't a mistake. It wasn't a slight of hand. It wasn't an omission. He was present at the two board meetings held after the asset purchase agreement was entered into and at those board meetings reported on it. He is actually the one who signed amendment number two to the agreement, and he has no financial interest in the outcome of this case. He left Novell in 2000.

Well, should we rely upon Mr. Tolonen? Mr. Frankenberg said he did. In his testimony he indicated that

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he relied upon Mr. Tolonen's recommendation and advice. Mr. Frankenberg even said that he would expect that Mr. Tolonen would be in a position to accurately state what the position of Novell was relative to the asset purchase agreement.

Well, you heard from David Bradford, the general counsel of Novell. He came to court and he testified, and he is no longer with Novell, he has no financial interest in this case, but he told you that he had supervised the drafting of the asset purchase agreement, that he gave specific instruction to Novell's outside counsel to preserve the copyrights, and that he prepared the board meeting minutes and was at the board meeting when that very presentation was made, and that the board minutes were accurate. Mr. Frankenberg, of course, confirmed all of that as well. Mr. Bradford was deeply involved and he knew what happened.

You had the benefit of hearing from the lawyer who actually wrote the asset purchase agreement. He came here to court and testified extensively. If anyone would have known the language that was used and whether it was done perfectly, Mr. Braham would have been the one to do that. He testified that there was a specific strategy employed by Novell to protect its interests in this license stream, these SVRX license streams, and so the asset purchase agreement was carefully crafted in a particular way to

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protect that. Mr. Braham has no financial interest in the outcome.

Less there be any question as to whether Mr. Braham actually was involved, you saw the drafts. Now, it is hard to read the writing, and I feel badly for my own secretary who has to read some of my writing, but Mr. Braham wrote from start to finish and commented on the very specific terms of the asset purchase agreement.

This is important. Mr. Braham made it clear who his client was, not a single individual at Novell, but the client was the board of directors. The board of directors of the company makes the decisions and is the ultimate governing body. Mr. Braham shared with us that the board is the one that approved the asset purchase agreement. And then in terms of others who came that were not directly involved, you heard him identify the fact that Mr. Thompson was more involved in looking after the interests of SCO than Novell, and that others who had been involved certainly in the process, Ed Chatlos and Ty Mattingly, that they had not been as deeply involved when the agreement came to the final negotiations, and whatever views they had were not relevant to the board's decision.

Mr. Chatlos wasn't even at the board meeting. Mr. Mattingly was present, but as you have heard and we will highlight in a moment, does not remember things that were

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said. The board minutes speaks as to what really did happen.

Now, we also had a chance to hear from Allison Amadia. She is the one who drafted amendment number two. She is the one who commented on the initial language suggested by SCO's attorney. She is the one who knew best what the intent of Novell is along with Mr. Tolonen, and she has no financial interest in the outcome of the case.

Now, let's compare that to the witnesses that were presented to you on SCO's behalf. Duff Thompson was made reference to. You'll recall that Mr. Thompson had not been with Novell for very long. He had been previously at Word Perfect and when he came over there wasn't a place for him as general counsel at the company, because Mr. Bradford was the general counsel while this deal was being negotiated. He had already, as he testified, decided to leave the company. You heard the testimony that he had checked out. In fact, he was already planning to go to SCO and to be on its board of directors. You heard the testimony that Mr. Thompson was on SCO's litigation committee which approved the filing of this lawsuit against Novell. Mr. Thompson owns at least 110,000 shares of SCO stock.

We did get some good entertainment out of Mr. Michaels. The important thing is what did he actually say? Here is a portion of what Mr. Michaels actually

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testified to. He had no specific memory as to any specific agreement. He didn't even know what amendment number two was. He had not read the asset purchase agreement when it was prepared. He had never read it. And he had no comment on the asset purchase agreement. What we're going to do is look to the parties' agreement here, and we need to look to witnesses who actually read it and knew it and understood it and negotiated it. Whatever wishes or hopes or dreams Mr. Michaels may have had, he was not involved in the preparation of the asset purchase agreement.

We did hear from Mr. Mattingly formerly with Novell. You heard that he owns SCO stock. You heard that he was not involved by his own testimony in the details or the crafting of the asset purchase agreement. You heard that he had no involvement in the preparation of either amendment number one or amendment number two. You heard that he has no memory of what even happened at the September 18th, 1995 board meeting.

Well, let's look at some of the other witnesses. Steve Sabbath did not appear in court but you did have a chance to hear a portion of his testimony through videotape deposition. Now, it is very critical that we look at what Mr. Sabbath actually said. I would like to share with you a couple of snippets. As you recall his testimony, Mr. Sabbath had signed a declaration under penalty of perjury

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regarding what his views were. He had signed that in connection with the previously filed litigation involving I.B.M.

When asked about this he said, question, do you recall executing this declaration? Answer, I do, yes. Question, referring to that sworn declaration, you say in paragraph 11 of the declaration, quote, under the asset purchase agreement Novell retains significant UNIX related assets following the sale. For example, Schedule 1.1-B of the asset purchase agreement provided that much of the UNIX System V intellectual property would not be transferred. That was his sworn statement. It didn't end with that.

In that same declaration that was referred to in his videotaped testimony the following quote was elicited from his sworn statement. Quote, as described above in relation to the related agreements and amendment number two, Novell retained certain rights under the UNIX System V licensing agreements as well as certain UNIX System V intellectual property. This is the very lawyer at SCO who prepared the initial draft of amendment number two and signed it. So when he was first asked to make a statement under penalty of perjury, he confirmed, just as Novell has presented it to you in this courtroom, that Novell retained its intellectual property rights relative to UNIX.

Let's go back to Mr. Frankenberg. We were told by

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SCO's counsel that in their view he is the most important witness in the case. Well, if they believe that let's look at bit at what Mr. Frankenberg said. You'll recall both the first day he appeared and even here yesterday that I had the chance repeatedly to ask him about what the board had done and what it had approved. I asked him straight on whether the language in the asset purchase agreement signed by the parties, signed by him, was consistent with what the board of directors had approved. He said yes. And then there was some suggestion maybe that, bizarrely, even somehow that the board of directors of Novell was acting beyond its authority. To make sure that that was not the claim, I asked him and he said, no, of course not, they were not acting beyond their authority.

This is the testimony that you heard just yesterday. I apologize for the length of the question. Here is what he said. I asked him in this courtroom 24 hours ago this. So let me just see if I understand what you're saying. Is it your contention that although what was discussed with the board was an express exclusion of copyrights, and although the words that were in the asset purchase agreement expressly excluded the transfer of copyrights, and the minutes of the board of directors meeting excluded all copyrights, somehow in your mind you either saw or thought you heard something different than the

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express provisions? Is that essentially what you're telling us? Yes, it is.

Here is the problem. Imagine the difficulty any one of us would face if we were to make some sort of purchase or enter into some transaction, and we wrote it down and both parties signed it, and we thought we could rely on it, and then later someone were to suggest, well, I know that is what it says, and I heard the words telling me that that is what was agreed to, but I had something else in mind, and now I want to step away from it and not honor it. That is what is going on. That is the mischief in this case, from the most important witness, according to the plaintiff.

Now, Mr. Chatlos, and we don't want to place this out of proportion, but it must be known, as was elicited in testimony, that Mr. Chatlos's wife does work for SCO. He and his wife will make money if they win this case. Importantly, when we look to what was actually agreed to, and we look to the intent of Novell, he was not present at the board of directors meeting. He was not involved at that level. So his view or belief or suggestion has to be wondered a bit about.

We also did hear from Kim Madsen, who was an assistant to Mr. Sabbath at SCO. She had no specific memory or intent of the negotiation of amendment number two. She

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did not remember what was felt or believed or thought by that, and she testified that she had no specific recollection of discussing with Mr. Sabbath what he might have thought about amendment number two.

Now, there are others who came to court and testified. We heard from SCO's former chief executive officer, the one who we were told was in essence the sponsor of this SCOsource license program, what his interest is, and he told you how many millions of dollars he would make if SCO were to prevail. He acknowledged that he had a financial interest in the outcome of this case. Unlike other witnesses, it is not ending with that.

Mr. McBride, by his own admission, had no involvement in the preparation of the asset purchase agreement or any of the two amendments to it. He simply was not a party to it. He can't be looked to to understand what the intent of the parties was at any time.

Now, we also had a chance to hear from Mr. Tibbitts, who is the general counsel of SCO. He too has a financial interest in the outcome of this litigation. He too stands to gain if SCO prevails, but he too, like Mr. McBride, having joined SCO not until 2003, had no involvement whatsoever in the preparation of this agreement.

So, again, who we heard from was a parade of witnesses who either weren't there, far removed from the

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activities, not directly involved, not present at the board of directors meeting, or have a personal financial interest in the outcome of the case.

Now, you may ask the question, why would Novell have decided to exclude the transfer of copyrights when it entered into this agreement? Even posing the question sounds one sided. Keep in mind there were two parties to this transaction. The question might as easily be asked why did SCO agree not to transfer the copyrights? Because they did agree to that. Well, I think you'll find and you'll recall that there are significant, valid business reasons.

Let's first turn to Mike DeFazio. He was not on the list of witnesses that SCO's attorneys put up, but he was a critically important witness. You'll recall that he appeared by videotape deposition as well. Mr. DeFazio, as he testified, was the general manager of the UNIX business unit at Novell at the time that this transfer took place. He previously had worked for AT&T and he then came to Novell with that acquisition and he was asked, was it your understanding that the A.P.A. at the time was intended to transfer the copyrights for UNIX to Santa Cruz? His answer was no. The A.P.A. as it was written retained it and it was my understanding that the retention was the way that the team crafted the words to implement the goal of bulletproofing this financial asset stream, to protect it.

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Now, that is exactly what Mr. Braham told you. What was the rationale for excluding the copyrights? He testified that it was to protect Novell's interests, it was a concern that SCO might move into bankruptcy, and if it did there would be real entanglement and difficulty for Novell to protect its interests in those SVRX licenses, and there was also concerns about Microsoft.

One of the other things that was passed by is this important fact. The suggestion has somehow been made that Novell must have sold the entire business. Well, that is contrary to what the words say. It is also contrary to the practical economic realities. Novell paid over $300 million to acquire the business and what it got in return was about $50 million in stock. It retained what it already held, and that was rights to license fees, and then the other portion of possible consideration was if SCO actually succeeded in what it bought, and that was the right to develop the UnixWare, and if SCO had succeeded and it developed this merged product, as you'll see reference to in the asset purchase agreement, and made a profit, then Novell would have at a certain level been able to participate in that. SCO did not succeed and Novell did not receive any of those funds.

Well, back to Mr. Frankenberg, apparently the most important witness in the case. He was asked, despite

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his testimony, whether it was possible that in fact the asset purchase agreement purposefully had excluded the copyrights and he finally was able to acknowledge, yes, that is a possibility. We asked him several times about the asset purchase agreement exclusion and whether that is what the board had agreed to. He acknowledged, yes, that is what the board had agreed to.

Now, there were some people that you did not hear from in this trial. I wonder if you were curious about them. You heard that Novell's in-house counsel, David Bradford, working with Jim Tolonen, the chief financial officer, worked with outside counsel of Novell to prepare this asset purchase agreement. Santa Cruz Operation was not without its representatives. In fact, they hired a very talented set of lawyers from a very large law firm, a prominent law firm at the time, the Brobeck Phleger firm. You heard about Ed Leonard, this very experienced senior partner, Jeff Higgins and Scott Lester who worked with them, and none of them appeared in this case. None of them appeared by deposition testimony. Those are empty chairs.

That must tell you something about it if SCO was not able or willing to present any witnesses to suggest anything contrary to Novell's presentation. There was a complete failure or lack of evidence by SCO with respect to the actual negotiations on the asset purchase agreement.

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They have the burden of proof. They should have been required to present witnesses. They should have come forward with those who are on the other side of the table if they actually were going to try to substantiate this rumor or innuendo that there was a mistake or that Novell slid something passed them. Those very talented lawyers were not here. Nor did they go and ask the questions so that they could present it to you.

We do agree that amendment number two is of critical importance. Let's look at what amendment number two says and what it does not say. You may recall that the very first draft of this agreement resulted when Steve Sabbath, Santa Cruz's in-house counsel, contacted Ms. Amadia and said words to the effect, according to her testimony, there has been some clerical error. We need to fix that now, more than almost a year after the agreement was signed, and he sent over some language.

Well, what was the language that he proposed? This compares the language that he proposed with what actually was agreed to. You'll see in red the language that Novell struck out and which it rejected, and the language that was struck out was this very broad terminology about this amendment number two which pertained to the UNIX and UnixWare technologies. Mr. Sabbath also suggested and which SCO has acquired hereunder.

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Mr. Sabbath by the words he used wanted to have a document signed to suggest that in fact there had been a transfer of copyrights, but that was not the case and the language we have rejected that. So the final language of the asset purchase agreement very clearly contradicts the claim that SCO has been making in this case that there was a transfer of the UNIX and UnixWare copyrights.

Instead, the language is all copyrights and trademarks except for the copyrights and trademarks owned by Novell as of the date of the agreement required for SCO to exercise its rights with respect to the UNIX and UnixWare technologies.

Well, what was required? First of all, what was meant? We turn again to Mr. Tolonen. If we were to compare the people involved, Mr. Tolonen, the business representative, the chief financial officer who signed the asset purchase agreement, and Novell's legal representative, Ms. Amadia. On the other side of the transaction, Mr. Sabbath. What testimony did you hear on either side?

Very clearly Mr. Tolonen said we did not intend to transfer ownership of the copyrights to Santa Cruz. He made reference to the fact that when the suggestion was made by Santa Cruz that such a transaction be entered into that it was rejected. Then he testified that amendment number two so clearly was not intended to transfer ownership of the

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copyrights, that he did not go back to the board of directors to get approval for it, and he testified that to change the asset purchase agreement, to undo that which the parties had agreed to, to actually include the transfer of copyrights would have been such a material change, a big deal, that Novell's board of directors would have had to have been involved and they were not.

Let's go back to Ms. Amadia, the one who wrote the agreement. In your mind are you positive that Novell did not intend to transfer the copyrights? I am. How can you be so sure? Because I negotiated it, I drafted it, and that was not my intent. I didn't have the authority to do otherwise.

Well, so we have looked at the two people at Novell involved, the senior executive, Mr. Tolonen, the lawyer, Ms. Amadia, and who is on the other side? Back to Mr. Sabbath. What did he tell you about the intent and meaning of the second amendment? Question, and to the best of your recollection who at Santa Cruz would have been involved in negotiating the language of paragraph A of amendment number two? I don't know. Question, can you recall prior to signing amendment number two focusing on paragraph A to any extent? I don't.

A complete absence of anyone from Santa Cruz or SCO coming into this courtroom and suggesting what the

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intent or meaning was of amendment number two. Once, again, we have a clear contrast. You heard the evidence from Novell's representatives, and they testified without equivocation that there was no intent to transfer the copyrights, and then we have a complete absence by SCO.

Now, that then prompts this question. Were copyrights required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies? Well, we need to get an answer to that question, and so the first place we ought to look to is SCO itself. We heard this testimony from Mr. McBride. He was asked this very question. You may recall this. Question, didn't you tell them that you could run that part of your business without ownership of the UNIX copyrights? Answer, we could run our business without the copyrights just like H.P., I.B.M., and all of the other licensees of UNIX can run their businesses as well.

Let me pause right there. I will come back and finish this.

What is the significance of his open admission in this courtroom on this point? First of all, you'll recall that companies like Hewlett-Packard and I.B.M. and others, Sun Micro Systems, a number of other companies, they have a license to use the UNIX software. They then would take the license that they had to UNIX and build on top of it their

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own flavor, their own amendments and derivatives and additions. None of those companies owns the UNIX copyrights, but are perfectly capable of running their business by working on their derivatives and marketing and selling and profiting in some respects handsomely. That was the business that SCO said it was going to be in when this asset purchase agreement was entered into.

The SCO business was to take the UNIX operating system and then to build on to it, to amend it, to create derivative works, their own flavor, and they were left free to sell that and to derive royalties and payments for that additional work. They did not need ownership of the UNIX copyrights to do that. That is precisely what Mr. McBride acknowledged was the case.

Here is part two. The business that was involved in this sale of assets wasn't the business that Mr. McBride wanted to get into in 2003. He wanted to start a new and different business, a business that is not the subject of this agreement. He wanted to turn on his customers, and instead of helping them with UNIX or with Linux, he wanted to claim on SCO's behalf that these many customers who have been using this free open source software now were infringing UNIX. That is a new and different business. It is not the business that was the subject of the asset purchase agreement.

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This is why Mr. McBride says the part that we differ on here is we were unable to run our business for the licensing side without the copyrights, and the licensing side was really the future of the company. What he was talking about was the litigation shop that he wanted to turn SCO into.

So there will be no question, and you may recall this, Mr. Acker asked so let me get it straight so the jury understands. You could operate as a software company without the UNIX copyrights? You couldn't run your SCOsource campaign without the UNIX copyrights? Do I have that correct? Mostly.

Now we need to understand precisely what it is that SCO is doing. You'll recall that in May of 2003 it sent out letters to some 1,000 or more companies claiming that it owned the UNIX copyrights and licenses and it wanted to extract payments out of these various companies. What was it supposed to be doing? What was it prohibited from doing? If we look at the asset purchase agreement, Section 4.16-B as amended, you'll see in the highlighted portion that SCO shall not and shall have no right to enter into new SVRX licenses except in the situation specified in small i of the preceding sentence or as otherwise approved in writing in advance by seller. What SCO was doing was directly violating its contractual obligation by turning on

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people that it previously was designed to service and help.

Now, the suggestion has been, oh, it would be ludicrous and impossible and how could a software company possibly operate without holding the copyrights? And then you heard in open court from the general counsel, Mr. Tibbitts, and I asked him this question. You're aware of a proposed transaction just in the last year whereby SCO would have sold its business and retained solely the UNIX copyrights, correct? Correct. So although you have been told it would be ludicrous, that is precisely what SCO has given contemplation to. I didn't want there to be any confusion so I asked him to clear it up. What SCO has proposed to do is sell the UNIX business, product business, but retain the UNIX copyrights? Yes, and the rights to enforce those copyrights. SCO is interested in being a litigation shop.

Now, others were asked about whether or not copyrights were required. Mr. Messman told you that in his view as of 2003 that SCO didn't need the ownership of copyrights to run its legitimate UNIX and UnixWare technologies.

Let's make sure that we have a very clear understand again of what is at issue. These are Legos. Maybe some of you have seen these in your home and stepped on them and tripped on them. A Lego represents a building

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block. What initially Novell had and owned, and that the part it had acquired from AT&T, is represented by the small block on the left, the UNIX and the UnixWare copyrights that pertain to Versions 1.0 and 2.0. Under the asset purchase agreement certainly SCO had the right to use that intellectual property without ownership to develop its building block on top, the UnixWare copyrights. Whatever SCO has developed on its own, its derivative work, it owns the copyrights to. There has never been a challenge to that. Novell does not dispute that. SCO has every right and has and did for eight years before this litigation was commenced operate that business. It was not until Mr. McBride and SCO came up with its new litigation strategy, that the suggestion has been made that copyrights were needed.

Again, you heard the suggestion that somehow Mr. Braham or Mr. Bradford snuck the copyright exclusion into the A.P.A., that it was done in a corner, no one saw it, and no one had time to think about it. That is belied by the actual evidence. Mr. Levine, he is the one who was an AT&T lawyer who came over to Novell, and he is the one who actually then moved on to SCO after the transaction. He is the one who provided comments on Schedules 1.1-A and B. You heard and saw what he said. This is his very draft that supposedly was snuck by or snuck in. You will see that in

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his draft of Schedule 1.1-B, the excluded assets, very clearly all copyrights and trademarks except for the trademarks UNIX and UnixWare. That wasn't a last second invention. Mr. Levine, who, again, SCO purports as its witness, actually wrote that language.

Now, was Mr. Frankenberg duped? Here is the question. Now, do you recall whether or not you ever reviewed this excluded asset schedule in connection with the transaction? I am sure that I did, yes.

Mr. Mattingly, he also came to court. Sir, to your knowledge did the lawyers and business people at Santa Cruz have the opportunity to read the included and excluded asset schedule before they agreed to the A.P.A.? Yes. No question that those people had a chance to do that.

Here is an interesting document. You may have seen it from two sources. The first time you saw it was when Mr. Mattingly came into court and had that folder that none of us had seen before, said that he had it in his garage, he had given the documents or showed them to SCO's lawyers without ever notifying Novell, and I hadn't seem them before and I asked him for them. This is one of them. On it is a draft, a handwritten notation of September 16th, 1995, before the transaction closed, and it includes the exclusion of all copyrights and trademarks. It was not a secret. People knew about it.

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Now, the suggestion has been made that somehow if we disregard the language of the agreement, if we forget that it is there, or we want to act and believe contrary to it, let's see how people behaved and that should inform us as to whether or not Novell transferred the copyrights. You were told about three individuals that SCO brought forth, all SCO employees that suggested that somehow Novell acted inconsistently with the retention of copyrights. The first example was that somehow on the copyright notices, the marks that are put on the physical, tangible medium, that there was a copyright notice suggesting that SCO held the copyrights.

In his testimony he indicated that we didn't go back and change prior versions. We only put the SCO copyright notice on current or go-forward versions. Of course, that makes perfect sense. I showed you before that if you in essence inherent or have rights to use a product and you build your own on top of it, you can claim copyright protection and rights for the new work that you have performed. That doesn't mean the previous work you own copyright protection to. Mr. Broderick acknowledged that.

Then you heard from Mr. Nagle. The suggestion was that, well, maybe there is a copyright notice on the box in which the SCO C.D. is sold. He acknowledged that what is written on the box does not tell you what the ownership

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resolution is, you have to look to the legal agreements to establish copyright ownership. Fortunately, we have the legal agreements.

Then we had Mr. Maciaszek. The suggestion was made that Novell sent these letters out to customers after it entered into the asset purchase agreement, and somehow there was some concession by Novell in those letters that it had transferred ownership of the copyrights. You'll have a chance to look at examples of those letters. You'll see that they do not say that Novell transferred ownership of the copyrights. Mr. Masiaszek was good enough to confirm is that these letters were simplifications, and that what customers actually were being told is after the transition that if they had questions they should contact Santa Cruz. Why? Because Santa Cruz was acting as the administrative agent and was being paid five percent to administer the collection of royalties, that they should do something for the work they were asked to do and that is one of the items.

Now we get the important question. Did Novell have a First Amendment right to state its position? This is probably something you are familiar with. The First Amendment is incorporated and is the very first and is the most preeminent of the Bill of Rights. It protects a number of things. I'll take you back to a civics class. Congress shall make no law respecting an establishment of religion or

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prohibiting the free exercise thereof or abridging the freedom of speech or of the press or the right of the people peaceably to assemble and to petition the government for the redress of grievances. This is the fundamental foundation of our union and is the fundamental protection for our individual liberties. Novell does have a constitutionally protected right to comment on matters of public interest.

The Court has given you an instruction, and some of this was covered in part, but not in its entirety with you with Mr. Singer, and it bears some repetition. The instruction that you received states the following: The third element requires the party claiming slander of title to prove by clear and convincing evidence, not a preponderance, just a little bit more than a tip of the scales, but clear and convincing evidence, that the statement disparaging the ownership of the UNIX and UnixWare copyrights existed as of the date of the asset purchase agreement was made with constitutional malice.

Let's pause. Why is this very high and heavy burden placed on SCO? To protect constitutional rights, to avoid the chilling of speak, to avoid reprisal for those who choose to speak out on a matter of controversy. Imagine the difficulty that would occur to any one of us, to any citizens, individual or corporate, if they could not speak their mind because of a fear that they would be hailed into

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Court and held accountable for monumental damages. That is why this heavy burden exists. It is a constitutional right.

The instruction continues. That is, the party claiming slander of title must prove that the statement was published with knowledge that it was false or reckless disregard of whether it was true or false. What does that mean? The instruction is clear. Which means that the party making the statement acted with a high degree of awareness of the probable falsity of the statement, or that at the time the statement was transmitted, the party making the statement had serious doubts that the statement was true.

So as we examine the statements that are at issue in this case, that is the standard that has to apply. In order to hold Novell liable for slander, you must be convinced to the heightened degree of clear and convincing evidence that at the time the statement was made it was known to be false, or that it was made with reckless disregard that all of these other factors are satisfied.

What is clear and convincing evidence? The Court has instructed us. Clear and convincing evidence leaves no substantial doubt in your mind that the constitutional malice is highly probable. That is a very high standard. It protects all of us. Spite, ill will, hatred, bad faith, evil purpose or intent to harm does not alone support a finding of constitutional malice.

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So with that in mind, let's make sure that we understand what was going on in the marketplace and what Novell was facing when it made its alleged and accused statements. First of all, and you'll have a chance to look at this, Exhibit I-11. Not long prior to the announcement of the SCOsource licensing program SCO itself was in the business of licensing Linux and selling Linux to users, encouraging Linux users to use that open source product. It reached out and developed a clientele of Linux users. Those are among the very type of customers that SCO then turned on when it figured it wanted to make a bit more money.

What was the motivation for that dramatic turn, a new and different business? Well, Mr. McBride told us that it was because of the financial condition of the company. Things were not in good shape. Asked about this same licensing extraction program, Mr. Thompson was asked about whether it was a hail mary and he said, well, like every other company there are good times and bad times and we were looking for ways to improve our business.

What did Santa Cruz Operation think of what SCO was doing? Keep in mind Santa Cruz Operation ran the UnixWare business and sold it to SCO. When they themselves were asked what they felt about SCO's license extraction and litigation shop we got this answer. Guys who run protection rackets occasionally make a short-term profit, but never

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build a long-term business. That is what Santa Cruz Operation itself thought SCO was doing. There was an uproar in the market. There was tremendous publicity. There was a backlash of significance among Linux users and those who serviced Linux.

Well, what is it that SCO sought to do? You'll recall this, that in February of 2003, recognizing apparently that it did not own the copyrights, and that its licensing program would be dependent on actually owning the copyrights, SCO came to Novell through various means, one of which was senior executives to in-house counsel. One of the things that SCO sent over to Novell was a proposed agreement to clarify that, in fact, SCO owned the copyrights. If, indeed, SCO owned the copyrights as it claimed, so it could carry out its licensing extraction program, why on earth in 2003 was SCO asking for written confirmation? It is a little hard to see, but you'll have a chance to look at Exhibit I-31, and there was even a signature block put on that. What did Novell do in response? It rejected and did not sign that agreement.

Well, there were threats that went out. This is a threat that went everywhere. It even went to Novell. The claim was made that Linux infringes our UNIX intellectual property and other rights. That is the claim that was made. It was not made in isolation. It was made broadly and

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throughout the marketplace. You have heard that this demand was made to at least the Fortune 1000. Novell was faced not only with a public uproar, but it itself was challenged, it itself was the recipient of one of these letters.

This is only a small sample, and time does not permit more, but what was in fact the response? Linux advocates doubt the validity of the SCO licensing scheme. Advocates claim scheme violates the general public license or G.P.L. software license.

There are other examples. SCO irks about everyone in tech except Microsoft. Time does not permit, but if one were to think about the implications, Linux was a challenge to Microsoft. The Linux market was growing and developing, and it presented a market challenge to Microsoft's operating system. Who would be a chief beneficiary of the failure of Linux? Microsoft.

Well, ultimately Novell had to respond. In the midst of this adverse publicity, these claims and threats to Linux users, yes, on May 28, 2003 Novell did respond. And Novell did at that time report to Mr. McBride that Novell owned the UNIX copyrights.

Well, you heard this testimony. We need to put ourselves in the time and place of May 28th. Where is Novell? What is it thinking? What is available to it? It has the asset purchase agreement. Mr. Messman, as you

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recall, testified that he was present at the board meeting in which it was approved, and despite efforts to embarrass him because at one point he said in the 1980s instead of the 1990s, but you saw the board meeting minutes and you saw that he was present, and he recalled that the asset purchase agreement did not convey copyrights.

Mr. McBride was asked whether he thought that it would be reasonable for a person reading the asset purchase agreement, without the benefit of amendment number two, to conclude that there was no transfer of copyrights. Mr. McBride acknowledged that that would be a reasonable reading of this document. That is where Mr. Messman was in May of 2003.

Now, the suggestion has been made somehow that Novell must have known about amendment number two or it was creating or fabricating. Well, why did Novell respond as it did on May 28th? We heard from Mr. LaSala, the then general counsel of Novell, and he indicated that it was imperative to Novell's business interest to respond formally and publicly, although he did not know anything about SCO's earnings announcement. Mr. Stone testified that the issue was of wide interest. I don't think there is any dispute about that. He had no idea of the earnings timing. Mr. Messman told us that Novell had to put out its side of the story, and he wanted the world to know what Novell's

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position was.

Now, the suggestion has been made that there was some sort of malice. I think the sole witness actually that was presented to you was a journalist, this Maureen O'Gara. You heard her testimony by videotape. It was skimmed by in the argument by SCO's counsel. In fact, she confirmed to the public relations director of SCO that she wanted war pay for the articles and promotion that she was making for SCO. Excuse me. She was asked by SCO to send a jab P.J.'s way. You heard the testimony. P.J. is a woman who writes and comments on interests of the open source community, and SCO wanted Maureen O'Gara to write something negative about her. That hardly is evidence of a detached, objective journalist.

The other thing if you listened carefully, and you had a chance to see it again today, was the attempt by Ms. O'Gara to create words of Mr. Stone that he never said. If you listen carefully to the testimony, she was pressed several times, tell me what were the words that Mr. Stone used. She never answered that question squarely. Instead, she talked about, well, maybe he was laughing. These are my impressions. Pressed repeatedly, it is important to know what he said, she could not do that.

I would like to take a pause right now and have us focus on what was going on and why Novell responded the way it did. There are a number of things that are

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represented on this time line. I'm going to run across them and I hope they will be of help to you in summarizing and understanding.

The first event that we have here is the May 12th, 2003 threat letter sent by SCO to Fortune 1000 companies and others. SCO's gone public with its SCOsource licensing program and has made demands on many companies including Novell. Here is an interesting thing. Two days later on May 14th, SCO pre-announces publicly its earnings for that quarter. Now, you have heard a big deal made about Novell must have conspired and planned to release its response on the earnings date. Those earnings were announced two weeks before. Anyone knew that the earnings had been out there if they did careful research. What Novell did do on May 28th is respond and you have seen that response.

What happened a few days later on June 5th is Mr. McBride, having discovered himself a signed copy of amendment number two, sends if over to Mr. Messman. I will pause just for a minute on this. You heard in Mr. Singer's argument that what Novell should have done is reached out to its law firm, Wilson Sonsini, to get a copy of amendment number two. But you also know, if you had a chance to carefully listen, Wilson Sonsini was not involved in amendment number two. That was done by Ms. Amadia in-house.

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Then the suggestion was made that, oh, Novell should have reached out to its former chief executive officer, Bob Frankenberg, and got a signed copy of amendment number two. Well, that is an interesting proposition. Mr. Frankenberg had left the company well before amendment number two had been signed and had nothing to do with it. Novell did not discover amendment number two, the signed copy, until Mr. Messman received it, and then Novell, trying to act responsibly, did release the statement that you have seen suggesting that amendment number two appears to support the position articulated by SCO.

However, Novell then with some time undertook to review matters more carefully. Why did Novell respond the way it did on June 6th? You heard that it was because SCO was claiming that it was going to go public with an announcement, it was going to call a press conference on June 6th and go public, and Novell wanted to be responsible in its response and thus gave the muted response that it did on June 6th, because of the public pressure being exerted on it by SCO.

On June 6th, 2003, Novell did send a private letter to SCO indicating that now that it had a chance to look more closely at amendment number two, that it did not agree with the position that amendment number two effected a transfer of ownership. So as of June 6th, 2003, in a

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private non-published communication, Mr. McBride and SCO knew that there was no claim or concession of ownership.

Let's take just a quick look at then what SCO does on July 21st, if we could highlight that.

In the face of Novell's private letter that it did not agree that ownership transferred, Mr. McBride in an interview, a public interview said if you go talk to Novell today I'll guarantee you what they will say, which is they don't have a claim on those copyrights. That was a direct contradiction of a private communication. In the face of what Novell said privately, Mr. McBride and SCO went public suggesting something directly to the contrary.

Let's go back to the time line, please.

The next development is Novell again on August 4th sent another letter and said we dispute SCO's claimed ownership of these copyrights. So now here are two letters by Novell, private ones, not published, disputing the claim. What does SCO do in the face of those private communications? Mr. McBride in a public address said this. If we could look at the development on August 18th. In a keynote address, a public address, Mr. McBride said in regard to Novell's recent claim that it still owns the copyright to UNIX, McBride said it took SCO just four days to press the eject button on that claim. What Mr. McBride is doing, having received private letters from Novell where

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Novell said we did not transfer ownership, Mr. McBride is going public and claiming that Novell has conceded the point.

Back to the time line, please.

On October 14th Novell registers the copyrights and this happens on November 18th, if we could highlight the development on November the 18th.

This was a transcript of an interview with SCO's C.F.O., Mr. Bench. In that transcript, publicly made available, SCO said once we have the copyright issue resolved, where we fully had clarity around the copyright ownership on UNIX.

So what is happening, one more time back to the time line, is Novell is acting privately and Novell is not going public, but is repeatedly telling SCO we retain ownership of the copyrights, and what Mr. McBride and others at SCO are doing publicly is saying, no, you don't, and suggesting that Novell was conceded the point.

With all of that brewing Novell then on December 22nd, if we could highlight December 22nd, did make a public release. What was the form of the public release? Copies of our correspondence and SCO's reply are available here. Contrary to SCO's public statements, as demonstrated by this correspondence, SCO has been well aware that Novell continues to assert ownership of the UNIX copyrights. So

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what it did was invite people, if you want to know what is going on, if you want to see for yourself what the agreement say, if you the consuming public want to know the answer, we invite you to look at it. That is how Novell responded.

It is for that, making available to the public the actual position by Novell, that there is a claim of slander here. None of that comes close to any claim of constitutional malice. First of all, because Novell has not made a false statement. It did not transfer ownership of the copyrights. Second of all, those who made the statements did not believe at the time that they were false statements. Third, they were not made with the requisite level of malice.

Now, I would like to speak just for a minute or two on the issue of damages. The suggestion has been made somehow that Novell has done these atrocious acts and ought to be held liable for damages, and one of the measures of damages is what did the marketplace do in reaction to the real world?

Well, if we could take a look at just a summary then of what really happened in the real world. People dispute to this day that Linux infringes UNIX. That has not been proven, it has not been established, and the entire damages analysis that you have heard in this court from Dr. Botosan is premised on the notion that somehow there is

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infringement. That hasn't been proven. It is hotly debated and it is contested and users of Linux to this day reject the notion that there is infringement.

There were indemnification programs offered, that is software companies, Novell being one, Red Hat, another large software company and others, told their users we do not believe there is a problem here, but if you get into trouble, we'll cover you.

There is the issue about the G.P.L. I don't have time to explain that in-depth, but you heard that term, and essentially what it means is that the general public license under which Linux is used would provide protection for Linux users.

You heard as well that Linux users could quickly adapt and they could design around and that they would not pay a licensing extraction fee to SCO. Instead, they would just design around it. The suggestion of the price, and you have heard about that, and people were not willing to pay what SCO was charging and there was this tremendous public anger.

That is not all. I will only make a brief reference to this. The claim by the damages expert for SCO has been that looking in a but-for abstract world what would have happened? We have evidence from the real world, what really happened, and we know that in 2004 in this litigation

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a judicial ruling was issued that at a minimum raised a serious question as to whether amendment number two transferred copyright ownership to SCO. That was available to the public, and consumers were able to look themselves at the details of the ruling, and to read the rationale of the Court and make their own decision based on that ruling that called into question SCO's claims.

That was not all. On August 10th, 2007 in this courthouse, not Judge Stewart but another judge, issued summary judgment in favor of Novell, holding as a matter of law that Novell did not transfer ownership of the copyrights under the asset purchase agreement, including amendment number two. So consumers in 2007 looking at the rulings of a Federal District Judge concluded or could conclude that there was no reason to buy a SCOsource license.

Was that determination reversed? Yes. That is why we are here today. But the important rationale is what were consumer thinking at the time when they were able to look at the rulings being issued by a Federal District Court judge?

THE COURT: Mr. Brennan, you have four minutes left.

MR. BRENNAN: Thank you, Your Honor.

Now, there were many who rejected the claim that Novell had any influence on buying decisions. This is one

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of many. Let me use as an example H.P. It was put in front of you the notion that somehow Hewlett-Packard did not take a license and didn't enter into this agreement because of Novell. I urge you to take a look at Exhibit D-20 when you have a chance to retire to the jury room. You will see very clearly why Hewlett-Packard for so many reasons, none of which even reference Novell, decided not to enter into that agreement that was suggested to you was a fait accompli. I urge you to take a look at that.

Now, how do we conclude this? I would like to show you another copy of the special verdict form in this case. If we could take a quick look at it on the Elmo. The first question asks did the amended asset purchase agreement transfer the copyrights? No. How do you know that? You can look at the agreements themselves. Look at the words. Look at what they say. Look at the amendments. The contract does not support the claim being made here.

If you answer that question no, as we suggest the contract compels, then that really is the end of your deliberation. The instruction suggests that you sign the verdict form and turn it in. So my plea to you after considering the evidence is mark it no.

Now, if it goes past there the question is whether or not Novell slandered the title, and may I suggest this, that if you get into the jury room and begin your

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deliberations and there is an initial conference about what has happened here, and if there is a question in the mind of any of you, if any of you has some doubt in your mind whether there was a transfer of copyrights, I submit that you're reasonable people and if a reasonable person can differ on that question how on earth could Novell have committed this atrocious act of slander if reasonable jurors would have a question in their own minds about whether the contracts permitted it?

This constitutional standard is high. When you walked into this courthouse you saw a beautiful painting on the wall. That painting is a representation of the signing of the Constitution. That Constitution protects us. It protects people from spurious claims. It protects them against making outrageous demands for money. It protects you and me so that we in a free market and in a free economy and a free country can state our position without fear.

Ladies and gentlemen of the jury, there may be a difference of opinion, there may be a question of the legal merits, but this contract supports Novell's claim and it was entitled to rely on it and it was entitled to protect its position.

We're very, very grateful for your time and attention to these matters. Novell is not liable. It did not slander title. It owns those copyrights. If there is a

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reasonable difference of opinion, at the very least it did not slander title. It and you and I are protected by this beautiful Constitution.

Thank you, ladies and gentlemen.

THE COURT: Thank you, Mr. Brennan.

Ladies and gentlemen, why don't you stand up. You have another 12 to 15 minutes here, and I want to make sure that you have got some energy left for it.

(Standing recess.)

THE COURT: Go ahead, Mr. Singer.

MR. SINGER: Thank you, Your Honor.

Ladies and gentlemen, in 12 minutes I'm planning to touch on only a few topics, but you will have the opportunity back in deliberations to think about what you heard, think about the credibility of the witnesses you heard over three weeks, and think about the documents. I would like to touch on a few points.

May I borrow that book that you had up here?

MR. BRENNAN: Certainly.

MR. SINGER: This repeatedly was told to you to be the contract, the sanctity of the contract. The problem is is that you won't find anywhere in this book amendment number two, because that was entered into a year later. That is what fixed the problem in this contract. It is part of the account, and as you heard Judge Stewart instruct you,

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it prevails over any inconsistent terms. We are not here saying, well, there is some unwritten language that we are relying on. This is the written agreement that controls. That won't be found in this book, but it is the most important part of the case. It is the most important part because that with a few other things, which really aren't disputed, proves that the copyrights transferred.

The language, as we have seen repeatedly through this trial, says that the copyrights are excluded except for those required for the UNIX and UnixWare business. Now, there has been no denial of the two points of evidence that clearly indicate that those were required. One was their own admission on June the 6th. You can determine whether that is just a casual admission, but with their general counsel involved they say that it supports SCO's position.

The second point, which was not addressed at all by Mr. Brennan, was the testimony of Ms. Amadia who supposedly did draft that agreement. She started out in her direct examination supporting Novell's position. But, as I explained to you and showed you during my closing, under Mr. Normand's cross-examination she admitted that if the copyrights were required for the business, they transferred. That is just the plain language of the agreement.

Then the question you have to ask yourself is simply are the copyrights for the software business, the

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prime intellectual property to UNIX and UnixWare operating systems, required for that business? Virtually every witness in here has said, yes, they are and that it is obvious, that it would be absurd to have it without it.

Even if you could sell UnixWare products on a license, and there is no express license in any of this, there is only a license back to Novell, there is no license to SCO, but even if you could do that, you could not protect the intellectual property. That is a part of the business, protecting the intellectual property.

That makes it clear and that is why Novell, when confronted with this on June 6, 2003, admitted that we were correct.

Now today in this court they say something different. They tell you that we are trying to extract a license fee, a term that you repeatedly heard from Mr. Brennan. I suppose that when Novell licenses its intellectual property it is not an extraction, and when I.B.M. does that it is not an extraction. Well, it is not an extraction for SCO either. It is a business. It is a licensing business. You have a right to offer to consumers the opportunity to purchase a SCOsource license. They can make an intelligent decision, especially since we are talking about sophisticated corporate consumers.

There is nothing wrong with that, except that as

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Mr. Pisano told you, that program is no gone. It can't be resurrected. The market has moved on. That program is dead. That is why you need to consider that in terms of a damage award, rather than SCO now being able to go into the market years later and try to start selling SCOsource licenses.

Then they come to us and they say, well, there will be other litigation. Litigation, of course, is nothing more than another constitutional right, a right to go to the courts, a right that they tried to block. If SCO has proper rights, we trust the courts to vindicate. That is no different than any other citizen, corporate or individual should have. It is, of course, the right that I.B.M. and Novell have availed themselves of throughout this.

Then Mr. Brennan talked about the First Amendment. There was a very interesting phrase he used when about near two-thirds of the way through his closing he approached the First Amendment. He said now we get to the important question. I submit to you the reason he phrased it that way is he knows that this is a case where copyright ownership in fact is with SCO, and he knows that these statement were false, and that the difficult question, relatively speaking, the one that he is counting on is that you will find that these statements were in fact not slanderous under the First Amendment.

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I would suggest to you to look at the jury instruction that Judge Stewart provided on that subject of constitutional malice, because it weighs the interests of free speech against protecting people against slander. The test is recklessness, and I went over what went on on May 28th that was reckless, not finding out whether that amendment was signed, and then we have deliberate publication and republication of the slanders, which is done knowing that amendment number two has been signed, up to and including March of 2004 when Chris Stone stands up and goes so far as to say we still own UNIX. Those are slanders and those are actionable and those are liable.

One more point before I turn to some of the evidence. They also talk about these court decisions, and those were reversed as Judge Stewart told you. Of course, they have nothing to do with damages, because the damages presume the slander never occurred and you would never have any litigation and you would have these court decisions to begin with. That is a little slight of hand I think from Novell.

If we turn to what Novell has told you, they are saying you only get an implied license. Mr. LaSala admitted that. You will see under the instructions that an implied license does not give you the rights of a copyright owner. That does not give you what you need for this business. You

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also had some discussion about the empty table with the Brobeck Phleger firm, which they know, of course, is a firm that no longer exists. They also should know that Brobeck indicated its position on January 31, 1997, in this exhibit, which was submitted to the European union where they stated that SCO acquired the copyrights for UNIX. Maybe they didn't testify here because the firm isn't here, but you know what their position is.

Now, they also have raised that, well, we didn't get all the rights from Santa Cruz Operation when that was sold to Caldera. But the stipulated facts, the very first thing, ladies and gentlemen, that you heard at the beginning of the trial said that we have acquired all of the assets that Santa Cruz acquired from Novell. That is a non-issue. In fact, if you look at the document, it specifically assigns all of the copyrights and it says the assigner has the full power and authority and all rights necessary to transfer those rights. This is what we call a red herring issue.

Now, the issue on amendment number two is whether the copyrights are required for the UNIX and UnixWare business to protect it. You see a number of statements here which indicate how strongly those are required, that it would be ludicrous to operate the business without it, equating it to oxygen, that the copyrights have to go with

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it. We couldn't protect our software and we would be out of business.

In response to that they point to Mr. McBride who says, yes, we can try like these licensees to sell product, but be can't protect the intellectual property without the copyrights. Without the intellectual property being protected the products soon become meaningless, because the intellectual property in our products are out there, and if they are in a free product, it is very hard to compete with something that is being offered for free.

Now, they also suggested that what we could protect was this box, the Lego on top of another Lego. Except you'll recall Mr. Nagle saying that the UnixWare system embraces almost entirely at the time of the sale, UNIX. So it would be a very slivered, small sliver they went to give us of intellectual property, and yet they want to maintain all of the key intellectual property that gives that strength, the intellectual property which if just distributed widely would undermine the products that SCO was seeking to sell.

That is why all of these people, including their C.E.O. and other individuals agree, that you have to have the copyrights, and that is why they transferred to us under amendment number two.

Now, I would like to address a few other issues

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that came up in the course of the closing. One of those was a statement that there was an alleged term sheet from Mattingly's garage. Now, it has been testified to, and Mattingly was a Novell executive, and to be the term sheet actually used before the board meeting at Novell on the 15th of September to tell the executives what the summary of the deal was. It didn't mention anything about retaining copyrights.

You'll note that it was not produced for the first time by Mr. Mattingly. Those two documents were produced by Novell. They are SCO Exhibit 570 and SCO Exhibit 83, which are also in evidence, and there is no question about these being the actual term sheets. You heard Mr. Frankenberg say that this was presented, and you heard Mr. Bradford admit that he was not aware of any other term sheet.

Now, let's talk a little bit, if we might, about the witnesses who testified. I don't think that anything that Mr. Brennan said takes away from what we said a few minutes ago, that you have to disbelieve ten different witnesses, half of them are from Novell, to belive their position that the intent of this deal was not to transfer the copyrights.

Now, they have taken a lot of shots at witnesses, including their own executives, and I would like to go through some of them, those individuals.

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THE COURT: You have two minutes.

MR. SINGER: Steve Sabbath, who testified that this I.B.M. declaration was not his testimony. You heard Kim Madsen, and she was not equivocal, and she told you what was involved. Burt Levine, here is a gentlemen, it is true, he reviewed the copyright exclusion language. What did he say? It was intended to apply to NetWare. It would be unethical to have excluded the UnixWare copyrights.

Michael DeFazio did talk about the need to bulletproof a royalty stream. That was done by having separate equitable interest in the royalties. You have the draft language of amendment number two, but Ms. Amadia when she testified on cross-examination admitted under the final language, the approved language, that if the copyrights are required, we get those.

Now, you also heard about Tor Braham and all these handwritten notes which are true, and that is why something like this done at the last minute didn't get corrected until a year later. It got fixed. That is the agreement that you have to interpret here.

The one person they really can't take shots at is Bob Frankenberg. He has no interest in SCO. You know the old saying, that is where the buck stops. He came in here, and I don't have to look at slides, his testimony is recent enough in your minds to know where he stands, that it was

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clearly the intent to transfer these copyrights. That while Mr. Bradford and Mr. Tolonen had important roles in the company, they were not the individuals that he charged with selling this business. Those were Mr. Thompson and Mr. Chatlos and others. The deal they negotiated called for the transfer of those copyrights.

Now, with respect to damages you have heard, I think, two very credible witnesses, witnesses who if you put on the scales against a witness who has been paid to testify in over 200 cases, and was not a professor at Harvard, has not done any surveys, only comes up with a zero number, I think you'll find both Professors Botosan and Pisano very persuasive and that their views are reasonable. You will ultimately need to determine that.

I ask that you keep in mind the importance of this case to SCO, given what it has had to go through for these years, and to have to not have clear title to the crown jewels of the business, the UNIX and UnixWare copyrights that were a part of this transaction and which belonged to them.

Again, on behalf of SCO and on behalf of my colleagues and myself, thank you so very much for your careful consideration.

Thank you.

THE COURT: Thank you, Mr. Singer. You can

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breathe now.

MR. SINGER: I didn't want to go over your deadline, Your Honor.

THE COURT: Ladies and gentlemen, as we began this trial we selected 13 of you with one of you being an alternate juror. Ms. Cooper, it will be you, which means that you will be excused as soon as the jury is excused in just a moment. You will not be allowed to deliberate with the jury. That will perhaps be of some disappointment to you. That means I don't have to give the rest of this speech.

Upon reflection, if you think to yourself that perhaps you are disappointed that you did not get to help make the decision, I do want you to know that your being involved the last three weeks was a very, very important part of what we needed here. You will be excused with our gratitude, as I said, as soon as the jury is excused as a group in just a minute.

I do want to give an instruction to you, Ms. Cooper, as well as all of the jurors, although I normally would have given this at the end, as to whether or not you discuss this with anyone, including the attorneys in this case, or the media or anyone else, after the deliberations are all completed and the verdict has been rendered, I will leave up to you. You may or you may not. You are not

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prohibited from doing so and that will be entirely your decision.

With that, Ms. Malley, we need Mr. Jensen, I suppose.

This is Ben Jensen and he is from the marshal's office. He will have the responsibility to take care of you during the course of these deliberations. I want you to listen to the oath that he is about to take, because although it is addressed to him, it will indicate to you as jurors somewhat your conduct as well.

Mr. Jensen, if you would please come forward.

(WHEREUPON, an oath was administered.)

THE COURT: Ladies and gentlemen, you have now heard all of the evidence and you have been instructed on the law and you have heard the closing arguments, and you will now be allowed to go back to the jury room and to begin your deliberations.

Ms. Malley will be in shortly with a copy of the jury instructions that I read to you earlier this morning, as well as all of the exhibits admitted in this case.

Mr. Jensen, if you would please now assist the injure into the jury room.

(WHEREUPON, the jury leaves the proceedings.)

THE COURT: Counsel, if you would please make certain that Ms. Malley has telephone numbers to get ahold

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of you. If a note comes from the jury that has any substance to it, then I will ask you to come here and I will have you approve my response to it.

If it is something very simple, for example, if they should request a dictionary, the response to that will be no, and instead of making everybody come over here, I will simply say, yes, we agree it ought to be no, and we will handle that by telephone. If there is anything more than that, then I will ask one or more of you from each side to be here to approve whatever response the Court may give.

I do want to say a couple of last things to you all. I want to thank you on behalf of Mr. Copeland, because you had not met your apparent quota of at least one motion per day, he would have spent this last week as an aimless wasteful soul wandering the streets of Salt Lake.

I also think that on behalf of the Court I have a special expression of gratitude to Mr. Calvin and Mr. Lee, because they have played an extraordinary role on behalf of both sides as well as the Court's interest in this case, and with the way they have applied the technology that federal taxpayer dollars have recently paid to upgrade this courtroom. They have really made this system almost seem worthwhile.

I want to say one other thing, and that is that if any of you have loud teenagers and you want to know where to

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get this white noise, you can talk with Ms. Malley.

One last thing, counsel. I am very sincere when I say this. In the ten years I have been a judge I have never had a collection of such fine attorneys in this courtroom at one time. I want to thank you not only for your competence but in particular for your professionalism. The way that you have treated one another and the way that you have dealt with court personnel and the court has been genuinely appreciated in a case that has been hotly contested and the stakes are very high, and you have acquited yourselves extraordinarily well and you do have the sincere gratitude of this Court. I wanted to make sure that you heard that.

We'll be in recess until we receive either a verdict or a note.

(Recess)


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