A couple of things I notice. On pages 15 and 16, you will find SCO arguing that IBM has pulled a "fast one." That kind of paranoid and offensive speech is what has, in my opinion, helped to sink their ship in this litigation. For some reason, SCO always imagines the worst, and since it's a poison inside their own head, it offends observers. You can't help but be offended by false accusations. It certainly didn't help them here. Yet over and over, we've seen them try that type of argument, up until the most recent hearing on December 20 with Judge Wells, when she told them pointblank that she credits good faith on both sides, at which SCO's attorney, Ted Normand, immediately backpedaled.

Here, the argument has to do with how burdensome it would actually be to turn over notes and papers from all 300 Linux developers, which is what SCO was unsuccessfully asking for in this hearing.

Here's SCO's argument about IBM allegedly pulling a fast one. SCO says that IBM told the court that producing AIX and Dynix materials would be difficult and burdensome. "Yet now," Normand says, "in its briefing, IBM acknowledges that there is a central repository where IBM stores AIX and Dynix source code, and that the existence of that central repository makes the production of the Linux development material a different task than the development of the AIX and Dynix development." Because IBM's declarant Daniel Frye, testified that the estimate of the burden was actually counsel's and not his own, and despite SCO admitting that it is typical for "counsel to be the ones making the burden argument", SCO suggests IBM is somehow being tricky. (here's his declaration [PDF])

But IBM never denied it had a central repository for AIX and Dynix. You can see that for yourself in this February 2004 hearing transcript. Yet SCO's language, "IBM acknowledges that there is a central repository", implies that they used to deny it. But that isn't the case. And because the Linux materials are not stored in a central repository, it's harder to collect those materials. So what is the SCO argument about? It strikes me that perhaps SCO hoped Judge Kimball won't know any better, because it was Judge Wells who heard all those arguments. Collecting all versions of AIX is hard, because other things are in the central repository. Collecting Linux materials is harder because it's not even in a central repository. What in the world is difficult to understand about that? Is it that SCO can't get it? Or is it that it has a strategy (or had one) of painting IBM as the bad guy, even when it makes no sense and in fact requires a stretching of the truth?

It didn't help them in the end. Judge Kimball affirmed Judge Wells' order:

Thus, viewed against the backdrop of the briefing, the oral arguments on SCO's Renewed Motion, and the Order itself, the court finds that the Magistrate Judge explicitly denied SCO's request for additional discovery pertaining to the Linux development materials. In any event, however, SCO's request was at least implicitly denied in the Order, as a denial of a motion is routinely construed to encompass all requests made in that motion.

Moreover, SCO has failed to demonstrate that the Magistrate Judge's decision was "clearly erroneous or contrary to law." Rather, IBM has persuasively articulated several reasons why Judge Wells properly limited SCO's request for more information regarding the non-public Linux development materials. Accordingly, the Magistrate Judge's Order of October 12, 2005 is affirmed.

I don't know why SCO never listens to me. I've been writing for a long time that I thought casting unpleasant aspersions against IBM was costing them in this litigation. It's like my GPL Summer School lessons back at the beginning of this case. SCO just doesn't pay attention. They are so paranoid, they probably imagined I was trying to mislead them. Ironically, if they had paid attention, they'd have done much better.

Finally, on page 10, SCO's attorney speaks of the January 2005 order by Magistrate Wells. Here it is. (You can find other orders and hearings referenced on the IBM Timeline page.) You see that the judge records that one of the things SCO asked for was "2. Access to revision information including access to IBM's storage systems known as Configuration Management Version Control (CMVC) and Revision Controls System (RCS)." So why SCO in this hearing transcript makes those peculiar remarks about IBM now acknowledging the existence of a central repository as if it were a change -- well, it's simply incomprehensible. To quote IBM's attorney, David Marriott, in this hearing, " I don't have any idea, Your Honor, what's in SCO's mind."

I think you'll see numerous times in the transcript where SCO makes a statement and IBM bats it down as being not true. When that happens over and over, you lose credibility with the court, and that is one reason why, in my view, SCO has been losing recently. And for those of you who somehow have the impression that there are no limits to what SCO gets in discovery, this transcript proves you wrong. Judge Wells, as Marriott puts it, drew a line, a reasonable line, and Judge Kimball upheld it.

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

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

CENTRAL DIVISION

THE SCO GROUP, INC.,

Plaintiff/Counterclaim-Defendant,

vs.

INTERNATIONAL BUSINESS MACHINES
CORPORATION,

Defendant/Counterclaim-Plaintiff.

___________________________

Case No. 2:03-cv-0294

Transcript of Miscellaneous Hearing

BEFORE THE HONORABLE DALE A. KIMBALL

December 13, 2005

Mindi Powers, RPR
121305MP

ALPHA COURT REPORTING SERVICE
[address, phone, fax]

For the Plaintiff:

Brent O. Hatch
HATCH, JAMES & DODGE, P.C.
[address]

Edward Normand
BOIES, SCHILLER & FLEXNER, LLP
[address]

For the Defendant:

Todd M. Shaughnessy
SNELL & WILMER
[address]

David R. Marriott
CRAVATH, SWAINE & MOORE, LLP
[address]

2

Salt Lake City, Utah, December 13, 2005, 10:30 a.m.

* * *

THE COURT: We're here this morning in the matter of the SCO Group versus IBM 2:03-cv-294. Plaintiff is represented by Mr. Ted Normand and Mr. Brent Hatch, defended by David Marriott and Mr. Todd Shaughnessy.

MR. MARRIOTT: Good morning, Your Honor.

THE COURT: Good morning. We're hearing SCO's objection to magistrate's order, Mr. Normand and Mr. Hatch?

MR. NORMAND: That's correct.

THE COURT: Mr. Normand?

MR. NORMAND: Good morning, Your Honor. May it please the Court, my name is Ted Normand. I represent the SCO Group. As you mentioned the SCO Group has filed a limited objection to the Magistrate Court's October 12th order. SCO asks this Court to order IBM to produce the bulk of the nonpublic internal IBM materials that concern IBM's contributions of technologies of Linux operating system and that SCO asked IBM to produce at the outset of this litigation.

THE COURT: Now, you folks have the motion to compel in front of Judge Wells. Now, does this affect that?

MR. NORMAND: The motion to compel filed with Judge Wells is a motion to compel IBM to respond to SCO's seventh request for documents, which are more specific versions, a

3

THE COURT: If I uphold her ruling that you're objecting to, what will that do to your motion to compel?

MR. NORMAND: I think the motions are parallel, so that I think if you, if I understood the words you used, uphold our objection, then I think it moots the motion to compel. I think however either court resolves either motion affects the other motion, and we said that in both of the motions.

THE COURT: What if I uphold her order?

MR. NORMAND: I think if you uphold her order, it's unlikely that she is going to reach a different conclusion as to whether IBM should produce these materials.

THE COURT: If I uphold her order does that mean going back to her is basically a motion to ask her to reconsider?

MR. NORMAND: As a practical matter, I think that's true. We went through the same exercise, you might recall, Your Honor, in January of this year when the magistrate judge entered an order. IBM moved to reconsider that order and explain to Your Honor that that's what they were doing and you said that's fine, instead of objecting with me, you can file a motion to reconsider with the magistrate court. So as a practical matter, I think your resolution of the issue would

4

THE COURT: Tell me why I shouldn't uphold her order and tell me what your view of standard of review is.

MR. NORMAND: I think the standard of review is to the extent the Court concluded that she has not addressed an issue that the Court agrees should be raised to a level, if she has not addressed the issue -- the question is whether her failure to address the issue was clear error. If you find that she has addressed the issue, I think IBM argues that she has at least implicitly addressed the issue. If you conclude that she has implicitly addressed the issue, the question is whether she resolved it in a way that was abuse of discretion.

THE COURT: Go ahead.

MR. NORMAND: With the Court's permission I will address the three main points on which the parties have addressed in the briefing. Let me point out at the outset, as Your Honor may know, the October 12th order implements IBM's offer to produce these materials from 20 Linux developers. At the end of the hearing before the magistrate court on October 7th, IBM offered to produce these materials from 20 developers and the magistrate court implemented that offer in her October 12th order.

What SCO needs is the materials from the files of the remaining Linux developers. And I want to frame our argument with three main points: First, the direct

5

SCO admits that the materials are plain and relevant. We seek materials such as programmer notes, design documents, white papers, comments, e-mails and interim versions of source code that IBM's Linux developers have generated internally, and that's part of the reason that the documents are so relevant is that they are internal IBM documents created for the most part before litigation, before anyone had any incentive to say one thing or another.

The materials are often included in what is called the developer's sandbox, which is a term typically referring to a computer hard drive that describes the environment in which the developer works on code, comments on code, and sorts e-mails regarding code that the developer has developed.

SCO has brought claims, as Your Honor may recall, the breach of contract, copyright violation, and unfair competition among other torts.

THE COURT: I do recall that.

MR. NORMAND: For each of those claims, SCO seeks to show that IBM has contributed to Linux technologies, that IBM was not entitled to contribute to Linux, and SCO also seeks to show as to damages that the contributions that IBM has made to

6

To date SCO has identified to IBM more than 217 technologies that SCO submits IBM has improperly contributed to Linux. The technology includes verbatim copies of source code, non-literal copies of source code and implementation of protected methods and concepts.

SCO argues that by contributing such technology from Unix System V and from the AIX and Dynix operating systems, IBM has breached contracts with SCO, has violated SCO's copyrights and has engaged in unfair competition.

The nonpublic contribution material that SCO seeks is directly relevant to the fight that we expect will play out with IBM over the hundreds of technologies that, in SCO's view, IBM has improperly contributed to Linux, and let me explain that in some more detail.

The materials are relevant to SCO's defense as well as IBM -- in which IBM seeks a clean bill of health for all of its Linux activities. To the extent, as Your Honor will recall, other litigations that have been stayed pending the resolution in this litigation of whether IBM is entitled to a clean bill of health for all of its Linux activities, and yet we cannot recover, according to IBM, the materials from its 300 Linux developers.

For most of the technologies that SCO has

7

So the materials SCO seeks is relevant in three main ways: One, the material will contain evidence that will directly support SCO's arguments that technologies in Linux are copied from Unix System V and AIX and from Dynix, two, the materials contain important evidence that directly supports SCO's arguments regarding the importance of IBM's contributions to Linux, IBM's own developers' views of the importance of the contributions to Linux; and, three, for purposes of tracking IBM's implementation of methods and concepts in Linux, the documents will assist in that. And we will address those in some detail one by one.

On the first point, evidence that will support SCO's arguments about misappropriated technology, SCO expects the material, as the material from the 20 developers that we received, contained admissions from IBM's Linux programmers

8

It is true, as IBM says, that in many instances, SCO will show the fact finder a comparison of the code in Linux with the code in AIX or Dynix, and through that means SCO can prove that the technology in Linux was taken from those other operating systems. But that's not the only way SCO can prove that. SCO also is entitled to support that comparison, which is really a subject of expert testimony. SCO is entitled to support that comparison with evidence showing how the technology in Linux came from those operating systems and the internal IBM documents show how that is true.

And as I mentioned, Your Honor, I want to remind the Court, these are internal documents, so what we're finding and what we expect to find is IBM's developers' admissions where they say, I am taking this material from AIX, from Dynix, from Unix System V. I've seen it, and I think it will help the sufficiency in Linux. This is what I propose to do: I propose to develop the source code, the method, the concept from those operating systems, and I will fix the sufficiency in Linux, and those are what we call admissions.

It's important to note that both magistrate court

9

The second point that most of the materials are relevant is that it will contain evidence that directly supports SCO's arguments about the important of IBM's contributions of misappropriated technology. I've already touched on this a couple of times. Of course, the parties will fight with experts and other evidence over whether IBM's

10

We seek to support our arguments on that by representing internal IBM documents in which the developers themselves say, I think this is a deficiency in Linux, I think Linux can be improved if we were to take the following steps, and then in some cases after the steps have been taken, saying this has improved Linux. Linux is now something different by virtue of the contribution that I propose to make, and those are the kind of documents that would be relevant to our claim.

The third main point in which these materials would be relevant is that they would allow SCO to track IBM's implementations and methods and concepts. Again, this is another issue that will be the subject of expert testimony, and one way to avoid merely an expert fight from the fact finder, whoever it may be, is to find other evidence that IBM itself was using and admitted it was using methods and concepts that were protected in improving Linux. And if there is one area in which a code by code comparison is insufficient, it would be in terms of identifying the implementation of methods and concepts from Linux. And we have found trails of e-mails from some of these 20 developers and from other discovery in which it's clear that a developer comes up with the idea of using a method or concept or a structure, some kind of module in an operating system, in a

11

IBM has previously tried to convince the court that the only way SCO can prove any of its claims is to demonstrate that Linux's source code and Linux are taken verbatim from Linux's source code and Unix System V. For all of these reasons I have explained, it's just not true.

SCO will show in support of its contract claims, in particular, that IBM has breached those contracts by contributing protected methods and concepts of Linux, as I mentioned. And as SCO has told this Court since the beginning of the litigation, the task of tracking and identifying implementation of such methods and concepts is not simply a matter of running code comparisons. This very argument was made in February of 2004 before the magistrate court.

And it is precisely because that is true, because of the insufficiency of the code by code comparisons, that the fight between the parties over whether and how IBM implemented protected methods and concepts of Linux will be document intensive, and we seek as many documents as we can on the IBM

12

SCO expects that the internal Linux development materials will demonstrate that IBM recognized the need to implement certain methods and concepts and that IBM recognized that it had access to and expertise with respect to such methods and concepts by virtue of Unix System V, AIX and Dynix, which under SCO's contract theory are protected technologies.

Now, how much of this is directly relevant material, these internal documents containing what we think will be admissions and have contained admissions, how much of this material has IBM produced to date? That's a subject of some dispute between the parties as to what IBM says in its own brief. By its own estimate, IBM has produced about 16 percent of the approximately 300 Linux developers' files. That means that SCO has not had access to the vast majority of internal IBM documents concerning the contributions to Linux at the very heart of SCO's claim. We actually disagree with the 16-percent number. The proper number is probably 16 over 300, whatever percentage that comes out to be, 5 and a half percent or something, but even by IBM's lights, 16 percent of 300 developers is a pretty insignificant fraction of the material that we seek, and yet IBM argues that this should be sufficient.

That brings me to my second main point, which I

13

IBM's argument is that because IBM is so involved in its contributions to Linux because it has 300 developers involved in those contributions, it should only have to produce 16 percent at most of the evidence from those developers, and we think that's wrong. Under the federal rules and within its discretion, this Court can reject that argument. That is, the Court can consider the relative amount of discovery a party has produced. In IBM's own lights, it has produced only a very small fraction of this material.

And this is particularly true, Your Honor, when you consider how IBM has been able to devote such resources to its

14

One final point on burden, Your Honor, showing why in SCO's view the Court should take IBM's arguments with a grain of salt. IBM repeatedly opposed SCO's efforts to obtain the interim versions of AIX and Dynix on the grounds that it would be unduly burdensome to produce those materials. Yet now in its briefing, IBM acknowledges that there is a central repository where IBM stores AIX and Dynix source code, and that the existence of that central repository makes the production of the Linux development material a different task than the development of the AIX and Dynix development material.

15

Now, of course, it's not unusual for counsel to be the ones making the burden argument, but we think here that a fast one has been pulled. We're not sure who is responsible for coming up with the arguments as to the extent of this burden.

Let me briefly address a couple more points, Your Honor. The third main point is that SCO has diligently pursued the production of these materials. IBM's main argument on this point is not that SCO has actually waived its right to bring this motion, but that if SCO really thought this evidence were important, according to IBM, that SCO could file a motion to compel the production of material a long time ago. That assertion is incorrect and we think it's inconsistent with other arguments that IBM makes.

The first indication SCO had that IBM would refuse

16

SCO first requested these materials in June of 2003, and I don't think IBM disputes that. In October 2003, counsel for IBM wrote SCO a letter in which IBM said they were beginning to compile materials from the Linux technologies.

In November of 2003, SCO filed a motion to compel IBM to produce several categories of documents. Among the categories mentioned in that motion were the Linux development materials. SCO said, consistent with the allegations against IBM, it should be required to identify and produce all of its contributions and development work in Linux. And IBM acknowledged that argument in its opposition brief in the late fall of 2003.

In February of 2004, the parties argued SCO's motion to compel as well as the motion to compel that IBM had filed, and the Linux development material was not a focus of that argument. However, there were other areas of discovery that had been briefed for purposes of the argument that were not discussed at length in the area. So it's not unusual that the parties didn't focus on the Linux development materials.

In March 2004, the magistrate court issued a

17

And by IBM's own lights, the March 2004 order set up a discovery protocol whereby SCO would not have admitted to file a motion to compel or production of such materials until SCO had met certain threshold burdens on its own. And indeed IBM argues that the protocol is still in place, so it's a little unclear if IBM even thinks we could have filed a motion to compel until the issue of the amount of AIX and Dynix source code had been resolved.

Following the March 2004 order, the parties had essentially a nine-month fight, almost a yearlong fight, over whether IBM was obligated to produce the AIX and Dynix source code. IBM's own theory is that until that issue was resolved,

18

SCO waited until August 1st, 2005 to see what IBM produced in response to the Magistrate Court's April 2005 order, and when we saw that IBM hadn't produced the development materials we, you know, put into place the mechanisms that have led us here today. So I think that SCO has acted diligently in pursuing the materials.

And, again, I mentioned the April 2004 order, the magistrate court specifically found against us as to our interpretation of the April 2005 order, but that doesn't mean that we didn't believe the April 2005 order said what we thought it said. The magistrate court made no finding about our state of mind and whether our interpretation of that order was reasonable. So for IBM to say that you must not have thought the stuff was relevant because we didn't move to compel IBM to produce it until the last four or five months I think is incorrect.

And then one last point, Your Honor. The Court

19

THE COURT: Your contention is that the deadlines could remain.

MR. NORMAND: The deadlines for the end of fact discovery, which is I think mid March 2006. And let me explain why that is so. We expect that materials will serve primarily to provide SCO with the internal IBM evidence to help prove that IBM has contributed technology to Linux from Unix System V and AIX and Dynix, to prove that IBM knew it was doing that and to show that the IBM contributions to Linux is important as I've explained.

To the extent the evidence would help SCO to identify how these methods and concepts have been implemented into Linux, SCO can update its interrogatories accordingly during the January to March discovery period, and during that period, IBM is entitled to take discovery regarding the misappropriated code. There would be no prejudice to IBM.

To the extent the evidence identifies two or three additional Linux developers who SCO might seek to depose, the Court could easily permit SCO to take such a deposition before the end of discovery. And this two or three is probably the maximum number.

Your Honor, as you may know, we have a limit of 50

20

And one last point on this deadline, as the Court may be aware, we're filing a submission on December 22nd. The discovery we're seeking could result in amendments to that submission, but not substantial amendments. The submission identifies the code that IBM has misappropriated. We actually don't expect these materials to help us identify code that IBM has misappropriated. We expect the materials to help us further prove that the material we've identified that has been misappropriated was misappropriated, that IBM knew it had been misappropriated, but we do not expect that upon receipt of this discovery if it were produced, we would amend the December 22nd submission in any substantial way. The only potential amendment that could result, one which IBM could address during the January, February or March discovery period that has been set aside for IBM to do just this, the only potential amendment is to update the interrogatories to further specify how methods and concepts have been implemented

21

THE COURT: Thank you. Remind me when the hearing on motion to compel is in front of Judge Wells.

MR. NORMAND: Is it October 20th or -- I mean December 21st?

MR. SHAUGHNESSY: I think it's next Tuesday.

MR. NORMAND: Next week, Your Honor.

MR. MARRIOTT: It's on the 20th, Your Honor.

THE COURT: 20th? So it's a week from today?

MR. NORMAND: Yes.

THE COURT: Thank you.

MR. NORMAND: Thank you.

THE COURT: Mr. Marriott?

MR. MARRIOTT: Thank you, Your Honor. Just to be clear in response to Your Honor's question, the hearing that's set for argument next Tuesday is not the motion that's related to this one. Two arguments are set on different motions, not one that bears relationship to the appeal before Your Honor today.

THE COURT: Not the motion to compel.

MR. MARRIOTT: A motion to compel, but a different motion to compel and the one in which SCO seeks the same relief from Judge Wells that it seeks from Your Honor by way

22

THE COURT: Do you agree with that, Mr. Normand?

MR. NORMAND: I think that's right.

MR. MARRIOTT: Thank you, Your Honor.

MR. NORMAND: And one further thought, Your Honor, I think the parties have asked the magistrate court, I think we've asked her to schedule, if she could, the argument on that motion before December 22nd, and I don't think we've heard back from her on that.

THE COURT: All right.

MR. MARRIOTT: To my knowledge that's not true.

THE COURT: Which isn't true?

MR. MARRIOTT: That we have asked the magistrate judge to set arguments for SCO's motion.

THE COURT: So you disagree with Mr. Normand that you've asked for that?

MR. MARRIOTT: Correct, I disagree.

MR. NORMAND: Well, I certainly wouldn't have had that conversation with Mr. Marriott, and if I'm incorrect, I apologize, but I would have had a conversation with Mr. Shaughnessy.

MR. SHAUGHNESSY: Yeah, my recollection is that at most that would have been something that would have been included in the motion papers, but there has been no separate

23

THE COURT: All right. Go ahead.

MR. MARRIOTT: Thank you, Your Honor. I have three points -- two main points, Your Honor, and then I'd like to respond, if I may, to some of the assertions made by SCO in its reply papers and in its argument today. Before I do that though, I'd like to come, if I might, to a matter which is raised by a question of Your Honor to Mr. Normand and which is absent from discussion in SCO's papers and that's the discussion of the burden that SCO bears on this motion, an issue I think critical to the resolution of the appeal.

To prevail, as Mr. Normand I believe suggests, for the first time hearing this argument on this appeal, SCO must establish that Magistrate Judge Wells acted contrary to law and that she committed clear error. And that the Tenth Circuit cases -- Your Honor, what that means, as a practical matter, as I know Your Honor is aware, is that this Court should not interfere with Magistrate Judge Wells' determination unless Your Honor comes to a decision based on what the Tenth Circuit describes as the entire set of evidence, and if Your Honor does so based upon a definite and a firm conviction of mistake. The standard is not that Your Honor might have done it differently, not that Your Honor thinks there might be an error or suspects it. The question

24

With that backdrop, Your Honor, let me come, if I may, to the first of the points I'd like to make.

THE COURT: But if I understood part of his argument, it was that she, at least with respect to some of these matters, she really didn't consider them or rule on them, and with those, there might be a different standard.

MR. MARRIOTT: That is certainly SCO's contention, Your Honor. In fact, my first point is that Magistrate Judge Wells considered SCO's request. And as a result, the standard here, Your Honor, is whether or not she committed clear error or whether or not she acted contrary to law and we, of course, respectfully submit that she did not.

THE COURT: And you disagree with his suggestion that she might not have considered this or at least part of this?

MR. MARRIOTT: I disagree with that, Your Honor. The crux of SCO's contention on this appeal is, as this dialogue suggests, that Magistrate Judge Wells failed to address SCO's argument that IBM should be required to produce all documents related to the development of the claims, and that simply, as I believe, the record demonstrates incorrect. SCO filed a motion to compel, Your Honor, before Magistrate

25

SCO's argument in the alternative was that irrespective of Magistrate Judge Wells' orders, she should require IBM to produce all documents related to the development of Linux. In response to SCO's motion, which had two prongs, IBM filed a brief in opposition. In our opposition papers, Your Honor, we laid out for the court, Magistrate Judge Wells, that we did not understand her orders to require IBM to have produced the information SCO seeks. And second, we laid out, in even greater detail and greater length, our response to the argument raised by SCO that we should be required in any event to produce all documents related to the development of Linux.

And I refer Your Honor to pages 10 through 16 of our opposition papers below, which are devoted to the sole question presented by this appeal, which is whether, as SCO contends, Magistrate Judge Wells overlooked the argument set out in SCO's opening brief and in IBM's opposition papers.

26

Following Magistrate Judge Wells' indication that she reviewed the submissions of the parties, counsel for SCO argued that IBM should be required to produce the materials at issue on this appeal for two reasons, one, because they were supposedly required by prior orders of the court and, two, because SCO contended they were in any event required. And I refer Your Honor to page 25 of the transcript below. In opposition IBM argued that it had not violated orders of the court, and that in any event, we should not be required to produce the information SCO seeks on this appeal.

And with respect to the latter point, I refer Your Honor to pages 48 through 50 of the transcript below, that in reply SCO argued again that IBM should be required in any event to produce the information at issue. SCO refers to this portion of the transcript in its papers and that appears at page 55 by SCO's own description.

Following arguments from counsel, Magistrate Judge

27

Following that statement, Magistrate Judge Wells ruled from the bench and from the bench she said in substance two things. One, IBM did not misinterpret the Court's orders, and the Court had not previously ordered IBM to produce, as SCO contended, all documents related to the development of Linux. Second, Magistrate Judge Wells denied the motion. She denied SCO's request that IBM be required to produce all documents related to the development of Linux, and I refer Your Honor particularly to page 3 of Magistrate Judge Wells' order.

Moreover, Your Honor, at the close of the hearing, Magistrate Judge Wells said, does anyone have any other issues they would like to raise with the Court, in response to which SCO's counsel said at page 70, no. Following the hearing, at the direction of Magistrate Judge Wells, IBM prepared for the Court's signature a form of order, which IBM's counsel discussed with counsel for SCO. The parties disagreed as to one element of that order, an issue not relevant to the present appeal. That issue was then elevated to Magistrate

28

The suggestion here that Magistrate Judge Wells was somehow required to parse the papers of the parties and in her ruling from the bench itemize every single argument refuted is, respectfully, not supported in the case law. I would respectfully submit, Your Honor, that one cannot read the orders of Magistrate Judge Wells below in context and reach any other conclusion than that she fully understood SCO's argument, she said twice on the record that she had considered them, and she's ruled on them immediately after hearing from counsel from SCO and counsel for IBM, and at no point did SCO suggest that somehow an argument of apparently enormous importance was missed by Magistrate Judge Wells, and respectfully, Your Honor, I would submit that just didn't happen.

The second point which I'd like to make is that not

29

Now, I don't intend in any great depth, Your Honor, to discuss each of those four I think independent bases for Magistrate Judge Wells' decision. They are set out in our papers and I'm happy to address any questions Your Honor may have about them. Let me say briefly this with respect to them: As Your Honor has now heard, I'm sure more than you wish, Linux is an operating system that is an open operating system. It has been and is being developed in the public

30

In addition to that which is publicly available, Your Honor, we have produced from the files of IBM, contrary to what SCO suggests, a very substantial number of documents relating to the development of Linux. In the three -- nearly three years since this lawsuit has been pending, IBM has produced documents from 236 custodians. By comparison, SCO has produced documents from approximately 66 custodians. Contrary to what Mr. Normand said here this morning, IBM has not limited its production to the documents related to the development of Linux to the files of the 20 Linux developers. IBM has produced documents from the files of the company, from the files of individuals relating to the development of Linux, the number of individuals to whom have been produced Linux development documents, Your Honor, is approximately 80. It is not limited, as SCO suggests in its papers here, to 20.

The idea, Your Honor, and Mr. Normand suggests at the last hearing in an effort to put this dispute behind us, in an effort to reach a compromise, IBM offered to produce documents from an additional 20 developers to be selected by

31

SCO identified the 20 developers. We produced documents from those developers. That exercise, Your Honor, took 60 days, and it didn't take 60 days at a leisurely pace. Those were an intense 60 days with a lot of people involved, reviewing a lot of documents to determine whether they were responsive or privileged to prepare those for production, and yet what SCO asks for today, they ask Your Honor to require us to produce and to find more -- importantly, Magistrate Judge Wells acted contrary to law in ruling as she did -- documents from hundreds of additional Linux developers. If you just take the metric, Your Honor, of what it took to produce documents from the files of the 20, which was 60 days, on weekends, on a very late night review basis, we would be doing the production, the discovery that they request for over a year. The suggestion that there is not somehow undue burden associated with that is I think simply incorrect.

The evidence of record is what matters to the determination of this appeal, Your Honor, and though SCO suggests that the Court should look beyond the evidence that was presented to Magistrate Judge Wells. The deposition of Mr. Frye, which they cite in their reply papers, which in any event it doesn't support their contention, is beyond the scope

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Mr. Frye testified that the effort would require, as is obviously the case, and common sense would suggest, a production from the files of hundreds of people. If a production is done right and the people are visited with and they are interviewed and it is determined whether they have documents and they pass them along and they are carefully reviewed for privilege and for responsiveness, that is a substantial exercise, and it is not one that, we respectfully submit, that could be accomplished here, except by imposing undue burden on IBM, and we think Magistrate Judge Wells got

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We're not talking, Your Honor, about a world in which there is all the discovery or no discovery. Magistrate Judge Wells in the exercise of her discretion drew a line. Magistrate Judge Wells appreciated that there were enormous volumes of information available publicly on Linux. She understood the scope of IBM's production of Linux because we made it, I think, clear. She understood that IBM had produced on the order of magnitude that we're talking about here and she drew lines, I think reasonably, to provide SCO with what it needs without imposing on IBM undue burden.

Furthermore, Your Honor, contrary to what SCO suggests here today, we do contend that SCO delayed for bringing this motion to Magistrate Judge Wells' attention. If you believe SCO, Mr. Normand reiterated it here this morning, SCO has been seeking the documents at issue since the summer of 2003, since the beginning of this case. Magistrate Judge Wells rejected, and Mr. Normand does not dispute, Magistrate Judge Wells rejected in her October 12 order the idea that SCO's earlier motion to compel sought the information that is at issue on this appeal.

What that means is, Your Honor, SCO didn't bring a motion to compel the production of the materials it now says are at the core of the case, without which it claims it can't

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And let me pause for just a second on that issue. As Mr. Normand says today, if the materials at issue are as important as they are, then how can it be, Your Honor, they are not going to be used to supplement the alleged misuse of material. That tells you a lot about the supposed importance of these materials. They're not going to be used he says today, except in perhaps in a substantial way to amend the disclosures that are required to be made on December 20th as to what's at issue in the case. If all Mr. Normand wishes to know is something particular from IBM about the code already identified as allegedly misused, there are other ways by which SCO can find that information, and indeed they have propounded a 30(b)(6) notice on IBM to discover information such as the supposed significance of the information IBM is contributing, the very thing that Mr. Normand suggests now today. They were required the production of at least a million -- we don't know exactly how many documents are at issue here, Your Honor, but I think it's quite clear based on our experience it's going to be a million pages of paper, and to require that and the effort that would be involved to get it done, there are other ways to get the same information, it respectfully makes no

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So the motion was delayed unduly because there is absolutely no reason that SCO couldn't have brought this motion before. And Mr. Normand talks a lot today about SCO's subjective state of mind. I don't have any idea, Your Honor, what's in SCO's mind. What I can tell you is they claim they propounded requests in 2003. Magistrate Judge Wells makes it perfectly clear in her October 12, '05 order that no prior motion to compel had requested that information. If that's true, the first they requested it was September 2nd of this year, effectively on the eve of the close of fact discovery. That ought to tell you something how supposedly important the information is and that ought to tell you something about whether the motion was unduly delayed.

The idea that they somehow just figured this out in connection with the motion briefing on IBM's motion to reconsider with respect to Magistrate Judge Wells' ruling on AIX is not supported by the record here as we explained to Magistrate Judge Wells, Your Honor, below when this motion was argued in front of her. IBM has throughout the litigation, as has SCO, produced logs which disclose the identity of the individuals from whom IBM has produced documents. SCO propounded interrogatories early in the case asking who made contributions, who were the people who were involved. They've had the lists of people involved in making contributions for a

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Again, the contributions are publicly available and to the extent they aren't, we have produced those. IBM has produced a substantial volume of information relating to the development of Linux. And, again, as I said, by our count our production of information related to the development of Linux is somewhere in the order of a million and a half pages of paper.

As I said, Your Honor, it's not conceivable that the relief they request would not -- would not result in a delay in the resolution of this case, and effectively their reply papers say that, and they encouraged Mr. Normand here today by suggesting, despite saying that they won't, that the most that might be required is an amendment to their disclosures of December 20th. Well, that's a deadline, Your Honor. If they're amending their disclosures on December 20th, they're asking for a change in the schedule. If they're proposing depositions into February and March, they're asking for a change in schedules because the schedule at the moment allows

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The last point, Your Honor, and I think it's not an unimportant point, is that SCO's arguments in its reply papers and some of its arguments today simply distort the record of what has occurred here, and I want to run through just some of those because I think in their aggregate they're not of small significance, especially where Your Honor is reviewing this against the record presented to Magistrate Judge Wells.

SCO contends at page 6 of its reply brief that IBM has not argued that SCO did not diligently pursue court intervention. As I said, that's wrong. Moveover, we said just that at the point which they say we do not disagree at page 10 of our opposition papers. SCO attacks Magistrate Judge Wells' order, Your Honor, on the grounds that she failed to consider the entire record here, but SCO then in its reply papers seeks to take the Court beyond the record. SCO contends that IBM only produced documents from 20. That is not correct, we have reproduced documents related to the developers of Linux. SCO contends that the criteria that IBM used to select the documents that were produced in these 20 were, in the words of its reply at page 7, known only to IBM.

Your Honor, as I've indicated, SCO selected the 20 individuals from IBM to produce documents, not IBM. The criteria is known only to SCO, not to IBM. Moreover, the

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It is suggested here today, Your Honor, that we

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Well, Your Honor, Magistrate Judge Wells did say that this discovery at issue here was not before her, but she was talking about in the 2003 and the 2004 time frame. She wasn't talking about not being before her on the 7th of August, I think it was, when the argument occurred -- 7th of September -- well, forget the date, I frankly don't recall -- where the argument was on this motion. SCO suggests IBM's trying to have it both ways in these papers. It suggests on the one hand we're saying SCO never asked this information, on the other hand we're saying the information is duplicative of SCO's seventh set of requests. We're not trying to have it both ways.

We acknowledge that they say they requested this information from the beginning of the case. The problem is they didn't move to compel that until September 2nd of '05, but what we're saying is, Your Honor, they've never moved to

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SCO, Your Honor, says that it respects Magistrate Judge Wells' order. This is at page 2 of their reply papers. They say they respect Magistrate Judge Wells for the purposes of this appeal. Mr. Normand said it again today as it relates to her prior orders. Yet at page 4 of their reply they suggest that IBM, again, hasn't complied with the orders. At page 5 of their opening brief, they say that Magistrate Judge Wells ruled that all Linux documents relevant to this case were relevant to this case in her January order. She made it perfectly clear in her order that's on appeal here that that is not the case.

And SCO says at page 3 of its reply, that the relief that it seeks here follows or flows from Magistrate Judge Wells' earlier orders, again, a proposition expressly rejected by Magistrate Judge Wells. Finally, Your Honor, SCO suggests that it was incongruous for Magistrate Judge Wells to order IBM -- to not require IBM to produce documents from all developers of Linux when she required IBM to produce development documents related to AIX and to Dynix.

Your Honor, Magistrate Judge Wells never required IBM to produce all documents related to the development of AIX and Dynix. She asked that IBM produce a central repository, which we have done, two central repositories, which we've done, and she ordered IBM to produce documents from

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We produced documents from a far greater number of developers who were involved with Linux. So if congruity with the rules of production for AIX is the rule, then, Your Honor, we've already produced it.

In conclusion, Your Honor, respectfully, there is no basis on this record for interfering with Magistrate Judge Wells' determination. She did not act contrary to law. She did not abuse her discretion and we ask Your Honor to overrule the objection. Thank you.

THE COURT: Thank you, Mr. Marriott.

Mr. Normand, you get to reply. I think I have the issues pretty well in mind, so you won't take too long, right?

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

Standard of review at the bottom, we do think the Magistrate Court made a mistake, so that is the standard of review and that is what we think happened. There is no indication at all in her October 12th order that she addressed these issues, the kinds of issues that are relevant to a motion to compel.

And that was one of Mr. Marriott's lead points. IBM has argued that in her order the Magistrate Judge actually resolved the question of whether IBM should now produce Linux

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Not to put too fine a point on it, Your Honor, but the plain language of the October 12th order speaks for itself and, as a practical matter, I'm sure the Magistrate Court, herself, has a view as to whether she resolved it and that may be the quickest route to resolving the issue. But from our perspective for purposes of this objection, this Court has a record of the law and on the record below which is the October 12th order, there is no indication that she considered the variety of factors that I think both of us agree -- Mr. Marriott and I would agree are relevant in our motion to compel.

But there is some suggestion that we should have immediately at the end of the hearing or in the days following a hearing when we negotiated with counsel that we should have

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And when we were discussing the particular phrasing of the October 12th order, I did raise with counsel for IBM that we thought she had not resolved an issue and he disagreed. He said I think she did resolve the issue. Both parties took the position they're taking now, but it was not at all obvious and I don't think we're obligated to SCO at that time, in discussing the phrasing of what she had ruled during the October 7th hearing, that we were obligated to make these arguments.

Very quickly on the other points. Relevance, IBM says that they have produced these files from -- let me get the numbers right -- 80 developers. In their brief they said they had produced it from 55 developers. I don't know if the numbers are significant. The point is if IBM is willing to say now that they did produce these materials from 60 other

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What was the significance of the concession? We finally got to identify the developers. We have no idea how IBM decided which of the 60 other developers among the 300 to chose from, even if they did do that. We're not conceding that they have produced from the 80. I don't think we can reach a consensus as to that number, but if they produced these materials from the files of any developers other than the 20 that we identified following the October 12th order, I think that's a concession that those materials are relevant.

With respect to the burden argument, as I said, there is no indication in the Magistrate Court's October 12th order that she considered these burden arguments. There's no affidavit in front of this Court as to burden. Those are all the first points.

I think it is just as important, Your Honor, that we raised this issue when we first got an indication from IBM that they are not going to produce these materials. The parties have fought like mad throughout 2004 over the scope of several categories of broad documents, and that was the focus

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SCO took the view at that time that those were resolved and other discovery could be pursued. The first indication we got from IBM that they were not going to produce this material in whole was January of 2005. Since that time, we've pursued the issue. We've raised the issue before the current discovery schedule was set in place. We've sought what I think is a pretty small accommodation. We sought to amend in some part, the December 22nd submission, we don't expect it to be a very significant amendment at all, and we sought leave to take a few depositions. What we wanted to do is get the documents and examine them internally. We don't want to change discovery schedules, we don't think it's necessary, but to the extent it were necessary, I think it follows from the fact that we've been pursuing discovery for some time, and the delay in producing discovery shouldn't now preclude us from getting the materials and forcing us to run up against these discovery deadlines.

Finally, Your Honor, I know you'd like me to keep this brief on the argument about whether it's too late in the day and whether the schedule needs to be changed. IBM says that they don't know our state of mind, but in their briefs they said they did. In their briefs they said that we must not think or we must not have thought that this was relevant because we didn't pursue it. We think we did pursue it. IBM

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Last point, Your Honor, on cancelation of these depositions, the purpose of discovery is, I think everyone could agree, fact discovery. Document discovery is to help determine whom to depose. We never said to the Magistrate Court or IBM that we will depose all of these 20 developers. We asked for the files of 20 that we identified because from what we could figure from the public documents they seemed relevant. There are many nonpublic documents that IBM concedes exist. Indeed their production from the 20 developers are labeled confidential. They're not materials that other -- that the Linux community has seen. They're not

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And to the extent we reviewed those nonpublic documents and decided that we couldn't afford to depose many of the deponents, I think that's a proper use of discovery and both parties have had this issue of where they're running right up to the deadline of depositions deciding whether they can take them at that time or a later time and canceled them. IBM has canceled on the eve of two 30(b) (6) depositions. I think that's not improper. I think it's to be expected. I think our review of the files from the 20 developers was appropriate discovery. Thank you, Your Honor.

THE COURT: Thank you, Mr. Normand. Thank you all. I'll take this objection under advisement and get a ruling out shortly. Thank you very much. Court will be in recess.

(The matter was concluded.)

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