Now that SCO has filed its appeal brief in SCO v. Novell, let's get back to the trial itself. We've already done the first four days' transcripts, and here is the transcript of day five, as text, of the SCO v. Novell trial. The trial began on Monday, March 8, 2010 and ran for 15 days, Monday through Friday, for three weeks, with the Hon. Ted Stewart presiding. This transcript is for Friday, March 12, and the witnesses that day were Ty Mattingly and Bill Broderick. Here is Groklaw's eyewitness report from the trial for that day. And now I'll share with you what I see as the highlights of the day.
I know what you're saying, "Aw, on day four, they promised they would play Maureen O'Gara's deposition today" and you'd be right. They did. But you'll have to be patient, because these two witnesses used up the entire day. Mattingly showed up with documents that he had shared with SCO but not Novell, so that took some time to deal with. But she appears in spirit, as there are discussions about what parts of her deposition video can be played, both before the day began and at the very end of the day. SCO expresses worries and tries to keep the jury from hearing the dreaded G word. Yup. Groklaw is fear inspiring, to hear SCO talk. SCO didn't want the jury to hear about Groklaw for fear they'd come here and read something.
Because there is a lot to tell you about the day, for those who'd like to jump right to the transcript itself, here you go, a link to jump to the transcript Part 1,
Part 3, Part 2.
The transcript of this day is in three parts: part 1
[PDF] [Text], part 3
[PDF] [Text] and part 2
[PDF] [Text].
Pacer put parts 2 and 3 in reverse order, and we've turned that around, so you can follow along without confusion.
The rest of the trial transcripts are here, so you can click on any date that interests you:
The day before, the parties' lawyers said they'd put their concerns about the O'Gara deposition in writing to the judge, and you can read both letters they filed, as well as the O'Gara deposition transcript, here.
Maureen O'Gara:
The day opens with the discussion about her video deposition. The judge says he's ready to rule on it. The lawyers are allowed to speak, but he's decided to let the parts SCO objected to be played for the jury. From what is said, it's clear that SCO wanted to remove any reference to Groklaw.
SCO's lawyer says that his concern is that the jury will get curious and come and visit. But the judge has more confidence in the jury than SCO does. He's told them not to read about the case, he points out, and they've been good, and when playing the video, they are making sure that the reference in the scrolling text says Groklaw, not Groklaw.com, so chances are they've never heard of it and won't even know it's on the Internet.
By the way, it's never been Groklaw.com. It's Groklaw.net. I own both domains, but Groklaw.com has never been used for anything. I got it because I didn't want anyone else to use it. But when did SCO ever care about facts with specificity?
SCO says the danger is that if you Google for SCO, up pops Groklaw. But the jury has been told not to do that, so that's that. I mean, I have found that logic isn't SCO's strong point, but if the jury went to Google and typed in SCO, whether or not I was mentioned in the trial, they'd still get to me and pretty much every other news outlet in the world. So the issue is obedience to instructions, not what might occur if the jury disobeys.
Here is what I think it was really all about, since what SCO said makes no sense to me: I think SCO didn't want it out there that Maureen O'Gara was asked by SCO's PR man at the time, Blake Stowell, to "send a jab PJ's way". Which she then immediately did. She claims it was not connected. Heh heh.
As my beloved granny used to say, though, if you're kicked by a donkey, just consider the source.
I do find it amusing that SCO was suing Novell because it told the world it owned the copyrights on the very day SCO announced its financials, with SCO tying the two events together as if no one but a fool would think it a coincidence, yet O'Gara in her deposition pretends that her article attacking me was not in any way related to the SCO request to send a jab my way. It's all a coincidence.
I love covering these people.
But as it turns out, despite SCO's promise to play her video today, they don't. So you either have to wait or just click on the number in the calendar above, and it will take you to the day they did play it.
You know *I* jumped ahead.
You'd think the matter was settled. But at the end of the day, SCO's lawyer Brent Hatch stands up and raises the issue again. Here's how it goes: THE COURT: Counsel, do you have anything before we
recess?
MR. HATCH: Your Honor, we have one thing.
THE COURT: Go ahead, Mr. Hatch.
MR. HATCH: Um, I would like to ask Your Honor to
revisit at least a small portion of the ruling earlier today
on the Groklaw. And the only thing I would ask is if Your
Honor would reconsider allowing at least the striking of the
text, I mean the part of the deposition that would start at
Page 64 Line 23 through 65 line 3.
I think that they end up getting everything that they
need in, what Your Honor intended to have them get in, and
this would take out one of the references. And I think
those lines don't add anything because the person is
mentioned elsewhere in the testimony you have allowed. So
we would ask that you reconsider at least striking those.
THE COURT: Again Line 23 on Page 64 --
MR. HATCH: Starting on -- I guess you would start on
the question so line 22.
THE COURT: Line 22.
MR. HATCH: Through Line 3 on the next page.
THE COURT: Who wishes to respond?
MR. BRENNAN: Your Honor, I would be happy to. Just
let me take a quick look. Just so I'm clear, the suggestion
is Page 64 Line 22 through what Mr. Hatch?
MR. HATCH: Line 3 on the next page.
MR. BRENNAN: Well, Your Honor, here is the issue with
it. It gives context to the suggestion above regarding who
PJ is. And it indicates, as well, that what PJ is doing is
operating a website that in essence is a source or place of
news information that Ms. O'Gara is essentially competing
with. The real issue here, and the reason for the
testimony, is as the court may be aware, that Ms. O'Gara
makes a claim that Mr. Stone made a certain statement based
on a telephone conversation. Novell believes that it is
entitled to present evidence to the jury that Ms. O'Gara is
not an objective journalist and that she has a certain
relationship with SCO that led her to be less than objective
in her report of this conversation with Mr. Stone. This
fits in with that. We have already agreed to take out other
matters that would be extraneous, but this particular
reference gives context to who PJ is. He is essentially a
competing journalist.
MR. HATCH: Your Honor, it does that. We haven't
taken that out. If you note, the very next clip identifies
PJ as Pamela Jones and it goes on from there. The reason he
has given is some of the exact reasons why he shouldn't be
here because, you know, he wants to mention this cite which
they'll go to. And, you know, we think that is
inappropriate because we think it is inconsistent with what
Your Honor has ordered and been concerned about in the past.
And these couple sentences really don't add any of the
flavor that he has already got from the other designations
that Your Honor has allowed.
THE COURT: Um, go ahead, Mr. Brennan.
MR. BRENNAN: Well briefly. Your Honor, what this
does is first of all the argument assumes that the jury is
going to disregard the court's very careful instructions
that have been repeated every day of trial. Second of all,
there are other publications that have been referenced and
will be referenced during the course of trial and one is the
Wall Street Journal. A juror having heard reference to a
particular publication could just as easily go to the Wall
Street Journal or any other source.
Third, the reason for this particular reference is
that it mentions it is a website that follows the SCO case.
Now, we have to assume that the jury is going to disregard
the court's instruction for this to be an issue, but it
gives that very context as to why Ms. O'Gara may have lost
her objectivity and thus her statement is not credible.
THE COURT: The court has to presume that the jury is
going to follow the instructions that the court gives to it.
Otherwise, we are in very serious trouble. And so the court
is going to deny the request of Mr. Hatch that those
additional lines be excluded. The court believes that the
jury should be trusted to that extent. But more
importantly, again, the probative value of this testimony is
very important. There is a slight possibility of there
being something that would stick in a juror's mind that may
lead them to disobey the court and go home and look up the
website but I just think that it is so highly unlikely I
cannot allow the probative value to be ignored.
MR. HATCH: Can I raise one last suggestion? I know I
am trying your patience. But could we at least have the
scrolling turned off during this playing of this deposition
so they don't see the spelling?
THE COURT: I think that would be reasonable.
MR. BRENNAN: Very well.
THE COURT: If nothing else in the scrolling leave it
blank where the name is referred to.
MR. BRENNAN: We'll do that, Your Honor. Thank you.
THE COURT: All right. Are you happy now?
MR. HATCH: I got a crumb. You know as long as I
leave for the weekend with a crumb, I'm happy.
To know what part SCO wanted to get removed, we need to go to the PDF, to find the line numbers. So, if we go to page 64, which is on page 11 of the PDF, you'll find a handwritten note that says "Contested" in the margin. That is the spot. And what is on page 64 line 23 through page 65 line 3? It's Blake Stowell's May 20, 2005 email to Maureen O'Gara, with the subject line: "We need you to send a jab PJ's way." Then she is asked who PJ is, and she says "PJ is the purported author of the Groklaw site." And asked what Groklaw is, she says, "It is a website that follows the SCO case -- I should say cases maybe, but...." So that's what SCO didn't want the jury to hear. Can you blame them for not wanting their role highlighted to the world? Not only does it undermine Ms. O'Gara's testimony by showing her up as a member of the SCO team, so to speak, not an independent journalist, but it makes SCO look terrible, willing to arrange for a journalist covering their litigation to be harmed for no good reason, except that SCO wanted me to be harmed, to damage my credibility and smear my good name. It's an admission of an abnormal relationship with a journalist, such that their PR executive felt able to make a request like that. I'd so love to read the rest of that email. Someday, maybe. It explains why she was always so nasty when writing about me, I guess, which puzzled me at the time, since I'd never met her or had any dealings with her in any fashion. And I can't help but wonder why SCO listed her on its bankruptcy as being a creditor. Why would SCO owe her $10,000? Perhaps she was asked about that in parts of the deposition we didn't get to see in public. Not that I'd mind if she got stiffed for this piece of commissioned work, as I view it. One does enjoy when the universe is balanced. That's rare in the SCO universe, so it makes it especially satisfying when it happens. All right. Just kidding around. Oh, and I can speak with some authority on this next point. I am the *actual* author of Groklaw. And I'm very proud of my work, which is probably more than some journalists can say. One reason I am proud of my work is because no one has ever sent me an email like that. No one tells me what to write. No one pays me to write what they want written. That has never happened in the history of Groklaw. And I have never sent a deliberate jab anyone's way, either, on commission or on my own initiative, just to be mean. I've never tried to harm anyone or undermine their credibility unjustly. And speaking of balance in the universe, the end result of their calculated cruelty was that Ms. O'Gara's credibility as a witness was seriously undermined. Novell was able to use that incident to demonstrate that her testimony was not believable, since she was not independent but rather a SCO ally willing to do something that probably not a single juror would ever consider doing to anyone ever. So while, all things considered, I'd have preferred to skip that event, the jab they sent my way ended up boomeranging right back at them. Funny how life works out sometimes. Not that SCO meant for that to happen. I doubt Stowell ever expected that dirty little email to see the light of day in a courtroom. Any executive in 2005 ought to have known that emails are discoverable, but apparently not these SCOfolk. Of course, for all we know, the email came out in discovery because O'Gara still had it, while Stowell had deep-sixed it. Who knows which one was the careless conspirator, but here we are in 2010 reading the email. Like I often say, truth is like a weed. It will push through concrete to get to the light. And here they are, in a very bright light indeed.
Ty Mattingly:
One reason the two witnesses that do take the stand take all day is because Ty Mattingly, Darl's buddy, shows up with documents he claims to have found in his garage, which as it turns out, he gave to SCO earlier but about which nobody told Novell about until this very day, at trial. Birds of a feather flock together, I've read, and life's experience seems to bear it out. But if this was supposed to be SCO's Perry Mason moment, it falls flat. Instead we learn that someone has informed Mr. Mattingly of a prior witness being on the stand already, which is exactly what the judge has told everyone he doesn't want them doing. Maybe that's why SCO worries the jury won't follow his instructions. Mattingly's excuse for not telling Novell? He feels Novell is in the wrong. When you read Mattingly's testimony, I think you'll see that Novell's lawyer, Sterling Brennan, feels indignant. His destruction of Mattingly's credibility, despite Mattingly being obviously quick-witted and his lawyerly awareness of what Brennan is trying to achieve, is worthy to be used in classes on handling hostile witnesses. Here's one example, near the end of Mr. Brennan's cross: Q. Now, the other documents in addition to those
that you brought, you still have those, right?
A. I do.
Q. And those are at your home?
A. They are.
Q. Would you be willing to provide those documents to Novell's counsel to look at?
A. Absolutely.
Q. We would ask that you do that as well. Um, when do you think you might be able to do that?
A. Whenever you guys come down.
Q. Okay. I am sure we will come tomorrow. Now just a few more questions, Mr. Mattingly, I do appreciate your patience with me today.
I believe you said earlier that in response to a question by Mr. Singer that you thought that a majority of the UNIX business had been sold by Novell. Did I hear that correctly?
A. I don't know if I said a majority but yes.
Q. And so if one were to want to find out what assets were sold and which ones weren't, where would you recommend one look to make that determination?
A. I would say you could look at the contracts and all amendments to the contracts that clarify that.
Q. So you believe that in order to find out what assets Novell actually transferred to Santa Cruz Operation
one should look to the contract, right?
A. That would be the first place.
Q. Can you think of any other source other than the contract?
A. Sure. If ambiguity showed up, then you would probably talk to the deal team to understand what the spirit and intent of that contract was.
Q. So if one wanted to talk to the deal team, one would first talk to those who wrote the deal, right?
A. Depends on who you know. You might talk to them, you might talk to Ed Chatlos.
Q. And you know that one of the persons involved in writing the deal was Tor Braham; right?
A. Yes.
Q. Did you ever ask Mr. Braham about this transaction?
A. I have not spoken with Tor about this.
Q. Have you gone to him and said I would like to understand what this transaction meant in terms of assets that were transferred?
A. No.
Q. But you do believe that he would be one that you would want to ask that about to find out what was really meant by the written word, right?
A. Yes.
MR. BRENNAN: Thank you. I appreciate your time Mr. Mattingly.
Brennan has gotten this witness to state Novell's main theme: that if you want to understand a contract, so as to know what did and did not pass under the deal, you look to the writing. That's exactly what SCO is trying to say isn't where you should look. SCO's Stuart Singer tries in redirect to fix the damage, but the damage was done.
Boies Schiller's Stephen Zack, whose name appears on the SCO filings, said recently that he hopes to use his year heading up the ABA to develop a program for lawyers to teach civics classes to high school students. He could use this Brennan cross examination, I think, for those students, to show them why it's very important to tell the truth, the whole truth, and nothing but the truth on the witness stand. Law students obviously can also benefit by watching a master at work. Note especially how Brennan uses Mattingly's earlier deposition to show inconsistencies in the live testimony with what he had stated under oath in the deposition. As a helpful aid, I've marked the spot where he begins to unravel Mattingly's testimony Brennan's class in cross examination technique. Here is is [PDF], Exhibit 9 in the collection, if you'd like to follow along even more closely.
William Broderick:
Broderick retakes the stand, another live witness, and SCO begins direct examination. He actually went before Mattingly in time, but I'm dealing with his testimony last, because it is more significant. The first exhibit used is the 1985 software license agreement between AT&T and IBM [PDF]. Keep in mind something SCO will not be stressing, I imagine, which is that the agreement was amended and added to over time. This agreement isn't all there is. You can find all the additions and amendments on Groklaw's Contracts page, under the heading IBM.
Broderick explains the 1985 agreement [PDF] like this: A: Well, when you -- everybody who wants to get source code has to execute a software agreement. That's our umbrella. That's really our protections agreement. That's where we get our protections.
Q: How is it your protections?
A: Well, it's provisions for confidentiality and what rights of restrictions to a source code product that they license.
Q: What do the confidentiality restrictions mean, in your experience? What is the point of them?
A: Well, we're giving them our source code. It's our
family jewels. It's restricted to only people that, you know, have a need to know. It's the developers in-house, they have to protect that. They can't distribute the source code out to anybody else. They can't tell anybody. It also provides confidentiality for the methods and concepts in it. So they can't use our source code and then go out and tell their friends how the source code works. It's pretty heavy duty protection of our family jewels.
In addition, he says, beside the umbrella agreement, a licensee needs a product license. But then they go on to the AT&T Technology Sublicensing Agreement, SUB-00015A [PDF], and he explains:A: They would contact us, salespeople directly, and say they wanted to take a license. If they already had a software agreement in place, we would prepare a supplement product license for them, numbered sequentially, and send it out for execution. If they didn't have a software agreement in place, we would send them a software agreement to execute. And then when they executed that, we would send them the supplement. The judge then asks a question, and remember he can do this in particular in this case, because while the jury is assigned to judge certain facts, he was given the task to decide a list of issues as well. Here's his question:
THE COURT: Mr. Broderick, let me ask you a question. This may show my great ignorance here, but there has been fairly constant reference to a flavor of UNIX during the course of this trial. Would it be accurate to say that the license agreement and the software agreement together allow the licensee to create a flavor of UNIX and then the sublicense agreement allows them to market that flavored UNIX product?
THE WITNESS: Well, they couldn't take a license for a software product until they had a software agreement. And it's that product license that allows them to create a flavor. And then they could not distribute their binary of that flavor until they had executed a sublicensing agreement. Normand then takes Broderick through a letter that went out, he says, to whose with contracts that included a right to approve any transfer, a letter from Burt Levine that said "Novell has transferred to The Santa Cruz Operation, Inc. Novell's existing ownership interest in UNIX System-based offerings and related products, collectively transferred products". Of course, the *products* did transfer, just not the copyrights. The letter doesn't say that, Normand brings out, but then, why would it? And then there's another letter [PDF] to Broderick, then at Santa Cruz, from Novell in 1997 about Cray Research, that Normand describes as "an instance in which SCO is authorizing Novell to undertake to deal with SGI with respect to Cray." But notice something in this SCO exhibit, please. It acknowledges that Santa Cruz has authorized Novell to negotiate with Cray without Santa Cruz being involved. Cray had bought SGI, so it wanted to be under the SGI license, because SGI had bought out its license and so had no further payments due. So on its surface, you might describe it as Normand does. But look more closely at what the last paragraph says: This is intended to enable Novell to negotiate directly with Cray on the issue of Cray's intention to operate under the SGI Agreements for all SVRX royalty-generating binary shipments without requiring direct involvement from SCO. The only alternative would be for Novell and SCO to jointly negotiate with Cray, a situation which SCO has already indicated would unacceptably tax its legal resources. The only other alternative was not for SCO to negotiate alone. That is what I see. And if SCO bought everything, why would that be? Why would Novell be in the picture at all? SCO was in the picture because it was supposed to collect those royalties for Novell, obviously. But if there was an issue, Novell had to be involved, or so Santa Cruz at the time believed.Yet, despite Normand reading to him the part in the APA that says Novell could waive anything, Broderick insists that Novell did not have the right to waive, that it couldn't or shouldn't have the right to waive. Here's what Normand reads: In addition, at seller's sole discretion and direction, buyer shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX license to the extent so directed in any manner or respect by seller. Black and white. Yet note this exchange:
Q: In your view and your experience, if Novell had the right to waive or modify SCO's rights under the software agreement, what would be the consequences?
A: It would destroy our business.
Q: Why?
A: Because of the provisions -- that's where all our protections lie, the provisions of confidentiality, the
rights on -- limited rights for them not to just use the source code to modify it, not to distribute the source code. If they could waive those rights, Santa Cruz bought the business from Novell, Novell could just turn around the next day and destroy the business. …
Q: Now did there come a time you learned that Novell had directed SCO to waive its claim that IBM had breached IBM's software agreement?
A: I have heard that.
Q: What was your reaction?
A: They're nuts.
Q: What was the basis for that reaction?
A: They had no rights to do that. They had a right to protect their royalty binary stream, not to waive -- if they had the rights to waive provisions under the software agreement, that would have put us out of business, destroy the entire value of our company. Nuts or else they actually could and did read the APA, which Normand has just read to Broderick, which says in black and white that Novell had the right to waive. SCO's argument always comes down to the same thing: that logic tells you that this was not a good deal. OK. But that's not the same thing as saying that's not what the deal was.
Broderick testifies without choking that "the royalty stream [w]as part of the purchase price". But if Novell already had the royalty stream, how could it be payment for it to continue to have it?
And he testifies that if you license something, you call the document a license agreement. If you buy or sell, it's a purchase agreement or a sale. The APA, he says, was a purchase, not a license. Wait. APA means Asset Purchase Agreement. That doesn't say sale of everything. It says sale of some things but not everything. Which is what it did and that's what the jury eventually ruled. Santa Cruz already had a UNIX software agreement with AT&T. Guess how much it cost in 1995 for a source license? $375,000. The judge then asks a sensible question: THE COURT: Mr. Normand, before you do. This agreement is with AT&T. Was this agreement, to your knowledge, still in effect even though AT&T had sold the UNIX business to Novell?
THE WITNESS: Yes, it was still in effect. And the obvious question would have to be, why would Santa Cruz need it, if they bought everything lock, stock and barrel?
Interestingly, Broderick also testifies that a "SVRX licenses referred to the source code licenses for the products for -- all of the products that we licensed, excluding UnixWare." No footnotes about pre-existing or binary or any of the stories SCO has tried to tell over time. So, that's the level of quality of this testimony. The jury obviously didn't buy it, and neither did the judge, who eventually ruled that Novell has the right to waive. SCO, being SCO, is now appealing that ruling. It complains that the court failed to discuss the testimony by Mr. Broderick, among others, or to credit various SCO arguments based on his testimony, along with that of others. Here's their argument, so you can have it in mind as you read Broderick's testimony: After the trial, the district court entered its own findings on SCO's alternative claim for specific performance for transfer of the copyrights and on Novell's counterclaim that it had the authority under Section 4.16(b) of the APA to force SCO to waive its claims against IBM for alleged breach of the restrictions on disclosure of UNIX technology. The court found that Section 4.16's language
regarding "SVRX Licenses" applied to any "contract" concerning SVRX and therefore applied to all software development agreements or licenses. The court did not address SCO's argument that the "Software Agreement" and "Sublicensing Agreement" subject to which IBM obtained access to UNIX source code, and which imposed limitations on IBM's disclosure of such code, are included among the "Software and Sublicensing Agreements" referenced in Item III.L of Schedule 1.1(a), and is not an "SVRX License" as to which Novell had unrestricted waiver rights.
The district court also did not expressly discuss witnesses, including former Novell employees, who testified that in order to make sense, Novell's "waiver" rights under Section 4.16(b) of the APA extended only to the terms of the Product Schedule Licenses through which particular UNIX products were licensed. Those witnesses included Messrs. Broderick (A2331-2332), Frankenberg (A2188), Chatlos (A2254-56), Thompson (A2223-2224), Wilt (A2276), Mohan (A2282), Michels (A2288-90), Sabbath (A2396), and Ms. Madsen (A2382;A2392-93). The court also rejected SCO's argument that such a broad waiver right would permit Novell to undermine the UNIX and UnixWare business SCO had acquired. (A2392-93:892-93; A2315:593-94; A2316:599-600.)
Finally, the district court did not find persuasive the parties' own conduct shortly after the APA, when SCO disputed Novell's effort to unilaterally grant IBM a buyout of its binary royalty obligations and expanded source code rights, and "began to institute a law suit" against Novell. (A3433-34;A2600-2601:1690- 95.) The court found no significance in the fact that during the months of negotiations between Novell and SCO over this issue, Novell did not once assert ownership of the UNIX copyrights or the broad Section 4.16(b) rights it now claims....
Given the technological reality of UnixWare's development and ancestry, without copyright ownership, SCO does not have the right to enforce in court the copyrights at issue in the UNIX and UnixWare technology, and thus to protect the core technology in UnixWare. The need for the copyrights to enforce SCO's rights was supported by unequivocal testimony of witnesses who have been involved in the various aspects of the UNIX and UnixWare business, including former Novell and current SCO UNIX Contracts Manager William Broderick (A2333:666; A2334:667-68); Santa Cruz General Counsel Steven Sabbath (A2398:913-15); former SCO CEO Darl McBride (A2421:997); former Novell and current SCO
UNIX Product Manager & OEM Relations Manager John Maciaszek (A2599:1686-87); and former Santa Cruz Manager of Law and Corporate Affairs Kimberlee Madsen (A2364:780; A2369:802-03; A2386:865, 866; A2388:875; A2390-91:884-85).... The district court read the relevant contractual provisions as applying to "any SVRX License" (A2982 ¶92), but that begs the question of what constitutes an SVRX License. In finding support from the language that Item VI of Schedule 1.1(a) refers to "all contracts relating to the SVRX Licenses listed below," the court ignores that the definition of an SVRX License in Section 4.16 is not all of Item VI, but only the licenses supposedly listed within Item VI. The language of Item VI that "All contracts relating to the SVRX Licenses listed below" reflects that the term "all contracts" is separate from the term "SVRX Licenses," which are to be listed below. The reference to "all contracts" thus is not part of any definition of "SVRX License" as such. The SVRX Licenses to which the waiver rights apply are clearly a subset of "all contracts," SCO, 578 F.3d at 1223-24, and all contracts are not SVRX Licenses.
The district court also gave no weight to the extensive extrinsic evidence that Novell's waiver rights did not extend to such agreements. This evidence
included direct testimony not only from the SCO (Santa Cruz) executives and negotiators involved in the transaction, but also Novell executives, including its former CEO. Those executives included Frankenberg (A2188), Chatlos (A2254-56), Thompson (A2223-24), Wilt (A2276), Mohan (A2282), Michels (A2288-90), Broderick (A2331-32), Sabbath (A2396), and Madsen (A2382;A2392-93). These witnesses cogently testified that the waiver provision was intended to protect Novell's interest in the royalty stream in SVRX Licenses which it would continue to receive post-closing, and was no broader than that. The IBM Software Agreement was not the source of SVRX royalties (A3231-36; A2303-04); the product supplement schedules for specific binary products provided those royalties (A3409-10; A2314), and in addition, in 1996 IBM had completely paid-up the royalties even under those agreements and was no longer paying any SVRX royalties that were passed through to Novell. (A2668:1948-49.)
The district court discounted this testimony, saying that one SCO witness, William Broderick, was not involved in the negotiation or drafting of the APA, and that many other SCO witnesses acknowledged that the language of Section 4.16 of the APA was not limited to product supplement schedules. (A2980¶89.) Broderick, however, worked at Novell (and at USL before that) and offered evidence as to how Novell, and later Santa Cruz, actually interpreted these
provisions. (A2303-04; A2310-12.)...
Given the technological reality of UnixWare's development and ancestry, without copyright ownership, SCO does not have the right to enforce in court the copyrights at issue in the UNIX and UnixWare technology, and thus to protect the core technology in UnixWare. The need for the copyrights to enforce SCO's rights was supported by unequivocal testimony of witnesses who have been involved in the various aspects of the UNIX and UnixWare business, including former Novell and current SCO UNIX Contracts Manager William Broderick (A2333:666; A2334:667-68); Santa Cruz General Counsel Steven Sabbath (A2398:913-15); former SCO CEO Darl McBride (A2421:997); former Novell and current SCO
UNIX Product Manager & OEM Relations Manager John Maciaszek (A2599:1686-87); and former Santa Cruz Manager of Law and Corporate Affairs Kimberlee Madsen (A2364:780; A2369:802-03; A2386:865, 866; A2388:875; A2390-91:884-85). So now as you read the transcript, you'll understand what SCO was trying to achieve with the questions they asked Broderick, a strategy which failed at the District Court in Utah but which is now before the US Court of Appeals in Colorado.
*************************************************
565
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
| THE SCO GROUP, INC., a Delaware | ) | |
| corporation, | ) | |
| Plaintiff, | ) | |
| vs. | ) | Case No. 2:04-CV-139TS |
| NOVELL, INC., a Delaware | ) | |
| corporation, | ) | |
| Defendant. | ) | |
| _________________________________ | ) | |
| AND RELATED COUNTERCLAIMS. | ) | |
| _________________________________ | ) | |
BEFORE THE HONORABLE TED STEWART
---------------------------------
March 12, 2010
Jury Trial
REPORTED BY: Patti Walker, CSR, RPR, CP
[Address] Salt Lake City, Utah [Zip]
566
A P P E A R A N C E S
For Plaintiff: Brent Hatch
HATCH JAMES & DODGE
[Address]
Salt Lake City, Utah [Zip]
Stuart Singer
BOIES SCHILLER & FLEXNER
[Address]
Fort Lauderdale, Florida [Zip]
Edward Normand
BOIES SCHILLER & FLEXNER
[Address]
Armonk, New York [Zip]
For Defendant: Sterling Brennan
WORKMAN NYDEGGER
[Address]
Salt Lake City, Utah [Zip]
Eric Acker
Michael Jacobs
MORRISON & FOERSTER
[Address]
San Francisco, California [Zip]
567
I N D E X
| Witness | Examination By | PAGE |
| William Broderick | Mr. Normand (Direct cont.) | 574 |
| Mr. Acker (Cross) | 620 |
| Mr. Normand (Redirect) | 655 |
| Mr. Acker (Recross) | 668 |
| Ty Mattingly | Mr. Singer (Direct) | 671 |
| Mr. Brennan (Cross) | 695 |
| Mr. Singer (Redirect) | 759 |
| Mr. Brennan (Recross) | 759 |
568
569
SALT LAKE CITY, UTAH; FRIDAY, MARCH 12, 2010; 8:30 A.M.
PROCEEDINGS
THE COURT: Good morning.
Counsel, I am prepared to rule on the O'Gara
deposition designations unless one of you feels you need to
address it here orally.
MR. BRENNAN: Your Honor, it depends on what the
ruling is. Perhaps I should wait.
THE COURT: So do you want me to give you my
ruling and then let you argue it?
MR. BRENNAN: Perhaps your sense, and if I need to
say anything after that, I'll raise my hand, if that's fair.
THE COURT: I don't think you need to stand.
MR. BRENNAN: Thank you.
THE COURT: Mr. Normand, Mr. Singer, Mr. Hatch, do
any of you?
MR. HATCH: As I understand it, we're down to just
the third set of designations and, of course, one is that
they be able to -- again, back to the discussion that's
already there. You know, the jury is going to be able to
draw its conclusions. Any prejudice from what has already
been agreed to could be in there. So it's just cumulative,
for that matter. We're obviously very concerned about the
mention of specific sites. I think not having the .com
doesn't really improve that. It makes it easy to see, and
570
it is a particularly sensitive matter, as we discussed
previously with Your Honor and Your Honor indicated as well.
THE COURT: Thank you, Mr. Hatch.
Counsel, the Court is going to allow providing to
the jury those designated portions of the O'Gara deposition
that are in dispute and found at pages 64, 66, 67 and 69.
The Court will note that, in its opinion, the probative
value of this testimony does far outweigh the
prejudicial value. There is prejudicial value. I
understand your argument and I also understand the reference
to Groklaw would be of some concern, but the Court is more
concerned that they are looking at The Salt Lake Tribune or
some other source. I don't believe making reference to an
obscure Web site name without it being designated
necessarily as a Web site, per se, is going to somehow or
another draw attention to this jury to go look at,
particularly in light of the instructions the Court has
given. I think this jury is being very careful and I
believe that the risk is rather small that that is going to
result in any type of violation of the instructions of the
Court.
Mr. Hatch.
MR. HATCH: Yeah. My only comment to Your Honor
would be I think, on this matter, that is hardly an obscure
site because I think if you type in the names of the
571
parties, it's one of the first things that comes up with
pretty much any search engine.
THE COURT: I understand that, but, again, they
could be looking at much more readily available sources than
that.
So, counsel, I do have to ask you, we received
yesterday -- well, I guess it was -- it was received
yesterday, the petition for writ of certiorari in the above
entitled cases filed on March 4th, 2010, and placed on the
docket of the United States Supreme Court on March 8th. Do
you have any sense for whether or not this matter is going
to be taken by the Supreme Court, thus make this trial moot?
MR. SINGER: Your Honor, it's our view that it's
remote that the Supreme Court is going to take writ
certiorari from the Tenth Circuit's opinion. First of all,
it's a nonfinal decision -- not in the sense that it isn't a
final decision of the Tenth Circuit, but just for the reason
that this case has simply been remanded for trial, and after
that trial the issue will go forward, if necessary, to the
Tenth Circuit and parties have the rights to go beyond that.
But, second, this is a case where there was no
dissent on the Tenth Circuit panel. There was a motion made
by Novell to stay the mandate. That was denied. There was
a motion to the Tenth Circuit for en banc reconsideration.
That was denied with apparently no judge in active service
572
thinking that it should be reconsidered. We do not believe
that there is a circuit court conflict on this issue.
And for all those reasons, we think the odds of
the Supreme Court will take this case are low, and, of
course, the odds that the Supreme Court takes any case are
very low.
THE COURT: Thank you, Mr. Singer.
Mr. Jacobs.
MR. JACOBS: Your Honor, I certainly agree with
the last point Mr. Singer made, the odds of any certiorari
petition being granted are low. On all the other points, we
have the opposite view. We set them forth in your
certiorari petition. We haven't moved for a stay because,
frankly, I think I would have a hard time persuading the
Court just, given the odds, that the Court should stay this
trial pending the writ -- petition for writ of certiorari.
SCO's response is due I believe April 8th to the
petition, sometime in April, so the Supreme Court's
consideration of this is going to take into April or May.
MR. SINGER: We would likely, Your Honor, seek an
extension of time. Novell sought two extensions of time
that were granted by the Court in filing its petition. I
think, given that we're sort of tied up for the next few
weeks, the court might deem a short extension of time to be
reasonable.
573
THE COURT: So neither one of you are saying we
ought to quit and go home then?
MR. SINGER: That's certainly our position, Your
Honor.
MR. JACOBS: That's correct, Your Honor. We're
enjoying ourselves.
THE COURT: Do either of you have anything else
before we bring the jury in?
MR. SINGER: Not from the plaintiffs.
MR. BRENNAN: No. Thank you, Your Honor.
Ms. Malley.
Counsel, I'm assuming that these rather
intimidating white packages over here are the depositions
that will be read today; is that correct?
MR. ACKER: No, Your Honor. I think those are Mr.
Broderick's prior trial testimony and deposition testimony.
It's just potential for purposes of impeachment of Mr.
Broderick.
THE COURT: Okay. Thank you.
MR. NORMAND: Your Honor, do you want us to bring
in Mr. Broderick now?
THE COURT: Yes. Have him come in, but don't have
him yet take the witness stand, please.
(Jury present)
THE COURT: Good morning, ladies and gentlemen of
574
the jury. I would remind you that we, yesterday, had Mr.
Broderick as a witness. We'll continue with his
examination.
And, Mr. Broderick, if you would please come
forward and re-take the witness chair. I will remind you
that you are still under oath.
DIRECT EXAMINATION (Cont.)
BY MR. NORMAND:
Q Good morning, Mr. Broderick.
A Good morning.
Q When we left off yesterday afternoon, you were talking
about what you described as the umbrella software agreement.
Do you remember that?
A Yes.
MR. NORMAND: Mr. Calvin, would you put that up.
BY MR. NORMAND:
Q Do you recognize this document, Mr. Broderick?
A Yes, I do.
Q And can you briefly describe what it is?
A This is the software agreement that was executed
between AT&T Technologies and IBM.
Q What does the number on the top right of the first page
of this document signify?
A It says SOFT-00015. Each licensee, when they license a
software agreement, were assigned a specific number.
575
MR. NORMAND: Could we go to page 2 of this
document. And bring out section 2.01.
BY MR. NORMAND:
Q The beginning of this paragraph, Mr. Broderick, says,
AT&T grants to licensee a personal, nontransferable and
nonexclusive right to use in the United States each software
product identified in the one or more supplements hereto.
Do you see that language?
A Yes, I do.
Q Let's go to section 1.04 on the same page. Is this a
definition of software product that was just referred to in
that grant of rights?
A Yes.
Q It says, software product means materials such as
computer programs, information used or interpreted by
computer programs and documentation relating to the use of
computer programs. Do you see that language?
A Yes.
Q Let's go to section 1.02 on the same page. Is this a
definition of computer program that was just used in the
definition we went over?
A Yes.
Q It states, computer program means any instruction or
instructions, in source-code or object-code format, for
controlling the operation of a CPU. Do you see that
576
language?
A Yes.
Q Can you, when we add this all up, explain what's going
on with the software agreement? What rights are being
potentially given? What rights are potentially at issue?
A What it's doing is it's granting the rights. If you
take the supplement -- if you execute a product schedule
license, it gives you the rights to source code, to source
code computer programs. It's the instructions in
source-code format that you can use and you can modify -- a
CPU is a computer. It tells you that you can use the source
code on a computer and develop a product.
Q You referred to a product schedule license or a
supplement. What is that?
A Well, when you -- everybody who wants to get source
code has to execute a software agreement. That's our
umbrella. That's really our protections agreement. That's
where we get our protections.
Q How is it your protections?
A Well, it's provisions for confidentiality and what
rights of restrictions to a source code product that they
license.
Q What do the confidentiality restrictions mean, in your
experience? What is the point of them?
A Well, we're giving them our source code. It's our
577
family jewels. It's restricted to only people that, you
know, have a need to know. It's the developers in-house,
they have to protect that. They can't distribute the source
code out to anybody else. They can't tell anybody.
It also provides confidentiality for the methods and
concepts in it. So they can't use our source code and then
go out and tell their friends how the source code works.
It's pretty heavy duty protection of our family jewels.
MR. NORMAND: Now will you pull up SCO 167.
BY MR. NORMAND:
Q I don't believe this is yet in evidence. It should be
on your screen, Mr. Broderick. Do you recognize this
document?
A Yes. This is a product license that IBM took out.
It's numbered number 47, and it is for a UNIX System V
Release 3.0.
MR. NORMAND: Can we highlight that language on
the top right?
BY MR. NORMAND:
Q How are you familiar with this document?
A I worked with -- anybody who licenses a source code
ends up with a -- first, before they get the source code,
they have to execute a product license.
Q How are you personally familiar with this document?
A I worked with IBM in their licensing. I did not -- I
578
didn't do this one. This was before I did. But I worked
with IBM and I knew the licenses that they had.
MR. NORMAND: Your Honor, I move SCO 167 into
evidence.
THE COURT: Any objection?
MR. ACKER: No, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 167 was received into
evidence.)
MR. NORMAND: Mr. Calvin, can you pull out and
show the title of this document to the jury.
BY MR. NORMAND:
Q So explain briefly, once again, what purpose this
document serves in relation to the software agreement that
we just looked at?
A This actually licenses a software product. The
software agreement is the general terms and conditions to be
able to do this. It has the overall protections.
MR. NORMAND: Let's pull out the top right of that
document, Mr. Calvin, with the number.
BY MR. NORMAND:
Q Now is this agreement number the same as the one we
looked at, the software agreement, earlier?
A Yes.
Q How do those two correspond?
579
A Everything is -- everything is done -- since it's so
important to be able to keep track of who is licensed,
everything is done by a licensing mechanism. It's almost
like a library decimal system. So if IBM has a software
agreement SOFT-00015, and then every time they license a new
software product or a new designated CPU, new computer to
use it on, they execute a new supplement and they would get
a new number so we can reference -- when we talk with them
about a license they have, we can reference, you know, under
your software agreement X, Y, Z, we're looking at these
supplement numbers, and we're both talking about the same
thing.
Q Now you referred also yesterday to a sublicensing
agreement. This will be the last in our three issues we're
talking about in this lecture.
MR. NORMAND: Can you pull up SCO Exhibit 3.
BY MR. NORMAND:
Q Do you see that document on your screen, Mr. Broderick?
A Yes.
Q What's it titled?
A AT&T Technology Sublicensing Agreement.
Q How are you personally familiar with this document?
A I've worked with it. It's, you know --
MR. NORMAND: Your Honor, I, frankly, don't recall
if this is in evidence. If it's not, then I'll move it in.
580
THE COURT: Number 3?
MR. NORMAND: Yes, Your Honor.
THE COURT: Any objection?
MR. ACKER: No objection.
THE COURT: Exhibit 3 will be admitted.
(Plaintiff's Exhibit 3 was received into
evidence.)
BY MR. NORMAND:
Q Now this language on the top right, once again, Mr.
Broderick, what is the significance of that number on the
top right of this document?
A Well, you lost the first letter I think from a two-hole
punch, but it's SUB-00015A, and that was the number assigned
to the IBM sublicensing agreement, and each licensee would
have.
MR. NORMAND: Can we go to the second page of this
document and highlight 2.01(a).
BY MR. NORMAND:
Q This document says, AT&T grants the licensee personal,
nontransferable and nonexclusive rights: To make copies of
sublicensed products. Do you see that language?
A Yes.
Q Let's go to section 1.04 on the same page. And this
says, sublicensed product means, computer programs in
object-code format based on a software product.
581
Now taking those two definitions, can you explain the
purpose and operation of a sublicensing agreement?
A That granted the overall rights to distribute a
sublicensed product. A sublicensed product is -- I talked
yesterday about if you went to the store and you bought
Microsoft Windows. That's a binary product. A binary
product is an object code form. You can't change it. You
can just use it. So what this is granting them is rights,
if they have a license for a specific software product, to
take that software product and distribute a binary. It's
the same thing as allowing somebody to distribute Microsoft
Windows. You can't modify it at that point, just use it.
Q Now with all of this in mind, let's go back to an
exhibit we looked at yesterday, SCO 580. This was the
Prentice-Hall letter. Do you recall discussing that?
A Yes.
MR. NORMAND: Can you bring up the first paragraph
of the text.
BY MR. NORMAND:
Q This was a letter, Mr. Broderick, in which Novell was
explaining that it had transferred to the Santa Cruz
Operation, Inc. its existing ownership interests in UNIX
System-based offerings and related products as listed in
attachment A of this letter. Do you recall this?
A Yes.
582
MR. NORMAND: And can we go to attachment A of
this letter. Let's bring out that full set as well as we
can, Mr. Calvin.
BY MR. NORMAND:
Q Mr. Broderick, what are these lists comprised of? What
are these things?
A These are all the different software products -- part
of the list of the software products that we licensed under
product licenses.
MR. NORMAND: Can we go to the next page. The
next page, and the next page.
BY MR. NORMAND:
Q So all of those products, it's your understanding, had
been transferred by Novell to SCO?
A Yeah, that's what they say.
Q How was it that a company would go about licensing
products such as those listed here?
A They would contact us, salespeople directly, and say
they wanted to take a license. If they already had a
software agreement in place, we would prepare a supplement
product license for them, numbered sequentially, and send it
out for execution. If they didn't have a software agreement
in place, we would send them a software agreement to
execute. And then when they executed that, we would send
them the supplement.
583
Q In your experience -- you took over that business after
you transferred to Santa Cruz following the APA?
A Yes.
THE COURT: Mr. Broderick, let me ask you a
question. This may show my great ignorance here, but there
has been fairly constant reference to a flavor of UNIX
during the course of this trial. Would it be accurate to
say that the license agreement and the software agreement
together allow the licensee to create a flavor of UNIX and
then the sublicense agreement allows them to market that
flavored UNIX product?
THE WITNESS: Well, they couldn't take a license
for a software product until they had a software agreement.
And it's that product license that allows them to create a
flavor. And then they could not distribute their binary of
that flavor until they had executed a sublicensing
agreement.
THE COURT: Okay.
MR. NORMAND: Thank you, Your Honor.
BY MR. NORMAND:
Q Now, Mr. Broderick, did there come a time when --
A Kind of makes my job sound boring, doesn't it?
Q I didn't say that.
THE COURT: I was afraid you were going to be
offended that I used the term flavor. At your level, that
584
probably is not the phrase that you would use.
THE WITNESS: We use that all the time.
BY MR. NORMAND:
Q Did there come a time when the entire UNIX business
transferred from Santa Cruz to the company that's now known
as SCO?
A Yes.
Q And do you recall when that happened?
A The official date was May of 2001.
Q Did your responsibilities and obligations with respect
to overseeing the entire UnixWare business, contract aspects
thereof, change in any way when they were transferred from
Santa Cruz to SCO?
A At Santa Cruz I handled primarily U.S. domestic
business. When we transferred to SCO, I won the whole
world.
Q Congratulations.
We're going to show you SCO Exhibit 592. I don't think
that's in evidence. This is another category of the letters
that Novell sends out. Do you recognize this document?
A I recognize the contents of the letter. It was similar
to a lot of other letters that went out. I don't remember
specifically this customer.
Q Why do you recognize the document at all?
A Well, when we were in the transition teams, we had to
585
notify the licensees that Novell was selling the business.
Burt Levine was assigned the job of drafting up the
letter. And he did it -- when he drafted it up, he sent it
around to some of us for a second set of eyes to see if he
got everything correct in it. We said yes.
Then what they do is -- a standard licensee, where
there was no requirement for them to approve an assignment,
they just got blanket letters. They had a form letter that
was signed by -- I believe Stu Adamson, who was our
controller at the time, they did one of those things in
Microsoft Word where they throw the addresses in and they
sent them out.
Then we had to go through the files and we had to find
third-party suppliers and people we had special agreements
with that required them to approve any assignment. We had
to modify the letter a little bit telling them that, okay,
Novell sold the business to Santa Cruz, your agreement is
being assigned to Santa Cruz, talk with them from now on,
please sign this as your approval.
MR. NORMAND: Your Honor, I move SCO 592 into
evidence.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 592 was received into
evidence.)
586
MR. NORMAND: Mike, can you pull up the first
paragraph.
BY MR. NORMAND:
Q This states in the letter from Novell, as you may have
heard, Novell has transferred to The Santa Cruz Operation,
Inc. Novell's existing ownership interest in UNIX
System-based offerings and related products, collectively
transferred products. Do you see that language?
A Yes.
Q From your work, following the transition, do you know,
approximately, how many such letters Novell sent out to
these licensees and partners?
A My guess is about 3,000. I've got copies for all of
them and there were boxes filled in my office for a long
time.
MR. NORMAND: Can we pull up the signature, Mike.
BY MR. NORMAND:
Q Who signed this letter, Mr. Broderick?
A That's Burt Levine. He's a lawyer at Novell. He's the
sole lawyer of the UNIX group. He came from USL with us.
Q Now where was Mr. Levine located?
A In our offices in New Jersey. The UNIX developers and
finance people and contracts people that were with Novell
were all located in Florham Park, New Jersey, and Burt was
located there with us.
587
Q From your work following the transition from Novell to
Santa Cruz, are you aware of any letter saying that any
customers should deal with Novell concerning copyright
issues?
A No.
Q Are you aware of any letter saying Novell retained any
copyrights?
A No.
Q Let's do one more of these, Mr. Broderick. Turn to SCO
Exhibit 22. Do you recognize that document?
A I've seen this one, yes.
Q I take it you recognize it on the same basis that you
have recognized these earlier letters?
A Yes.
MR. NORMAND: I move SCO 22 into evidence, Your
Honor.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 22 was received into
evidence.)
MR. NORMAND: Now, Mike, let's pull up the top
left to show who this letter is to.
BY MR. NORMAND:
Q Did you have occasion in your work to deal with
Microsoft Corporation, Mr. Broderick?
588
A Not a lot, but I have had some dealings with them.
MR. NORMAND: Let's pull up the first paragraph of
the letter, Mike.
BY MR. NORMAND:
Q So this is another one of the letters with the
following language, as you may know, Novell transferred to
The Santa Cruz Operation, Inc. its existing ownership
interests in UNIX System-based offerings and related
products. Do you see that language?
A Yes.
Q In the next paragraph, this letter also contains, in
the second sentence, similar language to what we saw
earlier, it makes immeasurably more business sense for SCO,
as the owner of the software in which the components may be
included, to handle directly with Microsoft any matters that
may become relevant under the subject agreement. Do you see
that language?
A Yes.
Q How does that language comport with your understanding
of Santa Cruz's responsibilities and rights following the
transition?
A Well, Santa Cruz bought the business of technology.
They had all the contracts. Microsoft -- it was a product
that Microsoft had that Santa Cruz had used in the UNIX
operating system. And by buying the UNIX operating system,
589
they got all the contracts for all the third-party
suppliers, and this is just one of those letter to a
third-party supplier.
Q Let's look at the next page and the signature.
MR. NORMAND: Can you bring that up, Mike.
BY MR. NORMAND:
Q Who was Michael DeFazio?
A He was a Novell senior vice president in charge of the
UNIX business. He was located with us in New Jersey.
Q Now following this transition and during the course of
your work at Santa Cruz and SCO, did you have any
understanding of what rights Novell had retained with
respect to the APA?
MR. ACKER: Calls for speculation, Your Honor.
Also, there is no foundation.
BY MR. NORMAND:
Q Did you have in your month-to-month work while at Santa
Cruz and SCO occasion to deal with Novell with respect to
any rights it had retained under the APA?
A Yes, I did.
Q How so?
A Well, when we had the transition meetings, we were
still all Novell employees. They identified people who were
going to Santa Cruz and people who were staying Novell. And
they pulled up contracts binding these people together, and
590
we went through portions of the asset purchase agreement
because it had some ongoing requirements.
Q When you say they pulled?
A Novell management pulled us together. And part of
those ongoing requirements, they showed us sections of the
asset purchase agreement. One of them was section 4.16
which talks about Novell's retaining some binary royalty
rights. As part of the purchase price, you know, they got
stock and they got these ongoing royalties for the older
UNIX System V products.
And in the asset purchase agreement, there were some
restrictions that, as employees who were going to SCO, we
had to follow and the employees staying with Novell had to
make sure we followed them. One of them was we couldn't do
anything to jeopardize that royalty stream. It was money in
the bank to them. We weren't allowed to touch it.
We talked about it, and what we couldn't do was, once
we became Santa Cruz Operation, we couldn't go to the
licensee and say, look, you're paying $100 per copy on a
royalty for this product, take a license with us, we'll
charge you $50 a copy, and then beat Novell out of their
royalty stream. We weren't allowed to do that. There were
restrictions on our entering into new licenses.
Q Mr. Broderick, going back to what we started today, in
your experience and your view, what was the source of the
591
royalty streams? Where did those come from?
A They came from the product schedules. When you
license -- when you license a product, the product schedule
has the royalty listing, you know, what you had to pay.
MR. NORMAND: Now, Mike, let's go to Section 4.16
of the APA. Bring out (a).
BY MR. NORMAND:
Q Now, Mr. Broderick -- I'm sure the jury appreciates our
patience as we go through this -- this is the language in
which the APA refers to all, quote, SVRX licenses, as listed
in detail under item VI of schedule 1.1(a) hereof. Do you
see that language?
A Yes, I do.
MR. NORMAND: Mike, can you go to schedule 1.1(a)
and item VI.
BY MR. NORMAND:
Q Mr. Broderick, have you had occasion to review item VI
of schedule 1.1(a)?
A Oh, yes.
BY MR. NORMAND:
Q So the previous page, at the bottom --
MR. NORMAND: Let's first highlight for the jury,
Mike, the top. This is schedule 1.1(a), and highlight
number VI at the bottom.
//
592
BY MR. NORMAND:
Q It says, all contracts relating to the SVRX licenses
listed below. Now in your experience, Mr. Broderick, what
are actually listed below in item VI? What are those
things?
A These are the source code products that we had product
schedules for and we issued licenses for.
Q Now going back to section 4.16, following that
transition meeting and based on your experience at Santa
Cruz and then SCO, what was your understanding as to what
SVRX licenses referred to?
A SVRX licenses referred to the source code licenses for
the products for -- all of the products that we licensed,
excluding UnixWare.
Q And let's look at section 4.16(b). This is the
language that says, buyer shall not, and shall not have the
authority to amend, modify or waive any right under or
assign any SVRX license without by the prior written consent
from seller. In addition, at seller's sole discretion and
direction, buyer shall amend, supplement, modify or waive
any rights under, or shall assign any rights to, any SVRX
license to the extent so directed in any manner or respect
by seller. Do you see that language?
A Yes, sir.
Q Now in the course of your work, did you develop an
593
understanding of what rights Novell had with respect to
waiving or modifying SVRX licenses?
A Sure. I actually worked with Novell on some of those.
Q What was the understanding you had as to the scope of
those rights?
A They had rights to tell us to modify or have approval
for modifications of changes to the licenses, the product
schedules.
Q Did you have an understanding as to why they had the
right to do that?
A Because that's where the royalties came into play.
They were continuing to get the royalty stream as part of
the purchase price, so they had the right to manage that
royalty stream.
Q Now at the start of the day we were talking about what
we call the umbrella software agreement. Do you remember
that?
A Yes.
Q In your view and your experience, if Novell had the
right to waive or modify SCO's rights under the software
agreement, what would be the consequences?
A It would destroy our business.
Q Why?
A Because of the provisions -- that's where all our
protections lie, the provisions of confidentiality, the
594
rights on -- limited rights for them not to just use the
source code to modify it, not to distribute the source code.
If they could waive those rights, Santa Cruz bought the
business from Novell, Novell could just turn around the next
day and destroy the business.
Q Now, Mr. Broderick, I want to show you SCO Exhibit 213.
It's going to come up on your screen. It's not yet in
evidence. This is a letter to you. Do you recognize this
document?
A Yes, I do.
Q It's from Novell; is that right?
A Yes.
Q And did you have occasion to receive this letter during
your work at Santa Cruz?
A Yes.
MR. NORMAND: Your Honor, I move SCO 213 into
evidence.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 213 was received into
evidence.)
BY MR. NORMAND:
Q Now before we start to highlight this letter for the
jury, could you briefly describe the background with respect
to this company Cray that gave rise to this correspondence?
595
A Sure. Cray Research had a license going back to UNIX
System Laboratories. They licensed UNIX. And Cray built
super computers, those multimillion dollar computers mostly
used by the government. They were very high powered
computers. They sold for sold multimillions of dollars.
They had a special license with us where they not only had
the right to distribute the binaries with their products,
but they were given a special right to deliver source code
with that computer.
Q And did there come to be some dispute or discussion
with Cray about its rights?
A No. Actually the discussions slash dispute came with
SGI. Silicon Graphics bought Cray Research. They contacted
me. And Silicon Graphics had been given a binary royalty
buyout by Novell, so they didn't have to pay royalties
anymore. They had paid a lump sum up front. When they
bought Cray Research, they said we're putting Cray
underneath our buyout provisions. And I had said, nice try,
but no. And we discussed this back and forth for a while.
Q And what was the result of the discussions?
A The discussions weren't going anywhere. So I went to
my boss and I said, you know, we get five percent of these
binary royalties. I've been spending about that much
talking with them. This is a binary royalty deal. Why
don't we turn this over to Novell and say, look -- under the
596
APA, we have to take reasonable efforts to protect and
collect their royalties. I have expended that. So we went
to Novell and said, you know, here's the situation, you deal
with it as it applies to the binary royalties. You can't
touch any of the source code fees, rights or anything else,
but you do the binary stuff, I'm done.
MR. NORMAND: Mike, let's pull up the signatures
at the bottom.
BY MR. NORMAND:
Q Do you have an understanding, Mr. Broderick, as to why
this is signed by two people?
A It was signed by -- it was signed by Steve Sabbath and
Ryan Richards. Ryan Richards sent the letter to Steve
Sabbath, who was our general counsel at Santa Cruz, sign it
saying, yep, we agree to this.
MR. NORMAND: Mike, pull up the middle paragraph.
BY MR. NORMAND:
Q This language says, by signature below, SCO authorizes
Novell to negotiate and conclude with Cray the issue of
Craig's intention to operate under the SGI agreements for
all SVRX royalty-generating binary shipments. Do you see
that language?
A Yes.
Q This is an instance in which SCO is authorizing Novell
to undertake to deal with SGI with respect to Cray; is that
597
right?
A Yes.
Q Now, Mr. Broderick, when you were part of the UNIX
group at USL and Novell, did those companies amend and
modify rights under product schedule licenses?
A Certainly, often.
Q How so?
A There were hundreds of them. Most of them had to do
with --
Q When you say hundreds of them, what do you mean?
A Hundreds of license agreements. Any time we modified a
product schedule -- generally a product schedule that we
did, it had to be in writing. The software agreement says
any modifications to product schedules or anything, we both
have to sign it. So what they would do --
Q Why did those companies have occasion to amend and
modify the product schedule licenses with frequency?
A It generally had to do with royalties they would pay.
A lot of the companies would come and say, I'm only using a
portion of the UNIX I have embedded in my product. I only
need these sections, so I don't want to pay the full
royalty. Let's negotiate a lower royalty. We would do a
letter agreement modifying the product license so they would
pay the lower royalty.
Q When you were at USL and Novell, did those companies
598
sometimes waive rights under product schedule licenses to
cut a licensee a break, for example?
A By waive rights, you mean -- they do letter agreements
waiving -- if somebody licensed a source code product, there
was a one-time, up-front fee for the source code. And
depending on the source code product, if it was an operating
system, it would be anywhere from $100,000, to UnixWare,
which is $375,000. If they were a current licensee and we
wanted them to move to the next release that we were coming
out with, we would do a letter agreement and offer them a
lower one-time fee for the source code. So that was
essentially a waiver of something under a license.
Q Did all those activities relate to and surround the
product schedule licenses?
A Absolutely.
Q Now after the APA, did Novell direct SCO and Santa Cruz
to amend or modify the product schedule licenses from year
to year?
A Yes, they did.
Q How so?
A In each product schedule there is a provision for the
royalties to be increased. What they could do is -- when
you sign a license, you have to -- you agree to pay
royalties. And there are a lot of people that have taken --
there are people that are still shipping a product based on
599
UNIX System V Release 3.2. That was licensed back in the
1980s, which they continue to develop and they continue to
ship. So in the product schedule there is a provision that
we can increase their royalties based on an increase in the
consumer price index, and we can increase it annually.
After we went to Santa Cruz, the finance person at
Novell directed me each year to notify the licensees that we
were increasing the royalties by this consumer price index.
Q Was it your understanding, after this set of transition
meetings concerning the APA, that Novell had sought to
preserve for itself the same rights of waiver and
modification that it had before the APA was executed?
A I'm sorry. Could you repeat that?
Q Yes. The question is, was it your understanding,
following the transition meetings, that Novell wanted to
retain that same waiver of rights, same rights to modify
product schedule licenses after the APA that it had before
the APA?
A As it related to the binary royalties.
Q Was that your understanding?
A Yes.
Q Now, until 2003, to your knowledge did Novell ever
direct Santa Cruz or SCO to waive its rights under or to
amend or to modify any software agreement?
A No, but that's not where the royalties are generated,
600
so that wouldn't be a right they retained.
Q To your understanding?
A To my understanding.
Q Now did there come a time you learned that Novell had
directed SCO to waive its claim that IBM had breached IBM's
software agreement?
A I have heard that.
Q What was your reaction?
A They're nuts.
Q What was the basis for that reaction?
A They had no rights to do that. They had a right to
protect their royalty binary stream, not to waive -- if they
had the rights to waive provisions under the software
agreement, that would have put us out of business, destroy
the entire value of our company.
Q Now did there come a time when you learned that Novell
was claiming that under the APA Santa Cruz had obtained only
a license?
A I heard that.
Q What was your reaction to that?
A They're nuts.
Q Why?
A Well, first of all, I have been in contracts for almost
20 years. If I license something to somebody, I call it a
license. If I sell something to somebody, I call it a
601
purchase agreement or a sale.
Q Please continue.
A The agreement between Santa Cruz and Novell is an asset
purchase agreement. It's a purchase agreement. Also,
throughout the agreement, Novell was referred to as the
seller, not the licensor. Santa Cruz is referred to as the
buyer, not the licensee. And I've never done a license
where I've transferred all right, title and interest in an
asset.
Q Now, Mr. Broderick, as of the fall of 1995 -- it may
take a couple minutes to explain this, but as of the fall of
1995, totally apart from the APA, did Santa Cruz already
have a UNIX license?
A Yes, they did.
MR. NORMAND: Mike, can we pull of SCO 706.
BY MR. NORMAND:
Q Do you recognize this document, Mr. Broderick?
A Yes.
Q On what basis do you recognize it?
A It's a letter to Santa Cruz Operation from O.L. Wilson.
He used to be in charge of the licensing group at AT&T.
Q What is your personal knowledge of this document?
A It's among the documents that I worked with and have
seen.
MR. NORMAND: Your Honor, I move SCO 706 into
602
evidence.
MR. ACKER: Your Honor, I don't think that's a
sufficient foundation. This document predates his work at
Novell and/or SCO. He doesn't seem to be able to identify
where and when he used it or saw it.
BY MR. NORMAND:
Q Mr. Broderick, in your personal experience, did you
have occasion to review and consider the terms of Santa
Cruz's license during your work at Novell, Santa Cruz and
SCO?
A Yeah. I went through the licenses when we were told we
were going to be working for them to find out what they were
doing and who they were.
Q Did you do that as part of your job responsibilities?
A I did that out of curiosity and trying to stay
employed.
THE COURT: Would your review have included this
agreement that you would have reviewed?
THE WITNESS: I'm sorry?
THE COURT: Would your review have included review
of this agreement?
THE WITNESS: I pulled out all of Santa Cruz's
documents, licenses. I don't remember specifically seeing
this document. But I looked at everything Santa Cruz had.
MR. ACKER: Same objection, Your Honor.
603
MR. NORMAND: Could we go to the next page of the
document, Mr. Calvin. The next page.
BY MR. NORMAND:
Q Do you recognize this document, Mr. Broderick?
A Yes, I do.
Q On what basis do you recognize it?
A It's Santa Cruz's software agreement.
Q Is this the agreement you were referring to earlier
that you referred to and reviewed in the course of your job
responsibilities?
A Yes, I did.
Q Do you now recall reviewing this document?
A Yes.
MR. NORMAND: Your Honor, I move SCO 706 into
evidence.
THE COURT: Mr. Acker.
MR. ACKER: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 706 was received into
evidence.)
MR. NORMAND: Now, Mr. Calvin, can we pull up the
first three paragraphs, including the title.
BY MR. NORMAND:
Q This document is titled AT&T Information Systems, Inc.
Software Agreement. The first paragraph identifies the
604
Santa Cruz Operation, Inc. Do you see that reference, Mr.
Broderick?
A Yes, I do.
Q Now what would be the point -- let me start this way.
Summarizing what we started the day with, what is your
understanding of what -- as of 1995, what is your
understanding of what the scope of Santa Cruz's rights were
under this license and the corresponding sublicensing or
product schedules?
A Under this license -- under this license, it's like
every other license --
Q You say license?
A Well, I mean under this agreement. Sorry.
Q I should be clearer. Do you know whether Santa Cruz
executed a product schedule license under this operating
agreement?
A Yes, they did.
Q Taking these together, what was your understanding of
what Santa Cruz's rights were as of 1995 under the software
agreement and license?
A Well, under the software agreement, they had rights to
acquire source code products.
Q Do you know if they did?
A Yes, they did.
Q Do you know if they built a UNIX business around the
605
software agreement and license that they took?
A Yes, they did.
Q How do you know that?
A I know that because they were a licensee and we knew
what our licensees were doing. They paid royalties. And
they actually distributed a binary. They were the only
company I knew of -- the reason I got to know them is
because when we were talking about the business, it was
mostly OEM computer, original computer manufacturers that
license our software and they put the UNIX on their
computer. Santa Cruz had a different business model, which
is why I got to know them when I was working at USL and
Novell. Santa Cruz wasn't a computer manufacturer. They
took the UNIX operating system and they created a UNIX
binary similar to Microsoft Windows, but it was a UNIX
operating system.
Q Is that a flavor?
A That would be a flavor. And they distributed that.
They distributed it to distributors. They would sell it to
companies like Dell or Compaq, who had personal computers,
and instead of putting Microsoft Windows on the computer,
they put Santa Cruz's UNIX on the computer.
Q Now in the fall of 1995, based on your experience, if
Santa Cruz had wanted to license the most recent version of
UNIX, if it had wanted to license UnixWare, all it wanted
606
was a license to UnixWare, about how much would it have paid
for that kind of license?
A The standard unit for a source license was $375,000,
but current licensees that licensed UnixWare were generally
given a break in the price. You know, it was the effort to
move them to the next release and keep them current with
what we were doing. So they probably would have paid less
than the $375,000.
Q Now, Mr. Broderick, I want to show you a slide that
Novell used in its opening argument.
THE COURT: Mr. Normand, before you do. This
agreement is with AT&T. Was this agreement, to your
knowledge, still in effect even though AT&T had sold the
UNIX business to Novell?
THE WITNESS: Yes, it was still in effect. All
the agreements just transferred through. The agreements
were, essentially -- the agreements were, essentially, a
perpetual for source code. The reason that was was the
companies that license the source code, the large IBM,
Hewlett-Packard, they expended a lot of money and a lot of
resources to create their flavor, and they wouldn't -- they
wouldn't sign an agreement that said, okay, after you spend
all this time and all this effort, we're going to cancel
your agreement.
//
607
BY MR. NORMAND:
Q Were there circumstances in which these UNIX companies
did retain the right to terminate a licensee's rights under
the software agreement?
A The licensee could terminate any time they wanted. We
could terminate the license if they breached a provision of
the agreement.
Q I see.
A Absolutely, if -- you know, as I said before, this was
our family jewels we were letting these people have. If
they were doing something wrong with the source code, we
were going to shut them down.
Q Okay.
MR. NORMAND: Thank you, Your Honor.
BY MR. NORMAND:
Q I had asked Mike to put up the slide that Novell had
used in its opening argument, and I wanted to ask you some
questions about this slide, Mr. Broderick.
A Sure.
Q Do you see the top half of the exhibit reflects the
sale of the UNIX business from AT&T to USL and then from USL
to Novell?
A Yes.
Q Do you see the bottom half of the slide lists
Hewlett-Packard, HP, Sun and IBM?
608
A Yes.
Q In your experience, what was the nature of HP's, Sun's
and IBM's involvement with UNIX?
A They were a licensee.
Q Now let's start with HP. Did you have any involvement
in the licensing of UNIX to HP?
A Yes.
Q When did that occur?
A Through my time at Novell and Santa Cruz.
Q Did HP create its own flavor of UNIX called, as
indicated here, HP-UX?
A Yes, they did.
MR. NORMAND: Mike, can you bring back up schedule
1.1, please. Let's put up the first paragraph.
BY MR. NORMAND:
Q Now, Mr. Broderick, when HP licensed UNIX, did Novell
or its predecessor also transfer to HP all copies of UNIX
and UnixWare?
A No, they did not.
MR. NORMAND: Let's bring the slide back up, Mike.
BY MR. NORMAND:
Q When HP licensed UNIX from Novell, did Novell transfer
all of its employees in the UNIX licensing group to HP?
A No, they did not.
Q So you remained at Novell along with the rest of the
609
employees in the UNIX licensing group after that HP license?
A Yes, I did.
Q Let's move on to IBM. Did IBM license UNIX from Novell
or its predecessors?
A Yes.
Q That's the agreement we started the day with, right?
A Yes.
Q Now when IBM licensed UNIX, did the parties execute a
license purchase agreement?
A No. They executed a license.
Q When IBM licensed UNIX from Novell or its predecessors,
were the UNIX engineers instructed to go into the UNIX
source code and add copyright notices?
A No, they were not.
Q Let's move on to Sun, also indicated in the slide.
When Novell licensed UNIX to Sun, did Novell or its
predecessor license back the UNIX technology so it could use
that technology in its own products?
A No, it did not.
Q Did Novell send out letters to its customers and
partners informing them that Novell had transferred its
existing ownership interest in UNIX to Sun?
A No.
Q So returning to the slide that Novell created for the
jury, in your view, where does SCO fit into the diagram?
610
A On the same level, directly to the right of Novell.
Q Why do you say that?
A Because Santa Cruz bought their business, just like
Novell bought the business.
Q Now, Mr. Broderick, with all of this in mind -- we're
getting close here -- let me return to your participation in
that transition process in 1995. As part of that process,
did you separate materials that Novell was keeping from the
materials that Santa Cruz would take possession of?
A Yes, I did.
Q Why did you do that?
A Because Novell was -- Novell was retaining certain
products that were part of the -- the Novell UNIX group had
not only the UNIX operating system, but they had some other
products and they had some agreements related to those
products that were not going to Santa Cruz. So we had to go
through all of the legal and financial files, intellectual
property files and pull out the files that were related to
products that are -- business that was not going to Santa
Cruz and was staying with Novell.
Q Did you receive any direction from anyone in this
regard?
A Yes, we were told.
Q Who told you?
A Novell management. At the time we were all Novell
611
employees. We had just been designated you're going to
Santa Cruz, you're staying with Novell. So we went into the
file room and we were told what to look for. Obviously all
the NetWare agreements and files have to be pulled out. So
what we did is we put a couple of tables in the center of
the file room, and anything related to NetWare was put on
the table.
Then we looked -- there was the tuxedo product and some
kind of data management product, and Novell was retaining
that. That was not getting sold to Santa Cruz. So any
files relating to this tuxedo product were pulled out.
And then also there was a product called documented
workbench. It is an old product from AT&T, USL, but Novell
also was not selling that to Santa Cruz. So any files we
found relating to the documented workbench were pulled out.
What we did is we tried to isolate all the files that
Novell needed to retain. Then the resulting files were
going to be Santa Cruz's files. So we went through all
these files and pulled them out and said, okay, Novell,
here's, you know, what you asked for, these are all the
files you need. They said, yes. We said, okay, take them.
Q Now, Mr. Broderick, as part of that process, which
company took possession of the UNIX and UnixWare copyright
registration certificates that were in New Jersey?
A I'm assuming Santa Cruz because we have them now.
612
Q How do you know we have them now?
A They are in Lindon.
Q Lindon?
A Utah.
MR. NORMAND: May I approach, Your Honor?
THE COURT: You may, and you don't need to ask,
Mr. Normand.
MR. NORMAND: Thank you, Your Honor. I ask for
Mr. Broderick's sake.
BY MR. NORMAND:
Q Do you recognize those materials, Mr. Broderick?
A Yes. I saw these when we were -- there was a point in
time after Caldera bought us that we shipped also the legal
files to Lindon, and on one of my trips out to Lindon, we
were organizing the files and came across this and we made a
decision on where to file it.
Q What do you understand those materials to be?
A These are copyright registrations related to UNIX.
Q What do the green tabs on the side of those say, Mr.
Broderick? Are there exhibit numbers?
A The first one here says Exhibit 487.
Q What does the second one say?
A Exhibit 488.
Q Now before we get into those in a little more detail, I
want to show you and the jury, Mr. Broderick, a schedule to
613
the APA. Let's start with the seller disclosure schedule.
MR. NORMAND: Go to page 1 of that, Mike. The
page before that, I believe.
THE COURT: Mr. Normand, Mr. Broderick asked if he
could stretch for just a second.
MR. NORMAND: Of course.
THE WITNESS: I'm getting old.
BY MR. NORMAND:
Q We're going to show you the seller disclosure schedule
in the APA. This appears at the end of the APA. And the
second page of the seller disclosure schedule refers to --
let's start at section 2.10, bring all that out. This
refers to intellectual property. There is a reference at
the bottom, attachment E to this schedule contains a listing
of seller's copyright registrations covering products
related to the business. Do you see that?
A Yes.
Q So let's go to the first page of attachment E to the
APA.
THE COURT: Just one second, Mr. Normand. The
jury should be seeing this, correct?
MR. NORMAND: That's right, Your Honor.
THE COURT: He's doing the APA.
MR. NORMAND: I'm sorry.
THE COURT: You need to back up because they
614
didn't see that last one.
MR. NORMAND: Mike, let's go back to the seller
disclosure schedule. Let's highlight that top language of
the first page of the seller disclosure schedule so the
jurors can see what it says. This is in the APA, schedule
to the APA. Let's go to the second page of this schedule.
Highlight that section 2.10 language. See the reference to
intellectual property, and there is a reference at the
bottom, attachment E to this schedule contains a listing of
seller's copyright registrations covering products related
to the business.
So now let's, in turn, go to attachment E, page 1.
Bring up the title. Attachment titled Selling Copyrights in
Products of Business. Let's go to page 8. Let's highlight
those bottom three references.
BY MR. NORMAND:
Q Mr. Broderick, do you have an understanding of what,
with respect to this first reference, UNIX Operating System
Edition 6 is?
A Yes.
MR. ACKER: Object. He needs to read the whole
line, and instruction manual.
MR. NORMAND: I'm asking him if he understands
what the first part of the line is.
//
615
BY MR. NORMAND:
Q Is the instruction manual separate from the UNIX
Operating System Edition 6?
A The instruction manual tells you how to use the
Operating System Edition 6.
Q Now we're going to put on your screen, Mr. Broderick,
what's been marked as SCO Exhibit 486.
THE COURT: 486 or 487?
MR. NORMAND: 486, Your Honor.
THE COURT: This the jury should not see.
MR. NORMAND: That's correct. In fact, I'm not
sure 487 and 488 are in.
THE COURT: 485, 486, 487, 488 have not been
admitted yet.
MR. NORMAND: Correct, Your Honor.
BY MR. NORMAND:
Q Do you recognize Exhibit 486, Mr. Broderick?
A It's a copyright registration.
Q Let's go to 487. Let's go to page 3 of 487. Now can
you tell, Mr. Broderick, if the exhibit on the screen
corresponds to 487 in your book?
A It looks like it corresponds.
Q Are you familiar with these copyright registration
certificates?
A I've seen them, yes.
616
Q On what basis have you seen them?
A When we were filing out in Lindon, Utah, I believe I
thumbed through them. When we were doing the filing out in
Lindon, Utah, I was doing that filing with a woman named
Joanie Bingham, B-i-n-g-h-a-m, and we were deciding how to
file. We were doing the customers and the licensees
alphabetically, and I told her she should set up a separate
area for those things, like the copyright registrations. I
looked through the binders at that time and saw what they
were and said, put them in a file called copyrights.
Q Have you maintained ultimate control of these materials
since that time?
A They did in Lindon, yes.
Q And did they do so at your direction?
A I told her to file them and not throw them out. That's
my direction.
Q Apparently she did that.
A She did a good job. She didn't throw them out.
MR. NORMAND: Your Honor, I move SCO 487 into
evidence.
MR. ACKER: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 487 was received into
evidence.)
//
617
MR. NORMAND: Now, Mike, can you highlight the
language in number one were it says title of this work.
BY MR. NORMAND:
Q It says UNIX Operating System Edition 32V and
Instruction Manual. Do you see that language, Mr.
Broderick?
A Yes.
MR. NORMAND: Bring that down, Mike, and pull up
the top right. Actually, you can get rid of the operating
system reference. Can we pull that, Mike, up side by side
or top to bottom with the corresponding number in attachment
E of the APA.
BY MR. NORMAND:
Q Now, Mr. Broderick, what is the number on the top right
of the certificate of copyright registration? Can you see
that, the registration number?
A TXu 516 704.
Q Do you see a corresponding number in the attachment to
the seller disclosure schedule in the APA?
A Yes, I do. Same number.
MR. NORMAND: Let's bring up for Mr. Broderick SCO
Exhibit 488. Let's go to page 3.
THE COURT: 488 has not yet been admitted.
MR. NORMAND: Correct, Your Honor.
//
618
BY MR. NORMAND:
Q Can you see, Mr. Broderick, the document on your
screen, the right side of your screen --
MR. NORMAND: Let's do SCO 488, Mike.
BY MR. NORMAND:
Q The question is going to be whether the document that
comes up on your screen corresponds to 488 in the book
that's in front of you.
MR. NORMAND: Let's go to page 3.
THE WITNESS: The two documents correspond.
MR. NORMAND: Your Honor, I move SCO 488 into
evidence.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 488 was received into
evidence.)
MR. NORMAND: Mike, can you do the same
comparison.
THE COURT: Mr. Singer, you can be heard in that
microphone.
MR. SINGER: I'm sorry.
BY MR. NORMAND:
Q Do you see the number on the copyright registration,
Mr. Broderick, top right?
A Yes, I do.
619
Q Can you see if that corresponds to the number in the
attachment to the seller disclosure schedule in the APA?
A They are the same.
MR. NORMAND: Let's bring those down, Mike.
Actually take them out. We'll just look at page 3 of the
registration. Highlight the first half of the language 1
and 2.
BY MR. NORMAND:
Q Do you see, Mr. Broderick, the reference in 2, in sort
of the middle of that highlighted where it says nature of
authorship?
A Yes.
Q What does it say?
A Computer program.
Q Is it your understanding that UNIX Operating System
Edition 7 is a computer program?
A Oh, yes.
MR. NORMAND: Just a moment, Your Honor.
Your Honor, we would like to move into evidence as
well the other copyright registration certificates, and I
don't have the list handy. Maybe I can do that on redirect
or with some other witness. Just to flag that issue for the
Court.
THE COURT: All right.
MR. NORMAND: Thank you, Mr. Broderick. No
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further questions.
THE COURT: Mr. Normand, thank you.
Mr. Acker.
THE WITNESS: Do you want your books back?
MR. NORMAND: I'll take them.
THE COURT: Will you be using those books, Mr.
Acker?
MR. ACKER: We'll put them on that table over
there.
CROSS-EXAMINATION
BY MR. ACKER:
Q I'll give you these, Mr. Broderick, just in case.
Good afternoon.
A Good afternoon.
Q How are you?
A Pretty good.
Q Where do you currently work, sir?
A The SCO Group.
Q And do you have any equity interest in the company?
A I do. I have a little over 6,000 shares of stock that
I purchased through the stock purchase plan and I have a
number of options that are -- I think because we're in
Chapter 11 are frozen.
Q How many options do you have, sir?
A About 30,000.
621
Q So you have shares of stock that if SCO's stock price
rises, you will gain financially, correct?
A That's true.
Q And you also have shares -- 30,000 shares of stock. Do
you know what the strike price is for those shares of stock?
A Anywhere from 24 cents. Better than 50 percent of them
are around nine, $10.
Q So if those shares with a strike -- options of strike
price of 24 cents, if SCO's stock price was to go up to $10,
you would make $10 per option, correct?
A That's true, but on half of them I would make about 30
cents.
Q So if SCO's stock price were to rise, you would gain
financially, correct?
A Sure.
Q Now you were not involved in the negotiation of the
asset purchase agreement; is that right?
A That's true.
Q And you were not present at the Novell board meetings
in September of 1995 when the asset purchase agreement was
approved, correct?
A That's true.
Q And you had no involvement with any of the amendments
to the asset purchase agreement, correct?
A That's true.
622
Q Now you're a contract guy, right?
A I'm a contracts guy.
Q Let me ask you a little bit about contracts. You would
agree with me, wouldn't you, that a written contract
provides a written record of what the parties agreed to?
A That's the intent of a contract, yes.
Q And in a written contract, you want to be as clear as
possible in case there are misinterpretations in the future
about what the parties intended, correct?
A That's the intent of the contract, yes.
Q And the reason for putting it in writing is so there is
no misinterpretation years down the road about what the
parties agreed to, right?
A That's correct.
Q You want a written record so people in the future
cannot say the contract said one thing when it actually said
another, correct?
A That's the intent, yes.
Q You also want a contract so people don't forgot what
they agreed to years after it's put in writing, right?
A Correct.
MR. ACKER: Could we bring up SCO 04, please.
BY MR. ACKER:
Q We looked at this when Mr. Normand was taking you
through your direct examination. This is a software license
623
agreement between AT&T and IBM, right?
A Correct.
Q And this is one of the contracts that was first
purchased by Novell and eventually went to Santa Cruz; is
that right?
A Yes.
Q And you actually administered, at times, this contract,
correct?
A Correct.
Q And the reason that the words and the clauses are put
in the contract is so that both parties know what their
rights and obligations are, right?
A That's the intent, yes.
Q The reason that the words are put in the contract is so
that years after the contract was executed, you can pick up
the written document, you can look at it, you can read it,
and you can know what the rights and the obligations are of
each side, correct?
A Correct.
Q And when you enter into these sorts of agreements with
a party, you expect that party to comply with and abide by
the written terms of the agreement, right?
A Yes.
Q And you don't expect somebody on the other side of a
contract to, years later, just tell you orally, well,
624
despite what the words in the contract say, that is not what
we meant and therefore we're not going to abide by the
written contract, right?
A That's always been my intent.
Q That's your practice, right?
A Yes.
Q That's the way it works, right?
A Yes.
Q So, for instance, if we take a look at the third page
of this agreement, paragraph 2.05, this is a license
agreement, and this 2.05 excludes certain rights, in other
words, it says, no right is granted by this agreement for
the use of software products directly for others, or for any
use of software products by others, right?
A Yes.
Q In essence, back when this agreement was executed years
ago, AT&T was telling IBM you can't give these rights to
other people, they are just for you, right?
A Yes.
Q And they put it in writing, right?
A Yes.
Q They put it in writing so that 15 or 20 years later
someone from IBM couldn't say, well, we think when we made
this agreement, we really thought we had the right to give
these rights to other people, right?
625
A Yeah.
Q So you put it in writing so both parties know what the
agreement is, right?
A Yes.
Q What you can and can't do, right?
A Yes.
Q Despite that somebody may come years later and say what
they thought or hoped or wished the contract was, they are
stuck with what the language is? You would agree with me,
wouldn't you?
A In most cases, yeah, I agree.
Q Because that's the way contracts work, right?
A Yes.
Q Let me ask you about SCO Exhibit 03, please. Now I got
a little confused, but let me see if I can clear it up.
You talked about three types of licensing agreements
you entered into. This umbrella agreement that you enter
into with an entity sort of sets the general terms and
conditions of the relationship between the parties, correct?
A Yes.
Q Then there would be a first layer of agreement, which
would be a source code license where the licensee could take
a source code, could develop code on top of it, could make
their own flavor of UNIX; is that right?
A Yes.
626
Q And below that would be another licensing agreement,
which is what this one is, which is a sublicensing agreement
that allows the person who developed the new flavor of UNIX
to then turn around, put it into binary code, then license
to a customer, correct?
A Yeah. I wouldn't say it's below the -- you know, I
don't know if you are talking about hierarchy of priorities.
You have the software agreement, general terms and
conditions for licensing a software product. The
sublicensing agreement is the umbrella for distributing a
binary. Then you have the licenses where you actually
license a product and you can work with it, and that just
determines the royalties. So the hierarchy isn't a product
schedule under the sublicensing agreement.
Q I didn't mean to say that one was more superior to the
others, simply there are three types of licenses.
A Okay.
Q They are all related and they all work together, they
are all integrated, correct?
A Yes.
Q If you would take a look at paragraph 4 of SCO Exhibit
3.
MR. ACKER: If you would go there, Tom, an
highlight, please.
//
627
BY MR. ACKER:
Q It reads -- this is the agreement, again, where the
producer of the flavor of UNIX who has licensed the source
code rights is now sublicensing the binary code, and this
sublicensing agreement, together with the software agreement
and its supplement, sets forth the entire agreement and
understanding between the parties as to the subject matter
hereof.
What that is saying is that these three agreements that
you've talked about, the umbrella agreement, the source code
agreement and the sublicensing agreement, are all
interrelated, correct?
A Yeah. You have to have a software agreement in order
to have a sublicensing agreement. And you have to have a
software agreement in order to license a product.
Q It's those three agreements together that form the
relationship or define the bounds of the relationship
between the licensor and the licensee?
A Correct.
Q You talked about licenses with Sun and Microsoft. Do
you recall that testimony?
A Yes.
Q If we could -- let me show you a couple of agreements.
Let me show you what we've marked as Exhibit N-13 and T-13.
Have you had a chance to look at those, sir?
628
A I see them. How much detail do you want me to look at
them?
Q Just take a look, and start with N-13. It's a license
agreement that was entered into between SCO -- new SCO, the
plaintiff in this case, and Sun in 2003, correct?
A Uh-huh. (Affirmative)
Q You have to answer yes or no.
A Yes.
Q You also have T-13, which is an agreement that was
entered into between SCO, the plaintiff in this case, and
Microsoft in, again, 2003, right?
A Yes.
Q You are familiar with these licenses, correct?
A I'm familiar with them, yes.
Q Now as part of the APA, you understood that --
THE COURT: Mr. Acker, do you want these
admitted?
MR. ACKER: Yes. I move to have N-13 and T-13
admitted, Your Honor.
THE COURT: Any objection?
MR. NORMAND: No objection.
THE COURT: They will be admitted.
(Defendant's N-13 and T-13 were received into
evidence.)
//
629
BY MR. ACKER:
Q These two agreements, N-13 and T-13, they were entered
into between SCO, the plaintiff in this case, Sun and
Microsoft, correct?
A Yes.
Q After the APA was signed, first Santa Cruz, and then
SCO, had the ability to develop their new version of
UnixWare, correct? That was part of the APA?
A They owned the technology. They could do with it what
they want.
Q So they had the ability to the source code rights and
they could take that source code and build a new version of
UNIX on top of it, correct?
A They didn't have source code rights, they had ownership
of the source code.
Q I understand that's your opinion. But they had the
ability to build new code on top of the old UNIX code,
correct?
A Correct.
Q And they built different versions of UnixWare on top of
that, correct?
A Correct.
Q And that took place from 1995 until 2003, they were
continuing new versions of UnixWare coming out, right?
A Yes, correct.
630
Q They call these different revs or different versions of
it the new improved version of software, correct?
A Correct.
Q And in your business you have this one line of code
theory, correct?
A Correct.
Q The one line of code says that if you purchase the
most -- even one line of code of the most recent version of
the software, you pay that price for the software, right,
the price for the most recent version?
A No, that's not correct. The one line of code rule is
if you have a release of a software that you have developed
a derivative work and you are releasing a binary, you
license a later release of the code and you use one line of
code in your current binary release, then you have to pay
the royalties for that later release. It's not if you just
license it, you have to use it.
Q Use it and use it by creating -- building on top of it
and sublicensing it in binary form?
A Yes.
Q It's true, isn't it, that in these two agreements,
N-13, the Sun agreement, and T-13, the Microsoft agreement,
that what was being licensed in both of these agreements was
the most recent version of UnixWare, correct?
A Correct.
631
Q And so the jury understands, in 2003, when SCO entered
into a license agreement, the Sun agreement, N-13, what it
was licensing and what the value that Sun was paying for was
the most recent version of UnixWare, correct?
A Okay. Yes.
Q Is that true?
A True.
Q And then similarly for the Microsoft agreement entered
into, again, by SCO and Microsoft in 2003, what Microsoft
was paying for and the value they were getting was for the
most recent version of UnixWare, right?
A Well, Microsoft was also getting some release from some
claims. They were also getting a release that SCO wouldn't
sue them for certain things. Microsoft included more.
Q But you would agree with me that the vast majority of
what it was that Microsoft was paying money for in T-13, the
Microsoft license entered into in 2003, was for the rights
of the most recent versions of UnixWare?
A I don't know that for a fact.
Q Well --
A I'm familiar with the agreement. I don't know how you
parse out the amount of money that -- the value of the
agreement, whether it was for the release or whether it was
for the technology that was licensed. That's something
somebody else should probably answer.
632
Q But take a look at T-13. You see there is a --
THE COURT: T-13?
MR. ACKER: Yeah, T-13.
BY MR. ACKER:
Q If we go to Exhibit A of T-13, and if we could
highlight the top line, SCO UnixWare 7 Release 7.1.3. That
was the most recent version of UnixWare in 2003, correct?
A Correct.
Q And below that there are a number of additional
releases, correct, earlier software and other items?
A Yes, but I'm not sure what all of them are. I'm about
as technical as a doorknob.
Q But the real value and what really Microsoft was paying
for, setting the release aside, the release portion of this
agreement, getting the rights to the software, what they
were really paying for was the ability to use the most
recent version of SCO UnixWare 7, right?
A Yes.
Q Similarly, if you take a look at Exhibit C, you see at
the top there is Open UNIX 8 Release 8 and UnixWare 7
Release 7.0? Do you see that?
A Yes.
Q Those are the most recent versions of UnixWare and Open
UNIX, right?
A Yes.
633
Q And down below there is a bunch of older code, right,
on the schedule?
A Correct, but the SCO Open Server Release 5, that was
just as current as the UnixWare 7. That was just another
product.
Q But the real value, what Microsoft was paying for,
other than the release in the agreement, was the most recent
version of software of UnixWare, right?
A That's my opinion. You would have to ask Microsoft,
though.
Q But that's your opinion as the contracts guy at SCO,
correct?
A Yes.
Q Is that right?
A Yes.
Q And all of the older code listed below, that's simply
just added to the schedule as a routine practice, but that
wasn't what Microsoft was paying to get, right?
A I don't know.
Q Isn't it true that it's your normal practice that when
you license the most recent version of software, you also
provide licenses to the older versions just as a matter of
course?
A We provide the right to access, and that's because
every release is built on a preceding release.
634
Q But the real value in what the customers or licensees
are paying for is the most recent version of software,
right?
A Correct.
Q That was true both for Sun and Microsoft in 2003,
right?
A Yes.
THE COURT: Mr. Acker, would you please look for
an appropriate time for the morning recess?
MR. ACKER: It's an appropriate time.
THE COURT: It would be. All right.
Ms. Malley.
(Jury excused)
THE COURT: Do you have anything, counsel, before
we take the recess?
MR. NORMAND: Not from us, Your Honor.
MR. ACKER: No, Your Honor.
THE COURT: We'll take 15 minutes.
(Recess)
***** Part 3 *****
(10:15 a.m.)
THE COURT: Are you ready, counsel?
MR. ACKER: Yes, Your Honor.
THE COURT: If you would, please, Mr. Broderick.
(jury present)
THE COURT: Go ahead, Mr. Acker.
MR. ACKER: Thank you, Your Honor.
Q (BY MR. ACKER) Before we broke -- or actually Mr. Normand
was sort of asking you questions about a couple of schedules
that were attached to the APA, and I want to ask you about
those as well.
So why don't we start with section 2.0 of the Seller
Disclosure Schedule in the APA. Highlight that, please. Now,
this section 2.10 of the Seller Disclosure Schedule describes
those -- that list of copyrights that you were talking to
Mr. Normand about; correct?
A I assume so.
Q Let's take a look at it. The heading first is
Intellectual Property. Do you see that?
A Yes.
Q So this is a disclosure in the APA by the seller, Novell,
of its intellectual property; correct?
A Yes.
Q And then Attachment C to the schedule contains the most
current listing of pending and issued applications for
635
trademarks covering products of the business. Do you see
that?
A Yes.
Q And then Attachment D to the schedule contains a listing
of pending and issued applications for patents covering
products of the business. Do you see that?
A Yes.
Q And then, finally, the attachment that Mr. Normand asked
you about was Attachment E, and it says attachment E of this
schedule contained a listing of seller's copyright
registrations covering products relating to the business. Do
you see that?
A Yes.
Q So this is -- in the APA this is Novell's description of
intellectual property; correct?
A Yes.
Q And you've done asset purchase agreements, and you know
in an asset purchase agreement there will be a section of the
agreement that says what gets transferred and what does not
get transferred; correct?
A Yes.
Q Why don't we go to Schedule -- or Section 1.1(b) of the
Asset Purchase Agreement. And Schedule 1.1(b) of the Asset
Purchase Agreement, sir, you understand is the section of the
Asset Purchase Agreement that says what assets were excluded;
636
correct?
A Correct.
Q So, in other words, if we take a look at Roman Numeral V
of the excluded asset section, it says what intellectual
property is excluded from a deal that is not transferred;
right?
A Correct.
Q And so what this is is this is a subset of what is
disclosed later on in those disclosures we looked at, and this
is saying what is not going in the transaction; right?
A Correct.
Q And what the deal was was intellectual property,
including all copyrights and trademarks, except for trademarks
Unix and UnixWare were not being transferred; right?
A It makes no since to use this language because it's been
replaced. This language does not exist in the APA.
Q Well, this was the language that was approved by the
Board of Directors; correct?
A But it does not exist in the APA. It was -- it was
replaced with wording in Amendment 2.
Q My question was was this wording, "All copyrights and
trademarks, except for the trademarks Unix and UnixWare," as
intellectual property excluded from the Asset Purchase
Agreement, was that approved by the Novell Board of
directors?
637
A I would assume so.
Q And you also see there's all patents are excluded;
correct?
A Yes, but I don't believe -- AT&T didn't transfer any Unix
patents to Novell, so I don't think Novell had any patents to
transfer.
Q So these lists that we see, the disclosure lists that we
see at the end of the agreement that list patents and patent
applications and that list a bunch of copyrights, that's
simply a list of what exists, but you have to look to the
excluded assets section to see -- and the included assets
section to see what actually went and what actually did not go
in the transaction; right?
A That would be true.
Q So now if we could take a look at -- well, let me --
first of all, you mentioned Mr. Burt Levine.
If we could bring up his photograph, please.
Is that the Burt Levine that you were referring to as the
one that gave you these letters that went to customers?
A Yes.
Q And were you aware that Mr. Levine was an in-house lawyer
at Novell during 1995?
A Yes.
Q And were you aware that Mr. Levine actually reviewed and
edited the included and excluded asset schedules of the APA?
638
Were you aware of that?
A I didn't know that.
Q And were you aware that Mr. Levine approved and agreed
with those included and excluded asset sections, including the
section that excluded copyrights? Are you aware of that?
A No.
Q Let's go back to Schedule E if we could. Schedule E,
yes -- Attachment E. Now, this is a list that goes on for
one, two, three, four, five, six, seven, eight pages; is that
right?
A Okay. I'm only looking at the section of one page --
(voices overlapping)
THE COURT: Just a second. Just a second. Don't
talk over each other.
Mr. Acker, if you'd ask your question again.
MR. ACKER: Yeah, I'll ask him another question.
Q (BY MR. ACKER) You see in Attachment E it says page 1 of 8?
A Yes.
Q And you've looked at the APA, and you and Mr. Normand
have spent time looking at this together; correct?
A Correct.
Q And when you walk through these eight pages of these
copyrights, the first seven-and-a-half pages are all manuals,
instruction guides; right?
A Okay.
639
Q It's not code; right?
A Okay.
Q Do you agree with that? You want to look at it?
A I would agree with that.
Q So the only code listed, again on this disclosure, is in
the last four items; right? If we go to page --
I'm sorry, Thomas. Go to page eight, please. Highlight
those last four.
And do you know what year that code was written?
A I'd say the late 70's.
Q And there was many, many improved or added on or new
versions of Unix after the 70's before the Asset Purchase
Agreement in 1995; correct?
A Absolutely.
Q And none of those are listed in this schedule; right?
A No, they're not.
Q And in fact these copyright registrations -- if I can
hand those back to you, sir --
487, if you could bring up 487, please.
And the first page you see there's a section there in --
three in the front page?
A Yes.
Q The code is written in 1978; right?
A Yes.
Q And the named owner of the registration or the copyright
640
in this document that was being testified about was AT&T;
right?
A Yes.
Q And SCO or Santa Cruz or Caldera never made any effort to
change this; right?
A I don't know.
Q And all of that code that was improved on, the new Unix
code that was written between 1978 and 1995, that's not
anywhere in this attachment to the APA; correct?
A Correct.
Q And similarly, if you go to -- and I'm sorry. It's 488,
the next copyright registration. You see the date that that
code was written?
A Yes.
Q 1978?
A Yes.
Q And you see also that the name of the registrant is AT&T?
A Yes.
Q Now, when there was a switch, when the Asset Purchase
Agreement was finalized in the end of '95 and you moved from
Novell to Santa Cruz, you actually stayed in the same physical
building in New Jersey; right?
A Correct.
Q So, in other words, it wasn't as though the moving trucks
came and all of the folks, former Novell people who are now
641
becoming Santa Cruz people, got moved to another location.
You actually stayed in the same building; right?
A For a period of time, yes.
Q And if you take a look actually -- if we could bring up
SCO exhibit 580. So this letter was the letter that you
talked about that Mr. Levine gave to you. And this was a form
letter, wasn't it? In other words --
A Pretty much so, yes.
Q So you talked about thousands of these letters going out,
but this same paragraph was in every single letter; right?
A Well, this letter was a little different because it was
addressing a specific agreement that needed approval, but,
yes, there was a form letter that went to standard licensees.
Q And if you take a look at -- this is March 25th of '96,
so about four months after the -- or three months after the
close of the deal, the address for -- well, I'm sorry, wrong
letter. Give me a minute.
Bring up SCO -- or rather Novell H6, please.
Now, H6 is a letter that was sent in March of 1996 from
SCO to Novell. Do you see that?
A Yes.
Q And do you see the address at the top for SCO and the
address at the top for Novell, same address; right?
A Yes.
Q And so how was it that you -- did you simply move
642
those -- the Santa Cruz people over to cubicles on the right
and the Novell people to cubicles on the left, or did you all
just keep sitting in the same seats?
A I think for the most part we just kept staying in the
same offices. They did firewalls on I.P. computer systems,
but if I remember, we pretty much stayed in the same
offices.
THE COURT: Are you going to offer this exhibit?
MR. ACKER: I'm going to ask him about it. Yeah,
let me back up and I'll come back to this one.
THE COURT: All right.
MR. ACKER: Take that down.
Q (By MR. ACKER) Now, you -- there was some testimony you
gave to Mr. Normand about HP, Sun and IBM being able to
develop their own flavors of Unix. Do you recall that
testimony?
A Yes.
Q And what you said was that if and because HP, Sun and IBM
had a license, they had the ability to take Unix code and
build on top of it and develop their own flavor of Unix;
right?
A Yes.
Q And they did that, but they did not have ownership of the
copyrights; right?
A Well, yes.
643
Q And so it's true, isn't it, that you certainly can have
the rights to develop your own version of Unix on top of old
Unix and not own the copyrights; correct?
A That's true.
Q There's nothing surprising about that; correct?
A No.
Q Now, you also mentioned that Novell engineers changed
some of the language on the copyrights after the APA; is that
right?
A In the status meeting at one of the transition meetings
it was reported that the Novell engineers were changing --
were changing the copyrights from Novell to Santa Cruz.
Q Did you ever actually look at the code and see what those
changes were?
A No.
Q Let me show you what has been marked as SCO 641.
THE COURT: 641?
MR. ACKER: Yes, Your Honor.
Q (BY MR. ACKER) I'm going to ask you about the third page in
in the document. Now, if you take a look at Roman -- or
number six of what we've -- on the third page of what has been
marked as SCO 641, you see there's -- what is listed there is
changes that were made to the Unix code after the APA;
correct?
MR. NORMAND: Your Honor, the document is not in
644
evidence. We shouldn't be speaking to the substance of it.
MR. ACKER: I'm just trying to lay a foundation if
he even knows what actually got changed or what didn't get
changed.
THE COURT: Could you perhaps have him look at it.
And try to avoid referencing the content of the document,
Mr. Acker.
Q (BY MR. ACKER) Well, you're saying that you didn't actually
see what changes were made; correct?
A That's correct.
Q And so you don't know that in fact what happened is that
the engineers left on for Novell the ownership from 1984 to
1995. You don't know that; right?
A I have no idea what was changed.
Q And you don't know that the only time Santa Cruz is
mentioned as the owner of any copyrights is for UnixWare with
a registration after the APA of 1996? You just don't know
that; right?
A No, I don't.
Q And as far as you know, that's exactly what happened is
that the engineers left the Novell registration for the period
before the APA, and they only changed it for UnixWare after
the APA. You simply don't know that; right?
A No. The only thing I know about it is when they said
they were changing the copyrights, I asked if they were going
645
back into old, old versions of Unix, and they said no, they
only do what is on a current software product. So that's all
I know about it.
Q But in terms of what dates were put on there for who
owned -- who owned the old Unix code from 1984 to 1995, you
don't know that the engineers left Novell on, do you?
A I have no idea.
Q Now, between the period of the end of December of 1995
and October of 1996, that ten month period, you were at Santa
Cruz; correct?
A Yes.
Q And Santa Cruz was issuing licenses during that period,
during that ten month period; correct?
A Correct.
Q Let me show you L7. Have you had a chance to look at
what we've marked as Novell Exhibit L7?
A Yes.
Q And the first agreement is a Supplement and Licensing
Order Form that was executed by SCO in March of 1996;
correct?
A Yes.
Q And this is a license agreement in which Unix is being
licensed in March of 1996; correct?
A Correct.
Q And then if you go back into the document, do you see
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there's a second licensing agreement in May of 1996?
A I've got -- where do you want me to look? Up on the
screen I've got a June 25, '96.
Q Let me show it to you.
THE COURT: Mr. Acker, you need to know that the L7
identified in the list you gave us is not the same as the one
you're referring to. We can correct that easily.
MR. ACKER: We'll fix that.
THE COURT: That's based on the assumption you
ultimately will be asking for submission, which you have not
been doing, so I'm not going to worry about it until you do.
Q (BY MR. ACKER) Do you see that, sir, May 10th Software
License Agreement, SCO for Unix System V, release 4.0?
A Yes.
Q These were license agreements that were executed by SCO
in March and May of 1996; correct?
A Yes.
MR. ACKER: I move for admission of L7, Your
Honor.
MR. ACKER: No objection, Your Honor.
THE COURT: L7 will be admitted.
MR. ACKER: And we may need to amend that.
THE COURT: But just so that I -- for our records,
these are license agreements. You said that they were
dated.
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MR. ACKER: There's two of them, Your Honor. One is
dated March of 1996 and one is dated May of 1996, executed by
SCO licensing Unix software.
THE COURT: My dilemma is that the one -- the first
sheet of mine is the May 1996.
MR. ACKER: Right.
THE COURT: There's a subsequent one in here
somewhere?
MR. ACKER: No, I'm sorry, you're right. They're
both May.
The Court: Okay. That was why I was confused. So
license agreements from May of 1996 is how we can identify
them; correct?
MR. ACKER: Yes, Your Honor.
THE COURT: All right. And they're not objected to,
so they will be admitted.
(Defendant's Exhibit L7 received in evidence)
Q (BY MR. ACKER) So it was true that after you -- the APA was
executed and you went to work for Santa Cruz, you and your
team were issuing license agreements during the period of time
from December of '95 until October of '95; correct?
A Yes.
Q And did anybody during that period of time from Novell
say, "Hey, you can't do that. You don't have the rights to
issue license agreements"?
648
A No.
Q Did anyone during that period of time from December of
'95 until October of '95 say, "You don't have the rights --
you, Santa Cruz, don't have the rights to build a new version
of UnixWare on top of the old Unix code"?
A Well, Novell knew we were doing this because this is a
reference license. This is a read only right to look at the
source code. We did them at Novell. We continued to do them
at Santa Cruz. This was ordinary course of business. So I
don't see why I should have had to have asked Novell for
permission to do this.
Q And exactly right. That's my point. Novell knew you
were doing this, issuing licenses between December of '95 and
October of '96, and no one said, "Hey, you can't do that,
Mr. Broderick," correct?
A Correct.
Q Because that was your rights under the APA; correct?
A Correct. We owned the technology. We could do with it
what we wanted.
Q Why don't we take a look at Section 4.16(a) of the APA.
Now, this is -- Section 4.16(a) is the section regarding the
royalties that you were to collect, you being Santa Cruz, were
to collect and funnel 95 percent back to Novell; correct?
A Yes.
Q And it's your -- as I heard your testimony, was that your
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belief was that the only royalties that had to go back to
Novell were royalties for the binary licenses; is that
right?
A That's -- that's correct.
Q Now, can you show me where in 4.16(a) it says that the
obligation to pay back to Novell 95 percent of the SVRX
revenue is limited to binary licenses?
A That's covered in Amendment No. 1 where they clarify --
they realized when they did this that they had forgotten about
the source code and support fees. So Amendment 1 was executed
at the time of closing, and in Amendment 1 they carve out
source code right to use fees, support fees, and they carve
out everything, leaving only binary royalties.
Q But the deal that was approved by the Novell Board of
Directors, you'll agree with me that 4.16(a) doesn't say
anything about limiting it to binary code or binary licenses;
right?
A You have to know the contract's value. When I look at a
contract, I look at the whole contract, including amendments.
So when I look at the APA, in my mind I have to consider all
the amendments.
Q Ane we'll take a look at that. But you actually wrote
letters to people describing this -- these obligations;
correct? Letters were written by SCO describing what their
Obligations were under 4.16(a); correct?
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A I -- we had some dealings. I think there was an issue
with Unisys and probably with Cray and SGI where I sent a
letter to Novell saying under the APA we need to talk about
this.
Q And I apologize. I don't think you wrote it, but someone
I think at SCO did. If you'd take a look at H6.
A Okay.
Q Now, this is a letter written on March 12, 1996 by
Mr. James -- is it Machi?
A Jim Machi?
Q Jim Machi? What was his job in '96 at Santa Cruz?
A He was a Product Manager.
MR. ACKER: Your Honor, I move for admission of H6.
MR. NORMAND: No objection, Your Honor.
THE COURT: It will be admitted.
(Defendant's Exhibit H6 received in evidence)
Q (BY MR. ACKER) And if you take a look again at the top, you
see we have the same addresses, that Novell is residing in the
same location as Santa Cruz; correct?
A Yes.
Q And if you take a look, if we could highlight the first
paragraph down to the end of the parenthetical, you see
that -- is it Machi, Mr. Machi?
A Machi.
Q That Mr. Machi wrote, just three months after the APA was
651
executed, he wrote, "Under the December 6, 1995 Asset Purchase
Agreement, APA, between SCO and Novell, SCO has an obligation
to collect and pass through to Novell certain SVRX royalties
that are due under SVRX licenses listed in item six of
schedule 1.1(a) and assigned to SCO under the APA. Such
royalties are payments of the type that prior to December 6,
1995 accrued to Novell under standard customer licensing
agreements" -- and then he gives two examples of those sorts
of agreements. And he writes, "For example, source code and
sublicensing agreements". Do you see that?
A Yes.
Q And so at least Mr. Machi believed as of March of 1996
that what Santa Cruz was obligated to pass through to Novell
was fees from both binary licenses and source code licenses;
correct?
A Up to December 6, 1995 I think -- it was up to the
closing date. Novell got all the fees associated with the
business up to the closing date. After the business closed,
they only got the binary royalties.
Q No. But what he says is that under the Asset Purchase
Agreement, those royalties were source code royalties and
binary royalties that used to go -- that used to be -- go
to -- that Novell collected before the APA, now Santa Cruz
collects and gives 95 percent back to Novell?
A Not source code.
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Q Well, he says source code, doesn't he?
A Well, he's talking about such source code royalties are
payments of the type prior to December 6, 1995 accrued to
Novell under standard licenses, source code and sublicensing.
If you're trying to say that he's saying he's getting --
they're getting the source code fees, he's wrong, and we never
gave Novell source code fees and they never asked for them.
Q So three months after the APA was signed in December of
1995 and it went into effect, Mr. Machi believed that 4.16(a)
required Santa Cruz to pass through the source code royalties;
correct?
A I don't know if he believed that, but he was a product
manager, and --
Q That's what he wrote; right?
A That's what he wrote.
Q Take a look at the APA again, 4.16(b). Now, you said it
in direct, and I think it's accurate, that you, SCO, could do
nothing that would jeopardize the revenue stream for these
SVRX licenses; is that correct? Do I have that testimony
right?
A That's correct.
Q And you also said it was essentially money in the bank
for Novell; correct?
A That's correct.
Q So after December of '95, after the APA went into effect,
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Santa Cruz, and subsequently SCO, the plaintiff in this case,
could take no action that jeopardized that SVRX royalty stream
back to Novell; correct?
A Yeah. What we were told is as -- as of the closing, if a
licensee was paying royalties that were going to Novell, we
had to continue to collect those royalties and Novell got
them. We couldn't do anything. That's the example I gave
about going to a licensee and saying, "You're paying a hundred
dollars a copy for a royalty. Sign a license with us and
we'll only charge you 50." We couldn't do something like
that.
Q But you'll agree with me that what your testimony was is
that first Santa Cruz and then SCO couldn't take any actions
that would impact or affect that money in the bank for Novell
from those SVRX licenses; correct?
A Yeah. For the binary royalties they were receiving, we
couldn't screw that up.
Q Well, I understand we have a difference of opinion
regarding binary and source code, but it's true, isn't it,
that you couldn't take any actions, you SCO, Santa Cruz,
couldn't take any actions that affected that royalty stream
for SVRX licenses; right?
A True.
Q And if you take a look at 4.16(b), the language of the
contract regarding this waiver provision, there's no language
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in there that limits this waiver provision simply to binary
royalties; right?
A Yeah, but you only have to consider the amendments.
Q But in the contract approved by Novell Board of
Directors, it doesn't say anything about binary royalties;
right?
A No, it doesn't. That's why it was amended.
MR. ACKER: I don't have anything else.
REDIRECT EXAMINATION
BY MR. NORMAND:
Q Mr. Broderick, you testified you're a contracts guy?
A I'm a contracts guy.
Q And what does that mean exactly?
A I work contracts and licensing for the SCO group. I've
been doing it since Novell purchased us from U.S.L. If a
customer wants to license a source code product, get rights to
distribute a product that we have, or if we want to license a
third-party product, some company may have developed something
that we'd like to use in our product, I work with them.
Q Have you spent a lot of time thinking about how contracts
operate in the course of your work?
A Close to 20 years.
Q Now, as a contracts guy, is it your view that perfect
clarity in a contract is always the goal?
A That is the goal.
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Q Is perfect clarity in a contract always achieved?
A No, it is not.
Q In your experience are contracts ever ambiguous?
A Yes, they are.
Q In your experience are contracts ever amended?
A All the time.
Q In your experience, when a contract is amended, is the
amended language of the contract, the old language, relevant
to you anymore?
A The old language does not exist anymore. When we amend
something, the old language is gone and the new language goes
in. In fact what I do in a lot of cases, if we have a
contract that we amend, I will -- we have all the contracts in
word processing. What I'll do is I'll take that contract in
word processing. If we amend it, I will go in and put the
amended language in it so I'm sure to make sure I'm always
looking at the current state of the contract, the original
contract with the amended language.
MR. NORMAND: Mr. Calvin, could you bring up Roman
Numeral V.
Q (BY MR. NORMAND) Do you see this language, Mr. Broderick,
that Mr. Acker spent several minutes asking you about?
A Yes, I do.
Q Do you know whether this language has been amended?
A That language was replaced.
656
Q And in your experience as a contracts manager in
reviewing the APA, would this language be relevant to you
anymore?
A Not at all. It's been replaced.
Q What language would you look to in your experience?
A The amended language in the -- the language that's
included in the amendment.
Q Which amendment is that?
A This was replaced in Amendment No. 2.
Q Now, in your experience in working with contracts, has
there ever arisen an occasion where if you interpret a
contract very literally, you can create an absurd outcome?
A Oh, I can come up with some really absurd outcomes.
Q Now, in your experience, if you read a contract
literally, and it would create an absurd outcome from reading
it literally, do you take the language literally?
MR. ACKER: Objection. That calls for a legal
opinion, Your Honor.
MR. NORMAND: Your Honor, this goes to the first ten
minutes of Mr. Acker's examination of Mr. Broderick as a
contracts guy.
THE COURT: I'll overrule the objection.
Q (BY MR. NORMAND) Are there times, Mr. Broderick, when
interpreting a contract literally would create an absurd
result?
657
A Yes.
Q And when that happens in your experience, how would you
go about determining the intent of the parties under the
contract?
A I would talk to the parties -- both parties of the
contract, find out what they really intended the contract to
be, and then we would do an official amendment to the contract
to make it clear to everybody.
Q In your experience, when a contract is ambiguous, would
you look to the way the parties had performed under the
contract as relevant?
A Absolutely.
MR. NORMAND: Mr. Calvin, can you bring up 4.16(b).
Q (BY MR. NORMAND) Mr. Broderick, do you remember being asked
about this literal language in 4.16(b) of the APA?
A Yes.
Q Do you have an understanding as to whether this language
was subsequently amended?
A Yes, I believe it was.
Q And if it were amended, would this language be relevant
to you anymore in your work as a contracts guy?
A No. I'd look at the amended language.
Q Now, Mr. Acker asked you about the types of agreements
that you've overseen in the course of your work. I think they
included the software agreement, sublicensing agreement, and
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what you described as the product license schedules. Do you
recall that --
A Yes.
Q -- series of questions and answers? In your experience
in your time at Santa Cruz and SCO, what is an SVRX license?
A It's --
Q How would you use that term?
A A product license. Anytime -- anybody, whether we were
at USL, Novell, Santa Cruz Operation or SCO, if a salesperson
was dealing with a customer and the customer wanted to go to a
latest release, he would call us up and say they need a
license for "X" product. If a -- if the finance people wanted
to check the royalties that a customer was supposed to pay,
they would call us up and say, "Can I get a copy of this
company's license for "X" product?" And that would be the
product schedule because that's what the royalties are.
MR. NORMAND: Mr. Calvin, could you bring up
schedule 1.1(a). Go to the next page, and the next page.
Now, could you bring up, Mr. Calvin, the top half.
Q (BY MR. NORMAND) Mr. Broderick, do you recall what purpose
Schedule 1.1(a) of the APA served?
A It was a listing of all the assets that were going to
Santa Cruz.
Q Now, do you see item L in this description of the list of
assets that are being transferred?
659
A Yes.
Q And it says, "Software and sublicensing agreements. This
includes the source code and sublicensing agreements that
seller has with its OEM, end user and educational customers.
The total number of these agreements is approximately 30,000."
Do you see that language?
A Yes.
MR. NORMAND: And now, Mr. Calvin, can you bring out
item six. I think it's at the bottom. And could you put on
top of that the paragraph we just read?
Q (BY MR. NORMAND) Now, Mr. Broderick, in this asset schedule
the APA separately identifies in item six SVRX licenses; is
that right?
A That's correct.
Q Now, as a contracts guy, in your experience, would there
be any reason to make these two provisions redundant? Would
there be any reason to think that SVRX licenses refers to
something that has already been identified in the asset
schedule?
A Well, they're different. Up in L, software and
sublicense agreement, that's why I talked about the umbrella
agreements that really cover the general terms and protections
of the company for our software. And item six here, the SVRX
licenses, those are the actual products that we will grant
licenses for.
660
Q Now, Mr. Broderick, we're going to put on the screen --
Mr. Calvin, let's go to Exhibit 168.
Is this document, Mr. Broderick, among the ones that made
their way into your files and under your purview?
A Yes, I'm aware of this.
Q And you've seen this document before, of course?
A Yes.
MR. NORMAND: Your Honor, I move SCO Exhibit 168
into evidence.
MR. ACKER: No objection.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 168 received in evidence)
MR. NORMAND: And, Mr. Calvin, can we pull out the
paragraph two in the middle of the page.
Q (By MR. NORMAND) Now, Mr. Broderick, what is this
document?
A This document relates to a binary royalty buyout by
Hewlett Packard.
Q And this language states in paragraph two quote,
"Purpose: Novell retained or has acquired all rights to
outstanding and future HP binary code royalty and licensee fee
payments, but not source code royalties." Do you see that
language?
A Yes.
Q Now, was it your understanding over the course of your
661
work at Santa Cruz and SCO that those companies had any
obligations to pay source code royalties to Novell?
A No, they didn't. And Novell had a number of audits that
they performed to the royalty payments at Santa Cruz and the
SCO group. The people doing the audits were aware of our
business. They knew we were doing source code licensing, and
not once did they say, "But what about the source code?" All
they did was review the binary royalty reports.
Q Now, Mr. Acker asked you some questions about the Sun and
Microsoft agreements that he showed you. Do you recall
that?
A Yes.
Q Do you know whether those were part of the SCOsource
program?
A Yes, they were.
Q And did you negotiate those contracts?
A No. I had -- I didn't really have anything to do with
the Sun agreement. The Microsoft agreement, I participated in
some reviews of the documents as they were negotiating them.
Q Do you have any view or understanding as to the
individual value of the individual components of those
agreements?
A No, I don't, except for the fact that some of the values
are highlighted in the agreement. The values that anybody
placed on them, I'm not aware of.
662
Q Now, as a matter of practice in 2003 and 2004, around the
time these contracts were executed, did SCO license all of the
old Unix source code with the most current version of
UnixWare?
A The most current -- UnixWare was licensed with prior
products.
Q What are prior products?
A Prior products are the prior -- it's the -- sort of the
family tree or hierarchy of all of the development of the
products through time. The example I used, I gave a house two
bedrooms and a bathroom, and you add a room and add a
bathroom, and you end up down the road with UnixWare.
They listed prior products. But when we came to UnixWare
7, I believe they took a lot of the older prior products out
and only included UnixWare because the product people at the
time made the decision that they wanted the customers to focus
on UnixWare and not look at the prior stuff.
Q Now, in 2003 and 2004, when SCO licensed any prior
products with any UnixWare product, did they charge the
customer anything extra for those prior products?
A No.
Q You were asked some questions about the copyright
registration certificates that we discussed. Do you recall
that? Do you know whether all of the copyrights in the Unix
computer programs are registered, whether certificates exist
663
for all of the copyrights in those programs?
A What I've been told is they're not all registered.
Q And so in your view do certificates exist for all of the
computer programs that are identified in the APA?
MR. ACKER: Your Honor, That calls for speculation
given his prior answer.
MR. NORMAND: Well, he testified to his
understanding, and this is an issue that's come up --
THE COURT: I'll sustain the objection.
MR. ACKER: Speculation.
Q (BY MR. NORMAND) And who told you that copyright
registration certificates do not exist for all of the computer
programs for Unix and UnixWare?
A I believe it was Ryan Tibbitts.
Q Now, as to the older computer programs that have been
registered, who holds the copyright certificates? Who has
physical possession of them?
A The SCO group.
Q You were asked about HP, Sun and IBM, and you were asked
the question whether Santa Cruz and SCO have been able to
operate their Unix businesses in the years after the APA. Do
you recall those questions?
A Yes.
Q And you were asked whether they quote, "Needed the
copyrights to have done that." Do you recall that?
664
A Yes.
Q Now, I want to ask you about your understanding of how
this would work. When you're involved in your work at Santa
Cruz and negotiating contracts, does a copyright registration
number play any particular role in any of the work you do?
A No.
Q Do you look to see if there are copyright registration
numbers and contracts that they're executing?
A No.
Q To your understanding, do programmers, when they're
making copy of source code, do they have to enter a copyright
registration number or some sort of password?
A Not my knowledge.
Q To your knowledge, can a programmer copy the source code
without knowing what the corresponding copyright registration
number is?
A I would assume so.
Q So is it your testimony that in the 10 or 15 years after
the APA, programmers have been physically able to copy the
source code, and you have been physically able to sign
contracts that license the source code?
MR. ACKER: Objection, leading, Your Honor.
THE COURT: Overruled.
MR. NORMAND: It's an open-ended question.
THE COURT: Overruled.
665
MR. NORMAND: With a lot built in.
THE COURT: Why don't you try it again.
The Witness: Thank you.
Q (BY MR. NORMAND) Have you been physically able to sign
contracts with third parties since the execution of the APA?
A Yes.
Q Has anything stopped you from doing that?
A No.
Q When you do that, in the last 15 years has it been your
belief and understanding that Santa Cruz and SCO owns the Unix
copyrights?
A Well, yes. In our agreements we provide an
indemnification for infringement of a third-party product.
Somebody licensing our software, we would -- we would give
them an indemnification. So if somebody else came along and
said, "The product you're using infringes this, and I'm suing
you for $1,000,000," we indemnify them and say, "Since we've
licensed you the software, we'll protect you from that." We
wouldn't protect them from that unless we owned the software.
And the copyright -- in software a copyright is how you own
the software.
Q Let me ask you another question, Mr. Broderick. I think
we spoke earlier about the fact that IBM has a Unix license
with what is now SCO; is that right?
A Correct.
666
Q And in your view as a contracts guy, if IBM were to give
away the Unix code that it licensed from SCO and it gave it
away to a third party, as a contracts guy do you think you'd
have an ability to sue that third party for breach of
contract?
A I'd have to sue IBM.
Q What could you do as against that third party in your
experience as a contracts guy?
A I think the only thing you could do is get an injunction
against them using the software.
Q And how would you do that if you didn't have a contract
with them?
A If somebody is using something that belongs to you and
they're not authorized to use it. The only recourse we have
would be against a person with a contract.
Q And do you have a view as to whether if you own the
copyrights you would have any recourse against that third
party?
A We have ownership of the product, therefore, we could
press the issue. Copyrights is how you own a -- how you show
your ownership and protect your software is by copyright.
Q Now, in your view is the ability to enforce prescriptions
against third parties integral to the operation of SCO's
business?
A Oh, absolutely. If we couldn't protect our software,
667
we'd be out of business. You know, if we couldn't protect our
software, the first person that we licensed the software could
go into business for themselves and we'd be out of business.
We have to be able to protect our software, and you do that
through copyrights. That's how all of the companies have done
it.
MR. NORMAND: Your Honor, I had mentioned that I
wanted to move into evidence all of the copyright registration
certificates that we had identified. I can do that now. It's
a fairly long list, or we can do it however Your Honor
pleases.
THE COURT: Have you discussed this with --
MR. ACKER: We're going to have to take a look at
each of those, so maybe we can do it over a break.
MR. NORMAND: We'll do it that way, Your Honor.
THE COURT: All right.
MR. NORMAND: I have no further questions.
RECROSS-EXAMINATION
BY MR. ACKER:
Q Mr. Broderick, in response to Mr. Normand's questions you
said that sometimes, and in your -- your opinion is that the
language of the APA was ambiguous. Did I hear that right?
A There's language in the APA that's confusing.
Q And when language is confusing, it's the case, isn't it,
that two reasonably minded people can take a look at the
668
language and come to different opinions about what it means;
correct?
A Yes, they could.
Q And so two people might look at language that's
ambiguous, and one person might say copyright's transferred,
and another person might look at that language and say the
copyrights do not transfer; correct?
A They could, but that wasn't the case. They looked at the
copyrights transferring and executed Amendment 2, which
transferred the copyrights.
Q And my question was if the language is ambiguous, two
reasonably minded people can look at the same language and
come to different conclusions; correct?
A If they take all the facts into consideration, that's a
possibility.
MR. ACKER: That's all I have, Your Honor.
THE COURT: May this witness be excused, counsel?
MR. NORMAND: Yes, Your Honor.
MR. ACKER: Yes, Your Honor.
THE COURT: Mr. Broderick, that means you do not
need to worry about being recalled as a witness. You may go
about your business. But I do have to instruct you to please
not discuss your testimony with any other witness in this case
or in the presence of any other witness or in any other way
communicate the nature of your testimony broadly. All right?
669
MR. NORMAND: Your Honor, I hope to reach agreement
with Novell on the issue, but I suppose I should mention that
if we need to have Mr. Broderick technically on the stand to
get in the remaining registration certificates, maybe we
shouldn't let him go.
THE COURT: That means you may come back after all.
Forget everything I just said. No, that's not true.
THE WITNESS: Does that mean I get to sit out there
or I have to go back in the box?
THE COURT: I think you ought to stick around until
at least the end of the next break, all right, which will be
approximately an hour from now.
MR. NORMAND: I think his question, Your Honor --
THE COURT: Whether he can stay in the courtroom?
THE WITNESS: Can I watch or do I go in the closet?
THE COURT: Counsel, do you oppose if he stays in
the courtroom, Mr. Acker?
MR. ACKER: No, Your Honor.
THE COURT: You may stay here if you would like.
But, again, the instructions about discussing your testimony
with any other witness or in the presence of any other
witness --
THE WITNESS: No problem. Thank you very much.
THE COURT: -- Survives, whatever you may do in the
next hour, okay?
670
THE WITNESS: Thank you.
THE COURT: Go ahead, Mr. Singer.
MR. SINGER: Your Honor, our next witness is Ty
Mattingly.
The Clerk: Mr. Mattingly, do you want to come
forward and I'll swear you in.
THE WITNESS: Sure.
(Ty Mattingly, Plaintiff's witness, sworn)
The Clerk: Thank you. Please be seated.
And if you would please state and spell your name for the
court.
THE WITNESS: Ty D. Mattingly. It's T-Y, D.,
M-A-T-T-I-N-G-L-Y.
THE COURT: Thank you.
DIRECT EXAMINATION
BY MR. SINGER:
Q Good morning, Mr. Mattingly. I'm Stuart Singer, one of
the attorneys for the SCO group. Would you briefly describe
your educational background.
A Sure. Graduated, and came up to Brigham young university
in 1980, and graduated from B.Y.U. in '87 with a degree out of
the college of Engineering in the design engineering world.
And then took a job with IBM after that, and spent 14 months
going through IBM's advanced education program, where
basically spent 14 months learning about computers and
671
information technology, etcetera.
Q And after that?
A Educationally?
Q In business?
A You know, on and off would go to postgraduate types of
courses, education.
Q Could you briefly summarize where you went to work after
school, after college.
A Sure. I worked for IBM for just under five years, and
then left and joined Novell in 1992, about February of '92,
and then worked with Novell until 1987.
Q 1987 or '97?
A '97.
Q Can you describe what you worked at after you left Novell
in 1997?
A Sure. I started some companies up that were in the
consulting world, and built some internet types of businesses
there that we later sold. And then I've just been an investor
since about 19 -- excuse me -- since about 2004.
Q Has your investments focused on the technology business?
A Correct.
Q Was one of the companies that you invested in sold to SCO
group?
A It was.
Q Do you recall when that was?
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A I don't recall exactly what the time frame was, but it
was a company by the name of Voltis, and it was a real small
company, very small transaction.
Q As a result did you receive certain stock in the SCO
group?
A I did.
Q Do you know approximately how much?
A It was a little more than 9,000 shares.
Q And do you still have it?
A I do.
Q Are you good friends with certain members of the SCO
group?
A I am.
Q Such as Mr. Tibbitts? How do you know Mr. Tibbitts?
A Ryan and I met in 1980. We were teammates at B.Y.U. I
attended B.Y.U. on a football scholarship. And Ryan was an
upperclassman and one of my teammates, so I have known him for
30 years.
Q In fact were you an All-American at B.Y.U.?
A Well, I was an Academic All-American, so it's a little
bit of a combination of the school room as well as the playing
field.
Q Do you also have good friends at Novell?
A Sure.
Q And does that include David Bradford, General Counsel?
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A Yeah. David Bradford is the person that I approached
when I wanted to leave Novell -- excuse me -- IBM and go to
Novell, and he actually set up my interviews with Jim Bills
back in those days and really helped me get into Novell and
mentored me a lot through Novell.
Q Let's go back to the time when you joined Novell.
A I also know Dana Russell over there, who is their C.F.O.
Q You're friends with Mr. Russell as well?
A Yes.
Q Going back to the time when you joined Novell, can you
describe your responsibilities?
A Sure. When I first joined Novell, I was a product
manager working in the marketing group.
Q Did your responsibilities change at some point?
A Yeah. After about a year Ray Norda, who was the Chairman
and CEO, grabbed me and asked me to start working for him. So
I spent the next couple of years working in the Chairman's
Office on various projects.
Q When Robert Frankenberg became CEO, did you continue in
that role working closely with the Chairman?
A Yes, I had. I had the same role and stayed working with
Bob Frankenberg for probably a year-and-a-half.
Q Was that your position at Novell in 1995?
A No. I'd left working for the Chairman's Office and took
a role as Vice-President of Corporate Development Strategic
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Relationships.
Q Who did you report to at that time?
A Duff Thompson.
Q Were you involved in the sale of the Unix business to
Santa Cruz in 1995?
A Yes.
Q Do you recall who the principal negotiators were in that
transaction?
A Sure. The principal negotiators on the ground and living
in California for, you know, two months were myself and Ed
Chatlos, with me having the relationship and kind of the high
level strategy aspects of it, and Ed Chatlos, who was very
detailed oriented, assigned from the business unit, to work
out all of the details.
Q Did you attend negotiation sessions during those two
months that you were living in California?
A Sure, daily.
Q Was that the reason you were in California?
A Correct.
Q How personally involved was Mr. Bradford, the General
Counsel, in the negotiations?
A Well, Dave was the General Counsel of Novell at the time,
but he was not involved on the daily basis and was not on the
ground in California.
Q Are you familiar with a gentleman named Tor Braham, who
675
is an attorney from the Wilson Sonsini firm?
A Sure. Tor did a lot of work for us, very good guy.
Q How involved was Mr. Braham in the negotiations?
A You know, I don't recall that Tor was that involved on
the ground with the negotiations. When we finished coming to
a meeting of the minds, then docs were turned over, and that's
when the legal team took over for the last period of time, and
Tor would have been a key component in that.
Q When the lawyers came in to document the transaction, had
the principal business terms of the deal been agreed upon?
A Yes.
Q What was your Understanding from the negotiations as to
how much of the Unix business was being sold?
A Well, it was the majority of it. I mean we sold the
business. We acquired it from USL, and we were selling the
business to accomplish some very high level strategic
objectives for Novell and hopefully for the greater
industry.
Q What was not being sold?
A Oh, certain functions, like SCO was acting as Novell's
agent to collect some of the existing SVRX binary royalties,
and so that was retained, and SCO acted as the agent to
collect it, and I think the distribution was 95/5 towards
Novell.
Q Other than that, was the remainder of the business, the
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Unix and UnixWare business, sold --
A Absolutely.
Q -- To Santa Cruz?
A Absolutely.
Q During the months of negotiations that you attended, did
anyone from Novell ever say that we are selling the Unix
business but we are retaining the copyrights?
A No.
Q Would that have been consistent with your understanding
of the deal which you negotiated, holding back the
copyrights?
A Holding back the copyrights would not have been
consistent.
Q Let's advance to the time of the Board of Directors
Meeting to approve the sale in September of 1995. What
responsibility, Mr. Mattingly, did you have in connection with
Board of Directors meetings at Novell?
A Well, prior to that time I had attended all of the
meetings when I worked for Ray Norda and Bob Frankenberg. At
this time where I worked for Duff Thompson I did not go to all
of the Board meetings, but I did present at a number of them
when they involved transactions that I was involved with.
Q Who was responsible for preparing Board materials for the
Board of Directors to review prior to the meeting?
A Dave Bradford as the General Counsel and Corporate
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Secretary usually prepared and presented all of that
information.
Q Like to show you exhibit 570. It's on the screen. I'm
going to show you a hard copy. Can you identify exhibit 570,
Mr. Mattingly, as a memorandum sent to the Novell Board of
Directors from Mr. Bradford on September 15, 1995?
A Yes.
Q And was this in connection with the Santa Cruz
transaction that we've been discussing?
A Yes.
Q Did you receive a copy of this yourself?
A I did.
MR. SINGER: I move the admission of exhibit 570.
MR. BRENNAN: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit 570 received in evidence)
MR. BRENNAN: Your Honor, just one point. There are
some highlights that have been apparently -- excuse me --
apparently placed on the document, and we don't have the
source of that. Perhaps I should withhold the acknowledgment
of admission until we have an establishment as to the source
of that.
THE COURT: I think these traditionally, as I've
observed, these are the things that will be highlighted now,
but the document that will go to the jury will not include
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these highlights; is that correct?
MR. SINGER: That's correct. These can be removed
and will be removed.
THE COURT: All right.
MR. BRENNAN: Your honor, just so we're clear, the
submission of the exhibit has the highlights, so --
THE COURT: Again, the one I have on my computer
also has those highlights, as have others.
Again, I will say to you, Mr. Singer, that none of the
exhibits that will actually go to the jury should contain the
highlights.
MR. SINGER: We understand that, your honor.
The Court: Okay. Are you all right then,
Mr. Brennan?
MR. BRENNAN: Subject to that clarification, Your
Honor, thank you.
The Court: Exhibit 570 again will be admitted.
Q (BY MR. SINGER) Now, was this provided to the Board on
Friday, September 15th?
A Yes. It's very typical to provide information ahead of
Board meetings.
Q And was this for the Board Meeting at which the Santa
Cruz deal was up for approval?
A Yes.
Q Do you recall how soon after this September 15th meeting
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the Board was to have its meeting to consider the
transaction?
A Well, you know, I can recall by looking at it that it
was -- I think the transaction took place around the 19th, and
so we had the Board Meeting on the -- I think the 18th.
Q And that would make -- do you recall if you were --
looking at the last sentence on the second page where it talks
about weekend review, do you know whether September 15th, 1995
was a Friday?
A I don't know that, but I assume that it was a Friday.
We'd have it for Saturday, Sunday and then a Board Meeting
Monday, and then close the transaction sometime after the
Board Meeting.
Q And do you see the reference on the first page to a term
sheet for the proposed transaction?
A Yes.
Q I'd Like to show you exhibit 83. Mr. Mattingly, can you
identify exhibit 83?
THE COURT: Excuse me. 83 should not be shown to
the jury. It's not there, is it?
The Clerk: It's not.
Q (BY MR. SINGER) Can you identify exhibit 83?
A Yes. It's the Novell/SCO term sheet that's referenced as
letter "E" under the memo from Dave Bradford.
Q So this was part of the memorandum that we've just been
680
looking at from Mr. Bradford dated September 15th, 1995?
A Yes.
MR. SINGER: I move the admission of exhibit 83.
MR. BRENNAN: Your Honor, subject to the
qualifications that were given previously, we have no
objection. But, again, we're going to have to clean up the
highlighted portions.
THE COURT: All right. Exhibit 83 will be admitted,
understanding again that it will be cleaned by the time it
goes to the jury.
MR. SINGER: Yes, Your Honor.
(Plaintiff's Exhibit 83 received in evidence)
Q (BY MR. SINGER) Was this the term sheet that -- did you
receive this term sheet along with the memorandum to the Board
that's marked as exhibit 570?
A I did.
Q These documents were together at that time?
A Correct.
Q Can you review what is stated in item one, "Novell
transfers to SCO."
A You want me to just read it?
Q Well, can you give us your understanding of what is meant
by transfers to SCO the Unix technology assets and UnixWare
technology assets?
A Well, the Unix technology assets is the Unix business.
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UnixWare technology assets was the binary version of that that
Novell shipped that had some integrations with Novell's
network product offering.
Q Now, under the second item, item number two, does that
indicate what Novell was going to retain --
A Yes.
Q -- after the transaction closed with Santa Cruz
Operation?
A Yes.
Q And do you see that patents are listed as being retained
by Novell?
A Yes.
Q Do you see that there's a license back to Unix and
UnixWare for internal use and resale in bundled products?
A Yes.
Q Do you have an understanding of what that was?
A Well, sure. I mean Novell had some other product
offerings that were bundled with UnixWare, you know, such as
Groupwise or some of our network management products, various
other products. So Novell was retaining a license back from
SCO so that they could actually use those products bundled
with Novell's products internally and for resale as bundles.
Q Do you have an understanding of what Tuxedo was?
A It was a transaction processing monitor.
Q And that wasn't being sold?
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A It was not.
Q Do you see any mention under item two of Novell retaining
the Unix and UnixWare copyrights?
A No.
Q So if Mr. Frankenberg -- well, let me ask this. If
Novell was retaining the copyrights, would you expect to have
found that listed here under item two?
A Yes.
Q So if a member of the Novell Board of Directors was
looking at the package that went to them the Friday before the
Board Meeting, with the term sheet pertaining to the deal,
would they have seen anything that would indicate that Novell
was retaining copyrights in this term sheet?
A That's a pretty material omission, so it would have to be
listed here on Novell's retained assets.
Q So if Mr. Frankenberg, for example, was reviewing this
term sheet provided by Mr. Bradford, the General Counsel, the
weekend before the Board Meeting, would it have alerted him in
any way to Novell retaining copyrights?
MR. BRENNAN: Objection, Your Honor. This calls for
speculation as to the mind of Mr. Frankenberg.
THE COURT: I'm going to overrule the objection.
MR. SINGER: Yes.
THE WITNESS: Yes. And I think it would have also
alerted any of us that were on the business team. You know,
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you'd have to put this in perspective. At that point you're
in the 11th hour and 59 minutes into this process, and to have
something as material as the copyrights excluded from this
Asset Purchase Agreement, it would have alerted everyone in
the room.
Q (BY MR. SINGER) Would it have -- were you at the Board
Meeting on September 18, 1995?
A Yes.
Q Would it have alerted you that there's a problem here
that someone thinks that the copyrights are being retained?
A Yes.
Q And that didn't happen, did it?
A Did not.
Q Does the term sheet indicate what Novell expected to
receive from Santa Cruz Operation in exchange for the
business?
A Yes.
Q And does that include a number of different forms of
compensation?
A Yes.
Q Was the first of that the stock equal to 16.6 percent of
Santa Cruz Operation's stock?
A Yes.
Q Was the second 95 percent of all royalties received by
SCO on the existing Unix business?
684
A Yes.
Q Now, for fiscal year 1995 alone, was that estimated to be
47.65 million dollars?
A Yes.
Q And would you continue then to get those royalties in
future years from Santa Cruz?
A Yes.
Q And that would be part of the compensation that Santa
Cruz would be paying Novell for the business?
A Yes.
Q In addition, was there also a possibility of Novell
receiving additional royalties based on the UnixWare shipments
by SCO in the future?
A Yes.
Q And is that covered in item C --
A Yes, it is.
Q -- of what Novell would receive? And it says, "If SCO
hits our business forecast, which is admittedly aggressive,
royalties on future UnixWare shipments by SCO through the year
2002, those royalties could have a net present value of 50 to
$60,000,000," correct?
A Yes.
Q And then also if there was NetWare technology included in
UnixWare products, you would have rights to royalties on those
as well?
685
A Correct.
MR. BRENNAN: Objection, Your Honor. We're leading
the witness.
THE COURT: Sustained.
Q (BY MR. SINGER) Would you have contained -- would you have
received any royalties on NetWare technology included in the
UnixWare products that Santa Cruz would sell?
A Sure, since its says continuing royalties on NetWare
technology.
Q Now, I'd like to turn to the minutes for the Board
Meeting that was held on September 18th, 1995, which has
already been admitted into evidence as Novell's exhibit Z3.
If we look at these, you recognize these as the Board minutes
for that meeting?
A Yes.
Q And if you go to the top page, do you see that in
addition to the members of the Board itself, also present by
invitation were Dave Bradford, yourself, and Jeff Turner of
Novell?
A Yes.
Q And you attended this meeting; is that correct?
A Yes.
Q If we turn to -- you understand the first part -- do you
have an understanding as to whether the first part of the
Board minutes seek to summarize what was actually discussed at
686
the meeting before the Board of Directors?
A Yes.
Q Do you see any reference in that part, which runs from
the beginning of the minutes all the way down to the
resolutions, of any discussion at the Board over the
copyrights of the Unix and UnixWare systems specifically?
A No.
Q Do you on your own recollection recall any discussion at
the Board Meeting of the copyrights?
A No.
Q You then get the resolution which -- by which the Board
of Directors approved the sale. Do you know whether there was
any time that's typically spent at that point in the Board
Meeting reviewing in detail documents which are being approved
by the resolution?
A No, I don't think that would be typical with the Board of
Directors to get into the details of a asset purchase
agreement.
Q And if we compare for a moment what was listed on the
term sheet that was circulated on Friday before the Board of
Directors Meeting, and then this resolution of what was
summarized in the Board minutes, if we go back to the term
sheet, exhibit 83 --
And I don't know, Mr. Calvin, if it's possible to split
the screen and put one up on one half and one on the other.
687
If so, that would be helpful.
So on the right-hand side of the screen we have the term
sheet that we have been looking at, and if on the left-hand
side we can have page two of exhibit Z3, the minutes.
The Court: Ladies and gentlemen, can you read that?
A JUROR: Not really.
MR. SINGER: We're going to need to highlight.
Q (BY MR. SINGER) We'll go back and forth then between the
two. If we can go to the term sheet for a moment. Do you see
under Novell term sheet, Novell SCO term sheet item one the
reference to Unix technology assets, UnixWare technology
assets being transferred to SCO?
A Yes.
Q We turn now to page two of the minutes, which I think
Mr. Calvin has now successfully put on the right-hand side of
the screen. And if you can highlight the resolution. Do you
see a reference here in the resolution that pursuant to the
Asset Purchase Agreement, Novell will transfer to SCO its Unix
and UnixWare technology assets?
A Yes.
Q And if you keep reading it says, "A portion of the
employee base in New Jersey and equipment used in the UnixWare
business." Do you see that?
A Yes.
Q And if we turn back for a moment to exhibit 83, do you
688
also see under item one the reference to Novell transferring
to SCO the portion of the employee base in New Jersey and the
equipment used in the UnixWare business?
A Yes.
Q And that's under the category of Novell's transfers to
SCO; correct?
A Correct.
Q Can we now look at what Novell was retained. If we turn
back to exhibit 83, do you see on the term sheet that was in
the Board package the reference to patents, the license back
to Unix, UnixWare and Tuxedo and other miscellaneous
technology?
A Yes.
Q Can we now look at the Board minutes, and where it
says -- do you see where it says here that, "Novell will
retain all of its patents, copyrights and trademarks, except
for the trademarks Unix and UnixWare, a royalty-free,
perpetual, worldwide license back to Unix and UnixWare for
internal use and resale in bundled products, Tuxedo and other
miscellaneous, unrelated technology"?
A Yes.
Q Now, is that -- the term copyrights that's in the
minutes, that's not in the term sheet, is it?
A It's not.
Q Do you have an understanding of why it -- well, let me
689
ask you this. Are you able to reconcile the reference in the
minutes to Novell retaining its copyrights with no mention of
Unix copyrights being included on the term sheet?
A Sure. I mean Novell bundled its products with Unix and
UnixWare, and so the copyrights being referred to as well as
the trademarks are the Novell copyrights pertaining to the
Novell products that they retained, not those that they sold
to SCO.
Q So would you understand the reference to copyrights here,
where Novell will retain all of its copyrights, as pertaining
to the Unix copyrights being sold to Santa Cruz?
A Yes.
Q I'm sorry. Let me read back that question. Do you
understand --
MR. BRENNAN: Your Honor, I think the answer was
clearly heard.
THE WITNESS: Well, no. Say it again.
Q (BY MR. SINGER) My question is does the reference here of
Novell retaining its copyrights mean the Unix copyrights or
does it mean copyrights other than Unix copyrights?
A It's the Novell copyrights not the Unix copyrights.
Those were sold with the business to SCO.
Q You see the reference to the worldwide license back to
Unix and UnixWare?
A Yes.
690
Q Would that have made any sense if Novell was retaining
the copyrights to Unix and UnixWare?
A No, because they would have already had those copyrights.
Q I'd like to show you what is marked as Defendant's
Exhibit G4. Is this a memorandum on September 19th, '95 from
Ed Chatlos -- excuse me -- from David Bradford to Ed Chatlos,
copied to you?
A Yes.
Q And is this a document which transmitted the final Asset
Purchase Agreement between Novell and SCO?
A It looks like it is.
MR. SINGER: I move the admission of G4.
MR. BRENNAN: No objection, Your Honor.
THE COURT: It will be admitted.
(Plaintiff's Exhibit G4 received in evidence)
Q (BY MR. SINGER) So if we look at the -- and I'm going to
ask Mr. Calvin to highlight the text of the memorandum that
says, "Dear Ed." Now, the Ed here, is this Ed Chatlos, the
person you mentioned was out in California with you for two
months negotiating the deal?
A Yes.
Q And since this is not the clearest, can you read out loud
the language which Mr. Bradford put into this memorandum?
A From the beginning?
Q Please.
691
A Sure. "Dear Ed, I am now in receipt of the final Asset
Purchase Agreement between Novell and SCO. Simultaneous to my
receipt of this contract, you have been faxed an identical
copy. The purpose of this memorandum is to let you know that
I have reviewed the final document and find the same to be an
accurate reflection of the business and legal terms and
conditions negotiated between the parties. I therefore
approve this asset purchase agreement for final signature by
Bob Frankenberg. You have indicated that you will let him
know of my approval. Let me also congratulate you for the
effort you have expended in putting this deal together. Your
attention to detail and long hours were invaluable to Novell
throughout this process. Regards, David R. Bradford."
Q Was Mr. Bradford telling Mr. Chatlos that the final
agreement was an accurate reflection of the business and legal
terms negotiated between the parties?
MR. BRENNAN: Objection, Your Honor. In that regard
the document speaks for itself.
THE COURT: I'll sustain the objection.
Q (BY MR. SINGER) Is the General Counsel, Mr. Mattingly,
supposed to make sure that the legal documentation faithfully
implements the business terms negotiated between the
parties?
A Yes.
Q Do you and the other business executives rely on the
692
General Counsel to document the deal accurately?
A Yes.
Q And did anyone to your knowledge at Novell ever authorize
the lawyers to seek in the documentation to hold back the
copyrights for Unix and UnixWare in this transaction?
A No.
MR. SINGER: I have nothing further. Thank you.
THE COURT: Mr. Brennan, would it be a disadvantage
to you if we were to take a break before you do your cross?
MR. BRENNAN: Certainly not, Your Honor.
The Court: We'll go ahead and take a 20 minute
recess.
The Clerk: All rise for the jury, please.
(Jury excused)
THE COURT: Do you have anything, counsel, before we
recess?
MR. SINGER: Not from us, Your Honor.
MR. ACKER: No, Your Honor.
THE COURT: We'll take 20 minutes.
(recess at 11:39 a.m.)
* * *
693
***** Part 2 *****
(12:05 p.m.)
THE COURT: Are you ready, Mr. Brennan?
MR. BRENNAN: Yes. Thank you, Your Honor.
THE COURT: Ms. Malley, if you would.
Mr. Singer, when will you be getting the court a
response to defendant's motion about the door that you have
opened?
MR. SINGER: Well, I believe yesterday Your Honor
requested it by Monday morning and it was our intent --
THE COURT: All right.
MR. SINGER: -- to comply with that.
THE COURT: Thank you. Have you had a jury
instruction meeting since the court requested it?
MR. JACOBS: Your Honor, we have. We had probably an
hour long discussion last night. We talked about the
prospect of trying to put in a joint submission either today
or Monday.
THE COURT: All right.
MR. JACOBS: We decided that, um, given your action --
unfortunately we decided that we wouldn't be able to do
that. We thought we would still have SCO put in submissions
this afternoon and Novell will respond to it. We tried very
hard to come up with a format that would be helpful to the
court and the court's clerk, but we ended up thinking this
would still be the more --
694
THE COURT: So you will respond with your own set of
instructions today and then Novell by Monday?
THE CLERK: All rise for the jury, please.
(Whereupon, the jury returned to the courtroom.)
MR. ACKER: Yes, Your Honor.
MR. NORMAND: Yes, Your Honor.
THE COURT: Go ahead, Mr. Brennan.
MR. BRENNAN: Thank you, Your Honor.
CROSS-EXAMINATION
BY MR. BRENNAN:
Q. It is now good afternoon, Mr. Mattingly. My name
is Sterling Brennan. Have we met before?
A. Did you do my deposition here?
Q. Do you think I did?
A. I don't know. You answer the question for me.
Q. Actually, no. Do you think you and I have met
before?
A. I don't think so.
Q. Well, I am a little disappointed since you and
were classmates together at BYU.
A. Now, I remember. You used to cheat off of me.
Q. Well, I was an economics major and never made it
over to the engineering building. But the answer to your
question, no, I did not take your deposition. But that does
lead me to an important question. Do you recall that your
695
deposition was taken in this case on January 19th, 2007?
A. I do.
Q. Do you remember who did take your deposition?
A. I don't remember, but it was -- he had similar
features to you, he was a little bit darker.
Q. He must have been very good looking, no doubt.
Well, let me ask you this, do you recall that your
deposition was taken in this case on January 19th, 2007, and
that you were asked questions by Mr. Normand who is sitting
at counsel table here today?
A. Yes.
Q. Okay. And that deposition was more than two
years previous to today's date, right?
A. Correct.
Q. And did you remember facts and circumstances
involving the 1995 timeframe better a little more than two
years ago, than you do today?
A. Very likely.
Q. And that is because, of course, that would be two
years closer to the events than would today, right?
A. Correct.
Q. Since your deposition was taken on January 19th,
2007, have you had occasion to meet with any of SCO's
attorneys?
A. I have.
696
Q. Who have you met with?
A. I met with Ryan Tibbitts.
Q. When did you have that meeting or meetings?
A. You know, not meetings but, um, I was cleaning my
garage last year and came across some folders and they had
Sleigh Ride and Rhine River on them which were the code
names for these divestitures. So when I found those
documents there, I contacted Ryan.
Q. Now you say these code names, Sleigh Ride was the
code name for the transaction that ultimately came about
between Novell and Santa Cruz Operation; right?
A. Yes.
Q. And Rhine River was another transaction involving
Hewlett-Packard, right?
A. Yes.
Q. And so you came across some documents; is that
correct?
A. Yes.
Q. And you brought those with you today?
A. I did.
Q. May I have them, please? At least see them?
A. Sure. You want to see them again? I should them
to you ten minutes ago.
Q. You did. Thank you. I did a quick read. And
the documents that you brought here today, are these all of
697
the documents that you found in your garage?
A. No. I found a big folder that had Sleigh Ride
and Rhine River documents.
Q. What did you do with those other documents that
you didn't bring with you today?
A. I just have them.
Q. Did you ever give them to Mr. Tibbitts or any
other representatives of SCO?
A. No.
Q. What is in those other documents?
A. You know, a lot of legal docs, some MOU drafts, a
lot of power point presentations, just typical deal
collateral.
Q. So why did you decide to bring to court today the
folder of documents that you brought but not the other ones?
A. Well, I think that that one had some information
at this September 15th board memo that is interesting, and
it also has kind of what the final executable documents were
on the 19th.
Q. In addition to -- let me back up. You say that
you found some documents in your garage and you then
contacted Mr. Tibbitts and said I found some documents?
A. Yes.
Q. And when did you have that discussion with
Mr. Tibbitts you have identified?
698
A. My guess would be it would have been probably in
the fourth quarter of last year sometime.
Q. So that would have been sometime October,
November, December of --
A. Yeah, possibly.
Q. -- 2009?
A. Yes.
Q. Now just so we are all clear, Mr. Tibbitts is
this handsome man to my left, is that right? Right next to
Mr. -- Mr. Tibbitts, do you mind standing for just a minute?
Is this Ryan Tibbitts?
A. Yes, it is.
Q. Thank you. Did you meet with Mr. Tibbitts in
person to talk about this case?
A. He came to my office and I just showed him the
documents.
Q. And how long did your meeting last with him then?
A. Probably 15, 20 minutes.
Q. And since then, have you had any other
communications with any attorneys representing The SCO
Group?
A. Just Ryan.
Q. And when was your last meeting with Mr. Ryan
Tibbitts?
A. I think we probably went to lunch sometime this
699
year.
Q. Sometime in 2010?
A. Yeah.
Q. And during that lunch meeting, did you talk about
the case?
A. A little bit. Ryan is pretty -- just look at
him, he doesn't say much, he is pretty stuffy. But it was
kind of some old teammates, we kind of got together for a
lunch.
Q. And during this lunch meeting you talked about
this case that brings us here today?
A. No. No, we had a mixed group of former athletes.
Q. So just so I'm clear, at any time this year prior
to your appearing in court this morning, have you had any
discussions with Mr. Tibbitts about this case?
A. Yes.
Q. Tell me what you and Mr. Tibbitts have talked
about regarding this case?
A. Well, we have had some phone conversations
regarding these documents that you have in your possession,
and kind of their interest level to me, and whether they
would be of interest to Ryan and the SCO case.
Q. Now, at any time this year have you had any
communications with any Novell attorneys?
A. I have not.
700
Q. Have you had any communications with any Novell
attorneys since your sworn testimony was taken on January
19th, 2007?
A. You know, probably superficial meetings or
crossings with someone like Jim Lundberg who is in the room.
That would probably be the only attorney that I would have
crossed with from Novell. Maybe Greg Jones, if he is still
a Novell attorney, over at the gym.
Q. Have you ever talked with Mr. Lundberg or
Mr. Jones about this case?
A. No.
Q. Okay. Now I want to ask you a little bit about
your relationship with -- with The SCO Group. You indicated
in response to Mr. Singer's questions that you're a SCO
stockholder; right?
A. Yes.
Q. And I think you told me you have 9,000 shares of
SCO Group stock?
A. A little north than that.
Q. How much north of that?
A. I am not sure. I mean there was 9,000 and some
change probably in here somewhere exactly how many shares I
got through the Voltis transaction.
Q. And when you talk about this Voltis transaction,
this was a situation where The SCO Group was going to buy
701
this other company called Voltis; right?
A. Yes.
Q. And your role in that transaction was essentially
as a business broker essentially?
A. No. I was on the board of Voltis at one point.
And so, um, then when the Canopy Group did an investment in
Voltis, I am not sure if I was still on the board or not but
I had an equity position in Voltis.
Q. And in connection with that transaction you dealt
with an individual by the name of Darl McBride; right?
A. Yes.
Q. Who do you understand Darl McBride to be in
connection with the SCO Group?
A. He was the CEO of The SCO Group.
Q. Did you have any form of dispute with Mr. McBride
regarding how The SCO Group was treating the shares that you
hoped to get out of the Voltis transaction?
A. Um, yes. Basically the SCO stock had, if I can
recall, had some appreciation. And so the number of shares
that you are getting in consideration goes down if the stock
price goes up. And when you -- when we had structured some
type of an arrangement there, um, as the stock went up, of
course SCO was trying to present less shares to the Voltis
shareholders.
Q. So let me see if I understand what you're telling
702
me. When you thought that Voltis and The SCO Group had
entered into some form of an agreement, you thought that the
compensation should be fixed based on the number of shares
when you reached the agreement, right?
A. Right.
Q. And The SCO Group stock increased, and as you
understood it, SCO was claiming well the stock is worth more
so we shouldn't have to give you as many shares; right?
A. Correct.
Q. You disagreed with that, right?
A. Yes.
Q. You didn't think that was fair, did you?
A. No.
Q. You thought that was contrary to the agreement
that you had reached with Mr. McBride at The SCO Group,
right?
A. Well, I didn't reach that agreement with McBride.
It was the company that was negotiating with SCO, I don't
know, general counsel or employees.
Q. So you thought that -- thank you for correcting
me. So you thought that The SCO Group was in essence
welching on an agreement that it had entered into with
Voltis relative to the number of shares that not only Voltis
would get, but that you would get in SCO, right?
A. No, I wouldn't say welching is the correct
703
characterization of that. But in negotiation, if you have
a, you know, if you establish a collar, then shares can
float within that. But I don't recall if they had a collar
or anything as sophisticated as that. And so absent
something like that, it comes down to if you can negotiate
something that inures to your benefit.
Q. Explain that answer to me, please.
A. I think it is pretty explanatory. Well, if you
don't have a collar and the price goes up, you can go to
them and still say hey, look, we cut this deal on this date
so the stock was at this price that date so you should give
me X number of shares instead and not take advantage of the
appreciation. If the stock had gone down, um, I wouldn't be
here telling you you got to give me a lot more.
Q. So the way to avoid that sort of dispute is if
The SCO Group and Voltis had had a written agreement, right?
A. Correct.
Q. So if in that transaction before this dispute
arose, if Voltis and the other principals that you were
involved in and representing had a written agreement with
The SCO Group, then you wouldn't have had to have a fight
over what had been agreed to or not agreed to, correct?
A. Depends on how -- how definitive that written
agreement was.
Q. How well the agreement was written, right?
704
A. Correct.
Q. So would you agree with me that having a clearly
written agreement is important to make sure that later on
when there is a dispute you could look back to the written
agreement to see what had actually been agreed to?
A. As long as it is consistent with the intent and
spirit of what the transaction relationship was.
Q. Now you have been involved in investing in other
business ventures for a number of years, right?
A. Yes.
Q. You have been a party to written contracts,
right?
A. Yes.
Q. And the reason that you have been a party to
written contracts in your business dealings is for some of
the reasons we have talked about here today. You wanted to
make sure that there was a clear understanding regarding
what the actual terms of the agreement were so that when
later on, there may have been a change of circumstances, or
a question about what people agreed to, or maybe a loss of
memory, you could go back to the written agreement and you
could look at what the parties had agreed to at the time
they reached their agreement, right?
A. Yes.
Q. So you recognized the importance of written
705
agreements, fair?
A. Yes.
Q. Now, with respect to your -- your business
dealings, I would like to pick up from what you told
Mr. Singer. You left Novell in 1997, correct?
A. Correct.
Q. Do you remember the month that you left Novell?
A. I don't. Probably summertime.
Q. And what was your first source of employment or
business venture immediately upon leaving Novell?
A. A joint venture between NetScape Communications
and Novell.
Q. And that joint venture was called Novonyx,
N-O-V-O-N-Y-X?
A. Novonyx.
Q. Thank you. And what was your connection with
Novonyx?
A. Well, I authored the idea and completed that
joint venture between NetScape and Novell.
Q. And in connection with your involvement with
Novonyx, you became involved in a dispute with Novell;
right?
A. Yes.
Q. In fact, you and Novonyx threatened to sue
Novell, right?
706
A. I don't know if we threatened to sue them. We
retained counsel when we disagreed about their valuation.
Q. Did the counsel that Novonyx retain, did they
threaten to sue Novell?
A. I don't think anyone threatened to sue Novell. I
think it was about trying to get representation to make sure
that the valuation process by which Novell, the majority
shareholder in a small little company, valued the small
amount of shares that they didn't own and how they valued
those shares and therefore bought them.
Q. Now, you indicated that you and others at Novonyx
retained legal counsel, right?
A. Yes.
Q. That is what you told us here, right?
A. Yes.
Q. And the purpose for retaining legal counsel was
to make sure that your legal rights could be protected,
correct?
A. Correct.
Q. You're not a lawyer, right?
A. No.
Q. And so you would look to legal counsel to make
sure that your interests were best advocated and protected,
right?
A. Reasonably, yes. I mean, when you say that, you
707
know, I think when you look at something like that you can
-- you can take that legal representation a long way and
actually get into litigation. But that is not what we were
trying to do. We actually had -- we had legal counsel that
represented us to make sure that, you know, if there is any
give and take inside of their rights under the agreements,
that we could try and maximize those.
Q. Now, in your business career, including the
Novonyx situation that you have described and other
settings, you have been around lawyers, right?
A. Yes.
Q. And let's take your time at Novell. You
understood that Novell hired lawyers, both in-house
corporate lawyers and outside legal counsel, to best protect
the interests of the corporation, right?
A. Right.
Q. And did you understand when you were at Novell
that the best interests that were to be protected were those
of the shareholders?
A. Yes.
Q. That is the owners of the business?
A. Yes.
Q. And so while you are at Novell working with
Mr. Frankenberg, I think you told us about, or Mr. Noorda?
A. Yes.
708
Q. Both of whom had been at one point in time the
chairman of the Board of Directors of Novell, you understood
that those individuals as chairman of the board, their first
obligation was to protect the interests of the shareholders
of Novell, right?
A. To create shareholder value for the shareholders
of Novell.
Q. And in order to create shareholder value?
A. When you say protect, you're taking a legal
approach. The idea -- the idea is that, you know, they're
supposed to maximize shareholder value. That is their
charter.
Q. Thank you. And you're right, I am taking a legal
approach it is an occupational hazard. I apologize.
A. Yes, it is.
Q. But as you have worked with lawyers, you have
understood as they have represented to the corporation that
their role is, I suppose as you have put it to, to best
represent shareholder value, right?
A. Correct.
Q. You mentioned David Bradford. You said that he,
at a point in time, was the general counsel of Novell,
right?
A. Yes.
Q. And you understood that his role was to best
709
protect shareholder value from Novell, right?
A. Yes.
Q. Now, you said that you're, I think, a friend of
Mr. Bradford, right?
A. Yes.
Q. You respect him?
A. Yes.
Q. You admire him?
A. I do.
Q. You believe him to be an honest man?
A. Yes.
Q. From your observation do you think he was a good
lawyer?
A. I don't know. I am not a lawyer.
Q. So you don't know how to judge that?
A. I don't know how to judge that.
Q. In your role while you were at Novell, you
observed Mr. Bradford work with the Board of Directors of
Novell?
A. Yes.
Q. Now, I want to ask you a few questions about the
transaction that brings us into court today. And I would
like to have you focus on the time period of 1995. You are
familiar in 1995 that Novell had some negotiations with a
company called The Santa Cruz Operation; right?
710
A. I am.
Q. And your involvement was not focused on the
details on that transaction, was it?
A. No, I was more the high level strategy guy.
Q. Now, when you say high level strategy guy, you
were not involved in any of the negotiations of any
particular provision of what ultimately became the Asset
Purchase Agreement signed by Novell and The Santa Cruz
Operation on September 19th, 1995, were you?
A. Well, I don't agree with your characterization of
that. I mean I was heavily involved with the MOU phase of
that, that is why we had, you know, six to eight weeks on
the ground negotiating face-to-face with their team.
That document is the input to the legal process where
they kicked out the Asset Purchase Agreement not the
Licensing Agreement.
Q. You used an acronym MOU. That sounds for
memorandum --
A. Memorandum of understanding.
Q. So your suggestion here today in court is that
you were involved in the drafting of the memorandum of
understanding?
A. No, not in the drafting, in the input into the
drafting. So we had a team out there, Ed Chatlos that you
have referenced, and clearly he has been up on the stand.
711
Q. Let me pause you right there. How do you know
that Mr. Chatlos has clearly been up on the stand?
A. Well, because you guys have talked with him.
Q. How do you know that?
A. I am just sure he has.
Q. Has somebody told you that Mr. Chatlos has been a
witness in this trial?
A. Yes.
Q. Who told you that?
A. A friend of mine.
Q. Who?
A. Lee Johnson.
Q. Do you know what Mr. Chatlos' testimony has been?
A. I don't.
Q. What did Mr. Johnson tell you about Mr. Chatlos?
A. Just that he was up on the stand.
Q. Anything else?
A. No.
Q. Now, back to this memorandum of understanding,
you said that you did not actually draft any provisions, you
provided input, right?
A. Correct.
Q. But let's set a time reference here. Do you
understand that the Asset Purchase Agreement dated
September 19th, 1995 was signed both by Novell and The Santa
712
Cruz Operation on September 19th, 1995?
A. Yes.
Q. Did you observe the signature of that document?
A. I don't think so.
Q. But it is your understanding that it happened;
right?
A. Yes.
Q. So let's use that as a point in time. How
further in advance of September 19th, 19 -- excuse me,
September 19th, 1995 were you involved in the process of
this memorandum of understanding?
A. Well, all the way until the point where we
reached a meeting of the minds and agreement around the
substantive business terms and that is when it was kicked
over to the legal teams. Whether that was one week, two
weeks, I don't recall.
Q. Well, it was several weeks before the Asset
Purchase Agreement was signed at a minimum, right?
A. If you say so.
Q. Well, I'm asking you?
A. I don't recall.
Q. Do you recall answering that question at your
deposition?
A. I do not.
Q. Well, we will turn to that in a minute.
713
In your own words you were not the detail contract guy
in connection with the Asset Purchase Agreement, right?
A. As I have previously stated, yes.
Q. And your role in the discussions concerning the
transaction between Novell and The Santa Cruz Operation
related only to a high-level business strategy, right?
A. Well, the business strategy and the whole purpose
of why we were engaging in this transaction with SCO.
Q. You weren't involved in the details of the actual
legal document that was created that set forth the terms and
conditions of the parties agreement, namely, the
September 19th, 1995 Asset Purchase Agreement, right?
A. That is correct.
Q. You didn't help write or craft any of the
provisions of that referenced Asset Purchase Agreement; did
you?
A. No.
Q. You didn't participate in any of the so-called
wordsmithing or specific language that was used in the Asset
Purchase Agreement, did you?
A. No.
Q. You didn't make any contribution whatsoever to
the terms or conditions of the September 19th, 1995 Asset
Purchase Agreement, did you?
A. No.
714
Q. In fact, your so called high-level strategy
involvement with respect to what ultimately became the
transaction, that is the September 19th, 1995 Asset Purchase
Agreement, took place at least two to three weeks before
that agreement was signed, right?
A. That sounds reasonable.
Q. And, in fact, your observation, although you have
been involved in some high-level discussions, it was at
least two to three weeks after your involvement ended before
the Asset Purchase Agreement was finalized, right?
A. Well, other than the fact that I presented at the
board meeting the day before it was finalized some of the
substantive terms.
Q. And during this two to three week period between
when your involvement ended and when the Asset Purchase
Agreement was signed, you were generally aware that there
was a back and forth of many drafts of the Asset Purchase
Agreement, right?
A. Yes.
Q. And who did you think that those various drafts
were being passed back and forth between?
A. Well, the legal teams was Ed Chatlos being the
detailed business guy that remained there for continuity.
Q. Now Ed Chatlos was at that point a Novell person,
right?
715
A. Yes.
Q. And who were the lawyers who were involved for
Novell during that two week period or three week period of
sending drafts back and forth?
A. Well, there was a, you know, I don't remember
everyone's name. There was a Michael Hoffman who was the --
one of the primary attorneys that was out there in
California on the ground and unfortunately he has passed
away. I don't recall who all of the other attorneys were.
Q. Well, you knew, for example, that the law firm of
Wilson Sonsini was involved, right?
A. Sure. You said Novell, so if there were outside
counsel, he is Wilson. And so yeah, Tor Braham would have
been one of the main guys there, or the main guy.
Q. When you say "the main guy," you mean that he was
the primary first drafts person of the Asset Purchase
Agreement, right?
A. I don't know if he was the primary drafter. But
Tor Braham was the senior attorney from Wilson Sonsini and
did a lot if not all of Novell's transaction.
Q Let me ask you about that. During the time
period that you worked for Novell from 1992 to about 1997,
to your observation the law firm of Wilson Sonsini was
Novell's primary outside counsel on corporate matters,
right?
716
A. Yes.
Q. And Tor Braham was the lead attorney for Novell
in those various transactions, right?
A. Yes.
Q. Tor Braham essentially was the lawyer that Novell
turned to to document corporate transactions; right?
A. Yes.
Q. He was a trusted attorney?
A. Yes.
Q. And to your observation, Tor Braham was the key
component to the drafting of the actual terms and conditions
of the Asset Purchase Agreement, correct?
A. You know, I don't know. Again, as I stated, I
don't know if he was the key draftsman, if he had some of
his other people drafting. He was the senior attorney so he
may have looked at it from a high level and had others doing
the drafting work or the detail work.
Q. We referenced your deposition a bit earlier.
There is a transcript of your deposition. I would ask you
if you would like to turn to page number 89 of your
deposition. Again, this was taken on January 19th, 19 --
excuse me, 2007.
And Your Honor, with the court's permission, I would
like to display the lines and pages that I'll now state on
the record.
717
THE COURT: Do you have any objection to that,
Mr. Singer?
MR. SINGER: I do not, Your Honor.
Brennan
THE COURT: All right. You may go ahead, Mr. Brennan.
MR. SINGER: I would only ask that he tell us what
lines he plans to --
MR. BRENNAN: I am about to do that. Thank you,
Mr. Singer.
Q. (By Mr. Brennan) I'm going to be reading from
Page 89 Line 23 through page 90 line five. Do you have that
in front of you or you can see it on the screen, either way.
A. Yes.
Q. Question, "is it your understanding that Tor
Braham from Wilson Sonsini was actually drafting the, what
became this September 19, 1995 Asset Purchase Agreement?"
Your answer, "I don't know that he was drafting the APA. I
think he was -- he was certainly a key component there, so I
would think he would be working with the Novell legal team,
which was Michael Hoffman and someone from New Jersey, I
would assume."
That was your understanding when you gave this
testimony?
A. Yes.
Q. Do you now agree with me that by your own
previous testimony Tor Braham was the key component to the
718
drafting of the Asset Purchase Agreement?
A. You know, I am reading where it says I don't know
that he was drafting the APA, so I don't know what you're
wanting me to agree to.
Q. I'm simply want you to agree --
A. I think it is consistent with what he said there
with what I just verbally stated which is he was the senior
guy. Does that mean that he is the guy drafting the
agreement? I don't know.
Q. Now during -- during the preparation of the Asset
Purchase Agreement, you understood that Mr. Braham took the
lead role in drafting that agreement, fair?
A. Well, being responsible for the drafting, sure.
Q. Well, don't you think that he took the lead on
drafting the definitive ultimate agreement between the
parties?
A. We're disagreeing on semantics and definition.
When I hear you say drafting, I don't believe he was sitting
there at a keyboard typing stuff in, do you?
Q. You know --
THE COURT: Mr. Mattingly, you don't get to ask
questions.
THE WITNESS: Okay.
THE COURT: You answer the questions.
THE WITNESS: We're just kind of rat-holing on this
719
one.
Q. (By Mr. Brennan) I can only take you at your
previous word. Let's look now at Page 91 of your deposition
and I will be reading from lines two through nine on
Page 91. May I proceed, Your Honor?
THE COURT: You may.
Q. (By Mr. Brennan) Question, "does reviewing that
paragraph refresh your recollection as to Tor Braham's
involvement in drafting the agreement? Answer, yeah.
According to this, it looks like Tor was the lead on
drafting the definitive and -- which would still be
consistent with what I suggested that, you know, he would
doing that with input from the team, including potentially
Michael Hoffman, as well as attorneys from Summit."
Do you see that?
A. Yes.
Q. Would you agree that Tor Braham took the lead on
drafting the definitive Asset Purchase Agreement?
A. Well again, definitionally, I think consistent
with at that time I am still consistent that he was
primarily responsible for the drafting. But I don't believe
that he was actually typing on the keyboard.
Q. And you understand that what we're reading into
the record is your previous words under oath. You
understand that, right?
720
A. Yes.
Q. I'm not quoting somebody else, I'm quoting you.
A. I think I understand that.
Q. Okay. Now, you were not a member of any
transition team that was formed after the Asset Purchase
Agreement was signed, were you?
A. No.
Q. In fact, you had no further involvement with the
Asset Purchase Agreement after it was signed, did you?
A. I did not.
Q. Now, did you ever read the Asset Purchase
Agreement?
A. Um, I probably read it. I'm sure that I have a
copy of it in the folder that you have and was sent that so
I would have read it slash, perused it, skimmed it, either
before or after the close.
Q. When did you first skim or peruse or glance at
the Asset Purchase Agreement?
A. I would imagine when it showed up in my inbox
sometime ago.
Q. Now when would that have been?
A. I don't know, sometime in that two to three week
period prior to the close.
Q. I'm going to -- I am going to select from the
documents you brought today, one of them is a document
721
entitled Asset Purchase Agreement By and Between The Santa
Cruz Operation, Inc. and Novell, Inc. dated as of September,
then it has a blank, 1995. This is one of the documents you
brought with you to court today?
A. I believe so if you pulled it out of that manila
folder that I had.
MR. BRENNAN: I will represent to you that that is
where it came from. Your Honor, with your permission, I
would like to have this labeled for identification as
Novell's Exhibit 045.
THE COURT: Mr. Singer?
MR. SINGER: I have no objection to it being labeled
for identification.
MR. BRENNAN: Your Honor, with permission of the
court, I would like to display this on the ELMO projector?
THE COURT: Well, you asked for it to be marked.
MR. BRENNAN: Yes.
THE COURT: You have not asked for it to be admitted.
MR. BRENNAN: That is correct.
THE COURT: Are you going to seek its submission?
MR. BRENNAN: I will in just a moment. Thank you,
Your Honor.
Q. (By Mr. Brennan) Now, do you recall,
Mr. Mattingly, whether this document that I have identified
which has been marked as Defendant's Exhibit 045 is a
722
document that you received previous to the Asset Purchase
Agreement being signed?
A. If it is a draft, then that would have been
previous to it.
Q. Is this the copy of the draft that you looked at?
A. It would have been a paper or online to an
electronic format.
MR. BRENNAN: Your Honor, I do move the admission of
Defendant's 045.
MR. SINGER: No objection.
THE COURT: It will be admitted.
(Whereupon, Defendant's Exhibit 045 was received
into evidence.)
MR. BRENNAN: May I now present it on the ELMO, Your
Honor?
THE COURT: You may.
MR. BRENNAN: Thank you.
Q. (By Mr. Brennan) Now, we have just displayed to
the jury through this technology the first page of
Defendant's Exhibit 045. And I would now like to turn to a
portion of that document which is entitled Schedule 1.1(b)
Excluded Assets and in particular, I will show that first,
I'll try to keep my fingers out of the screen, but do you
see that page there?
A. Yes.
723
Q. And on the version of the document that you see,
it says, let me lower it just a little bit, do you see where
it says "draft" stamped on the top?
A. Yes.
Q. I know it is a little difficult to see but there
appears to be a handwritten date to the right 9/16/95; do
you see that?
A. Yes.
Q. Is that your handwriting?
A. I don't think so.
Q. Does this suggest to you that you had possession
of this document at least as early as September 16th, 1995?
A. That would be reasonable.
Q. And so did you understand that in this draft at
least that what is set forth in this schedule Excluded
Assets were Novell assets that would not transfer to Santa
Cruz Operation under the Asset Purchase Agreement then being
considered?
A. Yes.
Q. I'm now going to turn to Page 2 of that draft
Schedule 1.1(b). Excuse my big hands there. You will see,
I know it is a little difficult, but there is a Roman
numeral five Intellectual Property. Are you able to make
that out on the screen?
A. Yes.
724
Q. And it has three parts; correct?
A. Yes.
Q. One is labeled capital letter A and it says
patent licenses, parenthesis, i.e. Pike and all others
associated with the UNIX System, in parenthesis, do you see
that?
A. Yes.
Q. Did you understand that the draft under
consideration several days before the Asset Purchase
Agreement was signed was to exclude all patent licenses?
A. Sure.
Q. That is what it says, right?
A. That is what it says.
Q. And the draft that you had in your possession
several days before the final agreement was signed had that
exclusion, right?
A. That is correct.
Q. And September 16th, 1995 would have been before
the Novell Board of Directors meeting that was held on
September 18th, 1995, correct?
A. Yes.
Q. So you would have had in your possession at least
two days before the Novell Board of Directors meeting a
draft of the Asset Purchase Agreement that listed at least
these proposed exclusions from transfers of assets by Novell
725
to Santa Cruz, correct?
A. Yes.
Q. Let's then look at Item B, all copyrights and
trademarks, except for the trademarks UNIX and UnixWare. Do
you see that?
A. Yes.
Q. So is it correct then that as with the patent
licenses you had in your possession a draft of the Asset
Purchase Agreement at least two days before the board
meeting that listed as excluded assets, that is assets that
would not be transferred to Santa Cruz Operation, a document
that showed all copyrights and trademarks except for the
trademarks UNIX and UnixWare?
A. If that was delivered to me on the date that the
-- somebody wrote 9/16 then I would have had it at least two
days before the board meeting.
Q. So even before you went into the board meeting,
you would have had access to a draft of the Asset Purchase
Agreement that clearly stated that -- no, let's put it back
just so we have no mistake here, clearly would have stated
that contemplated to be excluded are all copyrights and
trademarks except for the trademarks UNIX and UnixWare;
right?
A. As long as it wasn't delivered at the board
meeting and actually copied on the 16th.
726
Q. When did you tell me you got this document?
A. I don't know. You just said that it was on the
16th.
Q. Now, just so that we're clear here, I showed you
the previous page that had a date?
A. Written.
Q. I asked you and we can go back to that, we're
back to the first page of the draft and I asked you about
the reference to the date 9/16/95, and unless I misheard
you, I thought you told me that you believed that was the
date that you got this. Did I misunderstand?
A. That is the date it was written. I don't know --
you asked me if I wrote that and that is not my writing. So
I wouldn't have written 9/16/95 there. So someone did it on
that date, I assume. And whether it was delivered to me on
a Saturday, or whether I received it Monday as part of the
board package, I don't know the answer.
Q. I am going to show you the original that I have
in front of you. I would like you to look at the date.
Does that appear to be written in handwritten ink?
A. Yes.
Q. That is not a photocopy, is it?
A. It is not. But if you look at the fax date on
the bottom, what does the fax date on the bottom say?
Q. There is a fax date on the bottom, it says
727
September 18, 1995, right? Now, are you saying you got this
by fax?
A. I don't know. I am just saying it has that
written on the bottom so, you know, you're trying to
establish whether I got it on the 16th, I don't know. Does
it have 9/16 written in handwriting? Yes, it does.
Q. In original ink, right?
A. Well, I don't know. Well, I don't know if that
is original ink, original or a photocopy.
Q. Let's take a look, I apologize. I thought we
cleared that up. Let's go back and have another look at it.
A. But my point is, is whether I got it on the 16th
or the 18th as part of the board meeting, I don't recall.
Q. If you would like to take another look,
Mr. Mattingly, does that appear to be original ink rather
than a copy or a facsimile?
A. No, it looks to me like it is a photocopy of
original ink.
Q. That is your best observation?
A. Yeah.
Q. Now, before you -- before you entered the board
meeting you had access to this document, right?
A. Well, or at the board meeting. As I stated, I
don't know if it was before or if it was at the board
meeting.
728
Q. Let's take a look at what has been marked as
defendant's, excuse me, SCO Exhibit 570. This is the
September 15th, 1995 package.
And is it your testimony that you received a copy of
this document?
A. Yes.
Q. And when did you receive it?
A. Well, again, it is dated September 15th, so I
would assume that that being a Friday, I might have received
that on the 15th.
Q. And did you review that document at the time you
received it?
A. I'm sure I did.
Q. Let's look at the -- now you were not a member of
the Board of Directors of Novell, were you?
A. No.
Q. Never were?
A. No.
Q. You weren't a voting member of the board, right?
A. No.
Q. And in the board meeting that you attended on
September 18th, 1995 it was not your purpose to vote on any
resolution, right?
A. No.
Q. So let's look at this package that you were given
729
a copy of. It says, if we can highlight the first full
paragraph, "dear board member" and then the first full
paragraph. It says quote, "we are in the process of
negotiating long-term business relationships with SCO and
Hewlett-Packard for the purpose of strengthening UNIX on the
Intel Platform."
Now let me just pause right here. Did you believe as
of September 15th that it was the intention of Novell to
sell its entire UNIX and UnixWare business to SCO?
A. Yes.
Q. Let's go back then to Exhibit 570, the next
sentence. Quote, "one of the key steps in this process is
the sale of a portion of our UnixWare business to The Santa
Cruz Operation."
Now certainly when you read this document you
understood that what was being considered was a sale of a
portion of the business, right?
A. Well, yes, because we were retaining the royalty
stream from the SVRX royalties.
Q. In fact, that is referenced in the next sentence,
right?
A. Yes.
Q. And that next sentence which is a parenthetical
reads, "for example, we will be retaining our traditional
royalty stream from UNIX SVRX source code which we -- which
730
was approximately $50,000,000 for FY 1995;" correct?
A. Yes.
Q. And that suggests that the Novell royalty
payments that it received for UNIX SVRX source code alone
was about $50 million; is that right?
A. For that year.
Q. Fiscal year 1995, right?
A. Correct.
Q. So you understood going into the board meeting,
that Novell had a very keen important interest in
maintaining that royalty stream; right?
A. To an extent, yes.
Q. Well, that was critical to Novell, right?
A. Well, the revenue was clearly critical, right.
Q. And so you understood, for example, Mr. Bradford
and other members, excuse me, Mr. Frankenberg and other
members of the board in order to maintain and enhance
shareholder value would have felt a duty and obligation to
do everything that they reasonably could to protect that
royalty payment stream, right?
A. That is what you would assume if you didn't
understand what we were trying to accomplish from a higher
level strategic initiative.
Q. Let me see if I understand what you're saying.
By your own testimony you believe that one of the things
731
that was a part of the transaction between Novell and SCO,
excuse me, Santa Cruz, was a provision whereby the royalty
payments that Novell was receiving, $50 million according to
this fiscal year in 1995, after the Asset Purchase Agreement
would continue to come to Novell, right?
A. Yes.
Q. That was very important to Novell, right?
A. Yes.
Q. And so back to my question, that was a
fundamental part of the transaction, right?
A. It was.
Q. And so Novell and its officers and directors,
including its general counsel, Mr. Bradford, in your
estimation would have been acting within the scope and duty
of their offices in taking whatever reasonable and
appropriate steps were available to them to protect that
royalty stream, right?
A. Within the framework of the strategic objectives.
If you would like for me to elaborate on that, I would be
happy to briefly --
Q. Just answer my question. That is all I need.
A. Well, then the answer would be no.
Q. So it is your testimony under oath that it was
not within the purview of the members of the Board of
Directors of Novell and its officers, including its general
732
counsel, to take all reasonable steps to protect Novell's
interest in that royalty stream? Is that your testimony
under oath here today?
MR. SINGER: Objection, that is a compound question.
THE WITNESS: I'm trying to answer your question so
quit badgering me.
MR. BRENNAN: I did not intend to badger you.
THE WITNESS: The intention here and the strategic
realm of what we're trying to do is to establish a common
UNIX operating environment on Intel processors. So while we
absolutely wanted this $50,000,000 in revenue and it's very
important to Novell because it was very heavy margin, that
is almost 50,000,000 that goes right to the bottom line,
very important, but more importantly for Novell was to try
and get a common UNIX platform out there on Intel so that
there was a viable alternative to what Microsoft was
offering that was eroding NetWare away aggressively.
So in the greater context of things, okay, sometimes
short-term sacrifices for long-term gains have to take
place. And so the purpose here is there would have been
nothing better for Novell than if SCO had been very
successful with this UNIX business that they had acquired in
successfully unifying the entire industry around their UNIX
offering on X86 architecture.
If they could have done that, that would have eroded
733
our revenue streams here from this SVRX old royalties. But
in the greater strategic contest, that would have been a
fantastic tradeoff for Novell.
Q. (By Mr. Brennan) Now let me --
A. So that is what I'm referring to when I say
they're trying to look after shareholder value. You can't
take a rifle shot of an isolated thing and try to badger me
on that.
Q. Well, I apologize if you think you're being
badgered.
A. I was being badgered.
Q. I do hope that you can answer my questions. Now,
in terms of the business objective that you understood of
SCO, excuse me, Santa Cruz Operation when this transaction
was being contemplated, what did you think Santa Cruz
Operation was going to do with the development of the UNIX
or UnixWare code?
A. They were going to create a merged product. They
were going to try and establish an opportunity for all of
the other OEM's that were out there, some of which were
paying royalties that counted into this 50,000,000, to
entice them to adopt this new version of an operating
environment for their hardware platform and unify UNIX on
Intel.
Q. Your basic understanding was that what Santa Cruz
734
Operation would do is take whatever rights they got to
UnixWare and seek to further develop it and develop a
product that would be a benefit to its customers; right?
A. Well, to their customers and the industry.
Q. The industry.
A. And therefore, we established this agreement in a
fashion that NetWare components would be part of this future
merged UNIX. So if you could get HP and Sun and Fujitsu and
Hitachi and everyone using that version of UNIX that had
NetWare in it, then all of a sudden we could, you know, drag
in and be the de facto networking standard inside of these
UNIX operating environments.
Q. You did not understand that the purpose of the
transaction was so that Santa Cruz Operation or any of its
successors could turn on users of Linux, right?
A. Well, that wasn't -- that wasn't even discussed
at that point.
Q. Now, let's go back to what we were looking at,
namely Exhibit 570. The next line in this board memo that
Mr. Bradford says we are currently finalizing the terms of
an Asset Purchase Agreement which would result in Novell
owning, on a post transaction basis, about 16 percent of
SCO. Do you see that?
A. Yes.
Q. And then it says, SCO's current market cap is
735
$300,000,000 at $10 a share. Do you see that?
A. Yes.
Q. Now, when you were involved back in 1995, did you
think that this transaction that was being discussed was one
where SC -- excuse me, Santa Cruz Operation, abbreviated SCO
here, would be paying Novell about $125,000,000 in cash?
A. Well, I don't know about cash but consideration.
In my mind, it seemed like it was about $125,000,000 deal
that came in various forms of consideration of which I think
we looked at earlier.
Q. Well for example, 16 percent of SCO's stock at
$10 a share, how much would that be?
A. I don't know.
Q. Far less than 125,000,000, right?
A. Sure. But there were multiple components that
added up to what I recall to be that amount.
Q. Do you recall at your deposition you thought that
the deal was such that SCO would be paying Novell
$125,000,000 in cash? Do you remember being asked that?
A. Yes.
Q. And you told the answer I think it is 125,000,000
in cash?
A. Yes, I probably volunteered the 125. I didn't
stay in cash.
Q. Then you asked at you deposition are you even in
736
the ball park? Do you remember that?
A. Yeah, I do.
Q. So when your deposition was taken two years ago,
you didn't even know what the financial terms of the
agreement were, right?
A. I don't recall what it was that built up to what
in my mind seemed like it was about $125,000,000
transaction.
Q. Now, you were asked about the meetings of the
Board of Directors. I would like to turn back, if you
could, to what has been entered into evidence as Exhibit Z3.
Now, let me ask you a question while you're looking at that.
Who was present in the board meeting?
A. Those listed in the first paragraph.
Q. Do you recall each of those individuals being
present?
A. Um, well yeah, they were all pretty good about
showing up for the meetings.
Q. My question is, do you recall each of those
individuals being present?
A. I don't.
Q. Did Larry Sonsini speak at the meeting?
A. Well, Larry usually speaks at any meeting he
participates in. So is he here?
Q. Let me ask you this. Without reading the minutes
737
themselves, are you able to answer my question as to whether
Mr. Sonsini spoke at the meeting?
A. I'm sure he spoke at the meeting.
Q. What did he say?
A. I don't remember.
Q. Did David Bradford speak at the meeting?
A. I'm sure he did.
Q. What did he say?
A. I don't remember.
(Whereupon, the reporter requested the
attorney to slow down.)
Q. (By Mr. Brennan) I'll slow down. Did Robert
Frankenberg speak at the meeting?
A. I'm sure he did.
Q. What did he say?
A. I don't remember.
Q. Did Jack Messman speak at the meeting?
A. I'm sure he did.
Q. What did he say?
A. I don't remember.
Q. Did Elaine Bond speak at the meeting?
A. I'm sure she did.
Q. What did she say?
A. I don't remember.
Q. Did Alan Ashton speak at the meeting?
738
A. Alan Ashton? I don't think so. Was he there?
Q. Well, let me ask you. Do you remember whether he
was even there?
A. I don't. It looks like it was a telephonic
conference call.
Q. Well, you're aware that Mr. Ashton was a
participant in the meeting, right?
A. I am now. He was a member of the board member
but at some point he got off of the board and --
Q. So without looking at the minutes, are you able
to tell me whether Mr. Ashton was even a board member at the
time?
A. Sure. I think he was a board member until we
divested of WordPerfect.
Q. Thank you. Do you remember anything about
Mr. Ashton or his participation at the meeting?
A. I don't remember. He did not necessarily
participate a lot verbally at meetings.
Q. Okay. You're familiar with a board member by the
name of Ian Wilson, right?
A. Yes.
Q. Did Mr. Wilson speak at the meeting?
A. I don't remember.
Q. Are you familiar with a board member by the name
of John Young, right?
739
A. Yes.
Q. Did Mr. Young speak at the meeting?
A. I'm sure he would have spoken.
Q. What did he say?
A. I don't remember.
Q. You just don't remember what any of these
individuals said?
A. I do not.
Q. Are you aware that at the Board of Directors
Meeting, that David Bradford and Larry Sonsini reviewed the
terms of the Asset Purchase Agreement?
A. I am sure they would have.
Q. So they --
A. That was the purpose of the meeting.
Q. They would have gone through the terms of the
agreement, right?
A. Yes.
Q. And so to your recollection, the Board of
Directors would have had the benefit of two attorneys, Larry
Sonsini and David Bradford going through the terms of the
Asset Purchase Agreement; right?
A. Correct.
Q. And the Asset Purchase Agreement that was before
the board included the exclusions of all copyrights and
trademarks except the trademarks UNIX and UnixWare, right?
740
A. That is what the document states.
Q. Well, do you remember that?
A. I remember that as I read it.
Q. So now looking at the minutes of the Board of
Directors Meeting, your memory is refreshed, and you recall
that Mr. Bradford, general counsel, Larry Sonsini, a member
of the board, and also a senior partner at Wilson Sonsini
went through with the board the terms and conditions of the
Asset Purchase Agreement, right?
A. Well, I think that they would have reviewed the
high-level terms and conditions in the Asset Purchase
Agreement. They would have not gone through the agreement
and gone on a line-by-line basis.
Q. Well, do you remember one way or the other?
A. I don't, but I guarantee you they wouldn't have
done that.
Q. You guarantee it, but you just don't remember?
A. I don't remember. But we would never take a 50,
60 page document and review that on a line-by-line basis.
Q. Now --
A. Never in the four years that I attended board
meetings would we do that.
Q. Would the most important aspects of the
transaction be reflected in the resolution of the board?
A. They should be.
741
Q. So to your understanding, the most critical parts
of the Asset Purchase Agreement put before the board would
have been those that the board reached specific resolution
on, right?
A. Yes.
Q. So then let's look at the actual resolutions
reached by the board. They're on Page 2. And we're going
to focus on the third paragraph where it says, "Novell will
retain." If I could have that highlighted. Our patient
jury has seen this language several times. "Novell will
retain." So if I understand your testimony correctly, the
most important parts of the transaction would be part of the
resolutions, right?
A. Yes.
Q. It says here as part of resolved, quote, "Novell
will retain all its patents, copyrights and trademarks
(except for the trademarks UNIX and UnixWare)" right?
A. Yes.
Q. And that -- that is almost verbatim if not
exactly the language that was in the draft Asset Purchase
Agreement that you and other people attending the board
meeting received in advance of the board meeting, right?
A. Correct.
Q. There was no surprise, right?
A. Well, I think once again, as I talked about when
742
you were trying to badger me about the $50,000,000, you
can't take a rifle shot in a two month negotiation and a 60
page document and try and zero in on that. This is
referring to the fact that Novell bundled a number of its
products that it retained that weren't part of this Asset
Purchase Agreement. And Novell obviously would retain that
intellectual property, those copyrights and trademarks with
those products that they retained. That is what this is
stating.
Q. What I'm trying to find out from you is the
following. First, there was -- there was no surprise
foisted on the board with language that would appear in the
ultimate signed Asset Purchase Agreement that would state
that the excluded assets would include all copyrights and
trademarks except the trademarks UNIX and UnixWare. Would
you agree with that?
A. In a perfect world that should be the case.
Q. But would you agree with me that the members of
the board and other participants in the meeting, including
yourself, were provided with the draft of the asset purchase
agreement before the board meeting that included the very
language I have been focusing on?
A. Yes.
Q. So would you agree with me then that there was no
attempt by Mr. Bradford or anyone else to try to somehow
743
surprise or trick the board?
A. I don't believe it would have been their
intention, but I want to emphatically state that at this
point in time, this is the eleventh hour, 59th minute and
59th second to all of the sudden assume that the UNIX
copyrights weren't part of this transaction that we had been
selling for two months would have definitely raised
eyebrows. That is not inconsistent with this because Novell
is going to retain its patents and copyrights for NetWare,
for Groupwise, or any of those products that they bundled
with UnixWare.
Q. Well, again, just so we can be very clear on
these minutes, one of the resolutions was that the explicit
exclusion that we have talked about was a part of the
resolution by the board, right?
A. Well, on the Novell patents or the Novell
patents, copyrights and trademarks pertaining to Novell's
retained products.
Q. Now --
A. I disagree with you saying that that applies to
UNIX.
Q. Well I -- I appreciate the fact that that is your
argument here today. My question is --
A. It is not my argument. It is what I spent two
months out in California negotiating with SCO, with 12 other
744
people from Novell and 12 from SCO.
Q. Now do you know whether --
A. There was never confusion in my mind.
THE COURT: Mr. Mattingly, please. If you have
something more that you would like to say, you will be given
an opportunity with Mr. Singer who will have another
opportunity to ask you questions. Please just answer
Mr. Brennan's questions as directly as you can.
THE WITNESS: I apologize.
Q. (By Mr. Brennan) Now, there was also additional
resolutions. If we could go down to the resolution on the
bottom of page 2 where it says reserve -- excuse me,
resolved further?
A. Uh-huh (affirmative).
Q. Next one down. Next one. So there was an
additional resolution, quote, "That the terms and conditions
of the Asset Purchase Agreement as set forth therein are
hereby approved, subject to such changes and modifications
of a non-material nature as the proper officers of Novell
may consider appropriate or necessary." Do you see that?
A. Yes.
Q. Now do you know whether the language that
appeared in the Asset Purchase Agreement, excluding all
copyrights and trademarks except the trademarks UNIX and
UnixWare were changed prior to the signing of the Asset
745
Purchase Agreement by either Novell or Santa Cruz Operation?
A. I don't know.
Q. Did you have any involvement whatsoever in any
amendments to the Asset Purchase Agreement?
A. I did not.
Q. You played no role in any of that; right?
A. No.
Q. You have no personal knowledge about any of that,
right?
A. No. Well personal knowledge, I do have the
knowledge that there was an Amendment 2 that tried to
clarify some of the ambiguous legal work.
Q. Somebody told you that?
A. Sure, it was front page news.
Q. But you don't -- you weren't involved in any of
that, right?
A. No.
Q. Now, I would like to ask you a bit about an
individual I think that Mr. Singer asked you about, Duff
Thompson. You're familiar with Mr. Thompson?
A. You bet.
Q. Mr. Thompson became your boss after you stopped
working for Bob Frankenberg; right?
A. Yes.
Q. And you had a chance in your role working for
746
Mr. Thompson to observe his work habits?
A. Yes.
Q. You began working for Mr. Thompson when?
A. I'm not sure exactly what the time frame was, but
after I stopped working for Bob Frankenberg then I took a
job with him as vice-president of corporate development and
strategic relationships.
Q. In that role, you would have had that position
with Mr. Thompson before you engaged in any discussions with
Santa Cruz Operation; right?
A. Yes.
Q. And you would have continued working with
Mr. Thompson until he left the company; right?
A. Yes.
Q. When did Mr. Thompson leave Novell?
A. I am not sure exactly. It would have been after
the WordPerfect divestiture.
Q. Sometime in 1996?
A. That sounds reasonable.
Q. Okay. So is it fair to say that from the time
period at least before any discussions were had with Santa
Cruz Operation and until at least when Mr. Thompson left in
1996 you worked with and for him?
A. Yes.
Q. Now based on your observation of him, would you
747
agree that Mr. Thompson was not really involved with the
details of the Novell Santa Cruz transaction?
A. No. Duff had specific responsibilities as the
senior executive overseeing that and participated in all of
the high-level senior executive type meetings. He was not
on the ground for two months out in California day-to-day
like the rest of the team was.
Q. If we could go back to your deposition, let's
look, again this is your deposition taken more than two
years ago on January 19th, 2007?
A. Yes.
Q. If you would turn with me to Page 70 and counsel
we're going to read from Line 17 through 22 on Page 70. Do
you have that, Mr. Mattingly?
A. Yes.
Q. The question, "Is it fair to say that, based on
your personal knowledge, that Duff Thompson was not really
involved in the details of the Novell, Santa Cruz
transaction?" Do you see that question?
MR. SINGER: Your Honor, I would ask that the entire
answer be shown to the witness and blown up on the computer
screen.
MR. BRENNAN: Well, I'm happy to do that. That is not
a problem.
THE COURT: All right.
748
Q. (By Mr. Brennan) And then we'll see your answer
that does spill over to the top of Page 71.
Your answer, "you know, I would say that that's
probably a fair statement because the real detail guy in
this was Ed Chatlos, and of course, Ed and I were peers and
reported to Duff. But he was a general counsel and formerly
with WordPerfect and was the senior or executive vice
president of Corporate Development at Novell."
So would you agree with me today, as I believe you
agreed with Mr. Brakebill who asked you this question, that
Mr. Thompson was not really involved with the details of the
transaction?
A. Well, as I stated there in my deposition and as I
earlier stated today, he was the senior executive overseeing
the transaction, but that doesn't mean that he is the detail
guy that is negotiating every aspect of the transaction. So
I think it is all consistent with what I said back then. It
is consistent with the dialogue you and I had about whether
Tor was drafting the APA or whether he was just focussing --
THE COURT: Mr. Mattingly, thank you.
THE WITNESS: -- overseeing the drafting.
THE COURT: Thank you.
Q. (By Mr. Brennan) Is it true that in fact to your
observation Duff Thompson was quote "checked out" unquote
from Novell during this time period?
749
A. No.
Q. Did you ever hear anyone suggest that?
A. Yes.
Q. So just so I understand, you have heard people at
Novell suggest that Duff Thompson was checked out during
that time frame; right?
A. Yes.
Q. And to your observation, was it commonly known at
Novell during this timeframe, that is discussions about the
Novell Santa Cruz Operation transaction, that Mr. Thompson
was checked out?
A. No.
Q. Okay. Let's look at your deposition, again, if
we might. This time we'll turn to Page 71. And if I could
direct your attention, I'll be reading from lines 18 through
23.
Question, "would you say it was commonly known amongst
the people who were working on the Novell, Santa Cruz
transaction that Duff was checked out? Answer, yeah. I
would think that -- I would think that generally people
would have agreed with that sentiment."
MR. SINGER: Your Honor I would ask the prior question
and answer also be presented to the witness.
MR. BRENNAN: Your Honor, they certainly will have
that opportunity on their redirect, but if he would like I'm
750
happy to do the same thing.
MR. SINGER: I think this falls under the completeness
rule, Your Honor.
THE COURT: I think we probably ought to have you do
it now.
MR. BRENNAN: I'm happy to do it right now.
Q. (By Mr. Brennan) So let's look on Page 71 the
question at line seven through the answer that continues to
line 17.
Question, "and what was your understanding of what
that meant, Duff was checked out during this period of time
preceding the Novell -- during the Novell, Santa Cruz
transaction? Answer, well, Duff came into Novell and
assumed that position of, you know, senior executive over
corporate development, but he was not in the office that
often and participated in the senior executive level
meetings inside of Novell, as well as the senior executive
level meetings when we had high level meetings with, you
know, maybe Alok Mohan and Doug Michels." Do you see that?
A. Yes.
Q. Now, were you also aware of a circumstance during
the course of discussions over The Santa Cruz Operation
where you yourself believed that he had checked out?
A. No.
Q. Do you remember an all hands meeting held in
751
California where Mr. Thompson didn't show up?
A. Yes.
Q. And you considered that to be in your own mind
evidence that he had checked out?
A. No. Um, time frame wise, you asked if that was
during that SCO transaction and I don't believe that was
during it. I think it was after.
Q. So you thought that Mr. Duff Thompson was checked
out after the SCO transaction?
A. Well, I think that is what people understood him
to be.
Q. Now, you believed that under the Asset Purchase
Agreement all UNIX related patents transferred to Novell,
right, excuse me, from Novell to Santa Cruz Operation,
right?
A. Say that again, please.
Q. Yes. You believed that under the Asset Purchase
Agreement that all UNIX related patents transferred from
Novell to Santa Cruz, right?
A. Well, as I stated, I think it was relevant
because I think Novell retained -- well as we read earlier,
Novell retained patents but they were some specifically that
we referenced like the Pike patent that were pretty
significant that Novell retained.
Q. Let me see if I understand what you're telling
752
me. You believe that under the Asset Purchase Agreement
Novell retained patents, right?
A. Yes.
Q. Did it transfer any patents?
A. I don't believe so unless there were some that
were possibly relevant to UNIX.
Q. And your -- the basis for your belief that Novell
retained patents and didn't transfer any is premised on
what?
A. Well, I knew that we had acquired this patent
from USL around overlapping windows. And if we had that
patent, there was a company by the name of Microsoft that
had a pretty nice business in overlapping windows that I
felt like we should have executed our rights against that.
Q. Well, were you aware that under the Asset
Purchase Agreement signed on September 19th, 1995 that one
of the excluded assets was all patents?
A. I am now.
Q. What do you mean you are now?
A. We just read that earlier.
Q. Well, just so we're clear, what we looked at
earlier was a draft unsigned version of the Asset Purchase
Agreement. Let's actually look at the final version of the
Asset Purchase Agreement signed on September 19th, 1995 and
we'll look in particular at the final version of Schedule
753
1.1(b) that was entered into by the parties on
September 19th, 1995.
Here it says, and again I'll represent to you that
this is from the executed version of the final Asset
Purchase Agreement signed on September 19th, 1995. And
under intellectual property it says, "all copyrights and
trademarks except for the trademarks UNIX and UnixWare," do
you see that?
A. Yes.
Q. And that is exactly the same language that
appeared in the draft that you got before the board meeting;
right?
A. Yes.
Q. But there also is an exclusion of all patents;
right?
A. Correct.
Q. So is this what tells you that no patents
transferred?
A. Yes.
Q. Isn't this also what tells you that no copyrights
or trademarks except for the trademarks UNIX and UnixWare
transferred?
A. Well, once again, in a rifle shot you would
assume that.
Q. Well, are you aware of any other provision that
754
one would look to in the Asset Purchase Agreement signed on
September 19th, 1995 to show that some copyrights or
trademarks did pass to Santa Cruz Operation?
A. No.
Q. Did you have any involvement in the preparation
of the schedule of either included or excluded assets?
A. No.
Q. Do you know who did?
A. I do not.
Q. Do you believe, based on the role that you played
as compared to the role that, for example, Tor Braham played
in the preparation of the Asset Purchase Agreement, that you
or he would better know what was actually written in the
final version of the agreement?
A. It would be Tor.
Q. Now, we have talked earlier about the documents
that you brought with you to court today as well as other
documents that you found in your garage?
A. Yes.
Q. And that upon finding those, you immediately
called Ryan Tibbitts at SCO, right?
A. I don't think it was immediately, but I did talk
with him.
Q. And these were documents that you obtained during
the course of your employment at Novell; right?
755
A. Yes.
Q. These are documents that you would have obtained
while you were vice-president of Novell, right?
A. Yes.
Q. Why didn't you call Novell and tell Novell that
you found some documents?
A. SCO is the company that actually subpoenaed me
and drove this entire deposition process. And as I stated
earlier, I have a 30 year relationship with Ryan Tibbitts as
a former teammate.
Q. So because of your relationship with
Mr. Tibbitts, you thought you would call him?
A. Well, that would be part of it. Clearly he is a
friendly face. But I absolutely -- you asked the question,
I absolutely believe that Novell is wrong in what they're
trying to allege here.
Q. Do you have any concern about our holding the
documents that you brought today to give us a chance to look
at them?
A. No, as long as I get them back.
Q. Um, and after we have a chance to look at them,
if we have any further questions would you be willing to
return so we could ask you about those?
A. Sure.
Q. Now, the other documents in addition to those
756
that you brought, you still have those, right?
A. I do.
Q. And those are at your home?
A. They are.
Q. Would you be willing to provide those documents
to Novell's counsel to look at?
A. Absolutely.
Q. We would ask that you do that as well. Um, when
do you think you might be able to do that?
A. Whenever you guys come down.
Q. Okay. I am sure we will come tomorrow. Now just
a few more questions, Mr. Mattingly, I do appreciate your
patience with me today.
I believe you said earlier that in response to a
question by Mr. Singer that you thought that a majority of
the UNIX business had been sold by Novell. Did I hear that
correctly?
A. I don't know if I said a majority but yes.
Q. And so if one were to want to find out what
assets were sold and which ones weren't, where would you
recommend one look to make that determination?
A. I would say you could look at the contracts and
all amendments to the contracts that clarify that.
Q. So you believe that in order to find out what
assets Novell actually transferred to Santa Cruz Operation
757
one should look to the contract, right?
A. That would be the first place.
Q. Can you think of any other source other than the
contract?
A. Sure. If ambiguity showed up, then you would
probably talk to the deal team to understand what the spirit
and intent of that contract was.
Q. So if one wanted to talk to the deal team, one
would first talk to those who wrote the deal, right?
A. Depends on who you know. You might talk to them,
you might talk to Ed Chatlos.
Q. And you know that one of the persons involved in
writing the deal was Tor Braham; right?
A. Yes.
Q. Did you ever ask Mr. Braham about this
transaction?
A. I have not spoken with Tor about this.
Q. Have you gone to him and said I would like to
understand what this transaction meant in terms of assets
that were transferred?
A. No.
Q. But you do believe that he would be one that you
would want to ask that about to find out what was really
meant by the written word, right?
A. Yes.
758
MR. BRENNAN: Thank you. I appreciate your time
Mr. Mattingly.
THE COURT: Mr. Singer?
MR. SINGER: Thank you, Your Honor. I only have a
couple of questions.
REDIRECT EXAMINATION
BY MR. SINGER:
Q. Mr. Mattingly, who do you think has a better
understanding of what this deal constituted, specifically
with whether the UNIX copyrights were being sold, you and
the other individuals who negotiated the deal for two months
in California, or Mr. Braham, Tor Braham, and the lawyers
who were supposed to document what you negotiated?
A. I think collectively the business team would
understand what the strategy and the implementation of that
strategy should have been better than Tor Braham.
MR. BRENNAN: Okay. Thank you very much.
THE WITNESS: Collectively.
MR. SINGER: Thank you.
MR. BRENNAN: Your Honor, that just invites a question
or two, if I might.
THE COURT: Go ahead.
RECROSS-EXAMINATION
BY MR. BRENNAN:
Q. Now Mr. Mattingly, there were two parties to this
759
transaction, right?
A. Yes.
Q. Novell on one hand, correct?
A. Yes.
Q. Santa Cruz Operation on the other, right?
A. Yes.
Q. And they both had lawyers representing them,
correct?
A. Yes.
Q. We have talked about Wilson Sonsini. You have
been asked questions about Mr. Braham.
A. Yes.
Q. Who was representing Santa Cruz Operation?
A. Um, I can't remember the name. Was it Brobeck
or --
Q. Well, you're doing pretty well. I will go back
to the file of documents you brought with you today. And
one of them is a fax cover sheet dated September 18th, 1995
and it is on the letterhead of Brobeck Phleger,
P-H-L-E-G-E-R and Harrison. Does that refresh your
recollection as to who the lawyers were that were
representing Santa Cruz Operation?
A. Yes.
Q. Do you know how large the law firm of Brobeck
Phleger & Harrison was in September of 1995?
760
A. No, but they were a large credible firm.
Q. Did you understand that they had more than 500
lawyers at that time?
A. I did not know how many they had.
Q. And did you ever have any dealings with the
Brobeck firm?
A. No.
Q. Did you understand that Santa Cruz Operations had
both in-house lawyers and a very sophisticated large law
firm representing it in this transaction?
A. Sure, yes.
Q. Would you have expected that Santa Cruz Operation
officers, directors and in-house counsel and in particular
outside lawyers would have reviewed the Asset Purchase
Agreement before it was signed?
A. Yes.
Q. And you would expect that if Santa Cruz Operation
believed that there was a provision in the Asset Purchase
Agreement signed by Alok Mohan, the chairman of its Board of
Directors on September 19th, 1995, that those lawyers would
have protected the interests of Santa Cruz just as Novell's
lawyers would have been represented?
A. To the best of their abilities, yes.
Q. And would you expect that if there was a problem
in the agreement, particularly with respect to what the
761
included or excluded assets were, that the Brobeck firm
would have been well-equipped to advise and protect Santa
Cruz against a mistake?
A. They should have been.
Q. Any reason to believe they didn't?
A. Well, just because it is -- we're here today.
Pretty good evidence that the legal work on both sides was
sloppy and did not represent the intent of the business
agreement.
Q. Now, you say the work was sloppy. Just so we can
perhaps end here, when we looked at the minutes of the Board
of Directors, the resolution of the Board of Directors was
that the Asset Purchase Agreement that was signed by Robert
Frankenberg was one that was in the best interest of the
shareholders of Novell, right?
MR. SINGER: This is way beyond.
THE COURT: I'll sustain the objection.
MR. BRENNAN: Thank you, Your Honor. No further
questions.
THE COURT: Mr. Mattingly, it is possible that you may
be recalled. So if you would keep yourself available for
that eventuality. And I do have to instruct you
specifically please do not have a conversation with any
other witness in this case, either someone who has been
called or will be called, and please do not discuss your
762
testimony with anyone who will be a witness in this case.
THE WITNESS: Yes, Your Honor.
THE COURT: All right. Thank you, Mr. Mattingly.
THE WITNESS: Thank you. We're done?
THE COURT: You're done, yes.
Ladies and gentlemen, we're going to go ahead and
recess for the weekend. I do want to, because of its
importance, read to you again the instruction that you were
given the very first day of trial about your conduct.
First, I again instruct you that during the trial you
are not to discuss the case with anyone including fellow
jurors or permit anyone to discuss it with you. Again, I
stress if anyone attempts to make any conversation about
this case with you, you need to bring it to my attention
very, very quickly.
Until you retire to the jury room at the end of the
case to deliberate on your verdict, you simply are not to
talk about this case. Not talking about this case means not
talking about it in any way including by internet, e-mail,
text message and instant communication devices or services
such as cell phones, blackberries, I-phones, social
networking websites including Facebook, Twitter, et cetera.
Second, do not read or listen to anything touching on
this case in any way. Do not watch or listen to any news
reports concerning this trial on television or on the radio.
763
And do not read any news accounts of this trial in the
newspaper, on the internet or on any instant communication
device including again Facebook, Twitter and so on.
Third, and perhaps most importantly right now because
you have heard a week of testimony, do not form any opinion
until all of the evidence is in. Keep an open mind until
you start your deliberations at the end of the case. And
finally, do not do any research or make any investigation
about the case on your own.
I hope you all have a nice weekend. I hope that you
have some basketball teams left that you can at least watch
basketball. If you want to cheer for Utah State, by the
way, I won't mind that.
Ms. Malley, would you please assist the jury to the
jury room.
THE CLERK: All rise for the jury, please.
(Whereupon, the jury left the courtroom.)
THE COURT: Counsel, do you have anything before we
recess?
MR. HATCH: Your Honor, we have one thing.
THE COURT: Go ahead, Mr. Hatch.
MR. HATCH: Um, I would like to ask Your Honor to
revisit at least a small portion of the ruling earlier today
on the Groklaw. And the only thing I would ask is if Your
Honor would reconsider allowing at least the striking of the
764
text, I mean the part of the deposition that would start at
Page 64 Line 23 through 65 line 3.
I think that they end up getting everything that they
need in, what Your Honor intended to have them get in, and
this would take out one of the references. And I think
those lines don't add anything because the person is
mentioned elsewhere in the testimony you have allowed. So
we would ask that you reconsider at least striking those.
THE COURT: Again Line 23 on Page 64 --
MR. HATCH: Starting on -- I guess you would start on
the question so line 22.
THE COURT: Line 22.
MR. HATCH: Through Line 3 on the next page.
THE COURT: Who wishes to respond?
MR. BRENNAN: Your Honor, I would be happy to. Just
let me take a quick look. Just so I'm clear, the suggestion
is Page 64 Line 22 through what Mr. Hatch?
MR. HATCH: Line 3 on the next page.
MR. BRENNAN: Well, Your Honor, here is the issue with
it. It gives context to the suggestion above regarding who
PJ is. And it indicates, as well, that what PJ is doing is
operating a website that in essence is a source or place of
news information that Ms. O'Gara is essentially competing
with. The real issue here, and the reason for the
testimony, is as the court may be aware, that Ms. O'Gara
765
makes a claim that Mr. Stone made a certain statement based
on a telephone conversation. Novell believes that it is
entitled to present evidence to the jury that Ms. O'Gara is
not an objective journalist and that she has a certain
relationship with SCO that led her to be less than objective
in her report of this conversation with Mr. Stone. This
fits in with that. We have already agreed to take out other
matters that would be extraneous, but this particular
reference gives context to who PJ is. He is essentially a
competing journalist.
MR. HATCH: Your Honor, it does that. We haven't
taken that out. If you note, the very next clip identifies
PJ as Pamela Jones and it goes on from there. The reason he
has given is some of the exact reasons why he shouldn't be
here because, you know, he wants to mention this cite which
they'll go to. And, you know, we think that is
inappropriate because we think it is inconsistent with what
Your Honor has ordered and been concerned about in the past.
And these couple sentences really don't add any of the
flavor that he has already got from the other designations
that Your Honor has allowed.
THE COURT: Um, go ahead, Mr. Brennan.
MR. BRENNAN: Well briefly. Your Honor, what this
does is first of all the argument assumes that the jury is
going to disregard the court's very careful instructions
766
that have been repeated every day of trial. Second of all,
there are other publications that have been referenced and
will be referenced during the course of trial and one is the
Wall Street Journal. A juror having heard reference to a
particular publication could just as easily go to the Wall
Street Journal or any other source.
Third, the reason for this particular reference is
that it mentions it is a website that follows the SCO case.
Now, we have to assume that the jury is going to disregard
the court's instruction for this to be an issue, but it
gives that very context as to why Ms. O'Gara may have lost
her objectivity and thus her statement is not credible.
THE COURT: The court has to presume that the jury is
going to follow the instructions that the court gives to it.
Otherwise, we are in very serious trouble. And so the court
is going to deny the request of Mr. Hatch that those
additional lines be excluded. The court believes that the
jury should be trusted to that extent. But more
importantly, again, the probative value of this testimony is
very important. There is a slight possibility of there
being something that would stick in a juror's mind that may
lead them to disobey the court and go home and look up the
website but I just think that it is so highly unlikely I
cannot allow the probative value to be ignored.
MR. HATCH: Can I raise one last suggestion? I know I
767
am trying your patience. But could we at least have the
scrolling turned off during this playing of this deposition
so they don't see the spelling?
THE COURT: I think that would be reasonable.
MR. BRENNAN: Very well.
THE COURT: If nothing else in the scrolling leave it
blank where the name is referred to.
MR. BRENNAN: We'll do that, Your Honor. Thank you.
THE COURT: All right. Are you happy now?
MR. HATCH: I got a crumb. You know as long as I
leave for the weekend with a crumb, I'm happy.
THE COURT: All right. Counsel, let me point out
something. Let me ask something first of all. Are we back
on schedule?
MR. SINGER: Not quite. We were planning to be at the
end of the day, but we thought we would get through
Mr. Mattingly much quicker than we did. So we have
Mr. Maciaszek and some depositions that didn't come in today
that will be put into next week.
THE COURT: But Mr. Davis is not going to be
testifying so you --
MR. SINGER: That saves some time. I am sure that
would not have been a short examination.
THE COURT: Yeah, that is what I would have thought as
well.
768
MR. JACOBS: Could we have an indication for Monday
and Tuesday?
MR. SINGER: Yes. And the first witness that we will
call is Kimberly Madsen. She is traveling from --
MR. JACOBS: After Mr. Maciaszek?
MR. SINGER: No. No, before Mr. Maciaszek.
Ms. Madsen will be our first witness. We will then go to --
probably to Steve Sabbath's deposition and then pick up with
either Mr. Maciaszek or Mr. Nagel in some order.
MR. JACOBS: And after that?
MR. SINGER: Um, well, if we get beyond that, there is
several other depositions which we haven't played and, you
know, Mr. McBride would be probably the next witness after
that.
MR. JACOBS: So am I to understand, I'm sorry to being
doing this in front of Your Honor, am I to understand that
Mr. Maciaszek will not be called?
MR. HATCH: He just listed him.
MR. SINGER: I thought I listed him. We're talking in
terms of live witnesses on Monday. Ms. Madsen,
Mr. Maciaszek, Mr. Nagle. If we get through that, then we
would also go through Mr. McBride. That is optimistic.
THE COURT: There are no hearings this afternoon so
you can leave here what you want to. And if you would
please retrieve these three Broderick depositions the court
769
would appreciate it.
MR. BRENNAN: Yes, Your Honor.
THE COURT: We will be in recess until 8:30 Monday
morning.
MR. ACKER: Have a good weekend, Judge.
(Whereupon, court adjourned for the day at 1:30 p.m.
The jury trial will continue on Monday, March 15th
at 8:30 a.m.)
770
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