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SCO v. Novell, Day 5, Friday, March 12, 2010

[Part 1] [Part 3] [Part 2]

This is the text transcript of day five of the SCO v. Novell trial that began on Monday, March 8, 2010 and ran for 15 days, Monday through Friday, for three weeks, with the Hon. Ted Stewart presiding. This day is Friday, March 12, and the witnesses that day were William Broderick and Ty Mattingly. Here is Groklaw's eyewitness report from the trial for that day.

The transcript of this day is in three parts: part 1 [PDF] [Text], part 3 [PDF] [Text] and part 2 [PDF] [Text]. [Part 2 and Part 3 are in reverse order on the docket.]

For transcripts of the rest of the days of the trial, click on the date that interests you:

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

Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 1 of 70
565
1
               IN THE UNITED STATES DISTRICT COURT
2
               DISTRICT OF UTAH, CENTRAL DIVISION
3
4
   THE SCO GROUP, INC., a Delaware    )
5
   corporation,                       )
6
             Plaintiff,               )
7
      vs.                             )    Case No. 2:04-CV-139TS
8
   NOVELL, INC., a Delaware           )
9
   corporation,                       )
10    
              Defendant.              )
11
   _________________________________)
12
   AND RELATED COUNTERCLAIMS.         )
13
   _________________________________)
14
15
                  BEFORE THE HONORABLE TED STEWART
16
                  ---------------------------------
17
                            March 12, 2010
18
                              Jury Trial
19
20
21
22
23
24
   REPORTED BY: Patti Walker, CSR, RPR, CP
25
   [Address] Salt Lake City, Utah      [Zip]
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 2 of 70
566
1
                    A P P E A R A N C E S
2
3
4
   For Plaintiff:            Brent Hatch
                             HATCH JAMES & DODGE
5
                             [Address]
                             Salt Lake City, Utah [Zip]
6
7
                             Stuart Singer
                             BOIES SCHILLER & FLEXNER
8
                             [Address]
                             Fort Lauderdale, Florida [Zip]
9
10
                             Edward Normand
                             BOIES SCHILLER & FLEXNER
11
                             [Address]
                             Armonk, New York [Zip]
12
13
      For Defendant:         Sterling Brennan
14
                             WORKMAN NYDEGGER
                             [Address]
15
                             Salt Lake City, Utah [Zip]
16
                             Eric Acker
17
                             Michael Jacobs
                             MORRISON & FOERSTER
18
                             [Address]
                             San Francisco, California   [Zip]
19
20
21
22
23
24
25
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 3 of 70
567
1
                        I N D E X
2
   Witness             Examination By                   PAGE
3
   William Broderick   Mr. Normand    (Direct cont.)     574
4
                       Mr. Acker    (Cross)              620
5
                       Mr. Normand    (Redirect)         655
6
                       Mr. Acker    (Recross)            668
7
   Ty Mattingly        Mr. Singer    (Direct)            671
8
                       Mr. Brennan    (Cross)            695
9
                       Mr. Singer    (Redirect)          759
10
                       Mr. Brennan    (Recross)          759
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 4 of 70
568
1
   EXHIBITS RECEIVED INTO EVIDENCE                      PAGE
2
   Plaintiff's:
3
   167
4
   3
5
   592
6
   22
7
   213
8
   706
9
   487
10
   488
11
   168
12
   570
13
   83
14
15
16
   Defendant's:
17
   N-13 and T-13                                         628
18
   L-7                                                   648
19
   H-6                                                   651
20
   G-4                                                   691
21
   O-45                                                  723
22
23
24
25
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 5 of 70
569
1 SALT LAKE CITY, UTAH; FRIDAY, MARCH 12, 2010; 8:30 A.M.
2 PROCEEDINGS
3 THE COURT: Good morning.
4 Counsel, I am prepared to rule on the O'Gara
5 deposition designations unless one of you feels you need to
6 address it here orally.
7 MR. BRENNAN: Your Honor, it depends on what the
8 ruling is. Perhaps I should wait.
9 THE COURT: So do you want me to give you my
10 ruling and then let you argue it?
11 MR. BRENNAN: Perhaps your sense, and if I need to
12 say anything after that, I'll raise my hand, if that's fair.
13 THE COURT: I don't think you need to stand.
14 MR. BRENNAN: Thank you.
15 THE COURT: Mr. Normand, Mr. Singer, Mr. Hatch, do
16 any of you?
17 MR. HATCH: As I understand it, we're down to just
18 the third set of designations and, of course, one is that
19 they be able to -- again, back to the discussion that's
20 already there. You know, the jury is going to be able to
21 draw its conclusions. Any prejudice from what has already
22 been agreed to could be in there. So it's just cumulative,
23 for that matter. We're obviously very concerned about the
24 mention of specific sites. I think not having the .com
25 doesn't really improve that. It makes it easy to see, and
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 6 of 70
570
1 it is a particularly sensitive matter, as we discussed
2 previously with Your Honor and Your Honor indicated as well.
3 THE COURT: Thank you, Mr. Hatch.
4 Counsel, the Court is going to allow providing to
5 the jury those designated portions of the O'Gara deposition
6 that are in dispute and found at pages 64, 66, 67 and 69.
7 The Court will note that, in its opinion, the probative
8 value of this testimony does far outweigh the
9 prejudicial value. There is prejudicial value. I
10 understand your argument and I also understand the reference
11 to Groklaw would be of some concern, but the Court is more
12 concerned that they are looking at The Salt Lake Tribune or
13 some other source. I don't believe making reference to an
14 obscure Web site name without it being designated
15 necessarily as a Web site, per se, is going to somehow or
16 another draw attention to this jury to go look at,
17 particularly in light of the instructions the Court has
18 given. I think this jury is being very careful and I
19 believe that the risk is rather small that that is going to
20 result in any type of violation of the instructions of the
21 Court.
22 Mr. Hatch.
23 MR. HATCH: Yeah. My only comment to Your Honor
24 would be I think, on this matter, that is hardly an obscure
25 site because I think if you type in the names of the
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 7 of 70
571
1 parties, it's one of the first things that comes up with
2 pretty much any search engine.
3 THE COURT: I understand that, but, again, they
4 could be looking at much more readily available sources than
5 that.
6 So, counsel, I do have to ask you, we received
7 yesterday -- well, I guess it was -- it was received
8 yesterday, the petition for writ of certiorari in the above
9 entitled cases filed on March 4th, 2010, and placed on the
10 docket of the United States Supreme Court on March 8th. Do
11 you have any sense for whether or not this matter is going
12 to be taken by the Supreme Court, thus make this trial moot?
13 MR. SINGER: Your Honor, it's our view that it's
14 remote that the Supreme Court is going to take writ
15 certiorari from the Tenth Circuit's opinion. First of all,
16 it's a nonfinal decision -- not in the sense that it isn't a
17 final decision of the Tenth Circuit, but just for the reason
18 that this case has simply been remanded for trial, and after
19 that trial the issue will go forward, if necessary, to the
20 Tenth Circuit and parties have the rights to go beyond that.
21 But, second, this is a case where there was no
22 dissent on the Tenth Circuit panel. There was a motion made
23 by Novell to stay the mandate. That was denied. There was
24 a motion to the Tenth Circuit for en banc reconsideration.
25 That was denied with apparently no judge in active service
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 8 of 70
572
1 thinking that it should be reconsidered. We do not believe
2 that there is a circuit court conflict on this issue.
3 And for all those reasons, we think the odds of
4 the Supreme Court will take this case are low, and, of
5 course, the odds that the Supreme Court takes any case are
6 very low.
7 THE COURT: Thank you, Mr. Singer.
8 Mr. Jacobs.
9 MR. JACOBS: Your Honor, I certainly agree with
10 the last point Mr. Singer made, the odds of any certiorari
11 petition being granted are low. On all the other points, we
12 have the opposite view. We set them forth in your
13 certiorari petition. We haven't moved for a stay because,
14 frankly, I think I would have a hard time persuading the
15 Court just, given the odds, that the Court should stay this
16 trial pending the writ -- petition for writ of certiorari.
17 SCO's response is due I believe April 8th to the
18 petition, sometime in April, so the Supreme Court's
19 consideration of this is going to take into April or May.
20 MR. SINGER: We would likely, Your Honor, seek an
21 extension of time. Novell sought two extensions of time
22 that were granted by the Court in filing its petition. I
23 think, given that we're sort of tied up for the next few
24 weeks, the court might deem a short extension of time to be
25 reasonable.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 9 of 70
573
1 THE COURT: So neither one of you are saying we
2 ought to quit and go home then?
3 MR. SINGER: That's certainly our position, Your
4 Honor.
5 MR. JACOBS: That's correct, Your Honor. We're
6 enjoying ourselves.
7 THE COURT: Do either of you have anything else
8 before we bring the jury in?
9 MR. SINGER: Not from the plaintiffs.
10 MR. BRENNAN: No. Thank you, Your Honor.
11 Ms. Malley.
12 Counsel, I'm assuming that these rather
13 intimidating white packages over here are the depositions
14 that will be read today; is that correct?
15 MR. ACKER: No, Your Honor. I think those are Mr.
16 Broderick's prior trial testimony and deposition testimony.
17 It's just potential for purposes of impeachment of Mr.
18 Broderick.
19 THE COURT: Okay. Thank you.
20 MR. NORMAND: Your Honor, do you want us to bring
21 in Mr. Broderick now?
22 THE COURT: Yes. Have him come in, but don't have
23 him yet take the witness stand, please.
24 (Jury present)
25 THE COURT: Good morning, ladies and gentlemen of
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 10 of 70
574
1 the jury. I would remind you that we, yesterday, had Mr.
2 Broderick as a witness. We'll continue with his
3 examination.
4 And, Mr. Broderick, if you would please come
5 forward and re-take the witness chair. I will remind you
6 that you are still under oath.
7 DIRECT EXAMINATION (Cont.)
8 BY MR. NORMAND:
9 Q Good morning, Mr. Broderick.
10 A Good morning.
11 Q When we left off yesterday afternoon, you were talking
12 about what you described as the umbrella software agreement.
13 Do you remember that?
14 A Yes.
15 MR. NORMAND: Mr. Calvin, would you put that up.
16 BY MR. NORMAND:
17 Q Do you recognize this document, Mr. Broderick?
18 A Yes, I do.
19 Q And can you briefly describe what it is?
20 A This is the software agreement that was executed
21 between AT&T Technologies and IBM.
22 Q What does the number on the top right of the first page
23 of this document signify?
24 A It says SOFT-00015. Each licensee, when they license a
25 software agreement, were assigned a specific number.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 11 of 70
575
1 MR. NORMAND: Could we go to page 2 of this
2 document. And bring out section 2.01.
3 BY MR. NORMAND:
4 Q The beginning of this paragraph, Mr. Broderick, says,
5 AT&T grants to licensee a personal, nontransferable and
6 nonexclusive right to use in the United States each software
7 product identified in the one or more supplements hereto.
8 Do you see that language?
9 A Yes, I do.
10 Q Let's go to section 1.04 on the same page. Is this a
11 definition of software product that was just referred to in
12 that grant of rights?
13 A Yes.
14 Q It says, software product means materials such as
15 computer programs, information used or interpreted by
16 computer programs and documentation relating to the use of
17 computer programs. Do you see that language?
18 A Yes.
19 Q Let's go to section 1.02 on the same page. Is this a
20 definition of computer program that was just used in the
21 definition we went over?
22 A Yes.
23 Q It states, computer program means any instruction or
24 instructions, in source-code or object-code format, for
25 controlling the operation of a CPU. Do you see that
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 12 of 70
576
1 language?
2 A Yes.
3 Q Can you, when we add this all up, explain what's going
4 on with the software agreement? What rights are being
5 potentially given? What rights are potentially at issue?
6 A What it's doing is it's granting the rights. If you
7 take the supplement -- if you execute a product schedule
8 license, it gives you the rights to source code, to source
9 code computer programs. It's the instructions in
10 source-code format that you can use and you can modify -- a
11 CPU is a computer. It tells you that you can use the source
12 code on a computer and develop a product.
13 Q You referred to a product schedule license or a
14 supplement. What is that?
15 A Well, when you -- everybody who wants to get source
16 code has to execute a software agreement. That's our
17 umbrella. That's really our protections agreement. That's
18 where we get our protections.
19 Q How is it your protections?
20 A Well, it's provisions for confidentiality and what
21 rights of restrictions to a source code product that they
22 license.
23 Q What do the confidentiality restrictions mean, in your
24 experience? What is the point of them?
25 A Well, we're giving them our source code. It's our
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 13 of 70
577
1 family jewels. It's restricted to only people that, you
2 know, have a need to know. It's the developers in-house,
3 they have to protect that. They can't distribute the source
4 code out to anybody else. They can't tell anybody.
5 It also provides confidentiality for the methods and
6 concepts in it. So they can't use our source code and then
7 go out and tell their friends how the source code works.
8 It's pretty heavy duty protection of our family jewels.
9 MR. NORMAND: Now will you pull up SCO 167.
10 BY MR. NORMAND:
11 Q I don't believe this is yet in evidence. It should be
12 on your screen, Mr. Broderick. Do you recognize this
13 document?
14 A Yes. This is a product license that IBM took out.
15 It's numbered number 47, and it is for a UNIX System V
16 Release 3.0.
17 MR. NORMAND: Can we highlight that language on
18 the top right?
19 BY MR. NORMAND:
20 Q How are you familiar with this document?
21 A I worked with -- anybody who licenses a source code
22 ends up with a -- first, before they get the source code,
23 they have to execute a product license.
24 Q How are you personally familiar with this document?
25 A I worked with IBM in their licensing. I did not -- I
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 14 of 70
578
1 didn't do this one. This was before I did. But I worked
2 with IBM and I knew the licenses that they had.
3 MR. NORMAND: Your Honor, I move SCO 167 into
4 evidence.
5 THE COURT: Any objection?
6 MR. ACKER: No, Your Honor.
7 THE COURT: It will be admitted.
8 (Plaintiff's Exhibit 167 was received into
9 evidence.)
10 MR. NORMAND: Mr. Calvin, can you pull out and
11 show the title of this document to the jury.
12 BY MR. NORMAND:
13 Q So explain briefly, once again, what purpose this
14 document serves in relation to the software agreement that
15 we just looked at?
16 A This actually licenses a software product. The
17 software agreement is the general terms and conditions to be
18 able to do this. It has the overall protections.
19 MR. NORMAND: Let's pull out the top right of that
20 document, Mr. Calvin, with the number.
21 BY MR. NORMAND:
22 Q Now is this agreement number the same as the one we
23 looked at, the software agreement, earlier?
24 A Yes.
25 Q How do those two correspond?
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 15 of 70
579
1 A Everything is -- everything is done -- since it's so
2 important to be able to keep track of who is licensed,
3 everything is done by a licensing mechanism. It's almost
4 like a library decimal system. So if IBM has a software
5 agreement SOFT-00015, and then every time they license a new
6 software product or a new designated CPU, new computer to
7 use it on, they execute a new supplement and they would get
8 a new number so we can reference -- when we talk with them
9 about a license they have, we can reference, you know, under
10 your software agreement X, Y, Z, we're looking at these
11 supplement numbers, and we're both talking about the same
12 thing.
13 Q Now you referred also yesterday to a sublicensing
14 agreement. This will be the last in our three issues we're
15 talking about in this lecture.
16 MR. NORMAND: Can you pull up SCO Exhibit 3.
17 BY MR. NORMAND:
18 Q Do you see that document on your screen, Mr. Broderick?
19 A Yes.
20 Q What's it titled?
21 A AT&T Technology Sublicensing Agreement.
22 Q How are you personally familiar with this document?
23 A I've worked with it. It's, you know --
24 MR. NORMAND: Your Honor, I, frankly, don't recall
25 if this is in evidence. If it's not, then I'll move it in.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 16 of 70
580
1 THE COURT: Number 3?
2 MR. NORMAND: Yes, Your Honor.
3 THE COURT: Any objection?
4 MR. ACKER: No objection.
5 THE COURT: Exhibit 3 will be admitted.
6 (Plaintiff's Exhibit 3 was received into
7 evidence.)
8 BY MR. NORMAND:
9 Q Now this language on the top right, once again, Mr.
10 Broderick, what is the significance of that number on the
11 top right of this document?
12 A Well, you lost the first letter I think from a two-hole
13 punch, but it's SUB-00015A, and that was the number assigned
14 to the IBM sublicensing agreement, and each licensee would
15 have.
16 MR. NORMAND: Can we go to the second page of this
17 document and highlight 2.01(a).
18 BY MR. NORMAND:
19 Q This document says, AT&T grants the licensee personal,
20 nontransferable and nonexclusive rights: To make copies of
21 sublicensed products. Do you see that language?
22 A Yes.
23 Q Let's go to section 1.04 on the same page. And this
24 says, sublicensed product means, computer programs in
25 object-code format based on a software product.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 17 of 70
581
1 Now taking those two definitions, can you explain the
2 purpose and operation of a sublicensing agreement?
3 A That granted the overall rights to distribute a
4 sublicensed product. A sublicensed product is -- I talked
5 yesterday about if you went to the store and you bought
6 Microsoft Windows. That's a binary product. A binary
7 product is an object code form. You can't change it. You
8 can just use it. So what this is granting them is rights,
9 if they have a license for a specific software product, to
10 take that software product and distribute a binary. It's
11 the same thing as allowing somebody to distribute Microsoft
12 Windows. You can't modify it at that point, just use it.
13 Q Now with all of this in mind, let's go back to an
14 exhibit we looked at yesterday, SCO 580. This was the
15 Prentice-Hall letter. Do you recall discussing that?
16 A Yes.
17 MR. NORMAND: Can you bring up the first paragraph
18 of the text.
19 BY MR. NORMAND:
20 Q This was a letter, Mr. Broderick, in which Novell was
21 explaining that it had transferred to the Santa Cruz
22 Operation, Inc. its existing ownership interests in UNIX
23 System-based offerings and related products as listed in
24 attachment A of this letter. Do you recall this?
25 A Yes.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 18 of 70
582
1 MR. NORMAND: And can we go to attachment A of
2 this letter. Let's bring out that full set as well as we
3 can, Mr. Calvin.
4 BY MR. NORMAND:
5 Q Mr. Broderick, what are these lists comprised of? What
6 are these things?
7 A These are all the different software products -- part
8 of the list of the software products that we licensed under
9 product licenses.
10 MR. NORMAND: Can we go to the next page. The
11 next page, and the next page.
12 BY MR. NORMAND:
13 Q So all of those products, it's your understanding, had
14 been transferred by Novell to SCO?
15 A Yeah, that's what they say.
16 Q How was it that a company would go about licensing
17 products such as those listed here?
18 A They would contact us, salespeople directly, and say
19 they wanted to take a license. If they already had a
20 software agreement in place, we would prepare a supplement
21 product license for them, numbered sequentially, and send it
22 out for execution. If they didn't have a software agreement
23 in place, we would send them a software agreement to
24 execute. And then when they executed that, we would send
25 them the supplement.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 19 of 70
583
1 Q In your experience -- you took over that business after
2 you transferred to Santa Cruz following the APA?
3 A Yes.
4 THE COURT: Mr. Broderick, let me ask you a
5 question. This may show my great ignorance here, but there
6 has been fairly constant reference to a flavor of UNIX
7 during the course of this trial. Would it be accurate to
8 say that the license agreement and the software agreement
9 together allow the licensee to create a flavor of UNIX and
10 then the sublicense agreement allows them to market that
11 flavored UNIX product?
12 THE WITNESS: Well, they couldn't take a license
13 for a software product until they had a software agreement.
14 And it's that product license that allows them to create a
15 flavor. And then they could not distribute their binary of
16 that flavor until they had executed a sublicensing
17 agreement.
18 THE COURT: Okay.
19 MR. NORMAND: Thank you, Your Honor.
20 BY MR. NORMAND:
21 Q Now, Mr. Broderick, did there come a time when --
22 A Kind of makes my job sound boring, doesn't it?
23 Q I didn't say that.
24 THE COURT: I was afraid you were going to be
25 offended that I used the term flavor. At your level, that
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 20 of 70
584
1 probably is not the phrase that you would use.
2 THE WITNESS: We use that all the time.
3 BY MR. NORMAND:
4 Q Did there come a time when the entire UNIX business
5 transferred from Santa Cruz to the company that's now known
6 as SCO?
7 A Yes.
8 Q And do you recall when that happened?
9 A The official date was May of 2001.
10 Q Did your responsibilities and obligations with respect
11 to overseeing the entire UnixWare business, contract aspects
12 thereof, change in any way when they were transferred from
13 Santa Cruz to SCO?
14 A At Santa Cruz I handled primarily U.S. domestic
15 business. When we transferred to SCO, I won the whole
16 world.
17 Q Congratulations.
18 We're going to show you SCO Exhibit 592. I don't think
19 that's in evidence. This is another category of the letters
20 that Novell sends out. Do you recognize this document?
21 A I recognize the contents of the letter. It was similar
22 to a lot of other letters that went out. I don't remember
23 specifically this customer.
24 Q Why do you recognize the document at all?
25 A Well, when we were in the transition teams, we had to
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 21 of 70
585
1 notify the licensees that Novell was selling the business.
2 Burt Levine was assigned the job of drafting up the
3 letter. And he did it -- when he drafted it up, he sent it
4 around to some of us for a second set of eyes to see if he
5 got everything correct in it. We said yes.
6 Then what they do is -- a standard licensee, where
7 there was no requirement for them to approve an assignment,
8 they just got blanket letters. They had a form letter that
9 was signed by -- I believe Stu Adamson, who was our
10 controller at the time, they did one of those things in
11 Microsoft Word where they throw the addresses in and they
12 sent them out.
13 Then we had to go through the files and we had to find
14 third-party suppliers and people we had special agreements
15 with that required them to approve any assignment. We had
16 to modify the letter a little bit telling them that, okay,
17 Novell sold the business to Santa Cruz, your agreement is
18 being assigned to Santa Cruz, talk with them from now on,
19 please sign this as your approval.
20 MR. NORMAND: Your Honor, I move SCO 592 into
21 evidence.
22 MR. ACKER: No objection.
23 THE COURT: It will be admitted.
24 (Plaintiff's Exhibit 592 was received into
25 evidence.)
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 22 of 70
586
1 MR. NORMAND: Mike, can you pull up the first
2 paragraph.
3 BY MR. NORMAND:
4 Q This states in the letter from Novell, as you may have
5 heard, Novell has transferred to The Santa Cruz Operation,
6 Inc. Novell's existing ownership interest in UNIX
7 System-based offerings and related products, collectively
8 transferred products. Do you see that language?
9 A Yes.
10 Q From your work, following the transition, do you know,
11 approximately, how many such letters Novell sent out to
12 these licensees and partners?
13 A My guess is about 3,000. I've got copies for all of
14 them and there were boxes filled in my office for a long
15 time.
16 MR. NORMAND: Can we pull up the signature, Mike.
17 BY MR. NORMAND:
18 Q Who signed this letter, Mr. Broderick?
19 A That's Burt Levine. He's a lawyer at Novell. He's the
20 sole lawyer of the UNIX group. He came from USL with us.
21 Q Now where was Mr. Levine located?
22 A In our offices in New Jersey. The UNIX developers and
23 finance people and contracts people that were with Novell
24 were all located in Florham Park, New Jersey, and Burt was
25 located there with us.
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1 Q From your work following the transition from Novell to
2 Santa Cruz, are you aware of any letter saying that any
3 customers should deal with Novell concerning copyright
4 issues?
5 A No.
6 Q Are you aware of any letter saying Novell retained any
7 copyrights?
8 A No.
9 Q Let's do one more of these, Mr. Broderick. Turn to SCO
10 Exhibit 22. Do you recognize that document?
11 A I've seen this one, yes.
12 Q I take it you recognize it on the same basis that you
13 have recognized these earlier letters?
14 A Yes.
15 MR. NORMAND: I move SCO 22 into evidence, Your
16 Honor.
17 MR. ACKER: No objection.
18 THE COURT: It will be admitted.
19 (Plaintiff's Exhibit 22 was received into
20 evidence.)
21 MR. NORMAND: Now, Mike, let's pull up the top
22 left to show who this letter is to.
23 BY MR. NORMAND:
24 Q Did you have occasion in your work to deal with
25 Microsoft Corporation, Mr. Broderick?
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1 A Not a lot, but I have had some dealings with them.
2 MR. NORMAND: Let's pull up the first paragraph of
3 the letter, Mike.
4 BY MR. NORMAND:
5 Q So this is another one of the letters with the
6 following language, as you may know, Novell transferred to
7 The Santa Cruz Operation, Inc. its existing ownership
8 interests in UNIX System-based offerings and related
9 products. Do you see that language?
10 A Yes.
11 Q In the next paragraph, this letter also contains, in
12 the second sentence, similar language to what we saw
13 earlier, it makes immeasurably more business sense for SCO,
14 as the owner of the software in which the components may be
15 included, to handle directly with Microsoft any matters that
16 may become relevant under the subject agreement. Do you see
17 that language?
18 A Yes.
19 Q How does that language comport with your understanding
20 of Santa Cruz's responsibilities and rights following the
21 transition?
22 A Well, Santa Cruz bought the business of technology.
23 They had all the contracts. Microsoft -- it was a product
24 that Microsoft had that Santa Cruz had used in the UNIX
25 operating system. And by buying the UNIX operating system,
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1 they got all the contracts for all the third-party
2 suppliers, and this is just one of those letter to a
3 third-party supplier.
4 Q Let's look at the next page and the signature.
5 MR. NORMAND: Can you bring that up, Mike.
6 BY MR. NORMAND:
7 Q Who was Michael DeFazio?
8 A He was a Novell senior vice president in charge of the
9 UNIX business. He was located with us in New Jersey.
10 Q Now following this transition and during the course of
11 your work at Santa Cruz and SCO, did you have any
12 understanding of what rights Novell had retained with
13 respect to the APA?
14 MR. ACKER: Calls for speculation, Your Honor.
15 Also, there is no foundation.
16 BY MR. NORMAND:
17 Q Did you have in your month-to-month work while at Santa
18 Cruz and SCO occasion to deal with Novell with respect to
19 any rights it had retained under the APA?
20 A Yes, I did.
21 Q How so?
22 A Well, when we had the transition meetings, we were
23 still all Novell employees. They identified people who were
24 going to Santa Cruz and people who were staying Novell. And
25 they pulled up contracts binding these people together, and
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1 we went through portions of the asset purchase agreement
2 because it had some ongoing requirements.
3 Q When you say they pulled?
4 A Novell management pulled us together. And part of
5 those ongoing requirements, they showed us sections of the
6 asset purchase agreement. One of them was section 4.16
7 which talks about Novell's retaining some binary royalty
8 rights. As part of the purchase price, you know, they got
9 stock and they got these ongoing royalties for the older
10 UNIX System V products.
11 And in the asset purchase agreement, there were some
12 restrictions that, as employees who were going to SCO, we
13 had to follow and the employees staying with Novell had to
14 make sure we followed them. One of them was we couldn't do
15 anything to jeopardize that royalty stream. It was money in
16 the bank to them. We weren't allowed to touch it.
17 We talked about it, and what we couldn't do was, once
18 we became Santa Cruz Operation, we couldn't go to the
19 licensee and say, look, you're paying $100 per copy on a
20 royalty for this product, take a license with us, we'll
21 charge you $50 a copy, and then beat Novell out of their
22 royalty stream. We weren't allowed to do that. There were
23 restrictions on our entering into new licenses.
24 Q Mr. Broderick, going back to what we started today, in
25 your experience and your view, what was the source of the
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1 royalty streams? Where did those come from?
2 A They came from the product schedules. When you
3 license -- when you license a product, the product schedule
4 has the royalty listing, you know, what you had to pay.
5 MR. NORMAND: Now, Mike, let's go to Section 4.16
6 of the APA. Bring out (a).
7 BY MR. NORMAND:
8 Q Now, Mr. Broderick -- I'm sure the jury appreciates our
9 patience as we go through this -- this is the language in
10 which the APA refers to all, quote, SVRX licenses, as listed
11 in detail under item VI of schedule 1.1(a) hereof. Do you
12 see that language?
13 A Yes, I do.
14 MR. NORMAND: Mike, can you go to schedule 1.1(a)
15 and item VI.
16 BY MR. NORMAND:
17 Q Mr. Broderick, have you had occasion to review item VI
18 of schedule 1.1(a)?
19 A Oh, yes.
20 BY MR. NORMAND:
21 Q So the previous page, at the bottom --
22 MR. NORMAND: Let's first highlight for the jury,
23 Mike, the top. This is schedule 1.1(a), and highlight
24 number VI at the bottom.
25 //
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1 BY MR. NORMAND:
2 Q It says, all contracts relating to the SVRX licenses
3 listed below. Now in your experience, Mr. Broderick, what
4 are actually listed below in item VI? What are those
5 things?
6 A These are the source code products that we had product
7 schedules for and we issued licenses for.
8 Q Now going back to section 4.16, following that
9 transition meeting and based on your experience at Santa
10 Cruz and then SCO, what was your understanding as to what
11 SVRX licenses referred to?
12 A SVRX licenses referred to the source code licenses for
13 the products for -- all of the products that we licensed,
14 excluding UnixWare.
15 Q And let's look at section 4.16(b). This is the
16 language that says, buyer shall not, and shall not have the
17 authority to amend, modify or waive any right under or
18 assign any SVRX license without by the prior written consent
19 from seller. In addition, at seller's sole discretion and
20 direction, buyer shall amend, supplement, modify or waive
21 any rights under, or shall assign any rights to, any SVRX
22 license to the extent so directed in any manner or respect
23 by seller. Do you see that language?
24 A Yes, sir.
25 Q Now in the course of your work, did you develop an
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1 understanding of what rights Novell had with respect to
2 waiving or modifying SVRX licenses?
3 A Sure. I actually worked with Novell on some of those.
4 Q What was the understanding you had as to the scope of
5 those rights?
6 A They had rights to tell us to modify or have approval
7 for modifications of changes to the licenses, the product
8 schedules.
9 Q Did you have an understanding as to why they had the
10 right to do that?
11 A Because that's where the royalties came into play.
12 They were continuing to get the royalty stream as part of
13 the purchase price, so they had the right to manage that
14 royalty stream.
15 Q Now at the start of the day we were talking about what
16 we call the umbrella software agreement. Do you remember
17 that?
18 A Yes.
19 Q In your view and your experience, if Novell had the
20 right to waive or modify SCO's rights under the software
21 agreement, what would be the consequences?
22 A It would destroy our business.
23 Q Why?
24 A Because of the provisions -- that's where all our
25 protections lie, the provisions of confidentiality, the
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1 rights on -- limited rights for them not to just use the
2 source code to modify it, not to distribute the source code.
3 If they could waive those rights, Santa Cruz bought the
4 business from Novell, Novell could just turn around the next
5 day and destroy the business.
6 Q Now, Mr. Broderick, I want to show you SCO Exhibit 213.
7 It's going to come up on your screen. It's not yet in
8 evidence. This is a letter to you. Do you recognize this
9 document?
10 A Yes, I do.
11 Q It's from Novell; is that right?
12 A Yes.
13 Q And did you have occasion to receive this letter during
14 your work at Santa Cruz?
15 A Yes.
16 MR. NORMAND: Your Honor, I move SCO 213 into
17 evidence.
18 MR. ACKER: No objection.
19 THE COURT: It will be admitted.
20 (Plaintiff's Exhibit 213 was received into
21 evidence.)
22 BY MR. NORMAND:
23 Q Now before we start to highlight this letter for the
24 jury, could you briefly describe the background with respect
25 to this company Cray that gave rise to this correspondence?
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1 A Sure. Cray Research had a license going back to UNIX
2 System Laboratories. They licensed UNIX. And Cray built
3 super computers, those multimillion dollar computers mostly
4 used by the government. They were very high powered
5 computers. They sold for sold multimillions of dollars.
6 They had a special license with us where they not only had
7 the right to distribute the binaries with their products,
8 but they were given a special right to deliver source code
9 with that computer.
10 Q And did there come to be some dispute or discussion
11 with Cray about its rights?
12 A No. Actually the discussions slash dispute came with
13 SGI. Silicon Graphics bought Cray Research. They contacted
14 me. And Silicon Graphics had been given a binary royalty
15 buyout by Novell, so they didn't have to pay royalties
16 anymore. They had paid a lump sum up front. When they
17 bought Cray Research, they said we're putting Cray
18 underneath our buyout provisions. And I had said, nice try,
19 but no. And we discussed this back and forth for a while.
20 Q And what was the result of the discussions?
21 A The discussions weren't going anywhere. So I went to
22 my boss and I said, you know, we get five percent of these
23 binary royalties. I've been spending about that much
24 talking with them. This is a binary royalty deal. Why
25 don't we turn this over to Novell and say, look -- under the
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1 APA, we have to take reasonable efforts to protect and
2 collect their royalties. I have expended that. So we went
3 to Novell and said, you know, here's the situation, you deal
4 with it as it applies to the binary royalties. You can't
5 touch any of the source code fees, rights or anything else,
6 but you do the binary stuff, I'm done.
7 MR. NORMAND: Mike, let's pull up the signatures
8 at the bottom.
9 BY MR. NORMAND:
10 Q Do you have an understanding, Mr. Broderick, as to why
11 this is signed by two people?
12 A It was signed by -- it was signed by Steve Sabbath and
13 Ryan Richards. Ryan Richards sent the letter to Steve
14 Sabbath, who was our general counsel at Santa Cruz, sign it
15 saying, yep, we agree to this.
16 MR. NORMAND: Mike, pull up the middle paragraph.
17 BY MR. NORMAND:
18 Q This language says, by signature below, SCO authorizes
19 Novell to negotiate and conclude with Cray the issue of
20 Craig's intention to operate under the SGI agreements for
21 all SVRX royalty-generating binary shipments. Do you see
22 that language?
23 A Yes.
24 Q This is an instance in which SCO is authorizing Novell
25 to undertake to deal with SGI with respect to Cray; is that
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1 right?
2 A Yes.
3 Q Now, Mr. Broderick, when you were part of the UNIX
4 group at USL and Novell, did those companies amend and
5 modify rights under product schedule licenses?
6 A Certainly, often.
7 Q How so?
8 A There were hundreds of them. Most of them had to do
9 with --
10 Q When you say hundreds of them, what do you mean?
11 A Hundreds of license agreements. Any time we modified a
12 product schedule -- generally a product schedule that we
13 did, it had to be in writing. The software agreement says
14 any modifications to product schedules or anything, we both
15 have to sign it. So what they would do --
16 Q Why did those companies have occasion to amend and
17 modify the product schedule licenses with frequency?
18 A It generally had to do with royalties they would pay.
19 A lot of the companies would come and say, I'm only using a
20 portion of the UNIX I have embedded in my product. I only
21 need these sections, so I don't want to pay the full
22 royalty. Let's negotiate a lower royalty. We would do a
23 letter agreement modifying the product license so they would
24 pay the lower royalty.
25 Q When you were at USL and Novell, did those companies
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1 sometimes waive rights under product schedule licenses to
2 cut a licensee a break, for example?
3 A By waive rights, you mean -- they do letter agreements
4 waiving -- if somebody licensed a source code product, there
5 was a one-time, up-front fee for the source code. And
6 depending on the source code product, if it was an operating
7 system, it would be anywhere from $100,000, to UnixWare,
8 which is $375,000. If they were a current licensee and we
9 wanted them to move to the next release that we were coming
10 out with, we would do a letter agreement and offer them a
11 lower one-time fee for the source code. So that was
12 essentially a waiver of something under a license.
13 Q Did all those activities relate to and surround the
14 product schedule licenses?
15 A Absolutely.
16 Q Now after the APA, did Novell direct SCO and Santa Cruz
17 to amend or modify the product schedule licenses from year
18 to year?
19 A Yes, they did.
20 Q How so?
21 A In each product schedule there is a provision for the
22 royalties to be increased. What they could do is -- when
23 you sign a license, you have to -- you agree to pay
24 royalties. And there are a lot of people that have taken --
25 there are people that are still shipping a product based on
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1 UNIX System V Release 3.2. That was licensed back in the
2 1980s, which they continue to develop and they continue to
3 ship. So in the product schedule there is a provision that
4 we can increase their royalties based on an increase in the
5 consumer price index, and we can increase it annually.
6 After we went to Santa Cruz, the finance person at
7 Novell directed me each year to notify the licensees that we
8 were increasing the royalties by this consumer price index.
9 Q Was it your understanding, after this set of transition
10 meetings concerning the APA, that Novell had sought to
11 preserve for itself the same rights of waiver and
12 modification that it had before the APA was executed?
13 A I'm sorry. Could you repeat that?
14 Q Yes. The question is, was it your understanding,
15 following the transition meetings, that Novell wanted to
16 retain that same waiver of rights, same rights to modify
17 product schedule licenses after the APA that it had before
18 the APA?
19 A As it related to the binary royalties.
20 Q Was that your understanding?
21 A Yes.
22 Q Now, until 2003, to your knowledge did Novell ever
23 direct Santa Cruz or SCO to waive its rights under or to
24 amend or to modify any software agreement?
25 A No, but that's not where the royalties are generated,
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1 so that wouldn't be a right they retained.
2 Q To your understanding?
3 A To my understanding.
4 Q Now did there come a time you learned that Novell had
5 directed SCO to waive its claim that IBM had breached IBM's
6 software agreement?
7 A I have heard that.
8 Q What was your reaction?
9 A They're nuts.
10 Q What was the basis for that reaction?
11 A They had no rights to do that. They had a right to
12 protect their royalty binary stream, not to waive -- if they
13 had the rights to waive provisions under the software
14 agreement, that would have put us out of business, destroy
15 the entire value of our company.
16 Q Now did there come a time when you learned that Novell
17 was claiming that under the APA Santa Cruz had obtained only
18 a license?
19 A I heard that.
20 Q What was your reaction to that?
21 A They're nuts.
22 Q Why?
23 A Well, first of all, I have been in contracts for almost
24 20 years. If I license something to somebody, I call it a
25 license. If I sell something to somebody, I call it a
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1 purchase agreement or a sale.
2 Q Please continue.
3 A The agreement between Santa Cruz and Novell is an asset
4 purchase agreement. It's a purchase agreement. Also,
5 throughout the agreement, Novell was referred to as the
6 seller, not the licensor. Santa Cruz is referred to as the
7 buyer, not the licensee. And I've never done a license
8 where I've transferred all right, title and interest in an
9 asset.
10 Q Now, Mr. Broderick, as of the fall of 1995 -- it may
11 take a couple minutes to explain this, but as of the fall of
12 1995, totally apart from the APA, did Santa Cruz already
13 have a UNIX license?
14 A Yes, they did.
15 MR. NORMAND: Mike, can we pull of SCO 706.
16 BY MR. NORMAND:
17 Q Do you recognize this document, Mr. Broderick?
18 A Yes.
19 Q On what basis do you recognize it?
20 A It's a letter to Santa Cruz Operation from O.L. Wilson.
21 He used to be in charge of the licensing group at AT&T.
22 Q What is your personal knowledge of this document?
23 A It's among the documents that I worked with and have
24 seen.
25 MR. NORMAND: Your Honor, I move SCO 706 into
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1 evidence.
2 MR. ACKER: Your Honor, I don't think that's a
3 sufficient foundation. This document predates his work at
4 Novell and/or SCO. He doesn't seem to be able to identify
5 where and when he used it or saw it.
6 BY MR. NORMAND:
7 Q Mr. Broderick, in your personal experience, did you
8 have occasion to review and consider the terms of Santa
9 Cruz's license during your work at Novell, Santa Cruz and
10 SCO?
11 A Yeah. I went through the licenses when we were told we
12 were going to be working for them to find out what they were
13 doing and who they were.
14 Q Did you do that as part of your job responsibilities?
15 A I did that out of curiosity and trying to stay
16 employed.
17 THE COURT: Would your review have included this
18 agreement that you would have reviewed?
19 THE WITNESS: I'm sorry?
20 THE COURT: Would your review have included review
21 of this agreement?
22 THE WITNESS: I pulled out all of Santa Cruz's
23 documents, licenses. I don't remember specifically seeing
24 this document. But I looked at everything Santa Cruz had.
25 MR. ACKER: Same objection, Your Honor.
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1 MR. NORMAND: Could we go to the next page of the
2 document, Mr. Calvin. The next page.
3 BY MR. NORMAND:
4 Q Do you recognize this document, Mr. Broderick?
5 A Yes, I do.
6 Q On what basis do you recognize it?
7 A It's Santa Cruz's software agreement.
8 Q Is this the agreement you were referring to earlier
9 that you referred to and reviewed in the course of your job
10 responsibilities?
11 A Yes, I did.
12 Q Do you now recall reviewing this document?
13 A Yes.
14 MR. NORMAND: Your Honor, I move SCO 706 into
15 evidence.
16 THE COURT: Mr. Acker.
17 MR. ACKER: No objection, Your Honor.
18 THE COURT: It will be admitted.
19 (Plaintiff's Exhibit 706 was received into
20 evidence.)
21 MR. NORMAND: Now, Mr. Calvin, can we pull up the
22 first three paragraphs, including the title.
23 BY MR. NORMAND:
24 Q This document is titled AT&T Information Systems, Inc.
25 Software Agreement. The first paragraph identifies the
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1 Santa Cruz Operation, Inc. Do you see that reference, Mr.
2 Broderick?
3 A Yes, I do.
4 Q Now what would be the point -- let me start this way.
5 Summarizing what we started the day with, what is your
6 understanding of what -- as of 1995, what is your
7 understanding of what the scope of Santa Cruz's rights were
8 under this license and the corresponding sublicensing or
9 product schedules?
10 A Under this license -- under this license, it's like
11 every other license --
12 Q You say license?
13 A Well, I mean under this agreement. Sorry.
14 Q I should be clearer. Do you know whether Santa Cruz
15 executed a product schedule license under this operating
16 agreement?
17 A Yes, they did.
18 Q Taking these together, what was your understanding of
19 what Santa Cruz's rights were as of 1995 under the software
20 agreement and license?
21 A Well, under the software agreement, they had rights to
22 acquire source code products.
23 Q Do you know if they did?
24 A Yes, they did.
25 Q Do you know if they built a UNIX business around the
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1 software agreement and license that they took?
2 A Yes, they did.
3 Q How do you know that?
4 A I know that because they were a licensee and we knew
5 what our licensees were doing. They paid royalties. And
6 they actually distributed a binary. They were the only
7 company I knew of -- the reason I got to know them is
8 because when we were talking about the business, it was
9 mostly OEM computer, original computer manufacturers that
10 license our software and they put the UNIX on their
11 computer. Santa Cruz had a different business model, which
12 is why I got to know them when I was working at USL and
13 Novell. Santa Cruz wasn't a computer manufacturer. They
14 took the UNIX operating system and they created a UNIX
15 binary similar to Microsoft Windows, but it was a UNIX
16 operating system.
17 Q Is that a flavor?
18 A That would be a flavor. And they distributed that.
19 They distributed it to distributors. They would sell it to
20 companies like Dell or Compaq, who had personal computers,
21 and instead of putting Microsoft Windows on the computer,
22 they put Santa Cruz's UNIX on the computer.
23 Q Now in the fall of 1995, based on your experience, if
24 Santa Cruz had wanted to license the most recent version of
25 UNIX, if it had wanted to license UnixWare, all it wanted
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1 was a license to UnixWare, about how much would it have paid
2 for that kind of license?
3 A The standard unit for a source license was $375,000,
4 but current licensees that licensed UnixWare were generally
5 given a break in the price. You know, it was the effort to
6 move them to the next release and keep them current with
7 what we were doing. So they probably would have paid less
8 than the $375,000.
9 Q Now, Mr. Broderick, I want to show you a slide that
10 Novell used in its opening argument.
11 THE COURT: Mr. Normand, before you do. This
12 agreement is with AT&T. Was this agreement, to your
13 knowledge, still in effect even though AT&T had sold the
14 UNIX business to Novell?
15 THE WITNESS: Yes, it was still in effect. All
16 the agreements just transferred through. The agreements
17 were, essentially -- the agreements were, essentially, a
18 perpetual for source code. The reason that was was the
19 companies that license the source code, the large IBM,
20 Hewlett-Packard, they expended a lot of money and a lot of
21 resources to create their flavor, and they wouldn't -- they
22 wouldn't sign an agreement that said, okay, after you spend
23 all this time and all this effort, we're going to cancel
24 your agreement.
25 //
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1 BY MR. NORMAND:
2 Q Were there circumstances in which these UNIX companies
3 did retain the right to terminate a licensee's rights under
4 the software agreement?
5 A The licensee could terminate any time they wanted. We
6 could terminate the license if they breached a provision of
7 the agreement.
8 Q I see.
9 A Absolutely, if -- you know, as I said before, this was
10 our family jewels we were letting these people have. If
11 they were doing something wrong with the source code, we
12 were going to shut them down.
13 Q Okay.
14 MR. NORMAND: Thank you, Your Honor.
15 BY MR. NORMAND:
16 Q I had asked Mike to put up the slide that Novell had
17 used in its opening argument, and I wanted to ask you some
18 questions about this slide, Mr. Broderick.
19 A Sure.
20 Q Do you see the top half of the exhibit reflects the
21 sale of the UNIX business from AT&T to USL and then from USL
22 to Novell?
23 A Yes.
24 Q Do you see the bottom half of the slide lists
25 Hewlett-Packard, HP, Sun and IBM?
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1 A Yes.
2 Q In your experience, what was the nature of HP's, Sun's
3 and IBM's involvement with UNIX?
4 A They were a licensee.
5 Q Now let's start with HP. Did you have any involvement
6 in the licensing of UNIX to HP?
7 A Yes.
8 Q When did that occur?
9 A Through my time at Novell and Santa Cruz.
10 Q Did HP create its own flavor of UNIX called, as
11 indicated here, HP-UX?
12 A Yes, they did.
13 MR. NORMAND: Mike, can you bring back up schedule
14 1.1, please. Let's put up the first paragraph.
15 BY MR. NORMAND:
16 Q Now, Mr. Broderick, when HP licensed UNIX, did Novell
17 or its predecessor also transfer to HP all copies of UNIX
18 and UnixWare?
19 A No, they did not.
20 MR. NORMAND: Let's bring the slide back up, Mike.
21 BY MR. NORMAND:
22 Q When HP licensed UNIX from Novell, did Novell transfer
23 all of its employees in the UNIX licensing group to HP?
24 A No, they did not.
25 Q So you remained at Novell along with the rest of the
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1 employees in the UNIX licensing group after that HP license?
2 A Yes, I did.
3 Q Let's move on to IBM. Did IBM license UNIX from Novell
4 or its predecessors?
5 A Yes.
6 Q That's the agreement we started the day with, right?
7 A Yes.
8 Q Now when IBM licensed UNIX, did the parties execute a
9 license purchase agreement?
10 A No. They executed a license.
11 Q When IBM licensed UNIX from Novell or its predecessors,
12 were the UNIX engineers instructed to go into the UNIX
13 source code and add copyright notices?
14 A No, they were not.
15 Q Let's move on to Sun, also indicated in the slide.
16 When Novell licensed UNIX to Sun, did Novell or its
17 predecessor license back the UNIX technology so it could use
18 that technology in its own products?
19 A No, it did not.
20 Q Did Novell send out letters to its customers and
21 partners informing them that Novell had transferred its
22 existing ownership interest in UNIX to Sun?
23 A No.
24 Q So returning to the slide that Novell created for the
25 jury, in your view, where does SCO fit into the diagram?
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1 A On the same level, directly to the right of Novell.
2 Q Why do you say that?
3 A Because Santa Cruz bought their business, just like
4 Novell bought the business.
5 Q Now, Mr. Broderick, with all of this in mind -- we're
6 getting close here -- let me return to your participation in
7 that transition process in 1995. As part of that process,
8 did you separate materials that Novell was keeping from the
9 materials that Santa Cruz would take possession of?
10 A Yes, I did.
11 Q Why did you do that?
12 A Because Novell was -- Novell was retaining certain
13 products that were part of the -- the Novell UNIX group had
14 not only the UNIX operating system, but they had some other
15 products and they had some agreements related to those
16 products that were not going to Santa Cruz. So we had to go
17 through all of the legal and financial files, intellectual
18 property files and pull out the files that were related to
19 products that are -- business that was not going to Santa
20 Cruz and was staying with Novell.
21 Q Did you receive any direction from anyone in this
22 regard?
23 A Yes, we were told.
24 Q Who told you?
25 A Novell management. At the time we were all Novell
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1 employees. We had just been designated you're going to
2 Santa Cruz, you're staying with Novell. So we went into the
3 file room and we were told what to look for. Obviously all
4 the NetWare agreements and files have to be pulled out. So
5 what we did is we put a couple of tables in the center of
6 the file room, and anything related to NetWare was put on
7 the table.
8 Then we looked -- there was the tuxedo product and some
9 kind of data management product, and Novell was retaining
10 that. That was not getting sold to Santa Cruz. So any
11 files relating to this tuxedo product were pulled out.
12 And then also there was a product called documented
13 workbench. It is an old product from AT&T, USL, but Novell
14 also was not selling that to Santa Cruz. So any files we
15 found relating to the documented workbench were pulled out.
16 What we did is we tried to isolate all the files that
17 Novell needed to retain. Then the resulting files were
18 going to be Santa Cruz's files. So we went through all
19 these files and pulled them out and said, okay, Novell,
20 here's, you know, what you asked for, these are all the
21 files you need. They said, yes. We said, okay, take them.
22 Q Now, Mr. Broderick, as part of that process, which
23 company took possession of the UNIX and UnixWare copyright
24 registration certificates that were in New Jersey?
25 A I'm assuming Santa Cruz because we have them now.
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1 Q How do you know we have them now?
2 A They are in Lindon.
3 Q Lindon?
4 A Utah.
5 MR. NORMAND: May I approach, Your Honor?
6 THE COURT: You may, and you don't need to ask,
7 Mr. Normand.
8 MR. NORMAND: Thank you, Your Honor. I ask for
9 Mr. Broderick's sake.
10 BY MR. NORMAND:
11 Q Do you recognize those materials, Mr. Broderick?
12 A Yes. I saw these when we were -- there was a point in
13 time after Caldera bought us that we shipped also the legal
14 files to Lindon, and on one of my trips out to Lindon, we
15 were organizing the files and came across this and we made a
16 decision on where to file it.
17 Q What do you understand those materials to be?
18 A These are copyright registrations related to UNIX.
19 Q What do the green tabs on the side of those say, Mr.
20 Broderick? Are there exhibit numbers?
21 A The first one here says Exhibit 487.
22 Q What does the second one say?
23 A Exhibit 488.
24 Q Now before we get into those in a little more detail, I
25 want to show you and the jury, Mr. Broderick, a schedule to
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1 the APA. Let's start with the seller disclosure schedule.
2 MR. NORMAND: Go to page 1 of that, Mike. The
3 page before that, I believe.
4 THE COURT: Mr. Normand, Mr. Broderick asked if he
5 could stretch for just a second.
6 MR. NORMAND: Of course.
7 THE WITNESS: I'm getting old.
8 BY MR. NORMAND:
9 Q We're going to show you the seller disclosure schedule
10 in the APA. This appears at the end of the APA. And the
11 second page of the seller disclosure schedule refers to --
12 let's start at section 2.10, bring all that out. This
13 refers to intellectual property. There is a reference at
14 the bottom, attachment E to this schedule contains a listing
15 of seller's copyright registrations covering products
16 related to the business. Do you see that?
17 A Yes.
18 Q So let's go to the first page of attachment E to the
19 APA.
20 THE COURT: Just one second, Mr. Normand. The
21 jury should be seeing this, correct?
22 MR. NORMAND: That's right, Your Honor.
23 THE COURT: He's doing the APA.
24 MR. NORMAND: I'm sorry.
25 THE COURT: You need to back up because they
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1 didn't see that last one.
2 MR. NORMAND: Mike, let's go back to the seller
3 disclosure schedule. Let's highlight that top language of
4 the first page of the seller disclosure schedule so the
5 jurors can see what it says. This is in the APA, schedule
6 to the APA. Let's go to the second page of this schedule.
7 Highlight that section 2.10 language. See the reference to
8 intellectual property, and there is a reference at the
9 bottom, attachment E to this schedule contains a listing of
10 seller's copyright registrations covering products related
11 to the business.
12 So now let's, in turn, go to attachment E, page 1.
13 Bring up the title. Attachment titled Selling Copyrights in
14 Products of Business. Let's go to page 8. Let's highlight
15 those bottom three references.
16 BY MR. NORMAND:
17 Q Mr. Broderick, do you have an understanding of what,
18 with respect to this first reference, UNIX Operating System
19 Edition 6 is?
20 A Yes.
21 MR. ACKER: Object. He needs to read the whole
22 line, and instruction manual.
23 MR. NORMAND: I'm asking him if he understands
24 what the first part of the line is.
25 //
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1 BY MR. NORMAND:
2 Q Is the instruction manual separate from the UNIX
3 Operating System Edition 6?
4 A The instruction manual tells you how to use the
5 Operating System Edition 6.
6 Q Now we're going to put on your screen, Mr. Broderick,
7 what's been marked as SCO Exhibit 486.
8 THE COURT: 486 or 487?
9 MR. NORMAND: 486, Your Honor.
10 THE COURT: This the jury should not see.
11 MR. NORMAND: That's correct. In fact, I'm not
12 sure 487 and 488 are in.
13 THE COURT: 485, 486, 487, 488 have not been
14 admitted yet.
15 MR. NORMAND: Correct, Your Honor.
16 BY MR. NORMAND:
17 Q Do you recognize Exhibit 486, Mr. Broderick?
18 A It's a copyright registration.
19 Q Let's go to 487. Let's go to page 3 of 487. Now can
20 you tell, Mr. Broderick, if the exhibit on the screen
21 corresponds to 487 in your book?
22 A It looks like it corresponds.
23 Q Are you familiar with these copyright registration
24 certificates?
25 A I've seen them, yes.
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1 Q On what basis have you seen them?
2 A When we were filing out in Lindon, Utah, I believe I
3 thumbed through them. When we were doing the filing out in
4 Lindon, Utah, I was doing that filing with a woman named
5 Joanie Bingham, B-i-n-g-h-a-m, and we were deciding how to
6 file. We were doing the customers and the licensees
7 alphabetically, and I told her she should set up a separate
8 area for those things, like the copyright registrations. I
9 looked through the binders at that time and saw what they
10 were and said, put them in a file called copyrights.
11 Q Have you maintained ultimate control of these materials
12 since that time?
13 A They did in Lindon, yes.
14 Q And did they do so at your direction?
15 A I told her to file them and not throw them out. That's
16 my direction.
17 Q Apparently she did that.
18 A She did a good job. She didn't throw them out.
19 MR. NORMAND: Your Honor, I move SCO 487 into
20 evidence.
21 MR. ACKER: No objection, Your Honor.
22 THE COURT: It will be admitted.
23 (Plaintiff's Exhibit 487 was received into
24 evidence.)
25 //
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1 MR. NORMAND: Now, Mike, can you highlight the
2 language in number one were it says title of this work.
3 BY MR. NORMAND:
4 Q It says UNIX Operating System Edition 32V and
5 Instruction Manual. Do you see that language, Mr.
6 Broderick?
7 A Yes.
8 MR. NORMAND: Bring that down, Mike, and pull up
9 the top right. Actually, you can get rid of the operating
10 system reference. Can we pull that, Mike, up side by side
11 or top to bottom with the corresponding number in attachment
12 E of the APA.
13 BY MR. NORMAND:
14 Q Now, Mr. Broderick, what is the number on the top right
15 of the certificate of copyright registration? Can you see
16 that, the registration number?
17 A TXu 516 704.
18 Q Do you see a corresponding number in the attachment to
19 the seller disclosure schedule in the APA?
20 A Yes, I do. Same number.
21 MR. NORMAND: Let's bring up for Mr. Broderick SCO
22 Exhibit 488. Let's go to page 3.
23 THE COURT: 488 has not yet been admitted.
24 MR. NORMAND: Correct, Your Honor.
25 //
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1 BY MR. NORMAND:
2 Q Can you see, Mr. Broderick, the document on your
3 screen, the right side of your screen --
4 MR. NORMAND: Let's do SCO 488, Mike.
5 BY MR. NORMAND:
6 Q The question is going to be whether the document that
7 comes up on your screen corresponds to 488 in the book
8 that's in front of you.
9 MR. NORMAND: Let's go to page 3.
10 THE WITNESS: The two documents correspond.
11 MR. NORMAND: Your Honor, I move SCO 488 into
12 evidence.
13 MR. ACKER: No objection.
14 THE COURT: It will be admitted.
15 (Plaintiff's Exhibit 488 was received into
16 evidence.)
17 MR. NORMAND: Mike, can you do the same
18 comparison.
19 THE COURT: Mr. Singer, you can be heard in that
20 microphone.
21 MR. SINGER: I'm sorry.
22 BY MR. NORMAND:
23 Q Do you see the number on the copyright registration,
24 Mr. Broderick, top right?
25 A Yes, I do.
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1 Q Can you see if that corresponds to the number in the
2 attachment to the seller disclosure schedule in the APA?
3 A They are the same.
4 MR. NORMAND: Let's bring those down, Mike.
5 Actually take them out. We'll just look at page 3 of the
6 registration. Highlight the first half of the language 1
7 and 2.
8 BY MR. NORMAND:
9 Q Do you see, Mr. Broderick, the reference in 2, in sort
10 of the middle of that highlighted where it says nature of
11 authorship?
12 A Yes.
13 Q What does it say?
14 A Computer program.
15 Q Is it your understanding that UNIX Operating System
16 Edition 7 is a computer program?
17 A Oh, yes.
18 MR. NORMAND: Just a moment, Your Honor.
19 Your Honor, we would like to move into evidence as
20 well the other copyright registration certificates, and I
21 don't have the list handy. Maybe I can do that on redirect
22 or with some other witness. Just to flag that issue for the
23 Court.
24 THE COURT: All right.
25 MR. NORMAND: Thank you, Mr. Broderick. No
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1 further questions.
2 THE COURT: Mr. Normand, thank you.
3 Mr. Acker.
4 THE WITNESS: Do you want your books back?
5 MR. NORMAND: I'll take them.
6 THE COURT: Will you be using those books, Mr.
7 Acker?
8 MR. ACKER: We'll put them on that table over
9 there.
10 CROSS-EXAMINATION
11 BY MR. ACKER:
12 Q I'll give you these, Mr. Broderick, just in case.
13 Good afternoon.
14 A Good afternoon.
15 Q How are you?
16 A Pretty good.
17 Q Where do you currently work, sir?
18 A The SCO Group.
19 Q And do you have any equity interest in the company?
20 A I do. I have a little over 6,000 shares of stock that
21 I purchased through the stock purchase plan and I have a
22 number of options that are -- I think because we're in
23 Chapter 11 are frozen.
24 Q How many options do you have, sir?
25 A About 30,000.
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1 Q So you have shares of stock that if SCO's stock price
2 rises, you will gain financially, correct?
3 A That's true.
4 Q And you also have shares -- 30,000 shares of stock. Do
5 you know what the strike price is for those shares of stock?
6 A Anywhere from 24 cents. Better than 50 percent of them
7 are around nine, $10.
8 Q So if those shares with a strike -- options of strike
9 price of 24 cents, if SCO's stock price was to go up to $10,
10 you would make $10 per option, correct?
11 A That's true, but on half of them I would make about 30
12 cents.
13 Q So if SCO's stock price were to rise, you would gain
14 financially, correct?
15 A Sure.
16 Q Now you were not involved in the negotiation of the
17 asset purchase agreement; is that right?
18 A That's true.
19 Q And you were not present at the Novell board meetings
20 in September of 1995 when the asset purchase agreement was
21 approved, correct?
22 A That's true.
23 Q And you had no involvement with any of the amendments
24 to the asset purchase agreement, correct?
25 A That's true.
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1 Q Now you're a contract guy, right?
2 A I'm a contracts guy.
3 Q Let me ask you a little bit about contracts. You would
4 agree with me, wouldn't you, that a written contract
5 provides a written record of what the parties agreed to?
6 A That's the intent of a contract, yes.
7 Q And in a written contract, you want to be as clear as
8 possible in case there are misinterpretations in the future
9 about what the parties intended, correct?
10 A That's the intent of the contract, yes.
11 Q And the reason for putting it in writing is so there is
12 no misinterpretation years down the road about what the
13 parties agreed to, right?
14 A That's correct.
15 Q You want a written record so people in the future
16 cannot say the contract said one thing when it actually said
17 another, correct?
18 A That's the intent, yes.
19 Q You also want a contract so people don't forgot what
20 they agreed to years after it's put in writing, right?
21 A Correct.
22 MR. ACKER: Could we bring up SCO 04, please.
23 BY MR. ACKER:
24 Q We looked at this when Mr. Normand was taking you
25 through your direct examination. This is a software license
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623
1 agreement between AT&T and IBM, right?
2 A Correct.
3 Q And this is one of the contracts that was first
4 purchased by Novell and eventually went to Santa Cruz; is
5 that right?
6 A Yes.
7 Q And you actually administered, at times, this contract,
8 correct?
9 A Correct.
10 Q And the reason that the words and the clauses are put
11 in the contract is so that both parties know what their
12 rights and obligations are, right?
13 A That's the intent, yes.
14 Q The reason that the words are put in the contract is so
15 that years after the contract was executed, you can pick up
16 the written document, you can look at it, you can read it,
17 and you can know what the rights and the obligations are of
18 each side, correct?
19 A Correct.
20 Q And when you enter into these sorts of agreements with
21 a party, you expect that party to comply with and abide by
22 the written terms of the agreement, right?
23 A Yes.
24 Q And you don't expect somebody on the other side of a
25 contract to, years later, just tell you orally, well,
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 60 of 70
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1 despite what the words in the contract say, that is not what
2 we meant and therefore we're not going to abide by the
3 written contract, right?
4 A That's always been my intent.
5 Q That's your practice, right?
6 A Yes.
7 Q That's the way it works, right?
8 A Yes.
9 Q So, for instance, if we take a look at the third page
10 of this agreement, paragraph 2.05, this is a license
11 agreement, and this 2.05 excludes certain rights, in other
12 words, it says, no right is granted by this agreement for
13 the use of software products directly for others, or for any
14 use of software products by others, right?
15 A Yes.
16 Q In essence, back when this agreement was executed years
17 ago, AT&T was telling IBM you can't give these rights to
18 other people, they are just for you, right?
19 A Yes.
20 Q And they put it in writing, right?
21 A Yes.
22 Q They put it in writing so that 15 or 20 years later
23 someone from IBM couldn't say, well, we think when we made
24 this agreement, we really thought we had the right to give
25 these rights to other people, right?
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1 A Yeah.
2 Q So you put it in writing so both parties know what the
3 agreement is, right?
4 A Yes.
5 Q What you can and can't do, right?
6 A Yes.
7 Q Despite that somebody may come years later and say what
8 they thought or hoped or wished the contract was, they are
9 stuck with what the language is? You would agree with me,
10 wouldn't you?
11 A In most cases, yeah, I agree.
12 Q Because that's the way contracts work, right?
13 A Yes.
14 Q Let me ask you about SCO Exhibit 03, please. Now I got
15 a little confused, but let me see if I can clear it up.
16 You talked about three types of licensing agreements
17 you entered into. This umbrella agreement that you enter
18 into with an entity sort of sets the general terms and
19 conditions of the relationship between the parties, correct?
20 A Yes.
21 Q Then there would be a first layer of agreement, which
22 would be a source code license where the licensee could take
23 a source code, could develop code on top of it, could make
24 their own flavor of UNIX; is that right?
25 A Yes.
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1 Q And below that would be another licensing agreement,
2 which is what this one is, which is a sublicensing agreement
3 that allows the person who developed the new flavor of UNIX
4 to then turn around, put it into binary code, then license
5 to a customer, correct?
6 A Yeah. I wouldn't say it's below the -- you know, I
7 don't know if you are talking about hierarchy of priorities.
8 You have the software agreement, general terms and
9 conditions for licensing a software product. The
10 sublicensing agreement is the umbrella for distributing a
11 binary. Then you have the licenses where you actually
12 license a product and you can work with it, and that just
13 determines the royalties. So the hierarchy isn't a product
14 schedule under the sublicensing agreement.
15 Q I didn't mean to say that one was more superior to the
16 others, simply there are three types of licenses.
17 A Okay.
18 Q They are all related and they all work together, they
19 are all integrated, correct?
20 A Yes.
21 Q If you would take a look at paragraph 4 of SCO Exhibit
22 3.
23 MR. ACKER: If you would go there, Tom, an
24 highlight, please.
25 //
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1 BY MR. ACKER:
2 Q It reads -- this is the agreement, again, where the
3 producer of the flavor of UNIX who has licensed the source
4 code rights is now sublicensing the binary code, and this
5 sublicensing agreement, together with the software agreement
6 and its supplement, sets forth the entire agreement and
7 understanding between the parties as to the subject matter
8 hereof.
9 What that is saying is that these three agreements that
10 you've talked about, the umbrella agreement, the source code
11 agreement and the sublicensing agreement, are all
12 interrelated, correct?
13 A Yeah. You have to have a software agreement in order
14 to have a sublicensing agreement. And you have to have a
15 software agreement in order to license a product.
16 Q It's those three agreements together that form the
17 relationship or define the bounds of the relationship
18 between the licensor and the licensee?
19 A Correct.
20 Q You talked about licenses with Sun and Microsoft. Do
21 you recall that testimony?
22 A Yes.
23 Q If we could -- let me show you a couple of agreements.
24 Let me show you what we've marked as Exhibit N-13 and T-13.
25 Have you had a chance to look at those, sir?
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1 A I see them. How much detail do you want me to look at
2 them?
3 Q Just take a look, and start with N-13. It's a license
4 agreement that was entered into between SCO -- new SCO, the
5 plaintiff in this case, and Sun in 2003, correct?
6 A Uh-huh. (Affirmative)
7 Q You have to answer yes or no.
8 A Yes.
9 Q You also have T-13, which is an agreement that was
10 entered into between SCO, the plaintiff in this case, and
11 Microsoft in, again, 2003, right?
12 A Yes.
13 Q You are familiar with these licenses, correct?
14 A I'm familiar with them, yes.
15 Q Now as part of the APA, you understood that --
16 THE COURT: Mr. Acker, do you want these
17 admitted?
18 MR. ACKER: Yes. I move to have N-13 and T-13
19 admitted, Your Honor.
20 THE COURT: Any objection?
21 MR. NORMAND: No objection.
22 THE COURT: They will be admitted.
23 (Defendant's N-13 and T-13 were received into
24 evidence.)
25 //
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 65 of 70
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1 BY MR. ACKER:
2 Q These two agreements, N-13 and T-13, they were entered
3 into between SCO, the plaintiff in this case, Sun and
4 Microsoft, correct?
5 A Yes.
6 Q After the APA was signed, first Santa Cruz, and then
7 SCO, had the ability to develop their new version of
8 UnixWare, correct? That was part of the APA?
9 A They owned the technology. They could do with it what
10 they want.
11 Q So they had the ability to the source code rights and
12 they could take that source code and build a new version of
13 UNIX on top of it, correct?
14 A They didn't have source code rights, they had ownership
15 of the source code.
16 Q I understand that's your opinion. But they had the
17 ability to build new code on top of the old UNIX code,
18 correct?
19 A Correct.
20 Q And they built different versions of UnixWare on top of
21 that, correct?
22 A Correct.
23 Q And that took place from 1995 until 2003, they were
24 continuing new versions of UnixWare coming out, right?
25 A Yes, correct.
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1 Q They call these different revs or different versions of
2 it the new improved version of software, correct?
3 A Correct.
4 Q And in your business you have this one line of code
5 theory, correct?
6 A Correct.
7 Q The one line of code says that if you purchase the
8 most -- even one line of code of the most recent version of
9 the software, you pay that price for the software, right,
10 the price for the most recent version?
11 A No, that's not correct. The one line of code rule is
12 if you have a release of a software that you have developed
13 a derivative work and you are releasing a binary, you
14 license a later release of the code and you use one line of
15 code in your current binary release, then you have to pay
16 the royalties for that later release. It's not if you just
17 license it, you have to use it.
18 Q Use it and use it by creating -- building on top of it
19 and sublicensing it in binary form?
20 A Yes.
21 Q It's true, isn't it, that in these two agreements,
22 N-13, the Sun agreement, and T-13, the Microsoft agreement,
23 that what was being licensed in both of these agreements was
24 the most recent version of UnixWare, correct?
25 A Correct.
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1 Q And so the jury understands, in 2003, when SCO entered
2 into a license agreement, the Sun agreement, N-13, what it
3 was licensing and what the value that Sun was paying for was
4 the most recent version of UnixWare, correct?
5 A Okay. Yes.
6 Q Is that true?
7 A True.
8 Q And then similarly for the Microsoft agreement entered
9 into, again, by SCO and Microsoft in 2003, what Microsoft
10 was paying for and the value they were getting was for the
11 most recent version of UnixWare, right?
12 A Well, Microsoft was also getting some release from some
13 claims. They were also getting a release that SCO wouldn't
14 sue them for certain things. Microsoft included more.
15 Q But you would agree with me that the vast majority of
16 what it was that Microsoft was paying money for in T-13, the
17 Microsoft license entered into in 2003, was for the rights
18 of the most recent versions of UnixWare?
19 A I don't know that for a fact.
20 Q Well --
21 A I'm familiar with the agreement. I don't know how you
22 parse out the amount of money that -- the value of the
23 agreement, whether it was for the release or whether it was
24 for the technology that was licensed. That's something
25 somebody else should probably answer.
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1 Q But take a look at T-13. You see there is a --
2 THE COURT: T-13?
3 MR. ACKER: Yeah, T-13.
4 BY MR. ACKER:
5 Q If we go to Exhibit A of T-13, and if we could
6 highlight the top line, SCO UnixWare 7 Release 7.1.3. That
7 was the most recent version of UnixWare in 2003, correct?
8 A Correct.
9 Q And below that there are a number of additional
10 releases, correct, earlier software and other items?
11 A Yes, but I'm not sure what all of them are. I'm about
12 as technical as a doorknob.
13 Q But the real value and what really Microsoft was paying
14 for, setting the release aside, the release portion of this
15 agreement, getting the rights to the software, what they
16 were really paying for was the ability to use the most
17 recent version of SCO UnixWare 7, right?
18 A Yes.
19 Q Similarly, if you take a look at Exhibit C, you see at
20 the top there is Open UNIX 8 Release 8 and UnixWare 7
21 Release 7.0? Do you see that?
22 A Yes.
23 Q Those are the most recent versions of UnixWare and Open
24 UNIX, right?
25 A Yes.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 69 of 70
633
1 Q And down below there is a bunch of older code, right,
2 on the schedule?
3 A Correct, but the SCO Open Server Release 5, that was
4 just as current as the UnixWare 7. That was just another
5 product.
6 Q But the real value, what Microsoft was paying for,
7 other than the release in the agreement, was the most recent
8 version of software of UnixWare, right?
9 A That's my opinion. You would have to ask Microsoft,
10 though.
11 Q But that's your opinion as the contracts guy at SCO,
12 correct?
13 A Yes.
14 Q Is that right?
15 A Yes.
16 Q And all of the older code listed below, that's simply
17 just added to the schedule as a routine practice, but that
18 wasn't what Microsoft was paying to get, right?
19 A I don't know.
20 Q Isn't it true that it's your normal practice that when
21 you license the most recent version of software, you also
22 provide licenses to the older versions just as a matter of
23 course?
24 A We provide the right to access, and that's because
25 every release is built on a preceding release.
Case 2:04-cv-00139-TS Document 859 Filed 04/19/10 Page 70 of 70
634
1 Q But the real value in what the customers or licensees
2 are paying for is the most recent version of software,
3 right?
4 A Correct.
5 Q That was true both for Sun and Microsoft in 2003,
6 right?
7 A Yes.
8 THE COURT: Mr. Acker, would you please look for
9 an appropriate time for the morning recess?
10 MR. ACKER: It's an appropriate time.
11 THE COURT: It would be. All right.
12 Ms. Malley.
13 (Jury excused)
14 THE COURT: Do you have anything, counsel, before
15 we take the recess?
16 MR. NORMAND: Not from us, Your Honor.
17 MR. ACKER: No, Your Honor.
18 THE COURT: We'll take 15 minutes.
19 (Recess)
20
21
22
23
24
25

Part 3:

Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 1 of 59
1 (10:15 a.m.)
2 THE COURT: Are you ready, counsel?
3 MR. ACKER: Yes, Your Honor.
4 THE COURT: If you would, please, Mr. Broderick.
5 (jury present)
6 THE COURT: Go ahead, Mr. Acker.
7 MR. ACKER: Thank you, Your Honor.
8 Q (BY MR. ACKER) Before we broke -- or actually Mr. Normand
9 was sort of asking you questions about a couple of schedules
10     that were attached to the APA, and I want to ask you about
11 those as well.
12 So why don't we start with section 2.0 of the Seller
13 Disclosure Schedule in the APA. Highlight that, please. Now,
14 this section 2.10 of the Seller Disclosure Schedule describes
15 those -- that list of copyrights that you were talking to
16 Mr. Normand about; correct?
17 A I assume so.
18 Q Let's take a look at it. The heading first is
19 Intellectual Property. Do you see that?
20 A Yes.
21 Q So this is a disclosure in the APA by the seller, Novell,
22 of its intellectual property; correct?
23 A Yes.
24 Q And then Attachment C to the schedule contains the most
25 current listing of pending and issued applications for
635
Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 2 of 59
1 trademarks covering products of the business. Do you see
2 that?
3 A Yes.
4 Q And then Attachment D to the schedule contains a listing
5 of pending and issued applications for patents covering
6 products of the business. Do you see that?
7 A Yes.
8 Q And then, finally, the attachment that Mr. Normand asked
9 you about was Attachment E, and it says attachment E of this
10 schedule contained a listing of seller's copyright
11 registrations covering products relating to the business. Do
12 you see that?
13 A Yes.
14 Q So this is -- in the APA this is Novell's description of
15 intellectual property; correct?
16 A Yes.
17 Q And you've done asset purchase agreements, and you know
18 in an asset purchase agreement there will be a section of the
19 agreement that says what gets transferred and what does not
20 get transferred; correct?
21 A Yes.
22 Q Why don't we go to Schedule -- or Section 1.1(b) of the
23 Asset Purchase Agreement. And Schedule 1.1(b) of the Asset
24 Purchase Agreement, sir, you understand is the section of the
25 Asset Purchase Agreement that says what assets were excluded;
636
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1 correct?
2 A Correct.
3 Q So, in other words, if we take a look at Roman Numeral V
4 of the excluded asset section, it says what intellectual
5 property is excluded from a deal that is not transferred;
6 right?
7 A Correct.
8 Q And so what this is is this is a subset of what is
9 disclosed later on in those disclosures we looked at, and this
10 is saying what is not going in the transaction; right?
11 A Correct.
12 Q And what the deal was was intellectual property,
13 including all copyrights and trademarks, except for trademarks
14 Unix and UnixWare were not being transferred; right?
15 A It makes no since to use this language because it's been
16 replaced. This language does not exist in the APA.
17 Q Well, this was the language that was approved by the
18 Board of Directors; correct?
19 A But it does not exist in the APA. It was -- it was
20 replaced with wording in Amendment 2.
21 Q My question was was this wording, "All copyrights and
22 trademarks, except for the trademarks Unix and UnixWare," as
23 intellectual property excluded from the Asset Purchase
24 Agreement, was that approved by the Novell Board of
25 directors?
637
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1 A I would assume so.
2 Q And you also see there's all patents are excluded;
3 correct?
4 A Yes, but I don't believe -- AT&T didn't transfer any Unix
5 patents to Novell, so I don't think Novell had any patents to
6 transfer.
7 Q So these lists that we see, the disclosure lists that we
8 see at the end of the agreement that list patents and patent
9 applications and that list a bunch of copyrights, that's
10 simply a list of what exists, but you have to look to the
11 excluded assets section to see -- and the included assets
12 section to see what actually went and what actually did not go
13 in the transaction; right?
14 A That would be true.
15 Q So now if we could take a look at -- well, let me --
16 first of all, you mentioned Mr. Burt Levine.
17 If we could bring up his photograph, please.
18 Is that the Burt Levine that you were referring to as the
19 one that gave you these letters that went to customers?
20 A Yes.
21 Q And were you aware that Mr. Levine was an in-house lawyer
22 at Novell during 1995?
23 A Yes.
24 Q And were you aware that Mr. Levine actually reviewed and
25 edited the included and excluded asset schedules of the APA?
638
Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 5 of 59
1 Were you aware of that?
2 A I didn't know that.
3 Q And were you aware that Mr. Levine approved and agreed
4 with those included and excluded asset sections, including the
5 section that excluded copyrights? Are you aware of that?
6 A No.
7 Q Let's go back to Schedule E if we could. Schedule E,
8 yes -- Attachment E. Now, this is a list that goes on for
9 one, two, three, four, five, six, seven, eight pages; is that
10 right?
11 A Okay. I'm only looking at the section of one page --
12 (voices overlapping)
13 THE COURT: Just a second. Just a second. Don't
14 talk over each other.
15 Mr. Acker, if you'd ask your question again.
16 MR. ACKER: Yeah, I'll ask him another question.
17 Q (BY MR. ACKER) You see in Attachment E it says page 1 of 8?
18 A Yes.
19 Q And you've looked at the APA, and you and Mr. Normand
20 have spent time looking at this together; correct?
21 A Correct.
22 Q And when you walk through these eight pages of these
23 copyrights, the first seven-and-a-half pages are all manuals,
24 instruction guides; right?
25 A Okay.
639
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1 Q It's not code; right?
2 A Okay.
3 Q Do you agree with that? You want to look at it?
4 A I would agree with that.
5 Q So the only code listed, again on this disclosure, is in
6 the last four items; right? If we go to page --
7 I'm sorry, Thomas. Go to page eight, please. Highlight
8 those last four.
9 And do you know what year that code was written?
10 A I'd say the late 70's.
11 Q And there was many, many improved or added on or new
12 versions of Unix after the 70's before the Asset Purchase
13 Agreement in 1995; correct?
14 A Absolutely.
15 Q And none of those are listed in this schedule; right?
16 A No, they're not.
17 Q And in fact these copyright registrations -- if I can
18 hand those back to you, sir --
19 487, if you could bring up 487, please.
20 And the first page you see there's a section there in --
21 three in the front page?
22 A Yes.
23 Q The code is written in 1978; right?
24 A Yes.
25 Q And the named owner of the registration or the copyright
640
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1 in this document that was being testified about was AT&T;
2 right?
3 A Yes.
4 Q And SCO or Santa Cruz or Caldera never made any effort to
5 change this; right?
6 A I don't know.
7 Q And all of that code that was improved on, the new Unix
8 code that was written between 1978 and 1995, that's not
9 anywhere in this attachment to the APA; correct?
10 A Correct.
11 Q And similarly, if you go to -- and I'm sorry. It's 488,
12 the next copyright registration. You see the date that that
13 code was written?
14 A Yes.
15 Q 1978?
16 A Yes.
17 Q And you see also that the name of the registrant is AT&T?
18 A Yes.
19 Q Now, when there was a switch, when the Asset Purchase
20 Agreement was finalized in the end of '95 and you moved from
21 Novell to Santa Cruz, you actually stayed in the same physical
22 building in New Jersey; right?
23 A Correct.
24 Q So, in other words, it wasn't as though the moving trucks
25 came and all of the folks, former Novell people who are now
641
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1 becoming Santa Cruz people, got moved to another location.
2 You actually stayed in the same building; right?
3 A For a period of time, yes.
4 Q And if you take a look actually -- if we could bring up
5 SCO exhibit 580. So this letter was the letter that you
6 talked about that Mr. Levine gave to you. And this was a form
7 letter, wasn't it? In other words --
8 A Pretty much so, yes.
9 Q So you talked about thousands of these letters going out,
10 but this same paragraph was in every single letter; right?
11 A Well, this letter was a little different because it was
12 addressing a specific agreement that needed approval, but,
13 yes, there was a form letter that went to standard licensees.
14 Q And if you take a look at -- this is March 25th of '96,
15 so about four months after the -- or three months after the
16 close of the deal, the address for -- well, I'm sorry, wrong
17 letter. Give me a minute.
18 Bring up SCO -- or rather Novell H6, please.
19 Now, H6 is a letter that was sent in March of 1996 from
20 SCO to Novell. Do you see that?
21 A Yes.
22 Q And do you see the address at the top for SCO and the
23 address at the top for Novell, same address; right?
24 A Yes.
25 Q And so how was it that you -- did you simply move
642
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1 those -- the Santa Cruz people over to cubicles on the right
2 and the Novell people to cubicles on the left, or did you all
3 just keep sitting in the same seats?
4 A I think for the most part we just kept staying in the
5 same offices. They did firewalls on I.P. computer systems,
6 but if I remember, we pretty much stayed in the same
7 offices.
8 THE COURT: Are you going to offer this exhibit?
9 MR. ACKER: I'm going to ask him about it. Yeah,
10 let me back up and I'll come back to this one.
11 THE COURT: All right.
12 MR. ACKER: Take that down.
13 Q (BY MR. ACKER) Now, you -- there was some testimony you
14 gave to Mr. Normand about HP, Sun and IBM being able to
15 develop their own flavors of Unix. Do you recall that
16 testimony?
17 A Yes.
18 Q And what you said was that if and because HP, Sun and IBM
19 had a license, they had the ability to take Unix code and
20 build on top of it and develop their own flavor of Unix;
21 right?
22 A Yes.
23 Q And they did that, but they did not have ownership of the
24 copyrights; right?
25 A Well, yes.
643
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1 Q And so it's true, isn't it, that you certainly can have
2 the rights to develop your own version of Unix on top of old
3 Unix and not own the copyrights; correct?
4 A That's true.
5 Q There's nothing surprising about that; correct?
6 A No.
7 Q Now, you also mentioned that Novell engineers changed
8 some of the language on the copyrights after the APA; is that
9 right?
10 A In the status meeting at one of the transition meetings
11 it was reported that the Novell engineers were changing --
12 were changing the copyrights from Novell to Santa Cruz.
13 Q Did you ever actually look at the code and see what those
14 changes were?
15 A No.
16 Q Let me show you what has been marked as SCO 641.
17 THE COURT: 641?
18 MR. ACKER: Yes, Your Honor.
19 Q (BY MR. ACKER) I'm going to ask you about the third page in
20 in the document. Now, if you take a look at Roman -- or
21 number six of what we've -- on the third page of what has been
22 marked as SCO 641, you see there's -- what is listed there is
23 changes that were made to the Unix code after the APA;
24 correct?
25 MR. NORMAND: Your Honor, the document is not in
644
Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 11 of 59
1 evidence. We shouldn't be speaking to the substance of it.
2 MR. ACKER: I'm just trying to lay a foundation if
3 he even knows what actually got changed or what didn't get
4 changed.
5 THE COURT: Could you perhaps have him look at it.
6 And try to avoid referencing the content of the document,
7 Mr. Acker.
8 Q (BY MR. ACKER) Well, you're saying that you didn't actually
9 see what changes were made; correct?
10 A That's correct.
11 Q And so you don't know that in fact what happened is that
12 the engineers left on for Novell the ownership from 1984 to
13 1995. You don't know that; right?
14 A I have no idea what was changed.
15 Q And you don't know that the only time Santa Cruz is
16 mentioned as the owner of any copyrights is for UnixWare with
17 a registration after the APA of 1996? You just don't know
18 that; right?
19 A No, I don't.
20 Q And as far as you know, that's exactly what happened is
21 that the engineers left the Novell registration for the period
22 before the APA, and they only changed it for UnixWare after
23 the APA. You simply don't know that; right?
24 A No. The only thing I know about it is when they said
25 they were changing the copyrights, I asked if they were going
645
Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 12 of 59
1 back into old, old versions of Unix, and they said no, they
2 only do what is on a current software product. So that's all
3 I know about it.
4 Q But in terms of what dates were put on there for who
5 owned -- who owned the old Unix code from 1984 to 1995, you
6 don't know that the engineers left Novell on, do you?
7 A I have no idea.
8 Q Now, between the period of the end of December of 1995
9 and October of 1996, that ten month period, you were at Santa
10 Cruz; correct?
11 A Yes.
12 Q And Santa Cruz was issuing licenses during that period,
13 during that ten month period; correct?
14 A Correct.
15 Q Let me show you L7. Have you had a chance to look at
16 what we've marked as Novell Exhibit L7?
17 A Yes.
18 Q And the first agreement is a Supplement and Licensing
19 Order Form that was executed by SCO in March of 1996;
20 correct?
21 A Yes.
22 Q And this is a license agreement in which Unix is being
23 licensed in March of 1996; correct?
24 A Correct.
25 Q And then if you go back into the document, do you see
646
Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 13 of 59
1 there's a second licensing agreement in May of 1996?
2 A I've got -- where do you want me to look? Up on the
3 screen I've got a June 25, '96.
4 Q Let me show it to you.
5 THE COURT: Mr. Acker, you need to know that the L7
6 identified in the list you gave us is not the same as the one
7 you're referring to. We can correct that easily.
8 MR. ACKER: We'll fix that.
9 THE COURT: That's based on the assumption you
10 ultimately will be asking for submission, which you have not
11 been doing, so I'm not going to worry about it until you do.
12 Q (BY MR. ACKER) Do you see that, sir, May 10th Software
13 License Agreement, SCO for Unix System V, release 4.0?
14 A Yes.
15 Q These were license agreements that were executed by SCO
16 in March and May of 1996; correct?
17 A Yes.
18 MR. ACKER: I move for admission of L7, Your
19 Honor.
20 MR. ACKER: No objection, Your Honor.
21 THE COURT: L7 will be admitted.
22 MR. ACKER: And we may need to amend that.
23 THE COURT: But just so that I -- for our records,
24 these are license agreements. You said that they were
25 dated.
647
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1 MR. ACKER: There's two of them, Your Honor. One is
2 dated March of 1996 and one is dated May of 1996, executed by
3 SCO licensing Unix software.
4 THE COURT: My dilemma is that the one -- the first
5 sheet of mine is the May 1996.
6 MR. ACKER: Right.
7 THE COURT: There's a subsequent one in here
8 somewhere?
9 MR. ACKER: No, I'm sorry, you're right. They're
10 both May.
11 The Court: Okay. That was why I was confused. So
12 license agreements from May of 1996 is how we can identify
13 them; correct?
14 MR. ACKER: Yes, Your Honor.
15 THE COURT: All right. And they're not objected to,
16 so they will be admitted.
17 (Defendant's Exhibit L7 received in evidence)
18 Q (BY MR. ACKER) So it was true that after you -- the APA was
19 executed and you went to work for Santa Cruz, you and your
20 team were issuing license agreements during the period of time
21 from December of '95 until October of '95; correct?
22 A Yes.
23 Q And did anybody during that period of time from Novell
24 say, "Hey, you can't do that. You don't have the rights to
25 issue license agreements"?
648
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1 A No.
2 Q Did anyone during that period of time from December of
3 '95 until October of '95 say, "You don't have the rights --
4 you, Santa Cruz, don't have the rights to build a new version
5 of UnixWare on top of the old Unix code"?
6 A Well, Novell knew we were doing this because this is a
7 reference license. This is a read only right to look at the
8 source code. We did them at Novell. We continued to do them
9 at Santa Cruz. This was ordinary course of business. So I
10 don't see why I should have had to have asked Novell for
11 permission to do this.
12 Q And exactly right. That's my point. Novell knew you
13 were doing this, issuing licenses between December of '95 and
14 October of '96, and no one said, "Hey, you can't do that,
15 Mr. Broderick," correct?
16 A Correct.
17 Q Because that was your rights under the APA; correct?
18 A Correct. We owned the technology. We could do with it
19 what we wanted.
20 Q Why don't we take a look at Section 4.16(a) of the APA.
21 Now, this is -- Section 4.16(a) is the section regarding the
22 royalties that you were to collect, you being Santa Cruz, were
23 to collect and funnel 95 percent back to Novell; correct?
24 A Yes.
25 Q And it's your -- as I heard your testimony, was that your
649
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1 belief was that the only royalties that had to go back to
2 Novell were royalties for the binary licenses; is that
3 right?
4 A That's -- that's correct.
5 Q Now, can you show me where in 4.16(a) it says that the
6 obligation to pay back to Novell 95 percent of the SVRX
7 revenue is limited to binary licenses?
8 A That's covered in Amendment No. 1 where they clarify --
9 they realized when they did this that they had forgotten about
10 the source code and support fees. So Amendment 1 was executed
11 at the time of closing, and in Amendment 1 they carve out
12 source code right to use fees, support fees, and they carve
13 out everything, leaving only binary royalties.
14 Q But the deal that was approved by the Novell Board of
15 Directors, you'll agree with me that 4.16(a) doesn't say
16 anything about limiting it to binary code or binary licenses;
17 right?
18 A You have to know the contract's value. When I look at a
19 contract, I look at the whole contract, including amendments.
20 So when I look at the APA, in my mind I have to consider all
21 the amendments.
22 Q Ane we'll take a look at that. But you actually wrote
23 letters to people describing this -- these obligations;
24 correct? Letters were written by SCO describing what their
25 Obligations were under 4.16(a); correct?
650
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1 A I -- we had some dealings. I think there was an issue
2 with Unisys and probably with Cray and SGI where I sent a
3 letter to Novell saying under the APA we need to talk about
4 this.
5 Q And I apologize. I don't think you wrote it, but someone
6 I think at SCO did. If you'd take a look at H6.
7 A Okay.
8 Q Now, this is a letter written on March 12, 1996 by
9 Mr. James -- is it Machi?
10 A Jim Machi?
11 Q Jim Machi? What was his job in '96 at Santa Cruz?
12 A He was a Product Manager.
13 MR. ACKER: Your Honor, I move for admission of H6.
14 MR. NORMAND: No objection, Your Honor.
15 THE COURT: It will be admitted.
16 (Defendant's Exhibit H6 received in evidence)
17 Q (BY MR. ACKER) And if you take a look again at the top, you
18 see we have the same addresses, that Novell is residing in the
19 same location as Santa Cruz; correct?
20 A Yes.
21 Q And if you take a look, if we could highlight the first
22 paragraph down to the end of the parenthetical, you see
23 that -- is it Machi, Mr. Machi?
24 A Machi.
25 Q That Mr. Machi wrote, just three months after the APA was
651
Case 2:04-cv-00139-TS Document 859-2 Filed 04/19/10 Page 18 of 59
1 executed, he wrote, "Under the December 6, 1995 Asset Purchase
2 Agreement, APA, between SCO and Novell, SCO has an obligation
3 to collect and pass through to Novell certain SVRX royalties
4 that are due under SVRX licenses listed in item six of
5 schedule 1.1(a) and assigned to SCO under the APA. Such
6 royalties are payments of the type that prior to December 6,
7 1995 accrued to Novell under standard customer licensing
8 agreements" -- and then he gives two examples of those sorts
9 of agreements. And he writes, "For example, source code and
10 sublicensing agreements". Do you see that?
11 A Yes.
12 Q And so at least Mr. Machi believed as of March of 1996
13 that what Santa Cruz was obligated to pass through to Novell
14 was fees from both binary licenses and source code licenses;
15 correct?
16 A Up to December 6, 1995 I think -- it was up to the
17 closing date. Novell got all the fees associated with the
18 business up to the closing date. After the business closed,
19 they only got the binary royalties.
20 Q No. But what he says is that under the Asset Purchase
21 Agreement, those royalties were source code royalties and
22 binary royalties that used to go -- that used to be -- go
23 to -- that Novell collected before the APA, now Santa Cruz
24 collects and gives 95 percent back to Novell?
25 A Not source code.
652
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1 Q Well, he says source code, doesn't he?
2 A Well, he's talking about such source code royalties are
3 payments of the type prior to December 6, 1995 accrued to
4 Novell under standard licenses, source code and sublicensing.
5 If you're trying to say that he's saying he's getting --
6 they're getting the source code fees, he's wrong, and we never
7 gave Novell source code fees and they never asked for them.
8 Q So three months after the APA was signed in December of
9 1995 and it went into effect, Mr. Machi believed that 4.16(a)
10 required Santa Cruz to pass through the source code royalties;
11 correct?
12 A I don't know if he believed that, but he was a product
13 manager, and --
14 Q That's what he wrote; right?
15 A That's what he wrote.
16 Q Take a look at the APA again, 4.16(b). Now, you said it
17 in direct, and I think it's accurate, that you, SCO, could do
18 nothing that would jeopardize the revenue stream for these
19 SVRX licenses; is that correct? Do I have that testimony
20 right?
21 A That's correct.
22 Q And you also said it was essentially money in the bank
23 for Novell; correct?
24 A That's correct.
25 Q So after December of '95, after the APA went into effect,
653
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1 Santa Cruz, and subsequently SCO, the plaintiff in this case,
2 could take no action that jeopardized that SVRX royalty stream
3 back to Novell; correct?
4 A Yeah. What we were told is as -- as of the closing, if a
5 licensee was paying royalties that were going to Novell, we
6 had to continue to collect those royalties and Novell got
7 them. We couldn't do anything. That's the example I gave
8 about going to a licensee and saying, "You're paying a hundred
9 dollars a copy for a royalty. Sign a license with us and
10 we'll only charge you 50." We couldn't do something like
11 that.
12 Q But you'll agree with me that what your testimony was is
13 that first Santa Cruz and then SCO couldn't take any actions
14 that would impact or affect that money in the bank for Novell
15 from those SVRX licenses; correct?
16 A Yeah. For the binary royalties they were receiving, we
17 couldn't screw that up.
18 Q Well, I understand we have a difference of opinion
19 regarding binary and source code, but it's true, isn't it,
20 that you couldn't take any actions, you SCO, Santa Cruz,
21 couldn't take any actions that affected that royalty stream
22 for SVRX licenses; right?
23 A True.
24 Q And if you take a look at 4.16(b), the language of the
25 contract regarding this waiver provision, there's no language
654
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1 in there that limits this waiver provision simply to binary
2 royalties; right?
3 A Yeah, but you only have to consider the amendments.
4 Q But in the contract approved by Novell Board of
5 Directors, it doesn't say anything about binary royalties;
6 right?
7 A No, it doesn't. That's why it was amended.
8 MR. ACKER: I don't have anything else.
9 REDIRECT EXAMINATION
10 BY MR. NORMAND:
11 Q Mr. Broderick, you testified you're a contracts guy?
12 A I'm a contracts guy.
13 Q And what does that mean exactly?
14 A I work contracts and licensing for the SCO group. I've
15 been doing it since Novell purchased us from U.S.L. If a
16 customer wants to license a source code product, get rights to
17 distribute a product that we have, or if we want to license a
18 third-party product, some company may have developed something
19 that we'd like to use in our product, I work with them.
20 Q Have you spent a lot of time thinking about how contracts
21 operate in the course of your work?
22 A Close to 20 years.
23 Q Now, as a contracts guy, is it your view that perfect
24 clarity in a contract is always the goal?
25 A That is the goal.
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1 Q Is perfect clarity in a contract always achieved?
2 A No, it is not.
3 Q In your experience are contracts ever ambiguous?
4 A Yes, they are.
5 Q In your experience are contracts ever amended?
6 A All the time.
7 Q In your experience, when a contract is amended, is the
8 amended language of the contract, the old language, relevant
9 to you anymore?
10 A The old language does not exist anymore. When we amend
11 something, the old language is gone and the new language goes
12 in. In fact what I do in a lot of cases, if we have a
13 contract that we amend, I will -- we have all the contracts in
14 word processing. What I'll do is I'll take that contract in
15 word processing. If we amend it, I will go in and put the
16 amended language in it so I'm sure to make sure I'm always
17 looking at the current state of the contract, the original
18 contract with the amended language.
19 MR. NORMAND: Mr. Calvin, could you bring up Roman
20 Numeral V.
21 Q (BY MR. NORMAND) Do you see this language, Mr. Broderick,
22 that Mr. Acker spent several minutes asking you about?
23 A Yes, I do.
24 Q Do you know whether this language has been amended?
25 A That language was replaced.
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1 Q And in your experience as a contracts manager in
2 reviewing the APA, would this language be relevant to you
3 anymore?
4 A Not at all. It's been replaced.
5 Q What language would you look to in your experience?
6 A The amended language in the -- the language that's
7 included in the amendment.
8 Q Which amendment is that?
9 A This was replaced in Amendment No. 2.
10 Q Now, in your experience in working with contracts, has
11 there ever arisen an occasion where if you interpret a
12 contract very literally, you can create an absurd outcome?
13 A Oh, I can come up with some really absurd outcomes.
14 Q Now, in your experience, if you read a contract
15 literally, and it would create an absurd outcome from reading
16 it literally, do you take the language literally?
17 MR. ACKER: Objection. That calls for a legal
18 opinion, Your Honor.
19 MR. NORMAND: Your Honor, this goes to the first ten
20 minutes of Mr. Acker's examination of Mr. Broderick as a
21 contracts guy.
22 THE COURT: I'll overrule the objection.
23 Q (BY MR. NORMAND) Are there times, Mr. Broderick, when
24 interpreting a contract literally would create an absurd
25 result?
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1 A Yes.
2 Q And when that happens in your experience, how would you
3 go about determining the intent of the parties under the
4 contract?
5 A I would talk to the parties -- both parties of the
6 contract, find out what they really intended the contract to
7 be, and then we would do an official amendment to the contract
8 to make it clear to everybody.
9 Q In your experience, when a contract is ambiguous, would
10 you look to the way the parties had performed under the
11 contract as relevant?
12 A Absolutely.
13 MR. NORMAND: Mr. Calvin, can you bring up 4.16(b).
14 Q (BY MR. NORMAND) Mr. Broderick, do you remember being asked
15 about this literal language in 4.16(b) of the APA?
16 A Yes.
17 Q Do you have an understanding as to whether this language
18 was subsequently amended?
19 A Yes, I believe it was.
20 Q And if it were amended, would this language be relevant
21 to you anymore in your work as a contracts guy?
22 A No. I'd look at the amended language.
23 Q Now, Mr. Acker asked you about the types of agreements
24 that you've overseen in the course of your work. I think they
25 included the software agreement, sublicensing agreement, and
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1 what you described as the product license schedules. Do you
2 recall that --
3 A Yes.
4 Q -- series of questions and answers? In your experience
5 in your time at Santa Cruz and SCO, what is an SVRX license?
6 A It's --
7 Q How would you use that term?
8 A A product license. Anytime -- anybody, whether we were
9 at USL, Novell, Santa Cruz Operation or SCO, if a salesperson
10 was dealing with a customer and the customer wanted to go to a
11 latest release, he would call us up and say they need a
12 license for "X" product. If a -- if the finance people wanted
13 to check the royalties that a customer was supposed to pay,
14 they would call us up and say, "Can I get a copy of this
15 company's license for "X" product?" And that would be the
16 product schedule because that's what the royalties are.
17 MR. NORMAND: Mr. Calvin, could you bring up
18 schedule 1.1(a). Go to the next page, and the next page.
19 Now, could you bring up, Mr. Calvin, the top half.
20 Q (BY MR. NORMAND) Mr. Broderick, do you recall what purpose
21 Schedule 1.1(a) of the APA served?
22 A It was a listing of all the assets that were going to
23 Santa Cruz.
24 Q Now, do you see item L in this description of the list of
25 assets that are being transferred?
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1 A Yes.
2 Q And it says, "Software and sublicensing agreements. This
3 includes the source code and sublicensing agreements that
4 seller has with its OEM, end user and educational customers.
5 The total number of these agreements is approximately 30,000."
6 Do you see that language?
7 A Yes.
8 MR. NORMAND: And now, Mr. Calvin, can you bring out
9 item six. I think it's at the bottom. And could you put on
10 top of that the paragraph we just read?
11 Q (BY MR. NORMAND) Now, Mr. Broderick, in this asset schedule
12 the APA separately identifies in item six SVRX licenses; is
13 that right?
14 A That's correct.
15 Q Now, as a contracts guy, in your experience, would there
16 be any reason to make these two provisions redundant? Would
17 there be any reason to think that SVRX licenses refers to
18 something that has already been identified in the asset
19 schedule?
20 A Well, they're different. Up in L, software and
21 sublicense agreement, that's why I talked about the umbrella
22 agreements that really cover the general terms and protections
23 of the company for our software. And item six here, the SVRX
24 licenses, those are the actual products that we will grant
25 licenses for.
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1 Q Now, Mr. Broderick, we're going to put on the screen --
2 Mr. Calvin, let's go to Exhibit 168.
3 Is this document, Mr. Broderick, among the ones that made
4 their way into your files and under your purview?
5 A Yes, I'm aware of this.
6 Q And you've seen this document before, of course?
7 A Yes.
8 MR. NORMAND: Your Honor, I move SCO Exhibit 168
9 into evidence.
10 MR. ACKER: No objection.
11 THE COURT: It will be admitted.
12 (Plaintiff's Exhibit 168 received in evidence)
13 MR. NORMAND: And, Mr. Calvin, can we pull out the
14 paragraph two in the middle of the page.
15 Q (BY MR. NORMAND) Now, Mr. Broderick, what is this
16 document?
17 A This document relates to a binary royalty buyout by
18 Hewlett Packard.
19 Q And this language states in paragraph two quote,
20 "Purpose: Novell retained or has acquired all rights to
21 outstanding and future HP binary code royalty and licensee fee
22 payments, but not source code royalties." Do you see that
23 language?
24 A Yes.
25 Q Now, was it your understanding over the course of your
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1 work at Santa Cruz and SCO that those companies had any
2 obligations to pay source code royalties to Novell?
3 A No, they didn't. And Novell had a number of audits that
4 they performed to the royalty payments at Santa Cruz and the
5 SCO group. The people doing the audits were aware of our
6 business. They knew we were doing source code licensing, and
7 not once did they say, "But what about the source code?" All
8 they did was review the binary royalty reports.
9 Q Now, Mr. Acker asked you some questions about the Sun and
10 Microsoft agreements that he showed you. Do you recall
11 that?
12 A Yes.
13 Q Do you know whether those were part of the SCOsource
14 program?
15 A Yes, they were.
16 Q And did you negotiate those contracts?
17 A No. I had -- I didn't really have anything to do with
18 the Sun agreement. The Microsoft agreement, I participated in
19 some reviews of the documents as they were negotiating them.
20 Q Do you have any view or understanding as to the
21 individual value of the individual components of those
22 agreements?
23 A No, I don't, except for the fact that some of the values
24 are highlighted in the agreement. The values that anybody
25 placed on them, I'm not aware of.
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1 Q Now, as a matter of practice in 2003 and 2004, around the
2 time these contracts were executed, did SCO license all of the
3 old Unix source code with the most current version of
4 UnixWare?
5 A The most current -- UnixWare was licensed with prior
6 products.
7 Q What are prior products?
8 A Prior products are the prior -- it's the -- sort of the
9 family tree or hierarchy of all of the development of the
10 products through time. The example I used, I gave a house two
11 bedrooms and a bathroom, and you add a room and add a
12 bathroom, and you end up down the road with UnixWare.
13 They listed prior products. But when we came to UnixWare
14 7, I believe they took a lot of the older prior products out
15 and only included UnixWare because the product people at the
16 time made the decision that they wanted the customers to focus
17 on UnixWare and not look at the prior stuff.
18 Q Now, in 2003 and 2004, when SCO licensed any prior
19 products with any UnixWare product, did they charge the
20 customer anything extra for those prior products?
21 A No.
22 Q You were asked some questions about the copyright
23 registration certificates that we discussed. Do you recall
24 that? Do you know whether all of the copyrights in the Unix
25 computer programs are registered, whether certificates exist
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1 for all of the copyrights in those programs?
2 A What I've been told is they're not all registered.
3 Q And so in your view do certificates exist for all of the
4 computer programs that are identified in the APA?
5 MR. ACKER: Your Honor, That calls for speculation
6 given his prior answer.
7 MR. NORMAND: Well, he testified to his
8 understanding, and this is an issue that's come up --
9 THE COURT: I'll sustain the objection.
10 MR. ACKER: Speculation.
11 Q (BY MR. NORMAND) And who told you that copyright
12 registration certificates do not exist for all of the computer
13 programs for Unix and UnixWare?
14 A I believe it was Ryan Tibbitts.
15 Q Now, as to the older computer programs that have been
16 registered, who holds the copyright certificates? Who has
17 physical possession of them?
18 A The SCO group.
19 Q You were asked about HP, Sun and IBM, and you were asked
20 the question whether Santa Cruz and SCO have been able to
21 operate their Unix businesses in the years after the APA. Do
22 you recall those questions?
23 A Yes.
24 Q And you were asked whether they quote, "Needed the
25 copyrights to have done that." Do you recall that?
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1 A Yes.
2 Q Now, I want to ask you about your understanding of how
3 this would work. When you're involved in your work at Santa
4 Cruz and negotiating contracts, does a copyright registration
5 number play any particular role in any of the work you do?
6 A No.
7 Q Do you look to see if there are copyright registration
8 numbers and contracts that they're executing?
9 A No.
10 Q To your understanding, do programmers, when they're
11 making copy of source code, do they have to enter a copyright
12 registration number or some sort of password?
13 A Not my knowledge.
14 Q To your knowledge, can a programmer copy the source code
15 without knowing what the corresponding copyright registration
16 number is?
17 A I would assume so.
18 Q So is it your testimony that in the 10 or 15 years after
19 the APA, programmers have been physically able to copy the
20 source code, and you have been physically able to sign
21 contracts that license the source code?
22 MR. ACKER: Objection, leading, Your Honor.
23 THE COURT: Overruled.
24 MR. NORMAND: It's an open-ended question.
25 THE COURT: Overruled.
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1 MR. NORMAND: With a lot built in.
2 THE COURT: Why don't you try it again.
3 The Witness: Thank you.
4 Q (BY MR. NORMAND) Have you been physically able to sign
5 contracts with third parties since the execution of the APA?
6 A Yes.
7 Q Has anything stopped you from doing that?
8 A No.
9 Q When you do that, in the last 15 years has it been your
10 belief and understanding that Santa Cruz and SCO owns the Unix
11 copyrights?
12 A Well, yes. In our agreements we provide an
13 indemnification for infringement of a third-party product.
14 Somebody licensing our software, we would -- we would give
15 them an indemnification. So if somebody else came along and
16 said, "The product you're using infringes this, and I'm suing
17 you for $1,000,000," we indemnify them and say, "Since we've
18 licensed you the software, we'll protect you from that." We
19 wouldn't protect them from that unless we owned the software.
20 And the copyright -- in software a copyright is how you own
21 the software.
22 Q Let me ask you another question, Mr. Broderick. I think
23 we spoke earlier about the fact that IBM has a Unix license
24 with what is now SCO; is that right?
25 A Correct.
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1 Q And in your view as a contracts guy, if IBM were to give
2 away the Unix code that it licensed from SCO and it gave it
3 away to a third party, as a contracts guy do you think you'd
4 have an ability to sue that third party for breach of
5 contract?
6 A I'd have to sue IBM.
7 Q What could you do as against that third party in your
8 experience as a contracts guy?
9 A I think the only thing you could do is get an injunction
10 against them using the software.
11 Q And how would you do that if you didn't have a contract
12 with them?
13 A If somebody is using something that belongs to you and
14 they're not authorized to use it. The only recourse we have
15 would be against a person with a contract.
16 Q And do you have a view as to whether if you own the
17 copyrights you would have any recourse against that third
18 party?
19 A We have ownership of the product, therefore, we could
20 press the issue. Copyrights is how you own a -- how you show
21 your ownership and protect your software is by copyright.
22 Q Now, in your view is the ability to enforce prescriptions
23 against third parties integral to the operation of SCO's
24 business?
25 A Oh, absolutely. If we couldn't protect our software,
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1 we'd be out of business. You know, if we couldn't protect our
2 software, the first person that we licensed the software could
3 go into business for themselves and we'd be out of business.
4 We have to be able to protect our software, and you do that
5 through copyrights. That's how all of the companies have done
6 it.
7 MR. NORMAND: Your Honor, I had mentioned that I
8 wanted to move into evidence all of the copyright registration
9 certificates that we had identified. I can do that now. It's
10 a fairly long list, or we can do it however Your Honor
11 pleases.
12 THE COURT: Have you discussed this with --
13 MR. ACKER: We're going to have to take a look at
14 each of those, so maybe we can do it over a break.
15 MR. NORMAND: We'll do it that way, Your Honor.
16 THE COURT: All right.
17 MR. NORMAND: I have no further questions.
18 RECROSS-EXAMINATION
19 BY MR. ACKER:
20 Q Mr. Broderick, in response to Mr. Normand's questions you
21 said that sometimes, and in your -- your opinion is that the
22 language of the APA was ambiguous. Did I hear that right?
23 A There's language in the APA that's confusing.
24 Q And when language is confusing, it's the case, isn't it,
25 that two reasonably minded people can take a look at the
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1 language and come to different opinions about what it means;
2 correct?
3 A Yes, they could.
4 Q And so two people might look at language that's
5 ambiguous, and one person might say copyright's transferred,
6 and another person might look at that language and say the
7 copyrights do not transfer; correct?
8 A They could, but that wasn't the case. They looked at the
9 copyrights transferring and executed Amendment 2, which
10 transferred the copyrights.
11 Q And my question was if the language is ambiguous, two
12 reasonably minded people can look at the same language and
13 come to different conclusions; correct?
14 A If they take all the facts into consideration, that's a
15 possibility.
16 MR. ACKER: That's all I have, Your Honor.
17 THE COURT: May this witness be excused, counsel?
18 MR. NORMAND: Yes, Your Honor.
19 MR. ACKER: Yes, Your Honor.
20 THE COURT: Mr. Broderick, that means you do not
21 need to worry about being recalled as a witness. You may go
22 about your business. But I do have to instruct you to please
23 not discuss your testimony with any other witness in this case
24 or in the presence of any other witness or in any other way
25 communicate the nature of your testimony broadly. All right?
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1 MR. NORMAND: Your Honor, I hope to reach agreement
2 with Novell on the issue, but I suppose I should mention that
3 if we need to have Mr. Broderick technically on the stand to
4 get in the remaining registration certificates, maybe we
5 shouldn't let him go.
6 THE COURT: That means you may come back after all.
7 Forget everything I just said. No, that's not true.
8 THE WITNESS: Does that mean I get to sit out there
9 or I have to go back in the box?
10 THE COURT: I think you ought to stick around until
11 at least the end of the next break, all right, which will be
12 approximately an hour from now.
13 MR. NORMAND: I think his question, Your Honor --
14 THE COURT: Whether he can stay in the courtroom?
15 THE WITNESS: Can I watch or do I go in the closet?
16 THE COURT: Counsel, do you oppose if he stays in
17 the courtroom, Mr. Acker?
18 MR. ACKER: No, Your Honor.
19 THE COURT: You may stay here if you would like.
20 But, again, the instructions about discussing your testimony
21 with any other witness or in the presence of any other
22 witness --
23 THE WITNESS: No problem. Thank you very much.
24 THE COURT: -- Survives, whatever you may do in the
25 next hour, okay?
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1 THE WITNESS: Thank you.
2 THE COURT: Go ahead, Mr. Singer.
3 MR. SINGER: Your Honor, our next witness is Ty
4 Mattingly.
5 The Clerk: Mr. Mattingly, do you want to come
6 forward and I'll swear you in.
7 THE WITNESS: Sure.
8 (Ty Mattingly, Plaintiff's witness, sworn)
9 The Clerk: Thank you. Please be seated.
10 And if you would please state and spell your name for the
11 court.
12 THE WITNESS: Ty D. Mattingly. It's T-Y, D.,
13 M-A-T-T-I-N-G-L-Y.
14 THE COURT: Thank you.
15 DIRECT EXAMINATION
16 BY MR. SINGER:
17 Q Good morning, Mr. Mattingly. I'm Stuart Singer, one of
18 the attorneys for the SCO group. Would you briefly describe
19 your educational background.
20 A Sure. Graduated, and came up to Brigham young university
21 in 1980, and graduated from B.Y.U. in '87 with a degree out of
22 the college of Engineering in the design engineering world.
23 And then took a job with IBM after that, and spent 14 months
24 going through IBM's advanced education program, where
25 basically spent 14 months learning about computers and
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1 information technology, etcetera.
2 Q And after that?
3 A Educationally?
4 Q In business?
5 A You know, on and off would go to postgraduate types of
6 courses, education.
7 Q Could you briefly summarize where you went to work after
8 school, after college.
9 A Sure. I worked for IBM for just under five years, and
10 then left and joined Novell in 1992, about February of '92,
11 and then worked with Novell until 1987.
12 Q 1987 or '97?
13 A '97.
14 Q Can you describe what you worked at after you left Novell
15 in 1997?
16 A Sure. I started some companies up that were in the
17 consulting world, and built some internet types of businesses
18 there that we later sold. And then I've just been an investor
19 since about 19 -- excuse me -- since about 2004.
20 Q Has your investments focused on the technology business?
21 A Correct.
22 Q Was one of the companies that you invested in sold to SCO
23 group?
24 A It was.
25 Q Do you recall when that was?
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1 A I don't recall exactly what the time frame was, but it
2 was a company by the name of Voltis, and it was a real small
3 company, very small transaction.
4 Q As a result did you receive certain stock in the SCO
5 group?
6 A I did.
7 Q Do you know approximately how much?
8 A It was a little more than 9,000 shares.
9 Q And do you still have it?
10 A I do.
11 Q Are you good friends with certain members of the SCO
12 group?
13 A I am.
14 Q Such as Mr. Tibbitts? How do you know Mr. Tibbitts?
15 A Ryan and I met in 1980. We were teammates at B.Y.U. I
16 attended B.Y.U. on a football scholarship. And Ryan was an
17 upperclassman and one of my teammates, so I have known him for
18 30 years.
19 Q In fact were you an All-American at B.Y.U.?
20 A Well, I was an Academic All-American, so it's a little
21 bit of a combination of the school room as well as the playing
22 field.
23 Q Do you also have good friends at Novell?
24 A Sure.
25 Q And does that include David Bradford, General Counsel?
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1 A Yeah. David Bradford is the person that I approached
2 when I wanted to leave Novell -- excuse me -- IBM and go to
3 Novell, and he actually set up my interviews with Jim Bills
4 back in those days and really helped me get into Novell and
5 mentored me a lot through Novell.
6 Q Let's go back to the time when you joined Novell.
7 A I also know Dana Russell over there, who is their C.F.O.
8 Q You're friends with Mr. Russell as well?
9 A Yes.
10 Q Going back to the time when you joined Novell, can you
11 describe your responsibilities?
12 A Sure. When I first joined Novell, I was a product
13 manager working in the marketing group.
14 Q Did your responsibilities change at some point?
15 A Yeah. After about a year Ray Norda, who was the Chairman
16 and CEO, grabbed me and asked me to start working for him. So
17 I spent the next couple of years working in the Chairman's
18 Office on various projects.
19 Q When Robert Frankenberg became CEO, did you continue in
20 that role working closely with the Chairman?
21 A Yes, I had. I had the same role and stayed working with
22 Bob Frankenberg for probably a year-and-a-half.
23 Q Was that your position at Novell in 1995?
24 A No. I'd left working for the Chairman's Office and took
25 a role as Vice-President of Corporate Development Strategic
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1 Relationships.
2 Q Who did you report to at that time?
3 A Duff Thompson.
4 Q Were you involved in the sale of the Unix business to
5 Santa Cruz in 1995?
6 A Yes.
7 Q Do you recall who the principal negotiators were in that
8 transaction?
9 A Sure. The principal negotiators on the ground and living
10 in California for, you know, two months were myself and Ed
11 Chatlos, with me having the relationship and kind of the high
12 level strategy aspects of it, and Ed Chatlos, who was very
13 detailed oriented, assigned from the business unit, to work
14 out all of the details.
15 Q Did you attend negotiation sessions during those two
16 months that you were living in California?
17 A Sure, daily.
18 Q Was that the reason you were in California?
19 A Correct.
20 Q How personally involved was Mr. Bradford, the General
21 Counsel, in the negotiations?
22 A Well, Dave was the General Counsel of Novell at the time,
23 but he was not involved on the daily basis and was not on the
24 ground in California.
25 Q Are you familiar with a gentleman named Tor Braham, who
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1 is an attorney from the Wilson Sonsini firm?
2 A Sure. Tor did a lot of work for us, very good guy.
3 Q How involved was Mr. Braham in the negotiations?
4 A You know, I don't recall that Tor was that involved on
5 the ground with the negotiations. When we finished coming to
6 a meeting of the minds, then docs were turned over, and that's
7 when the legal team took over for the last period of time, and
8 Tor would have been a key component in that.
9 Q When the lawyers came in to document the transaction, had
10 the principal business terms of the deal been agreed upon?
11 A Yes.
12 Q What was your Understanding from the negotiations as to
13 how much of the Unix business was being sold?
14 A Well, it was the majority of it. I mean we sold the
15 business. We acquired it from USL, and we were selling the
16 business to accomplish some very high level strategic
17 objectives for Novell and hopefully for the greater
18 industry.
19 Q What was not being sold?
20 A Oh, certain functions, like SCO was acting as Novell's
21 agent to collect some of the existing SVRX binary royalties,
22 and so that was retained, and SCO acted as the agent to
23 collect it, and I think the distribution was 95/5 towards
24 Novell.
25 Q Other than that, was the remainder of the business, the
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1 Unix and UnixWare business, sold --
2 A Absolutely.
3 Q -- To Santa Cruz?
4 A Absolutely.
5 Q During the months of negotiations that you attended, did
6 anyone from Novell ever say that we are selling the Unix
7 business but we are retaining the copyrights?
8 A No.
9 Q Would that have been consistent with your understanding
10 of the deal which you negotiated, holding back the
11 copyrights?
12 A Holding back the copyrights would not have been
13 consistent.
14 Q Let's advance to the time of the Board of Directors
15 Meeting to approve the sale in September of 1995. What
16 responsibility, Mr. Mattingly, did you have in connection with
17 Board of Directors meetings at Novell?
18 A Well, prior to that time I had attended all of the
19 meetings when I worked for Ray Norda and Bob Frankenberg. At
20 this time where I worked for Duff Thompson I did not go to all
21 of the Board meetings, but I did present at a number of them
22 when they involved transactions that I was involved with.
23 Q Who was responsible for preparing Board materials for the
24 Board of Directors to review prior to the meeting?
25 A Dave Bradford as the General Counsel and Corporate
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1 Secretary usually prepared and presented all of that
2 information.
3 Q Like to show you exhibit 570. It's on the screen. I'm
4 going to show you a hard copy. Can you identify exhibit 570,
5 Mr. Mattingly, as a memorandum sent to the Novell Board of
6 Directors from Mr. Bradford on September 15, 1995?
7 A Yes.
8 Q And was this in connection with the Santa Cruz
9 transaction that we've been discussing?
10 A Yes.
11 Q Did you receive a copy of this yourself?
12 A I did.
13 MR. SINGER: I move the admission of exhibit 570.
14 MR. BRENNAN: No objection, Your Honor.
15 THE COURT: It will be admitted.
16 (Plaintiff's Exhibit 570 received in evidence)
17 MR. BRENNAN: Your Honor, just one point. There are
18 some highlights that have been apparently -- excuse me --
19 apparently placed on the document, and we don't have the
20 source of that. Perhaps I should withhold the acknowledgment
21 of admission until we have an establishment as to the source
22 of that.
23 THE COURT: I think these traditionally, as I've
24 observed, these are the things that will be highlighted now,
25 but the document that will go to the jury will not include
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1 these highlights; is that correct?
2 MR. SINGER: That's correct. These can be removed
3 and will be removed.
4 THE COURT: All right.
5 MR. BRENNAN: Your honor, just so we're clear, the
6 submission of the exhibit has the highlights, so --
7 THE COURT: Again, the one I have on my computer
8 also has those highlights, as have others.
9 Again, I will say to you, Mr. Singer, that none of the
10 exhibits that will actually go to the jury should contain the
11 highlights.
12 MR. SINGER: We understand that, your honor.
13 The Court: Okay. Are you all right then,
14 Mr. Brennan?
15 MR. BRENNAN: Subject to that clarification, Your
16 Honor, thank you.
17 The Court: Exhibit 570 again will be admitted.
18 Q (BY MR. SINGER) Now, was this provided to the Board on
19 Friday, September 15th?
20 A Yes. It's very typical to provide information ahead of
21 Board meetings.
22 Q And was this for the Board Meeting at which the Santa
23 Cruz deal was up for approval?
24 A Yes.
25 Q Do you recall how soon after this September 15th meeting
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1 the Board was to have its meeting to consider the
2 transaction?
3 A Well, you know, I can recall by looking at it that it
4 was -- I think the transaction took place around the 19th, and
5 so we had the Board Meeting on the -- I think the 18th.
6 Q And that would make -- do you recall if you were --
7 looking at the last sentence on the second page where it talks
8 about weekend review, do you know whether September 15th, 1995
9 was a Friday?
10 A I don't know that, but I assume that it was a Friday.
11 We'd have it for Saturday, Sunday and then a Board Meeting
12 Monday, and then close the transaction sometime after the
13 Board Meeting.
14 Q And do you see the reference on the first page to a term
15 sheet for the proposed transaction?
16 A Yes.
17 Q I'd Like to show you exhibit 83. Mr. Mattingly, can you
18 identify exhibit 83?
19 THE COURT: Excuse me. 83 should not be shown to
20 the jury. It's not there, is it?
21 The Clerk: It's not.
22 Q (BY MR. SINGER) Can you identify exhibit 83?
23 A Yes. It's the Novell/SCO term sheet that's referenced as
24 letter "E" under the memo from Dave Bradford.
25 Q So this was part of the memorandum that we've just been
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1 looking at from Mr. Bradford dated September 15th, 1995?
2 A Yes.
3 MR. SINGER: I move the admission of exhibit 83.
4 MR. BRENNAN: Your Honor, subject to the
5 qualifications that were given previously, we have no
6 objection. But, again, we're going to have to clean up the
7 highlighted portions.
8 THE COURT: All right. Exhibit 83 will be admitted,
9 understanding again that it will be cleaned by the time it
10 goes to the jury.
11 MR. SINGER: Yes, Your Honor.
12 (Plaintiff's Exhibit 83 received in evidence)
13 Q (BY MR. SINGER) Was this the term sheet that -- did you
14 receive this term sheet along with the memorandum to the Board
15 that's marked as exhibit 570?
16 A I did.
17 Q These documents were together at that time?
18 A Correct.
19 Q Can you review what is stated in item one, "Novell
20 transfers to SCO."
21 A You want me to just read it?
22 Q Well, can you give us your understanding of what is meant
23 by transfers to SCO the Unix technology assets and UnixWare
24 technology assets?
25 A Well, the Unix technology assets is the Unix business.
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1 UnixWare technology assets was the binary version of that that
2 Novell shipped that had some integrations with Novell's
3 network product offering.
4 Q Now, under the second item, item number two, does that
5 indicate what Novell was going to retain --
6 A Yes.
7 Q -- after the transaction closed with Santa Cruz
8 Operation?
9 A Yes.
10 Q And do you see that patents are listed as being retained
11 by Novell?
12 A Yes.
13 Q Do you see that there's a license back to Unix and
14 UnixWare for internal use and resale in bundled products?
15 A Yes.
16 Q Do you have an understanding of what that was?
17 A Well, sure. I mean Novell had some other product
18 offerings that were bundled with UnixWare, you know, such as
19 Groupwise or some of our network management products, various
20 other products. So Novell was retaining a license back from
21 SCO so that they could actually use those products bundled
22 with Novell's products internally and for resale as bundles.
23 Q Do you have an understanding of what Tuxedo was?
24 A It was a transaction processing monitor.
25 Q And that wasn't being sold?
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1 A It was not.
2 Q Do you see any mention under item two of Novell retaining
3 the Unix and UnixWare copyrights?
4 A No.
5 Q So if Mr. Frankenberg -- well, let me ask this. If
6 Novell was retaining the copyrights, would you expect to have
7 found that listed here under item two?
8 A Yes.
9 Q So if a member of the Novell Board of Directors was
10 looking at the package that went to them the Friday before the
11 Board Meeting, with the term sheet pertaining to the deal,
12 would they have seen anything that would indicate that Novell
13 was retaining copyrights in this term sheet?
14 A That's a pretty material omission, so it would have to be
15 listed here on Novell's retained assets.
16 Q So if Mr. Frankenberg, for example, was reviewing this
17 term sheet provided by Mr. Bradford, the General Counsel, the
18 weekend before the Board Meeting, would it have alerted him in
19 any way to Novell retaining copyrights?
20 MR. BRENNAN: Objection, Your Honor. This calls for
21 speculation as to the mind of Mr. Frankenberg.
22 THE COURT: I'm going to overrule the objection.
23 MR. SINGER: Yes.
24 THE WITNESS: Yes. And I think it would have also
25 alerted any of us that were on the business team. You know,
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1 you'd have to put this in perspective. At that point you're
2 in the 11th hour and 59 minutes into this process, and to have
3 something as material as the copyrights excluded from this
4 Asset Purchase Agreement, it would have alerted everyone in
5 the room.
6 Q (BY MR. SINGER) Would it have -- were you at the Board
7 Meeting on September 18, 1995?
8 A Yes.
9 Q Would it have alerted you that there's a problem here
10 that someone thinks that the copyrights are being retained?
11 A Yes.
12 Q And that didn't happen, did it?
13 A Did not.
14 Q Does the term sheet indicate what Novell expected to
15 receive from Santa Cruz Operation in exchange for the
16 business?
17 A Yes.
18 Q And does that include a number of different forms of
19 compensation?
20 A Yes.
21 Q Was the first of that the stock equal to 16.6 percent of
22 Santa Cruz Operation's stock?
23 A Yes.
24 Q Was the second 95 percent of all royalties received by
25 SCO on the existing Unix business?
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1 A Yes.
2 Q Now, for fiscal year 1995 alone, was that estimated to be
3 47.65 million dollars?
4 A Yes.
5 Q And would you continue then to get those royalties in
6 future years from Santa Cruz?
7 A Yes.
8 Q And that would be part of the compensation that Santa
9 Cruz would be paying Novell for the business?
10 A Yes.
11 Q In addition, was there also a possibility of Novell
12 receiving additional royalties based on the UnixWare shipments
13 by SCO in the future?
14 A Yes.
15 Q And is that covered in item C --
16 A Yes, it is.
17 Q -- of what Novell would receive? And it says, "If SCO
18 hits our business forecast, which is admittedly aggressive,
19 royalties on future UnixWare shipments by SCO through the year
20 2002, those royalties could have a net present value of 50 to
21 $60,000,000," correct?
22 A Yes.
23 Q And then also if there was NetWare technology included in
24 UnixWare products, you would have rights to royalties on those
25 as well?
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1 A Correct.
2 MR. BRENNAN: Objection, Your Honor. We're leading
3 the witness.
4 THE COURT: Sustained.
5 Q (BY MR. SINGER) Would you have contained -- would you have
6 received any royalties on NetWare technology included in the
7 UnixWare products that Santa Cruz would sell?
8 A Sure, since its says continuing royalties on NetWare
9 technology.
10 Q Now, I'd like to turn to the minutes for the Board
11 Meeting that was held on September 18th, 1995, which has
12 already been admitted into evidence as Novell's exhibit Z3.
13 If we look at these, you recognize these as the Board minutes
14 for that meeting?
15 A Yes.
16 Q And if you go to the top page, do you see that in
17 addition to the members of the Board itself, also present by
18 invitation were Dave Bradford, yourself, and Jeff Turner of
19 Novell?
20 A Yes.
21 Q And you attended this meeting; is that correct?
22 A Yes.
23 Q If we turn to -- you understand the first part -- do you
24 have an understanding as to whether the first part of the
25 Board minutes seek to summarize what was actually discussed at
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1 the meeting before the Board of Directors?
2 A Yes.
3 Q Do you see any reference in that part, which runs from
4 the beginning of the minutes all the way down to the
5 resolutions, of any discussion at the Board over the
6 copyrights of the Unix and UnixWare systems specifically?
7 A No.
8 Q Do you on your own recollection recall any discussion at
9 the Board Meeting of the copyrights?
10 A No.
11 Q You then get the resolution which -- by which the Board
12 of Directors approved the sale. Do you know whether there was
13 any time that's typically spent at that point in the Board
14 Meeting reviewing in detail documents which are being approved
15 by the resolution?
16 A No, I don't think that would be typical with the Board of
17 Directors to get into the details of a asset purchase
18 agreement.
19 Q And if we compare for a moment what was listed on the
20 term sheet that was circulated on Friday before the Board of
21 Directors Meeting, and then this resolution of what was
22 summarized in the Board minutes, if we go back to the term
23 sheet, exhibit 83 --
24 And I don't know, Mr. Calvin, if it's possible to split
25 the screen and put one up on one half and one on the other.
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1 If so, that would be helpful.
2 So on the right-hand side of the screen we have the term
3 sheet that we have been looking at, and if on the left-hand
4 side we can have page two of exhibit Z3, the minutes.
5 The Court: Ladies and gentlemen, can you read that?
6 A JUROR: Not really.
7 MR. SINGER: We're going to need to highlight.
8 Q (BY MR. SINGER) We'll go back and forth then between the
9 two. If we can go to the term sheet for a moment. Do you see
10 under Novell term sheet, Novell SCO term sheet item one the
11 reference to Unix technology assets, UnixWare technology
12 assets being transferred to SCO?
13 A Yes.
14 Q We turn now to page two of the minutes, which I think
15 Mr. Calvin has now successfully put on the right-hand side of
16 the screen. And if you can highlight the resolution. Do you
17 see a reference here in the resolution that pursuant to the
18 Asset Purchase Agreement, Novell will transfer to SCO its Unix
19 and UnixWare technology assets?
20 A Yes.
21 Q And if you keep reading it says, "A portion of the
22 employee base in New Jersey and equipment used in the UnixWare
23 business." Do you see that?
24 A Yes.
25 Q And if we turn back for a moment to exhibit 83, do you
688
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1 also see under item one the reference to Novell transferring
2 to SCO the portion of the employee base in New Jersey and the
3 equipment used in the UnixWare business?
4 A Yes.
5 Q And that's under the category of Novell's transfers to
6 SCO; correct?
7 A Correct.
8 Q Can we now look at what Novell was retained. If we turn
9 back to exhibit 83, do you see on the term sheet that was in
10 the Board package the reference to patents, the license back
11 to Unix, UnixWare and Tuxedo and other miscellaneous
12 technology?
13 A Yes.
14 Q Can we now look at the Board minutes, and where it
15 says -- do you see where it says here that, "Novell will
16 retain all of its patents, copyrights and trademarks, except
17 for the trademarks Unix and UnixWare, a royalty-free,
18 perpetual, worldwide license back to Unix and UnixWare for
19 internal use and resale in bundled products, Tuxedo and other
20 miscellaneous, unrelated technology"?
21 A Yes.
22 Q Now, is that -- the term copyrights that's in the
23 minutes, that's not in the term sheet, is it?
24 A It's not.
25 Q Do you have an understanding of why it -- well, let me
689
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1 ask you this. Are you able to reconcile the reference in the
2 minutes to Novell retaining its copyrights with no mention of
3 Unix copyrights being included on the term sheet?
4 A Sure. I mean Novell bundled its products with Unix and
5 UnixWare, and so the copyrights being referred to as well as
6 the trademarks are the Novell copyrights pertaining to the
7 Novell products that they retained, not those that they sold
8 to SCO.
9 Q So would you understand the reference to copyrights here,
10 where Novell will retain all of its copyrights, as pertaining
11 to the Unix copyrights being sold to Santa Cruz?
12 A Yes.
13 Q I'm sorry. Let me read back that question. Do you
14 understand --
15 MR. BRENNAN: Your Honor, I think the answer was
16 clearly heard.
17 THE WITNESS: Well, no. Say it again.
18 Q (BY MR. SINGER) My question is does the reference here of
19 Novell retaining its copyrights mean the Unix copyrights or
20 does it mean copyrights other than Unix copyrights?
21 A It's the Novell copyrights not the Unix copyrights.
22 Those were sold with the business to SCO.
23 Q You see the reference to the worldwide license back to
24 Unix and UnixWare?
25 A Yes.
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1 Q Would that have made any sense if Novell was retaining
2 the copyrights to Unix and UnixWare?
3 A No, because they would have already had those copyrights.
4 Q I'd like to show you what is marked as Defendant's
5 Exhibit G4. Is this a memorandum on September 19th, '95 from
6 Ed Chatlos -- excuse me -- from David Bradford to Ed Chatlos,
7 copied to you?
8 A Yes.
9 Q And is this a document which transmitted the final Asset
10 Purchase Agreement between Novell and SCO?
11 A It looks like it is.
12 MR. SINGER: I move the admission of G4.
13 MR. BRENNAN: No objection, Your Honor.
14 THE COURT: It will be admitted.
15 (Plaintiff's Exhibit G4 received in evidence)
16 Q (BY MR. SINGER) So if we look at the -- and I'm going to
17 ask Mr. Calvin to highlight the text of the memorandum that
18 says, "Dear Ed." Now, the Ed here, is this Ed Chatlos, the
19 person you mentioned was out in California with you for two
20 months negotiating the deal?
21 A Yes.
22 Q And since this is not the clearest, can you read out loud
23 the language which Mr. Bradford put into this memorandum?
24 A From the beginning?
25 Q Please.
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1 A Sure. "Dear Ed, I am now in receipt of the final Asset
2 Purchase Agreement between Novell and SCO. Simultaneous to my
3 receipt of this contract, you have been faxed an identical
4 copy. The purpose of this memorandum is to let you know that
5 I have reviewed the final document and find the same to be an
6 accurate reflection of the business and legal terms and
7 conditions negotiated between the parties. I therefore
8 approve this asset purchase agreement for final signature by
9 Bob Frankenberg. You have indicated that you will let him
10 know of my approval. Let me also congratulate you for the
11 effort you have expended in putting this deal together. Your
12 attention to detail and long hours were invaluable to Novell
13 throughout this process. Regards, David R. Bradford."
14 Q Was Mr. Bradford telling Mr. Chatlos that the final
15 agreement was an accurate reflection of the business and legal
16 terms negotiated between the parties?
17 MR. BRENNAN: Objection, Your Honor. In that regard
18 the document speaks for itself.
19 THE COURT: I'll sustain the objection.
20 Q (BY MR. SINGER) Is the General Counsel, Mr. Mattingly,
21 supposed to make sure that the legal documentation faithfully
22 implements the business terms negotiated between the
23 parties?
24 A Yes.
25 Q Do you and the other business executives rely on the
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1 General Counsel to document the deal accurately?
2 A Yes.
3 Q And did anyone to your knowledge at Novell ever authorize
4 the lawyers to seek in the documentation to hold back the
5 copyrights for Unix and UnixWare in this transaction?
6 A No.
7 MR. SINGER: I have nothing further. Thank you.
8 THE COURT: Mr. Brennan, would it be a disadvantage
9 to you if we were to take a break before you do your cross?
10 MR. BRENNAN: Certainly not, Your Honor.
11 The Court: We'll go ahead and take a 20 minute
12 recess.
13 The Clerk: All rise for the jury, please.
14 (Jury excused)
15 THE COURT: Do you have anything, counsel, before we
16 recess?
17 MR. SINGER: Not from us, Your Honor.
18 MR. ACKER: No, Your Honor.
19 THE COURT: We'll take 20 minutes.
20 (recess at 11:39 a.m.)
21 * * *
22
23
24
25
693

Part 2:

Case 2:04-cv-00139-TS Document 859-1 Filed 04/19/10 Page 1 of 77
1 (12:05 p.m.)
2 THE COURT: Are you ready, Mr. Brennan?
3 MR. BRENNAN: Yes. Thank you, Your Honor.
4 THE COURT: Ms. Malley, if you would.
5 Mr. Singer, when will you be getting the court a
6 response to defendant's motion about the door that you have
7 opened?
8 MR. SINGER: Well, I believe yesterday Your Honor
9 requested it by Monday morning and it was our intent --
10     THE COURT: All right.
11 MR. SINGER: -- to comply with that.
12 THE COURT: Thank you. Have you had a jury
13 instruction meeting since the court requested it?
14 MR. JACOBS: Your Honor, we have. We had probably an
15 hour long discussion last night. We talked about the
16 prospect of trying to put in a joint submission either today
17 or Monday.
18 THE COURT: All right.
19 MR. JACOBS: We decided that, um, given your action --
20 unfortunately we decided that we wouldn't be able to do
21 that. We thought we would still have SCO put in submissions
22 this afternoon and Novell will respond to it. We tried very
23 hard to come up with a format that would be helpful to the
24 court and the court's clerk, but we ended up thinking this
25 would still be the more --
694
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1 THE COURT: So you will respond with your own set of
2 instructions today and then Novell by Monday?
3 THE CLERK: All rise for the jury, please.
4 (Whereupon, the jury returned to the courtroom.)
5 MR. ACKER: Yes, Your Honor.
6 MR. NORMAND: Yes, Your Honor.
7 THE COURT: Go ahead, Mr. Brennan.
8 MR. BRENNAN: Thank you, Your Honor.
9 CROSS-EXAMINATION
10 BY MR. BRENNAN:
11 Q. It is now good afternoon, Mr. Mattingly. My name
12 is Sterling Brennan. Have we met before?
13 A. Did you do my deposition here?
14 Q. Do you think I did?
15 A. I don't know. You answer the question for me.
16 Q. Actually, no. Do you think you and I have met
17 before?
18 A. I don't think so.
19 Q. Well, I am a little disappointed since you and
20 were classmates together at BYU.
21 A. Now, I remember. You used to cheat off of me.
22 Q. Well, I was an economics major and never made it
23 over to the engineering building. But the answer to your
24 question, no, I did not take your deposition. But that does
25 lead me to an important question. Do you recall that your
695
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1 deposition was taken in this case on January 19th, 2007?
2 A. I do.
3 Q. Do you remember who did take your deposition?
4 A. I don't remember, but it was -- he had similar
5 features to you, he was a little bit darker.
6 Q. He must have been very good looking, no doubt.
7 Well, let me ask you this, do you recall that your
8 deposition was taken in this case on January 19th, 2007, and
9 that you were asked questions by Mr. Normand who is sitting
10 at counsel table here today?
11 A. Yes.
12 Q. Okay. And that deposition was more than two
13 years previous to today's date, right?
14 A. Correct.
15 Q. And did you remember facts and circumstances
16 involving the 1995 timeframe better a little more than two
17 years ago, than you do today?
18 A. Very likely.
19 Q. And that is because, of course, that would be two
20 years closer to the events than would today, right?
21 A. Correct.
22 Q. Since your deposition was taken on January 19th,
23 2007, have you had occasion to meet with any of SCO's
24 attorneys?
25 A. I have.
696
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1 Q. Who have you met with?
2 A. I met with Ryan Tibbitts.
3 Q. When did you have that meeting or meetings?
4 A. You know, not meetings but, um, I was cleaning my
5 garage last year and came across some folders and they had
6 Sleigh Ride and Rhine River on them which were the code
7 names for these divestitures. So when I found those
8 documents there, I contacted Ryan.
9 Q. Now you say these code names, Sleigh Ride was the
10 code name for the transaction that ultimately came about
11 between Novell and Santa Cruz Operation; right?
12 A. Yes.
13 Q. And Rhine River was another transaction involving
14 Hewlett-Packard, right?
15 A. Yes.
16 Q. And so you came across some documents; is that
17 correct?
18 A. Yes.
19 Q. And you brought those with you today?
20 A. I did.
21 Q. May I have them, please? At least see them?
22 A. Sure. You want to see them again? I should them
23 to you ten minutes ago.
24 Q. You did. Thank you. I did a quick read. And
25 the documents that you brought here today, are these all of
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1 the documents that you found in your garage?
2 A. No. I found a big folder that had Sleigh Ride
3 and Rhine River documents.
4 Q. What did you do with those other documents that
5 you didn't bring with you today?
6 A. I just have them.
7 Q. Did you ever give them to Mr. Tibbitts or any
8 other representatives of SCO?
9 A. No.
10 Q. What is in those other documents?
11 A. You know, a lot of legal docs, some MOU drafts, a
12 lot of power point presentations, just typical deal
13 collateral.
14 Q. So why did you decide to bring to court today the
15 folder of documents that you brought but not the other ones?
16 A. Well, I think that that one had some information
17 at this September 15th board memo that is interesting, and
18 it also has kind of what the final executable documents were
19 on the 19th.
20 Q. In addition to -- let me back up. You say that
21 you found some documents in your garage and you then
22 contacted Mr. Tibbitts and said I found some documents?
23 A. Yes.
24 Q. And when did you have that discussion with
25 Mr. Tibbitts you have identified?
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1 A. My guess would be it would have been probably in
2 the fourth quarter of last year sometime.
3 Q. So that would have been sometime October,
4 November, December of --
5 A. Yeah, possibly.
6 Q. -- 2009?
7 A. Yes.
8 Q. Now just so we are all clear, Mr. Tibbitts is
9 this handsome man to my left, is that right? Right next to
10 Mr. -- Mr. Tibbitts, do you mind standing for just a minute?
11 Is this Ryan Tibbitts?
12 A. Yes, it is.
13 Q. Thank you. Did you meet with Mr. Tibbitts in
14 person to talk about this case?
15 A. He came to my office and I just showed him the
16 documents.
17 Q. And how long did your meeting last with him then?
18 A. Probably 15, 20 minutes.
19 Q. And since then, have you had any other
20 communications with any attorneys representing The SCO
21 Group?
22 A. Just Ryan.
23 Q. And when was your last meeting with Mr. Ryan
24 Tibbitts?
25 A. I think we probably went to lunch sometime this
699
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1 year.
2 Q. Sometime in 2010?
3 A. Yeah.
4 Q. And during that lunch meeting, did you talk about
5 the case?
6 A. A little bit. Ryan is pretty -- just look at
7 him, he doesn't say much, he is pretty stuffy. But it was
8 kind of some old teammates, we kind of got together for a
9 lunch.
10 Q. And during this lunch meeting you talked about
11 this case that brings us here today?
12 A. No. No, we had a mixed group of former athletes.
13 Q. So just so I'm clear, at any time this year prior
14 to your appearing in court this morning, have you had any
15 discussions with Mr. Tibbitts about this case?
16 A. Yes.
17 Q. Tell me what you and Mr. Tibbitts have talked
18 about regarding this case?
19 A. Well, we have had some phone conversations
20 regarding these documents that you have in your possession,
21 and kind of their interest level to me, and whether they
22 would be of interest to Ryan and the SCO case.
23 Q. Now, at any time this year have you had any
24 communications with any Novell attorneys?
25 A. I have not.
700
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1 Q. Have you had any communications with any Novell
2 attorneys since your sworn testimony was taken on January
3 19th, 2007?
4 A. You know, probably superficial meetings or
5 crossings with someone like Jim Lundberg who is in the room.
6 That would probably be the only attorney that I would have
7 crossed with from Novell. Maybe Greg Jones, if he is still
8 a Novell attorney, over at the gym.
9 Q. Have you ever talked with Mr. Lundberg or
10 Mr. Jones about this case?
11 A. No.
12 Q. Okay. Now I want to ask you a little bit about
13 your relationship with -- with The SCO Group. You indicated
14 in response to Mr. Singer's questions that you're a SCO
15 stockholder; right?
16 A. Yes.
17 Q. And I think you told me you have 9,000 shares of
18 SCO Group stock?
19 A. A little north than that.
20 Q. How much north of that?
21 A. I am not sure. I mean there was 9,000 and some
22 change probably in here somewhere exactly how many shares I
23 got through the Voltis transaction.
24 Q. And when you talk about this Voltis transaction,
25 this was a situation where The SCO Group was going to buy
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1 this other company called Voltis; right?
2 A. Yes.
3 Q. And your role in that transaction was essentially
4 as a business broker essentially?
5 A. No. I was on the board of Voltis at one point.
6 And so, um, then when the Canopy Group did an investment in
7 Voltis, I am not sure if I was still on the board or not but
8 I had an equity position in Voltis.
9 Q. And in connection with that transaction you dealt
10 with an individual by the name of Darl McBride; right?
11 A. Yes.
12 Q. Who do you understand Darl McBride to be in
13 connection with the SCO Group?
14 A. He was the CEO of The SCO Group.
15 Q. Did you have any form of dispute with Mr. McBride
16 regarding how The SCO Group was treating the shares that you
17 hoped to get out of the Voltis transaction?
18 A. Um, yes. Basically the SCO stock had, if I can
19 recall, had some appreciation. And so the number of shares
20 that you are getting in consideration goes down if the stock
21 price goes up. And when you -- when we had structured some
22 type of an arrangement there, um, as the stock went up, of
23 course SCO was trying to present less shares to the Voltis
24 shareholders.
25 Q. So let me see if I understand what you're telling
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1 me. When you thought that Voltis and The SCO Group had
2 entered into some form of an agreement, you thought that the
3 compensation should be fixed based on the number of shares
4 when you reached the agreement, right?
5 A. Right.
6 Q. And The SCO Group stock increased, and as you
7 understood it, SCO was claiming well the stock is worth more
8 so we shouldn't have to give you as many shares; right?
9 A. Correct.
10 Q. You disagreed with that, right?
11 A. Yes.
12 Q. You didn't think that was fair, did you?
13 A. No.
14 Q. You thought that was contrary to the agreement
15 that you had reached with Mr. McBride at The SCO Group,
16 right?
17 A. Well, I didn't reach that agreement with McBride.
18 It was the company that was negotiating with SCO, I don't
19 know, general counsel or employees.
20 Q. So you thought that -- thank you for correcting
21 me. So you thought that The SCO Group was in essence
22 welching on an agreement that it had entered into with
23 Voltis relative to the number of shares that not only Voltis
24 would get, but that you would get in SCO, right?
25 A. No, I wouldn't say welching is the correct
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1 characterization of that. But in negotiation, if you have
2 a, you know, if you establish a collar, then shares can
3 float within that. But I don't recall if they had a collar
4 or anything as sophisticated as that. And so absent
5 something like that, it comes down to if you can negotiate
6 something that inures to your benefit.
7 Q. Explain that answer to me, please.
8 A. I think it is pretty explanatory. Well, if you
9 don't have a collar and the price goes up, you can go to
10 them and still say hey, look, we cut this deal on this date
11 so the stock was at this price that date so you should give
12 me X number of shares instead and not take advantage of the
13 appreciation. If the stock had gone down, um, I wouldn't be
14 here telling you you got to give me a lot more.
15 Q. So the way to avoid that sort of dispute is if
16 The SCO Group and Voltis had had a written agreement, right?
17 A. Correct.
18 Q. So if in that transaction before this dispute
19 arose, if Voltis and the other principals that you were
20 involved in and representing had a written agreement with
21 The SCO Group, then you wouldn't have had to have a fight
22 over what had been agreed to or not agreed to, correct?
23 A. Depends on how -- how definitive that written
24 agreement was.
25 Q. How well the agreement was written, right?
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1 A. Correct.
2 Q. So would you agree with me that having a clearly
3 written agreement is important to make sure that later on
4 when there is a dispute you could look back to the written
5 agreement to see what had actually been agreed to?
6 A. As long as it is consistent with the intent and
7 spirit of what the transaction relationship was.
8 Q. Now you have been involved in investing in other
9 business ventures for a number of years, right?
10 A. Yes.
11 Q. You have been a party to written contracts,
12 right?
13 A. Yes.
14 Q. And the reason that you have been a party to
15 written contracts in your business dealings is for some of
16 the reasons we have talked about here today. You wanted to
17 make sure that there was a clear understanding regarding
18 what the actual terms of the agreement were so that when
19 later on, there may have been a change of circumstances, or
20 a question about what people agreed to, or maybe a loss of
21 memory, you could go back to the written agreement and you
22 could look at what the parties had agreed to at the time
23 they reached their agreement, right?
24 A. Yes.
25 Q. So you recognized the importance of written
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1 agreements, fair?
2 A. Yes.
3 Q. Now, with respect to your -- your business
4 dealings, I would like to pick up from what you told
5 Mr. Singer. You left Novell in 1997, correct?
6 A. Correct.
7 Q. Do you remember the month that you left Novell?
8 A. I don't. Probably summertime.
9 Q. And what was your first source of employment or
10 business venture immediately upon leaving Novell?
11 A. A joint venture between NetScape Communications
12 and Novell.
13 Q. And that joint venture was called Novonyx,
14 N-O-V-O-N-Y-X?
15 A. Novonyx.
16 Q. Thank you. And what was your connection with
17 Novonyx?
18 A. Well, I authored the idea and completed that
19 joint venture between NetScape and Novell.
20 Q. And in connection with your involvement with
21 Novonyx, you became involved in a dispute with Novell;
22 right?
23 A. Yes.
24 Q. In fact, you and Novonyx threatened to sue
25 Novell, right?
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1 A. I don't know if we threatened to sue them. We
2 retained counsel when we disagreed about their valuation.
3 Q. Did the counsel that Novonyx retain, did they
4 threaten to sue Novell?
5 A. I don't think anyone threatened to sue Novell. I
6 think it was about trying to get representation to make sure
7 that the valuation process by which Novell, the majority
8 shareholder in a small little company, valued the small
9 amount of shares that they didn't own and how they valued
10 those shares and therefore bought them.
11 Q. Now, you indicated that you and others at Novonyx
12 retained legal counsel, right?
13 A. Yes.
14 Q. That is what you told us here, right?
15 A. Yes.
16 Q. And the purpose for retaining legal counsel was
17 to make sure that your legal rights could be protected,
18 correct?
19 A. Correct.
20 Q. You're not a lawyer, right?
21 A. No.
22 Q. And so you would look to legal counsel to make
23 sure that your interests were best advocated and protected,
24 right?
25 A. Reasonably, yes. I mean, when you say that, you
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1 know, I think when you look at something like that you can
2 -- you can take that legal representation a long way and
3 actually get into litigation. But that is not what we were
4 trying to do. We actually had -- we had legal counsel that
5 represented us to make sure that, you know, if there is any
6 give and take inside of their rights under the agreements,
7 that we could try and maximize those.
8 Q. Now, in your business career, including the
9 Novonyx situation that you have described and other
10 settings, you have been around lawyers, right?
11 A. Yes.
12 Q. And let's take your time at Novell. You
13 understood that Novell hired lawyers, both in-house
14 corporate lawyers and outside legal counsel, to best protect
15 the interests of the corporation, right?
16 A. Right.
17 Q. And did you understand when you were at Novell
18 that the best interests that were to be protected were those
19 of the shareholders?
20 A. Yes.
21 Q. That is the owners of the business?
22 A. Yes.
23 Q. And so while you are at Novell working with
24 Mr. Frankenberg, I think you told us about, or Mr. Noorda?
25 A. Yes.
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1 Q. Both of whom had been at one point in time the
2 chairman of the Board of Directors of Novell, you understood
3 that those individuals as chairman of the board, their first
4 obligation was to protect the interests of the shareholders
5 of Novell, right?
6 A. To create shareholder value for the shareholders
7 of Novell.
8 Q. And in order to create shareholder value?
9 A. When you say protect, you're taking a legal
10 approach. The idea -- the idea is that, you know, they're
11 supposed to maximize shareholder value. That is their
12 charter.
13 Q. Thank you. And you're right, I am taking a legal
14 approach it is an occupational hazard. I apologize.
15 A. Yes, it is.
16 Q. But as you have worked with lawyers, you have
17 understood as they have represented to the corporation that
18 their role is, I suppose as you have put it to, to best
19 represent shareholder value, right?
20 A. Correct.
21 Q. You mentioned David Bradford. You said that he,
22 at a point in time, was the general counsel of Novell,
23 right?
24 A. Yes.
25 Q. And you understood that his role was to best
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1 protect shareholder value from Novell, right?
2 A. Yes.
3 Q. Now, you said that you're, I think, a friend of
4 Mr. Bradford, right?
5 A. Yes.
6 Q. You respect him?
7 A. Yes.
8 Q. You admire him?
9 A. I do.
10 Q. You believe him to be an honest man?
11 A. Yes.
12 Q. From your observation do you think he was a good
13 lawyer?
14 A. I don't know. I am not a lawyer.
15 Q. So you don't know how to judge that?
16 A. I don't know how to judge that.
17 Q. In your role while you were at Novell, you
18 observed Mr. Bradford work with the Board of Directors of
19 Novell?
20 A. Yes.
21 Q. Now, I want to ask you a few questions about the
22 transaction that brings us into court today. And I would
23 like to have you focus on the time period of 1995. You are
24 familiar in 1995 that Novell had some negotiations with a
25 company called The Santa Cruz Operation; right?
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1 A. I am.
2 Q. And your involvement was not focused on the
3 details on that transaction, was it?
4 A. No, I was more the high level strategy guy.
5 Q. Now, when you say high level strategy guy, you
6 were not involved in any of the negotiations of any
7 particular provision of what ultimately became the Asset
8 Purchase Agreement signed by Novell and The Santa Cruz
9 Operation on September 19th, 1995, were you?
10 A. Well, I don't agree with your characterization of
11 that. I mean I was heavily involved with the MOU phase of
12 that, that is why we had, you know, six to eight weeks on
13 the ground negotiating face-to-face with their team.
14 That document is the input to the legal process where
15 they kicked out the Asset Purchase Agreement not the
16 Licensing Agreement.
17 Q. You used an acronym MOU. That sounds for
18 memorandum --
19 A. Memorandum of understanding.
20 Q. So your suggestion here today in court is that
21 you were involved in the drafting of the memorandum of
22 understanding?
23 A. No, not in the drafting, in the input into the
24 drafting. So we had a team out there, Ed Chatlos that you
25 have referenced, and clearly he has been up on the stand.
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1 Q. Let me pause you right there. How do you know
2 that Mr. Chatlos has clearly been up on the stand?
3 A. Well, because you guys have talked with him.
4 Q. How do you know that?
5 A. I am just sure he has.
6 Q. Has somebody told you that Mr. Chatlos has been a
7 witness in this trial?
8 A. Yes.
9 Q. Who told you that?
10 A. A friend of mine.
11 Q. Who?
12 A. Lee Johnson.
13 Q. Do you know what Mr. Chatlos' testimony has been?
14 A. I don't.
15 Q. What did Mr. Johnson tell you about Mr. Chatlos?
16 A. Just that he was up on the stand.
17 Q. Anything else?
18 A. No.
19 Q. Now, back to this memorandum of understanding,
20 you said that you did not actually draft any provisions, you
21 provided input, right?
22 A. Correct.
23 Q. But let's set a time reference here. Do you
24 understand that the Asset Purchase Agreement dated
25 September 19th, 1995 was signed both by Novell and The Santa
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1 Cruz Operation on September 19th, 1995?
2 A. Yes.
3 Q. Did you observe the signature of that document?
4 A. I don't think so.
5 Q. But it is your understanding that it happened;
6 right?
7 A. Yes.
8 Q. So let's use that as a point in time. How
9 further in advance of September 19th, 19 -- excuse me,
10 September 19th, 1995 were you involved in the process of
11 this memorandum of understanding?
12 A. Well, all the way until the point where we
13 reached a meeting of the minds and agreement around the
14 substantive business terms and that is when it was kicked
15 over to the legal teams. Whether that was one week, two
16 weeks, I don't recall.
17 Q. Well, it was several weeks before the Asset
18 Purchase Agreement was signed at a minimum, right?
19 A. If you say so.
20 Q. Well, I'm asking you?
21 A. I don't recall.
22 Q. Do you recall answering that question at your
23 deposition?
24 A. I do not.
25 Q. Well, we will turn to that in a minute.
713
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1 In your own words you were not the detail contract guy
2 in connection with the Asset Purchase Agreement, right?
3 A. As I have previously stated, yes.
4 Q. And your role in the discussions concerning the
5 transaction between Novell and The Santa Cruz Operation
6 related only to a high-level business strategy, right?
7 A. Well, the business strategy and the whole purpose
8 of why we were engaging in this transaction with SCO.
9 Q. You weren't involved in the details of the actual
10 legal document that was created that set forth the terms and
11 conditions of the parties agreement, namely, the
12 September 19th, 1995 Asset Purchase Agreement, right?
13 A. That is correct.
14 Q. You didn't help write or craft any of the
15 provisions of that referenced Asset Purchase Agreement; did
16 you?
17 A. No.
18 Q. You didn't participate in any of the so-called
19 wordsmithing or specific language that was used in the Asset
20 Purchase Agreement, did you?
21 A. No.
22 Q. You didn't make any contribution whatsoever to
23 the terms or conditions of the September 19th, 1995 Asset
24 Purchase Agreement, did you?
25 A. No.
714
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1 Q. In fact, your so called high-level strategy
2 involvement with respect to what ultimately became the
3 transaction, that is the September 19th, 1995 Asset Purchase
4 Agreement, took place at least two to three weeks before
5 that agreement was signed, right?
6 A. That sounds reasonable.
7 Q. And, in fact, your observation, although you have
8 been involved in some high-level discussions, it was at
9 least two to three weeks after your involvement ended before
10 the Asset Purchase Agreement was finalized, right?
11 A. Well, other than the fact that I presented at the
12 board meeting the day before it was finalized some of the
13 substantive terms.
14 Q. And during this two to three week period between
15 when your involvement ended and when the Asset Purchase
16 Agreement was signed, you were generally aware that there
17 was a back and forth of many drafts of the Asset Purchase
18 Agreement, right?
19 A. Yes.
20 Q. And who did you think that those various drafts
21 were being passed back and forth between?
22 A. Well, the legal teams was Ed Chatlos being the
23 detailed business guy that remained there for continuity.
24 Q. Now Ed Chatlos was at that point a Novell person,
25 right?
715
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1 A. Yes.
2 Q. And who were the lawyers who were involved for
3 Novell during that two week period or three week period of
4 sending drafts back and forth?
5 A. Well, there was a, you know, I don't remember
6 everyone's name. There was a Michael Hoffman who was the --
7 one of the primary attorneys that was out there in
8 California on the ground and unfortunately he has passed
9 away. I don't recall who all of the other attorneys were.
10 Q. Well, you knew, for example, that the law firm of
11 Wilson Sonsini was involved, right?
12 A. Sure. You said Novell, so if there were outside
13 counsel, he is Wilson. And so yeah, Tor Braham would have
14 been one of the main guys there, or the main guy.
15 Q. When you say "the main guy," you mean that he was
16 the primary first drafts person of the Asset Purchase
17 Agreement, right?
18 A. I don't know if he was the primary drafter. But
19 Tor Braham was the senior attorney from Wilson Sonsini and
20 did a lot if not all of Novell's transaction.
21 Q Let me ask you about that. During the time
22 period that you worked for Novell from 1992 to about 1997,
23 to your observation the law firm of Wilson Sonsini was
24 Novell's primary outside counsel on corporate matters,
25 right?
716
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1 A. Yes.
2 Q. And Tor Braham was the lead attorney for Novell
3 in those various transactions, right?
4 A. Yes.
5 Q. Tor Braham essentially was the lawyer that Novell
6 turned to to document corporate transactions; right?
7 A. Yes.
8 Q. He was a trusted attorney?
9 A. Yes.
10 Q. And to your observation, Tor Braham was the key
11 component to the drafting of the actual terms and conditions
12 of the Asset Purchase Agreement, correct?
13 A. You know, I don't know. Again, as I stated, I
14 don't know if he was the key draftsman, if he had some of
15 his other people drafting. He was the senior attorney so he
16 may have looked at it from a high level and had others doing
17 the drafting work or the detail work.
18 Q. We referenced your deposition a bit earlier.
19 There is a transcript of your deposition. I would ask you
20 if you would like to turn to page number 89 of your
21 deposition. Again, this was taken on January 19th, 19 --
22 excuse me, 2007.
23 And Your Honor, with the court's permission, I would
24 like to display the lines and pages that I'll now state on
25 the record.
717
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1 THE COURT: Do you have any objection to that,
2 Mr. Singer?
3 MR. SINGER: I do not, Your Honor.
4 THE COURT: All right. You may go ahead, Mr. Brennan.
5 MR. SINGER: I would only ask that he tell us what
6 lines he plans to --
7 MR. BRENNAN: I am about to do that. Thank you,
8 Mr. Singer.
9 Q. (By Mr. Brennan) I'm going to be reading from
10 Page 89 Line 23 through page 90 line five. Do you have that
11 in front of you or you can see it on the screen, either way.
12 A. Yes.
13 Q. Question, "is it your understanding that Tor
14 Braham from Wilson Sonsini was actually drafting the, what
15 became this September 19, 1995 Asset Purchase Agreement?"
16 Your answer, "I don't know that he was drafting the APA. I
17 think he was -- he was certainly a key component there, so I
18 would think he would be working with the Novell legal team,
19 which was Michael Hoffman and someone from New Jersey, I
20 would assume."
21 That was your understanding when you gave this
22 testimony?
23 A. Yes.
24 Q. Do you now agree with me that by your own
25 previous testimony Tor Braham was the key component to the
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1 drafting of the Asset Purchase Agreement?
2 A. You know, I am reading where it says I don't know
3 that he was drafting the APA, so I don't know what you're
4 wanting me to agree to.
5 Q. I'm simply want you to agree --
6 A. I think it is consistent with what he said there
7 with what I just verbally stated which is he was the senior
8 guy. Does that mean that he is the guy drafting the
9 agreement? I don't know.
10 Q. Now during -- during the preparation of the Asset
11 Purchase Agreement, you understood that Mr. Braham took the
12 lead role in drafting that agreement, fair?
13 A. Well, being responsible for the drafting, sure.
14 Q. Well, don't you think that he took the lead on
15 drafting the definitive ultimate agreement between the
16 parties?
17 A. We're disagreeing on semantics and definition.
18 When I hear you say drafting, I don't believe he was sitting
19 there at a keyboard typing stuff in, do you?
20 Q. You know --
21 THE COURT: Mr. Mattingly, you don't get to ask
22 questions.
23 THE WITNESS: Okay.
24 THE COURT: You answer the questions.
25 THE WITNESS: We're just kind of rat-holing on this
719
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1 one.
2 Q. (By Mr. Brennan) I can only take you at your
3 previous word. Let's look now at Page 91 of your deposition
4 and I will be reading from lines two through nine on
5 Page 91. May I proceed, Your Honor?
6 THE COURT: You may.
7 Q. (By Mr. Brennan) Question, "does reviewing that
8 paragraph refresh your recollection as to Tor Braham's
9 involvement in drafting the agreement? Answer, yeah.
10 According to this, it looks like Tor was the lead on
11 drafting the definitive and -- which would still be
12 consistent with what I suggested that, you know, he would
13 doing that with input from the team, including potentially
14 Michael Hoffman, as well as attorneys from Summit."
15 Do you see that?
16 A. Yes.
17 Q. Would you agree that Tor Braham took the lead on
18 drafting the definitive Asset Purchase Agreement?
19 A. Well again, definitionally, I think consistent
20 with at that time I am still consistent that he was
21 primarily responsible for the drafting. But I don't believe
22 that he was actually typing on the keyboard.
23 Q. And you understand that what we're reading into
24 the record is your previous words under oath. You
25 understand that, right?
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1 A. Yes.
2 Q. I'm not quoting somebody else, I'm quoting you.
3 A. I think I understand that.
4 Q. Okay. Now, you were not a member of any
5 transition team that was formed after the Asset Purchase
6 Agreement was signed, were you?
7 A. No.
8 Q. In fact, you had no further involvement with the
9 Asset Purchase Agreement after it was signed, did you?
10 A. I did not.
11 Q. Now, did you ever read the Asset Purchase
12 Agreement?
13 A. Um, I probably read it. I'm sure that I have a
14 copy of it in the folder that you have and was sent that so
15 I would have read it slash, perused it, skimmed it, either
16 before or after the close.
17 Q. When did you first skim or peruse or glance at
18 the Asset Purchase Agreement?
19 A. I would imagine when it showed up in my inbox
20 sometime ago.
21 Q. Now when would that have been?
22 A. I don't know, sometime in that two to three week
23 period prior to the close.
24 Q. I'm going to -- I am going to select from the
25 documents you brought today, one of them is a document
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1 entitled Asset Purchase Agreement By and Between The Santa
2 Cruz Operation, Inc. and Novell, Inc. dated as of September,
3 then it has a blank, 1995. This is one of the documents you
4 brought with you to court today?
5 A. I believe so if you pulled it out of that manila
6 folder that I had.
7 MR. BRENNAN: I will represent to you that that is
8 where it came from. Your Honor, with your permission, I
9 would like to have this labeled for identification as
10 Novell's Exhibit 045.
11 THE COURT: Mr. Singer?
12 MR. SINGER: I have no objection to it being labeled
13 for identification.
14 MR. BRENNAN: Your Honor, with permission of the
15 court, I would like to display this on the ELMO projector?
16 THE COURT: Well, you asked for it to be marked.
17 MR. BRENNAN: Yes.
18 THE COURT: You have not asked for it to be admitted.
19 MR. BRENNAN: That is correct.
20 THE COURT: Are you going to seek its submission?
21 MR. BRENNAN: I will in just a moment. Thank you,
22 Your Honor.
23 Q. (By Mr. Brennan) Now, do you recall,
24 Mr. Mattingly, whether this document that I have identified
25 which has been marked as Defendant's Exhibit 045 is a
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1 document that you received previous to the Asset Purchase
2 Agreement being signed?
3 A. If it is a draft, then that would have been
4 previous to it.
5 Q. Is this the copy of the draft that you looked at?
6 A. It would have been a paper or online to an
7 electronic format.
8 MR. BRENNAN: Your Honor, I do move the admission of
9 Defendant's 045.
10 MR. SINGER: No objection.
11 THE COURT: It will be admitted.
12 (Whereupon, Defendant's Exhibit 045 was received
13 into evidence.)
14 MR. BRENNAN: May I now present it on the ELMO, Your
15 Honor?
16 THE COURT: You may.
17 MR. BRENNAN: Thank you.
18 Q. (By Mr. Brennan) Now, we have just displayed to
19 the jury through this technology the first page of
20 Defendant's Exhibit 045. And I would now like to turn to a
21 portion of that document which is entitled Schedule 1.1(b)
22 Excluded Assets and in particular, I will show that first,
23 I'll try to keep my fingers out of the screen, but do you
24 see that page there?
25 A. Yes.
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1 Q. And on the version of the document that you see,
2 it says, let me lower it just a little bit, do you see where
3 it says "draft" stamped on the top?
4 A. Yes.
5 Q. I know it is a little difficult to see but there
6 appears to be a handwritten date to the right 9/16/95; do
7 you see that?
8 A. Yes.
9 Q. Is that your handwriting?
10 A. I don't think so.
11 Q. Does this suggest to you that you had possession
12 of this document at least as early as September 16th, 1995?
13 A. That would be reasonable.
14 Q. And so did you understand that in this draft at
15 least that what is set forth in this schedule Excluded
16 Assets were Novell assets that would not transfer to Santa
17 Cruz Operation under the Asset Purchase Agreement then being
18 considered?
19 A. Yes.
20 Q. I'm now going to turn to Page 2 of that draft
21 Schedule 1.1(b). Excuse my big hands there. You will see,
22 I know it is a little difficult, but there is a Roman
23 numeral five Intellectual Property. Are you able to make
24 that out on the screen?
25 A. Yes.
724
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1 Q. And it has three parts; correct?
2 A. Yes.
3 Q. One is labeled capital letter A and it says
4 patent licenses, parenthesis, i.e. Pike and all others
5 associated with the UNIX System, in parenthesis, do you see
6 that?
7 A. Yes.
8 Q. Did you understand that the draft under
9 consideration several days before the Asset Purchase
10 Agreement was signed was to exclude all patent licenses?
11 A. Sure.
12 Q. That is what it says, right?
13 A. That is what it says.
14 Q. And the draft that you had in your possession
15 several days before the final agreement was signed had that
16 exclusion, right?
17 A. That is correct.
18 Q. And September 16th, 1995 would have been before
19 the Novell Board of Directors meeting that was held on
20 September 18th, 1995, correct?
21 A. Yes.
22 Q. So you would have had in your possession at least
23 two days before the Novell Board of Directors meeting a
24 draft of the Asset Purchase Agreement that listed at least
25 these proposed exclusions from transfers of assets by Novell
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1 to Santa Cruz, correct?
2 A. Yes.
3 Q. Let's then look at Item B, all copyrights and
4 trademarks, except for the trademarks UNIX and UnixWare. Do
5 you see that?
6 A. Yes.
7 Q. So is it correct then that as with the patent
8 licenses you had in your possession a draft of the Asset
9 Purchase Agreement at least two days before the board
10 meeting that listed as excluded assets, that is assets that
11 would not be transferred to Santa Cruz Operation, a document
12 that showed all copyrights and trademarks except for the
13 trademarks UNIX and UnixWare?
14 A. If that was delivered to me on the date that the
15 -- somebody wrote 9/16 then I would have had it at least two
16 days before the board meeting.
17 Q. So even before you went into the board meeting,
18 you would have had access to a draft of the Asset Purchase
19 Agreement that clearly stated that -- no, let's put it back
20 just so we have no mistake here, clearly would have stated
21 that contemplated to be excluded are all copyrights and
22 trademarks except for the trademarks UNIX and UnixWare;
23 right?
24 A. As long as it wasn't delivered at the board
25 meeting and actually copied on the 16th.
726
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1 Q. When did you tell me you got this document?
2 A. I don't know. You just said that it was on the
3 16th.
4 Q. Now, just so that we're clear here, I showed you
5 the previous page that had a date?
6 A. Written.
7 Q. I asked you and we can go back to that, we're
8 back to the first page of the draft and I asked you about
9 the reference to the date 9/16/95, and unless I misheard
10 you, I thought you told me that you believed that was the
11 date that you got this. Did I misunderstand?
12 A. That is the date it was written. I don't know --
13 you asked me if I wrote that and that is not my writing. So
14 I wouldn't have written 9/16/95 there. So someone did it on
15 that date, I assume. And whether it was delivered to me on
16 a Saturday, or whether I received it Monday as part of the
17 board package, I don't know the answer.
18 Q. I am going to show you the original that I have
19 in front of you. I would like you to look at the date.
20 Does that appear to be written in handwritten ink?
21 A. Yes.
22 Q. That is not a photocopy, is it?
23 A. It is not. But if you look at the fax date on
24 the bottom, what does the fax date on the bottom say?
25 Q. There is a fax date on the bottom, it says
727
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1 September 18, 1995, right? Now, are you saying you got this
2 by fax?
3 A. I don't know. I am just saying it has that
4 written on the bottom so, you know, you're trying to
5 establish whether I got it on the 16th, I don't know. Does
6 it have 9/16 written in handwriting? Yes, it does.
7 Q. In original ink, right?
8 A. Well, I don't know. Well, I don't know if that
9 is original ink, original or a photocopy.
10 Q. Let's take a look, I apologize. I thought we
11 cleared that up. Let's go back and have another look at it.
12 A. But my point is, is whether I got it on the 16th
13 or the 18th as part of the board meeting, I don't recall.
14 Q. If you would like to take another look,
15 Mr. Mattingly, does that appear to be original ink rather
16 than a copy or a facsimile?
17 A. No, it looks to me like it is a photocopy of
18 original ink.
19 Q. That is your best observation?
20 A. Yeah.
21 Q. Now, before you -- before you entered the board
22 meeting you had access to this document, right?
23 A. Well, or at the board meeting. As I stated, I
24 don't know if it was before or if it was at the board
25 meeting.
728
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1 Q. Let's take a look at what has been marked as
2 defendant's, excuse me, SCO Exhibit 570. This is the
3 September 15th, 1995 package.
4 And is it your testimony that you received a copy of
5 this document?
6 A. Yes.
7 Q. And when did you receive it?
8 A. Well, again, it is dated September 15th, so I
9 would assume that that being a Friday, I might have received
10 that on the 15th.
11 Q. And did you review that document at the time you
12 received it?
13 A. I'm sure I did.
14 Q. Let's look at the -- now you were not a member of
15 the Board of Directors of Novell, were you?
16 A. No.
17 Q. Never were?
18 A. No.
19 Q. You weren't a voting member of the board, right?
20 A. No.
21 Q. And in the board meeting that you attended on
22 September 18th, 1995 it was not your purpose to vote on any
23 resolution, right?
24 A. No.
25 Q. So let's look at this package that you were given
729
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1 a copy of. It says, if we can highlight the first full
2 paragraph, "dear board member" and then the first full
3 paragraph. It says quote, "we are in the process of
4 negotiating long-term business relationships with SCO and
5 Hewlett-Packard for the purpose of strengthening UNIX on the
6 Intel Platform."
7 Now let me just pause right here. Did you believe as
8 of September 15th that it was the intention of Novell to
9 sell its entire UNIX and UnixWare business to SCO?
10 A. Yes.
11 Q. Let's go back then to Exhibit 570, the next
12 sentence. Quote, "one of the key steps in this process is
13 the sale of a portion of our UnixWare business to The Santa
14 Cruz Operation."
15 Now certainly when you read this document you
16 understood that what was being considered was a sale of a
17 portion of the business, right?
18 A. Well, yes, because we were retaining the royalty
19 stream from the SVRX royalties.
20 Q. In fact, that is referenced in the next sentence,
21 right?
22 A. Yes.
23 Q. And that next sentence which is a parenthetical
24 reads, "for example, we will be retaining our traditional
25 royalty stream from UNIX SVRX source code which we -- which
730
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1 was approximately $50,000,000 for FY 1995;" correct?
2 A. Yes.
3 Q. And that suggests that the Novell royalty
4 payments that it received for UNIX SVRX source code alone
5 was about $50 million; is that right?
6 A. For that year.
7 Q. Fiscal year 1995, right?
8 A. Correct.
9 Q. So you understood going into the board meeting,
10 that Novell had a very keen important interest in
11 maintaining that royalty stream; right?
12 A. To an extent, yes.
13 Q. Well, that was critical to Novell, right?
14 A. Well, the revenue was clearly critical, right.
15 Q. And so you understood, for example, Mr. Bradford
16 and other members, excuse me, Mr. Frankenberg and other
17 members of the board in order to maintain and enhance
18 shareholder value would have felt a duty and obligation to
19 do everything that they reasonably could to protect that
20 royalty payment stream, right?
21 A. That is what you would assume if you didn't
22 understand what we were trying to accomplish from a higher
23 level strategic initiative.
24 Q. Let me see if I understand what you're saying.
25 By your own testimony you believe that one of the things
731
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1 that was a part of the transaction between Novell and SCO,
2 excuse me, Santa Cruz, was a provision whereby the royalty
3 payments that Novell was receiving, $50 million according to
4 this fiscal year in 1995, after the Asset Purchase Agreement
5 would continue to come to Novell, right?
6 A. Yes.
7 Q. That was very important to Novell, right?
8 A. Yes.
9 Q. And so back to my question, that was a
10 fundamental part of the transaction, right?
11 A. It was.
12 Q. And so Novell and its officers and directors,
13 including its general counsel, Mr. Bradford, in your
14 estimation would have been acting within the scope and duty
15 of their offices in taking whatever reasonable and
16 appropriate steps were available to them to protect that
17 royalty stream, right?
18 A. Within the framework of the strategic objectives.
19 If you would like for me to elaborate on that, I would be
20 happy to briefly --
21 Q. Just answer my question. That is all I need.
22 A. Well, then the answer would be no.
23 Q. So it is your testimony under oath that it was
24 not within the purview of the members of the Board of
25 Directors of Novell and its officers, including its general
732
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1 counsel, to take all reasonable steps to protect Novell's
2 interest in that royalty stream? Is that your testimony
3 under oath here today?
4 MR. SINGER: Objection, that is a compound question.
5 THE WITNESS: I'm trying to answer your question so
6 quit badgering me.
7 MR. BRENNAN: I did not intend to badger you.
8 THE WITNESS: The intention here and the strategic
9 realm of what we're trying to do is to establish a common
10 UNIX operating environment on Intel processors. So while we
11 absolutely wanted this $50,000,000 in revenue and it's very
12 important to Novell because it was very heavy margin, that
13 is almost 50,000,000 that goes right to the bottom line,
14 very important, but more importantly for Novell was to try
15 and get a common UNIX platform out there on Intel so that
16 there was a viable alternative to what Microsoft was
17 offering that was eroding NetWare away aggressively.
18 So in the greater context of things, okay, sometimes
19 short-term sacrifices for long-term gains have to take
20 place. And so the purpose here is there would have been
21 nothing better for Novell than if SCO had been very
22 successful with this UNIX business that they had acquired in
23 successfully unifying the entire industry around their UNIX
24 offering on X86 architecture.
25 If they could have done that, that would have eroded
733
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1 our revenue streams here from this SVRX old royalties. But
2 in the greater strategic contest, that would have been a
3 fantastic tradeoff for Novell.
4 Q. (By Mr. Brennan) Now let me --
5 A. So that is what I'm referring to when I say
6 they're trying to look after shareholder value. You can't
7 take a rifle shot of an isolated thing and try to badger me
8 on that.
9 Q. Well, I apologize if you think you're being
10 badgered.
11 A. I was being badgered.
12 Q. I do hope that you can answer my questions. Now,
13 in terms of the business objective that you understood of
14 SCO, excuse me, Santa Cruz Operation when this transaction
15 was being contemplated, what did you think Santa Cruz
16 Operation was going to do with the development of the UNIX
17 or UnixWare code?
18 A. They were going to create a merged product. They
19 were going to try and establish an opportunity for all of
20 the other OEM's that were out there, some of which were
21 paying royalties that counted into this 50,000,000, to
22 entice them to adopt this new version of an operating
23 environment for their hardware platform and unify UNIX on
24 Intel.
25 Q. Your basic understanding was that what Santa Cruz
734
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1 Operation would do is take whatever rights they got to
2 UnixWare and seek to further develop it and develop a
3 product that would be a benefit to its customers; right?
4 A. Well, to their customers and the industry.
5 Q. The industry.
6 A. And therefore, we established this agreement in a
7 fashion that NetWare components would be part of this future
8 merged UNIX. So if you could get HP and Sun and Fujitsu and
9 Hitachi and everyone using that version of UNIX that had
10 NetWare in it, then all of a sudden we could, you know, drag
11 in and be the de facto networking standard inside of these
12 UNIX operating environments.
13 Q. You did not understand that the purpose of the
14 transaction was so that Santa Cruz Operation or any of its
15 successors could turn on users of Linux, right?
16 A. Well, that wasn't -- that wasn't even discussed
17 at that point.
18 Q. Now, let's go back to what we were looking at,
19 namely Exhibit 570. The next line in this board memo that
20 Mr. Bradford says we are currently finalizing the terms of
21 an Asset Purchase Agreement which would result in Novell
22 owning, on a post transaction basis, about 16 percent of
23 SCO. Do you see that?
24 A. Yes.
25 Q. And then it says, SCO's current market cap is
735
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1 $300,000,000 at $10 a share. Do you see that?
2 A. Yes.
3 Q. Now, when you were involved back in 1995, did you
4 think that this transaction that was being discussed was one
5 where SC -- excuse me, Santa Cruz Operation, abbreviated SCO
6 here, would be paying Novell about $125,000,000 in cash?
7 A. Well, I don't know about cash but consideration.
8 In my mind, it seemed like it was about $125,000,000 deal
9 that came in various forms of consideration of which I think
10 we looked at earlier.
11 Q. Well for example, 16 percent of SCO's stock at
12 $10 a share, how much would that be?
13 A. I don't know.
14 Q. Far less than 125,000,000, right?
15 A. Sure. But there were multiple components that
16 added up to what I recall to be that amount.
17 Q. Do you recall at your deposition you thought that
18 the deal was such that SCO would be paying Novell
19 $125,000,000 in cash? Do you remember being asked that?
20 A. Yes.
21 Q. And you told the answer I think it is 125,000,000
22 in cash?
23 A. Yes, I probably volunteered the 125. I didn't
24 stay in cash.
25 Q. Then you asked at you deposition are you even in
736
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1 the ball park? Do you remember that?
2 A. Yeah, I do.
3 Q. So when your deposition was taken two years ago,
4 you didn't even know what the financial terms of the
5 agreement were, right?
6 A. I don't recall what it was that built up to what
7 in my mind seemed like it was about $125,000,000
8 transaction.
9 Q. Now, you were asked about the meetings of the
10 Board of Directors. I would like to turn back, if you
11 could, to what has been entered into evidence as Exhibit Z3.
12 Now, let me ask you a question while you're looking at that.
13 Who was present in the board meeting?
14 A. Those listed in the first paragraph.
15 Q. Do you recall each of those individuals being
16 present?
17 A. Um, well yeah, they were all pretty good about
18 showing up for the meetings.
19 Q. My question is, do you recall each of those
20 individuals being present?
21 A. I don't.
22 Q. Did Larry Sonsini speak at the meeting?
23 A. Well, Larry usually speaks at any meeting he
24 participates in. So is he here?
25 Q. Let me ask you this. Without reading the minutes
737
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1 themselves, are you able to answer my question as to whether
2 Mr. Sonsini spoke at the meeting?
3 A. I'm sure he spoke at the meeting.
4 Q. What did he say?
5 A. I don't remember.
6 Q. Did David Bradford speak at the meeting?
7 A. I'm sure he did.
8 Q. What did he say?
9 A. I don't remember.
10 (Whereupon, the reporter requested the
11 attorney to slow down.)
12 Q. (By Mr. Brennan) I'll slow down. Did Robert
13 Frankenberg speak at the meeting?
14 A. I'm sure he did.
15 Q. What did he say?
16 A. I don't remember.
17 Q. Did Jack Messman speak at the meeting?
18 A. I'm sure he did.
19 Q. What did he say?
20 A. I don't remember.
21 Q. Did Elaine Bond speak at the meeting?
22 A. I'm sure she did.
23 Q. What did she say?
24 A. I don't remember.
25 Q. Did Alan Ashton speak at the meeting?
738
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1 A. Alan Ashton? I don't think so. Was he there?
2 Q. Well, let me ask you. Do you remember whether he
3 was even there?
4 A. I don't. It looks like it was a telephonic
5 conference call.
6 Q. Well, you're aware that Mr. Ashton was a
7 participant in the meeting, right?
8 A. I am now. He was a member of the board member
9 but at some point he got off of the board and --
10 Q. So without looking at the minutes, are you able
11 to tell me whether Mr. Ashton was even a board member at the
12 time?
13 A. Sure. I think he was a board member until we
14 divested of WordPerfect.
15 Q. Thank you. Do you remember anything about
16 Mr. Ashton or his participation at the meeting?
17 A. I don't remember. He did not necessarily
18 participate a lot verbally at meetings.
19 Q. Okay. You're familiar with a board member by the
20 name of Ian Wilson, right?
21 A. Yes.
22 Q. Did Mr. Wilson speak at the meeting?
23 A. I don't remember.
24 Q. Are you familiar with a board member by the name
25 of John Young, right?
739
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1 A. Yes.
2 Q. Did Mr. Young speak at the meeting?
3 A. I'm sure he would have spoken.
4 Q. What did he say?
5 A. I don't remember.
6 Q. You just don't remember what any of these
7 individuals said?
8 A. I do not.
9 Q. Are you aware that at the Board of Directors
10 Meeting, that David Bradford and Larry Sonsini reviewed the
11 terms of the Asset Purchase Agreement?
12 A. I am sure they would have.
13 Q. So they --
14 A. That was the purpose of the meeting.
15 Q. They would have gone through the terms of the
16 agreement, right?
17 A. Yes.
18 Q. And so to your recollection, the Board of
19 Directors would have had the benefit of two attorneys, Larry
20 Sonsini and David Bradford going through the terms of the
21 Asset Purchase Agreement; right?
22 A. Correct.
23 Q. And the Asset Purchase Agreement that was before
24 the board included the exclusions of all copyrights and
25 trademarks except the trademarks UNIX and UnixWare, right?
740
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1 A. That is what the document states.
2 Q. Well, do you remember that?
3 A. I remember that as I read it.
4 Q. So now looking at the minutes of the Board of
5 Directors Meeting, your memory is refreshed, and you recall
6 that Mr. Bradford, general counsel, Larry Sonsini, a member
7 of the board, and also a senior partner at Wilson Sonsini
8 went through with the board the terms and conditions of the
9 Asset Purchase Agreement, right?
10 A. Well, I think that they would have reviewed the
11 high-level terms and conditions in the Asset Purchase
12 Agreement. They would have not gone through the agreement
13 and gone on a line-by-line basis.
14 Q. Well, do you remember one way or the other?
15 A. I don't, but I guarantee you they wouldn't have
16 done that.
17 Q. You guarantee it, but you just don't remember?
18 A. I don't remember. But we would never take a 50,
19 60 page document and review that on a line-by-line basis.
20 Q. Now --
21 A. Never in the four years that I attended board
22 meetings would we do that.
23 Q. Would the most important aspects of the
24 transaction be reflected in the resolution of the board?
25 A. They should be.
741
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1 Q. So to your understanding, the most critical parts
2 of the Asset Purchase Agreement put before the board would
3 have been those that the board reached specific resolution
4 on, right?
5 A. Yes.
6 Q. So then let's look at the actual resolutions
7 reached by the board. They're on Page 2. And we're going
8 to focus on the third paragraph where it says, "Novell will
9 retain." If I could have that highlighted. Our patient
10 jury has seen this language several times. "Novell will
11 retain." So if I understand your testimony correctly, the
12 most important parts of the transaction would be part of the
13 resolutions, right?
14 A. Yes.
15 Q. It says here as part of resolved, quote, "Novell
16 will retain all its patents, copyrights and trademarks
17 (except for the trademarks UNIX and UnixWare)" right?
18 A. Yes.
19 Q. And that -- that is almost verbatim if not
20 exactly the language that was in the draft Asset Purchase
21 Agreement that you and other people attending the board
22 meeting received in advance of the board meeting, right?
23 A. Correct.
24 Q. There was no surprise, right?
25 A. Well, I think once again, as I talked about when
742
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1 you were trying to badger me about the $50,000,000, you
2 can't take a rifle shot in a two month negotiation and a 60
3 page document and try and zero in on that. This is
4 referring to the fact that Novell bundled a number of its
5 products that it retained that weren't part of this Asset
6 Purchase Agreement. And Novell obviously would retain that
7 intellectual property, those copyrights and trademarks with
8 those products that they retained. That is what this is
9 stating.
10 Q. What I'm trying to find out from you is the
11 following. First, there was -- there was no surprise
12 foisted on the board with language that would appear in the
13 ultimate signed Asset Purchase Agreement that would state
14 that the excluded assets would include all copyrights and
15 trademarks except the trademarks UNIX and UnixWare. Would
16 you agree with that?
17 A. In a perfect world that should be the case.
18 Q. But would you agree with me that the members of
19 the board and other participants in the meeting, including
20 yourself, were provided with the draft of the asset purchase
21 agreement before the board meeting that included the very
22 language I have been focusing on?
23 A. Yes.
24 Q. So would you agree with me then that there was no
25 attempt by Mr. Bradford or anyone else to try to somehow
743
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1 surprise or trick the board?
2 A. I don't believe it would have been their
3 intention, but I want to emphatically state that at this
4 point in time, this is the eleventh hour, 59th minute and
5 59th second to all of the sudden assume that the UNIX
6 copyrights weren't part of this transaction that we had been
7 selling for two months would have definitely raised
8 eyebrows. That is not inconsistent with this because Novell
9 is going to retain its patents and copyrights for NetWare,
10 for Groupwise, or any of those products that they bundled
11 with UnixWare.
12 Q. Well, again, just so we can be very clear on
13 these minutes, one of the resolutions was that the explicit
14 exclusion that we have talked about was a part of the
15 resolution by the board, right?
16 A. Well, on the Novell patents or the Novell
17 patents, copyrights and trademarks pertaining to Novell's
18 retained products.
19 Q. Now --
20 A. I disagree with you saying that that applies to
21 UNIX.
22 Q. Well I -- I appreciate the fact that that is your
23 argument here today. My question is --
24 A. It is not my argument. It is what I spent two
25 months out in California negotiating with SCO, with 12 other
744
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1 people from Novell and 12 from SCO.
2 Q. Now do you know whether --
3 A. There was never confusion in my mind.
4 THE COURT: Mr. Mattingly, please. If you have
5 something more that you would like to say, you will be given
6 an opportunity with Mr. Singer who will have another
7 opportunity to ask you questions. Please just answer
8 Mr. Brennan's questions as directly as you can.
9 THE WITNESS: I apologize.
10 Q. (By Mr. Brennan) Now, there was also additional
11 resolutions. If we could go down to the resolution on the
12 bottom of page 2 where it says reserve -- excuse me,
13 resolved further?
14 A. Uh-huh (affirmative).
15 Q. Next one down. Next one. So there was an
16 additional resolution, quote, "That the terms and conditions
17 of the Asset Purchase Agreement as set forth therein are
18 hereby approved, subject to such changes and modifications
19 of a non-material nature as the proper officers of Novell
20 may consider appropriate or necessary." Do you see that?
21 A. Yes.
22 Q. Now do you know whether the language that
23 appeared in the Asset Purchase Agreement, excluding all
24 copyrights and trademarks except the trademarks UNIX and
25 UnixWare were changed prior to the signing of the Asset
745
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1 Purchase Agreement by either Novell or Santa Cruz Operation?
2 A. I don't know.
3 Q. Did you have any involvement whatsoever in any
4 amendments to the Asset Purchase Agreement?
5 A. I did not.
6 Q. You played no role in any of that; right?
7 A. No.
8 Q. You have no personal knowledge about any of that,
9 right?
10 A. No. Well personal knowledge, I do have the
11 knowledge that there was an Amendment 2 that tried to
12 clarify some of the ambiguous legal work.
13 Q. Somebody told you that?
14 A. Sure, it was front page news.
15 Q. But you don't -- you weren't involved in any of
16 that, right?
17 A. No.
18 Q. Now, I would like to ask you a bit about an
19 individual I think that Mr. Singer asked you about, Duff
20 Thompson. You're familiar with Mr. Thompson?
21 A. You bet.
22 Q. Mr. Thompson became your boss after you stopped
23 working for Bob Frankenberg; right?
24 A. Yes.
25 Q. And you had a chance in your role working for
746
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1 Mr. Thompson to observe his work habits?
2 A. Yes.
3 Q. You began working for Mr. Thompson when?
4 A. I'm not sure exactly what the time frame was, but
5 after I stopped working for Bob Frankenberg then I took a
6 job with him as vice-president of corporate development and
7 strategic relationships.
8 Q. In that role, you would have had that position
9 with Mr. Thompson before you engaged in any discussions with
10 Santa Cruz Operation; right?
11 A. Yes.
12 Q. And you would have continued working with
13 Mr. Thompson until he left the company; right?
14 A. Yes.
15 Q. When did Mr. Thompson leave Novell?
16 A. I am not sure exactly. It would have been after
17 the WordPerfect divestiture.
18 Q. Sometime in 1996?
19 A. That sounds reasonable.
20 Q. Okay. So is it fair to say that from the time
21 period at least before any discussions were had with Santa
22 Cruz Operation and until at least when Mr. Thompson left in
23 1996 you worked with and for him?
24 A. Yes.
25 Q. Now based on your observation of him, would you
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1 agree that Mr. Thompson was not really involved with the
2 details of the Novell Santa Cruz transaction?
3 A. No. Duff had specific responsibilities as the
4 senior executive overseeing that and participated in all of
5 the high-level senior executive type meetings. He was not
6 on the ground for two months out in California day-to-day
7 like the rest of the team was.
8 Q. If we could go back to your deposition, let's
9 look, again this is your deposition taken more than two
10 years ago on January 19th, 2007?
11 A. Yes.
12 Q. If you would turn with me to Page 70 and counsel
13 we're going to read from Line 17 through 22 on Page 70. Do
14 you have that, Mr. Mattingly?
15 A. Yes.
16 Q. The question, "Is it fair to say that, based on
17 your personal knowledge, that Duff Thompson was not really
18 involved in the details of the Novell, Santa Cruz
19 transaction?" Do you see that question?
20 MR. SINGER: Your Honor, I would ask that the entire
21 answer be shown to the witness and blown up on the computer
22 screen.
23 MR. BRENNAN: Well, I'm happy to do that. That is not
24 a problem.
25 THE COURT: All right.
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1 Q. (By Mr. Brennan) And then we'll see your answer
2 that does spill over to the top of Page 71.
3 Your answer, "you know, I would say that that's
4 probably a fair statement because the real detail guy in
5 this was Ed Chatlos, and of course, Ed and I were peers and
6 reported to Duff. But he was a general counsel and formerly
7 with WordPerfect and was the senior or executive vice
8 president of Corporate Development at Novell."
9 So would you agree with me today, as I believe you
10 agreed with Mr. Brakebill who asked you this question, that
11 Mr. Thompson was not really involved with the details of the
12 transaction?
13 A. Well, as I stated there in my deposition and as I
14 earlier stated today, he was the senior executive overseeing
15 the transaction, but that doesn't mean that he is the detail
16 guy that is negotiating every aspect of the transaction. So
17 I think it is all consistent with what I said back then. It
18 is consistent with the dialogue you and I had about whether
19 Tor was drafting the APA or whether he was just focussing --
20 THE COURT: Mr. Mattingly, thank you.
21 THE WITNESS: -- overseeing the drafting.
22 THE COURT: Thank you.
23 Q. (By Mr. Brennan) Is it true that in fact to your
24 observation Duff Thompson was quote "checked out" unquote
25 from Novell during this time period?
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1 A. No.
2 Q. Did you ever hear anyone suggest that?
3 A. Yes.
4 Q. So just so I understand, you have heard people at
5 Novell suggest that Duff Thompson was checked out during
6 that time frame; right?
7 A. Yes.
8 Q. And to your observation, was it commonly known at
9 Novell during this timeframe, that is discussions about the
10 Novell Santa Cruz Operation transaction, that Mr. Thompson
11 was checked out?
12 A. No.
13 Q. Okay. Let's look at your deposition, again, if
14 we might. This time we'll turn to Page 71. And if I could
15 direct your attention, I'll be reading from lines 18 through
16 23.
17 Question, "would you say it was commonly known amongst
18 the people who were working on the Novell, Santa Cruz
19 transaction that Duff was checked out? Answer, yeah. I
20 would think that -- I would think that generally people
21 would have agreed with that sentiment."
22 MR. SINGER: Your Honor I would ask the prior question
23 and answer also be presented to the witness.
24 MR. BRENNAN: Your Honor, they certainly will have
25 that opportunity on their redirect, but if he would like I'm
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1 happy to do the same thing.
2 MR. SINGER: I think this falls under the completeness
3 rule, Your Honor.
4 THE COURT: I think we probably ought to have you do
5 it now.
6 MR. BRENNAN: I'm happy to do it right now.
7 Q. (By Mr. Brennan) So let's look on Page 71 the
8 question at line seven through the answer that continues to
9 line 17.
10 Question, "and what was your understanding of what
11 that meant, Duff was checked out during this period of time
12 preceding the Novell -- during the Novell, Santa Cruz
13 transaction? Answer, well, Duff came into Novell and
14 assumed that position of, you know, senior executive over
15 corporate development, but he was not in the office that
16 often and participated in the senior executive level
17 meetings inside of Novell, as well as the senior executive
18 level meetings when we had high level meetings with, you
19 know, maybe Alok Mohan and Doug Michels." Do you see that?
20 A. Yes.
21 Q. Now, were you also aware of a circumstance during
22 the course of discussions over The Santa Cruz Operation
23 where you yourself believed that he had checked out?
24 A. No.
25 Q. Do you remember an all hands meeting held in
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1 California where Mr. Thompson didn't show up?
2 A. Yes.
3 Q. And you considered that to be in your own mind
4 evidence that he had checked out?
5 A. No. Um, time frame wise, you asked if that was
6 during that SCO transaction and I don't believe that was
7 during it. I think it was after.
8 Q. So you thought that Mr. Duff Thompson was checked
9 out after the SCO transaction?
10 A. Well, I think that is what people understood him
11 to be.
12 Q. Now, you believed that under the Asset Purchase
13 Agreement all UNIX related patents transferred to Novell,
14 right, excuse me, from Novell to Santa Cruz Operation,
15 right?
16 A. Say that again, please.
17 Q. Yes. You believed that under the Asset Purchase
18 Agreement that all UNIX related patents transferred from
19 Novell to Santa Cruz, right?
20 A. Well, as I stated, I think it was relevant
21 because I think Novell retained -- well as we read earlier,
22 Novell retained patents but they were some specifically that
23 we referenced like the Pike patent that were pretty
24 significant that Novell retained.
25 Q. Let me see if I understand what you're telling
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1 me. You believe that under the Asset Purchase Agreement
2 Novell retained patents, right?
3 A. Yes.
4 Q. Did it transfer any patents?
5 A. I don't believe so unless there were some that
6 were possibly relevant to UNIX.
7 Q. And your -- the basis for your belief that Novell
8 retained patents and didn't transfer any is premised on
9 what?
10 A. Well, I knew that we had acquired this patent
11 from USL around overlapping windows. And if we had that
12 patent, there was a company by the name of Microsoft that
13 had a pretty nice business in overlapping windows that I
14 felt like we should have executed our rights against that.
15 Q. Well, were you aware that under the Asset
16 Purchase Agreement signed on September 19th, 1995 that one
17 of the excluded assets was all patents?
18 A. I am now.
19 Q. What do you mean you are now?
20 A. We just read that earlier.
21 Q. Well, just so we're clear, what we looked at
22 earlier was a draft unsigned version of the Asset Purchase
23 Agreement. Let's actually look at the final version of the
24 Asset Purchase Agreement signed on September 19th, 1995 and
25 we'll look in particular at the final version of Schedule
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1 1.1(b) that was entered into by the parties on
2 September 19th, 1995.
3 Here it says, and again I'll represent to you that
4 this is from the executed version of the final Asset
5 Purchase Agreement signed on September 19th, 1995. And
6 under intellectual property it says, "all copyrights and
7 trademarks except for the trademarks UNIX and UnixWare," do
8 you see that?
9 A. Yes.
10 Q. And that is exactly the same language that
11 appeared in the draft that you got before the board meeting;
12 right?
13 A. Yes.
14 Q. But there also is an exclusion of all patents;
15 right?
16 A. Correct.
17 Q. So is this what tells you that no patents
18 transferred?
19 A. Yes.
20 Q. Isn't this also what tells you that no copyrights
21 or trademarks except for the trademarks UNIX and UnixWare
22 transferred?
23 A. Well, once again, in a rifle shot you would
24 assume that.
25 Q. Well, are you aware of any other provision that
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1 one would look to in the Asset Purchase Agreement signed on
2 September 19th, 1995 to show that some copyrights or
3 trademarks did pass to Santa Cruz Operation?
4 A. No.
5 Q. Did you have any involvement in the preparation
6 of the schedule of either included or excluded assets?
7 A. No.
8 Q. Do you know who did?
9 A. I do not.
10 Q. Do you believe, based on the role that you played
11 as compared to the role that, for example, Tor Braham played
12 in the preparation of the Asset Purchase Agreement, that you
13 or he would better know what was actually written in the
14 final version of the agreement?
15 A. It would be Tor.
16 Q. Now, we have talked earlier about the documents
17 that you brought with you to court today as well as other
18 documents that you found in your garage?
19 A. Yes.
20 Q. And that upon finding those, you immediately
21 called Ryan Tibbitts at SCO, right?
22 A. I don't think it was immediately, but I did talk
23 with him.
24 Q. And these were documents that you obtained during
25 the course of your employment at Novell; right?
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1 A. Yes.
2 Q. These are documents that you would have obtained
3 while you were vice-president of Novell, right?
4 A. Yes.
5 Q. Why didn't you call Novell and tell Novell that
6 you found some documents?
7 A. SCO is the company that actually subpoenaed me
8 and drove this entire deposition process. And as I stated
9 earlier, I have a 30 year relationship with Ryan Tibbitts as
10 a former teammate.
11 Q. So because of your relationship with
12 Mr. Tibbitts, you thought you would call him?
13 A. Well, that would be part of it. Clearly he is a
14 friendly face. But I absolutely -- you asked the question,
15 I absolutely believe that Novell is wrong in what they're
16 trying to allege here.
17 Q. Do you have any concern about our holding the
18 documents that you brought today to give us a chance to look
19 at them?
20 A. No, as long as I get them back.
21 Q. Um, and after we have a chance to look at them,
22 if we have any further questions would you be willing to
23 return so we could ask you about those?
24 A. Sure.
25 Q. Now, the other documents in addition to those
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1 that you brought, you still have those, right?
2 A. I do.
3 Q. And those are at your home?
4 A. They are.
5 Q. Would you be willing to provide those documents
6 to Novell's counsel to look at?
7 A. Absolutely.
8 Q. We would ask that you do that as well. Um, when
9 do you think you might be able to do that?
10 A. Whenever you guys come down.
11 Q. Okay. I am sure we will come tomorrow. Now just
12 a few more questions, Mr. Mattingly, I do appreciate your
13 patience with me today.
14 I believe you said earlier that in response to a
15 question by Mr. Singer that you thought that a majority of
16 the UNIX business had been sold by Novell. Did I hear that
17 correctly?
18 A. I don't know if I said a majority but yes.
19 Q. And so if one were to want to find out what
20 assets were sold and which ones weren't, where would you
21 recommend one look to make that determination?
22 A. I would say you could look at the contracts and
23 all amendments to the contracts that clarify that.
24 Q. So you believe that in order to find out what
25 assets Novell actually transferred to Santa Cruz Operation
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1 one should look to the contract, right?
2 A. That would be the first place.
3 Q. Can you think of any other source other than the
4 contract?
5 A. Sure. If ambiguity showed up, then you would
6 probably talk to the deal team to understand what the spirit
7 and intent of that contract was.
8 Q. So if one wanted to talk to the deal team, one
9 would first talk to those who wrote the deal, right?
10 A. Depends on who you know. You might talk to them,
11 you might talk to Ed Chatlos.
12 Q. And you know that one of the persons involved in
13 writing the deal was Tor Braham; right?
14 A. Yes.
15 Q. Did you ever ask Mr. Braham about this
16 transaction?
17 A. I have not spoken with Tor about this.
18 Q. Have you gone to him and said I would like to
19 understand what this transaction meant in terms of assets
20 that were transferred?
21 A. No.
22 Q. But you do believe that he would be one that you
23 would want to ask that about to find out what was really
24 meant by the written word, right?
25 A. Yes.
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1 MR. BRENNAN: Thank you. I appreciate your time
2 Mr. Mattingly.
3 THE COURT: Mr. Singer?
4 MR. SINGER: Thank you, Your Honor. I only have a
5 couple of questions.
6 REDIRECT EXAMINATION
7 BY MR. SINGER:
8 Q. Mr. Mattingly, who do you think has a better
9 understanding of what this deal constituted, specifically
10 with whether the UNIX copyrights were being sold, you and
11 the other individuals who negotiated the deal for two months
12 in California, or Mr. Braham, Tor Braham, and the lawyers
13 who were supposed to document what you negotiated?
14 A. I think collectively the business team would
15 understand what the strategy and the implementation of that
16 strategy should have been better than Tor Braham.
17 MR. BRENNAN: Okay. Thank you very much.
18 THE WITNESS: Collectively.
19 MR. SINGER: Thank you.
20 MR. BRENNAN: Your Honor, that just invites a question
21 or two, if I might.
22 THE COURT: Go ahead.
23 RECROSS-EXAMINATION
24 BY MR. BRENNAN:
25 Q. Now Mr. Mattingly, there were two parties to this
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1 transaction, right?
2 A. Yes.
3 Q. Novell on one hand, correct?
4 A. Yes.
5 Q. Santa Cruz Operation on the other, right?
6 A. Yes.
7 Q. And they both had lawyers representing them,
8 correct?
9 A. Yes.
10 Q. We have talked about Wilson Sonsini. You have
11 been asked questions about Mr. Braham.
12 A. Yes.
13 Q. Who was representing Santa Cruz Operation?
14 A. Um, I can't remember the name. Was it Brobeck
15 or --
16 Q. Well, you're doing pretty well. I will go back
17 to the file of documents you brought with you today. And
18 one of them is a fax cover sheet dated September 18th, 1995
19 and it is on the letterhead of Brobeck Phleger,
20 P-H-L-E-G-E-R and Harrison. Does that refresh your
21 recollection as to who the lawyers were that were
22 representing Santa Cruz Operation?
23 A. Yes.
24 Q. Do you know how large the law firm of Brobeck
25 Phleger & Harrison was in September of 1995?
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1 A. No, but they were a large credible firm.
2 Q. Did you understand that they had more than 500
3 lawyers at that time?
4 A. I did not know how many they had.
5 Q. And did you ever have any dealings with the
6 Brobeck firm?
7 A. No.
8 Q. Did you understand that Santa Cruz Operations had
9 both in-house lawyers and a very sophisticated large law
10 firm representing it in this transaction?
11 A. Sure, yes.
12 Q. Would you have expected that Santa Cruz Operation
13 officers, directors and in-house counsel and in particular
14 outside lawyers would have reviewed the Asset Purchase
15 Agreement before it was signed?
16 A. Yes.
17 Q. And you would expect that if Santa Cruz Operation
18 believed that there was a provision in the Asset Purchase
19 Agreement signed by Alok Mohan, the chairman of its Board of
20 Directors on September 19th, 1995, that those lawyers would
21 have protected the interests of Santa Cruz just as Novell's
22 lawyers would have been represented?
23 A. To the best of their abilities, yes.
24 Q. And would you expect that if there was a problem
25 in the agreement, particularly with respect to what the
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1 included or excluded assets were, that the Brobeck firm
2 would have been well-equipped to advise and protect Santa
3 Cruz against a mistake?
4 A. They should have been.
5 Q. Any reason to believe they didn't?
6 A. Well, just because it is -- we're here today.
7 Pretty good evidence that the legal work on both sides was
8 sloppy and did not represent the intent of the business
9 agreement.
10 Q. Now, you say the work was sloppy. Just so we can
11 perhaps end here, when we looked at the minutes of the Board
12 of Directors, the resolution of the Board of Directors was
13 that the Asset Purchase Agreement that was signed by Robert
14 Frankenberg was one that was in the best interest of the
15 shareholders of Novell, right?
16 MR. SINGER: This is way beyond.
17 THE COURT: I'll sustain the objection.
18 MR. BRENNAN: Thank you, Your Honor. No further
19 questions.
20 THE COURT: Mr. Mattingly, it is possible that you may
21 be recalled. So if you would keep yourself available for
22 that eventuality. And I do have to instruct you
23 specifically please do not have a conversation with any
24 other witness in this case, either someone who has been
25 called or will be called, and please do not discuss your
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1 testimony with anyone who will be a witness in this case.
2 THE WITNESS: Yes, Your Honor.
3 THE COURT: All right. Thank you, Mr. Mattingly.
4 THE WITNESS: Thank you. We're done?
5 THE COURT: You're done, yes.
6 Ladies and gentlemen, we're going to go ahead and
7 recess for the weekend. I do want to, because of its
8 importance, read to you again the instruction that you were
9 given the very first day of trial about your conduct.
10 First, I again instruct you that during the trial you
11 are not to discuss the case with anyone including fellow
12 jurors or permit anyone to discuss it with you. Again, I
13 stress if anyone attempts to make any conversation about
14 this case with you, you need to bring it to my attention
15 very, very quickly.
16 Until you retire to the jury room at the end of the
17 case to deliberate on your verdict, you simply are not to
18 talk about this case. Not talking about this case means not
19 talking about it in any way including by internet, e-mail,
20 text message and instant communication devices or services
21 such as cell phones, blackberries, I-phones, social
22 networking websites including Facebook, Twitter, et cetera.
23 Second, do not read or listen to anything touching on
24 this case in any way. Do not watch or listen to any news
25 reports concerning this trial on television or on the radio.
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1 And do not read any news accounts of this trial in the
2 newspaper, on the internet or on any instant communication
3 device including again Facebook, Twitter and so on.
4 Third, and perhaps most importantly right now because
5 you have heard a week of testimony, do not form any opinion
6 until all of the evidence is in. Keep an open mind until
7 you start your deliberations at the end of the case. And
8 finally, do not do any research or make any investigation
9 about the case on your own.
10 I hope you all have a nice weekend. I hope that you
11 have some basketball teams left that you can at least watch
12 basketball. If you want to cheer for Utah State, by the
13 way, I won't mind that.
14 Ms. Malley, would you please assist the jury to the
15 jury room.
16 THE CLERK: All rise for the jury, please.
17 (Whereupon, the jury left the courtroom.)
18 THE COURT: Counsel, do you have anything before we
19 recess?
20 MR. HATCH: Your Honor, we have one thing.
21 THE COURT: Go ahead, Mr. Hatch.
22 MR. HATCH: Um, I would like to ask Your Honor to
23 revisit at least a small portion of the ruling earlier today
24 on the Groklaw. And the only thing I would ask is if Your
25 Honor would reconsider allowing at least the striking of the
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1 text, I mean the part of the deposition that would start at
2 Page 64 Line 23 through 65 line 3.
3 I think that they end up getting everything that they
4 need in, what Your Honor intended to have them get in, and
5 this would take out one of the references. And I think
6 those lines don't add anything because the person is
7 mentioned elsewhere in the testimony you have allowed. So
8 we would ask that you reconsider at least striking those.
9 THE COURT: Again Line 23 on Page 64 --
10 MR. HATCH: Starting on -- I guess you would start on
11 the question so line 22.
12 THE COURT: Line 22.
13 MR. HATCH: Through Line 3 on the next page.
14 THE COURT: Who wishes to respond?
15 MR. BRENNAN: Your Honor, I would be happy to. Just
16 let me take a quick look. Just so I'm clear, the suggestion
17 is Page 64 Line 22 through what Mr. Hatch?
18 MR. HATCH: Line 3 on the next page.
19 MR. BRENNAN: Well, Your Honor, here is the issue with
20 it. It gives context to the suggestion above regarding who
21 PJ is. And it indicates, as well, that what PJ is doing is
22 operating a website that in essence is a source or place of
23 news information that Ms. O'Gara is essentially competing
24 with. The real issue here, and the reason for the
25 testimony, is as the court may be aware, that Ms. O'Gara
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1 makes a claim that Mr. Stone made a certain statement based
2 on a telephone conversation. Novell believes that it is
3 entitled to present evidence to the jury that Ms. O'Gara is
4 not an objective journalist and that she has a certain
5 relationship with SCO that led her to be less than objective
6 in her report of this conversation with Mr. Stone. This
7 fits in with that. We have already agreed to take out other
8 matters that would be extraneous, but this particular
9 reference gives context to who PJ is. He is essentially a
10 competing journalist.
11 MR. HATCH: Your Honor, it does that. We haven't
12 taken that out. If you note, the very next clip identifies
13 PJ as Pamela Jones and it goes on from there. The reason he
14 has given is some of the exact reasons why he shouldn't be
15 here because, you know, he wants to mention this cite which
16 they'll go to. And, you know, we think that is
17 inappropriate because we think it is inconsistent with what
18 Your Honor has ordered and been concerned about in the past.
19 And these couple sentences really don't add any of the
20 flavor that he has already got from the other designations
21 that Your Honor has allowed.
22 THE COURT: Um, go ahead, Mr. Brennan.
23 MR. BRENNAN: Well briefly. Your Honor, what this
24 does is first of all the argument assumes that the jury is
25 going to disregard the court's very careful instructions
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1 that have been repeated every day of trial. Second of all,
2 there are other publications that have been referenced and
3 will be referenced during the course of trial and one is the
4 Wall Street Journal. A juror having heard reference to a
5 particular publication could just as easily go to the Wall
6 Street Journal or any other source.
7 Third, the reason for this particular reference is
8 that it mentions it is a website that follows the SCO case.
9 Now, we have to assume that the jury is going to disregard
10 the court's instruction for this to be an issue, but it
11 gives that very context as to why Ms. O'Gara may have lost
12 her objectivity and thus her statement is not credible.
13 THE COURT: The court has to presume that the jury is
14 going to follow the instructions that the court gives to it.
15 Otherwise, we are in very serious trouble. And so the court
16 is going to deny the request of Mr. Hatch that those
17 additional lines be excluded. The court believes that the
18 jury should be trusted to that extent. But more
19 importantly, again, the probative value of this testimony is
20 very important. There is a slight possibility of there
21 being something that would stick in a juror's mind that may
22 lead them to disobey the court and go home and look up the
23 website but I just think that it is so highly unlikely I
24 cannot allow the probative value to be ignored.
25 MR. HATCH: Can I raise one last suggestion? I know I
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1 am trying your patience. But could we at least have the
2 scrolling turned off during this playing of this deposition
3 so they don't see the spelling?
4 THE COURT: I think that would be reasonable.
5 MR. BRENNAN: Very well.
6 THE COURT: If nothing else in the scrolling leave it
7 blank where the name is referred to.
8 MR. BRENNAN: We'll do that, Your Honor. Thank you.
9 THE COURT: All right. Are you happy now?
10 MR. HATCH: I got a crumb. You know as long as I
11 leave for the weekend with a crumb, I'm happy.
12 THE COURT: All right. Counsel, let me point out
13 something. Let me ask something first of all. Are we back
14 on schedule?
15 MR. SINGER: Not quite. We were planning to be at the
16 end of the day, but we thought we would get through
17 Mr. Mattingly much quicker than we did. So we have
18 Mr. Maciaszek and some depositions that didn't come in today
19 that will be put into next week.
20 THE COURT: But Mr. Davis is not going to be
21 testifying so you --
22 MR. SINGER: That saves some time. I am sure that
23 would not have been a short examination.
24 THE COURT: Yeah, that is what I would have thought as
25 well.
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1 MR. JACOBS: Could we have an indication for Monday
2 and Tuesday?
3 MR. SINGER: Yes. And the first witness that we will
4 call is Kimberly Madsen. She is traveling from --
5 MR. JACOBS: After Mr. Maciaszek?
6 MR. SINGER: No. No, before Mr. Maciaszek.
7 Ms. Madsen will be our first witness. We will then go to --
8 probably to Steve Sabbath's deposition and then pick up with
9 either Mr. Maciaszek or Mr. Nagel in some order.
10 MR. JACOBS: And after that?
11 MR. SINGER: Um, well, if we get beyond that, there is
12 several other depositions which we haven't played and, you
13 know, Mr. McBride would be probably the next witness after
14 that.
15 MR. JACOBS: So am I to understand, I'm sorry to being
16 doing this in front of Your Honor, am I to understand that
17 Mr. Maciaszek will not be called?
18 MR. HATCH: He just listed him.
19 MR. SINGER: I thought I listed him. We're talking in
20 terms of live witnesses on Monday. Ms. Madsen,
21 Mr. Maciaszek, Mr. Nagle. If we get through that, then we
22 would also go through Mr. McBride. That is optimistic.
23 THE COURT: There are no hearings this afternoon so
24 you can leave here what you want to. And if you would
25 please retrieve these three Broderick depositions the court
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Case 2:04-cv-00139-TS Document 859-1 Filed 04/19/10 Page 77 of 77
1 would appreciate it.
2 MR. BRENNAN: Yes, Your Honor.
3 THE COURT: We will be in recess until 8:30 Monday
4 morning.
5 MR. ACKER: Have a good weekend, Judge.
6 (Whereupon, court adjourned for the day at 1:30 p.m.
7 The jury trial will continue on Monday, March 15th
8 at 8:30 a.m.)
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Next day: [860] 15-Mar-2010.


Last Updated Friday, July 23 2010 @ 07:54 PM EDT


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