SCO Grp v. Novell Inc

Filing 857

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 10, 2010-Jury Trial-Volume II before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Ed Young, Ray Fenlon, Patti Walker, Telephone number [phone]. NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 business days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at www.utd.uscourts.gov. Please read this policy carefully. If no Notice of Intent to Redact is filed within the allotted time, this transcript will be made electronically available on the date set forth below. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 5/10/2010. Redacted Transcript Deadline set for 5/20/2010. Release of Transcript Restriction set for 7/19/2010. (Attachments: # 1 Part Two, # 2 Part 3)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

SCO Grp v. Novell Inc

Doc. 857 Att. 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. ACKER: Q meet. THE COURT: MR. ACKER: jury in? MR. ACKER: MR. SINGER: THE COURT: The COURT:

(10:30 a.m.) Anything, counsel, before we bring the

Not on behalf of Novell, Your Honor. Not on behalf of SCO, Your Honor. Thank you. (jury present) Go ahead, Mr. Acker. Thank you, Your Honor. CROSS-EXAMINATION

Good morning, Mr. Thompson.

We haven't had a chance to I want to take

I'm Eric Acker and I represent Novell.

a step back so the jury truly understands your position in this litigation. When you testified about being at Novell, Do

the time that you were at Novell was just in 1994 to 1996. I have that right? A Q That's correct.

And you were an employee at Novell during that period of

time; correct? A Q Yes. And you had come to Novell as a result of Novell

acquiring the company that you used to work for, WordPerfect; right? A That's correct.

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Q

And when Novell decided in late 2000 -- or 1995 to sell When

that division, you decided to leave Novell; correct?

they decided to sell WordPerfect, you decided to leave Novell? A Yeah. You said late '95. Actually I think the decision

was reached fairly early in the year. Q '95? A That's when I announced to Bob or had a discussion with And You made your decision to leave early in the year in

Bob that it would probably be best for me to leave the company. Q Because you didn't want to be at Novell any longer; is

that right? A Q Yeah, I really didn't. And what time -- what time frame was that that you told

Mr. Frankenberg that you no longer wanted to work for his company? A To the best of my recollection it would have been the

April, May time frame. Q Okay. So before the negotiation and actual signing of

the APA, you had already decided you were going to leave Novell? A Q A I had discussed with Bob that I would leave Novell. And that's what you ultimately did; correct? Bob asked me to stay to conduct this transaction and a

couple of others, and I did.

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Q

Would It be fair to say that at the time of the APA, the

negotiations leading up to it, and the time after the signing of the APA in September of 1995 until the end of the year, you were pretty much checked out from Novell? accurate? A Q I don't know what you refer to by checked out. Well, mentally you'd already made the decision to leave; Isn't that

right? A If that's what you're referring to is that I had made a

decision that I would be leaving the company, then that is correct. Q Now, after you left Novell as an employee, and after the

APA transaction, you joined the board of Santa Cruz, the other side of -- the company on the other side of the APA; correct? A I think I actually was made a member of the board of

Santa Cruz while I was still an employee of Novell. Q And then subsequently after Santa Cruz, or Tarantella at

that point, transferred the assets that it acquired in the APA to Caldera, you became a board member of Caldera in 2001; right? A Q Correct. And since May of 2001, you have been a board member until

just recently of Caldera and subsequently the new SCO; correct?

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A Q

That is correct. And it's the new SCO that is the plaintiff in this case

that's suing Novell; correct? A Q That is correct. So fair to say for the last nine years you have been a

board member for the company that is accusing Novell of slander of title; right? A Q I was a member of SCO -- SCO's board, that's right. And it's that board, SCO's board, that made the decision

to sue Novell and accuse it of slander of title; correct? A Q Yes. And so in 2004 you were actually head of the litigation

committee that made the decision to sue the company you used to work for; right? A Well, could you repeat that question? I was a member of

the board in 2004?

Yes, I was a member of the board in 2004.

Is that your question? Q My question was were you the member of the board that

decided to sue your old company in 2004? A Q A Q A Q Was I the member of the board that made the decision? Were you on the board that made the decision? I was on the board that made the decision. Did you vote in favor of it? Yes. And as a board member of SCO, you have an allegiance to

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SCO; correct? A Sure. I have obligations and duties that relate to being

a board member. Q In fact you have a fiduciary obligation that requires you

to act in the best interests of SCO at all times; correct? A Q A That is correct. As a board member of that company; correct? For the period up -- for the total duration of the time

that I was a board member of SCO, that's right. Q Including the time the decision was made to sue your old

company Novell; right? A Q Yes. And in addition to having a fiduciary obligation to

protect SCO, you also have a financial interest in SCO; correct? A Q Well, I didn't at that time, but I do now. And I think you told Mr. Singer you have 100,000 shares

of stock? A Q I think the actual number is 110,000 shares. And you also have additional stock options on top of

that; correct? A I may have. I may not. The problem with that question

is whether or not those other options have expired. Q Well, let me ask you about the stock. Now, you told

Mr. Singer that that 110,000 shares of stock was only worth

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about 80 or $90,000; correct? A I was informed today that the stock price is 70 something

cents, and so I guess that's the amount. Q But if SCO succeeds in this litigation and its stock

price goes up, you stand to gain financially; correct? A Q A Q A Q Sure. So you have a financial interest in this case? Okay, fair to say. Is that true? It is fair to say that I have stock in SCO. And you have a financial interest in the outcome of this

case; correct? A Q A Q A Q A Yes. And you want SCO to win, don't you? Repeat your name again. Eric Acker. Mr. Acker, I want the truth to be told. You want SCO to win, don't you? I want the truth to be told. The transaction that I

conducted in 1995 with my team, I want that transaction to be understood. Q A Q All right. And we'll go through that.

That's what I want. We'll go through that. But in addition to your hundred

thousand shares of stock that gives you a financial obligation

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in this case, you're part of a partnership, aren't you? E-S Net? A Q ES-Net?

ES-Net, Yes. And isn't it true that your partner is a man by the name

of Dan Campbell? A Q Yes. And hasn't Dan Campbell recently invested $100,000 in

order to fund this litigation for SCO? A Well, I'm aware that he has done that, yes. That's not my partnership. But that's

Dan Campbell. Q

But Dan Campbell, your partner in your venture group;

right? A Dan Campbell, a former director of SCO, like me, already He exercised his options the same way I As an individual I do not control his His

has shares in SCO.

exercised my options. investments.

I do not benefit from his investments.

investments are his alone. Q And he put $100,000 in in order to fund this case;

right? A I actually don't know how much money he put in. He

didn't consult with me when he made the investment, and I don't know what the number is. Q In addition to having a fiduciary obligation to protect

SCO in order to have a -- in addition to having a financial interest in the outcome of this case, in order -- in addition

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to being on the board that voted to bring this case, you also were on the litigation committee at SCO for a number of years and actually oversaw the running of this case; correct? A Well, I didn't oversee the running of the case. The

general counsel of the company oversaw the running of the Case. board. Q I interfaced between the lawyers and the rest of the That was my assignment.

And when you say the lawyers, you're talking about the

lawyers that are running the SCO litigation on behalf of SCO and the board of directors of SCO? A And the general counsel of SCO, and the board of

directors. Q That was also your role. Fair to say that of the board

members of SCO, since you were on the litigation committee, that you were the person on the board that was most knowledgeable about this litigation over the last four or five years on the SCO board? A No, I don't think that's fair. I think there are a

couple of other members of the litigation committee that were just as knowledgeable. Q Let's go back to 1995. I'm going to give you another

exhibit, Exhibit A1.

Now, Mr. Singer asked you some And he used the

questions -- and I want this to be clear.

document that was marked the SCO exhibit 1 in your binder there. And that's the APA that included both Amendment 1 and

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Amendment 2.

Do you remember that series of questions from

Mr. Singer this morning? A Q Yes. Now, what I've handed you, Novell Exhibit A1, is an APA

that does not include either Amendment 1 or Amendment 2; correct? A Q A Q I'm thumbing through it right now. Take your time. It appears to be just the APA agreement. Is that right?

I'm going to represent that to you, but if you don't

trust me, please take a look. A I think that's what it is. I think it's just the APA

agreement. Q Okay. So we get the chronology straight, the APA itself

was signed and approved by the board of directors of Novell in September of 1995; got that right? A Q A Q That's correct, Mr. Acker. And you weren't on the board; correct? I was not. And it was the board of Novell that had to approve that

deal; right? A Q That is correct. And the transaction, although it was approved in

September of 1995, actually didn't get closed, and the bill of sale was not actually signed until December of 1995; is that

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right? A Q That's correct. And at the signing in December of 1995 there was an

Amendment 1 that was prepared during the several months between September of '95 and December of '95; right? A Yes. We had the technology licensing agreement, the bill

of sale and the Amendment 1 that were all signed in December of 1995. Q A Q A Q And you signed the Amendment No. 1; right? Yes. And you signed the bill of sale? Yes. And you signed the technology licensing agreement;

correct? A Q That's correct. And just so the chronology is set, September of '95 APA

is signed and approved by the board; December of 1995 Amendment No. 1 is done; correct? A Q Yes. And then you -- you're out of the process. You leave the

company; right? A gone. Q But in terms of dealing with the APA, your last dealing Well, not right then, but within a couple of months I was

with the APA until you were at Santa Cruz and seeing issues

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arise was in December of '95; fair? A Q I think that's a fair statement, yes. And fair to say that actually after the deal was signed

in September of '95, you sort of became much less involved in the process because you began working on the sale of WordPerfect by Novell; correct? A Q That's correct. So really your real involvement in the negotiations

leading up to the APA occurred sometime before September of '95. A Is that fair? Well, by the real involvement, do you mean the majority

of the time that I spent on this was prior to the signing of the APA, I would agree with that. I spent some time after the

signing of the APA in continuing discussions with the team, Ed Chatlos and others, who were continuing to work on this matter to get it closed. But my time, the time in California, the

time meeting with AP -- with SCO and with Alok Mohan and the others, was primarily prior to this time. Q And can you place a time around when it was or how far in

advance of September of 1995 this meeting in Palo Alto you referred to was? A Well, there were a number of meetings. I don't mean to The

suggest there was a single meeting in Palo Alto.

reference I had before was to a particular meeting on the terrace of the law firm of Brobeck in which I was talking to

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Alok Mohan and Jim Wilt and Jeff Seabrook from their company, and I was there with Ty Mattingly and Ed Chatlos. Q A Can you put a date on it? I don't have a date. It was sometime in the Summer or

late Summer, either July or August of 1995. Q A Q So it was -Could have been early September even. So it was at least several weeks before the APA was

completed? A Best of my recollection, it was prior -- it was sometime

in the Summer of 1995. Q And you weren't involved in the day to day face-to-face

negotiations in the APA; correct? A Well, yeah. Occasionally I was there on a day to day

basis.

I'd be there for two or three days, and then I would

go on to other things. Q A But Ed Chatlos -Ed Chatlos was there every day as far as I knew. If

there was a negotiation session going on with the team, Ed Chatlos was there. Q And you hired lawyers to assist you in this process;

correct? A Yes. We had outside counsel and inside counsel working

on this project. Q And inside counsel was Mr. Bradford; correct?

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A

No.

No.

Actually it wasn't Dave.

It was someone on his

staff and someone from New Jersey, whose name I can't remember. But there was a gentleman from New Jersey that came

out with Mike DeFazio, who was the executive vice-president over the Unix Group within Novell, and then there were other lawyers of the team with Novell. there very much. Q And when you were -- when the detailed negotiations were Dave Bradford really wasn't

taking place, you hired Wilson Sonsini to act as your outside counsel; correct? A Dave Bradford -- Dave Bradford hired Wilson Sonsini. That was David's --

That wasn't my role. Q

That's who represented Novell in the transaction was the

outside counsel? A Q Yes. And Tor Braham was the lead lawyer for that team;

correct? A Tor Braham was a participant. There were a number of

other parties that were draftsmen in that process. Q And because you were not acting as a lawyer at Novell in

this period of time, you relied on Novell's outside counsel at Wilson Sonsini to do the detailed drafting of the APA agreement; correct? A Q Wilson Sonsini was the principal outside firm, yes. And you had confidence in the Wilson lawyers, including

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Mr. Braham; correct? A Q A They were our lawyers. And you had confidence in them; correct? They were our lawyers. I mean were they perfect? No.

And it was -- listen.

Are you asking me were they absolutely I would say they were

dead-on on everything they ever did? better than average. Q A Q

So you had confidence in them; correct? I had confidence in them. Now, let's take a look at the APA. And let's back up.

You testified -THE COURT: Going to offer it as an amendment --

excuse me -- as an exhibit, your A1? MR. ACKER: Your Honor. Yeah. I would move to have A1 admitted,

It is A1, yes. Mr. Singer? Our only objection is that it's already

THE COURT: MR. SINGER:

in evidence as part of SCO Exhibit 1. THE COURT: The Court will admit Exhibit A1.

(Defendant's Exhibit A1 received in evidence) Q (BY MR. ACKER) Now, when you were describing the strategy

leading up to the decision to select Santa Cruz, not SCO that's the Plaintiff in this case, but Santa Cruz to be the entity to buy portions of the Unix business, you said that you were concerned because they didn't have enough cash at some

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point. A

Is that right?

That became a concern?

Yeah.

The Novell team, Bob, the rest of us, Jim Tolonen,

understood that SCO did not have enough cash to just simply buy this outright. Q But the initial plan was to sell the entire business

outright for cash; correct? A Well, the plan was to sell the whole business period. It

wasn't a question of -- maybe that's the issue that I'm trying to suggest. There was never a provision in the instructions The instruction was go It was

that I received go sell this for cash. sell this lock, stock and barrel. not go get cash for this business. Q

Sell the business.

It was go sell this.

And at a point during the negotiations it became clear

that Santa Cruz didn't have enough cash, didn't have close to $300,000,000 in order to buy the business; right? A Q That's right. They did not have $300,000,000 cash.

And because of that, the deal was restructured into the

structure that you've described for us, where one portion of it was the payment of $6,000,000 of stock; right? A Q The deal was not restructured, Mr. Acker. Well, the deal became the giving of $6,000,000 -- or

6,000,000 shares of stock; correct? A The way to pay for this was part stock, which was

limited -- our original estimate was that they'd be able to pay for more of it with stock. But it was Novell's issue that

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it not be a larger amount of stock. stock.

SCO was fine giving more

I'm not sure that anybody is aware of that, but SCO

was fine giving much more stock than they ended up giving. But it was Novell's issue that they did not want more than 19 percent of the stock because Novell did not want to have a consolidated financial reporting issue. Q And so what Novell got was a little over 6,000,000 shares

of Santa Cruz stock; correct? A Q Right. And then another portion of this deal was this SVRX

license, which we're talking about 4.16(a) of the APA; correct? A Q Yes, the royalties. Now, those were royalties that before the deal, AP --

that Novell was collecting; correct? A Q Yes. And you said it was about 47 -- or 47 to $50,000,000 a

year that Novell was collecting? A I didn't say 47, but my recollection was that at or

around the time that we were making the deal, our estimates in our mind it was around $50,000,000 a year. Q And then after the transaction, the way it was

structured, is instead of Novell collecting that money directly from licensees, Santa Cruz would collect the money and remit 95 percent of it to Novell; correct?

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A

Well, that's exactly what happened, is that when

Novell -- when we did the transaction, Novell, which had been the licensor under those licenses, transferred those licenses to SCO, SCO became the licensor and now began to collect those royalties. Q And so what happened between -- before the APA and after

the APA is the amount of money that Novell was collecting from those licenses decreased by five percent; correct? A Q Correct. And so to take a round number, for instance, if Novell

had been collecting $100 for the APA for those licenses, then after the APA it would -- it would get a hundred dollars for the APA, but it had to give five bucks back to Santa Cruz? A Q That's correct. That was the second part. We had stock, and then we had

this 4.16 SVRX license component to the deal? A Actually, just to be precise, SCO would receive that SCO would collect it, all of the royalties. SCO was

money.

the party that was in touch with the clients.

And SCO on a

periodic basis, and it seems to me that there were a particular number of days after the collection of some of the royalties that they were to remit those royalties back to Novell. Q But regardless of how the mechanics worked, the hundred

bucks came to Santa Cruz and 95 bucks went to Novell;

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correct? A Q Yes. So the day before the APA, Novell was getting a hundred

bucks; the day after the APA they're getting 95; right? A That's right. Well, not after the APA, but after we

closed in December, yeah. Q And then the third part of the deal was the development

of a combined product; correct? A Q That's right. And the combined product was Santa Cruz was supposed to

go out and continue to develop UnixWare; correct? A Well, the combined product was to combine the Unix

components with the SCO OpenServer and Open Desktop components. Q That was the combined product.

And those monies, what Novell was able to get for the new

network -- NetWare combined product, that -- Novell -- or Santa Cruz was entitled to those monies until they reached a certain amount of revenue, and then Novell was entitled to its share on a portion of that? A Q A Did you say NetWare combined product? NetWare and UnixWare, yes. Well, okay. The combined product had elements of NetWare It was -- it was

in it, but it wasn't a NetWare product.

components of network enabled Unix combined with some of the technologies in UnixWare.

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By the way -- or not UnixWare. in OpenServer.

The combined technologies And so which were

That was SCO's product.

basically interface type elements which were coming from the SCO. So yes. And there was a -- the way the schedule was set

up, that until SCO hits a certain target, there were no -there was no sharing. And after they hit another target --

well, once they hit that target, however, then they would share to a certain percentage. And then if they hit another

target, they would share at a higher percentage. Q And this product that we're talking about, this is not These are -- this is a new product

the old SVRX licenses.

that's going to be developed after the APA by Santa Cruz; correct? A It was actually going to be developed by Santa Cruz with

contributions from Novell, and that included people and money. Q Okay. We'll get to that. But just so the jury is clear,

the part where there wasn't going to be any payment to Novell until we hit a certain point, that's a new product that's going to be developed by Santa Cruz; correct? A Q Yes. And the old licensing stream that was already existing at

Novell, that's the licensing stream in which Novell was actually going to receive less money after the APA closed than before; right?

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A Q

Yes. Now, let's take a look at Novell Exhibit A1, which is the And if we could

APA without Amendment 1 and not Amendment 2. go to Schedule 1.1(a), please.

Now, in questions -- in

response to questions from Mr. Singer you said that this is a schedule -- this is an asset purchase agreement, so it's -the lawyers need to say what's in the deal and what's out of the deal; right? A Q Yes. So you have a list, 1.1(a) and that's what is in the

deal; correct? A Q Yes. And then the next couple pages after that are Schedule

1.1B, which is what's not in the deal; correct? A Q Yes. And the reason for having those two schedules is so that

everybody knows what's being sold in 1.1(a) and what's not being sold in 1.1(b); correct? A Q Yes. And what we see in schedule 1.1(a) is a listing of what

was included; correct? A Q That's correct. And you agree that what is listed in schedule 1.1(a) is

what was included in that, what was sold in the APA that went from Novell to Santa Cruz in 1995; right?

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A Q

That's what 1.1(a) is, included assets. If we can take a look at section 1.1(a) paragraph Roman And this again is the section of the included

Numeral five.

assets that is referencing intellectual property; right? A Q Yes. And what it says is what is included in the deal is

trademarks Unix and UnixWare to the extent held by seller, excluding any compensation seller receives with respect of the license granted in X/Open regarding the Unix trademark; right? A Q A Q A Yes. That's it; right? Well, no. That's not it.

In the paragraph -Oh, in the paragraph. But, no, that's one of many

included assets. Q In the paragraph in the included assets it says

intellectual property, all that's listed is trademarks Unix and UnixWare; right? A Q I see that, yes. And you would agree with me that copyrights are

intellectual property? A I would agree that copyrights are intellectual

property. Q And in the APA that was executed in September of '95 and

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closed in December of '95, in the included assets section referring to intellectual property, the only intellectual property mentioned is trademarks Unix and UnixWare; right? A In paragraph five, but all the rest of that assets

provision talks about intellectual property. Q But in the intellectual property section of 1.1(a) Would you agree with

there's no mention of copyrights. that? A Q

I would agree that it says what it says. Okay. Let's go to the corresponding section 1.1(b) Now, schedule 1.1(b) -- so to make it clear,

paragraph five.

this is an asset purchase agreement, and 1.1(a) is what is sold and 1.1(b) is what is not sold, that is what is retained by Novell; correct? A Q Correct. And there's a corresponding paragraph in section 1.1(b),

again, Roman Numeral five, that says intellectual property; right? A Q Yes. And it reads in the first section-A what is -MR. SINGER: Your Honor, I object. I think this

should be identified as to prior or replaced language. MR. ACKER: Q (BY MR. ACKER) I'll be perfectly clear.

We're talking about the APA that was

signed -- or signed by the board of directors in September of

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1995; right? A Q

That's what we're talking about?

That is this document, yes. And we're not talking about anything that happened after.

I'm focusing on September of 1995, okay? A Q Okay. In the intellectual property section of what was

excluded, 1.1(b), in (a), what's listed there is all copyrights and trademarks, except for the trademarks Unix and UnixWare; correct? A Q A Q A Q Yes. And that was what was excluded from the sale; correct? Well, I see that. You see those words? I don't agree with it. I understand you don't agree with it. I heard your

testimony, but you see the words, and those are the words in the deal? A Q I see the words. Okay. And there's some symmetry between what we saw in

the included assets 1.1(a) paragraph five that said the trademarks Unix and UnixWare went with the deal and this portion of 1.1(b), the excluded assets, that say all the other copyrights and trademarks stayed, except for trademarks Unix and UnixWare, which are included in the included assets 1.1(a); right?

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A

Their symmetry?

Well, I see that Unix and UnixWare

trademarks are mentioned in both. Q And now you testified on direct that when you say -- when

you read the words all copyrights as being excluded, you thought that just meant copyrights to NetWare; right? A Q NetWare and other Novell core products, that's right. Can you show me where in this section, intellectual

property, paragraph 5(A) of the excluded assets, it says NetWare? A Q A Q Well, it doesn't say that. I'm sorry? It does not say that. So in the section talking about intellectual property and

what's excluded from the deal, there is no mention of NetWare; right? A Mr. Acker, if you refer to the whole previous page, the

entire previous page, it mentions nothing but NetWare and TUXEDO. And so what I am -- I guess my answer to you is this.

The reason that our understanding, our negotiating team's understanding, that -- on this provision is because the entire page preceding that line talks about NetWare. Q And my question was really pretty simple. In the section

of the excluded assets from the deal that talk about intellectual property, it says all copyrights, and there's no mention of NetWare?

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A

And my answer is equally simple.

That made no sense.

I

knew what the deal was.

And the idea of delivering source

code, the idea of delivering these mountains of documentation of this product, the entire business of Unix, to a company and to somehow then suggest that you don't own the ability to use that, just seems inconsistent. Q So that's my answer.

So it's your opinion that's inconsistent, but you don't

disagree that what the document actually says is that copyrights were excluded from the deal? A I don't disagree that this paragraph says copyrights are

excluded assets, but I do disagree that that had any bearing on the transaction that we negotiated, the words that I said to SCO, the words that I heard from Bob Frankenberg, and the deal that we cut. Q So it's your testimony that the actual language of the

agreement saying what is excluded have no bearing on what was actually the deal was? A It is not my testimony that the words have no bearing.

It is my testimony that these words do not accurately reflect the transaction that I negotiated. Q So now we're getting down to it. It's your testimony

that the actual deal, what was documented, what was signed, what was approved by the board of directors, is inconsistent with what you thought the deal was? A It is my testimony that the APA is incomplete in that

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there were a number of things that we modified in Amendment 1 and Amendment 2 to clarify this document. Q All right. We'll ask you about Amendment 1, but you

didn't have anything to do with Amendment 2, did you? A Q A Q The negotiation of Amendment 2? Yes. I did not negotiate Amendment 2. So let me go back to my question. It's your testimony

that it's your opinion about what the deal was is inconsistent with the language of the deal; correct? A Q Yes, it is inconsistent with this language. But you're not disputing that what the actual document

says that was approved by the board of directors says that copyrights were excluded, are you? A Q I'm not disputing that it says what it says. And this is the deal that was approved by September of

1995 by the Novell board of directors; correct? A Q A Q I don't believe that. Well, were you at the meeting? No. A member of my staff was at the meeting.

Did you listen to what was said to the members of the

board of directors before they approved the deal? A Q A A member of my staff was at the meeting. My question was were you? No.

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Q A

Did you hear what was said? I did not hear them speaking. I was not at the

meeting. Q A Q A Q A Q A Q A Q A Q Did you hear the vote of the directors? I was not at the meeting. Did you have authority to approve this deal? I did not. Who did? Bob Frankenberg and the board of directors. And they approved the deal; correct? They did. At that meeting in September of '95; right? That's my understanding. And you weren't there; correct? I was not there. And this is the language that came out of that meeting;

right? A No. No. This was the language that was in the document I have no idea -- as you

that was signed by Bob Frankenberg.

properly point out, I was not at the meeting, so I don't know what language they reviewed. Q And is it also true, isn't it, that you do not recall any

specific discussion leading up to the execution of the APA in September 1995 about copyright ownership; correct? A I do not recall parsing out copyright ownership as

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separate and apart from the rest of the business. Q Now, you said something in response to Mr. Singer's

question earlier, and I want to make sure -- I wrote it down, and I want to make sure I heard your testimony correctly. You

said -- when he asked you whether the copyrights were part of the deal, you said you assumed they were because Santa Cruz was given the whole business. A Q A Q Yes. You assume they were; right? I did. Let me show you another document, Exhibit T5. Have you Was that testimony correct?

had a chance to look at that, sir? A Q Yes. And T5 is Amendment No. 1, which is a cleanup document

that was prepared between September of '95 and the closing of the deal in September of '95; correct? A Q Yes. And so the jurors understand, what happens is this was There was tight

sort of a tight deal towards the end.

negotiations and the deal got papered or documented pretty quickly; is that right? A Q There was significant pressure to get it done quickly. And then after it got approved on September 18th by the

board, there's a period of time where the lawyers kind of go through the document to make sure that in the rush to get the

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document done there weren't mistakes made; right? A Q Among other things, yeah. So not only are mistakes caught, but there actually can

be some substantive negotiation back and forth to actually change some of the terms? A Q And to clarify some of the terms, that's right. And the idea is you want to gain clarity about what the

document is before it actually is closed and a bill of sale is signed that transfers -- and the assets actually get transferred; right? A Q A Q A Q Yes. And that's what this document memorializes; correct? This document is the first amendment to the ADA. But what it is -The APA, sorry. It's the cleanup for the APA that got signed by you in

December -- on December 6th, 2005; right? A Q Yes, it is. So did lawyers for Novell go through the document to make

sure that everything was right? A Q A I assume so. And did lawyers for -I don't recall any specific discussion with any of the

lawyers on that point, but I assume that that's what they were doing.

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Q

And the business people at Novell, did Ed Chatlos and

others go through it? A Q A Q For certain the business people did. Ed Chatlos actually was in charge of this; right? Yes. Yes, he was.

And his counterpart at Santa Cruz also went through the

document, the APA, the one we looked at, Exhibit A1, and they made their changes too; right? A Q Yes. And then they all got written down in this piece of

paper, and you looked at it December 6th and you signed it; right? A Q A Q A Q Yes. Did you read it before you signed it? Yes. All of it? All of it. And if you take a look at -- if we could go to the

signature page, please. A Q A Q I'm getting there. That's your signature, sir? Yes. Now, if you go back to I believe it's page nine, if we Are you there, sir,

could highlight the middle section there. page nine?

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A Q

Yes. Now, this -- there's a letter (I) paragraph-I of this

cleanup document, right, in the middle of the page? A Q Yes. Isn't that (L)? The frailty of my eyes. And

You're right, it is (L).

that (L) refers to changes that were made to the excluded asset portion of the APA; right? A Q Yes. And you see that in the top it says in schedule 1.1(b)

item seven is amended to read as follows, and there's some changes that are made; correct? A Q Yes. And the changes are made to paragraph seven of the

excluded assets; right? A Q Yes. But the paragraph about intellectual property that

excluded copyrights was paragraph five; right? A Q Yes. So after the lawyers for Novell and Santa Cruz went

through the APA, and they looked at the excluded asset portion, they didn't make any changes to the paragraph that excluded copyrights; right? A Q A Not at this time, that's right. And you read the document in December of 2005; right? Yes.

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Q A Q A Q A Q A Q

I'm sorry, 2000 -- '95; right? 1995. In 1995, correct, in December? Yes. And you signed it; right? Yes, I did. You thought it was accurate; right? Yes, it was. And no changes were made to the 1.1(b) of the APA that Correct?

excluded copyrights; right? A That's correct. These were the changes that were made in

Amendment 1. Q And you did not recall any issue being raised during the

cleanup to the APA that resulted in Amendment No. 1 regarding ownership of the Unix copyrights? A Q No. So no one from Santa Cruz came to anyone at Novell and That's not part of

said, "Hey, the copyrights are excluded. the deal," right? A Not to my knowledge.

No one ever reported such a

discussion to me. Q And by the way, this actually -- with the copyrights

excluded is actually a better deal for Novell than if the copyrights had been included; correct? A I don't exactly understand why it would be a better

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deal. Q A Well, they're giving up less rights; correct? Well, they're conveying all the business. So I guess the

question is this. got anymore money?

Was it a better deal in the sense that they Could they go out and resell those items? I think it was the same deal. It was the

They'd already sold them once. It wasn't a better deal. same deal.

It wasn't a worse deal.

And I'll be very clear on that.

We had already delivered So they

source code, all copies of the source code to SCO. had it.

They were now the licensors under the agreement. Novell was no longer the licensor. It was now

They had it.

simply receiving the royalties under those licenses. So I don't understand how it could be a better deal or a worse deal. been sold. Q So it's your belief that it was the same deal whether or It was the same deal because all the business had

not the copyrights were included or excluded? A It was the same deal. All the business was sold. That's

my understanding of what happened. THE COURT: Mr. Acker, do you want me to instruct

the witness to answer your question without proffering additional testimony? MR. ACKER: appreciate the offer. No, Your Honor. We're doing fine, but I

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THE COURT: Q (BY MR. ACKER)

All right. You

Let me show you another document.

signed another document in December of '95, a strategic development agreement; is that right? Do you recall that? Exhibit V5 is a

Let me hand you what we've marked as V5.

strategic development agreement between Novell, Inc. and Santa Cruz operation, Inc. And if you go to the last page, or page

15, you see your signature there? A Q Yes. And you executed this document on December 6, 1995, along

with the bill of sale and the other documents to close the deal? A Yes, I did. MR. ACKER: Exhibit V5. MR. SINGER: THE COURT: No objection. It will be admitted. Your Honor, I'd move for admission of

(Defendant's Exhibit V5 received in evidence) Q (BY MR. ACKER) Now, Mr. Singer asked you some questions If we could bring

about the technology licensing agreement. that up, please, SCO Exhibit 162. A Q A Q

Do you have a copy there?

I can see a copy on the screen. I'll give you a hard copy too. Thanks. Now, this is the document that you testified about that

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after the deal Novell was given a license back to the technology that had been included assets that were part of the deal; right? A Q Yes. But the only assets that were licensed back to Novell

were licenses that were included in schedule 1.1(a) of the asset purchase agreement; correct? A Q Yes. If we could bring up SCO exhibit 90, please. This is the

bill of sale; correct? A Q Yes, it is. And so that the jurors understand, the bill of sale is

the document that actually transfers ownership from Novell to Santa Cruz; right? A Q Yes. And so business people and lawyers can get together and

negotiate a deal and can decide we're going to transfer these assets, but until the bill of sale is actually transferred, nothing is transferred; right? A Q That's my understanding, yes. And you executed this document in December of 1995;

right? A Q Yes. And if we could blow up the first two paragraphs, please. It

And the first paragraph just gives us some background.

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says, "Reference hereby is made to that certain asset purchase agreement by and between the Santa Cruz operation, Inc. and Novell dated as of September 19th, 1995, as amended by Amendment No. 1," which we've looked at, "to asset purchase agreement as of December 6, 1993 together -- 1995, (together, the agreement)." A Q Yes. And it says, "Capitalized terms used in this bill of sale Do you see that?

and not otherwise defined shall have the meanings ascribed to such terms in the agreement," right? A Q Yes. And that's really lawyer speak for if it's got a capital

in front of it, it means you've got to find a definition for it somewhere; right? A Q Yes. What this is telling you is for the definition you have

to go back to the asset purchase agreement; correct? A Q Correct. And then in the second paragraph it reads, "In accordance

with article 1.1(a)," which was the included -- or excuse me -- "in accordance with article 1.1(a) of the agreement, seller, for valuable and good -- for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby transfer, convey, sell, assign and deliver to buyer, without recourse, representation or warranty

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except as otherwise expressly provided in the agreement all of the assets," right? A Q Yes. And what's being transferred is the assets with a capital

(A); right? A Q Yes. And the assets with a capital (A) are what is the defined

assets in the asset purchase agreement; right? A Q A Q The 1.1(a) of the -Yes. Yes. So what got transferred, the only thing that got

transferred, is what was included in schedule 1.1(a) of the asset purchase agreement as it existed on September 19th, 1995; right? A Q Isn't it as it existed on December 6, 1995? You're absolutely right. With Amendment No. 1, as

schedule 1.1(a) existed in December of 1995, as those assets were defined in schedule 1.1(a), that's what went from Novell to Santa Cruz? A Q A Q That's the way the agreement was set up, yes. And that's all that went; right? Yes. Show you another document that we've marked as zero 10.

Hand a copy of that to you, sir.

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THE COURT: MR. ACKER: Q (BY MR. ACKER) sir? A Q Yes.

Mr. Acker, you said zero 10. O-10, Your Honor.

Have you had a chance to look at that,

Exhibit O-10 is an intellectual property assignment

between Santa Cruz and Caldera; correct? A Q Yes. And you were on the board of directors of actually both

companies at this point in time in 2001; is that right? A No. Actually I think I was on the board of directors of

Santa Cruz operation only at this time. Q Okay. And so Santa Cruz operations, so the jury follows,

is the company that got the assets from Novell in the APA and then now we're six years later and they're going to turn around and they've going to assign or transfer some of those assets to Caldera, which becomes the plaintiff in this case, SCO; right? A Q A Q Yes. And that's what this document is; right? It appears to be what this is, yes. Were you involved at all -I'd move for admission of exhibit O-10, Your Honor. MR. SINGER: THE COURT: No objection. It will be admitted.

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(Defendant's Exhibit O-10 received in evidence) Q (BY MR. ACKER) And if you take a look at paragraph six of If we could

that document -- I'm sorry, paragraph eight. highlight the paragraph eight-five, please. THE COURT: MR. SINGER: lack of foundation. MR. ACKER: we'll see how we go. Q (BY MR. ACKER) Mr. Singer.

If he was not involved, I object on

We haven't gotten an answer yet, so

Now, let me lay a little background.

When

the assignment of certain rights are made, or in this case assets are made, the assets that Santa Cruz purchased from Novell, they're going to assign them to Caldera, Caldera wants some sort of representations from Santa Cruz that they actually own those assets; right? MR. SINGER: THE COURT: Objection, lack of foundation. I think we better, before you ask any

questions about the agreement or the language of the agreement, would you please establish the foundation so we can admit it. MR. ACKER: Sure. And this is background just in

terms of his knowledge of how deals work, and then I'll get to his knowledge of this document. The Court: Why don't you just focus on the deals of

the document because I'm not sure the jury can distinguish

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between your background questions and -Q (BY MR. ACKER) Okay. You know that when you were on the

board of Santa Cruz they transferred the assets that they had purchased a few years earlier to Caldera; right? A Q A Yes. And they did it by an assignment; correct? I wasn't clear on what the document was, the manner in I

which they made -- frankly I haven't seen this document. don't remember seeing this document actually. Q

Was the board of directors involved in the decision to

transfer the assets -- the board of directors of Santa Cruz involved in the decision to transfer the assets at Santa Cruz that they had bought three years earlier from Novell? A Q A Q Yes. You were involved in that decision? Yes. And when that decision was made at the board level, did

you understand that those assets would be transferred by an assignment? A I don't remember having a specific understanding of how

the assets would be transferred, only that the assets would be transferred. Q And your understanding as a member of the board of Santa

Cruz was that the only assets that transferred to Caldera and that are now the plaintiff's assets in this case are the

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assets that Santa Cruz got in the APA; right? A I'm trying to make sure I understand your question, Are you asking me whether there were any other

Mr. Acker.

assets that went as part of this other than those specific assets which SCO obtained from Novell? Q A Q Right. I don't know the answer to that question. All right. Do you know -- are you aware of any assets

being given to Caldera and now SCO other than what they obtained from Novell by Santa Cruz? A I'm not aware of any. THE COURT: MR. ACKER: Honor. You're not going to offer it? Well, I would offer to move O-10, Your It's already admitted. I

I think I already did.

think we did that. The Court: MR. ACKER: THE COURT: well, all right. I moved. All right. He said no objection. It is admitted.

Mr. Singer, your question about it? MR. SINGER: I was not questioning the document. I

just had an objection to -THE COURT: MR. SINGER: THE COURT: zero -- O-10? Him being asked --- the question without foundation. Are you going to pursue discussion of

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MR. ACKER: THE COURT: Q (BY MR. ACKER)

Not with Mr. Thompson, Your Honor. Thank you.

Now, you -- on direct examination Mr. Singer

showed you a Wall Street Journal article from 1995; right? A Q Yes. And is it your testimony to this jury that you have a

distinct memory of seeing that Wall Street Journal article 15 years ago? A Well, I remember reading this article when it was issued

because it was something that my team had worked on, and we wanted to make sure -- indeed, the press release -- working out the press release is something my group had contact with and involvement in, so I remember seeing this article, yes. Q You're certain that you saw this exact article and these

exact words 15 years ago? A My memory is that I saw the Wall Street Journal article

dated May 20th, 1995. Q And you can remember that far back, and you can remember

that date, and you can remember that article? A There are few things that I can remember that far back,

but this is one of them. Q Okay. Let's take a look at it, SCO Exhibit 133. And if

we could highlight the first two paragraphs.

Now, what the

words say are in the second paragraph, "The deal includes the purchase by Santa Cruz Operation of most trademarks and

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intellectual property," right? A Q A

Those are the words?

That's the reporter's words; right? And the reporter used the word most; correct? The reporter is quoting someone quote "familiar with the

situation", and he says, "Most trademarks and intellectual property." Q A Q Doesn't say all; right? No, he did not say all. Let me turn your attention now to when you -- after you

went on the board of what -- Caldera, what became the plaintiff in this case, SCO. At some point in late 2002 and

early 2003 the C.E.O., relatively new C.E.O. of SCO, Darl McBride, came to the board and asked the board to approve a SCOsource licensing campaign; correct? A Q Yes, that's right. And that the idea behind the SCOsource licensing campaign

is that SCO was going to take what it -- the intellectual property it believed it owned and ask users of Linux to pay it royalties; is that right? A The SCOsource licensing program was a way for SCO to

license rights to users who were at that point in time using Linux. Q And Mr. McBride's theory was that there is some

violation, copyright violation, by Linux users because there is some Unix -- protected Unix in Linux; right?

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A Q

That was the theory. But at this point in time in December of 2002, SCO was

actually selling the Linux product; right? A Q I don't have dates in mind on that issue. But it's true, isn't it, that the rest of the business at

SCO was not going very well; correct? A Q The company was struggling. In fact the fiscal quarter ending in the end of October

of 2002 SCO had lost more than $24,000,000; right? A I don't have anything to -- the company was struggling.

It was a hard time for that company, yes. Q And this was Mr. McBride's idea of how he was going to

turn the company around by using what he believed to be Unix copyrights to sue everyone who used Linux; right? A Well, no not to sue. This was Mr. McBride's idea on how

to gain some financial remuneration for intellectual property that we believed SCO owned. Q A Q You wanted to increase revenues; correct? Yes. The old model wasn't working, so this was a new plan;

correct? A Q We wanted to increase revenues. And the new plan was we'll use what we believe in Unix

and we'll send letters out to a thousand fortune 100 companies and say you're using Linux. You've got to pay us money;

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right? A Q Did you say a thousand fortune 100 companies? If I did, I misspoke. You sent out to over 1,000

companies in the top fortune 1,000 companies? A I don't know how many letters. They sent out a lot of

letters. Q A Q A Q A A lot of letters; correct? Yes. In fact they even sent a letter to Novell, didn't they? I do not know that. But the board of directors approved this idea; right? We discussed and approved this initiative to try to go

out and license the Unix intellectual property, that's right. Q A Q A Fair to say this was sort of a Hail Mary for SCO? Your words, not mine. Do you disagree with that? We're like every company in the United States that comes

on good times and bad times, how do we improve our business? And we were looking for ways to improve our business. Q And in fact before you -- this program was announced in

January of 2003, you were actually warned, weren't you, that there would be a real problem with this because there was no way there was actually any Unix in Linux? that concern? You were warned of

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A Q A Q A

I was warned of that concern? Yes. Personally? Yes. Well, if you have something that could refresh my memory

on that warning and that time frame, I guess I'd take a look at that. Q G12. A Q Give me a minute. Let me hand you what we've marked as

Have you had a chance to look at that? Yes. It's an E-mail to you and a number of others from a Geoff

Seabrook; correct? A Q A It is. And who is Mr. Seabrook? Geoff Seabrook, I don't know if he worked at SCO at this Let me be

time or if he had left the company at that time. clear.

At this point in time the company's name was

Tarantella -- Tarantella, the one down in Santa Cruz, the one that had formerly been Santa Cruz Operation. Seabrook had worked at that company. still an employee there at this time. Geoff Seabrook. Q So somebody who worked there, and so we don't totally And so Geoff

I don't know if he was So it's an E-mail from

confuse the jury, this company that you went to as a board of director when you left Novell, Santa Cruz, that purchased what

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it purchased in the asset purchase agreement; correct? A Q A Yes. And he sends it to Alok Mohan; correct? It appears to be directed to Doug, and I assume that

means Doug Michels at Tarantella. Q A And who is Doug Michels at Tarantella? At that point in time Doug Michels -- well, he was a He actually may have been the He eventually

senior executive at Tarantella.

president at that point in time of Tarantella. became the president of Tarantella. that particular moment. Q

I don't know if he was at

So the E-mail is to the president -- what you believe to

be the president at the time of Tarantella, or the old Santa Cruz, as well as a number of board members? A Q A Q Yes, that's right. And that includes yourself; correct? It does. And he's giving you a warning about the SCOsource

program; correct? A Well -THE COURT: I think before you ask anymore

questions, let's see whether or not it can be admitted. MR. ACKER: That was going to be my next question.

I move for admission of G12, Your Honor. THE COURT: Any objection?

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MR. SINGER: THE COURT:

No objection. It will be admitted.

(Defendant's Exhibit G12 received in evidence) Q (BY MR. ACKER) He gave you a warning. This is January

13th, about a week before Darl McBride announced SCOsource; right? A Q I have no recollection of this E-mail. Let's take a read. Let's look at the first paragraph. "I thought this was a

If you could highlight that, please.

bad idea when we discussed in the days when we ran SCO, and I still think it is a bad idea. Guys who run protection rackets

occasionally make a short-term profit but never build a long-term business, usually they are dead. New SCO has far You

few enough friends anyway without pulling this stunt." see that? A Q A Q A Q Yes. And he's referring to SCOsource; right? What do you mean he's referring to SCOsource? The stunt being SCOsource?

I don't see what -- it doesn't say in this document. Why don't you take a look at the -- the article that's

attached to the bottom of his E-mail is actually an article that leaked out before SCOsource was actually announced; correct? A Are you asking me a question?

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Q

Yeah.

I'm asking you to look at the press release or the

article at the bottom of this to refresh your memory of what this E-mail is about. A Q Okay. Is this an article from some publication? I'm just asking, it's

It's the E-mail that you got.

true, isn't it, that what he's talking about is SCOsource, isn't it? A Do you have any doubt about that?

Well, it's a little hard to tell because he talks about So I -- that

something that says from SCO enforced patents. doesn't ring a bell. Q

Let's go to the last paragraph of the E-mail itself. If we could go up to the

Maybe that will refresh your memory.

last paragraph of the E-mail, "A program". A Q Yes. In the last Sentence he writes, "It would alienate the

whole Open Source community as well as users and potential users. The main beneficiary will be Microsoft with Sun

possibly benefiting to a minor degree if they are aggressive enough." A Q Yes. And you don't have any dispute that this was an E-mail Do you see that?

that you received before the SCOsource program was announced; correct? A Q I don't remember receiving this E-mail. Do you have any reason to doubt that you received it?

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A Q

No. Was that a consideration in the board before the decision

to go ahead with SCOsource -A I'm sorry. I have to answer that previous question. It

has my name on it, but it doesn't necessarily mean I received it. It doesn't have my E-mail address on it. It simply has

my name on it, which -- and I see here that it also has all of the other -- well, not all the other. the SCO board members on it. It has some other of

But I guess what I'm trying to

suggest is I don't remember seeing this. Q Let me just ask this. In the discussion leading up to

the announcements of SCOsource, was there a concern on the board that you were going to alienate the Linux community? A Q A Yes. And why was that a concern? Because the reason there was some sense that this would

be an irritation to the Linux community was because the Linux community viewed this software as being free, that the code, the software and everything that related to it was free. Q Did you also understand that another problem with the

SCOsource program was actually proving that there was any protected Unix in Linux? going to be an issue? A Which part of that question do you want me to answer, Did you understand that that was

that there was a problem with it or that that was one of the

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issues that had to be shown? Q We'll start -- in the discussion about SCOsource, did the

board discuss the fact that in order for this program to be successful, SCO was going to have to prove that there actually was protected Unix prevalent in Linux? A Okay. The manner in which the issue came to the board of

new SCO was, is there any Unix software, any of the copyrighted materials, any of the source code, in Linux? The

discussion at the board level was show us that there is some of that code in Linux. idea. Q And if there is, then this is a good

If there isn't, then it's not a good idea. But wasn't it true that even months later, when the

SCOsource program was floundering, there was still a real question at SCO, inside SCO, about whether or not there was protected Unix code that was prevalent in Linux? A We asked for information that would lead us to conclude

that there was Unix software in Linux. Q My question wasn't that. My question was after SCOsource

got going and rolling -- and you would agree with me that there was an uproar in the Linux community; correct? A Q There were a lot of people that didn't like this idea. And there was -THE COURT: answered yes or no. I'm going to. Mr. Thompson, that question can be And Mr. Acker hasn't asked for it, but

When a question is asked that can clearly be

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answered yes or no, answer it yes or no.

If you feel that

something more has to be said, Mr. Singer will have an opportunity on redirect to point that out, but I want the question answered as directly as possible. THE Witness: THE COURT: MR. ACKER: Q (By MR. ACKER) correct? A Q Yes. And many, many people in the Linux community said that Thank you. Because we have to move this along. Thank you, Your Honor.

There was an uproar in the Linux community;

there is no copyright infringement here because there is no protected Unix prevalent in Linux; right? A Q Yes. And that was a real problem with the SCOsource program;

correct? A Q The uproar was a problem? No. The fact that the people that were the potential

licensees, the people that were going to be asked to pay money, said there is no protected Unix in Linux? A Q That was their statement, yes. And that created a real problem in order for there to be

any licenses taken; right? A Yes. THE COURT: Mr. Acker, how much more do you have?

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MR. ACKER:

About three questions, one more

THE COURT: Q (BY MR. ACKER)

Okay. Sir,

Let me show you what's marked as Q22.

I'm going to ask you about a specific portion, but you can always feel free to look at any part of it. Q22 is a Form

10-K that SCO filed with the Securities and Exchange Commission for the year-ended December -- or October 31st, 2003; right? A Q Yes. And you as a member of the board of directors, if you

take a look at the very last page of the document, your electronic signature is there. A Q Yes. And when you did that, when you allowed your electronic Do you see that?

signature to be put there, you were certifying that the statements in the document were true; correct? A Q To the best of my knowledge, yes. Why don't we take a look -I move for admission of Exhibit Q22, Your Honor. MR. SINGER: this point. THE COURT: Well, the court will admit the Object on the grounds of relevancy at

(Defendant's Exhibit Q22 received in evidence)

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Q (BY MR. ACKER) page 19 I believe.

Why don't you take a look at page -- it's I'm sorry, page 41 at the bottom. And I Do you

will turn your attention to the paragraph -- no, 41. have that paragraph?

Turn your attention to the paragraph

that begins with the word "notwithstanding". A Q A On page 41? Yes. It's on the screen too.

Oh, sorry, I'm looking at the page numbers on bottom There we go. Okay. Okay, I

left, which does not line up. see that paragraph. Q

And to the best of your knowledge, that paragraph is

true; right? THE COURT: read it, Mr. Thompson. THE WITNESS: Q (By MR. ACKER) Okay. Do you believe Go ahead and take the time you need to

So let's walk through it.

the statement is true as of October, 2003? A Q Yes. So after the SCOsource program has been going for about

ten months, the statements in this paragraph are still accurate; right? A Q I believe they are. And the first sentence reads, "Notwithstanding our

assertions of full ownership of Unix-related intellectual property rights, as set forth above, including copyrights, and

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even if we are successful in our legal action against Novell, the efforts of Novell and the other Linux proponents described above may cause Linux end-users to be less willing to purchase from us our SCOsource I.P. license authorizing their use of our intellectual property contained in the Linux operating system, which may adversely affect our revenue from SCOsource initiatives. These efforts may also increase the negative

view some participants in our marketplace have regarding our legal actions against IBM and Novell and our SCOsource initiatives and may contribute to creating confusion in the marketplace about the validity of our claim that the unauthorized use of our Unix source code and derivative works in Linux infringes on our copyrights. Increased negative

perception and potential confusion about our claims in our marketplace could impede our continued pursuit of our SCOsource initiatives and negatively impact our business." It was true at this point, even in October of 2003, that one of the reasons the SCOsource campaign was failing was because Linux users did not believe there was Unix in Linux; isn't that right? A Q Yes. And so after ten months, after ten months of SCOsource,

the campaign was still failing because people in the Linux community did not believe SCO's claims of infringement; right?

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A Q A

I can't answer that yes or no. Well -Because I don't agree it was failing. I agree that there

was tumult over this issue. other parties.

We had licensed some of this to

And so the issue for me is was it failing? Was there tumult in the

Well, it wasn't a screaming success. community? Q

Yes, there was tumult in the Linux community.

And part of the reason that it was failing and there was

tumult in the community is because people who were using Linux didn't believe SCO's claims that there was protected Unix in Linux; right? A Q I think that's correct. And that has nothing to do with Novell's claim to

ownership of the Unix copyrights; right? A Well, doesn't it have something to do with it? If Novell

owns those copyrights, then SCO would not have been able to assert those claims. Q But in terms of whether there is protected Unix code

prevalent in Linux, that issue has nothing to do with whether Novell claims ownership -A Yeah. If there's -- I think if the point you're asking

is if there is not Unix code in Linux, then it doesn't matter who owns the Unix copyright. Q And because of that, if the dispute and the p