SCO Grp v. Novell Inc

Filing 860

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 15, 2010-Jury Trial before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Patti Walker, CSR, RPR, CP, Telephone number (801)364-5440. 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 Three)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

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SCO Grp v. Novell Inc Doc. 860 771 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 vs. IN THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION THE SCO GROUP, INC., a Delaware corporation, Plaintiff, ) ) ) ) ) ) ) Case No. 2:04-CV-139TS NOVELL, INC., a Delaware corporation, Defendant. _________________________________) AND RELATED COUNTERCLAIMS. ) _________________________________) BEFORE THE HONORABLE TED STEWART --------------------------------March 15, 2010 Jury Trial REPORTED BY: Patti Walker, CSR, RPR, CP 350 South Main Street, #146, Salt Lake City, Utah 84101 Dockets.Justia.com 772 1 2 3 4 5 6 7 8 9 10 11 12 13 For Defendant: 14 15 16 17 18 19 20 21 22 23 24 25 For Plaintiff: APPEARANCES Brent Hatch HATCH JAMES & DODGE 10 West Broadway, #400 Salt Lake City, Utah 84010 Stuart Singer BOIES SCHILLER & FLEXNER 401 East Las Olas Blvd., #1200 Fort Lauderdale, Florida 33301 Edward Normand BOIES SCHILLER & FLEXNER 33 Main Street Armonk, New York 10504 Sterling Brennan WORKMAN NYDEGGER 60 East South Temple, #1000 Salt Lake City, Utah 84111 Eric Acker Michael Jacobs MORRISON & FOERSTER 425 Market Street San Francisco, California 94105 773 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 Witness Kimberlee Madsen INDEX Examination By Mr. Normand (Direct) Mr. Jacobs Mr. Normand Mr. Jacobs Stephen Sabbath Deposition Darl McBride Mr. Singer (Direct) (Cross) (Redirect) (Recross) PAGE 774 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 EXHIBITS RECEIVED INTO EVIDENCE: Plaintiff's: 29 30 521 127 199 163 95 672 675 678 PAGE Defendant's: N-5 C-6 D-11 A-24 775 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 SALT LAKE CITY, UTAH; MONDAY, MARCH 15, 2010; 8:30 A.M. PROCEEDINGS THE COURT: Good morning, counsel. I want to deal, first of all, with the motion by defendant to allow evidence responding to plaintiff's allegation that Novell's slander continues to this very day. The Court is going to deny the motion. The Court believes that the questions that were asked and the statements that were made in opening were unwise and inappropriate, but did not bring enough attention to the jury that it justify opening up the Court's prior ruling on denying the opportunity for prior Court rulings to be introduced. The Court is concerned primarily with the fact that it would be very difficult to present to the jury in a fair and accurate fashion the legal history of this case. And to do so would, I think, become ultimately very confusing to the jury and would be very prejudicial, and the probative value to the defendants would be minimal. The Court will, however, state that plaintiffs had better be very, very careful not to come close to the line again because this ruling could be revisited. And, secondly, the Court will try to make sure that in the jury instructions it gives to the jury that it is very, very clear to the jury that any issue of, say, scienter, has to focus on that period of time when the statements, allegedly 776 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 evidencing malice, took place. Are there any questions, counsel? MR. BRENNAN: Your Honor, thank you. Novell does move for a mistrial on the grounds set forth in the papers, Your Honor. THE COURT: MR. SINGER: Do you wish to respond, Mr. Singer? We believe, for all the reasons the Court has stated in denying the motion, that the motion for mistrial should be denied. THE COURT: The Court will take the issue of mistrial under advisement and will issue a ruling at an appropriate time. Do we have anything else, counsel, before we bring the jury in? MR. SINGER: Your Honor, I just want to report that Mr. Jacobs and his jury instruction group and our jury instruction group met over the weekend. I think we made some progress in resolving points of disagreement between the respective sets of jury instructions. There are certain jury instructions as to which we indicated we would take a further look and some that Novell was going to take a further look. to the Court. We hope that continuing process is acceptable We hope to be able to submit a narrow set of areas of disagreement to the Court as soon as possible. THE COURT: By when do you think, Mr. Singer? 777 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 MR. SINGER: I think if we had a couple of days, perhaps two days, they might be in a position where we could submit those. We are in disagreement on the verdict form, and we do plan to go ahead and submit that to the Court to begin considering. THE COURT: All right, counsel. The Court will give you until Wednesday, but no later than Wednesday because we need to do what work we'll have that remains and try to get you something by the end of the week. So you have over the weekend to look at what we consider to be the appropriate packet, and then we can deal with the further objections next week. So if you can get them to us by five o'clock, Wednesday, all right, Mr. Singer? MR. SINGER: THE COURT: We'll do so. Thank you. I do want to express gratitude to both I hope it remains sides for making this additional effort. your attitude throughout the remainder of this trial to, where possible, cooperate and try to solve these dilemmas. Mr. Brennan, do you have anything before we bring the jury in? MR. BRENNAN: THE COURT: today, Mr. Singer. MR. SINGER: Your Honor, our first witness is Kim No. Thank you, Your Honor. Remind me where we're going to start Madsen, she's a life witness, followed by deposition 778 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 testimony of Steve Sabbath. That is approximately one hour And after that we would with designations from both sides. call Darl McBride as a life witness. THE COURT: All right. Thank you. Ms. Malley, if you would please bring the jury in. Mr. Singer, what is your new Exhibit 748? MR. SINGER: This is a document that was inadvertently omitted from the exhibit list that was used in the deposition of Mr. McBride. It is a July 2003 presentation with respect to the SCOsource program. THE COURT: Are defendants aware of it? Are we going to have any special problem regarding it? MR. SINGER: It was a document used in cross-examination of Mr. McBride at his deposition. MR. ACKER: It's hearsay. We'll see what they try to use it for. We're going to object to it as we go along. In terms of surprise, we'll deal with it on an evidentiary basis, as we did. (Jury present) THE COURT: the jury. Good morning, ladies and gentlemen of I need to ask I hope you had a pleasant weekend. whether or not any of you violated those instructions that you have been given as to your conduct in any way or in any respect? Good. 779 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 forward. Mr. Singer, if you would, please. MR. NORMAND: as our next witness. THE CLERK: Ms. Madsen, do you want to come Your Honor, we call Kimberlee Madsen KIMBERLEE MADSEN, Having been duly sworn, was examined and testified as follows: THE CLERK: If you would please state and spell your name for the Court. THE WITNESS: My name is Kimberlee Madsen. Kimberlee, K-i-m-b-e-r-l-e-e, Madsen, M-a-d-s-e-n. DIRECT EXAMINATION BY MR. NORMAND: Q A Q A Good morning, Ms. Madsen. Good morning. Could you briefly describe your educational background? Yes. I attended the University of California at Santa Cruz and graduated with a bachelor's degree in politics and English literature. Q Could you briefly describe your work experience up to the present? A Yes. I worked for -- my senior year in college I And then I worked for worked for a small family law firm. the Santa Cruz Operation. I believe that started at the end 780 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 of 1990. And the Santa Cruz Operation became Tarantella I remained with after it sold the UNIX assets to Caldera. Tarantella, and left there -- I believe it was in August of 2004. And I went to work for a CRM software company called I stayed there for about a year. Then I went to Accordant. work for Apple, and I am currently employed at Apple. Q A Q A What is your title at Apple? I'm senior contracts manager at Apple. Could you summarize your responsibilities? Yes. I negotiate enterprise contracts. Those are contracts where Apple is selling product directly to Fortune 100 companies for their own internal corporate use. I also negotiate reseller contracts where Apple is selling products to Fry's or Best Buy for resell to end-user customers. Q A Q Now you said you were at Santa Cruz in 1995? Yes, I was. How many attorneys were in the Santa Cruz legal department in 1995? A Q A Q A One. Who was that? Steve Sabbath. What was your title at Santa Cruz at that point? In 1995, I believe it was manager of law and corporate affairs. Q In brief, what were your responsibilities at Santa Cruz 781 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 at that point? A I had a variety of responsibilities, primarily pertaining to corporate law, so preparing SEC filings, mergers and acquisitions to the extent that SCO engaged in those activities. I did a little bit of HR, legal, but it was mainly supporting SCO's corporate legal work. Q A Q Is that work that you did with Mr. Sabbath? Yes, I worked directly for Mr. Sabbath. Did there come a time in 1995 when you became involved with a potential transaction between Novell and Santa Cruz? A Q A Q Yes. Who was the buyer and who was the seller? SCO was the buyer and Novell was the seller. What was the nature of your involvement in the events leading up to that transaction? A I supported Mr. Sabbath and was involved in the negotiations with Novell. Q Where did those discussions that you participated in take place? A There were discussions in New Jersey at Novell's There were also discussions in Santa Cruz at facilities. SCO's facilities, and discussions at the law firms in Palo Alto. I think they were primarily at the Brobeck Phleger & Harrison law firm, but there may have been some conversations at Wilson Sonsini as well. 782 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 Q A Who do you recall participating in those discussions? Oh, there was quite a cast of characters. For SCO, I remember Steve Sabbath of course, as well as Jim Wilt and Jeff Seabrook, Doug Michels. Q Do you recall who you participated in discussions with on the Novell side? A I remember discussions with Burt Levine, John I'm sure there were others. Their Maciaszek, Ed Chatlos. names just don't come to mind. Q Do you recall if Novell had outside counsel in connection with this transaction? A Q Yes. The Wilson Sonsini law firm represented Novell. Do you recall participating in any discussions with those attorneys? A Q I do. Did you participate in discussions in which Steve Sabbath, the general counsel at Santa Cruz, was not present? A I remember a couple of conversations where Steve was not present. Q Did you develop an understanding during these discussions as to what assets Santa Cruz was acquiring? A Q A Q Yes. To your understand, what were those assets? Apple was purchasing all of the UNIX -Did you say Apple? 783 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 A I'm sorry. Different life. SCO was purchasing all of the UNIX and UnixWare assets. Q Was it your intent, as a representative of Santa Cruz, to acquire the copyrights of that business? A Q Yes. Was it your understanding and belief after the transaction was completed that Santa Cruz had acquired those copyrights? A Q Yes. In any discussion in which you participated before the agreement was signed, did you ever hear any discussion about the prospect of Novell retaining any UNIX or UnixWare copyrights? A Q No. Before the agreement was signed, did anyone from Novell ever say to you that Novell would retain any UNIX or UnixWare copyrights? A Q No. Would you have remembered that if they would have said something like that? A Yes, that would have been a significant deal point and I would have recalled that. Q Before the agreement was signed, did anyone from Santa Cruz ever say to you that Novell would retain the UNIX or UnixWare copyrights? 784 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 A Q No. Would you have remembered that if they would have said something like that? A Q Yes. Did you have any understanding during these discussions as to whether Novell would retain its intellectual property in NetWare? A Yes. That was very important to Novell to retain that business. Q A Did you have an understanding as to why? Well, that was their crown jewels, that was their I don't know much more about going-forward business. NetWare or even what it really does. Q Do you recall any discussion about a license back to Novell? A Q Yes. Just, in general, what can you recall about those discussions? A I know that Novell wanted to retain rights to the UNIX and UnixWare technology for use in NetWare and for its own corporate use, so SCO licensed back certain rights -- use rights to Novell. Q Do you know if there was a meeting with the Santa Cruz board of directors in which the approval of this transaction was discussed? 785 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 A Q A Q A Yes. Did you attend that meeting? I did. Did Mr. Sabbath attend the meeting? Yes, he did. MR. NORMAND: Mr. Calvin, can you put SCO Exhibit 29 on the screen. BY MR. NORMAND: Q Is the document on the screen in front of you, Ms. Madsen? A Q A Q Yes, it is. Do you recognize this document? Yes, I remember this. Do you see your name toward the bottom half of the document? A Q Yes. I think you said you do recall participating in this meeting? A I have a general recollection, yes. MR. NORMAND: into evidence. THE COURT: MR. JACOBS: THE COURT: Any objection? No objection, Your Honor. It will be admitted. Your Honor, I move SCO Exhibit 29 (Plaintiff's Exhibit 29 was received into 786 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 evidence.) MR. NORMAND: Mr. Calvin, would you show the jury the top of the document so they see what it is. BY MR. NORMAND: Q So, Ms. Madsen, these are the minutes of the meeting of This is the the board of directors on September 19th, 1995. meeting you at least have a general recollection of attending? A Q Yes. And if we look at the names identified who are part of the quorum of the board of directors, who was Doug Michels? A Doug Michels, I believe he was -- his title was executive vice president. Q A Q Who was Alok Mohan? Alok was the CEO. And do you see the next paragraph identifying who was also present at the meeting? A Yes. MR. NORMAND: Mr. Calvin, if we could bring up that paragraph also present. BY MR. NORMAND: Q Do you see the reference in the second line to the Brobeck firm, Ms. Madsen? A Q Yes. Who was the Brobeck firm? 787 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 A Brobeck represented SCO in the acquisition of the UNIX and UnixWare technology from Novell. Q Do you see the next line down towards the right side there is a reference to Jim Wilt? A Q A Yes. Who was Jim Wilt? He was the vice president of business development and one of the lead negotiators for SCO. Q In the next line down there is a reference to Steve Who was Steve Sabbath again? Sabbath. A Steve Sabbath was the vice president of law and corporate affairs, and my supervisor. MR. NORMAND: Mr. Calvin, would you take that away, and let's bring out the bottom, beginning with project sleigh ride. BY MR. NORMAND: Q ride? A Q A Uh-huh. (Affirmative) Ms. Madsen, do you see the reference to project sleigh What was project sleigh ride? Project sleigh ride was the code name. We always had code names for various projects. for the acquisition. Q So it was the code name I see reference to Jeff Seabrook presented a detailed overview of project sleigh ride? 788 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 A Q A Yes. Who was Jeff Seabrook? Jeff Seabrook was vice president of strategic planning along with Jim Wilt, one of the lead negotiators for SCO. Q And to your knowledge, in this discussion to the board, did Mr. Seabrook say that Novell had retained any UNIX or UnixWare copyrights? A No. MR. JACOBS: MR. NORMAND: the matter. Objection, Your Honor, hearsay. It's not going in for the truth of It's going in for her recollection and opinion. The Court will overrule the objection. THE COURT: Ms. Madsen, if, however, during the course of your examination here while or after a question has been raised, if Mr. Jacobs, who just stood up, stands up again, I want you to not answer the question until he's had a chance to address the Court. THE WITNESS: BY MR. NORMAND: Q Ms. Madsen, do you recall any discussion at all in the Okay. meeting about the prospect of Novell retaining UNIX or UnixWare copyrights? A Q No. During this board meeting, what did you understand that Santa Cruz was acquiring under the asset purchase agreement? 789 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 A I understood that SCO was acquiring all right, title and interest in UNIX and UnixWare. Q To your understanding, at the time of this meeting, did that include UNIX and UnixWare copyrights? A Q Yes. Ms. Madsen, did you participate in any negotiation meetings in which representatives discussed the issue of patents? A Q Yes. And did you develop an understanding from those meetings as to whether Novell would sell any patents under the asset purchase agreement? A No. Novell was very clear that it would not be selling any patents. Q And did you have an understanding at that time as to whether patents were an important part of the UNIX or UnixWare business? A Q A They weren't important to SCO. Why was that, to your recollection? Well, because there was no patent covering all of UNIX. So it was really the Patent covers a specific routine. copyrights that were fundamental to the business, not the patents. I'm not even sure that Novell had acquired all of So it just wasn't -- it wasn't that the patents from AT&T. important to SCO, but I do recall Novell being very specific 790 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 that it would not be transferring any patents that were associated with the technology. Q Do you recall any discussion of copyrights in connection with the discussion of patents? A Q A Q No. Is that something that you would have remembered? Yes. Was there a transition period after the execution of the asset purchase agreement in which Novell transferred the UNIX and UnixWare business to Santa Cruz? A Q A Yes. Did you participate in that process? I did. There was a transition team set up and I was a member of that team. MR. NORMAND: N-5. Mr. Calvin, can you show the witness If you could show the witness two or three pages in. One more. BY MR. NORMAND: Q Ms. Madsen, do you recognize this document? MR. JACOBS: copies of exhibits? THE WITNESS: checklist. BY MR. NORMAND: Q Do you recall receiving it? Yes. I remember this closing Your Honor, are we going to receive 791 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 A I have a general recollection. MR. NORMAND: Let's go back two pages, Mr. Calvin. BY MR. NORMAND: Q Ms. Madsen, do you see your name on the fax cover sheet? A Yes. MR. NORMAND: Your Honor, this is a document on Novell's list of exhibits, I would move into evidence. MR. JACOBS: THE COURT: No objection, Your Honor. N-5 will be admitted. (Defendant's Exhibit N-5 was received into evidence.) MR. NORMAND: Calvin. Let's go to the first page, Mr. I'm sorry, the Let's show the jury the top half. very first page of the document. BY MR. NORMAND: Q So, Ms. Madsen, this is a fax cover sheet from Wilson Who was Wilson Sonsini again? Sonsini. A Wilson Sonsini represented Novell in the asset purchase However, Wilson Sonsini was also SCO's corporate agreement. attorneys. Q A Now what is the date of this document? November 22nd, 1995. THE COURT: Mr. Jacobs. Just one second. 792 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 implying. the jury) MR. JACOBS: THE COURT: MR. JACOBS: Could we have a quick side-bar? Do you want this on the record? Yes, please. (Side-bar conference held outside the hearing of MR. JACOBS: We had a specific discussion about We have to be this in our counsel meeting yesterday. concerned there is an implication of an improper conflict here. In fact, as I believe SCO will readily agree, there was a waiver on all sides -- a written waiver by SCO there is an ethical wall internally at Wilson Sonsini to deal with the Novell representation versus the Santa Cruz representation. I'm very concerned there is going to be an implication of something improper in her answer. MR. NORMAND: This is not what I think she was Part of Certainly not what we intended to show. the discussion at trial was you read the APA, it's self-evident that copyrights are not included. Whether there was an ethical wall, I think it's relevant to show that Wilson Sonsini subsequently participated with Santa Cruz in creating documents showing the copyrights transferred. So whether the same attorneys were involved or not, I think it's of probative value. THE COURT: I would agree, but I do believe that the jury will have heard that and immediately have the same 793 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 question that Mr. Jacobs just addressed. I don't know whether or not you want to deal with it with some voir dire right now or whether or not you, Mr. Normand, want to do what you must to make it clear that this was not some oversight by the law firm, that it was a clear addressing of the issues or something. MR. NORMAND: will be a challenge. minutes. I think we need to do something. Trying to do that without leading I can try. Why don't we try for a few I really don't think the point -THE COURT: I'm not worried about if it was her point, I'm worried about that the jury -MR. NORMAND: My point, Your Honor, because it wasn't her point, I don't think it will take that long to clarify it. MR. JACOBS: I believe the appropriate thing is for Mr. Normand to stand up and say the following words: Ladies and gentlemen of the jury, Ms. Madsen alluded to Novell's role in representing -- I'm sorry, Wilson Sonsini's role in representing Novell in the transaction and to the fact that it was also Santa Cruz's outside counsel. On behalf of SCO, we wish to stipulate that Wilson Sonsini had permission from both companies, a written waiver, so both companies understood the role it would play in this particular transaction. MR. NORMAND: Whether you prefer that or whether 794 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 you want me to do that through the witness, Your Honor. THE COURT: you would do it. I think it would be more efficient if All right. I'll make sure I get those words MR. NORMAND: out. (Side-bar conference concluded) MR. NORMAND: Ladies and gentlemen of the jury, just to clarify, you may have heard Ms. Madsen answer a question regarding the involvement of the Wilson Sonsini firm in both negotiating and participating in negotiations of the APA on behalf of Novell and then also representing Santa Cruz in connection with its corporate work. want the jury to be clear about is that there is no suggestion from the witness that Wilson Sonsini was acting inappropriately in any respect in undertaking both of those representations. Is that clear? There was, in fact, apparently -- it What we THE COURT: had been addressed by the parties, there was a written acknowledgment, and procedures were put in place to make certain that the same attorneys were not representing both sides, and there was a clear firewall between those who were representing Novell and those who were representing Santa Cruz. Mr. Jacobs, does that address everything do you think? 795 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 much. MR. JACOBS: Yes, Your Honor. Thank you very THE COURT: MR. NORMAND: BY MR. NORMAND: Q Thank you, Mr. Normand. Thank you, Your Honor. Ms. Madsen, we were talking about the transition Do process after the signing of the APA in September 1995. you recall that? A Q Yes. I think you were starting to say you did participate in that transition process; is that right? A Q Yes. And do you recall -MR. NORMAND: and 6 of this document. BY MR. NORMAND: Q Do you generally recall what aspects of the transition Mr. Calvin, can you pull up pages 5 process you were involved in? A Q A Is it possible to make this a little larger? It is. Thank you. So specifically relating to the items on this checklist? Q Well, we can do it that way, or if you generally recall, we can do it that way as well. 796 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 A Okay. I remember some general involvement in the HSR filing. Q A What's an HSR filing the first? The Hart-Scott-Rodino filings. Those are filings to make sure that -- you have to get Hart-Scott-Rodino approval to make sure there are no violations of antitrust laws. I was involved in finalizing the disclosure schedules, amending the asset purchase agreement. the NetWare license. recollection. Q Were you involved, as part of this transition process, I may have reviewed I don't have any specific in registering the shares of Santa Cruz stock in Novell's name? A Yes, I was. MR. NORMAND: Exhibit C-6. BY MR. NORMAND: Q A Do you recognize this document? Yes. MR. NORMAND: Mr. Calvin, could you focus in on Mr. Calvin, if we could bring up this text of the letter for the witness. BY MR. NORMAND: Q Do you recall making the request referenced in the first line of this document? A Yes. 797 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 evidence.) evidence. MR. NORMAND: Your Honor, I move Exhibit C-6 into MR. JACOBS: THE COURT: No objection, Your Honor. It will be admitted. (Defendant's Exhibit C-6 was admitted into BY MR. NORMAND: Q A What is the date of this document, Ms. Madsen? December 14th, 1995. MR. NORMAND: the letter. Let's see the address as well, Mr. Calvin. BY MR. NORMAND: Q So this letter says in the first sentence, Ms. Madsen, Mr. Calvin, bring out the text of at the request of Kim Madsen, enclosed please find original stock certificate FBU 17088 representing 6,127,500 shares of common stock of The Santa Cruz Operation, Inc. registered in the name of Novell, Inc. A Q Yes. Did you direct that request to Ms. Zenit of the Wilson Do you see that language? Sonsini law firm? A Q A Yes. And why did you do that? The shares were a part -- were one component of the consideration under the asset purchase agreement. 798 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 Q To your understanding what were the other components of this payment or compensation? A I don't remember all of the specific details, but my general recollection is in addition to the six million shares -- 6,127,500 shares, that Novell was also retaining a portion of the binary royalties -- SVRX binary royalties, and that there were certain sales thresholds. And if those thresholds were met, additional monies would be paid to Novell. Q Do you ever recall hearing from anyone that Novell would keep the UNIX and UnixWare copyrights because Santa Crux did not have enough cash? A No. The binary royalties were the mechanism that we used to provide additional consideration. Q Ms. Madsen, in the course of your responsibilities at Santa Cruz, did you work on annual reports? A Q A Yes. In general, what is an annual report? Well, it's just that. It's a report that's prepared And it is sent out to annually. It is filed with the SEC. the shareholders or it's incorporated by reference in the proxy statement that is sent out to all of the shareholders. MR. NORMAND: witness SCO Exhibit 30. // Mr. Calvin, could we show the 799 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. NORMAND: Q It's not the best resolution, Ms. Madsen, but do you recognize this document? MR. NORMAND: Mr. Calvin. THE WITNESS: BY MR. NORMAND: Q Did you have any involvement in reviewing this document Yes. Why don't we page a couple pages in, before it was made public? A Yes. I would have reviewed, you know, commented, edited the document, or at least portions of it. MR. NORMAND: into evidence. MR. JACOBS: THE COURT: No objection, Your Honor. It will be admitted. Your Honor, I move SCO Exhibit 30 (Plaintiff's Exhibit 30 was received into evidence.) BY MR. NORMAND: Q So the jury is now looking at the document, Ms. Madsen. At the top, do you see the language, the Santa Cruz Operation, Inc. 1995 annual report? language? A Q Yes. I wanted to direct your attention to page 3 of the Do you see that document. 800 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 MR. NORMAND: Let's bring out that middle paragraph in the middle column, Mr. Calvin. BY MR. NORMAND: Q Do you see the language, looking into the future, SCO In will play a more central role in the UNIX market. addition to our well established packaged product market for UNIX Business Critical Servers, the acquisition of the UNIX technologies and UnixWare business places us in a much more strategic position to license technology to the computer manufacturers and system providers. language? A Q Yes. How does that reference to the acquisition of the UNIX Do you see that technologies and UnixWare business compare to your understanding of the assets that Santa Cruz had acquired under the asset purchase agreement? THE COURT: MR. JACOBS: Mr. Jacobs. Lacks foundation. It doesn't establish any relationship between this witness and this letter. THE COURT: BY MR. NORMAND: Q The question, Ms. Madsen, is how does this language I will sustain the objection. compare to your understanding of the assets that had been acquired? 801 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 THE WITNESS: THE COURT: THE WITNESS: Can I answer? You may. Go ahead. This reflects the transaction in the This language reflects that. asset purchase agreement. BY MR. NORMAND: Q Did you draft this language? Do you recall drafting that language? A Q No, I don't recall drafting this language. Did there come a time in 1996 when you learned of a dispute between Novell and Santa Cruz concerning the scope of Novell's rights under the asset purchase agreement? A Q Yes. In general, to the best of your recollection, what was the dispute? A The dispute involved some expanded UNIX rights that Novell had offered to IBM that were contrary to the rights that SCO had acquired under the asset purchase agreement. Q Do you recall any discussions with Novell about that issue? A Q Yes. What, in general, was your recollection of those Who did you speak with? discussions? A I remember speaking with Larry Bufford of Novell and She was an Allison -- I think her last name was Lisbon. attorney at Novell. And we subsequently entered into an 802 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 amendment to the asset purchase agreement to clarify SCO's rights. Q Now to your recollection, at any time during that dispute as a defense to what it had done with respect to IBM, did Novell ever assert that it owned the UNIX or UnixWare copyrights? A Q A Q No, it did not. Is that something you would remember? It's something that I would remember, yes. Did you remember any discussions with Novell about UNIX or UnixWare copyrights at all during the course of this dispute? A Q No. Do you recall the execution of Amendment No. 2 to the asset purchase agreement? A Q A I have some general memory. Did you draft the language of Amendment No. 2? I wasn't the author, but I would have reviewed and commented on it. Q Do you have any specific recollection of any specific discussions with Mr. Sabbath about Amendment No. 2? A Q No specific recollections, just general recollections. Did you have a view, as of 1996, as to what copyrights were required for Santa Cruz to operate its UNIX and UnixWare business? 803 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 A Q We would have acquired all the copyrights. Now how long did you remain at Santa Cruz after Amendment No. 2 had been signed? A Well, the history of SCO is a little bit confusing because SCO sold -- subsequently sold the UNIX business to Caldera. Caldera then assumed the name SCO, but the legal entity remained the same and changed its name to Tarantella. So I remained with Tarantella. So, you know, SCO -- I stayed with SCO until it sold the technology in 2001 -- I can't remember the specific date, and then I stayed with Tarantella until 2004. Q And during the time when you were at Santa Cruz, when it was called Santa Cruz, did you have occasion to work with any form 10-Ks? A Q A Q A Yes. I would have reviewed and edited those. To the best your recollection, what is a form 10-K? A form 10-K is an annual financial filing with the SEC. What is SEC? The Securities and Exchange Commission. MR. NORMAND: And, Mr. Calvin, could you put SCO Exhibit 521 up for the witness. BY MR. NORMAND: Q It may be a little hard to see, but do you recall seeing this document before, Ms. Madsen? A Yes, I'm sure that I did. 804 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 Q Is this Santa Cruz's form 10-K for the fiscal year ended September 30th, 1996? MR. NORMAND: page, Mr. Calvin. THE WITNESS: BY MR. NORMAND: Q Now would you have reviewed this document before it was Yes. Yes. I think that's reflected on the next filed with the Securities and Exchange Commission? A Yes, I would have. MR. NORMAND: into evidence. MR. JACOBS: Your Honor, we don't object as a We do object on Your Honor, I move SCO Exhibit 521 reflection of Santa Cruz's state of mind. hearsay grounds for the truth of the matter asserted. THE COURT: All right. The Court will allow the document to be introduced, but I think on cross-examination you perhaps need to explore that a little bit, Mr. Jacobs. (Plaintiff's Exhibit 521 was received into evidence.) MR. NORMAND: So, Mr. Calvin, let's show the jury the top half of the document and see what it is. BY MR. NORMAND: Q Do you see the reference at the top, Ms. Madsen, for the fiscal year ending September 30th, 1996? A Yes. 805 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 Q A What does that mean? Well, we would report on the year ending, we would report on our financials for the year ending in September 30th, 1996. MR. NORMAND: Mr. Calvin, on page 2, I think it's toward the bottom -- next page -- previous page, Mr. Calvin, at the bottom -- very bottom. BY MR. NORMAND: Q 1996? A Q A Q A Q A Yes. So was this document filed after December 16th, 1996? Yes. Now let's go to page 57. Can I clarify something? Of course. While the financial report concerns the time period Do you see the bottom line, quote, as of December 16th, ending September 30th, 1996, my recollection of the SEC requirements is that if there is something material that occurs subsequent to that, you would include that in the financial filing as well. So that's why you would see a date that is subsequent to the time period of the filing. Q Thank you. We're going to show you and the jury, Ms. Madsen, page 57. I think it's the bottom paragraph. This is the 806 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 language saying, quote, UNIX business in December 1995, the company -- who's the company being referred to here? A Q SCO, or the Santa Cruz Operation. The company acquired certain assets related to the UNIX business including the core intellectual property from Novell, end quote. A Q Yes. How does that statement compare with your Do you see that language? understanding, as of this time, as to the intellectual property that Santa Cruz had acquired from Novell under the agreement? A That is my understanding. That's what the asset purchase agreement was to accomplish. Q To your understanding, did the core intellectual property of the UNIX business include the UNIX and UnixWare copyrights? A Q Yes. Now did an outside law firm represent Santa Cruz in connection with this transaction? A In connection with the asset purchase agreement or in connection with this filing? Q A With this filing. Yes. I'm sorry. Wilson Sonsini would have represented us and assisted in the preparation of this filing. Q Now, to the best of your understanding, was it 807 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 appropriate for Wilson Sonsini to be representing Santa Cruz at that time? A Q Yes. After October 1996 when Amendment No. 2 was signed, did any dispute arise between Santa Cruz and Microsoft? A Q Yes. And can you recall the general nature of that dispute? Did it concern royalties? A Yes, it did. Microsoft was imposing a royalty on SCO and a compatibility requirement that all versions of UNIX remain compatible with some ancient version of -- I can't remember the technology specifically, but there was this ongoing compatibility requirement. And in order to maintain that compatibility, we also had to always remit a royalty to Microsoft. Q Were you involved in any discussions about what actions Santa Cruz would take with respect to Microsoft? A Yes, I was. MR. NORMAND: Exhibit 127. BY MR. NORMAND: Q A Q A Ms. Madsen, do you recognize this document? Yes, I do. In general terms, what is this document? This was an application with the European Union's Now, Mr. Calvin, can we bring up SCO 808 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 anticompetition division. Q And did you have occasion to review this petition in the course of your job responsibilities? A I did. MR. NORMAND: 127 into evidence. MR. JACOBS: grounds. Your Honor, objection on hearsay Your Honor, I would move SCO Exhibit Again, if they are offering this to prove that something occurred during the asset purchase agreement as a matter of fact, then it's hearsay. If they want to have another document in to show Santa Cruz's state of mind, that would be different. MR. NORMAND: Your Honor, of course the document goes to the parties' course of performance which, under Mr. Jacobs' definition, would all be stricken because it's hearsay. It's course of performance. MR. JACOBS: Honor. It is not course of performance, Your It's a unilateral statement made by Santa Cruz to a regulatory body in Europe with no showing that Novell had anything to do with it whatsoever. MR. NORMAND: There is no requirement for course of performance that the parties' conduct be bilateral, Your Honor. THE COURT: The Court will overrule the objection and allow the admission of the document. 809 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 A evidence.) (Plaintiff's Exhibit 127 was received into BY MR. NORMAND: Q Now I think the jury can see the document, Ms. Madsen, It says in the so we'll go through briefly what it is. front, application for the initiation of proceedings pursuant to Article 3 of Regulation 17/62 to establish the existence of infringements Articles 85 and 86 of the Treaty of Rome. Sounds important. What was your recollection about where this was filed? This was filed with the anticompetition division of the European union. MR. NORMAND: Mr. Calvin, show the jury the middle part of the document on the front. BY MR. NORMAND: Q A Q A Q When was this document filed? January 31st, 1997. So how long after Amendment No. 2 is this being filed? I think it was just a couple months. Let's go to Section 3.4. First sentence of section 3.4, it says, as a result of the chain of transactions described below, SCO has now acquired ownership of the UNIX program itself so that it no longer requires a license from anyone to produce UNIX products. A That's right. Do you see that language? 810 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 Q Is that language consistent with your understanding of what SCO had acquired under the asset purchase agreement? A Q Yes, it is. Let's look at section 4.9. The next sentence of section 4.9 says, quote, because it has acquired ownership of the copyrights to UNIX from AT&T, SCO should be free to develop new UNIX based works without the necessity of a license from anybody. A Q Yes. How does that assertion compare with your understanding Do you see that language? of what Santa Cruz had acquired under the asset purchase agreement? A That matches my understanding. MR. NORMAND: Calvin. BY MR. NORMAND: Q There is a reference in the top paragraph in the second Let's go to the top of page 12, Mr. sentence, quote, whereas Microsoft is free to innovate and change its Windows product line as it sees fit and price them as it chooses, the copyright owner of UNIX is required to include unnecessary features for a common product that no longer exists and bear a royalty charge for the required inclusion of such features. The reference to the copyrights owner of UNIX, who is that referring to? 811 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 A That's referring to SCO. MR. NORMAND: Now, Mr. Calvin, let's look at the We can bring out all of that last page of this document. text. BY MR. NORMAND: Q You see the reference on the bottom left, Ms. Madsen, to Brobeck Phleger & Harrison? A Q Yes. Is that the same firm that represented Santa Cruz in connection with the asset purchase agreement? A Q That's correct. Let's go back to section 4.9. We had look before, Ms. Madsen, at the statement, because it has acquired ownership of the copyrights to UNIX from AT&T. that language? A Q Yes. Is this statement consistent with your understanding of Do you see Santa Cruz's ownership rights just after the execution of Amendment No. 2? A Q Yes, it is. Do you know if Santa Cruz and Microsoft came to enter into a settlement concerning the dispute reflected in this petition? A Yes, we did. MR. NORMAND: Mr. Calvin, can we bring up SCO 812 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 Exhibit 199. BY MR. NORMAND: Q Ms. Madsen, do you recognize this document entitled settlement agreement? A Q Yes, I do. Are you familiar with the settlement referenced in this agreement, when it occurred? A Q Yes. Did you have occasion to review this settlement agreement in the course of your job responsibilities? A Yes, I did. MR. NORMAND: into evidence. MR. JACOBS: Your Honor, same objection. This is Your Honor, I move SCO Exhibit 199 unilateral statements by SCO out of court about something they claim there is probative value here, but this is not showing Novell had anything to do with this. MR. NORMAND: Your Honor, it goes to the same argument I made before, and really the same as the document we just went through and that was admitted into evidence. THE COURT: and admit Exhibit 199. (Plaintiff's Exhibit 199 was received into evidence.) // The Court will overrule the objection 813 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. NORMAND: Q Ms. Madsen, the jury can see the document. MR. NORMAND: Mr. Calvin, let's bring out the Let's start title in the first paragraph of the document. at the very stop, Mr. Calvin, so they see what this is. BY MR. NORMAND: Q This document is titled Settlement Agreement, and it is made on what date, Ms. Madsen? A Q A May 29th. Which year? 1998. MR. NORMAND: look at the recitals. BY MR. NORMAND: Q Now do you see, Ms. Madsen, among the recitals in Let bring that down, Mr. Calvin, and Down to the paragraph B. paragraph B stating, quote, SCO has acquired AT&T's ownership of the copyright in the UNIX System V operating system program and is the successor in interest of AT&T and the Centaur agreement, as subsequently amended? A Q Yes, I do. How does this language compare with your understanding at the time as to what assets Santa Cruz had acquired under the asset purchase agreement? A It matches my understanding. MR. NORMAND: Can we look at the last page of the 814 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 document, Mr. Calvin. BY MR. NORMAND: Q Let's bring out the signature blocks. Do you see the signature block for the Santa Cruz Operation, Inc., Ms. Madsen? A Q A Q Yes. Whose signature is that? Steve Sabbath's. What was Mr. Sabbath's position as of the asset purchase agreement? A He was the senior vice president of law and corporate affairs. Q Did you ever have any discussion with Mr. Sabbath at any time about the prospect that Novell had retained any UNIX or UnixWare copyrights? A Q No, I did not. Did Mr. Sabbath ever say to you that Santa Cruz had acquired only a license to the UNIX or UnixWare copyrights? A Q No. Now, in connection with Amendment No. 2, did Mr. Sabbath ever say to you that Santa Cruz had agreed to a process whereby Santa Cruz could ask Novell to transfer UNIX or UnixWare copyrights? A Q No. In 1995, was it your understanding and intent that Santa Cruz had acquired the UNIX and UnixWare copyrights? 815 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 A Q A Yes, it was. Did your understanding or intent ever change? No. MR. NORMAND: THE COURT: No further questions, Your Honor. Mr. Jacobs. CROSS-EXAMINATION BY MR. JACOBS: Q A Q The thickness is not representative of how long. Thank you. But I do want you to have your deposition transcript in case we have to refer to it. A Q Okay. Thank you. I'm Michael Jacobs. I'm one Ms. Madsen, good morning. of the counsel for Novell in this action. A Q Good morning, Mr. Jacobs. So let's start at the beginning. You joined Santa Cruz in the early '90s? A Q Yes. I think it was 1990. At that time Santa Cruz was already in the UNIX business, wasn't it? A Q A It was. It had a product called Open Server? I don't think Open Server was available when I first started in 1990, but it did develop Open Server, yes. Q There was a UNIX product available in 1990? 816 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 A Q Yes. Santa Cruz developed that product as a flavor of UNIX, correct? A Q A Q A Q Yes. It did so under a license originally from AT&T? Yes. I'm sorry. Go ahead. And it also had a license from Microsoft. The license from AT&T transferred to Novell when Novell bought the UNIX subsidiary of AT&T, correct? A Q I believe so. Isn't that kind of key to your understanding of the whole chain of transactions here, Ms. Madsen, that Novell acquired the UNIX business originally from AT&T? A Q Yes. So at that point Santa Cruz was a licensee of Novell under the original AT&T, Santa Cruz license, correct? A Q Yes. Santa Cruz was developing its flavor of UNIX under a license from Novell? A SCO had a license with Novell. It also had a license from Microsoft. those agreements. Q It developed its flavor of UNIX pursuant to Santa Cruz had developed a pretty substantial business around its flavor of UNIX at that time, correct? 817 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 A Q Yes. And it had -- I think we've been told in court that Santa Cruz had about a thousand employees at that point? A Q A Q That sounds right. Doing about $200 million a year in business? 200 million was what it probably did at its peak. It did so insofar as the UNIX product -- the UNIX flavor was concerned, it did so under a license from AT&T-Novell and a license from Microsoft, correct? A Q Yes. So at that point there was no issue that Santa Cruz didn't own the copyrights to the underlying UNIX code, did it? A Q Not at that time, no. Now you have said, as have many witnesses in this trial so far, that you understood that Santa Cruz was acquiring the whole UNIX business from Novell; is that right? A Q Yes. Let me ask you to take a look at an internal Santa Cruz announcement from the time of the asset purchase agreement. THE COURT: Jacobs? MR. JACOBS: THE COURT: // This is SCO Exhibit 163, Your Honor. SCO 163. What is this identified as, Mr. 818 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. JACOBS: Q Take a look at the first -- as much as you want, but I take a look at the first two pages of that, Ms. Madsen. don't know that you've seen it recently, so take a moment. The highlighting, by the way, Ms. Madsen, comes from Santa Cruz. Ms. Madsen, were you at Santa Cruz on September 19th, 1995? A Q A Q Yes. You were an employee of Santa Cruz? I was. And you likely received this announcement by Alok Mohan, the CEO of Santa Cruz, in connection with the acquisition of the UNIX business from Novell, correct? A I have no specific recollection of receiving this, but I have no reason to doubt that I did. MR. JACOBS: into evidence. THE COURT: MR. NORMAND: THE COURT: Mr. Normand. No objection, Your Honor. It will be admitted. Your Honor, we move SCO Exhibit 163 (Plaintiff's Exhibit 163 was received into evidence.) BY MR. JACOBS: Q So just to review, Ms. Madsen, this is a message from 819 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 Alok Mohan, the CEO of Santa Cruz, correct? A Q Yes. It's dated September 19th, 1995, and the subject is the acquisition of the UNIX business from Novell and relationship announcement to all SCO employees. that? A Q Yes. I would like to focus your attention on the portions So Do you see that SCO, when it marked the exhibits, has highlighted. let's look at the first box there, Ms. Madsen. Do you see Mr. Mohan represents to the company, today, we announced the purchase of the UNIX business from Novell? A Q Yes. So I'm just going to try my hand at a little drawing, Do you see that? Ms. Madsen, to see if we can help the jury understand this. If we imagine there is a UNIX business, that announcement suggests that that whole business -- or that portion of the announcement suggests that whole business is going to Santa Cruz, right? A Q Yes. So we announced the purchase of the UNIX business from That would be a pretty simple transaction. Here's the pie. The We Novell. bought the whole UNIX business. business goes from Novell to Santa Cruz, correct? A Yes. 820 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 Q But, in fact, the transaction was more complicated than that, wasn't it? A Q It was. So let's look at what Mr. Mohan says in the next portion that SCO highlighted when they marked this exhibit, and let's take it literally word by word, Ms. Madsen. SCO has signed an agreement with Novell whereby we become the owner of the UnixWare product line and UnixWare licensing to OEMs. A Q Do you see that? Yes. Then he says, in addition, we will manage the licensing Do you see business for UNIX prior to UnixWare 1.0 (SVRX). that? A Q I do. Mr. Mohan, as he gets a little more detailed, is now Isn't he really dividing up our pie, isn't he, Ms. Madsen? dividing the pie between UNIX and UnixWare? A Q No, I don't think that is a fair characterization. Doesn't he say that we're acquiring the UnixWare business, it looks like that portion of the business is going to go to Santa Cruz under this announcement, but as to UNIX, Mr. Mohan is saying, we get a little sliver of it because we're going to manage the licensing business, but we're not doing anymore than that as to UNIX? say that, Ms. Madsen? Doesn't it 821 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 A No, that's not my understanding of what he's trying to convey. Q Ms. Madsen, isn't he going to say we're going to manage the licensing business much as you might hire a manager for a piece of property to rent out apartments to potential tenants? A No, that's not my understanding of the intent of what he's trying to say here. Q Isn't it true that Santa Cruz was, with respect to the System V Release X UNIX product licenses from Novell, merely Novell's agent in managing that property? A Q No. Let's take a look, please, Ms. Madsen, at Exhibit D-11. This is a different Securities and Exchange Commission filing, the form 10-K from right around the time -- I'm sorry. This is from Caldera after the acquisition under its So this is a form 10-K filed by Do you see that, agreement with Santa Cruz. Caldera, the plaintiff in this action. Ms. Madsen? A Q Yes. Take a look at page -MR. JACOBS: evidence, Your Honor. THE COURT: MR. NORMAND: Any objection? Let's move this exhibit into I am not sure we've layed a 822 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 foundation yet. THE COURT: BY MR. JACOBS: Q You conveyed to Caldera, that is you, Mr. Sabbath and Let's have a few more questions. others at Santa Cruz, your understanding of the relationship between Santa Cruz and Novell under the asset purchase agreement, didn't you, Ms. Madsen? A Q I am not sure I understand the question. Did you have discussions with Caldera, which became SCO, the plaintiff in this action, did you have discussions with them about your understanding of the asset purchase agreement and how it worked? A Q Yes. So let's turn to page 42 of this form 10-K. After all, Caldera wasn't there in 1995 and 1996, correct? A Q Correct. So what they learned, they learned from the documents and from what you and others at Santa Cruz told them about the asset purchase agreement? A We would have been one source of knowledge. I can't say that we would have been their only source. MR. JACOBS: Your Honor, this is a 10-K filed by We would move it into the plaintiff in this action. evidence as an admission of a party opponent, Exhibit D-11. 823 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 it. Cruz. MR. NORMAND: laid with this witness. personal involvement. MR. JACOBS: I'm not sure a foundation has been She hasn't testified to any I don't believe we need a foundation for an admission by a party opponent, and I could ask her whether this admission comports with her understanding, such as Mr. Normand did with documents that Santa Cruz filed. MR. NORMAND: Your Honor, if we have that understanding going forward, that's okay, but we've been trying to lay foundation with witnesses to date. THE COURT: Were you still with -- after Caldera obtained the assets from Santa Cruz, were you with -- did you go with Caldera or did you stay with what remained of Santa Cruz? THE WITNESS: I stayed with what remained of Santa THE COURT: Do you have any other witness that will be able to have -- if you can tell me you will be able to establish a foundation for this subsequently, I'm going to allow you to go ahead. MR. JACOBS: Will you be able to do that? We'll establish We will, Your Honor. THE COURT: I'll allow the admission of D-11 based upon the representation that a better foundation will be laid in the future. 824 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 evidence.) (Defendant's Exhibit D-11 was received into BY MR. JACOBS: Q Do you see the discussion on page 42 of this exhibit, Ms. Madsen, about the arrangement with Novell? A Q Which section in particular are you referring to. It's called restricted cash and royalty payable to Novell, Inc.? A Q Yes. It says, the company has an arrangement with Novell in which it acts as an administrative agent in the collection of royalties for customers who deploy SVRX technology. you see that? A Q I do see that. It says, under the agency agreement, the company Do collects all customer payments and remits 95 percent of the collected funds to Novell and retains five percent as an administrative fee. A Q Do you see that? I see those words. And the agency agreement that's been referred to is the asset purchase agreement, correct? A Q I don't know. I am unaware of any agency relationship. So when Mr. Mohan -- back to 163 -- said, in addition, we will manage the licensing business for UNIX prior to UnixWare 1.0 (SVRX), you didn't understand that that was 825 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 managing as Novell's agent? A I didn't understand that there was an agency relationship, no. Q You understood that -- are you disputing the truth of that sentence, Ms. Madsen? A I'm not disputing it, I'm just saying I have no knowledge -THE COURT: Which sentence? The one in the agreement or the one in the 10-K? MR. JACOBS: BY MR. JACOBS: Q In addition, we'll manage the licensing business for Are you disputing the truth of Sorry, Your Honor. UNIX prior to UnixWare 1.0. that sentence, Ms. Madsen, the accuracy of it? A I think you were saying two different things. You keep talking about an agency relationship, of which I have no specific knowledge, or general knowledge. With respect to Mr. Mohan's statement, he sent out a memo to all employees, so he is giving a general overview of the transaction for that audience. This wasn't prepared for attorneys review or executives review, but for all employees. Q A Q So it's a simplification? I wouldn't disagree with that. As is the sentence we're purchasing the UNIX business from Novell a simplification? 826 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 A Simplification, sure. It's one sentence that is describing a complicated transaction. Q A complicated transaction documented in a lot of complicated transactional documents, isn't it, Ms. Madsen? A Q I'm sorry. What was the question? It's a complicated transaction documented in complicated transactional documents, the asset purchase agreement? A that. Q So I'm going to hand you SCO Exhibit 1, Ms. Madsen. It is a complicated transaction, yes, I'll agree with SCO Exhibit 1 is the asset purchase agreement with its two amendments, Amendment No. 1 and Amendment No. 2. to you the last piece of paper in this stack. A Q Okay. I would like to -- if we go back to the pie chart a I'll hand little bit, I would like to start with your understanding of the transaction as refreshed by the asset purchase agreement, or whatever else you have in mind. Let's start with the UNIX portion of this and the portion that was simplified by Mr. Mohan in his sentence, in addition, we will manage the licensing business for UNIX prior to UnixWare? A Q Uh-huh. (Affirmative) So if you turn to section 4.16(b) in particular, 827 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 Ms. Madsen -A Q A I'm sorry. 4.16(b) of what? Of SCO Exhibit 1, the asset purchase agreement? I'm sorry. I thought you had referred me to Amendment No. 2. Q A No. I was just describing the package. Oh, okay. Yes. Q A Q This is about SVRX licenses, correct? Yes. And Mr. Mohan, in his message to the troops, refers to managing the licensing business for UNIX prior to UnixWare 1.0 (SVRX)? A Q Yes. It says, buyer shall not, and shall not have the Do you recall that? authority to, amend, modify or waive any right under or assign any SVRX license without the prior written consent of seller. A Q Do you see that? I do. Then it says, in addition, at seller's sole discretion and direction, buyer shall amend, supplement, modify or waive any rights under, or shall assign any rights to, any SVRX license to the extent so directed in any manner or respect by seller. A I do. Do you see that? 828 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 Q And you've worked on a lot of transactional documents, you had some experience in '95 and '96, you understand the meaning of the words sole discretion and direction, correct? A Q I understand what those words mean. They mean that, here, seller, Novell, in its sole discretion and direction, can tell buyer, SCO, what to do under these licenses, doesn't it? MR. NORMAND: Your Honor, this is calling for a legal conclusion, which is not something I asked. BY MR. JACOBS: Q That was your understanding at the time, wasn't it, Ms. Madsen, when your eyes passed over these words? THE COURT: THE WITNESS: the transaction. I will overrule the objection. No, that was not my understanding of It was so that it could modify or amend the royalties related to the SVRX license. BY MR. JACOBS: Q A Q Do you see that word reflected here, Ms. Madsen? No. So are you relying, for your understanding, on the language of the asset purchase agreement or on something else? A Q I'm relying on the intent of the agreement. The intent from where? Intent isn't in the air, is it, Ms. Madsen? It comes from somewhere, doesn't it? 829 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 What are you basing that on? You are in court and you're telling this jury, you are explaining that you think there is an intent to the agreement that's different than these words, right? A Yes, I'm relying on conversations that were held internally among SCO personnel as well as conversations with Novell. Q What specific conversations are you relying on with Novell in which somebody said to you, Ms. Madsen, this language is limited -- this language is limited to the binary royalty stream? A I remember conversations with Novell where Novell was concerned about SCO's financial viability and therefore needed to protect the binary royalty stream as a way to protect its interests in the event that SCO became insolvent. Q A That was a very important concern of Novell, correct? It was a concern of Novell's. I can't say how important it was. Q But in connection with this language, Ms. Madsen -- I want to distinguish, you've been in a lot of negotiations, right? A Q You're an experienced negotiator, yes? I have been in a lot of negotiations. Negotiators can talk to each other about what is bothering them at a particular moment, what is of concern to 830 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 them in a particular moment as a way of explaining to the other side what's going on in their head at that time, right? A Q Yes. That may reflect at that moment an intent behind a particular provision? A Q Sure. Of course, the language itself may be broader than that specific intent reflected at that particular moment, correct? A Q Yes. It's the language that the negotiators intend to control, right, not what they say to each other across the table at that moment? Based on your experience, isn't that right, isn't that what you do with your contracts? A Q I'm sorry. I've lost track of what the question was. Isn't there -- don't you The question is this: understand, as a negotiator of contracts, that what somebody says as a concern that may be reflected in some language is different from what the deal is, the deal is what is in the language, isn't it, Ms. Madsen? A The deal is is what is in the contract. But you have to -- I think you have to look at the contract in the context. Q Ms. Madsen, just to review where we were on 4.16(b), 831 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 the language includes, if you truncate it a little bit, in addition, at seller's sole discretion and direction, buyer shall assign any rights to any SVRX license to the extent so directed in any manner or respect by seller. that? A Q I see it. That language, you understood, as your eyes passed over Do you see that language in 1995, that that language meant that Novell could direct Santa Cruz to assign rights under an SVRX license to someone else? A Q That is not how I understood it in 1995. That's not how you understood the words, Ms. Madsen? That's not how you understood the words of this contract? A Q No, that isn't how I understood it. You have a specific recollection of 1995, 15 years ago, you have a specific recollection of your eyes passing over this language and thinking something different from what I just read and said to you? A I have no specific recollection. I have a general recollection of not understanding the intent to mean how you have interpreted it. Q So you have no specific recollection of understanding these words differently than the way I just articulated it? A Q That's correct. Because the words say that Novell, for whatever reason 832 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 it wants, in its sole discretion, can tell the buyer, Santa Cruz, assign the rights under the SVRX licenses to someone else, that's what the words say? A Q A Q Is that a question? Yes. That's what the words say. Terrific. That's like an agency, isn't it, Ms. Madsen? That's like when you hire a real estate agent, you know what, you are fired. I don't like the way you are selling my house. I'm going to assign the right to sell my house on my behalf to someone else. A No. Isn't that right, Ms. Madsen? I really don't know very much about agency relationships, so I couldn't make that statement one way or the other. Q You never had any relationship with a property manager? Let's say, it's like a property manager, isn't it, Ms. Madsen, where you say to the property manager, you're not doing a good job with these apartments, I'm going to assign your right to be my property manager to someone else? Isn't it like that, Ms.

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