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 [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 Three)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

SCO Grp v. Novell Inc

Doc. 860 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 Q.

THE COURT: MR. JACOBS:

Are you ready, counsel? Yes, Your Honor.

(Whereupon, the jury returned to the court proceedings.) THE COURT: Where did our witness go?

Go ahead, Mr. Jacobs. BY MR. JACOBS: Ms. Madsen, over the course of your

time at Santa Cruz, various internal issues would arise in which people were needing advice about how to apply the asset purchase agreement day to day; correct? A. Q. Yes. And you were involved in the rendering of that

advice to the individuals who asked questions; correct? A. Q. From time to time. So you had occasion during your time at Santa Cruz

to actually sit down with the asset purchase agreement, sort through the provisions, many of which we're discussing today, and figure out how they actually apply to the day-to-day business of Santa Cruz; correct? A. Q. From time to time, yes. Let me ask you about, I mentioned this before the If you turn to

break, the operating agreement, Exhibit X5.

the signature page, Ms. Madsen, you'll see that the agreement was executed by the CEO of Santa Cruz. A. I do. 841 Do you see that?

Dockets.Justia.com

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. evidence.

MR. JACOBS:

Your Honor, we would move X5 into

MR. NORMAND: THE COURT:

No objection. X5 will be admitted.

(Whereupon, Defendant's Exhibit X5 was received.) BY MR. JACOBS: So as I mentioned, Ms. Madsen, I

don't think the jury has seen this piece of the package of APA related agreements. But you had seen this around the time of

the asset purchase agreement; correct? A. Q. Yes. I have a general recollection of seeing this.

And the operating agreement is referred to in the

asset purchase agreement as one of the other pieces of the transactional arrangement; correct? A. Q. I believe so. And in particular, Ms. Madsen, take a look with Do

me -- well, let's go to just the introductory paragraph.

you see, this operating agreement is made by and between Santa Cruz Operation and Novell? A. Q. see that? A. Q. Yes. And the closing date is the defined term in the Yes. And the effective date is the closing date, do you

asset purchase agreement, but it was actually, I'll represent to you, December 6th, 1995; correct, Ms. Madsen? 842

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 date.

A. Q.

That sounds right. So now let's look at, product and channel strategy, And we're talking in the operating agreement Do you

on Page 5 of X5.

about, in this section in particular, about UnixWare. see that? A. Q. In which section? I'm sorry?

Product and channel strategy, B(i), as the closing

A. Q.

Yes. It says: SCO will begin to distribute, offer,

promote and market UnixWare through the channel, the distributorship channel that's there. Do you see that? A. Q. Yes. And it says: Novell will cease distributing UnixWare product through its indirect channel and cease signing the distribution agreement. Do you see that? A. Q. I do. So the contract is pretty clear as of the closing

date and it is consistent with your understanding that as of the closing date Santa Cruz would be the UnixWare business in terms of actually selling UnixWare products; right? A. Yes. 843

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Q.

And Novell would, through the mechanisms set forth

in the asset purchase agreement and the operating agreement transfer that sales relationship, those customer relationships, to Santa Cruz; correct? A. Yes. MR. JACOBS: second? MR. HATCH: Q. Sure. And when we're talking about May I, Mr. Hatch, borrow this for a

BY MR. JACOBS:

UnixWare we are talking about something like this; right, Mrs. Madsen? A. Q. A. Q. Wow. I haven't seen this in a long time. Yes.

It's a disk; right? Yep, it is. So when we talk about distributing UnixWare, we're

not talking about anything much more than distributing these packages; right? A. Q. These disks? I lost the question.

I'm sorry.

This is how UnixWare was distributed in 1995-1996,

on a disk; right? A. Umm, you know what, I don't know that that was the We may have -- we may have

only way that it was distributed. distributed it electronically. Q. Okay.

I'm not sure.

So let's go on and see if this refreshes

your recollection about how all of this was going to occur. 844

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.

This specifies, first of all, as we began that Santa Cruz is, in fact, going to distribute and market UnixWare; correct? A. Q. A. Q. Yes. And that was your understanding at the time? That was my understanding at the time. And it is clear in the contract, isn't it, that

that's one of the rights and obligations of Santa Cruz, to distribute the UnixWare software? A. Q. Yes. And so there's no -- you don't see any -- you

didn't have any at the time, there was never any issue, Santa Cruz had permission from Novell to distribute UnixWare? A. That's right. That was one of the fundemental We were acquiring all

pieces of the asset purchase agreement. right, title and interest in UnixWare. Q. A. Q.

Now, if you look at little (b) little iv, Roman iv. Yes. It says: SCO will continue to offer OpenServer

Release V in conjunction with the UnixWare 2x after the closing date. Do you see that? I do. So that was the legacy, the older Santa Cruz 845

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product, and now it's going to be -- and this is making clear and this is your understanding that both products would be in distribution after the closing date? A. Q. Yes. You know what, Ms. Madsen. I don't believe in

trick questions.

So if I'm going to ask you a trick question, So for the

I'll raise my hand and warn you in advance, okay?

moment I just want to walk you through your understanding of the asset purchase agreement at the time and how the contract worked, okay? A. Q. Okay. So in the next sentence: Additionally SCO will begin offering Eiger binary and source offerings. Do you see that? A. Q. Yes. So there is explicit grant or permission for SCO to Do you see that?

offer the Eiger release. A. permission.

You know, I'm uncomfortable with the word But it does reflect the intent that SCO would be I don't know that we needed

offering Eiger binary. permission. Q.

But it certainly could be understood as both a To

right and obligation under the contract to do that; right? agree to offer Eiger binary and source offerings?

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A.

It was SCO's intent to offer Eiger binary and

source offerings, yes. Q. And then in the next sentence we're talking about Do you see that?

the merge product.

SCO will also offer a binary and source offering of the merged products. A. Q. A. Q. Right. So at the time in the first half of 1997? Yes. So that's an explicit permission about SCO's

offering of the merged product; right? A. permission. Again, I don't -- I'm not comfortable with the word I don't see where this is permission. It's

stating what SCO intends to do.

It will offer binary and

source offerings of the merged product. Q. will do. A. Q. Yes. Now, if you turn to Page 6 of the operating And Novell is agreeing that that's what Santa Cruz

agreement, product packaging. A. Q. A. Q. Uh-huh (affirmative). This is back to our disk package. Uh-huh (affirmative). Commencing after the closing date, SCO

plans to sell the UnixWare 1.1 and the 847

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UnixWare 2.x product and may use existing Novell inventory with the SCO sticker on it. Do you see that? A. Q. I do. So that's how the distribution will occur right

after the closing date; right? A. I see that, yes. Again, I really don't have any

specific knowledge about our distribution processes. Q. A. Q. You recall the operating agreement? I recall the operating agreement. You recall picking up the operating agreement from

time to time to understand the party's rights and obligations under the asset purchase agreement? A. Q. A. Q. I do. Next sentence, Ms. Madsen. Yes. Once this stock is exhausted, SCO will

be responsible for manufacturing all products in the UnixWare 1.1 and UnixWare 2.x product family. Do you see that? A. Q. Yes. Yes.

And so once again, the operating agreement is quite

clear at this moment in time, that is, once the stock is exhausted, SCO is going to manufacture; right? A. Yes. 848

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Q.

SCO is going to take these, re-using this

distribution mechanism, SCO is going to cut the disks; right? A. Q. Yes. The contract is clear that SCO has both the right

and obligation to do that, isn't it? A. Q. Yes. No issue ever came up between the parties with

respect to this question of whether SCO would actually have a right to make disks of UnixWare, did it? A. Q. Not that I'm aware of, no. Mr. Normand asked you about Amendment X. Do you

recall this question on that subject? MR. NORMAND: THE WITNESS: Amendment X. Q. A. Q. BY MR. JACOBS: I do. That was the amendment between Santa Cruz, Novell Do you recall Amendment X? Your Honor, that's not true. No. I don't recall any discussion of

and -- Santa Cruz and Novell that resolved the dispute about the IBM buyout; correct? A. Q. A. Q. correct? 849 Yes. And you were involved in that dispute? Yes. And you were involved in some way in Amendment X;

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 says:

A. Q.

Yes. And Mr. Normand is correct. I'm refreshed, my

recollection is refreshed. Amendment X.

We didn't talk specifically about

You didn't talk with Mr. Normand about that, but The buyout

you did talk about the IBM dispute; correct? dispute? A. Q. A. Q.

I do remember that giving rise to Amendment 2. Do you recall it giving rise to Amendment X, also? I do, yes. So let me hand you this. This is O8.

And if you'll turn to the signature page for Santa Cruz you'll see that Steve Sabbath signed this agreement. A. Do you see that? Yes. MR. JACOBS: MR. NORMAND: THE COURT: Your Honor, we offer O8 into evidence. No objection, Your Honor. It will be admitted.

(Whereupon, Defendant's Exhibit O8 was received.) Q. BY MR. JACOBS: Now, Ms. Madsen, if you look at the

top of this document, you'll see it's, International Business Machines Corporation, The Santa Cruz Operation, Novell. you see that? A. Q. I do. And then if you look at the next several lines, it Do

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Amendment Number X to software agreement SOFT-00015. Do you see that? I do. You became familiar with the structure of the old

AT&T UNIX licensing system that applied to companies like IBM that were in the business of creating their own flavor of UNIX; correct? A. Marginally familiar. I relied on other people who

had greater familiarity to inform me about those agreements. Q. Were you familiar with what a software agreement Let me help you. But as I sit here

SOFT-00015 would contain? A.

At that time, yes, I would have.

today, I have no specific knowledge of the contents of that agreement. Q. Do you recall that the software agreement

SOFT-00015 is kind of a master agreement in that the sublicensing agreement and the supplements are part of a package with the software agreement? A. I remember that there was a master, and then there

was a supplement, but I don't remember which was which. Q. So you don't recall which agreement was the

software agreement, the sublicensing agreement and the agreement, do you? A. No. Not as I sit here today, no. 851

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Q.

So in conjunction with the asset purchase

agreement, if we go back to 4.16(b) or 4.16(a), when it refers to SVRX licenses in the asset purchase agreement, you don't have an opinion one way or another whether it's referring to the entire package of agreement, the software agreement, the supplement and the schedule or pieces of those agreements, do you? A. It was my understanding that it related to a

subsection of the agreement relating to the distribution of binary royalties. Q. Santa Cruz? A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. That's correct. In the legal department of Santa Cruz? Correct. Under Steve Sabbath? Yes. The lawyer at Santa Cruz? Yes. Who signed the agreement? Yes. Hand up. Yes. Do you see there the Recitals, the first sentence Take a look at Recitals on O8. And that was your understanding as you worked at

of the recitals? 852

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A. Q.

Uh-huh (affirmative). AT&T and IBM entered into various software

license agreements concerning the software product UNIX System V Release 3.2. Do you see that? A. Q. I see that language. Which are software agreement, SOFT-00015 as

amended. A. Q. A. Q. Uh-huh (affirmative). That's the software agreement; right? Yes. Sublicensing agreement SOFT-00015 as amended. Do

you see that? A. Q. Yes. And then software agreement SOFT-00015

Supplement Number 170 as amended. Do you see that? A. Q. Yes. Or any other supplements that pertain to -THE COURT: start reading? MR. JACOBS: Q. Sure. Or any other supplements that Mr. Jacobs, will you slow down when you

BY MR. JACOBS:

pertain to prior versions or releases of the software product. 853

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. Q. A. Q. A. Q. agreement.

Do you see that? Yes. And substitution agreement XFER-00015B. Yes. And then that's all the defined terms in related

Do you see that? I do. And then it says: Novell acquired AT&T rights

under the related agreement. Do you see that? Yes. And then it says: In an agreement between Novell and SCO dated September 19, 1995, the asset purchase agreement, SCO purchased and Novell retained certain rights with respect to the related agreements. Do you see that? I do. That makes clear, does it not, that Novell retained

rights with respect to the supplements, the sublicensing agreement and the software agreement? A. Doesn't it, Ms. Madsen?

No, I don't believe so; because the first sentence

is talking about the agreements that were entered into between IBM and AT&T, and the second sentence is saying that Novell 854

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retained certain rights with respect to the agreements, but it doesn't say which ones. Q. Okay. So you're reading that and your

understanding at the time is that it retained certain rights with respect only to some of the related agreements? A. I don't know -- I mean, without looking at these

agreements it's really hard for me to talk about the specifics of the sublicensing agreements and the software agreements and the supplements. Q. All right. Fair enough, Ms. Madsen.

Let's go back, then, to SCO Exhibit 1. You testified in your direct examination as to your role in the original asset purchase agreement. that back and forth with Mr. Normand? A. Q. Yes. And by the original asset purchase agreement Do you recall

meaning the version that was signed on September 19th, 1995. A. Q. A. Q. Yes. Do you recall that back and forth? Yes. There is a section in this agreement, Section 1 in

Article One that defines what's going to Santa Cruz and what's being kept by Novell; right? A. Q. Yes. It's the purchase of asset section; right? 855

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A. Q. A. Q.

Yes. And you understood that at the time? Yes. So my hand is up again. You have a specific

recollection as you sit here today of understanding that 1.1(a) was the purchase and sale of assets provision that governed the -- what Novell would sell to Santa Cruz and what Novell would retain? A. Well, I think the entire agreement talks about what So, I mean, I hesitate to just pluck out

is being conveyed.

one sentence and say that captures in its entirety what assets are being transferred. Q. My question was a little different. I'm trying to

figure out what exactly you remember about 1995, 15 years ago, versus what looking at the agreements, trying to understand the general context, you're trying to think what must have happened -A. Q. A. Q. A. Q. Yes. -- back in 1995? Yes. That's the thrust of my question. Yes. So is it more the former or more the latter? What

you specifically remember or what you're able to reconstruct and say must have happened based on the documents and the few 856

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things that you do actually remember? A. It's both. And it would be hard for me, you know, But it's both.

to draw a bright line between the two. Q. bit. All right.

Then let's go through this a little

You understood that Section 1.1(a) says that Novell

is going -- in a nutshell it says that Novell is going to sell to Santa Cruz the assets identified on Schedule 1.1(a), but there's a Schedule 1.1(b). And Schedule 1.1(b) is controlling You understood

as to what is excluded; correct, Miss Madsen? that? A. Q.

Well, I understood that the two worked together. Well, that you understood that the language, not

withstanding the foregoing, means that the excluded asset sentence, if you will, is more powerful than the included asset sentence; right? A. No, I would disagree with that characterization. No, I

The excluded assets might modify, but more powerful? wouldn't agree with that characterization. Q.

In your understanding and belief, sometimes lawyers Isn't it

talk about one provision trumping another provision?

true that the excluded asset schedule trumps the included asset schedule if there's a disagreement between the two? A. Q. I don't know. You don't know what, not withstanding the

foregoing, meant or means? 857

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A. Q.

I understand what that means, yes. Notwithstanding the foregoing, because now you do a

lot of contracts, so now you know when somebody writes, notwithstanding the foregoing, the mean -A. Q. However. However, or, forget what came before because if

this next sentence says something different, it's this next sentence that applies; right? A. That is my understanding of the clause, not It's making an exception to what

withstanding the foregoing. was previously stated.

But I wouldn't use that statement to

say something blatantly contradictory. Q. You don't think, notwithstanding the foregoing, What did you

means, I mean -- let's go back to 1995.

understand, then, when your eyes passed over this provision about the words, not withstanding the foregoing? A. including. That the excluded assets is modifying the So there's a however. You get this, however,

there might be, you know, an exception. Q. A. Q. And you don't get what's in the exception? Right. Okay. So now let's look at the excluded assets

schedule as the agreement was signed on September 19th, 1995. A. Q. Okay. You testified that you were present at meetings 858

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between Santa Cruz representatives and Novell representatives? A. Q. Yes. You were present at business level meetings

involving people like Ed Chatlos and Mr. Wilt and other business level negotiators. meetings? A. I was. I can't say that I was at all of them, but You were actually at those

I was present at some of them. Q. And you were also present when the legal teams met

to negotiate the final change of the asset purchase agreement; correct? A. Q. Correct. And in those meetings, it was really legal team to

legal team, wasn't it, Ms. Madsen? A. No, not exclusively. The business team was also

present during many of those meetings. Q. Let's talk about the week leading up to the signing Do you recall those

of the asset purchase agreement. meetings? A. Q. Yes.

Those were at the Brobeck, Phleger & Harrison

office in Palo Alto? A. Q. A. Yes. And the legal teams met face to face; correct? They did. 859

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Q. A. Q. A.

And drafts were exchanged back and forth. Yes, they were. Including drafts of the excluded assets schedule? I don't remember specifically the excluded asset

schedule, but, yes, I'm sure that it was. Q. And that's a classic example of, you don't have a

specific recollection, but surely they must have been exchanged back and forth; right? A. Well, I remember, you know, the agreement being I don't remember when a specific But I remember the contract packet

exchanged back and forth. schedule was exchanged. being exchanged. Q.

Do you have a specific recollection of your eyes

passing over the excluded asset schedule before the agreement was signed? A. I have a general recollection, but not a specific

recollection. Q. So general recollection that you're present in the

room, the drafts are flying back and forth, people are working hard because there's deadline, isn't there -A. Q. Yes. -- to sign it? By the way, where did the deadline come from? A. I believe that we needed to get the transaction

finalized prior to a scheduled board meeting -860

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Q. A. Q. A. Q. recall? A.

Of --- that Novell had. That's your recollection? That's my recollection. It didn't come from the Santa Cruz side as you The time pressure? I know that the Santa Cruz operation was anxious to

get the deal done, but I don't remember them setting the specific timeline. Q. So the Santa Cruz side wants to get the deal done

and is anxious to do so? A. Q. Absolutely. The excluded asset schedule goes back and forth

between the parties, yes? A. Q. I believe so. But you don't have a recollection as you sit here

today of looking at the excluded asset schedule and in particular the intellectual property section that so much of this case revolves around; correct? A. Q. No. So you don't recall as you sit here today that you

read and thought, oh, this must be related to NetWare? A. Q. I don't have that specific recollection, no. Do you have a general -- I'm not sure -- we'll have But do 861

to figure out what we mean by specific versus general.

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you have a general recollection of that? hand up again. A.

And I should put my

I have a general recollection of reading this asset

schedule, but I cannot recall what I thought about it in 1995. Q. You had occasion to look at this excluded asset The

schedule again well before this dispute arose; correct? dispute between -- this dispute in this courtroom. A. Q. Yes. Did you look at it in connection with the

negotiations around Amendment Number 2? A. Q. Yes. Did you look at it and did you conclude that when

it was referring to intellectual property and all copyrights and trademarks it must be referring -- it was referring -I'll withdraw the must be and ask was -- it was referring to network copyrights? A. question. Q. It wasn't a very good one. Let me start over. I'm sorry. I'm not sure I understand your

When you looked at the excluded asset schedule in the period following the exclusion of the asset purchase agreement for whatever purpose in your business role -A. Q. Uh-huh (affirmative). -- at Santa Cruz and you came across Roman V,

intellectual property, all copyrights and trademarks except 862

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for the trademarks UNIX and UnixWare, did you conclude, did your mind go, oh, that's excluding the NetWare copyrights? A. I don't know. I know that we modified this, but I

don't recall saying, oh -- I don't know. Q. No recollection as you sit here today in this

courtroom of reading this provision and thinking, this is referring to NetWare? A. SCO understood that the copyrights were being

transferred, so I wasn't looking at this provision in that context. I mean, I just don't have any specific recollection It's the

of thinking, oh, you know, this is NetWare.

copyrights for UNIX and UnixWare were being transferred as part of the asset purchase agreement. Q. Well, sort of actually, your last fragment there is

relevant to the next question I was going to ask, which is, you see it says, except for the trademarks in UNIX and UnixWare; right? A. Q. Do you see that?

Uh-huh (affirmative). Now the trademarks in UNIX, that doesn't have

anything to do with NetWare, does it? A. Q. No. I have no reason to think so. No.

So when we're talking about excluding all

copyrights and trademarks except for the UNIX and UnixWare, we must be talking about UNIX -- we must be talking at least in part about intellectual property relating to UNIX; correct? 863

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A. Q. A. Q.

I'm sorry. When it says except for the trademarks UNIX -Yes. -- that's referring to UNIX intellectual property;

A. Q.

It's referring to the trademark UNIX. And that's UNIX intellectual property, not NetWare

intellectual property; correct? A. Q. Yes. So this section must be dealing with, at least in

part UNIX intellectual property; correct? A. Q. At least in part, yes. So when it says, all copyrights and trademarks, it

just doesn't make any sense to have understood it as your eyes were passing over it in 1995 or 1996 as referring to NetWare, does it? A. problem. Q. Can you answer my question? It doesn't make any This provision doesn't make any sense, is the

sense that when your eyes passed over this in 1995 or 1996, you would have understood it as NetWare copyrights and trademarks? A. Q. I didn't say that it did. And it wouldn't have made any sense to you, would

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A.

I don't know.

I mean, I just -- I don't know how I

was thinking about NetWare at that time. Q. Let me approach the topic this way. At the end of

your direct examination, Mr. Normand asked you whether over the course of your tenure at Santa Cruz you understood that the UNIX copyrights were required for Santa Cruz to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies? A. Q. Yes. I may have reformulated a little bit from the way

he asked it. A. Q. Yes. And I believe I heard that you said in response, we Do you recall that answer?

acquired the UNIX copyrights. A. Q. That sounds right.

So let me ask his question again.

Over the course

of your tenure at Santa Cruz, did you understand that Santa Cruz required the UNIX copyrights to exercise its rights with respect to the acquisition of the UNIX and UnixWare technologies? A. Q. Yes. Did you understand that requirement to exist when

you were sitting there at the negotiating table in connection with the asset purchase agreement as originally signed on September 19th, 1995? 865

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A. Q.

Yes. So let's see if we can set the stage. You're there

at the negotiating table.

There are lawyers from both sides,

Wilson Sonsini lawyers; right? A. Q. A. Q. A. Q. A. Q. Yes. Brobeck, Phleger & Harrison lawyers; right? Yes. The Brobeck lawyers representing Santa Cruz; right? Yes. The Wilson lawyers representing Novell? Correct. You never had any doubt about the legal team in

that transaction? A. Q. No. Brobeck lawyers were well recognized as outstanding

lawyers in the mid '90s in Silicon Valley; right? A. Q. I believe so. And you're sitting there and you're thinking, we

require the UNIX copyrights in order for this UNIX, UnixWare business to be successful. A. Q. Yes. And a schedule comes across the table, and the

schedule says it excluded assets, intellectual property, all copyrights, and no one catches it. You don't catch it, the

Brobeck lawyers don't catch it, Steve Sabbath doesn't catch 866

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it, nobody catches it. required -A. Q. A. Yes.

You're sitting there thinking it's

-- but you don't catch it; right? Yes; because the entire asset purchase agreement is So we were looking at this in

contrary to this one statement.

its entirety, and we just didn't notice that this statement really didn't make sense. not a license agreement. Q. A. Q. It's a complicated transaction; right, Ms. Madsen? It is a complicated transaction, yes. And what's included in the included asset schedule It's an asset purchase agreement,

is superceded if there's a disagreement by what's excluded by the excluded asset schedule. A. Well, we just talked about this a little bit. It

modifies it.

You wouldn't put, I'm giving you this and then

I'm taking the exact same thing away, in two different schedules. It would be, I'm giving you this. However, you

know, there's an exception to this. Q. So let's see what we were giving on the included Schedule 1.1(a),

assets, Roman V, on the included asset. Roman V.

So here's a specific provision in the included asset governing intellectual property; right, Ms. Madsen? A. Yes. 867

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 1995.

Q. A. Q. A. Q.

And copyrights aren't listed there? Correct. Trademarks UNIX and UnixWare are listed. Yes. Now, if we put the included assets sort of back to

back against the excluded assets, they mesh quite well, don't they, Ms. Madsen? That is, copyrights aren't listed under

intellectual property in V, and copyrights are excluded on the excluded asset schedule. The trademarks UNIX and UnixWare are

entirely consistent between the two provisions; right? A. Q. Yes. So let me ask you the same question again. It's

You have in your head that copyrights are required,

essential, not optional, not nice to have, not a good thing to keep around in case you have to go file a lawsuit, required to exercise your rights. And you look at the included assets

under intellectual property, and no one on the Santa Cruz legal team notices copyrights aren't on the included assets, either? A. Yes. Copyrights -- because copyrights were always And I have a specific

understood to be transferred.

recollection that the reason why this statement was inserted was because of the transaction between Novell and X/Open regarding the trademark UNIX. Q. Let me offer you -868 So they wanted to clarify that.

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 again.

A.

There was no need to clarify that the copyrights

were transferring because everybody understood they were transferring. Q. Let me offer an alternative explanation. We've

talked a little bit about memory, Ms. Madsen, and how you can be in the courtroom and you're trying to think what happened back 15 years ago, and it's a mix of specific recollections and general recollection and what must have happened. A. Q. Right. So let me offer you an alternative explanation.

You've been in the business of UNIX, the company Santa Cruz, for I think 12 years without owning the underlying UNIX copyrights but successfully selling OpenServer; right? A. Q. Yes. And you're now going to get, an important part of

what you're going to get is another flavor of UNIX, UnixWare; right? According to Mr. Mohan in his summary, we're going to

own UnixWare product line. A. Q. A. Q. Yes. So UnixWare is another flavor of UNIX; right? Yes. And so we're going to be in the flavor business We don't need ownership of the UNIX copyrights in

order to be in the flavor business. Isn't that a more plausible explanation, 869

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Ms. Madsen, of how legal teams on both sides could have left the asset purchase agreement the way it was? A. Q. No. Well, you know, Mr. Sabbath disagrees with you in a

sworn declaration; right? MR. NORMAND: THE COURT: Q. Your Honor, obvious hearsay. Sustained. Ms. Madsen, are you aware of a

BY MR. JACOBS:

declaration that Mr. Sabbath, your superior, signed under oath under penalties of perjury -MR. NORMAND: Q. Same objection, Your Honor.

BY MR. JACOBS: -- in December of 2003? THE COURT: The Court will sustain the objection. Ms. Madsen, who was Mr. Sabbath

Q. again? A.

BY MR. JACOBS:

Mr. Sabbath was the senior vice-president law in

corporate affairs and my boss. Q. And so he's the actual lawyer, the in-house lawyer

on the deal; right? A. Q. He is. And he has many years at that time of software and

software licensing and copyright experience; right? A. Q. Yes. And he's an experienced lawyer in dealing with

UNIX-related issues because SCO has had this OpenServer 870

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business for a while. A. Q. Yes. And Mr. Sabbath did not speak up during the asset

purchase agreement negotiations and say, wait a minute, why is Novell retaining all copyrights under the excluded asset schedule? A. Q. You have no memory of that; right? I have no memory of that. By the way, the same is true for the next three

months, isn't it, Ms. Madsen, after the asset purchase agreement is signed? A. Because we believed that the copyrights were

transferring, there would have been no need to speak up. Q. So, Ms. Madsen, there's now a team of lawyers again They have all the time in the world compared

on both sides.

to the closing of the asset purchase agreement -- I'm sorry -the signing of the asset purchase agreement; right? three months to look at this document? A. No. That's an unfair characterization because They have

during that three months, we were conducting all of the transition activities as well as that closing check list that Mr. Normand showed. So, I mean, there was still a lot of

activity and not a lot of leisure to reflect on missed language in an agreement. Q. If you go to Amendment Number 1 as part of SCO's

Exhibit Number 1, and you've seen this before, Miss Madsen, I 871

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believe, you know that, in fact, the excluded asset schedule was modified? A. Q. A. Q. Yes. And the included asset schedule was modified? Yes. And so attention was paid to the included asset

schedule during the follow three months. A. Q. A. Q. It was. And there were adjustments made to make it; right? Yes. And this specific exclusion, all copyrights and

trademarks, was not adjusted; correct? A. Q. Correct. So surely you would agree with me that there was

more time that one could spend on the asset purchase agreement and, if I will, its details over the months after the asset purchase agreement than during the week just before signing. A. Q. A. Q. Yes. I agree that there was more time.

And yet -That's the question. -- in that period of time Mr. Sabbath didn't raise We meant to get the

his hand and say, there's a bug here.

copyrights, but it excludes all copyrights. A. Q. No, he didn't. He didn't do that? 872

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 again.

A. Q. A. Q.

No, he didn't. And you agree with me there is a bug. I agree that that language is unclear. And so I'll ask you my question again. Here's an

experienced software lawyer. years and years.

He's been in the business for

He's been in the UNIX business, and there He along with everybody else blew it They understood it, and they We don't

are two possibilities.

or their eyes passed over it.

said, we're going to be in the UNIX flavor business. need to own the UNIX copyrights.

And your testimony is that

the former is the better explanation. A. Q. I lost the question in that. And I loved it. So I'm sorry. I'll have to try it

We have Mr. Sabbath looking at the asset purchase agreement in Amendment Number 1 and not catching the bug in the period leading up to Amendment Number 1; right? A. Q. Correct. And in that period the lawyers and Mr. Sabbath and

yourself all have additional time to focus on the excluded asset schedule. A. We had a lot of things that we were working on.

But, yes, we did have some time to create Amendment 1. Q. And there's two possibilities, at least in my view.

One possibility is that you and your colleagues on the Santa 873

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Cruz side, leave aside the Novell people who were going to go with the business like Mr. Levine, the people on the Santa Cruz side didn't catch what you regard as a mistake in the drafting during that period. A. Yes. I mean, mistake, the drafting, yes. It

certainly could have been more clear. that, no. Q. We didn't catch it.

And we did not correct

And your explanation is, everybody on the Santa

Cruz side, people you had trust and confidence in, including your boss Mr. Sabbath, blew it. A. it. Blew it. I don't want to say my former boss blew But everyone The Novell

I would say that, yes, that was overlooked.

understood that the copyrights were transferred.

people that came over to the Santa Cruz Operation understood that the copyrights were transferred. mind to clarify the agreement. Q. closely? A. Q. Not with respect to copyrights, no. So that's your explanation, and you reject the It wasn't in your mind to read the excluded assets It just wasn't in our

explanation, again, trying to put all these pieces of the puzzle together and figuring out actually the relevant question in this lawsuit, what copyrights are required, you reject that explanation, that explanation being that Santa Cruz had been in the UNIX flavor business. It had not owned 874

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

copyrights to the UNIX operating system.

In order to be in

the flavor business, now they were going to be in a second flavor, UnixWare, and the negotiators thought to themselves, we can live with this. We don't need ownership of the

copyrights because we have all the permissions we need in the asset purchase agreement to carry on the business of UnixWare. A. No, that was not my understanding at all. SCO It

wanted to unify UNIX.

It wanted to be the UNIX company.

wanted all rights to the UNIX, and it wanted to be able to enforce and protect its intellectual property rights. copyrights would have been essential to that. The

And we wanted

to be able to take action such as we did with the European union with respect to Microsoft, and we needed the copyrights to do that, as well. Q. And it was just -- to sum all of this up, then,

your testimony is that as of the exclusion of the asset purchase agreement on September 19th, 1995, the execution of the closing documents including the bill of sale on December 6th, 1995, as of that period, Santa Cruz and yourself thought that the copyrights in UNIX were essential, were required for SCO to carry out, to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies, and nobody on the SCO side caught the fact that the excluded assets schedule includes all copyrights. A. Yes. 875

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 Honor.

Q.

And your testimony to that effect is not in any way

called into question in your mind by what you understand Mr. Sabbath believes to have been as stated in a sworn declaration. MR. NORMAND: MR. JACOBS: Same objection, Your Honor. Your Honor, I believe I can impeach And I can show the witness

with an out-of-court statement.

the declaration, and I can ask her whether it affects her understanding. MR. NORMAND: I don't think that's right, Your

MR. JACOBS:

And it will be referred to in SCO isn't calling him

Mr. Sabbath's videotaped deposition. live, but it will be in the videotape. MR. NORMAND: THE COURT: Q.

Same objection, Your Honor. I will sustain the objection. Ms. Madsen, just to clarify a few So he

BY MR. JACOBS:

things about the exhibits Mr. Normand asked you about.

asked you about SCO Exhibit 30, and in particular he asked you about a paragraph that the SCO side had put a bracket around on Mr. Mohan's letter. A. Q. Yes. 1456, Mr. Lee. It refers to the acquisition of UNIX technologies. A. Yes. 876 Do you recall that?

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.

Now, you understood that, in fact, Santa Cruz was

acquiring UNIX source code from Novell; correct? A. Q. Yes. And you know enough about this dispute that's

arisen to know that there's never been any question that Santa Cruz rightfully acquired the actual physical source code; correct? A. I haven't heard that there's been any dispute with

respect to source code, no. Q. So when it refers to acquisition of the UNIX

technologies, that could simply be referring to the acquisition of UNIX source code, couldn't it? A. It could. That wasn't my understanding of the

transaction, but it's not rendered inaccurate by that. Q. So now let's look back at the asset purchase

agreement just for a minute, and let's look at the provision governing the technology license agreement, which is in 1.6. And this is a license back of assets. A. Q. Yes. Concurrent with the closing, buyer shall Do you see that?

execute a license agreement under which it shall grant to seller a royalty free perpetual worldwide license to all of the technology including the assets. Do you see that? A. Yes. 877

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 Honor. right?

Q.

Now there was technology included in the assets; There was source code included in the assets.

A. Q.

Yes. And this license, then, would license Novell to

have access to and use the source code; right, Ms. Madsen? A. Correct. However, if it retained the copyrights,

it wouldn't have needed such a license. Q. Well, are you aware, Ms. Madsen, that Novell has

actually written to SCO and said under the technology licensing agreement, we have a right to access the source code because we have a license back, we retained a license to the technology included in the assets, and that Novell actually asked to get a copy of the source code under that provision? Are you aware of that? MR. NORMAND: Your Honor, I think that's both

hearsay and best evidence problem. MR. JACOBS: I'm asking her if she's aware, Your

THE COURT: THE WITNESS:

I'll overrule the objection. To which letter are you referring and

what's the time frame and -Q. Ms. Madsen? A. Well, you haven't given me enough detail about the BY MR. JACOBS: You're not aware of it, are you,

letter to say one way or another. 878

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.

Fair enough. It again then goes on, let's stay on with this for

a minute: All derivatives of this technology included in the assets including the Eiger product release. Do you see that? A. Q. Yes. And such licensed back technology to be

referred to collectively as licensed technology. Do you see that? A. Q. Yes. Now for the terms of the Eiger product release,

that was one of the evolving products that Santa Cruz was supposed to pursue; correct? A. Q. Yes. And Santa Cruz would, as you understand the way the

mechanics of ownership works in the software business, you understood that at the very least Santa Cruz would own the copyright in the code that Santa Cruz wrote; correct? A. It would own a copyright in the new product that it

created, yes. Q. And so this provision makes sense as you sit here

today or as you looked at it in 1995, this provision makes sense even if Novell owns the underlying UNIX copyrights because the derivatives Santa Cruz would own, and Novell would 879

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

get a license of the derivatives. A. Q. But that's not what this provision states. It says, all derivatives of the technology included

in the assets, doesn't it? A. It does. But it also says, all technology included

in the assets. Q. And if we want to know what technology was included

in the assets as of the asset purchase agreement of September 1995 -A. Q. Right. -- we should go look at the included assets and

throw out what's in the excluded assets; correct? A. Q. No. We shouldn't do that? Isn't that how assets is

defined in this agreement, Ms. Madsen? A. I'm sorry. I'm really trying to understand your But I'm not sure

question here.

I'm not trying to be obtuse.

what you're asking me. Q. I'm asking you for your understanding because

you've testified that you have to look at this as a whole. A. Q. A. Q. Yes. You have to make it all work. Yes. And I'm just asking you, can you make it all work

under my alternative explanation? 880

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, I can't. Because you reject the idea that Novell would want

a license to all of the technology included in the assets when the technology includes the source code, Ms. Madsen? A. Q. Yes. And you reject the idea that Novell would want a

license to all derivatives of the technology included in the assets -A. No. It's not that I reject that. It's just that

this gives them broader rights than what they would have needed if they retained the copyrights. So it would make

sense if they said, we want, you know, future versions, we want the derivatives. But here they're talking about they But if they retained

want a license back of all technology. the copyrights, they wouldn't need that. Q.

And that's because as a legal matter, Ms. Madsen,

your understanding is that the word technology equals the word copyrights? A. Q. Well, it's a portion of that. So if we go to the included assets and we go to the

excluded assets to see under the plain language of the asset purchase agreement of September 1995, isn't it true, Ms. Madsen, that all of the technology included in the assets included the source code to UNIX? A. Well, if I could look at that provision again. 881

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

But, yes, I believe that's correct. Q. So at the very least, Novell got a license back to

the source code in UNIX; right, Ms. Madsen? A. Q. I believe so. Now, a couple of other exhibits that Mr. Normand

asked you about. The settlement agreement between Santa Cruz Operation and Microsoft, SCO Exhibit 199. A. Q. A. Yes. Novell had no role in that; correct? I don't know. I have a general recollection that Certainly Duff Thompson

SCO may have apprised Novell of this.

who was Novell's representative on SCO's board, would have known about this. Q. By the 29th of May, 1998, Duff Thompson was no

longer a Novell representative; correct, Ms. Madsen? A. I don't know when Duff departed the board. But

discussions regarding this were prior to that, so I'm not sure when he left. Q. Let me sharpen up my question. No one at Novell

legal reviewed Recital B, SCO has acquired AT&T ownership of the copyright. A. Q. Not that I'm aware of, no. And same question with respect to SCO Exhibit 127,

the filing with the European union, which Mr. Normand asked 882

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 about. correct? A.

No one in Novell legal reviewed that document;

No, not to my knowledge. MR. JACOBS: THE COURT: No further questions, Ms. Madsen. Mr. Normand? REDIRECT EXAMINATION

BY MR. NORMAND: Q. Thank you for your patience, Mrs. Madsen. Mr. Jacobs finished or nearly finished by asking about the technology license agreement. A. Q. Yes. And he showed you repeatedly the word license in Do you recall that?

that document. A. Q. Yes. Do you recall there being the word license in the

asset purchase agreement with respect to Santa Cruz' rights? A. Q. No. Mr. Jacobs asked you about a bug, as he called it, Do you recall

in the excluded assets provision in the APA. that question and answer? A. Q. fixed? A. Q. Yes. In what form? Yes.

To your understanding, was the bug subsequently

883

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.

Amendment Number 2. Did Mr. Sabbath ever express to you any

dissatisfaction with the way the bug had been fixed? A. Q. No. Did Santa Cruz shortly after Amendment Number 2

represent that it owned the UNIX copyright? A. It did in the Microsoft filing -- or the filing

with the European union. Q. And was that representation consistent with your

understanding of what assets Santa Cruz had acquired? A. Q. this disk? A. Q. Yes. Is there intellectual property in here to your Yes. Now, do you recall questions about this box and

understanding? A. Q. Yes. And do you recall being asked a hypothetical about

contract interpretation? A. Q. Yes. Do you recall being asked about whether copyrights

are required? A. Q. Yes. Let me give you a hypothetical. Let's say you're In that 884

Santa Cruz in the hypothetical, and I'm a licensee.

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

hypothetical do I have to have a contract with you? A. Q. contract? A. Q. licensee. A. Q. A. Q. Correct. Let's say I give this to Mr. Hatch. Just a good citizen of Utah. Yes. Can you sue me for breach of contract? Yes, I can. Can you sue him for breach of contract? Do you He's not a Yes. In order to acquire this I need to execute a

have a contract with him? A. Q. No, I don't. On what basis could you enforce rights against him?

Would you need intellectual property to do that? A. Q. I would. I would need to look to copyright law.

Is that what's happening in connection with the You were exercising intellectual property

Microsoft dispute?

rights that were required in your view to operate the business? A. Q. Yes. Now, do you recall being asked about the operating

agreement that was signed in 1995? A. Q. I do. Mr. Calvin, can we pull that up? 885

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.

THE COURT: MR. NORMAND: THE COURT:

Which exhibit is it again? It's X5, Your Honor. Thank you. And let's go to Paragraph 7,

BY MR. NORMAND:

Mr. Calvin, and let's bring up the paragraph at the bottom. You see, Ms. Madsen, in the operating agreement it states, quote: It is the intent of the parties to transfer the agreements and associated rights and obligations which relate to Novell's UNIX system business to SCO. A. Q. A. Q. A. Q. I do. Did Mr. Jacobs show you that language? No. I don't remember him showing me that language.

Should he have raised his hand? Shame on you, Mr. Jacobs. Let's look at SCO's Exhibit 163. You recall questions and answers about this e-mail,

Ms. Madsen, when it comes up? A. Q. I do.

This is the Alok Mohan e-mail.

And let's look at the top box, Mr. Calvin, if you

could pull up that paragraph. Do you see here, Ms. Madsen, that Mr. Mohan says: We announce the purchase of the UNIX business from Novell? A. Yes. 886

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.

Did you understand the UNIX business to include the

UNIX copyrights? A. Q. copyrights? A. Q. Yes. And could you compare that, Mr. Calvin, to the Yes. Did you understand it to include the UnixWare

language at the very bottom of the e-mail, very bottom. And here Mr. Mohan explains that, quote: SCO is now the primary supplier of the UNIX technology. Do you see that language? A. Q. I do. To your understanding, was UNIX technology part of

the UNIX business? A. Q. Yes. To your understanding, was the copyrights for UNIX

and UnixWare part of the UNIX technology? A. Q. Yes. Now, Mr. Jacobs asked you a series of questions

about the license that Santa Cruz had before the asset purchase agreement was signed. A. Q. Yes. Now, looking at the top paragraph, before the asset Do you recall that?

purchase agreement, was Santa Cruz the principal provider of 887

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

UNIX products and technology to the entire computer industry? A. Q. No. And before the asset purchase agreement was signed,

was SCO the, looking at the bottom paragraph, primary supplier of UNIX technology to most OEMs? A. Q. No. Now, this exhibit also contains a press release. And, Mr. Calvin, if you could bring up the first page of the press release. At the bottom, Ms. Madsen, we'll bring that up for you and the jury. This is a press release with the title, SCO

Acquires Unix Business From Novell and Licenses of NetWare Technology. Do you see that? A. Q. Yes. Does the title say that SCO licenses UNIX business

from Novell? A. Q. release. And let's bring up, Mr. Calvin, the paragraph beginning, according. This press release states: According to the terms of the agreement, SCO will acquire Novell's UnixWare business and UNIX 888 No. Now let's go to the next page of that press

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

intellectual property. Do you see that statement? A. Q. I do. Is that statement consistent with your

understanding of the assets that Santa Cruz acquired? A. Q. Yes. Mr. Jacobs showed you Exhibit D11. And, Mr. Calvin, can we pull that up? And you were shown Page 42 of this Caldera document. And I think its the restricted cash and royalty

payable to Novell paragraph, Mr. Calvin. THE COURT: MR. NORMAND: THE COURT: Q. What page is that on? Page 42, Your Honor. Thank you. And these were the series of Do you recall that,

BY MR. NORMAND:

questions and answers about agency. Miss Madsen? A. Q. Yes.

Now, does this document speak to the fact that

Santa Cruz had acquired all copies of the UNIX source code under the asset purchase agreement? A. Q. Yes. Show me where it says that. In other words, does it speak to anything other than agency? 889

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 page.

A. Q.

Well, I'm not comfortable with the word agency. I'm asking you to just look at the words on the

Do you see anything other than agency discussed in this

paragraph of this document? A. Well, what I see is a royalty stream where we're

going to collect the royalties, and we're going to remit a portion of those royalties to Novell. Q. Do you read this paragraph to be a complete

description of the assets Santa Cruz had acquired? A. Q. No. Now, Mr. Jacobs showed you Section 4.16(b) of the

original APA. Can you pull that up, Mr. Calvin? you bring up Paragraph B for now. And Mr. Jacobs asked you about whether the reference to SVRX license in this paragraph refers only to royalties. A. Q. 4.16(b)? And I'm looking at the language, Ms. Madsen, in the first sentence, which says: Following the closing, buyer, Santa Cruz, shall administer the collection of all royalties, fees and other amounts due under all SVRX 890 Do you recall all of those questions and answers? Yes. Mr. Calvin, could you bring up Paragraph A of And why don't

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

licenses. A. Q. Right. As listed in detail under Item 6 of

Schedule 1.1(a) hereof and referred to herein as SVRX royalties. A. Q. Yes. Do you see that? How does that language compare as to your understanding of what payment Santa Cruz will be making to Novell after the APA? A. Q. Well, I'm not sure I understand the question. What was your understanding of what payments Santa

Cruz would be making to Novell after the APA? A. Well, there were three components that I recall.

There were the stock, which we talked about earlier; there was the royalty stream; and then I remember that there were certain thresholds, revenue thresholds, that if we met those, there would be additional monies transferred to Novell. Q. And when Mr. Jacobs was asking you about

Subsection B in his questions about royalties, did he show you the reference to royalties in Subsection A? A. Q. No, I don't recall that. Now, Mr. Jacobs asked you a series of questions Do you

based on your experience as a contracts person. remember those questions?

891

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. documents. Q. each other? A. Q. A. Q.

Yes. Are contracts sometimes ambiguous? Yes. Unfortunately, you know, they are not perfect

And in mind sight we wish we could perfect them. Do provisions of contracts sometimes contradict

Unfortunately sometimes they do. Are contracts sometimes amended? Yes. And when they're amended, is the only language in

the contract in your view relevant anymore? A. Q. No. Now, Mr. Jacobs asked you about Section 4.16(b). And he asked about the second

That's still on the screen. sentence.

Let's read it again. As sellers, Novell's, sole discretion, buyer,

Santa Cruz, 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 with respect to seller. Do you recall questions and answers about that provision? A. Q. Yes. And then Mr. Jacobs referred to what he called the Do 892

master agreement, which he called the software agreement.

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 remember that? A. Q. Yes. Do you have a view as a contracts person as to the

consequences if Novell could waive all of Santa Cruz' rights under all of the master agreements it had just acquired under the APA? A. Well, that would have rendered this asset purchase

agreement meaningless. Q. A. How so? Well, they could -- they could give away, they They could, you

could waive confidentiality requirements.

know, essentially resell the Brooklyn Bridge. Q. Ms. Madsen, have you seen anything today that is

inconsistent with your view that Santa Cruz acquired UNIX and UnixWare copyrights under the asset purchase agreement? A. No. MR. NORMAND: THE COURT: MR. JACOBS: No further questions, Your Honor. Mr. Jacobs? Your Honor, could we have a brief side

bar or maybe use this as a break to talk about possibly recalling Ms. Madsen? THE COURT: Let's do it with a side bar.

(Whereupon, the following proceedings were held outside the hearing of the jury:) MR. JACOBS: Mr. Sabbath executed a declaration 893

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 directly contradicts her testimony today.

It is a

statement like many of the statements that Mr. Normand showed Ms. Madsen that is completely inconsistent with her testimony. It will be introduced by way of deposition testimony in the next segment of the trial. Mr. Normand asked Mr. Sabbath We will offer it into We would then

about that declaration as did I.

evidence in conjunction with that deposition.

like to -- we would like to be able to recall Ms. Madsen and ask her about how her understanding is affected by Mr. Sabbath's declaration. MR. NORMAND: Your Honor, we object to the use of And I

the declaration in the way that Mr. Jacobs proposes.

suppose if it rises to this level of gravity we should address the issue in writing to Your Honor. THE COURT: The Court is not going to allow the use And if she has to be So --

of the declaration with no foundation.

recalled, then she'll have to be recalled. MR. NORMAND: THE COURT: Okay.

The dilemma I have is that in effect

what she would be asked to do would then to comment on the testimony of another witness, which is prohibited. MR. NORMAND: For what it's worth, Your Honor,

Mrs. Madsen was asked about that declaration in her deposition, and her answer was, this is not my understanding of Mr. Sabbath's understanding of the transaction. So she 894

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

offered no explanation one way or the other.

I think it's of

a tiny probative value in terms of the substance of her testimony, and its massively prejudicial hearsay with respect to the remainder of the trial. THE COURT: Again, the Court is not going to allow I'm going to have to see

her to be questioned at this time.

how the declaration is treated in the video deposition of Mr. Sabbath, and then we'll have to revisit it at that time. MR. NORMAND: But in the interim you'd like us to

not close testimony with Ms. Madsen? THE COURT: MR. NORMAND: Yes. Thank you.

(Whereupon, the following proceedings were held in open court:) THE COURT: at this time? MR. JACOBS: THE COURT: No, Your Honor. All right. Thank you very much. Mr. Jacobs, do you have anything else

Ms. Madsen, I've been informed that you may be recalled. So if you would be available to return, if Is that going to be a

necessary, at some subsequent point. great inconvenience to you? THE WITNESS: me.

It would be a great inconvenience to

I have two children back in Santa Cruz, California, that They are missing 895

I don't have child care arrangements for.

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

school today. me.

And I have an infant child outside waiting for

Plus my employer would be most aggrieved if I were to

miss additional work. THE COURT: The decision as to whether to recall

you will be made very carefully by the Court, but I still think it's possible that it could happen. be aware of that. THE WITNESS: THE COURT: Okay. But it will not be till many days have So you just need to

passed by, so you certainly should be able to return to California now. THE WITNESS: MR. NORMAND: Okay. Thank you. Could we have

Your Honor, I'm sorry.

one brief side bar on this issue, having heard what Ms. Madsen just said? THE COURT: Yes.

(Whereupon, the following proceedings were held outside the hearing of the jury:) MR. NORMAND: And I apologize, Your Honor. I

started to speak to that issue, and I should have completed the thought. At a maximum her deposition testimony when she Of

was asked about what Mr. Sabbath said would come in.

course, we object to it coming in, but we don't need her back live. She was asked at deposition, and she gave an answer.

And I know Mr. Jacobs would like to do a more extensive cross, 896

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but under the circumstances we object whole-heartedly.

But if

anything could come in perhaps that portion of the deposition where she's asked about that prior deposition. MR. JACOBS: I have an alternative proposal. Let's

see what happens with Sabbath.

And if we need to recall her,

we will discuss it after Sabbath, and we'll do it today. MR. BRENNAN: designations. Sabbath is the next witness through

And it would be a sufficient time to hear what

Mr. Sabbath has to say before the Court concludes testimony for the day. And if the decision is then made at that time, That could all happen today.

then we would reexamine her. MR. NORMAND: flight today.

I do believe she has a 3 o'clock

I just feel we're treading on her. My inclination is not to allow her to I would

THE COURT:

be directly examined on the testimony of Mr. Sabbath.

agree that the Court will consider, ought to consider whether the deposition testimony should be permitted, but I want to see the deposition testimony. So if any of you could get that

for me so I could look at it during the next break. Well, try to make -- let's just proceed. But it's

highly unlikely I'm going to make her stay if that's all we're going to do. MR. NORMAND: THE COURT: MR. NORMAND: So we should keep her? Keep her in the witness room until -Okay. 897

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 time? A. Q.

THE COURT:

If she had a 3 o'clock flight, she'll

have plenty of time once we finish and it is done. (Whereupon, the following proceedings were continued in open court:) THE COURT: THE WITNESS: THE COURT: You have a 3 o'clock flight today? I do. We will try to deal with anything we So just make

need to with you before you leave today.

yourself, keep yourself available throughout the remainder of this trial time today, which should be 1:30. THE WITNESS: THE COURT: Okay. Thank you.

Thank you, Ms. Madsen.

Mr. Singer, Mr. Norman, call your next witness. MR. SINGER: Thank you, Your Honor. We call Steve

Sabbath by his deposition. (Whereupon, the following excerpts were played by video deposition of Steven Sabbath:) Q. A. And how long were you at Santa Cruz? Well, I was there almost 13 years. I believe

12 1/2, 13 years. Q. And you were the general counsel throughout that

That's correct. Did you understand in 1995 that there were

negotiations between Novell and Santa Cruz regarding this 898

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potential acquisition? A. Q. Sure. And who did you understand on the Santa Cruz side

was leading those negotiations? A. Well, we had two corporate development

vice-presidents or senior vice-presidents, I can't recall. Jim Wilt or James Wilt and Geoff Seabrook. Q. And did those individuals have occasion to speak

with you regarding progress of the negotiations? A. Yes. I mean, once we engaged with Novell, I worked

with those two individuals constantly. Q. Did you develop an understanding during these

negotiations as to whether Santa Cruz would be acquiring UNIX intellectual property? A. Sure. I mean, sure. We were buying the entire

business including the intellectual property. Q. A. Q. A. And what was your basis for that understanding? I'm not sure I understand the question. How did you develop that understanding? Well, I mean, that is what the corporate As we started meeting with the

development guys told me.

Novell people and their attorneys, that was the discussion. We were buying the entire business. Novell didn't want to

keep any part of it so that they could go off and do other things, mainly focus on NetWare. 899

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Q.

Did you have occasion during the negotiations

regarding this potential transaction to deal with folks on the Novell side? A. Q. recall? A. Well, their chief negotiator, their coun