SCO Grp v. Novell Inc

Filing 861

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 16, 2010-Jury Trial-Volume VII before Judge Ted Stewart, re 567 Notice of Appeal. Court Reporter/Transcriber Ed Young, Becky Janke, Patti Walker, Telephone number [phone]. NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 business days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at www.utd.uscourts.gov. Please read this policy carefully. If no Notice of Intent to Redact is filed within the allotted time, this transcript will be made electronically available on the date set forth below. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 5/10/2010. Redacted Transcript Deadline set for 5/20/2010. Release of Transcript Restriction set for 7/19/2010. (Attachments: # 1 Part Two, # 2 Part Three)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

SCO Grp v. Novell Inc

Doc. 861 Att. 1

1 2 this off.

MR. ACKER:

Your Honor, I think maybe I can cut

I've learned something here today. As long as it goes both ways -I'm Mr. Stewart. I'm sorry. You're always right.

3 Mr. Stewart is right. 4 5 6 7 THE COURT: MR. ACKER: MR. SINGER: MR. ACKER:

I think that's Judge Stewart. Yeah, it is Judge Stewart. He's

8 always right.

Mr. Singer is right, and I have no

9 objection as long as the hearsay comes in both ways. 10 That is, if he wants to put in statements of customers as 11 to why they did or did not take SCOsource licenses, then 12 we will do the same. 13 THE COURT: The analysis we've been able to do,

14 based on a couple of Tenth Circuit cases, would indicate 15 that he may he testify as to statements made that they 16 were interested and, if he can prove that they would have 17 engaged in business and he can demonstrate that they 18 decided not to, but he would not be permitted to testify 19 as to why they decided not to. 20 There are a couple of cases that my law clerks

21 were able to find that would indicate that there is that 22 limitation. He can not speculate as to what was the

23 reason for ultimately not consummating the deal. 24 Now, if you two somehow or another want to

25 agree to violate the rule jointly, I'm not sure that 1045

Dockets.Justia.com

1 that's very wise. 2 MR. SINGER: Your Honor, we're also learning

3 something because when he looked into this, we found 4 Second and Third Circuit authority which said that 5 customer motives were admissible under 8033 to the 6 Hearsay Rule but we didn't discover Tenth Circuit 7 authority. 8 that? 9 THE COURT: This is from the case of United It's 443 Fed 3d 702. Let me just Would the Court be able to share with us

10 States of America vs. Ledford.

11 It's a Tenth Circuit decision from 2006. 12 read the relevant part: 13

Under the state-of-mind exception -- which I

14 presume we're all operating under -- itself, a statement 15 is not excluded by the Hearsay Rule if it is, A, a 16 statement of the declarant's then existing state of mind, 17 etc. 18 It then cites the rule. Then, going on, it says: Thus the Federal

19 Rules of Evidence contemplate an exception to the 20 exception. A statement that would otherwise be

21 admissible under the state-of-mind exception is 22 inadmissible if it is a statement of memory or belief 23 offered to prove the fact remembered or believed. 24 law makes it clear that a witness may testify to a 25 declarant saying "I am scared," but not "I am scared Case

1046

1 because the defendant threatened me."

The first

2 statement indicates a natural state of mind or admission, 3 while the second statement expresses belief about why the 4 declarant is frightened. 5 The phrase "because the defendant threatened

6 me" is expressly outside the state-of-mind exception 7 because the explanation for the fear expresses a belief 8 different from the state of mind of being afraid. 9 Now, admittedly, it's a criminal case, but I

10 don't know of any reason why it should be distinguished. 11 MR. SINGER: The authority that we are relying

12 on, Your Honor, and I'm happy to provide copies if I 13 may. 14 15 THE COURT: MR. SINGER: If you would, please. This is Hydrolevel Corporation vs.

16 American Society of Mechanical Engineers, 635 F.2d 118. 17 Second Circuit. 18 THE COURT: Do you have the relevant portion

19 marked or something? 20 MR. SINGER: Yes. It is highlighted. It is at

21 page 11 as the opinion is printed. 22 23 Mr. Acker? 24 MR. SINGER: Yes, we have. But, you know, we This is THE COURT: Have you given copies of these to

25 recognize these are out of different Circuits.

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1 the Third Circuit in Freeser vs. Serv-a-Portion, 909 F.2d 2 1524. I think, in light of the Court's Tenth Circuit

3 authority, we would be happy to be governed by the Tenth 4 Circuit authority if the Court is inclined to follow on 5 this and to proceed just within what I understand to be 6 the scope of this, that we can talk with Mr. McBride 7 about the fact that there was a business opportunity that 8 they were interested in, the opportunity was lost, but 9 not to elicit either through correspondence or through 10 testimony as to the reasons that he was given why that 11 customer was lost. 12 THE COURT: I believe that's what the Tenth

13 Circuit tells us we are allowed to do. 14 MR. ACKER: Well, if that's the rule we are

15 going to operate under, then I think we have to strike 16 Mr. McBride's testimony regarding why HP obtained a 17 license and what Mr. Buyers allegedly said to him in a 18 telephone call. 19 THE COURT: Mr. Acker, I was expecting you to And I don't believe that, in

20 object, and you didn't.

21 light of your failure to object timely, that I can now go 22 back and expect a jury to remember what it was that I'm 23 striking from. 24 MR. ACKER: And then I'm just alerting the

25 Court and counsel that I'm going into the reasons why it

1048

1 is that HP did or did not take a license. 2 THE COURT: And I think I've got to allow you

3 to do that certainly, but this point forward. 4 5 MR. ACKER: THE COURT: I understand. All right. Do we understand each

6 other then, counsel? 7 8 9 10 11 Q. MR. SINGER: THE COURT: I believe so, Your Honor. All right.

(Jury brought into the courtroom.) THE COURT: Okay, Mr. Singer.

Mr. McBride, I think we were in the course of

12 discussing Google. 13 14 A. Q. Yes. Was there an offer made by SCO to Google for

15 selling SCOsource licenses? 16 17 A. Q. Yes. Do you recall what SCO's offering price was for

18 a SCOsource license? 19 A. Yes. There was a discount off from our It was a discount

20 at-the-time list price, which was 699.

21 off from that price because of their volume amount they 22 had, down to a hundred dollars per server. 23 24 25 Q. A. Q. Did that deal get done? No, it did not. And did you have a business opportunity with

1049

1 Dell? 2 3 A. Q. Yes. Were you personally involved in those

4 discussions? 5 6 A. Q. Yes, I was. What type of license was the business

7 opportunity that you presented to Dell consist of? 8 A. Dell was basically going to be a reseller of

9 our SCOsource product line. 10 Q. And what was the time frame of those

11 discussions? 12 A. That was in the early 2004, January, February,

13 2004 time frame. 14 Q. And were you able to bring that discussion to a

15 satisfactory conclusion? 16 17 A. Q. No. In January, 2004, did Novell announce its own

18 program with respect to selling indemnification for Linux 19 users? 20 21 A. Q. Yes, they did. And can you explain what -- well, actually, Was this

22 let's take a look at the exhibit, Exhibit 394.

23 an announcement by Novell of a Linux indemnification 24 program? 25 A. Yes, that's right.

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1 2 3 4 5 Q.

MR. SINGER: MR. ACKER: THE COURT:

I move 394 into evidence. No objection, Your Honor. It will be admitted.

(SCO Exhibit 394 received in evidence.) BY MR. SINGER: And what is indemnification?

6 Can you explain your understanding of that? 7 A. Basically, they were looking to give legal

8 protection to people who were using Linux. 9 Q. Was this a program that would compete with the

10 SCOsource licenses that SCO was offering? 11 12 A. Q. Yes. Absolutely.

And is it your under -- what is the time frame

13 in which this was announced by Novell? 14 A. My understanding is, if I recall correctly, it

15 was announced and launched in January of 2004. 16 Q. Were there requirements, as part of the

17 program, that the customers buy a certain minimum amount 18 of Novell goods in order to be eligible for this 19 protection? 20 21 A. Q. That was my understanding. Can we turn to -- and perhaps Mr. Calvin can

22 enlarge it -- the terms and conditions of the program 23 which appear on the right-hand column of this exhibit. 24 25 A. Q. Okay. Are you referring to the statement that the

1051

1 Novell indemnification program is available to all 2 qualified Novell customers? Requirements include meeting

3 the $50 thousand annual minimum purchase requirement for 4 licenses, upgrades and updates within the year preceding 5 a claim against your indemnified Linux product? 6 7 A. Q. Yes. That's right.

Going forward into 2004, how did the SCOsource

8 program fair? 9 10 11 A. Q. A. Very poorly. Can you elaborate? So, after having a record -- a banner year

12 record, it was our first year, but we launched SCOsource 13 in 2003, had a great year. The revenues were rolling

14 nicely as we moved into 2004, and on the heels of 15 Novell's second announcement on our earnings date, that 16 they in fact did own UNIX, it put a severe damper -17 "damper" is probably too light of a word -- on our 18 ability to sell SCOsource licenses. 19 Q. What happened to the SCOsource division? Had

20 you built up a sales force for SCOsource? 21 A. Yes. We had, I believe, four or five people

22 working in the sales force, in addition to some other 23 people on the international side. 24 25 Q. A. What happened to that sales force? We had -- ultimately, it became too high of a

1052

1 hurdle for us to get over, and time after time it became 2 problematic to sell in light of the Novell ownership 3 claims and also their indemnification program, and before 4 2004 was over, we had to shutter the SCOsource division 5 and shut it down. I think the specific question was the

6 employees related to that were laid off. 7 8 time. 9 10 11 12 BY MR. ACKER: 13 Q. Let me give you copies of your previous MR. SINGER: Thank you. THE COURT: MR. ACKER: Mr. Acker. Thank you, Your Honor. CROSS EXAMINATION I have nothing further at this

14 testimony, Mr. McBride. 15 16 17 18 19 20 21 22 A. Q. A. Q. A. Q. A. Q. Thank you. You may need that, too. Oh. Good morning, Mr. McBride. Good morning, Mr. Acker. It's good to see you again. Likewise. I want to take a step back a little bit, and

23 during your answers to the questions that Mr. Singer 24 posed, you talked about the time that you worked at 25 Novell. Do you recall that?

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1 2

A. Q.

Yes, I do. But you left Novell in February of 1996,

3 correct? 4 5 A. Q. That's correct. And you were not involved in the negotiation of

6 the asset purchase agreement between Novell and Santa 7 Cruz while at Novell; is that right? 8 9 A. Q. That's correct. Also true and you agree that you were not

10 involved in the details of the structure of the asset 11 purchase agreement in 1995, fair? 12 13 A. Q. That's fair. And, also, it's certainly the case that you

14 were not present at the Novell board of directors' 15 meeting in September of 1995, when the directors approved 16 the asset purchase agreement, correct? 17 18 A. Q. Correct. And, obviously, if you weren't in the room, you

19 don't know what was said, correct? 20 21 A. Q. Correct. And you don't know what it is that the Novell

22 board of directors approved, correct? 23 24 25 A. Q. A. (Witness nods.) Is that right, sir? I know what was approved by the board of

1054

1 directors as a result of what came out of their meetings 2 that were later published, but, beyond that, I don't 3 know. 4 5 6 Q. A. Q. Well, you weren't in the room, correct? No. I was not in the room.

Have you ever read the minutes of the board of

7 directors' meeting? 8 9 10 11 A. Q. A. Q. Yes, I have. You have read those? Yes, I have. And you understand that those minutes say that

12 what the board of directors did is approved an asset 13 purchase agreement that excluded the transfer of the UNIX 14 copyrights, correct? 15 16 A. Q. No. That's not correct? Is that right? Is that

17 your testimony? 18 19 A. Q. Pardon? That is your testimony, that the board of

20 directors meetings don't say that? 21 22 A. Q. Not the way you asked it. Isn't it true -- let me try again. Isn't it

23 true that the board of directors' meetings in September 24 of 1995, where the Novell board approved the APA, it says 25 the copyrights will be excluded?

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1

A.

The way you asked it that time, I would agree.

2 I would say yes. 3 Q. And so the only information that you have about

4 what occurred at the board of directors' meeting is 5 reading the minutes, right? 6 7 A. Q. No. The only documentation you've ever seen about

8 the board of directors' meeting is reading the minutes, 9 correct? 10 A. I don't recall if I have other documentation

11 that I have read. 12 Q. And the documents that you have said, say that

13 what the board did at Novell in 1995 is approved a deal 14 where copyrights were excluded, right? 15 A. I agree with you that there are board minutes I guess we don't

16 that say the copyrights were excluded. 17 agree on which copyrights. 18 Q.

And you didn't review the APA again until 2002,

19 or that's actually the first time you ever laid eyes on 20 it, right? 21 22 A. Q. Yes. That's correct.

So, a deal is done at Novell in 1995 that

23 you're not part of, correct? 24 25 A. Q. That's correct. And the board of directors at Novell approves

1056

1 that deal, and you're not at that meeting. 2 3 A. Q. That's correct.

Right?

And you're not involved in the negotiations of

4 that deal, correct? 5 6 A. Q. That's correct. And the first time that you ever actually lay

7 eyes on the piece of paper that embodies that deal is 8 seven years later, right? 9 10 A. Q. That's correct. Now, you also testified, just a bit ago, that

11 to run your business at SCO before you were terminated as 12 CEO, you had to own the copyrights to UNIX. 13 that right? 14 15 A. Q. Yes. That's right. Did I hear

Well, when Santa Cruz -- before you were

16 involved with the company, when Santa Cruz was selling 17 OpenServer in 1996, 1997, and even before the APA in 1994 18 and 1995, they didn't own the UNIX copyrights, did 19 they? 20 21 A. Q. No, they did not. And they were out in the marketplace with their

22 flavor of UNIX, OpenServer, selling OpenServer without 23 the copyrights, right? 24 25 A. Q. Without which copyrights? Before the APA, Santa Cruz did not own the UNIX

1057

1 copyrights, correct? 2 3 A. Q. They had their own copyrights for OpenServer. But what they had for OpenServer for the UNIX

4 portion of OpenServer was a license, right? 5 A. For the portion that related to that, yes, but

6 they did have their copyrights. 7 Q. And with that license, they were able to run

8 their business selling OpenServer, correct? 9 A. The license plus the copyrights to

10 OpenServer. 11 Q. Right. But they didn't have the copyrights, at

12 least according to you, before 1995, right? 13 A. No. No. No. No, I don't agree with that

14 statement. 15 Q. You also stated in your press release, when you

16 announced SCOsource in January of 2002, that Santa 17 Cruz -- SCO, the plaintiff in this case, also owned the 18 UNIX patents. 19 you? 20 A. There was a press release that went out that You said that in the press release, didn't

21 mentioned UNIX patents. 22 Q. And you also know that in the APA, in the

23 language that you looked at and the exclusion language of 24 the APA, excluded patents as being transferred as part of 25 the APA, right?

1058

1 2

A. Q.

Yes. And there is nothing in Amendment Number 2 that

3 says anything about patents, is there? 4 5 A. Q. No, there is not. And so, the information that you have is that

6 patents were excluded in the original deal by the plain 7 language of the agreement, correct? 8 9 A. Q. Yes. And there's nothing in Amendment Number 2 that

10 says anything about patents, correct? 11 12 A. Q. Correct. But you, as CEO of SCO, put out a press release

13 to the world in January, 2002, or 2003, saying that you 14 owned those patents, didn't you? 15 16 A. Q. I wouldn't quite characterize it that way. So let's go back to when you first joined the This was your first job as a CEO at SCO

17 company in 2002.

18 when you joined in June of 2002, correct? 19 A. Did you say it was my first job as a CEO or CEO

20 of SCO? 21 Q. First job as a CEO of a publicly traded

22 company? 23 24 25 A. Q. A. That's correct. And that was a big deal, wasn't it? Yes.

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1

Q.

And when you joined SCO in 2002, it was not in

2 great financial shape, right? 3 4 5 6 A. Q. A. Q. That's what I said earlier, that's right. The company was in a turnaround, right? Correct. Hadn't been profitable in the last fiscal year

7 that ended at the end of October of 2002, correct? 8 9 A. Q. That's correct. It suffered a net loss of more than $24

10 million; isn't that right? 11 A. I don't have those numbers in front of me, but

12 they clearly were not profitable. 13 Q. And the shoulder equity had decreased to such

14 an extent that there was a possibility of you being 15 delisted from the NASDAQ stock exchange, correct? 16 17 18 A. Q. A. What time frame are you talking about? December of 2002. I don't think the delisting issue was in

19 December, if I recall correctly. 20 Q. And it was under these circumstances that you

21 went to the board with this new SCOsource program, right? 22 23 A. Q. Yes. And you believed that that was the course of

24 action you had to take in order to save the company; is 25 that right?

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1 2

A. Q.

I wouldn't say it quite like that. Well, the reason you undertook SCOsource was in

3 order to turn around this dire financial situation at 4 SCO, wasn't it? 5 A. It was a key component of it, of turning around

6 the company, yes. 7 Q. And, in order to implement this new strategy of

8 SCOsource, you had to hire lawyers, right? 9 A. Lawyers were part of the team that we brought There were others. And you hired those lawyers. You had them on

10 together. 11 Q.

12 board, the Boies, Schiller firm, as of December of 2002, 13 right? 14 15 A. Q. Yes. And it was your belief, in late 2002, that the

16 SCOsource licensing strategy would only result in 17 significant revenue for SCO if the company was willing to 18 engage in litigation or the legitimate threat of 19 litigation, true? 20 A. I believed that we needed to be able to stand

21 firm and enforce our property if people were not willing 22 to license. 23 Q. And so you were changing the business plan of

24 SCO from one of being a software company to being a 25 litigation company, correct?

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1 2

A. Q.

Incorrect. But, in order for SCOsource to work, you

3 believed in 2002 you had to have a law firm and you had 4 to either sue or be willing to sue; isn't that true? 5 A. We believed that we needed to be willing to sue

6 people who would not -- if people would misuse our 7 materials, we believed, yes, we would need to file 8 lawsuits. 9 Q. And then, in January of 2002, you announced the

10 SCOsource program at the Linux World Conference in New 11 York? 12 13 A. Q. Yes. In January of 2003, you announced the SCOsource

14 in Linux World at New York, correct? 15 16 A. Q. Yes. That's correct. And

If we could bring up Exhibit N-12, please.

17 if we could highlight the first line under SCOsource. 18 And what you told the community, the software

19 community, was that you believed that you owned the UNIX 20 copyrights, correct? 21 22 A. Q. Yes. And you also believed that you owned the UNIX

23 patents, right? 24 25 A. Q. Yes. And we know that's not true, that you don't own

1062

1 the UNIX patents or SCO never did, correct? 2 A. Over time, we came to that understanding. We

3 had been trying to clarify the situation with Novell, but 4 at that time, that was our understanding. 5 Q. You came to the understanding that you didn't

6 own the patents, right? 7 8 A. Q. That's correct. And you came to that understanding you didn't

9 own the patents because the plain language of the 10 exclusion in 1.(b) of the asset purchase agreement says 11 that, right? 12 13 14 15 16 17 A. Q. A. Q. A. Q. No. And this was a big deal, wasn't it? What was a big deal? Your announcement? This was an important announcement for us. And it caused quite a stir in the software

18 community, didn't it? 19 20 A. Q. In some parts. That would be accurate.

And there was a great deal of press coverage,

21 correct? 22 23 A. Yes. It was reported widely. Mr. Acker, are you going to ask for

THE COURT:

24 admission of N-12? 25 MR. ACKER: Yes, Your Honor we'd move for

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1 admission of N-12. 2 3 4 5 Q. MR. SINGER: THE COURT: No objection. It will be admitted.

(Novell Exhibit N-12 received in evidence.) BY MR. ACKER: Let me show you some of that

6 press coverage.

Let me hand you a couple documents,

7 Mr. McBride, we have marked as Exhibit I-12 and Exhibit 8 P-12. 9 MR. SINGER: I am assuming these are not coming

10 in for the truth of the matter but simply press releases. 11 We have no objection. 12 MR. ACKER: I'd move for admission of both I-12

13 and P-12, Your Honor. 14 15 16 THE COURT: They will be admitted.

(Novell Exhibits I-12 and P-12 received in evidence.) Q. Have you had a chance to look at I-12,

17 Mr. McBride? 18 19 A. Q. Yes. And that's an article that was written by

20 somebody you know, Maureen O'Gara, right? 21 22 A. Q. Yes. That's correct.

And she's a reporter in the software industry;

23 is that correct? 24 25 A. That's right. MR. ACKER: And if we could highlight the first

1064

1 paragraph, please, Mr. Lee. 2 Q. BY MR. ACKER: And this article came out just There was actually a release of

3 before the announcement.

4 the announcement on the 22nd before it actually came out; 5 isn't that true? 6 7 A. Q. Say that again. There was a leak of the announcement of the

8 SCOsource program before it was actually announced; isn't 9 that true, Mr. McBride? 10 11 12 A. Q. I'm not aware of that. In the first paragraph Ms. O'Gara writes: The financially challenged SCO group, the

13 current avatar of pioneer Linux distributor Caldera 14 International has been threatening behind the scenes to 15 demand that the Linux users, regardless of whatever 16 distribution they are using, pay SCO money to ensure that 17 their Linux systems do not infringe on its UNIX System V 18 IP. 19 That was what the press reported around the

20 time of SCOsource in January of 2002; isn't that true, 21 Mr. McBride? 22 23 A. No. Let's go down to the next paragraph,

MR. ACKER:

24 below, sources, under the word "sources," Mr. Lee. 25 Q. BY MR. ACKER: Sources say the scheme, which

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1 pretty much sounds like a protection racket, we won't sue 2 if you pay, isn't engraved in stone, but an undated 3 weeks' old SCO press release that details the plan and 4 was read to us has been quietly making the rounds. At

5 press time, we got word that a major player, believed to 6 be IBM, thought it had dissuaded SCO from going through 7 with the idea. 8 Wasn't it the case, Mr. McBride, that many in

9 the Linux community and the software community thought 10 that your SCOsource program was in fact a protection 11 racket? 12 13 A. That wasn't my understanding. Let's go to the next paragraph, Mr. Lee,

MR. ACKER:

14 on the right column. 15 16 Q. BY MR. ACKER: We begin:

It is unclear whether the alleged IP is

17 unassailable and that valid patents or copyrights 18 actually exist or that UNIX libraries are actually in 19 Linux. Reportedly there has been a lot of patent

20 research going on in the Linux community lately, and 21 there are supposedly serious doubts SCO has much of 22 anything. 23 Wasn't it also the case, Mr. McBride, that when

24 you announced this SCOsource scheme in January of 2003, 25 that many in the software community thought, one, that it

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1 was a protection racket, and, two, you could not prove 2 copyright infringement? 3 MR. SINGER: Object to the form of the

4 question, using the term "scheme." 5 6 7 8 Q. A. Q. THE COURT: I'll overrule the objection.

BY MR. ACKER: Isn't that true? What was the question again, now? Isn't it true that many in the software

9 community and the Linux community, after you announced 10 SCOsource, thought that it was a protection racket and 11 that you were never going to be able to prove copyright 12 infringement. 13 A. Isn't that true?

I don't know how many people had that

14 opinion. 15 16 17 Q. A. Q. But you heard that, didn't you? I didn't hear that at this point in time. Well, you heard it after you announced it,

18 didn't you? 19 20 A. Q. No. It's your testimony that you never heard, after

21 announcing SCOsource at Linux World in 2003, that no one 22 ever said to you either in press reports or directly that 23 there's no way you can prove that there is any UNIX in 24 Linux. 25 A. Is that your testimony, Mr. McBride? That is a different question than the one you

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1 asked me before, Mr. Acker. 2 I would agree with you. 3 Q.

The way you asked it there,

So people were saying:

This is crazy, you are

4 never going to prove there is any UNIX in Linux because 5 there isn't any UNIX in Linux; isn't that true? 6 A. There were definitely some that had that

7 opinion. 8 Q. And wasn't it a great many that had that

9 opinion, Mr. McBride? 10 A. I don't know how to count how many people had

11 that opinion. 12 Q. And isn't it fair to say that after you came

13 out with the SCOsource program in January of 2002, and 14 after you had told your board of directors this is the 15 way we are going to turn the company around, that you had 16 staked your own personal representation on being right, 17 that, one, you owned the UNIX copyrights, and, two, you 18 could prove infringement? 19 A. I don't know if I would answer the question -There is no doubt that

20 say that exactly the way you did.

21 my reputation was on the line here, but this, at the end 22 of the day, was not about my reputation. It was about a

23 number of people at SCO that were advising me that all of 24 us were coming to the conclusion that this was the path 25 that we were going to go down.

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1

Q.

Once you launched this and went down that path,

2 you were committed, correct? 3 4 A. Q. Yes. That's correct.

Now, yesterday, in your testimony to the jury,

5 you described the Linux operating system in 2003 as an 6 upstart operating system, right? 7 8 A. Q. No. Well, you did use that word. Do you want to

9 change that testimony? 10 A. When I was talking about the upstart operating

11 system, I was referring to the state of the operating 12 system in the'90's time frame. In the 2003 time frame,

13 it was becoming more and more robust. 14 Q. And you would agree with me that in 2002,

15 actually, you, yourself, SCO, had your own Linux product? 16 17 A. Q. We did. And you were offering that Linux product

18 until -- up until April of 2003, you were out selling it 19 and issuing press releases regarding your Linux 20 product? 21 22 A. Q. Yes. That's correct.

And then, the next month, you did a flipflop,

23 didn't you, in May of 2003? 24 25 A. Q. No. Wasn't it May of 2003, on May 14, you decided

1069

1 that, despite the fact that we were in the Linux business 2 and we were selling software and despite the fact that we 3 had been touting it in late 2002, into April of 2003, now 4 we're committed to SCOsource, so we're going to stop 5 selling Linux; isn't that right? 6 A. In 2002, 2003, the time frame you are talking

7 about, when we found there was absolutely UNIX in Linux, 8 we felt it disingenuous for us to be out there promoting 9 Linux at the same time we were trying to get our 10 intellectual property defended with respect to that 11 infringement. 12 Q. So you gave up selling software and were going

13 to focus on the licensing scheme, right? 14 15 A. Q. That's totally wrong. You gave up selling Linux, and you were going

16 to focus on SCOsource; isn't that true, Mr. McBride? 17 A. We announced that we were going to discontinue,

18 as I recall, our Linux sales, and we would continue to 19 sell our software, UNIX, UnixWare, OpenServer, which 20 represented about 98 some-odd percent of our revenues, 21 and that we were introducing a new product line, 22 SCOsource, which is a licensing version that 23 under-stitched the product business. 24 two product lines we were announcing. So we basically had We've got, you

25 know, our product lines, and then over here we have our

1070

1 license materials, so that's quite a bit difference than 2 the way I think you characterized it. 3 Q. But SCOsource, when you say a product line, it

4 wasn't an actual software product you were selling, 5 right? 6 A. You were selling licenses? It was a license. It was a license as much as

7 somebody who has a music collection that decides not to 8 sell directly, to come back and offer a royalty if 9 somebody wants to come and use that music for something 10 that they use on a commercial. It gets commercialized.

11 It was a licensing business, which is very much a valid 12 way of selling your intellectual property. 13 Q. Let's go back to your review of the APA. After

14 1996, when you left Novell, you hadn't seen the APA until 15 2002 and then you picked up the document in 2002 while at 16 SCO, correct? 17 18 A. Q. Yes. That's right.

And you did not have Amendment Number 2, and

19 you hadn't seen that document until June 4 or 5 of 2003, 20 right? 21 22 5. 23 A. Yeah. I think it was -- was it -- it was June

That's right. Q. And so, when you were reading the APA before

24 that time and making your decisions about how to proceed, 25 all you had was the original document, right?

1071

1

A.

Well, I had the original document, and then I

2 had a lot of advisors that had weighed in and given me 3 advice with respect to the strength of that document. 4 Q. In fact, you had been reading the APA for

5 months by January of 2003; isn't that right? 6 7 A. Q. Yes. That's correct.

And why don't we bring up the APA if we could

8 and exclusion 1.1(b), Schedule 1.1(b). 9 And when you read the APA, Mr. McBride, while

10 you were at SCO in 2002 and 2003, you saw this language 11 in the Excluded Assets Schedule of the APA, and 12 particularly the Excluded Assets Schedule Roman Numeral 13 V, correct? 14 15 A. Q. Yes. And you saw what it said was that excluded from

16 the deal or excluded from the transfer was intellectual 17 property and, specifically, all copyrights and trademarks 18 except for the trademarks UNIX and UnixWare, right? 19 20 A. Q. That's what it says. And those were the words you read in 2002 and

21 2003, correct? 22 A. Those were a few of the words I read. I think

23 it was -- the asset purchase agreement, I think, is over 24 60 pages, but certainly within the 60 pages I read, this 25 is one of the lines that was in there.

1072

1

Q.

And when you read this section, you thought to Right? It didn't make

2 yourself, this is a problem. 3 A. Yeah.

It was a head scratcher.

4 sense, because if you read the other parts of the asset 5 purchase agreement, everything indicated that the 6 copyrights transferred. And so when you read one part,

7 like if you go -- I don't know if you have schedule 8 1.1(a) -9 THE COURT: Mr. McBride, Mr. Acker has the

10 opportunity to ask you questions, and I want you to 11 respond to them directly. 12 13 THE WITNESS: THE COURT: Okay. If there is something else you

14 think will need to be brought out in regards to a 15 question he asks, then Mr. Singer will have another 16 opportunity. 17 18 THE WITNESS: THE COURT: Okay. Fair enough.

But I don't want you going beyond

19 the question asked by Mr. Acker. 20 21 Q. THE WITNESS: BY MR. ACKER: Okay. When you read this section that You

22 says the copyrights are excluded, it was a problem. 23 thought it was a problem, didn't you? 24 25 A. Q. I thought it was problematic, yes.

And so it would be fair to say -- you consider

1073

1 yourself to be a reasonable person, don't you, sir? 2 3 A. Q. Yes. And fair to say that a reasonable person,

4 reading this agreement, without Amendment Number 2, could 5 come to the conclusion that the copyrights, the UNIX 6 copyrights were not transferred under the APA? 7 8 A. Q. If you -- you could come to that conclusion. So, a reasonable person, sitting down, picking

9 up the APA, without Amendment Number 2, reading it, could 10 reasonably come to the conclusion that the UNIX 11 copyrights did not transfer? 12 A. If they only read Amendment Number 2 and didn't

13 read the rest of the agreement, I think they could come 14 to that conclusion. I disagree with you. If they read

15 the entire agreement, they would come to a different 16 conclusion about the copyrights. 17 Q. You just said if they only read Amendment You weren't reading Amendment Number 2 -I'm sorry. If you just read the asset purchase

18 Number 2. 19 A.

20 agreement -- if you just read the asset purchase 21 agreement without excluded assets is what I meant to say. 22 I'm sorry. If you only read the excluded assets portion

23 of it, I agree that you could come to that conclusion, 24 that the assets were excluded. I think if you read the

25 entire agreement, it's hard to come to a conclusion that

1074

1 SCO didn't own the copyrights. 2 Q. But you'd agree with me that somebody -One person could

3 differing minds could differ on this.

4 read the asset purchase agreement and say, "Well, this 5 doesn't seem to make sense with the rest of the 6 agreement" and come to the conclusion there's something 7 wrong. But a reasonable person of a differing mind could

8 also read this and see the express language excluding the 9 copyrights and come to a reasonable collusion that, in 10 fact, the UNIX copyrights were excluded, right? 11 12 13 14 15 please. 16 Q. BY MR. ACKER: Now, you realized that this A. Q. A. You could come to that conclusion, yes. And that would not be unreasonable to do that? Correct. MR. ACKER: We could go to section 4.16(a),

17 section -- you also read this section, 4.16(a), correct? 18 19 A. Q. Yes. And you realized that this section created an

20 agency relationship in which Santa Cruz, and subsequently 21 SCO, collected royalties for customers who deploy SVRX 22 royalties, correct? 23 24 A. Q. Yes. And so this really was setting up an agency

25 relationship where, originally, Santa Cruz and then SCO

1075

1 were acting as an agent to collect SVRX royalties that 2 would flow -- 95 percent of which would flow back to 3 Novell, correct? 4 5 A. Q. Yes. That's right.

Let me show you a document, if I could, D-11.

6 And it's a large document, sir, and I know you're not 7 necessarily fond of these, but I'm going to point to a 8 specific provision of the Caldera form 10K SEC filing 9 for the year ended October 21, 2002. 10 11 And this has already been admitted, Your Honor. You were the CEO of Caldera, and subsequently

12 SCO, at this time when this form 10K was filed, right, 13 Mr. McBride? 14 15 A. Q. That's correct. And if you go to the second -- the Bates

16 numbered 415 near the end of the document, you see your 17 signature down there, sir, your electronic signature? 18 19 A. Q. Yes. So the jury understands, as the CEO, you needed

20 to certify that statements in this document are true and 21 accurate when it goes to the Securities and Exchange 22 Commission, correct? 23 24 25 A. Q. A. Yes. That's right.

And you do that? I'm sorry. I thought you were asking them.

1076

1 2

Q. A.

No.

No.

They won't let me ask them. I'm sorry. I

That's the way it came across.

3 was waiting for them to answer. 4 Q. But you take that responsibility seriously,

5 don't you, Mr. McBride? 6 7 A. Q. Absolutely. Yes. Of course.

You read these documents, SEC filings,

8 carefully before you allow your electronic signature to 9 be affixed and to be sent to the federal government, 10 correct? 11 12 A. That's correct. MR. ACKER: Now, if you take a look at -- if we

13 go to page 42, if we can highlight that section, Mr. Lee. 14 Q. BY MR. ACKER: And so, in this section,

15 Mr. McBride, what you're doing, as what the company SCO 16 is doing, is describing the agency relationship that was 17 created by the APA, correct? 18 A. Yes. It doesn't say that in here. Where does

19 it say it's describing the agency agreement? 20 Q. Well, let's read it, and then maybe we can work

21 through it. 22 23 24 A. Q. Does it say "agency agreement" in there? It says: The company has an arrangement with Novell in

25 which it acts as an administrative agent in the

1077

1 collection of royalties for customers who deploy SVRX 2 technology. 3 4 5 6 7 8 A. Q. A. Q. A. Q. Okay. That's a true statement, right? Okay. Is that right? That is correct. And that was describing the relationship in That is a true statement?

9 which SCO was collecting royalties for SVRX licensees, 10 right? 11 12 A. Q. That's correct. And then it continues: Under the agency

13 agreement, the company, SCO, collects all customer 14 payments and remits 95 percent of the collected funds to 15 Novell and retains 5 percent as an administrative fee. 16 17 18 A. Q. Do you see that? Yes, I do. And that's describing the relationship that was

19 created by the APA in Section 4.16(a) in which originally 20 Santa Cruz and then Caldera and then SCO were acting as 21 an agent to collect the SVRX royalties for Novell? 22 23 A. Q. Yes. I believe that's correct.

Now, you said that after you noticed this

24 problem with the APA, because the copyrights were in the 25 excluded assets section --

1078

1 2

A. Q.

Right. -- you had some communication with Novell Did I get that right? That's correct. And you called Gregg Jones, who you used to

3 employees. 4 5 A. Q.

6 work with at Novell, correct? 7 A. Yes. He worked for me in the division over

8 there. 9 Q. But, to your knowledge, Mr. Jones was not

10 involved in the actual negotiation or execution or 11 drafting of the APA, correct? 12 13 A. Q. I didn't think so. And so you simply called an old colleague out

14 of the blue and asked him about a document that had been 15 executed seven years ago that he had no involvement with 16 at the time? 17 A. I actually. That is true, but I actually

18 called other Novell attorneys before calling him that 19 were, I thought, going to be more involved. 20 Q. So Mr. Jones picks up the phone, gets a call

21 from you, hasn't talked to you in years, I assume. 22 Fair? 23 24 A. Q. That's correct. And you ask him about the APA, which he never

25 worked on, back in '95, correct?

1079

1

A.

That's incorrect.

That's not what I called -I called to

2 I didn't call to ask him about it initially.

3 talk about my transition to SCO and then started talking 4 about it. I never asked him about it. I told him what

5 the situation was. 6 7 8 9 10 A. Q. Q. And Mr. Jones' response was: I need to check with the business people. Right? No. That's incorrect.

Well, Mr. Jones, who had no knowledge of the

11 APA, didn't make any promises to you, did he? 12 13 A. Q. Yes, he did. He said he would talk with the business people,

14 didn't he? 15 16 A. Q. That's not what Mr. Jones told me. All right. Did you take notes of these

17 conversations? 18 A. I just remember what he told me. I don't

19 remember taking notes. 20 Q. Did you take any notes of these

21 conversations? 22 23 A. Q. No, I didn't. Did you draft any e-mails to document the

24 conversations? 25 A. I don't recall any.

1080

1

Q.

Was anyone with you on the phone that took

2 notes or drafted e-mails to document the conversations? 3 4 5 6 7 8 9 Q. A. Q. A. Q. No. But you know Mr. Jones did, don't you? I don't know if he did or didn't. Okay. Let's take a look at Exhibit K-11? You said K-11? K-11, Your Honor. Now, Exhibit K-11 is a November

THE COURT: MR. ACKER:

BY MR. ACKER:

10 20 e-mail from Gregg Jones to a Mr. Jim Lumber and Joe 11 LaSala inside of Novell, correct, Mr. McBride? 12 13 A. Q. Yes. That's right.

And you have seen this document before,

14 correct? 15 16 A. Q. Yes, I have. And you read it during your deposition,

17 correct? 18 19 A. Q. That's right. And when you read it during your deposition,

20 you agreed -21 MR. SINGER: Object if Mr. Acker is going to

22 get into the substance of a document not admitted. 23 MR. ACKER: I'm going to lay a foundation, then

24 I'm going to move it in, and then I'm going to ask him 25 about it. Would that be okay?

1081

1

THE COURT:

You can ask him about it but not

2 disclose the contents of it -3 4 5 please. 6 7 Q. MR. ACKER: Yes, sir. MR. ACKER: THE COURT: Sure. -- until it has been admitted,

BY MR. ACKER: You saw this during your

8 deposition, didn't you, Mr. McBride? 9 A. I saw something like this. I thought it was a I saw some Gregg

10 longer one, but maybe this is the one. 11 Jones e-mails.

If you want to show me my deposition

12 exhibit, I can tell you if I saw it or not, but, yeah. 13 Q. In your deposition, you read this and you

14 agreed -15 MR. SINGER: Objection. If he's going to

16 confront him with testimony, that needs to be done in the 17 proper manner, Your Honor. 18 19 20 Q. THE COURT: MR. ACKER: That does, Mr. Acker. All right. Well, do you agree -- having

BY MR. ACKER:

21 read this now, do you agree that this is an accurate -22 Mr. Jones' e-mail is an accurate depiction of what he 23 said to you during your call on November 20? 24 A. If you're asking me to read it, I will read it,

25 and I will give you an answer, Mr. Acker.

1082

1 2 3 4

Q. A.

Great. Yeah. This is not. All right. All right. Go ahead. Go ahead.

THE COURT: THE WITNESS:

So, what's the

5 question, then? 6 Q. BY MR. ACKER: Mr. Jones accurately described

7 what he said to you during the November 20 telephone 8 call, correct? 9 10 A. Q. No. Okay. That's not my recollection. During your deposition, you -- in March Yes? You were

11 27, 2007, you were under oath, correct? 12 under oath? 13 14 A. Q. Yes.

And you were asked the following questions, and

15 you gave the following answers. 16 And, Mr. Singer, it's his depo at page 64,

17 lines 4 to 9. 18 19 20 played? 21 22 MR. ACKER: THE COURT: Hang on. You have copies of the written And if we can play clip 11, please. MR. SINGER: May we see it first before it's

23 deposition, don't you? 24 25 MR. ACKER: THE COURT: Yes, Your Honor. Then why don't you show Mr. Singer

1083

1 the written deposition part? 2 MR. ACKER: He has a copy, and I have given him

3 the page and line. 4 5 6 7 8 9 10 MR. SINGER: MR. ACKER: MR. SINGER: MR. ACKER: MR. SINGER: MR. ACKER: MR. SINGER: You said page 64? Yes. Line? Four. Four. To 9. Could you show me where there's a

11 reference to this document? 12 MR. ACKER: It's above that passage,

13 Mr. Singer. 14 15 16 exhibit. 17 MR. SINGER: I'm looking for that, but I don't Will you show me where this MR. SINGER: MR. ACKER: On which page? The reference is the marked

18 see it in page 64, 63, 62.

19 document is, the document he's being questioned on? 20 MR. ACKER: Well, do you have any objection to

21 me playing the video clip and asking Mr. McBride if he 22 gave that testimony? 23 MR. SINGER: Yes because I don't understand

24 what the testimony pertains to. 25 THE COURT: Counsel, let's have a side bar.

1084

1 (Discussion between the Court and counsel outside of the 2 3 hearing of the jury.) THE COURT: This is the problem. The document

4 that he's been asked to address here, as well as in the 5 deposition, has not been admitted. If you're going to

6 offer it, my assumption is you'll object because you will 7 have -- he's not laid a foundation for it because it was 8 not prepared by him, and for you to try to get deposition 9 testimony in regarding that document without the jury 10 knowing what the document says is either error or 11 worse. 12 MR. ACKER: Well, in the transcript, he's

13 looking at this exhibit. 14 15 THE COURT: MR. ACKER: Yes. He's asked: "Did Mr. Jones

16 accurately recite the conversation, what he said to you?" 17 18 And he says: THE COURT: "Yes, he did." He says that, that's fine, except

19 the jury will not know what this document says because it 20 has not been admitted. 21 MR. ACKER: I know. I need to do that portion

22 first, if he's going to agree that this says what 23 Mr. Jones said to him. 24 25 THE COURT: MR. ACKER: You have done that. Then I'm going to move the exhibit

1085

1 in. 2 3 4 MR. SINGER: THE COURT: MR. ACKER: It's not admissible. It's not admissible. It's hearsay.

He's affirming that what Mr. Jones

5 said in the document is what he said to Mr. McBride 6 during the phone call. 7 8 9 no. 10 MR. ACKER: No, it isn't. It absolutely limits MR. SINGER: THE COURT: That's hearsay. That's absolutely hearsay, so,

11 what it is that Mr. Jones said to him during the course 12 of the conversation. 13 14 hearsay. 15 MR. ACKER: This document is a recitation of a THE COURT: I'm sorry, but this document is

16 phone call.

He's given some testimony about what he This document says

17 believes was in that phone call. 18 exactly what it is Mr. Jones said. 19 20 on? 21 22 MR. ACKER: THE COURT: THE COURT:

And you will be bringing Mr. Jones

And he'll come and testify. We can deal with it when Mr. Jones

23 comes to testify. 24 not admitted. 25 it is hearsay.

At this point in time, Mr. Acker, it's

I will to have sustain an objection that

1086

1

MR. ACKER:

Let me just ask this question of Is this, Mr. Jones'

2 Mr. McBride, just say -- ask him:

3 statements in this document, an accurate description of 4 what he said to you? 5 6 That's all I want to ask him. THE COURT: I think you have already asked him,

7 and he said it is not. 8 MR. ACKER: Then I should be allowed to impeach

9 him with his testimony in which he said the exact 10 opposite. 11 MR. SINGER: You have to have an admissible The document isn't

12 document for admissible impeachment. 13 admissible.

He can get Mr. Jones in to say something

14 different and contradict him, but the document is still 15 hearsay. 16 THE COURT: But the dilemma is, again, the jury

17 will never have read what this document represents or 18 what represents the conversation contained, and so you 19 will be doing this completely in the abstract. 20 be saying: 21 You will

In the deposition testimony, you said it did. But the jury will never know the difference

22 because this will not be admissible because it is a 23 hearsay document. 24 MR. ACKER: I would respectfully disagree, and

25 if he's to be impeached with his deposition testimony,

1087

1 maybe he changes his mind when he sees his sworn 2 testimony, and when he says this is what he says, then I 3 would be allowed to admit this evidence. 4 5 hearsay. MR. SINGER: It's still -- the document is

You're asking him in the abstract about an

6 inadmissible document. 7 MR. ACKER: "So you don't disagree with the

8 accounting of the November 20 materials?" when he is 9 looking at the exhibit. 10 11 12 dilemma. And he says: THE COURT: "I don't disagree." Let me restate. This is the The

So far the document has not been admitted. You

13 jury does not know the contents of the document. 14 have asked him: 15 Does this document, a representation by

16 Mr. Jones of what transpired in the telephone 17 conversation, is it accurate? 18 19 And he said no. You now want to go to deposition testimony,

20 without the jury knowing what the document and Mr. Jones' 21 representations were and say: 22 that it did? 23 24 MR. ACKER: THE COURT: Uh-huh. Are you going to try to do that Didn't you once before say

25 without ever seeking the admission of the document?

1088

1

MR. ACKER:

Well, no.

He has a choice.

He can

2 say no, that I was wrong in my deposition when I said 3 that, or he can stick by this testimony. 4 THE COURT: You didn't answer my question. Are

5 you going to ultimately seek the admission of the 6 document? 7 8 9 MR. ACKER: THE COURT: MR. ACKER: Yes. Based upon what? Well, based upon -- if he says this

10 is what was said, then I'm going to seek admission. 11 12 hearsay. MR. SINGER: But it's still going to be

And it's probably not going to come in with

13 Mr. Jones because it's still going to be hearsay with 14 Mr. Jones. 15 MR. ACKER: Absolutely not. It's a

16 contemporaneous recording of what his recollection was at 17 the time. 18 THE COURT: I think it's going to be admissible

19 with Mr. Jones.

I cannot see how it can be admissible

20 against Mr. McBride based upon what you've told me so 21 far. 22 23 MR. ACKER: MR. SINGER: Okay. I'll move on.

And can I just put on the record,

24 while we are on this point, on page 61, line 1, when he's 25 asked about this document specifically and asked is this

1089

1 consistent with his recollection of the phone call, the 2 answer is no. 3 MR. ACKER: When he's asked about if this is

4 what Mr. Jones said, he said yes. 5 THE COURT: Again, counsel, this is my concern.

6 We are talking about deposition testimony where he 7 apparently says yes, it did, no, it didn't. But the jury

8 never knows what the document says because, again, I do 9 not believe it is admissible. 10 11 12 13 Q. MR. ACKER: THE COURT: Okay. Okay.

(Proceedings continued in open court.) BY MR. ACKER: So, Mr. McBride, let me

14 summarize.

You called Mr. Jones, who you hadn't spoken

15 to in years, correct? 16 17 A. Q. That's right. And you had a conversation with him, several

18 conversations with him, correct? 19 20 A. Q. That's correct. And you asked him, at some point, to obtain

21 some sort of document that, in your words, would clarify 22 what rights were transferred under the asset purchase 23 agreement, correct? 24 25 A. Q. That's close enough. And, Mr. McBride -- or Mr. Jones refused to do

1090

1 that, right? 2 A. That's incorrect. That wasn't my testimony

3 either. 4 Q. You sent the document to Mr. Jones, or

5 Mr. Sontag did, correct? 6 A. Let's go back to your question. I think your

7 question was, I asked Mr. Jones if he would agree to go 8 try and find a document. The answer to that question is,

9 and it's in my testimony -- I just read this while we 10 were sitting here. He agreed to go try and find a

11 document to clarify the fact that the copyrights were 12 included in the original asset purchase agreement. 13 agreed. 14 15 Q. A. And couldn't find such a document, correct? In the first wave, that was correct. Okay. He

16 That was the answer to that question. 17 Q. So he couldn't find such a document and then he Those documents from years ago are in

18 also said to you:

19 archives and we're not going to continue to do due 20 dilligence to try and find that document, right? 21 22 A. Q. That is accurate. And then, in February, Mr. Sontag sent a

23 document to Mr. Jones that attempted to actually, in your 24 words, clarify the terms of the asset purchase agreement, 25 right?

1091

1

A.

That was -- that's correct, per Mr. Jones'

2 request. 3 Q. And Novell refused to execute that agreement,

4 correct? 5 6 A. Q. That is correct. So, you had the asset purchase agreement with

7 the excluded language, 1.1(b), that you believed caused a 8 problem, right? 9 10 A. Q. Yes. And you weren't successful in obtaining from

11 Novell, between November of 2002 and May of 2003, this 12 written document that you wanted that, in your words, 13 would clarify what copyrights transferred, right? 14 15 A. Q. The -- that's partially correct. And so you went to Novell, and they said: No,

16 we won't execute that clarification document. 17 18 19 A. Q. Right? That's correct. And, for all of these calls, both the calls

20 between February and into November, February of '02, into 21 February of '03, you never took any notes, right? 22 23 24 25 A. Q. A. Q. I don't recall taking notes on the topic. And Mr. Sontag never took any notes? I don't know if he did or didn't. You never saw him take any notes?

1092

1 2

A. Q.

No. And Mr. Sontag, to your knowledge, never wrote

3 any e-mails documenting what was said in those 4 conversations, correct? 5 6 A. Q. I don't know what he did with his e-mails. And you also didn't write any e-mails to

7 document what was said, fair? 8 A. I had e-mails that were going back and forth

9 between Gregg Jones and me and others inside the company, 10 but I don't recall to what extent it was documenting. 11 don't remember anything documenting what was said. 12 Q. So, in order to -- for this jury to understand I

13 exactly what was said in those conversations, they are 14 going to have to take your testimony and the testimony of 15 Mr. Jones and any other documents that might exist and 16 make up their minds what actually was said, right? 17 A. Yes. And I think it's important that they do

18 listen to Mr. Jones' testimony. 19 20 21 Q. A. Q. And they will. Who is Mike Anderer?

He is a consultant in the IT industry. And he was employed in your employ at SCO in

22 the fall and winter of 2002 and 2003; is that right? 23 A. He was working as an independent contractor That's correct.

24 with us during that time frame. 25 Q.

And Mr. Anderer reviewed the asset purchase

1093

1 agreement, didn't he? 2 3 A. Q. That's my understanding. And he sent you an e-mail in which he

4 documented his understanding of the asset purchase 5 agreement, correct? 6 7 A. Q. Yes, he did. And that was information that you had in your

8 head when you were deciding whether or not to go forth 9 with the SCOsource program, correct? 10 11 12 C-12. 13 14 A. Q. A. Q. That was one input that I had, of many. Let me show you what we have marked as Exhibit Do you recognize that document? Yes, I do. And this is the e-mail to you from Mike Anderer

15 on Saturday, January 4, 2003, correct? 16 17 A. Q. Yes. That's correct.

And in it he puts his thoughts regarding what

18 the APA did or did not transfer, correct? 19 A. Let me take a look here and see which one we're Yes. Roughly, that's correct Your Honor, I move for admission of

20 talking about. 21

MR. ACKER:

22 Exhibit C-12. 23 24 MR. SINGER: MR. ACKER: Object. It's hearsay.

It goes to his state of mind of

25 what was in or out of the APA at the time he moved

1094

1 forward with SCOsource, Your Honor. 2 MR. SINGER: Mr. McBride's state of mind isn't

3 on trial here. 4 MR. ACKER: Well, there is a slander of title

5 claim against SCO, so it certainly is. 6 THE COURT: The Court will allow the admission

7 of C-12, this was an e-mail to you; is that right, 8 Mr. McBride? 9 10 11 Q. THE WITNESS: Yes. That's correct.

(Novell Exhibit C-12 received in evidence.) BY MR. ACKER: So, again on Saturday, January

12 4, 2003, your consultant, Mr. Anderer, after reading the 13 APA writes the following to you: 14 Darl, if you do not have an e-mail that will

15 take an AMB attachment, then I will burn the Novell/SCO 16 agreement to a CD and a floppy. 17 18 19 20 21 22 A. Q. A. Q. Do you see that? Yes. Is he talking about the APA there? I don't know what he's talking about. And then he writes: This agreement indicates Novell transferred

23 substantially less than what was transferred to USL in 24 the previous agreement. 25 Do you see that?

1095

1 2 3

A. Q.

Yes, I do. And then he writes: It is an asset purchase and excludes all

4 patents, copyrights and just about everything else. 5 6 7 A. Q. Do you see that? Yes. And that was your paid consultant's opinion of

8 the APA in January of 2003, right? 9 A. It was. Yes. That's what he said in this

10 e-mail. 11 Q.

That's correct. And then, in the next paragraph, he wrote: It

12 does not look like USL was purchased, just UnixWare and 13 some other listed assets, but Streams was not listed, and 14 there is a lot of other items that do not appear in this 15 agreement. 16 17 18 19 20 21 22 A. Q. A. Q. Do you see that? Yes. And then he wrote: It is definitely worth reading. Do you see that? Yes. And is that because you hadn't read the asset

23 agreement and he was actually just sending it to you for 24 the first time in January of 2003? 25 A. No. I had read it multiple times at that

1096

1 point. 2 Q.

In fact, I had read it many months before this. So you had also seen the excluded assets

3 section of the APA that excludes copyrights by this time 4 as well, right? 5 6 A. Q. Yes that's why I called Mr. Jones. In the next paragraph, continuing in that same

7 paragraph, it reads: 8 I think it also leaves Novell with practical

9 control of the license agreements with IBM and others 10 with respect to SVRX. 11 12 13 14 A. Q. Do you see that? Yes. And then he also wrote: I think they might get the call on whether to

15 audit or pull these licenses. 16 17 18 A. Q. Do you see that? Yes. And the reason that you had hired Mr. Anderer

19 was to help you negotiate with Microsoft for the 20 Microsoft deal that you eventually did in 2003, right? 21 22 A. Q. That's correct. And so Mr. Anderer was interested to know

23 exactly what rights SCO had before he went into those 24 negotiations, right? 25 A. Right. Because if we didn't have the

1097

1 copyrights, we wouldn't have the ability to do the deal 2 with Microsoft. 3 Q. And so, in doing his due diligence, he went and

4 read the agreements, and these were the conclusions that 5 he came to, correct? 6 7 A. Q. At that point in time. Not later on.

If we could go to Exhibit H-14, your May 12 This is a letter that you wrote

8 letter to Jack Messman.

9 to Mr. Messman, as well as about a thousand other 10 companies in the United States in the middle of May, 11 2003, right? 12 13 A. Q. Yes. We referenced this earlier. We,

And what you're telling them in here is:

14 SCO, believe that we own the UNIX copyrights. 15 16 17 A. Right? Let's see, where are you pointing to in here? THE COURT: Mr. Acker, excuse me. Is this the

18 same as one of the plaintiff's exhibits? 19 MR. ACKER: Yes, it is, Your Honor. And if it

20 hasn't been admitted, I would move for its admission. 21 H-12, Your Honor. 22 23 admitted. 24 it was. 25 THE COURT: I'm fairly confident it was

I just want to know which plaintiff's exhibit Do you know that offhand, Mr. Singer? MR. SINGER: I don't have the plaintiff's

1098

1 number offhand on this. 2 3 4 5 Q. THE COURT: MR. ACKER: THE COURT:

It is admitted, I believe.

It's always preferable to always -I understand, Your Honor. But go ahead. Well, you know this letter,

BY MR. ACKER:

6 don't you, Mr. McBride? 7 A. Yeah. I can't recite it chapter and verse. If

8 you're going to quiz me on things, then I just need to 9 see what it is you're pointing to. 10 Q. Well, as Mr. Jacobs yesterday said: I'm not

11 going to go ask you any trick questions. 12 13 14 15 16 17 18 Okay. 19 here. 20 Q. A. Q. A. Q. A. So, I'll raise my hand if I'm going to, okay? You are going to? If I will, I'll raise my hand and let you know. So the ones up to this point, you haven't? No trick questions so far. Okay. These haven't been the trick ones?

I'm trying to figure out where we are in the game Okay. Fire away. I mean, you

You know this letter, don't you?

21 don't have to read it? 22 A. Yeah, but I don't memorize it. I don't have it

23 posted in my bedroom. 24 25 Q. A. This was a big deal, wasn't it? This was an important letter to put Linux users

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1 on notice as to -- with respect to our concerns we had 2 with Linux infringement and how it was infringing our 3 intellectual property. 4 Q. You are sending letters to a thousand companies

5 across the United States, many of which are running Linux 6 operating systems and have it imbeded as part of their 7 operations and saying: 8 Hey, guys, sorry. You're going to have to pay

9 us a license fee. 10 11 A. Isn't that right? That's incorrect. Can you point in here where

12 I says I was going to -13 14 Q. Isn't that the -THE COURT REPORTER: Excuse me, counsel. One

15 at a time, please. 16 17 18 I'm sorry. 19 20 Q. THE WITNESS: BY MR. ACKER: The answer to that is no. So the jist of the letter is THE WITNESS: THE COURT: I was asking Mr. Acker -You don't get to ask him questions.

21 you're putting them on notice that SCO believes it owns 22 UNIX and there's UNIX in Linux, right? 23 24 A. Q. That part I agree with. And you are also putting them on notice that

25 you have hired a law firm to enforce these rights,

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1 correct? 2 3 A. I don't remember that that's in here. THE COURT: Can you focus him to the paragraph

4 where that might be said, Mr. Acker? 5 6 MR. ACKER: Sure. Go to the next page.

If you will scroll down.

7 Why don't we highlight the second paragraph. 8 Q. BY MR. ACKER: You told these thousand

9 companies: 10 We believe that Linux infringes our UNIX

11 intellectual property and other rights. 12 13 14 15 16 17 A. Q. A. Q. You used those words, right? That's correct. It's a pretty strong statement, isn't it? Well, it's a statement that we believed in. And you also told them: We intend to aggressively protect and enforce

18 these rights. 19 20 21 A. Q. Correct? That's correct. And there was a firestorm of reaction to this

22 letter, wasn't there? 23 A. There were definitely those that didn't like

24 the letter. 25 Q. And there was an enormous amount of press about

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1 this letter and this campaign, wasn't there? 2 3 A. Q. Yes. That's accurate.

And many, many people in the software

4 community, and particularly the Open Source community 5 said: 6 7 8 9 A. Q. A. There simply is no UNIX in Linux. Isn't that right? There were those that said that. And this caused quite a stir, didn't it? Depending on your definition of "stir," there I

10 were definitely those that didn't like the letter. 11 agree with that. 12 Q.

Let's look at some of the reaction to the May

13 12 letter. 14 15 If we could bring up O-14, please. So, Mr. McBride, O-14 is an article that was

16 written on May 14, 2003, just about a couple days after 17 the letters went out in e-WEEK. 18 19 20 paragraph. 21 22 23 24 article. 25 We move for admission of O-14, Your Honor. MR. SINGER: MR. ACKER: So was -THE COURT: I will overrule the objection. It It's hearsay, Your Honor. So was the Wall Street Journal A. Yes, I do. MR. ACKER: And if we could highlight the first Do you see that?

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1 will be received. 2 3 4 Q. (Novell Exhibit O-14 received in evidence.) And in the first paragraph it reads: The SCO Group on Wednesday significantly raised

5 the stakes in its battle to prevent what it sees as the 6 illegal and unauthorized use of its UNIX technology in 7 the Linux operating system, warning that legal liability 8 for the use of Linux could extend to commercial users. 9 This is a turnabout for SCO, which said in

10 March, after announcing a $1 billion lawsuit against IBM, 11 that the case, quote, has nothing to do with Linux or the 12 Open Source community. 13 You were hearing comments like that, weren't

14 you, after you sent out your letter, Mr. McBride? 15 16 A. Yes. MR. ACKER: If we could go to the next page,

17 please, and highlight the second and third paragraphs, 18 please? 19 Q. BY MR. ACKER: An IBM spokesman, on Wednesday,

20 declined to comment on the latest SCO allegations, citing 21 pending -- SCO's pending litigation against IBM, but Lee 22 Day, a spokeswoman for Leading Edge distributor Red Hat, 23 Inc., told eWEEK on Wednesday that it had yet to see any 24 formal complaints against it from SCO. The company also

25 had been contacted by SCO in this -- also had not been

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1 contacted by SCO in this regard. 2 3 In the next paragraph there's a quote: We've heard all these allegations and rumors

4 and threats, but we haven't seen any specific code 5 referenced that we were in violation of. We have done

6 extensive work to make sure that we are not in violation, 7 and we take intellectual property very seriously. We

8 remain certain that we are not in violation of anyone's 9 intellectual property, she said. 10 And wasn't it true, Mr. McBride, that you also

11 heard comments like that after your letters went out, 12 that, in fact, you were not going to be able to prove 13 copyright infringement, and there was no infringement. 14 15 16 A. Q. You also heard that, didn't you, sir? Yes, I did. Let's take a look at another legal letter or You see this? Now, this

17 another article, Exhibit A-16.

18 uproar in the community also took on an international 19 flavor, didn't it, Mr. McBride? 20 21 A. Q. Yes. And what we have here is an article in CNET

22 regarding a restraining order that was obtained by a 23 Linux group in Germany, correct? 24 25 A. Yes. That's right. Mr. Acker, if you would, before you

THE COURT:

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1 start testifying -2 3 MR. ACKER: THE COURT: Yes. -- just by way of your question,

4 what the document says, would you please lay a foundation 5 so we can see if it's admissible? 6 7 Q. MR. ACKER: Sure. And you were aware of that

BY MR. ACKER:

8 action in Germany, correct? 9 10 A. Q. Yes, I was. And you were aware of the press reports on

11 that, correct? 12 13 A. Yes. MR. ACKER: We move for A-16 to be admitted,

14 Your Honor. 15 16 403. 17 MR. SINGER: We object, Your Honor, on 802 and

And may I approach? MR. ACKER: I don't know how this is that

18 different than the Wall Street Journal article or all the 19 other articles that have been shown. 20 21 THE COURT: MR. SINGER: I don't either, Mr. Singer. The only reason I suggested that

22 was because it talks about other litigation. 23 THE COURT: Is there something in this that's

24 going to cause a problem, Mr. Acker? 25 MR. ACKER: It has nothing related to anything

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1 other than events in Germany. 2 3 4 THE COURT: MR. ACKER: THE COURT: You are confident of that. I am. Let me look at it just a second

5 before you put it up. 6 MR. BRENNAN: Your Honor, I just offer, too,

7 this will be relevant, likely, to the next witness, their 8 damages expert. 9 MR. SINGER: Our argument is simply what's

10 happening in Germany is not irrelev