SCO Grp v. Novell Inc

Filing 862

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 17, 2010-Jury Trial before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Laura W. Robinson Rebecca 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. 862

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH CENTRAL DIVISION In re: THE SCO GROUP, INC., a Delaware corporation, Plaintiff, vs. NOVELL, INC., a Delaware corporation, Defendant. ________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No. 2:04-CV-00139TS

BEFORE THE HONORABLE TED STEWART March 17, 2010 Jury Trial

REPORTED BY: Laura W. Robinson Rebecca Janke Patti Walker 350 South Main Street 144 U.S. Courthouse Salt Lake City, Utah 84101-2180 1183

Dockets.Justia.com

APPEARANCES

For the Plaintiff:

Brent Hatch Attorney at Law HATCH JAMES & DODGE 10 West Broadway Suite 400 Salt Lake City, Utah 84010 Stuart Singer Attorney at Law BOIES SCHILLER & FLEXNER 401 Est Las Olas Blvd. Suite 1200 Fort Lauderdale, Florida 33301 Edward Normand Attorney at Law BOIS SCHILLER & FLEXNER 33 Main Street Armonk, New York 10504

For the Defendant:

Sterling Brennan Attorney at Law WORKMAN NYDEGGER 60 East South Temple Suite 1000 Salt Lake City, Utah 84111 Eric Acker Michael Jacobs Attorneys at Law MORRISON & FOERSTER 425 Market Street San Francisco, California 94105

1184

INDEX Witness Darl McBride Examination Redirect Mr. Singer Recross Mr. Acker Further Direct Mr. Singer Direct Mr. Singer Cross Mr. Acker Redirect Mr. Singer Direct Mr. Hatch Page 1200 1208 1226 1233 1271 1340 1346

Gary Pisano

Christine Botosan

EXHIBITS RECEIVED INTO EVIDENCE Defendant's Defendant's Defendant's Plaintiff's Defendant's Defendant's Defendant's Defendant's Defendant's Defendant's Defendant's Defendant's Defendant's Plaintiff's Plaintiff's Plaintiff's Defendant's Q45 D20 R45 750 M18 D16 V15 Z18 X22 W24 T25 F26 F27 188 187 and 227 749 M27 1211 1222 1224 1235 1292 1302 1306 1309 1312 1314 1315 1317 1319 1343 1343 1347 1328

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Salt Lake City, Utah, March 17, 2010 (8:30 a.m.) THE COURT: Next time I am tempted to give you ten

minutes off at the end of the day, remind me not to do it because doing so resulted in a flood of papers from both sides. Let me deal with some of these issues before we go

to some argument on others. On the question of the plaintiff's proposed use of certain deposition testimony taken in the case of SCO versus IBM, specifically plaintiff's desire to use the deposition testimony of three former SCO employees, Lawrence Gasparro, Phillip Langer and Gregory Pettit, the court would note that in the Tenth Circuit, the Bedrock rule is, quoting, that testimony adduced in a prior suit may be admissible in a subsequent suit even if the parties are not identical so long as the issues are so similar that the party opponent in a prior case have the same interests and motives in his cross-examination that the present opponent has, end of quote. That comes from the case of Minyen versus American

Home Assurance Company, 443 F.2d 788, Tenth Circuit decision from 1971. The court would rule that in this case there is a substantial identity of the issues. The defendant's own

filing in this case requesting that either the IBM case and this case be consolidated, or that both cases be handled by 1186

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a single judge supports this finding.

In that filing,

defendant stated quoting, the heart of both case is SCO's claim that IBM and Novell have infringed SCO's alleged right related to the Linux Computer Operating System, end of quote. Defendant further stated that the claims and

defenses in the two cases overlap in numerous respects. Defendant went on to detail those areas where the claims and defenses are similar including SCO's contention that it acquired ownership of the UNIX copyrights through the APA, and Novell and IBM's contentions that SCO does not own UNIX copyrights. Defendant further stated that, quoting, because this case presents so many of the same issues as SCO versus IBM, judicial economy and efficiency would be best served by ensuring the same judges decide both cases, end of quote. In essence, the court will find that based on the cited Minyen case that there is the similarity of issues, and that the interest and motives of cross-examination were similar enough that the depositions will be permitted. will be up to the plaintiffs and defendants, however, to agree to the designation of the testimony from those depositions. This morning SCO filed a -- well, I don't know when it was filed, the court received it this morning, a request that the court re-examine its ruling not allowing 1187 It

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Mr. McBride to testify as to the intent of those entities that had originally discussed going to SCO source and ultimately decided not to and the court precluded testimony as to what was stated to Mr. McBride as to why they made that decision. It was my understanding yesterday that both It was the

sides had agreed to allow that testimony. court's ruling that precluded it.

Mr. Acker, are you still willing to agree to allowing that testimony? MR. ACKER: I'll allow that testimony as long as

Mr. McBride is subject to cross-examination on 15 or 16 customer letters in which there is no mention of Novell. So

it will take about 45 minutes to an hour to go through that, I would imagine. MR. SINGER: We accept that position. If it is good We believe that

for the goose, it is good for the gander. the evidence ruling should apply both ways. THE COURT:

The court will do so not just because you

have agreed to it, but I believe that this finding this morning and reference to cases indicated that the court's narrow ruling yesterday based on the criminal case was not appropriate. So the court will permit that. Again, I do

have to say, and I think that this is obvious to you, that the court will allow what would otherwise be hearsay testimony as to the intent of those parties who decided not 1188

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to go with SCO source but it cannot be used in any way to try to establish the proof of Novell's claims to the copyrights or SCO's claims of the copyrights. MR. SINGER: THE COURT: We understand that, Your Honor. All right. As to Mr. Pisano's expert

testimony, is Mr. Pisano going to be called, first of all? MR. SINGER: Yes. I don't know why -- perhaps the

reason there was confusion is we initially were going to call Ms. Botosan before Professor Pisano, but given that Mr. Pisano needs to leave town today, we switched the order. But it was always our intent and we do intend to call him. THE COURT: The court will note that the defense had

argued this in a motion in limine, the court had denied it. And what the defendant has now done is come up with a case which the court has reviewed. The court is going to allow

Mr. or Dr. Pisano to testify, but the court will state that if his ignorance of the underlying studies is established by cross-examination, that the court will entertain a motion to strike the testimony of Dr. Pisano. MR. BRENNAN: THE COURT: MR. BRENNAN: inquiry on that? THE COURT: MR. BRENNAN: You may. Would the court permit voir dire of the 1189 Thank you, Your Honor. And finally -Your Honor, can I just make one point of

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expert at the outset before he goes into the substance of his opinions so that determination can be made at the outset? MR. SINGER: Your Honor, we would object to that. The We

issue of voir dire goes to qualifications of the expert. think that was raised, properly disposed of on Daubert

motions, and it would not be appropriate to have a separate voir dire on the predicate for particular opinions. if that was true, every cross-examination -- every examination of expert witness would be broken up into a series of direct and crosses on that. THE COURT: Mr. Brennan, I think it is going to be Because

better to let this be played out in a normal fashion so that I would not permit a voir dire in that narrow way. have to deal with it on cross-examination. MR. BRENNAN: I understand. Just so I'm clear, Your You will

Honor, understanding the court's preference and ruling, if in fact through cross-examination it is demonstrated that Dr. Pisano does not have the requisite information, if you will, regarding the survey, then his testimony will be subject of being stricken. THE COURT: MR. BRENNAN: Thank you. THE COURT: All right. Three issues were raised about 1190 That is what I just said, I thought. That is what I understood, Your Honor.

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the Botosan testimony.

First of all, the argument is that I

she cannot rely on -- rely on Dr. Pisano's testimony. believe for the underlying reason that the court just

addressed that the court will have to deal with that after Dr. Pisano has testified. Secondly, it is asserted that she ought not to be allowed to testify beyond the dates of her report because there has been no supplement. And third, the defendants

have argued that she ought not to be permitted to testify regarding prejudgment interest. The court has looked at the prejudgment interest and is convinced that that is a correct statement and she should not be allowed to provide testimony as to an amount of prejudgment interest. As to the second issue, how do you wish to respond to that, Mr. Hatch? MR. HATCH: First, on the interest, we agree with Your I think

Honor that she was not going to testify as to that.

that to the extent interest is available, that would be a legal question for Your Honor at a later time. As to the issues regarding the event study, we have contemplated your ruling of yesterday overnight and this morning and have decided that we will not elicit testimony on the event study today. THE COURT: So that issue is moot. Thank you. Counsel, is there 1191

All right.

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anything else before we -- Mr. Singer? MR. SINGER: Yes. Your Honor, early this morning we

received notice that Novell is adding or seeking to add an additional exhibit to their list to use with Mr. McBride. That is a statement in a SCO filing pertaining to the effect of the summary judgment ruling in 2007 that since has been reversed. This is yet another attempt to introduce, through one way or another, what the court has already recognized repeatedly would be irrelevant, prejudicial, confusing to this jury, would be a decision reversed by the court of appeals. And we don't think that should be allowed. Aside

from that, it is being raised at the last moment and wasn't something I covered in redirect and so it wouldn't be proper on re-cross in any event. But our basic -- our principal

objection is that this is right in the face of the court's prior rulings. MR. ACKER: Your Honor, the evidence that we're

talking about is a form 8-K that Mr. McBride filed -- SCO filed with the SEC following Judge Kimball's ruling on the summary judgment motion. In the 8-K statement, Mr. McBride

said explicitly that SCO did not need to own the copyright in order to run its software business which is directly contrary to the sworn testimony that he has given in this court. And we think that given that, clearly this is 1192

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something that impeaches his testimony. probative.

It is extremely

And if the court is still concerned given the

court's ruling with respect to damages experts on whether they truly have opened the door to this issue, we would be willing to redact those portions of the 8-K and my questioning would not directly refer to Judge Kimball's ruling but would ask Mr. McBride if, in fact, he submitted a statement to the federal government saying that he could run his business without the copyrights. THE COURT: MR. SINGER: Okay. Go ahead, Mr. Singer.

Well, I was just going to note that the

exact statement pertaining to the UnixWare and the OpenServer Business and there is no contention that those businesses couldn't be run in light of the summary judgment ruling. The issue is, of course, the SCO source and the

effect of copyright enforcement. MR. ACKER: The issue is that Mr. McBride said the

exact opposite thing on the stand yesterday. THE COURT: Well, I am aware of this document and I But I will have to tell you,

will allow you to use it.

Mr. Acker, that if either advertently or inadvertently that it comes out that Judge Kimball's summary judgment ruling, then as I have stated before, the court will be required to inform the jury that as to the issues before it that was reversed by the Tenth Circuit which I frankly think is 1193

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something you ought to be very cautious about.

And so I

will allow it, as I do believe it is important for your purposes on impeachment, but I would caution you to try to avoid violating the court's prior ruling on not permitting reference to prior court rulings coming before this jury. MR. ACKER: MR. SINGER: Very well, Your Honor. I understand.

Your Honor, in connection with that

issue, might I note first that I don't think there was anything in redirect that would raise that issue and we're now on re-cross. THE COURT: Well, the dilemma is that redirect is

going to be opened up substantially by the court's ruling allowing you to get in with Mr. McBride the issue about the customs. And I think it is purely for impeachment purposes,

Mr. Singer, so I have got to allow it. MR. SINGER: Your Honor, in light of the court's

ruling on that, may we speak to Mr. McBride so he doesn't inadvertently refer to the 2007 ruling or the court of appeals ruling because when he sees this he might assume that somehow that has changed. MR. ACKER: be done. THE COURT: Okay. Yes. I would request that you do so. I was actually going to suggest that that

Is there anything else? MR. BRENNAN: Yes, Your Honor. Thank you. I do 1194

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appreciate the determination announced in court this morning by SCO that it will not be proffering the event study. I am also mindful of the court's comments regarding the possible impacts of raising these court decisions. Just so And

that at least we're clear from our side of the courtroom, there are aspects of Dr. Pisano's testimony and Dr. Botosan's testimony unrelated to the event study that still could implicate, in essence, the opening of the door on these court decisions. In particular, both experts, even in the portions of their testimony that is expected that do not result to an event study, are focusing their opinions on reactions of the marketplace and potential licensees through the period of 2007. 2007. Dr. Botosan, in particular, through October 31st, The significance of that, of course, is that there is What is

an analysis done of certain so-called risk factors.

it that the -- either the marketplace or in particular potential licensees may or may not have reacted to in making decisions regarding the taking of licenses. So we will be

mindful of the court's comments, but I also wanted to indicate that the mere removal of the event study does not avoid this opening of the door issue. to inform the court. THE COURT: MR. SINGER: Mr. Singer? Your Honor, I will address this with 1195 So that is more just

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respect to Mr. -- to Dr. Pisano and Mr. Hatch will address Dr. Botosan. With respect to Dr. Pisano, his is examining the "but for world" and what would have happened to this business line if there had been no slander of title, if copyright ownership is assumed, and if slander of title had not occurred. But that type of testimony there is no reason in

the world that any court decision that occurred in a real world and was reversed in the real world needs to come in. And I haven't heard anything that would suggest otherwise. MR. HATCH: The same thing would apply to Dr. Botosan.

And largely what she will be doing is the event study won't be spoken about, just doing a calculation of damages in the same manner that Mr. Singer just talked about. THE COURT: All right. Everyone has had their say, And I just want you to

including the court.

All right.

remember that the court feels very strongly about this because of its prior ruling, number one. But number two, again I believe that any reference to prior court rulings by Judge Kimball must result in the Tenth Circuit reversal being made known to the jury. have got to believe that if a jury hears that, it is probably going to consider that a more rigor matter than the preliminary summary judgment rulings. So anything else, counsel? 1196 And I

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 and --

MR. SINGER:

No, Your Honor.

May we have a minute to

discuss this issue with Mr. McBride? THE COURT: MR. BRENNAN: Yes, go ahead. Your Honor, in light of the comments

perhaps we could have just a minute ourselves to caucus relative to the court's suggestions this morning. THE COURT: MR. BRENNAN: Yes. Yes, go ahead.

Your Honor, we're just going to step

outside for a moment. THE COURT: Sure.

(Whereupon, there was a brief pause in the proceedings.) MR. HATCH: Your Honor, when Dr. Botosan gets up, I

need to set some easels and things. THE COURT: MR. HATCH: I will try to remember that. I don't know whether we will be near the Maybe that will be a good point to

break at that point. break, if we can. THE COURT: MR. HATCH:

Okay. Your Honor, we will put up two boards. Do

you have any preference where they go? THE COURT: No. As long as the jury can see them

MR. HATCH:

I'm not sure where I can put them where

you can see them, too. 1197

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THE COURT:

Probably right over here is probably the

safest for all purposes. MR. HATCH: some teaching. THE COURT: That is fine. It either has to be right I'm going to ask her to get up and to do

there (indicating) or back there (indicating) or the people in the courtroom can't see it. MR. SINGER: Your Honor, before the jury comes in, I

think there is one point that we wish to clarify lest there be any confusion among either side. It is our understanding

that the court's ruling is that the reference to prior decisions of Judge Kimball should not come in. It is not

that Novell has an option that if they want that to come in there is a -THE COURT: That is correct. The court has ruled on If,

the motion in limine that they're not to come in.

however, it does come in inadvertently, then the court will be compelled to make reference to the Tenth Circuit in jury instructions or some other special instruction. MR. SINGER: We just wanted to make clear that this

was not an option that the defendant could exercise one way or the other. THE COURT: instructions. Counsel, let me ask you about jury

Mr. Normand? Yes, Your Honor. 1198

MR. NORMAND:

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THE COURT: MR. NORMAND:

Where are we? We are going to submit to the court by

the end of the day today a joint filing reflecting agreement on, I would say, half of the instructions, and another half on which we would, for Your Honor's and clerk's convenience, set forth the party's respective arguments in favor of their version of the instruction after having identified the disagreements in the instructions. So we met again last

night, spoke on the phone for a couple of hours, and got even closer, and that is the filing that is going to happen. MR. JACOBS: That is correct, Your Honor. It will be

as -- the filings will clearly show what the point of disagreement is, and then have both sides arguments about that point of disagreement so that the court can call it and then what the resulting instruction should follow from the legal determination of the court. THE COURT: MR. NORMAND: All right. We did all of that work, Your Honor,

with the assumption, I think as Your Honor had said, that you would then send to us in a few days time your proposed instructions and we would offer our comments, for what they're worth, on those. THE COURT: Yes. And hopefully we'll get those to you

no later than Monday morning so you will have next week to prepare your responses as well as your final arguments. 1199

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MR. NORMAND: THE COURT: MR. SINGER: MR. BRENNAN:

Thank you. Are we ready now, counsel? Yes, Your Honor. Your Honor, I just had one last inquiry, Back to

I make my apologies as I cross the courtroom.

Dr. Botosan, as I understand, by eliminating inquiry regarding the event study, I assume that means that Dr. Botosan will not be offering an opinion regarding causation? MR. HATCH: THE COURT: MR. BRENNAN: THE COURT: Yeah, that is correct. Okay. All right.

Thank you. Let's bring the jury in. Please be sure We didn't have a

and tell them that we have been working. mass sleep in this morning. THE CLERK: All rise for the jury.

(Whereupon, the jury returned to the courtroom.) THE COURT: Good morning, ladies and gentlemen. We

will continue with the redirect examination by Mr. Singer of Mr. McBride. Mr. Singer? MR. SINGER: Thank you, Your Honor. REDIRECT EXAMINATION BY MR. SINGER: Q. Good morning, Mr. McBride. 1200

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A. Q.

Good morning, Mr. Singer. Do you recall there was some testimony or some

questions yesterday regarding your stock options; is that correct? A. Q. Yes, that is correct. Is it typical, to your knowledge, for the chief

executive officers of public companies for a significant part of their compensation to be in the form of stock options? A. Q. Yes, that is very typical. Now, if you had wanted to do so, could you have

exercised those stock options you held and at certain points sold the stock and made a substantial profit? A. Q. A. Q. A. Yes, for sure. Did you do that? No, I did not. Did you sell any of your SCO stock? Since I have joined the company, I have only I have yet to sell any, whether as options or

bought stock. as stock. Q. A. Q.

Did you believe in this company? Yes, I did. I would like to ask you about a couple of One of

business opportunities that we alluded to yesterday. those was with Google?

1201

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A. Q.

Yes. Just to set the foundation for that, can you tell

us what the time frame was that you had discussions with Google regarding a potential SCO source type business arrangement? A. Yes. It was initiated in late 2003 and it ended

in early 2004. Q. Was Google an important business opportunity for

A. Q. A.

Yes, for sure. Can you explain why? Because they were apparently the largest Linux They reportedly, in their own words,

customer in the world.

had over 500,000 servers running Linux. Q. Were you personally involved in the discussions

with Google? A. Q. Yes, I was. And can you discuss how far the discussions went

with respect to potential pricing of a SCO source license with Google? A. Yes. We entered into discussions, we had a

number of discussions with them, and we got to a point where they wanted a severe volume discount. We agreed to discount

the -- on a volume basis from our 699 per server price down to $100 per server, but that was where it stopped. 1202

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.

At $100 per server, if there were 500,000 servers

running Linux, how much in revenue would that have meant for SCO Group? A. Um, I don't have my calculator. I think that

comes up to about 50,000,000. Q. And can you tell us whether or not the issue of

Novell's assertions to own the copyrights to UNIX came up in the course of your discussions with Google? A. Yes, it came up in the end. When we were trying

to get them to the $100 per number of servers, that was the point in time that they came up, they brought it up as an issue, and that is when the discussions broke down. Q. Do you have an understanding as to whether in

your judgment a deal would have been able to have been reached if it had not been for the assertions of copyright ownership by Novell? MR. ACKER: Objection, calls no speculation, Your

MR. SINGER:

It goes based on his conversations, he is

in negotiations, he is able to express that view. MR. ACKER: He is asking for Mr. McBride to divine the

thinking of Novell or Google executives, Your Honor. THE COURT: I think if you would like to elicit more

foundation for the conclusion the court will allow that. MR. SINGER: Yes, Your Honor. 1203

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Q.

(By Mr. Singer)

Were the discussions that you

had with Novell, excuse me, with Google over a number of months? A. Q. A. Q. A. Yes, they were. Did it involve senior people at Google? Yes, it did. Were there face-to-face meetings? I wasn't involved in the face-to-face, I was

involved in some phone calls, but yes, it is my understanding that there were face-to-face calls. Q. For the meetings that you weren't present, did

you receive reports from people who were? A. Q. Yes, I did. With respect to the opportunity, did this occur

during the -- during the time frame of the Google discussions, did Novell come forward with its December 22, 2003 public announcement that they were asserting a claim to ownership? A. Q. Yes. Yes, it was in that same time frame.

Before that occurred, was the last public

statement that Novell had made the retraction on June 6, 2003? A. Q. Yes, that is correct. Did Google, after Novell's December 22, 2003

statement, make specific reference to Novell having asserted 1204

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copyright ownership? A. Q. Yes, they did. And on the basis of that, were you able to move

the discussions forward? A. No, we were not. Basically the discussions died

off at that point. Q. Given that course of dealing, in your view, was

the assertion of a claim to copyright ownership a substantial factor in Google's decision not to go forward and take a SCO source license? MR. ACKER: Your Honor. MR. SINGER: for this witness. THE COURT: THE WITNESS: Q. I will overrule the objection. Yes, there was. Okay. Mr. McBride, I would like Can you again set the time I think there is sufficient foundation Same objection. Calls for speculation,

(By Mr. Singer)

to talk a little bit about Dell.

frame as to when you were in discussions with Dell? A. Yes. It was roughly the same time frame as the And, again, the late 2003 first couple

Google discussions.

of months of 2004 is when we were talking to Dell. Q. Did you have personal conversations with

representatives of Dell? A. Yes. The first conversation was a phone call 1205

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between myself and Michael Dell who is the CEO of Dell. Q. at Dell? A. Q. A. Yes, I did. Who was that? There was -- Michael handed it over to their He Did you also have conversations with anyone else

general counsel, a gentleman by the name of Tom Green. is general counsel and also over their licensing group. Talked to him. that we had.

Mr. Green had some other people on the calls I don't recall their names offhand. And then

there were some other people inside of Dell as well. Q. What was the nature of the business opportunity

involving SCO source licensing that you were discussing with Dell? A. Um, Dell's idea was they wanted to be able to go

to market with a SCO source license to be able to provide indemnification for Linux users. And specifically, they

wanted something that would allow them to position themselves stronger than what HP's program was. Q. licenses? A. Q. Yes, that is correct. Can you explain whether or not the issue of Would Dell have been reselling SCO source

Novell's claims or ownership of the UNIX copyrights came out in the course of your discussions with Dell? 1206

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A. Q. A. Q.

Yes, they did. How was it raised? It was raised by their general counsel. And was this a positive or a negative issue from

the perspective of being able to do business with Dell? A. Q. It was definitely a negative. Um, was this raised in the aftermath of the

December 22, 2003 assertion of ownership that Novell made? A. Q. Yes. And were you able to conclude a transaction with

Dell after that assertion of ownership was made? A. Q. No. And in your view, based on the course of dealing

you had with Dell, was there a -- what role did the Novell assertion of ownership have in that transaction not occurring? MR. ACKER: MR. SINGER: THE COURT: THE WITNESS: Calls for speculation, Your Honor. It is the same issue. I will overrule the objection. I viewed it as the primary role in the

Dell deal not going through. Q. (By Mr. Singer) Now, there were a number of

business opportunities and many businesses out there which use Linux; is that correct? A. Yes, that is correct. 1207

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Q.

Now, would you agree, in your view are there

certain businesses that might have decided not to take a SCO source license for a variety of different reasons? A. Q. Yes, that is correct. Based on what was happening to SCO's business,

after the December 22, 2003 assertion of copyright ownership and reactions in the market to that, were you able to continue successfully with the SCO source licensing business? A. No, we were not. I have nothing further, Your Honor. One second, Your Honor. RECROSS-EXAMINATION BY MR. ACKER: Q. A. Q. A. Q. Good morning, Mr. McBride. Good morning, Mr. Acker. Happy Saint Patrick's Day. Thank you. Same to you. Where is your green?

MR. SINGER: MR. ACKER:

I left it at home.

Let me ask you about these -True is it, and let's

the Dell and the Google negotiations. start with Google? A. Q. Okay.

You were not involved in any face-to-face

negotiations with anyone from Google; correct? A. I never flew out to their campus, no. 1208

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 frame.

Q.

And the negotiations began sometime before Novell

put up on its website both its position and SCO's position regarding this dispute over the ownership of the UNIX copyrights; correct? A. Q. That is my recollection. And even after those materials went up on

Novell's website on December 22nd, 2003, the negotiations with Google continued for several months beyond that; correct? A. I think they went into the January, February time

Q.

And so on December 22nd, Novell puts up on its

website its position regarding a copyright ownership, it puts up on its website your position regarding copyright ownership, it puts up on its website the APA, it puts up on the website Amendment 1, it puts up on its website Amendment Number 2 so anybody can see it, everybody's position on all of the documents, and then Google continues to talk with you for another two months; correct? A. Q. Yes, that is correct. With respect to Dell, similarly negotiations with

Dell began before December 22, correct? A. Q. Yes. And on December 22nd, everything went up on

Novell's website, correct? 1209

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 at it. right? ones.

A. Q. A. Q.

Yes. Including your position, right? It was whatever they put up. Your letters regarding your position regarding

copyright ownership went up on the website, correct? A. That is not totally correct. If you go look at

the letters that Novell put up on their website, they conveniently omitted some of the letters that were very strongly in our position and that was an oddity to us. you're going to put up the whole story, put it up. If

But they

put up some of our position, but they didn't put up all of it. I remember that for certain. Q. A. Q. A. Q. A. Q. A. They put up the contract, the APA; correct? Yes. They put up Amendment Number 1, correct? Yes. They put up Amendment Number 2; correct? Yes. The whole world could see that, correct? Yes. But they didn't put up some of the other

Q.

The executives of Dell could see that, correct,

A.

I don't know when the executives at Dell looked I know that three days before Christmas a lot of 1210

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people were not looking at Novell's website. know that.

Um, I don't

I do know that over time these statements that

Novell put up on it's website was a little bit like dropping Napalm gas. time, it did. Q. And over time, you continued to negotiate with It didn't kill people immediately, but over

Dell for weeks, even months after December 22nd, correct? A. Q. Q45. Yes. Let me show you what we have marked as Exhibit

Now, the gentleman that you said that you spoke with

on the phone from Hewlett Packard was a man by the name of Joe Beyers; correct? A. Q. Yes, that is correct. And what you have in front of you, Exhibit Q45,

is an e-mail from Joe Beyers discussing whether or not he will enter into -- HP will enter into a licensing agreement with SCO in the August 2003 time frame; correct? A. Yes. Move for admission of Exhibit Q45, Your

MR. ACKER: Honor. MR. SINGER: THE COURT:

No objection. It will be admitted.

(Whereupon, Defendant's Exhibit Q45 was received into evidence.) Q. (By Mr. Acker) Why don't we take a look at what 1211

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Mr. Beyers said on August 15th, 2003.

Mr. Lee, if we could

bring up the first paragraph beginning with the word today. Mr. Beyers wrote to his colleagues at HP, "Today I threatened SCO that HP would not attend the SCO forum next week if they did not sign the HP UNIX release today." you see that? A. Q. Yes. "They responded by signing the release and they Do

also provided a letter that we can show our UNIX customers." Do you see that? A. Q. Yes, I see that. So wasn't it the case that after the SCO source

program was announced, um, you were in negotiations with HP and HP was going to participate in your SCO source forum in Las Vegas; correct? A. Q. Yes, that is correct. And a week before the forum, SCO is demanding, I

believe, a certain number of millions of dollars from HP; correct? A. We were in negotiations over something that they We were talking about millions of

were -- had initiated. dollars, yes. Q.

And what HP said to you, we're not going to pay

you millions of dollars, and if you don't give us a release for free, we're not going to come to your SCO forum; right? 1212

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A. Q.

That is part of what they said. Why don't we highlight the number of points And this is the release that HP wanted.

below, if we could.

"SCO releases/forgives any past actions by HP (and its future direct consequences) which may have been in violation of its UNIX licenses." A. Q. Right. Two, "The HP UNIX license now becomes

"unconditionally irrevocable", even for future "bad" acts." Three, "HP has no restrictions on what it does or says about the IBM case or the Linux case." A. Q. Yes. And four, "Publicity: SCO has provided us a Do you see that?

letter to Carly," who is the CEO, Ms. Fiorina, CEO of HP at the time, "that we can show to our customers that states that SCO believes that HP is in compliance with its UNIX license." A. Q. That is what they wanted, correct? Yes. And then the financial terms are also there at

number four, right? A. Q. A. Q. A. Yes. And the financial terms are zero, right? For that release. And you originally wanted $100,000,000, right? In the original instance of this, we had 1213

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$100,000,000 tied to the release and to the other SCO source agreement. What they ended up doing was separating the two.

So as you recall yesterday, we had two deals going with HP. One was the release that their CEO Carly had asked for, and then the other one was this SCO source licensing deal. had put those two together for a $100,000,000 deal. wanted to bifurcate them and so we did. ended up being for zero. that HP proposed back. Q. second. All right. And we'll talk about that in a We

They

So the release

The other one was the $30,000,000

So as I understand it, you want -- you originally

go to HP and you ask Ms. Fiorina pay me 100 million bucks, right, for both for the release and the other part of the license, right? A. Q. No. And then they come back to you and say, we're not

going to go to your forum in Las Vegas unless you give us this release for free, right? A. Q. right? A. Q. A. Q. We gave them the release for free, correct. This happened in August of 2003, right? Yes, that is correct. And so that was a couple of months after you 1214 That part, yes. And you guys gave them the release for free,

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

believe that Novell had retracted its claim to ownership on June 6, 2003, right? A. Q. That is correct. And so in your mind, there is no taint out there

by Novell's position in this period of time; correct? A. I didn't believe that -- well, yeah, I believe

that we had resolved that at that point, at this point. Q. So you buckled to HP and give them a license, a

release, for no money? A. Q. For the UNIX business. Despite the fact that according to you, there is

no suggestion by Novell in the marketplace in this period of time that they own the UNIX copyrights, right? A. Let me -- no, that is not correct. Let me

explain to you the difference. said two things there.

What you just said -- you I

I think you crossed metaphors.

think that might have been a trick question.

If you look at

the copyright issue, that was one that was tied to the $30,000,000 that we were discussing still with HP. If you look at the UNIX business issue, now if you remember we read through it yesterday, we stated in there, and I think I read it out loud before the court, we hereby certify that Hewlett Packard has done nothing wrong with their UNIX business, like IBM had done, and that is what we were giving them a release on. So that release, excuse me, 1215

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that release for their UNIX business was fundamentally and totally independent from the copyright issue that related to the $30,000,000 deal that HP was proposing back to us. Q. A. Q. A. Q. You gave them the release for free, correct? For the UNIX business. And you did that in August of 2003; correct? That is correct. And that was a period of time, according to you,

when Novell was taking the position that you owned the copyrights, right? A. Q. Yes. Now, the negotiations between HP and you, you

testified yesterday, they broke down in August and they were over by September of 2003, correct? A. Q. didn't say? A. September. Q. A. Q. A. Q. All right. Right. Done with HP, right? Yes. But Novell didn't, according to you, say that September of 2003? I recall testifying that they broke down in I don't recall testifying to that. Well, the jury knows what you said or what you

they owned their -- owned the copyrights until December 22nd 1216

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after the June 6th, what you believed to be, the recantation; correct? A. Q. Incorrect. So it is during this period of time between

June 6th, 2003 when you claim that Novell has said you own the copyrights, and before December 22nd, 2003 when you say they slander you again because they put everything up on the website that negotiations with HP broke down? A. broke down. So the big issue then was the reason that they And the reason that they broke down was they And when they

were pointing to the copyright problem.

brought it up, I said whoa, Joe, we put that to bed months ago. That -- I was -- I wasn't thinking when he first said

Novell copyright issue that they hadn't even been following what happened after Messman had announced they owned it and that we had come back and put that to bed. So I went

through that story with him and he said no, no, no, no, we got all of that. What you don't understand, Darl, is that

Novell is gearing up for another run and you will eventually see them come out public again and they will say that they own the copyrights. That was the first time that I had

heard that, in fact, Novell was going to take this public position and it was from Hewlett Packard in the context of not doing this deal. Q. So you knew that information in September of 2003 1217

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that Novell was going to claim ownership of the UNIX copyrights? A. Q. That was the first time I had heard about it. But you had that in your mind as the CEO of SCO

in September of 2003 that Novell was going to reassert its ownership of the UNIX copyrights? A. Q. Based on that we started watching. And despite having that knowledge in September of

2003, you and your CFO continued to tell the market that that issue was put to bed, right? A. The things that you pointed to yesterday were

predating that. Q. There was a -- you had a conference call in

November of 2003 where Mr. Bench your CFO said this issue is put to bed, and you were sitting right next to him. And now

you have told the jury that you had that knowledge in your head in September of 2003 that Novell was going to reassert its ownership to the UNIX copyrights? A. We had a lot of things in our heads. And every

time we would turn around from May, June, July, August we were hearing something different. And what happens with

these SEC filings is you have to state things based on material changes. And until they went public, we did not The fact that they were

view that as a material change.

behind the scenes saying this or saying that, is not a 1218

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materiality threshold by which you would adjust your 10-K filings for the investing public. Q. Let me ask you this. Do you believe that when

the general counsel of Novell sent you a letter on August 4th, 2003 and said Novell still owns the copyrights, do you believe that was a material fact that you were obligated to take to the market? A. copyrights. First of all, he didn't say we still own the Secondly, I didn't believe that his statement

trumped what Mr. Messman had told me. Q. So it is your testimony that when the general

counsel of Novell said that Amendment Number 2 did not transfer the copyrights to SCO, when he said that to you in no uncertain terms on August 4th, 2003, that was not material to you? A. statement. Q. fact? A. Q. At that point in time. Let me finish my question. Was it or was it not My question was, was it or was it not a material I didn't believe that it trumped Messman's

a material fact that you were obligated to take to the market? A. At that point in time, no. And because their

letters kept changing.

If you read the June 6th letter, it 1219

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says one thing. another thing. another thing.

If you read the June 26th letter, it says If you read the August 4th letter it says We can't go to the investing public every

time that Novell changes, and every time they sneeze we can't go out and say Novell sneezed. publically, then we did address it. Q. So let me get it clear. It is your testimony Once they came out

that when the general counsel of Novell wrote you a letter on August 4th, 2003 and said Amendment Number 2 did not transfer the copyrights, you as the CEO of SCO did not believe that was a material event that needed to be reported to the marketplace? A. Mr. Acker. Q. You haven't answered that question, Mr. McBride. Answer the question if you please, I believe I have answered that question,

THE COURT: Mr. McBride. THE WITNESS:

I did not believe that to be material at

that point in time. Q. (By Mr. Acker) So as the CEO of SCO, the fact

that Novell was claiming ownership of the UNIX copyrights was not a material fact to you? A. Not at that point in time. Show you D20. D20? 1220

MR. ACKER: THE COURT:

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.

MR. ACKER: Q.

D20, D as in dog, yes, Your Honor. Do you see, Mr. McBride, on

(By Mr. Acker)

Exhibit D20 is the internal e-mail at Hewlett Packard in which Hewlett Packard employees are discussing the reasons to move ahead with the SCO source deal and also reasons not to do the deal and it is dated September 3rd, 2003. see that? A. Yes. I move for admission of Exhibit D20, Your Do you

MR. ACKER:

MR. SINGER: THE COURT:

No objection. It will be admitted.

(Whereupon, Defendant's Exhibit D20 was received into evidence.) Q. (By Mr. Acker) Why don't we highlight, if we

could, Mr. Lee, the first paragraph. "There have been a bunch of messages floating about -floating around regarding SCO. I thought it would be useful

to summarize the situation, and present both sides of the argument. As you know, I oppose moving forward, although I

will do my best to support the larger HP position if we decide to move forward. I would like to emphasize that

there are not -- that there are open source nuances here that are not typical of normal software licensing deals. For this reason, this is "not" a licensing deal, but rather 1221

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an non-asset deal, paren, (SCO -- non-assert -- non-assert deal, paren, (SCO agree to not assert rights against our customers.)" Now Mr. Lee, if we could go down to the bottom of the e-mail which says Reasons Not to Do the Deal. to do the deal. "Reasons not

One, RedHat has counter-sued SCO and will

view HP as partnering with SCO and will potentially refuse to deal with HP, paren, (HP Linux biz rapidly moves to zero). B, we have strong indications that the Open Source

community will revolt against HP and will block any future HP enhancements to open source projects. C, while SCO has

shown Joe some code, there is still no clear evidence that IBM, paren, (or anyone else) end paren, has actually done anything wrong. D, all legal experts in the field believe

SCO's case is fundamentally flawed and have published white papers to support their position and (attached). E, while

we may have a quote, "most favored nation" end quote clause in the deal, our competitive advantage could evaporate in a day. The deal is not exclusive." And then the e-mail continues onto the next page. this is, in effect, support of terrorism. this behavior opens us up to other claims. from who/where. "F,

Rewarding SCO for We can't predict

G, doing a deal with SCO does not provide Customers want full

customers with full indemnification.

indemnification, so a deal with SCO is likely not enough. 1222

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H, SCO has shown a pattern of unpredictable and "bad" behavior. We can't predict future behavior from SCO which I, amusingly enough, doing the

could negatively impact HP.

deal would negatively impact our relationship with Microsoft. J, SCO is perceived very negatively in the HP will suffer a negative image as a

industry at large. result."

And then he concludes, "there is obviously no easy answer here. I believe that the risks associated with

points "a" and "b" are large enough that we should not do the deal." Did you understand that that was why HP didn't do a licensing deal with SCO in September of 19 -- 2003, Mr. McBride? A. Q. No, I did not. Mr. McBride, yesterday you told this court and

jury that you believed that you needed the UNIX copyrights in order to run your business, correct? A. Q. That is correct. Let me show you what we have marked as R45.

Mr. McBride, R45 is a form 8-K that SCO Group filed on behalf of -- that SCO Group filed on August 14th, 2007; correct? A. Q. Yes, that is correct. And a form 8-K is a form where SCO is advising 1223

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the SEC and the market at large of material facts that affect its business, right? A. Pardon me, I didn't get the last question. I was

looking here. Q. Form 8-K is a form by which a company advises the

Security and Exchange Commission and the market at large regarding material? A. Q. Yes, that is right. And you reviewed this document before it was

filed with the SEC; correct? A. Q. Yes, I did. And you wouldn't have filed it with the SEC if

you didn't think it was accurate, correct? A. Q. Correct. Now, I want you to listen carefully to my It is true, isn't it, that if

question, if you could, sir.

you turn to the last page of the document, in the one, two, three, four, fifth paragraph -THE COURT: further, please. MR. ACKER: I would move for admission of R45 with Why don't you offer it before we go any

redactions, Your Honor. MR. SINGER: THE COURT: No objection. It will be admitted.

(Whereupon, Defendant's Exhibit R45 was 1224

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received into evidence.) Q. (By Mr. Acker) If we could go to the last page Mr. McBride,

in the one, two, three, four, fifth paragraph.

isn't it true that although we have redacted portions of this document that what you told the SEC and the investing public, contrary to what you have told this court, is that even without ownership of the UNIX copyrights, that SCO's "ability to continue to develop and support all versions of UnixWare and OpenServer as well as the recently announced OpenServer 6M and UnixWare 7M as well as our new mobility products will not be impacted." that? A. This is part of what I told them. There is more Didn't you tell the market

nuances in other parts of this document that, um, come into play on this. Q. Didn't you tell them that you could run that part

of your business without ownership of the UNIX copyrights? A. I told them that we could run this part which That as we talked yesterday, there

relates to the products.

is the -- it is like a tree analogy of the source code coming up through the tree that was the IP licensing part. We had a licensing group and we had a products group. Yes,

we believed that the branchs off this tree, UnixWare and OpenServer, we could run our business with -- without the copyrights, just like HP, IBM, all of the other licensees of 1225

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UNIX can run their businesses as well.

The part that we

differ on here is we were unable to run our business for the licensing side without the copyrights. And the licensing

side was really the future of the company. Q. So let me get it straight so the jury You could operate as a software company

understands.

without the UNIX copyrights, but you couldn't run your SCO source campaign without the UNIX copyrights. correct? A. Mostly. That is all I have, Your Honor. Mr. Singer, I normally would not give you Do I have that

MR. ACKER: THE COURT:

a third time around, but I think in light of this I will. But don't either of you think that this somehow opens the door to a third course, all right? MR. SINGER: Thank you, Your Honor. FURTHER DIRECT EXAMINATION BY MR. SINGER: Q. I just have a few questions. First of all, with

respect to the press, well, the first area of examination by Mr. Acker was about Novell putting up both sides of the picture on its website. A. Q. Yes, I do. I would like you to look at the press release Would you 1226 Do you recall those questions?

that was issued December 22, 2003, Exhibit 517.

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

put that on the screen, please. A. Sure.

Can you read this out loud?

Novell Statement on UNIX Copyright

Registrations. THE COURT: THE WITNESS: Not too fast. Sorry, Your Honor. "Novell believes it

owns the copyrights in UNIX, and has applied for and received copyright registrations pertaining to UNIX consistent with that position. Novell detailed the basis

for its ownership position in correspondence with SCO. Copies of our correspondence, and SCO's reply, are available here. Contrary to SCO's public statements, as demonstrated

by this correspondence, SCO has been well aware that Novell continues to assert ownership of the UNIX copyrights." Q. (By Mr. Singer) Mr. McBride, did you understand

this press release as simply telling people go look at our website and make up your mind? A. Q. No. Now, with respect to the continuation to

negotiate with parties such as Google and Dell, did you try your best to dissuade them from listening to Novell's assertion of ownership? A. Q. A. Q. Yes. Were you able to do that? No, we were unsuccessful. With respect to Q45, could we put that on the 1227

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screen, that is one of the defendant's documents relating to HP? A. Q. A. Yes. Who is Joe Beyers? Joe Beyers was the vice president of Intellectual

Property and Licensing at Hewlett Packard. Q. Did you understand that he would be the

decision-maker here? A. Q. A. Yes. Was Mr. Fink the decision-maker? No. Mr. Fink was a Linux general manager who was

-- had a very strong interest in Linux being the show within inside of HP. Q. Was Mr. Fink, who wrote the D20 document that we

looked at a few minutes ago, a vocal advocate of Linux? A. Q. correct? A. Q. Yes. We never had one discussion with Mr. Fink. Yes, very much so. You were negotiating with Mr. Beyers; is that

Now, if you look at item number two where it

says, um, excuse me, item number three, I don't believe this part was highlighted in the recent examination, which says, "HP has no restrictions on what it does or says about the IBM case or the Linux case." And the footnote says, and

this is what wasn't highlighted, any restrictions of this 1228

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type will only be in a Linux release, if executed. the Linux release pertaining to? A.

What is

That pertains to the deal that we were working on

that did not go through. Q. And did that get to a point where a contract

which we saw yesterday was presented to you from HP that could have been signed by SCO? A. Q. Yes. And what was the amount of the payments on that

contract if you had signed it? A. Q. $30,000,000. Now after the -- did you have understandings as

to whether or not that could have been done after Novell's statements were made to Mr. Beyers? A. Q. I'm sorry? You had referred that they had heard from Novell

that they were going to go public with another round of comments? A. Yes, okay. Once those statements were there, it

really did kill the deal. Q. Now, you were asked about the August 4, 2003

letter and whether or not that was viewed as an outright assertion of copyright ownership. screen. A. This is Exhibit 105? Okay. 1229 Can we put that up on the

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.

Can we -- this is Mr. LaSala's letter of Do you understand this is what Mr. Acker

August 4, 2003.

was asking you about in the cross-examination? A. Q. Yes. If we come down to the last paragraph, can you

read that out loud? A. "Unless and until SCO is able to establish that

some particular copyright right is "required" for SCO to exercise its rights under the APA, SCO's claim to ownership of any copyrights in UNIX technologies must be rejected, and ownership of such rights instead remains with Novell." Q. Did you believe that copyright ownership was

required for SCO to exercise its rights under the APA to enforce its intellectual property? A. Q. Yes, absolutely. So at this point was this letter publically

announced by Novell? A. Q. No, it was not. Did you view this as the same as when they made

public announcements in May and then later in December 2003 to the effect of we own the copyrights? A. Q. No. Is that why this was not reported in your public

securities filings until they publically made such an assertion again? 1230

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A. Q.

That is correct. And when you saw that public assertion which you

were just asked about, where you said that you would be able to operate the UNIX and UnixWare business? A. Q. Yes. Would you have been able to do licensing deals

such as you did with Microsoft and Sun? A. Q. A. Q. No. If you didn't own the copyrights? No, not at all. Would you have been able to take any action to

enforce your intellectual property if you didn't own the copyrights? A. No. The copyrights were a prerequisite to

enforcing the intellectual property. Q. What you would have -- so were you referring to

just the ability to sell product, the UNIX and UnixWare products? A. Yes. Thank you very much. Thank you. Mr. Acker? I don't have anything else, Your Honor. May this witness be excused? Your Honor, it is possible he will need 1231

MR. SINGER: THE WITNESS: THE COURT: MR. ACKER: THE COURT: MR. SINGER:

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

to be recalled. THE COURT: All right. Mr. McBride, that means that But I

you need to keep yourself available in that event.

would again inform you please do not discuss your testimony with any other witness or in the presence of any other witness in the case or communicate in any way to them what the nature of your testimony is. THE WITNESS: THE COURT: THE WITNESS: THE COURT: MR. SINGER: THE CLERK: I understand, Your Honor. Thank you, Mr. McBride. Thank you. Mr. Singer, your next witness. Our next witness is Gary Pisano. Please raise your right hand. GARY PISANO, called as a witness at the request of the Plaintiff, having been first duly sworn, was examined and testified as follows: THE WITNESS: THE CLERK: I do. Thank you. Please be seated. And if you

would please state and spell your name for the court. THE WITNESS: P-I-S-A-N-O. THE CLERK: // // 1232 Thank you. My name is Gary Pisano, G-A-R-Y

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. SINGER: Q. A.

DIRECT EXAMINATION

Do you need some water? Yes. There should be some in there. Why don't we provide you some of ours. It is empty. Good morning. Professor Pisano,

THE COURT: MR. SINGER: THE WITNESS: Q.

(By Mr. Singer)

how are you employed? A. Q. I am a professor at Harvard Business School. And do you hold a particular position at the

Harvard Business School? A. Yes. I am the Harry E. Figgie, Junior Professor

of Business Administration. Q. A. academia. Q. A. Q. background? A. Yes. I have a PhD in Business Administration How long have you been a professor at Harvard? I have been on the faculty for 22 years. Can you briefly summarize your educational What does it mean to be a chaired professor? That is the highest rank you can have in

from the University of California Berkeley, and a BA in economics with distinction from Yale. Q. What is your area of specialty? 1233

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

A.

I specialize in economics and management of

technological innovations. THE COURT: Dr. Pisano, would you please speak into

the microphone and please do not speak so quickly that the court reporter cannot get what you have to say or that others cannot understand what you are saying, all right? THE WITNESS: last answer. Q. (By Mr. Singer) Yes. Can you explain what you Thank you sir, yes. I should repeat my

mean by economics of management innovation? A. Economics of management innovation I study a

range of topics concerning how firms develop innovations, the strategies and approaches they use, and how they try to commercialize those through various mechanisms including licensing strategies. Q. screen. I would like you to look at Exhibit 750 on the Is this a true and correct copy of your CV setting

forth your expert qualifications? A. Q. Yes, it is. And does this set forth your various honors and

awards and your publications? A. Yes, it does. I move the admission of Exhibit 750. No objection, Your Honor. It will be admitted. 1234

MR. SINGER: MR. ACKER: THE COURT:

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

(Whereupon, Plaintiff's Exhibit 750 was received into evidence.) Q. (By Mr. Singer) I would like to talk just a

little bit about some of that, and recognizing that when you're qualifying an expert witness, it is not a time for modesty so I'm going to ask you to disclose the full extent of your honors and recognition in the field. Has any of your work been published? A. Q. published? A. Q. A. I have published 30 articles. And presentations? Presentations, case studies, other materials, we Yes, it has. And approximately how many articles have you

do develop a lot of course material at Harvard, another 50 or 60 on top of that. Q. A. Q. A. Have you written books? Yes, I have. I'm the author of six books.

Are you on the editorial board of any journals? Yes. I am an editor of a journal called

Industrial and Corporate Change and I was, until a couple of years ago, the main editor, one of the main editors for the top journal in the innovation field called Research Policy. Q. A. Has your work won any awards? Yes, it has. 1235

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 is?

Q. A.

Can you explain? Yes. The most recent award was a paper for an

article published in the Harvard Business Review this past year in 2009 and it won an award called the McKenzie Award which is an award given to the best publication in the journal that year. Q. academics? A. Yes. It has been widely cited and one of my Has your work been cited widely by other

papers, in particular, called Dynamic Capabilities in Strategic Management was among the most cited papers in the entire fields of business finance and economics from 2000 to 2005. Q. Have you done any case studies in the information

technology field? A. Yes, I have done a number. I have written a case

study on Amazon web services as well as case studies on Intel and IBM. Q. And can you explain to the jury what a case study

A.

Sure.

Case studies are something that we write

and describe an actual business situation that we then use in our classroom and they're used in other business schools around the world to help students come to an understanding of how to analyze certain kinds of business situations. 1236

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Q.

And other than your position at Harvard, what

else do you do professionally? A. Q. A. I do consulting. And what type of consulting do you? Um, I advise companies of a range of sizes and in

a range of industries on strategies for innovation, how to develop innovation, how to introduce new products to the market, licensing strategy, development of business models, those sort of issues. Q. Now, are you limited to a certain number of days

of consulting? A. Yes. By Harvard rules I can do up to 52 days per

year of consulting. Q. A. Q. litigation? A. Q. No, I don't. In fact, is this the first time you have Does your work here count against that? It does. Now, do you act often as an expert witness in

testified in court? A. trial, yes. Q. A. And have you been deposed as an expert before? Yes. I was deposed in this case and in one other I was deposed in that 1237 This is the first time I have testified at a

case which was the SCO/IBM case.

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case. Q. And is there any other litigation or arbitration

that you have ever been involved in as an expert witness? A. I did one small arbitration case back in 1996,

1997, around that time frame. Q. Professor Pisano, are you being compensated for

your work on this case? A. Q. A. Q. A. Q. Yes, I am. And do you bill by the hour? Yes, I do. What is your hourly rate in this case? $600 per hour. Now, what do you -- what are you able to charge

for the companies that you consult with? A. For my corporate clients, um, I can charge up to

$1,250 per hour. Q. A. Q. And do you have a lot of customers at that rate? Yes, I do. Now, what were you asked to do for this case?

What was the scope of your engagement? A. I was asked to conduct research on the question

of how many right to use licenses SCO would have been able to sell had the slander not occurred. Q. And why are you qualified -- do you believe

you're qualified to offer an opinion on that issue? 1238

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A. Q. A.

Yes, I do. Why is that? For the past 22 years, you know, my research, my

consulting, my teaching, has focused on exactly these kind of issues of a company with a -- with a new product and trying to think about the ways it can be commercialized. And in particular, I have spent quite a bit of my time thinking about licensing, which this is a license, a licensed product, and how markets for licenses work. Q. A. How does that relate to this case? Well, this is a -- this is a product, the right

to use license, it is a license, um, and it is exactly the kind of, you know, selling it into that market it is a market for licensing as opposed to a market for a physical product. Q. What assumptions have you made about this case

for the purpose of your opinion work? A. I have made just two assum