SCO Grp v. Novell Inc

Filing 863

NOTICE OF FILING OF OFFICIAL TRANSCRIPT re March 18, 2010-Jury Trial-Volume IX before Judge Stewart re: 567 Notice of Appeal,. Court Reporter/Transcriber Ed Young, Laura Robinson, 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 on 4/20/2010 (jmr). Modified by removing restricted text on 7/19/2010 (rks).

SCO Grp v. Novell Inc

Doc. 863 Att. 1

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(10:40 a.m.) THE COURT: Mr. Hatch? MR. HATCH: Just one matter, Your Honor. If it

becomes necessary for you to make that instruction, we're somewhat concerned people may, may or may not, which we don't know, know the court process. And we would like the

reference to it as a unanimous decision. THE COURT: MR. HATCH: MR. BRENNAN: All right. Thank you. Your Honor, on that same subject of a The court will grant you that.

decision, we have two, at least two suggestions for the court to consider. First of all, we do believe the

suggestion in the instruction that the decision by the District Court was without merit is contrary to the holding of the Tenth Circuit. For example, among other things, the

Tenth Circuit held that Novell has powerful arguments. There were certainly aspects -THE COURT: As far as those issues that are before

this jury, I believe the court's statement is correct. MR. BRENNAN: The second aspect, Your Honor, is that

we suggest it might be a preferable course of action to see how the testimony goes and before giving an immediate instruction allowing the parties to make contributions to what the instruction ought to read like. of what action is presented to the jury. That is a function In other words, to 1474

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have some period of repose simply to analyze the presentation of the evidence, the testimony of the witness. We are quite a ways away from a final instruction to the jury, and if the court believes that some sort of explanatory statement needs to be made, we do understand that, but wonder whether it would be more appropriate to do that after some period of reflection. THE COURT: The suggestion you gave the court was that

it be given after Dr. Botosan's testimony and I agree. Because I don't want the jury sitting here from this point forward wondering why are we here if there was in fact a court decision that is brought up by your cross-examination. MR. HATCH: Your Honor, I think the cure instruction So I would give

should be given as soon as the prejudice. it as soon as he brings it up. THE COURT:

That is probably what I will do.

It will

depend on the context.

I think the court is going to have

to make that judgment as to whether or not it is disturbing enough to the jury that they begin to wonder. But the court

will just have to let you know when that decision is made. Counsel, if it is not clear to you, I hope you all understand that this case is going to go to the jury by noon a week from tomorrow. If there is any doubt about us going

until midnight on Friday and somehow deeming that as finishing the case within the three weeks, I think that you 1475

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need to be disabused of that notion. MR. SINGER: Certainly what the court has said is

exactly what our understanding is. THE COURT: Ms. Malley. All right. Let's bring the jury in,

Mr. Brennan, if you would try to time yourself

so that we stop at about five minutes to 12, please. MR. BRENNAN: Thank you. THE CLERK: All rise for the jury. I will certainly do that, Your Honor.

(Whereupon, the jury returned to the courtroom.) THE COURT: MR. BRENNAN: Q. Go ahead, Mr. Brennan. Thank you, Your Honor. Dr. Botosan, before our break And I

(By Mr. Brennan)

we were talking about the so-called risk factors.

would like to draw your attention, in particular, to Exhibit R21. You can find that either in the binder or it will be

displayed on the screen, whatever is easier for you. A. Q. Okay. R21 is a document that appears to be from

Deutsche Bank dated October 14th, 2003 entitled SCO Group, Inc. A call, parenthesis, (option) in parenthesis, to arms. Do you see that? A. Q. I do. Is this one of the two Deutsche Bank reports that

you made reference to in connection with your presentation 1476

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to the jury yesterday? A. Um, this is the Deutsche Bank report that I made

reference to, yes. Q. A. And when did you first review this report? Um, well it was after January 2007, but before It was in that time period. Your Honor, we wish to move

May when I put in my report. MR. BRENNAN: Thank you.

into evidence Exhibit R21. THE COURT: MR. HATCH: THE COURT: Any objection? No objection, Your Honor. It will be admitted.

(Whereupon, Defendant's Exhibit R21 was received into evidence.) Q. (By Mr. Brennan) Now focusing then on this

Deutsche Bank analyst report, you will see that in the first -- well, let me ask you this first. There appear to be two Do

authors, a Brian Skiba, S-K-I-B-A, and a Matthew Kelly. you see those two names? A. Q. Yes, I do.

Is it your understanding that those two gentlemen

are the authors of this report? A. Q. A. Q. It is. Have you ever spoken with either of them? I have not. Have you ever made any effort to contact them? 1477

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A. Q.

No, I did not. Did you ever do anything to reach out to Deutsche

Bank or Mr. Skiba or Mr. Kelly to understand the bases for their statements and recommendations in the report? A. Um, I did have one call to Deutsche Bank with

respect to the report. Q. A. Q. A. Q. Did you speak with anyone there? I did. Who was that? Um, I don't recall the name. Let's look at the first paragraph. Do you see that there? It begins

initiating coverage. A. Q. I do.

It states quote, "Initiating coverage with a Buy We view SCOX" now let me

rating and a $45 price target.

pause there, did you understand SCOX to be in essence the trading symbol for The SCO Group? A. Q. I do. Continues, "as a call option on a substantial

lawsuit against IBM and the potential to capitalize on Linux. Investors should consider an investment in SCOX as Do you see that?

extremely high risk and volatile." A. Q. I do.

And then if we can go to the next paragraph and

highlight that, it states quote, "We view SCOX as a 1478

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synthetic call option." is? A. Q. A. I do.

Now do you know what a call option

What do you understand a call option to be? Um, it is an option to purchase stock, um, at a

set price in the future. Q. And those who typically engage in call option

trading are hoping that there might be an event in the future whereby the price of the stock would rise and they would benefit from buying at a low price at least a call right hoping that it will rise in value? A. Q. Um, true. Okay. So then it continues, quote, "investors

with an appetite for risk should, in our view, see an investment in SCO Group as the equivalent of a call option with most of the risks and rewards often associated with options. The IBM lawsuit and the potential for Linux

licensing deals offer plenty to be excited about, while failure could render the shares worthless, in our view." This is the report that you relied upon, correct? A. Q. It is. And you understood that Mr. Skiba and Mr. Kelly,

the authors of the report, were suggesting that if someone wanted to take a highly risky investment, what they might do is buy SCO stock in the chance that perhaps SCO would 1479

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prevail in the lawsuit against IBM, right? A. Well, there are two things, right. The lawsuit

with IBM and the potential for capitalizing on the Linux business. Q. And if there were failure in either one, that

failure would render SCO stock worthless, right? A. Q. Um, that is what they're saying, yeah. And so did you essentially understand that this

Deutsche Bank recommendation was being prepared by Deutsche Bank stockbrokers? A. Um, so it was being prepared by Deutsche Bank's

analysts Brian Skiba and Matthew Kelly. Q. And you understood that Deutsche Bank was a

market-maker for SCO stock, right? A. Um, I don't believe -- if we can go back to the

back where they talk about what their -- what their relationship was with SCO, we can verify whether that is a true statement or not. Q. Well, if we can take just one minute and put your I would

proverbial finger, if you will, on Exhibit R21.

like to turn, if we could, to Exhibit C25 not yet in evidence. Now, Exhibit C25 is also a Deutsche Bank analyst report; correct? A. That is correct. 1480

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Q.

And this second Deutsche Bank report is dated

January 21st, 2004; right? A. Q. A. Q. A. Q. That is correct. And you have reviewed this before, haven't you? No, I don't believe I have. You have never seen this report? I don't believe so. Are you aware that Deutsche Bank issued a report

in January of 2004 which was just three months after the issuance of the report marked as Exhibit R21? A. Um, I did not look for forecasts into 2004

because this was after the December 22nd reassertion of ownership. Q. Looking at the third page of Exhibit C25 at the

bottom under the heading disclosures? MR. HATCH: Do you have a copy? You know, either

these are out of order that you gave me or I don't have a copy. MR. BRENNAN: MR. HATCH: Q. I'll lend mine to you. Thank you. Do you see the reference,

(By Mr. Brennan)

quote, "Deutsche Bank or its affiliates makes a market in securities issued by the following companies SCO Group, Inc.," do you see that? A. I do. 1481

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Q.

Does that inform you that, in fact, Deutsche Bank

was a market-maker for SCO stock? A. Um, as of that point in time, but I did not rely And if we could go back to the disclosures

on this report.

that are in the report that I actually relied upon, we could confirm whether that was the case at the time of the forecast that I relied upon. Q. We can in just one minute we'll turn back to R21.

My question to you is looking at Exhibit C25, which was issued less than three months after the report that you relied upon, you see that Deutsche Bank declares itself to be a market-maker for SCO stock; right? A. Q. I do see that, yes. And does that inform you that, in fact, the

Deutsche Bank had stockbrokers who were offering and encouraging the sell and trade of SCO stock; right? A. Um, that would suggest that they were making a

market in the securities, correct. Q. So a market-maker in securities is in essence a

brokerage house that undertakes steps to encourage trading in stock, right? A. Um, so this -- it is true, um, that it is quite

common for investment banks to have both sides of the house. Q. A. And Deutsche Bank -Independent of each other. 1482

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Q.

My apologies.

Deutsche Bank has a stock trading

aspect of it; doesn't it? A. Q. That is true. And now in looking at Exhibit C25, you would

agree that this suggests to you that Deutsche Bank had a stock trading component to it that was a market-maker in particular for SCO Group -- SCO Group stock, which meant, in fact, that it was encouraging trades in SCO stock; right? A. That portion of the business, which is

independent of the analyst side, by law, um, my understanding, um, was making a market. is not atypical. Q. evidence. Okay. Let's go back to Exhibit R21 which is in Now, if we But as I said, that

Let's put that back on the screen.

could turn to the third page of Exhibit R21 and it talks about risks; correct? A. Q. Correct. Let's highlight that, if we might. And it says

quote, "The largest risk is that SCO Group's claims be without legal merit. We are not lawyers and are not

attempting to predict the outcome of this legal case, however, should this lawsuit be without merit, it would be a huge blow to the shares. We believe the stock will be

extremely volatile, due to constant newsflow and a small share count. Swings of plus or minus 20 percent in a single 1483

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day could be expected.

A lawsuit against a large and rich

company such as IBM is a dangerous undertaking, and it could cause SCO to overextend its legal reach and budget. addition, SCO is being sued by Red Hat. In

This lawsuit is a

risk and we imagine SCO could be the focus of other lawsuits, as its legal actions could be interfering with Linux business at many companies. Finally, the company is

angering the Linux community, which could prove to hurt business down the road." A. Q. I do. So when you reviewed this report, the one that Do you see that?

you relied upon, you understood that the Deutsche Bank analysts were indicating that there was huge risk for SCO; right? A. Q. That this was a risky stock. That is true.

And the largest element of the risk was legal

maneuvering; right? A. Q. That is what they say, yeah. And the analyst suggested that there are varied One is that SCO may not win its

aspects of legal risk.

lawsuit against IBM; right? A. Q. That was one of the risks. And the other -- excuse me, the other risk would

be that SCO would lose lawsuits that have been filed against it, right? 1484

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A. Q.

That was another risk to the firm. There was reference to the Red Hat litigation.

Do you know what that litigation is about? A. Um, that one I have seen reference to, but I am

not very familiar with it. Q. Well, are you aware essentially that Red Hat is a

Linux provider like Novell, right? A. Q. Correct. And Red Hat had filed suit seeking a

determination that its version of Linux was not infringed, did not infringe UNIX, right? MR. HATCH: MR. BRENNAN: THE COURT: THE WITNESS: Objection, Your Honor. He is testifying.

It is a leading question, Your Honor. Overruled. Um, I'm not aware of that firsthand.

But if you purport that to be the case, I will accept it. Q. (By Mr. Brennan) And you understood from reading

the analyst reports that the analysts at Deutsche, the authors of the report that you relied upon, were also saying there could be other legal actions involving Linux, right? A. And that they recognize all of these as risks of

the company, yes. Q. Now, in your analysis did you take into account My apologies. Looking at the

the fact -- let me back up.

analyst's report, Exhibit R21, you understood that 1485

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essentially this was a litigation based play; right? A. Q. For the stock, yes. Right. That what Deutsche Bank again was

suggesting is that there are litigation aspects out there that will influence the future of SCO; right? A. Um, yes, for the value of SCO's stock is what I would agree with that

they're talking about there. statement. Q.

Let's go to Page 7, if we might, of the Deutsche If we could again there

Bank report that you relied upon.

is another section called risks here, right? A. Q. That is correct. And it begins under this section, quote, "Our

thesis that SCOX shares can be viewed as a call option implies that investors are paying the current share price as a premium. Should the legal case and the company's efforts

to arrange licensing agreements not come to fruition, the investment could wind up worthless. The upside potential is

clearly huge, should the SCO be able to monetize its UNIX assets." Then it continues with this language. "An

alternative way to look at the SCOX situation is as a straddle as opposed to a pure call." is in this context? A. Um, I think they go on to describe it a little Do you know a straddle

bit later in the report, um, or they say, if you continue 1486

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reading, "Rather than assuming the stock goes to zero, the management could decide to strike a more aggressive licensing arrangement with key vendors and perhaps settle all issues with IBM at a bargain price. Given this

strategy, we would expect the stock to support a higher price than zero, perhaps $15 per share." Um, so, that is

the only indication that I have of what they were referring to when they said a straddle. Q. Let's look at the next paragraph here. Quote,

"SCOX has frustrated the "Linux community" and should it not prevail (in its legal claims or in selling UNIX/Linux licenses), then the company could shut its doors. Notably,

the company's website has already been the target of at least two "denial of service" attacks." A. Q. A. I do. Do you know what a denial of service attack is? I don't know the technical aspects of it. I know Do you see that?

that it caused an inability for customers, I think, to access the website when it was going on. Q. Was this essentially because such a flood over

the internet of negative commentary coming into SCO that it shut down, in essence, its web service? A. Q. I don't know the details or the specifics. Okay. Then in the next paragraph, "Lawsuits are A lawsuit against a 1487

expensive and typically protracted.

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large and rich company such as IBM is a risky undertaking, and it could cause SCO to overextend its legal reach and budget. The company is also being sued by Red Hat. This

lawsuit is a risk and we imagine SCO could be the focus of other lawsuits." A. correct. Q. So you understood when you read this analysis and Do you see that?

I see all of those risks of the company listed,

did your report that what Deutsche Bank was doing is saying there are risks to this company and the risks are primarily litigation risks, right? A. correct. Q. Now, let's talk about other litigation. When I Um, when we're talking about the company,

asked you earlier about your expert report, you indicated that you had access to the SCO attorneys database, right? A. Q. right? A. Q. Yes. And you were aware that, for example, in this Yes. And you reviewed various pleadings in this case,

very case, Novell had filed a motion for summary judgment against SCO; right? A. Q. Yes. And that was filed sometime in 2007? 1488

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MR. HATCH: relevance. MR. BRENNAN:

Objection, Your Honor, foundation and

Your Honor, I'm asking what she looked I

We have been talking about the litigation risks.

would like to talk to her about litigation. THE COURT: Q. moment. I'll overrule the objection. Let me just back up for a

(By Mr. Brennan)

You were aware that Novell had filed a motion for

summary judgment in this case in 2007, right? A. Q. Correct. And that motion was filed before you prepared

your expert report; right? A. Q. That is correct. Now, several years before, let's back up. You

understand that this lawsuit that brings us here today was first filed by The SCO Group in January of 2004, right? A. Q. Correct. And you understand that Novell asked the court in

which the case was assigned to dismiss the lawsuit, right? A. Q. I'm sorry, can you repeat the question? You understand that when the lawsuit was first

filed Novell asked the court to dismiss the case, correct? A. Q. A. Are we talking about the -This case that brings us here today? Right. No, I understand. Are we talking about 1489

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the pleading that you were asking me about earlier, or are you talking about something different? Q. I'm talking about -Mr. Hatch? Your Honor, I don't think Mr. Brennan has

THE COURT: MR. HATCH:

laid a foundation yet for this kind of testimony. THE COURT: Okay. Well, I'm going to sustain the

objection, but we're jumping back and forth rather quickly here. So I'm going to sustain the objection, and ask you to

start over again. MR. BRENNAN: Q. back up. I would be happy to, Your Honor. You're aware that -- let me

(By Mr. Brennan)

You told us earlier that people in the community

were following this litigation, right? A. Q. Um, that they were aware of it, correct. And you expected that those who were Linux users

would be interested in developments in the case, right? A. Um, to the extent that it would affect their

beliefs about, for example, infringement. Q. And so those who were Linux users who were

concerned about the issues of infringement would have concerns about this litigation, right? A. Q. A. About the Novell litigation? Yes. That is correct. 1490

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Q.

Because one of the things that you told us

earlier in terms of assumptions is you were asked by SCO's attorneys to assume that Novell had transferred the UNIX copyrights to Santa Cruz Group, right? A. Q. Sure. That is one of the instructions you were given,

A.

One of the assumptions that I made and among So, for example, the assumption the but

other assumptions.

for world in this case didn't exist as well. Q. And you were -- you also in the materials you

reviewed and relied upon you looked at the initial asset purchase agreement, right? A. Q. A. Q. A. Q. Correct. You looked at Amendment Number 1? Correct. You looked at Amendment Number 2? Correct. And you were aware that decision-makers, that is

potential licensees of the SCO Source program would be interested in and make decisions in part as a result of rulings in this case, right? A. And incorporated that into the forecast. That is

incorporated into the forecast is the market condition, yes. Q. So your suggestion is that built into the market 1491

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conditions are results in this litigation, right? A. No. What I'm saying is that there were -- there

was a well-known -- it was well-known in the marketplace even before the Novell case was filed, the case against Novell was filed, um, that -- that infringement was not known, for example. So what I'm saying is those market

conditions were known to the market and to the analysts and were incorporated into the forecasts that I relied upon. Q. And you would agree that rulings by the Federal

District Court in which the Novell case was pending would be material to decision-makers in the real world relative to whether or not they should buy SCO license, right? A. But my analysis is not in the real world, it is So for my purposes, for my analysis, What would matter were the

in the but for world.

none of those would matter.

things that existed prior to the Novell suit being filed. And those are incorporated into the Deutsche Bank report. Q. A. So in your world it is an abstract world, right? Um, well, by definition it has to be because

we're trying to figure out how much damage, how much -- what SCO's sales would have been if Novell hadn't done what it did. So I can't look at the real world to get at that So I have to look at a I have, you know, that is

because Novell did what it did. world that is a but for world. the purpose of this.

1492

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Q.

Let's look at the real world for a moment.

I am

going to hand you a document entitled Memorandum Decision and Order, it is dated June 4th, 2009, issued by the United States District Court for the District of Utah Central Division Judge Kimball. MR. HATCH: foundation. Your Honor, I object. He has laid no

She has made it very clear that this was not

part of the but for analysis. MR. BRENNAN: MR. HATCH: MR. BRENNAN: And Your Honor I -Rule 403. I apologize, I think I gave the wrong I think I said 2009.

I should have said 2004. MR. HATCH: THE COURT: Same objection.

I'll overrule the objection and allow the

witness to continue. Q. (By Mr. Brennan) So what I would like you to do Again, I

is to look at this memorandum decision and order. apologize, I used the wrong date.

The correct date of the And I would like

issuance of the order is June 4th, 2009.

to direct your attention -- 2004, I keep doing that, I apologize. I would like to direct your attention to page And I will represent to you that this is the

number eight.

ruling of Judge Kimball in this case. MR. HATCH: MR. BRENNAN: Do you have a copy of that, Mr. Brennan? I certainly do. 1493

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Q.

(By Mr. Brennan) We're going to focus on Page 8

and I would like you to read with me from the last full paragraph on that page that begins, "it is undisputed." you see that? A. Q. I do. Okay. It reads, quote, "It is undisputed that Under the APA, Do

the APA did not transfer any copyrights.

Novell agreed that on the closing date, December 6, 1995" -MR. HATCH: Your Honor, I'm going to object. It is not properly This has

not been admitted into evidence. admitted.

He is reading from the document. Your Honor, I'm certainly permitted to

MR. BRENNAN:

read from a document to impeach the witness. THE COURT: MR. BRENNAN: THE COURT: Go ahead. Thank you. Now, ladies and gentlemen, I want to give I want you to listen

you an instruction right now though. to this very carefully.

In light of the testimony that is being elicited on prior court decisions in this matter, I want you to listen to this. You will hear evidence about prior court rulings And it may lead you to wonder why are we

in this case.

being asked to serve as jurors at this point in time in light of those prior decisions. You have to be aware that

SCO appealed the rulings by the District Court, this 1494

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decision and perhaps another decision that you may yet have reference to, to the Tenth Circuit Court of Appeals. Tenth Circuit Court of Appeals in a unanimous decision reversed the District Court as to the issues before you in this case and concluded that those issues were to be decided by a jury. And so it is important for you to understand that reference to these prior decisions does not in any way affect the decisions that you will be making in this case because they were reversed and they were found to have been in error in a unanimous decision. MR. BRENNAN: that. Q. (By Mr. Brennan) So if we could go back to the Thank you. I appreciate The

Thank you, Your Honor.

District Court's decision that was issued on June 9th of 2004. I'll continue. Let me just back up. Quote, "Under

the APA, Novell agreed that on the closing date, December 6, 1995, it would assign all assets on Schedule 1.1(a), but that it would transfer no assets listed on the Excluded Assets Schedule, Schedule 1.1(b). There is no dispute that

all copyrights were excluded on Schedule 1.1(b) and, therefore, no copyrights transferred on the closing date under the terms of the APA. Also, Amendment Number 2 merely

amends the schedule of excluded assets and does not constitute a transfer of copyrights on its own. Therefore, 1495

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the issue raised by Novell is whether the APA as amended by Amendment Number 2 is a sufficient writing under Section 204(a)" Your Honor, I'll insert of the copyright act, and then to continue, "to transfer ownership of" if we could continue to the top of the next page, "copyrights." Now, are you aware -- let me back up. I then will

continue in the next paragraph that begins "the APA amendment." It reads, quote, "The APA Amendment Number 2

excludes from transfer, quote, all copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the APA required" -THE COURT: MR. HATCH: Mr. Hatch? Your Honor, at this point Your Honor has

told the jury that the United States Court of Appeals by a unanimous decision found this to be in error and reversed it. He is just reading it to us. MR. BRENNAN: THE COURT: This is not an objection. It is an objection. And I am giving you

some leeway, Mr. Brennan, and it had better -- there better be some questions asked about this that is relevant to the testimony. MR. BRENNAN: MR. HATCH: I intend to do that. He is basically trying to read the

decision that is in error and it has been reversed to help the jury out to see these things. 1496

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THE COURT: more than that. him to proceed. MR. BRENNAN:

I am trusting Mr. Brennan is going to do So I will overrule the objection and allow

Thank you.

And just so the record is This is not the I

clear, this decision was never appealed.

subject of an appeal, what I'm reading to the court. will -THE COURT:

If you are somehow implying that that

language is the relevant language in this case, then that is very inappropriate. That specific decision by Judge Kimball

was reversed in a subsequent decision. MR. BRENNAN: I do intend to turn to that. And just

for the record, I want to indicate I'm reading from the ruling on the motion to dismiss, not the summary judgment ruling. MR. HATCH: Well, that decision was denied. So he is

-- this is improper. MR. BRENNAN: If I could just continue. I assure Your

Honor I will tie this together. THE COURT: MR. BRENNAN: Q. Go ahead, Mr. Brennan. Thank you.

(By Mr. Brennan) So if I could start again, "The

APA Amendment Number 2 excludes from transfer all copyrights and trademarks except for the copyrights and trademarks owned by Novell as of the date of the APA required for SCO's 1497

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predecessor to exercise its rights with respect to the acquisition of UNIX and UnixWare technologies. The

amendment does not identify which copyrights are required for SCO to exercise its rights with respect to the acquisition of UNIX and UnixWare and provides no date for the transfer. The amendment mentions copyrights owned by

Novell as of the date of the APA, but it is not retroactive to the date of the APA. Furthermore, although Amendment

Number 2 states that its effective date is the date of the amendment, the language of Amendment Number 2 does not state that a transfer of the copyrights is to occur as of the date of the amendment." you. THE COURT: impose here. Ladies and gentlemen, I want to again to End quote. Now, here is my question to

To the extent that language that was just read

to you from that 2004 decision pertains to the issues in this case, you are to disregard it. This is being offered

for a limited purpose and that is to allow Mr. Brennan the opportunity to challenge the testimony of this witness as to her conclusions about damages. But as to the issues of

contract interpretation, as you will be instructed by the court subsequently, you are to disregard the language you have just heard and rely only on those instructions that will be given to you by the court at the end of the case. MR. BRENNAN: Thank you, Your Honor. 1498

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Q.

(By Mr. Brennan)

So looking at, as you do now,

at the language of the court's ruling in June of 2004, would you expect that a potential licensee of a SCO source license in June of 2004 who read that language might come to the conclusion that it would not enter into a license agreement because of the question as to whether or not SCO owned the UNIX copyrights? A. Q. No. So you believe that a potential SCO licensee, in

June of 2004 who read that language issued by the court at that time, would form no decision or opinion whatsoever as to whether or not they should acquire a SCO source license? A. In my analysis, nobody would be able to read this

document because it wouldn't exist. Q. A. Because you're in an abstract world, right? Because I am in a world where Novell has done

nothing wrong, and so there would not be a court case, so there would not be this decision, so there wouldn't be anything to read. You can't pick and choose what parts of When you're

the but for world you're going to stick with.

calculating damages, you have to define what the parameters are of that but for world and then calculate the damages in that context. I can't -- I can't sort of say but, you know,

I'm going to assume that Novell did nothing wrong and yet all of a sudden there is a court case with decisions 1499

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associated with it. logical perspective. Q. us.

It makes absolutely no sense from a

Let me see if I understand what you're telling

Are you telling us that the world, the but for world

that you created, is a world where Novell did nothing wrong? A. I am saying that in the but for world that I am

looking at, it is one where Novell did not slander the title. What would SCO's -- SCO's source revenues have been

if Novell had not interfered in their market. Q. I apologize. I must have misunderstood what you I thought that what you

told us yesterday and this morning.

told us is that SCO's attorneys came to you and instructed you and asked you to assume that, in fact, Novell had transferred the UNIX copyrights and had slandered SCO's claim of title? A. So you're mixing up the -- there is two different One is I have to assume liability for there to And then having assumed that

points here.

be any potential for damages.

there was, then for the purposes of actually calculating the damages, you have to assume that they didn't do what it was that they did. So, you know, both of those have to hold but

they're getting at different issues. Q. So what I would like to do is compare your but Would you concede

for abstract world and the real world.

that in the real world, in June of 2004, potential SCO 1500

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licensees having read or been informed of this decision by the district court may have chosen not to acquire a SCO license because there was a serious question as to whether in fact there had been a transfer of copyrights? A. In the but for world the document would not exist

and the real world is not relevant to a damages analysis. Q. The real world is not relevant to what you have

done, right? A. The real world is not relevant to a damages

analysis including mine. Q. Let me ask you this. You were relying upon

Dr. Pisano's analysis, right? A. correct. Q. And what he did is he relied upon real world I incorporate some aspects of his calculations,

surveys, right? A. He used it as a proxy, I think is what he said. He used it as a

We're going to characterize what he said.

proxy, the best that he could get, for an input that he needed to create his but for world. created in the real world. Q. Thank you. So you used real world forecasts, and I also used forecasts

I am asking you to consider real world developments in terms of litigation and the forecast that you relied upon were real world forecasts prepared by Deutsche, right? 1501

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A.

But what you're asking me to do is to start

paying attention to aspects of the real world that couldn't exist in the but for world. The forecast exists in the but What you're asking me

for world and in the real world.

about doesn't exist in both of those worlds. Q. It doesn't exist in the abstract, artificial

world, does it? A. It doesn't exist in the but for world that I have

to take into consideration to do my job as an expert. Q. Now, you were asked earlier by myself as to

whether you had reviewed a document called Novell's Motion for Summary Judgment, right? A. Q. I'm sorry. Certainly. Can you repeat the question? One of the documents that you said

you considered in forming your opinions was a document that was filed in this case, a real world filing, a real world case, and it was Novell's Motion For Summary Judgment Against SCO, right? A. Q. A. Q. I did review that document. You read it, correct? Um, I think I did. And you saw Novell's legal arguments? Mr. Hatch? I think we're going to go into a line of We're objecting on foundation. I mean we 1502

THE COURT: MR. HATCH: objection again.

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

would like to have a side bar to discuss it. THE COURT: We will have a side bar.

(Whereupon, a side bar conference was held.) MR. HATCH: Your Honor, Mr. Brennan said he was going She has made it eminently clear this Now he is just

to lay a foundation.

has nothing to do with her calculation.

wanting to read into it the record, you know, things that don't matter to her analysis. business going into it. I don't think he has any

Secondly, I think a curative

instruction to the jury would also include that the judge was found in error and has been removed from the case and a new case -THE COURT: MR. HATCH: MR. BRENNAN: He was not removed. He recused himself. Under the Federal Rules the case would He chose to recuse.

have come back to him but for the decision to recuse himself. THE COURT: Well, if we do anything of that sort,

we'll do it in a final jury instruction and not at this point. MR. BRENNAN: Your Honor, just so we're clear, I will

do the same that I did on the prior line of questioning, no more, no less. have identified. MR. HATCH: He is reading from documents. He hasn't 1503 And it is for all of the reasons that we

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

laid any foundation for it. do with her analysis.

She indicated it had nothing to

You know, she is trying to deal with

the real world, trying to do his analysis rather than hers. THE COURT: judgment? MR. BRENNAN: THE COURT: MR. BRENNAN: Yes. Remind me again when it was issued? It was issued on August 10th, 2007. You're now going to go to the 2007 summary

That is within the damage period that they're claiming. That is why it is important. MR. HATCH: They have taken that into account, her

damages in the but for world, and they're trying to put something in it that she doesn't consider that the but for world is if none of this happened. this in and she says no. this. He is now trying to put

We shouldn't go any further than

He shouldn't be able to read into evidence what he It is not part of it. But to

says he can't get out of her.

sit and read, you know, read in language from the decisions that is -- that is simply 403 and it is not probative. THE COURT: MR. BRENNAN: Go ahead, Mr. Brennan. Briefly, Your Honor, because I think I We have heard in

have made most of these points previously.

the last line of questioning that she mixed and matched real world with the but for world. So it is not a pure

artificial world that she is suggesting it has been 1504

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represented.

And in addition, this opinion was issued

during the damages period and, in fact, if we look over at that chart, The SCO Group is seeking in excess of $50,000,000 in damages for 2007 alone. And the suggestion

has been that parties would continue through 2007 to acquire SCO source licenses, both RTU and vendor licenses, at a rate in excess of $50,000,000 in 2007. Clearly, the fact that

Judge Kimball issued a decision granting summary judgment would have an impact on those damage calculations. didn't put them at issue, they did. MR. HATCH: Couldn't possibly in any way, given her He hasn't laid any We

calculations, they don't exist.

foundation that those decisions are anywhere in that number. THE COURT: He has laid the foundation that at least

the Deutsche Bank Report relies on conclusions about the real world. And I do believe that those real world

conditions that they rely upon are often considered by the jury. The dilemma is whether or not these specific court

rulings were relied upon by that report. Go ahead, Mr. Singer. MR. SINGER: If I might address this, Your Honor. It is The

Deutsche Bank Report was in October of 2003.

contemplating certain litigation, IBM litigation, perhaps other litigation, as being risk factors. January 2004. This case is

There is nothing to do with the Deutsche Bank 1505

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Report.

The assumptions of the Deutsche Bank Report are

fair game, but they have nothing to do with this decision or any decisions in this case which are reactions to the public announcement in December 22, 2003, republishing the claim of slander which led to the January 2004 filing of this lawsuit and all of the decisions that followed. There is not one

word in the Deutsche Bank Report that relates to this case which is on the slander of title. THE COURT: Mr. Brennan, the court is going to require

of you additional foundation to establish that the Deutsche Bank Report contemplated if not these specific rulings at least rulings similar to this, all right? MR. BRENNAN: THE COURT: Okay. It is based on the court's assumption that

as you pointed out she has relied on that real world report. Again, if the foundation can be laid that this was the type of lawsuit and the potential rulings that you are referring to would be a possible result of that lawsuit, then I believe I have to allow the testimony to proceed. because of that connection. foundation for that. objection. But only

But you have got to lay more

If you cannot, I will sustain the

And I don't want you reading anything from the

2007 summary judgment decision until the court has ruled there has been proper foundation laid. MR. BRENNAN: Very well, Your Honor. Thank you. 1506

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

(Whereupon, the side bar conference concluded.) Q. (By Mr. Brennan) Dr. Botosan, when you looked

earlier, if we can go back to Exhibit R21, and we have been looking at various risk factors, do you recall that? A. Q. I do. If we can just revisit those to make sure that we Let's turn, if we could, to page number

have all of that. ten.

Again, this is the Deutsche Bank Report. THE COURT: Mr. Brennan, you're aware that the jury is

not looking at this? MR. BRENNAN: I apologize. THE COURT: MR. BRENNAN: apologies. Q. (By Mr. Brennan) We're back to Exhibit R21 which I'm going to look at, for example, page All right. My mistake. I will be more clear. My R21 should be in evidence, Your Honor.

is in evidence. number ten.

And there at the top of that page it says UNIX, Do you see that heading?

Linux, SCO and IBM. A. Q. I do.

Then in the second section it says, "How SCO Got Do you see

A chronology of System V ownership."

A. Q.

I do. Let's focus on that, if we might, for just a 1507

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moment.

It states, "In addition to its work with the

OpenServer, SCO acquired all right, title and interest in and to the UNIX Software Code. After AT&T sold UNIX to In 1995, SCO

Novell in 1993, Novell renamed UNIX UnixWare.

acquired the UNIX software designed for the Intel processor as well as UnixWare from Novell. In acquiring UNIX from

Novell, SCO acquired the licensing agreements for the UNIX OS software source code, object code, and related schematics, documentation, derivative works, and the sale of binary and source code licenses. It is this acquisition Do you see

that is at the heart of SCO's lawsuit with IBM." that? A. Q. I do.

Now, do you understand from reading that that

both in the IBM case and in this litigation there is a question of SCO's claim of ownership to UNIX, right? A. Well, I understand from reading that that the

analysts' beliefs at the time that they were writing this was that there wasn't a question of ownership. Q. And, in fact, there was reference made to the

fact that there was going to be other related litigation regarding SCO's claims. In fact, we read earlier in the

report under the risk section a specific reference by the analysts to other Linux related litigation; correct? A. That is correct. They talked about other 1508

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litigation. Q. In fact, if we could now go to Page 7, we looked

at this before, just so we're clear, Page 7, the third paragraph if we could highlight that reference to lawsuits, in the last sentence of that paragraph said, "This lawsuit is a risk and we imagine SCO could be the focus of other lawsuits." A. Right? I see that. But I do want to make the point that

not any of this is relevant to the analysis that I did. This was a risk to SCO, the company. SCO source revenue. revenue. Q. Would you agree that a lawsuit filed by SCO that My focus was on the

That was not a risk to the SCO source

put into question its ownership to the UNIX copyrights would be a risk to SCO Group, Inc.? A. Well, I think we're back to the same issue that

we were at a few moments ago which is in the but for world, SCO would not have filed a lawsuit related to the ownership of the copyrights because in the but for world, Novell would not have slandered the title which means that SCO would not have had to file the lawsuit. Q. So again, what I want to do is compare and And Your

contrast your but for world with the real world.

Honor, I believe that there is proper foundation laid just from what we have looked at for me to continue. 1509

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MR. HATCH:

Objection, Your Honor, for the reasons we

discussed before there clearly is not. THE COURT: I'll overrule the objection. You may go

ahead, Mr. Brennan. Q. (By Mr. Brennan) Now, we had talked earlier

about your having read Novell's motion for summary judgment in this very case and you had a chance to review Novell's legal arguments by reading that motion, right? A. Q. Yes. And, in fact, you were interested in the real

world in 2007 because that is why you relied upon Novell's motion for summary judgment in this case, right? A. Um, it is important to be cognizant of, you know, But it doesn't necessarily

of everything that has gone on.

mean that it is going to get incorporated into my damages estimate. Q. So you felt that it was important to be cognizant

of what was really going on in the real world, but you chose not to include it in your damages analysis, right? A. Q. No, that mischaracterizes what I just said. I'm sorry, maybe I misunderstood you. Let's take

it one piece at a time.

You believed, in forming your

conclusions, that it would be important to be cognizant of what was going on in the real world, right? A. True. 1510

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Q.

And you believe that one of the things that you

ought to be cognizant of were actual developments in the real world regarding litigation over SCO's claim that it had been slandered in terms of its claim of right to UNIX, right? A. I think it is important for me to be

knowledgeable about what is going on in the case, correct. Q. And you likewise would believe it would be

important for the jury to have that same knowledge that you sought after, right? A. Q. A. Q. Um, that I am -- that is up to the judge. Fair enough. That is not up to me. You believe that people in the real world who are

considering acquiring licenses would have an interest in a legal determination as to whether or not Novell had transferred the copyrights, correct? A. But now you're getting back into damages and the The So now

damages are not computed assuming the real world. damages are computed assuming the but for world. you're mixing things up again. Q.

Well, so that I don't mix anything up, I want to And I would like

be clear I'm in the real world right now.

to show you a document issued by this court, Judge Kimball, dated August 10th, 2007. It is entitled Memorandum Decision 1511

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 Order.

And I'm going to represent to you that this

decision was issued by the District Court in ruling on Novell's motion for summary judgment that you said you had reviewed. MR. HATCH: Your Honor, I'm going to object to this.

He hasn't tied this to her report or her damages study. THE COURT: overruled. Q. (By Mr. Brennan) Just so we're clear, um, when The objection is noted but will be

you -- when you came to the jury yesterday you came up with this five year period of damages, right? A. Q. Correct. And your suggestion was that in 2004, for vendor

license agreements, that your expectation, your projection would be that for vendor license agreements in that year alone, SCO would sell some $30,000,000 worth of vendor licenses, right? A. I want to make sure that we're accurate. That is

what I recall. them close by. Q.

But I will pull my numbers out so I have

I am happy to have you confirm them.

Just so you

know, I'm reading from the chart that you presented yesterday. A. Q. Correct. And also for 2004, your projection was that there 1512

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would be these right to use licenses that would generate revenue to SCO in the amount of $23,000,000 for just 2004, right? A. Q. Correct. And these right to use licenses again would be

licenses that Linux users would buy in order to protect themselves against a copyright infringement action filed that SCO might file against them, right? A. Q. True. And 2004 where you have this combined total of

revenues, 30,000,000 for vendor license agreements and 23,000,000 for right to use licenses, that is a total of $53,000,000 in projected revenues in an abstract world; right? A. That is, as I said yesterday, based on my

analysis, my best guess of what SCO would have generated in revenues if Novell had not interfered in the market. Q. So your best guess is in the artificial world you

have described is that SCO would have sold some $53,000,000 worth of licenses, right? A. Q. Correct. But in 2004 alone, we have a -- as we looked at

earlier, language from a ruling by this court indicating that there were questions about copyright ownership, right? A. But that ruling would not exist in the but for 1513

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

world. Q. A. Q. It would exist in the real world? Yes, because Novell did something bad. Well, Novell did something bad in the real world

or in your artificial world? A. Novell did something bad in the real world and my

damages are calculated assuming that Novell didn't do anything bad. I just don't understand why we're having such

difficulty with this concept. Q. you had -THE COURT: MR. BRENNAN: THE COURT: Mr. Brennan, if I may on that? Yes. Dr. Botosan, is it not true that you rely I confess I may not be as bright. I thought that

upon certain real world documents to reach your conclusions? THE WITNESS: THE COURT: I do. Those real world documents included

considerations of real world matters, not just your own make-believe world; isn't that correct? THE WITNESS: THE COURT: MR. BRENNAN: THE COURT: That is correct. All right. Thank you, Your Honor. Mr. Brennan, I do want to instruct you if

you go to the 2007 decision, I don't want you to read from it. I just want you to simply state its conclusions. 1514

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MR. BRENNAN: I'll do that. Q.

Fair enough, Your Honor.

Thank you.

(By Mr. Brennan)

What you have been handed, as I

mentioned, is an order issued by the court on August 10th, 2007. Now, between June 9th of 2004, when the first

decision was issued that we read to you, and August 10th, 2007, are you aware of any other court decisions in that interim period rendering decisions regarding the issues of ownership of the copyrights or slander of title? A. Q. I don't recall any. So to your knowledge, up to the date of

August 10th, 2007, from the time of June of 2004 when Judge Kimball issued his first ruling, until a little more than three years later, there were no subsequent rulings that dealt dispositively with the issue of copyright ownership or with the issue of slander of title, right? A. Q. Not that I'm aware of. So during that more than three year period, what

the consuming public would know is what had been issued by the court in June of 2004; right? A. Um, in reality, yes. But for my damages

calculation, no. Q. Okay. So mindful of the court's suggestion to

me, I am going to not read language from the court's decision but I will attempt to summarize. In the court's 1515

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decision it granted Novell's -MR. HATCH: Before he does that, Your Honor, can I That

have an ongoing objection to this line of questioning? way I don't have to interrupt. THE COURT:

I understand and the court will note that

you object to this line of questioning. MR. HATCH: I would also ask for a curative

instruction at the end of this as well. THE COURT: Q. I will do that. Focusing on the District

(By Mr. Brennan)

Court's decision on August 10th, 2007, just so we're clear you have it in front of you, there was a decision issued that is 102 pages in length, right? A. Q. It looks like it. And the conclusion among others of the court was That is a determination

to grant Novell summary judgment.

that is a matter of law that under the Asset Purchase Agreement, including Amendment Number 1 and Amendment Number 2, Novell did not transfer the UNIX copyrights to SCO, right? A. Q. Can you repeat that, please. I would be pleased to, if I can get it right.

One of the determinations made by the District Court in its order dated August 10th, 2007 was to grant to Novell judgment as a matter of law that Novell did not under the 1516

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

Asset Purchase Agreement, including Amendment Number 1 and Amendment Number 2, transfer ownership of the UNIX copyrights to Santa Cruz Operation or its successor The SCO Group, right? A. Can I ask if that was one of the decisions that

was overturned? Q. things. You certainly may. I will represent to you two

First of all, that what I have just stated to you Do you

is an accurate statement of the court's record. understand that? A. Q. A. Q. Okay. Any reason to question that? I don't think so.

I'll also represent to you that as the court has

instructed you, that there was an appeal taken and that the Tenth Circuit Court of Appeal determined that there was a factual issue that would require trial on that point? A. Okay. Which is another way of saying, ladies and

THE COURT:

gentlemen of the jury, that that specific finding -decision, excuse me, not fining but that decision by the court previously in 2007 was reversed by the Court of Appeals and that is the reason why we're having this trial. Q. (By Mr. Brennan) Now, understanding that in 2007

the court, the District Court had issued judgment in 1517

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Novell's favor, would you expect in the real world that in 2007 anyone would buy a license from SCO? A. That is in fact the entire problem right there.

That is the whole -Q. A. analysis. That is the problem. -- that is the whole basis of the damages Because Novell did what it did and SCO couldn't

convince users that it owned its copyrights, that is why there are damages. Q. That is why there are damages.

If you would listen to my question carefully and I'll do my best to

I apologize if I'm not phrasing it well. do better.

Would you agree with me that in the real world,

that if there are real potential licensees and real potential customers, if they learned that there had been a judgment issued in Novell's favor finding that SCO did not own the UNIX copyrights, that those potential customers or licensees would not have purchased a SCO source license in 2007? MR. HATCH: is ambiguous. Your Honor, just to be clear, I think it

Is he asking about the particular finding

here or the fact that it has been reversed and it is of no effect? I mean I don't know. The question seems a little

odd to me. MR. BRENNAN: Well clearly, Your Honor, I'm not. The

-- excuse me, the Tenth Circuit decision was not issued 1518

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until 2009.

I'm asking about 2007. But being -I think that is clear, Mr. Hatch.

MR. HATCH: THE COURT:

Ms. Botosan, if you would please answer the question? THE WITNESS: I can. So again, it is not relevant to That -- that is the

the damages analysis in the real world. point.

People wouldn't buy SCO source licenses because Because Novell had said

Novell had slandered the title.

that there weren't copyrights, that the copyrights weren't owned by SCO which was also the case which yielded those decisions which in the real world have been overturned. but for my damages analysis, again, all of this is irrelevant because Novell would not have slandered the title, there wouldn't have been a court case, there wouldn't have been a question about ownership. The only question So

that would have existed would have been about whether the copyrights were infringed. And that I will grant exists in But all

the real world and it exists in my but for world.

of the rest of this can't exist in the world that I'm examining. Q. (By Mr. Brennan) And what I'm asking you to do And the real That

is focus your attention on the real world.

world I would like you to focus on is the following.

SCO filed this lawsuit against Novell on January 20th, 2003; correct? 1519

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A. Q.

Incorrect. Excuse me, 2004, my apologies. I misspoke.

Would you agree with January 20th, 2004? A. Q. I would. Thank you. That is a real world fact to your

knowledge, right? A. Q. That is true, yes. And that several months later in June of 2004 the

Federal District Court issued a ruling that included the language that we read together, right? A. True. And subsequently they overturned it.

There is a lot of things that have happened in the real world. Q. It is not relevant to my analysis. And if you will just bear with me, I'm going to Do you have the patience to

go step-by-step line-by-line. do that with me? A. Q.

I don't know, but we'll give it a shot. I think I have tried a lot of people's patience. Would you agree

Let me just take one more shot at it here.

that in the real world in 2004 there was a decision issued by the Federal District Court that included the language that we read together today? A. I would agree and I would say that it is not

relevant to my analysis. Q. And then would you agree with me that from the 1520

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date of the issuance of that decision in June of 2004 until the date of the summary judgment ruling on August 10th, 2007, there were no intervening rulings by the court dispositively examining the question as to who owned the UNIX copyrights or whether there had been a slandered title? A. I would agree with that and state it is equally

irrelevant to my analysis. Q. And then would you agree with me that on

August 10th, 2007 the Federal District Court issued its order granting Novell summary judgment on the question of, among other things, the fact according to that ruling that Novell had not transferred copyrights to UNIX under the Asset Purchase Agreement as amended? A. I would agree with that statement and state that

it is irrelevant to my analysis. Q. And do you believe that the Tenth Circuit's

ruling is also irrelevant to your analysis? A. Q. Which ruling is that? Well, as the court has shared with us, and as I

represented to you, in 2009 the Tenth Circuit Court of Appeals -A. Oh, the appeal? That would also be irrelevant

because there wouldn't have been a need for an appeal. Q. So in your mind the Tenth Circuit ruling is

entirely irrelevant? 1521

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A. Q.

To my damages analysis, yes. And that would be for two reasons. Because your

calculation of damages only goes through 2007, right? A. That is correct. That is the date of my report

and that is when I ended the damages, yes. Q. And to your understanding, SCO is only seeking

damages through 2007, right? A. Q. That is my understanding. So what happened in 2008 or 2009 or 2010 in terms

of the amount of damages and the period for which it is seeking, those aren't relevant, right? or 2010, correct? A. Q. Can you rephrase that? I would be happy to. That may not have been a To your understanding, That is 2008, 2009

very good question.

I'll try again.

SCO is not seeking damages for the years 2008, 2009 or 2010, right? A. Q. Correct. And so for purposes of the damages claim in this

case, the only events that are relevant are those that occurred in 2003, 2004, 2005, 2006, 2007, right? A. So are you talking about real events or events

that happened in the but for world? Q. I'm assuming real events because the numbers that

you put up on the screen were real numbers, right? 1522

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A. Q.

They were. Okay. So I'm focusing on real world, real

dollars, real people? A. Okay. So, yes, that in the damages period those

-- yes, I guess. Q. So for purposes of your analysis, in the real

world the events that would be relevant for a person making a decision as to whether to acquire a SCO source license, whether it be a vendor license or a right to use license, would be events that occurred between 2003 and 2007, right? A. So again, for my damages analysis those real

world events, the ones that you're describing, don't matter. There are real world events that do matter. So, for That is

example, how much sales did SCO actually generate? in the real world and that matters. of my calculation.

And I deducted that off

So there were -- there is information in

the real world that matters, but there is also events in the real world that can't matter because they're simply -Q. A. Q. Too real? -- completely at odds with the but for world. Okay. All I'm trying to find out from you so

that we're clear is that the range of events, real or artificial, real or imagined, are those that occurred between 2003 and 2007, right? A. I wouldn't agree with that. As I said before, 1523

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when I -- when I, you know, as I have done my analysis and gotten prepared for my testimony, it is important for me to understand as best that I can what, you know, what has gone on in the case. And so, you know, you can't -- again, you

can't sort of pick and choose what you want me to pay attention to and what you don't want me to pay attention to. MR. BRENNAN: Your Honor, I'm mindful of the clock. I'm

Would you like me to go for another five minutes? nearing the end. THE COURT:

Yes, if you would, please, but only until

five to or as close to that as you can. MR. BRENNAN: Q. I will, Your Honor. I would like to switch gears

(By Mr. Brennan)

with you for a minute.

Um, now, when you were talking about

your calculations yesterday, you came up with essentially three computations. One is a projection in your but for

world of what revenues might have been, correct? A. So what I came up with was my computation, my

best estimate of what SCO's lost revenues -- what SCO's revenues would have been if Novell had not slandered the title. And then from that I arrived at the revenues that

they lost. Q. Okay. So I want to break it into three pieces so

we're clear.

Your first calculation was an estimation of

what revenues might have been, right? 1524

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A.

What the revenues would have been, yes, if they

had not slandered title. Q. Then you felt that you needed to come up -- those

are revenues and the simple formula for profits is revenues minus costs equals net revenues or profits, right? A. Q. I think it was profit, yeah. So you then had to come up with some calculation

as to what the costs would be that you would subtract from the revenues, right? A. Q. Correct. And the difference between those two would have

been your lost profits number, right? A. Q. That is correct. So I want to ask you a couple of questions about Now first of all, did you include in

your cost estimation.

your cost estimation legal fees that might attach to SCO's attempts to enforce its licensing program? A. For that I used three categories of expense,

three broad categories of expense, as I explained to the jury yesterday, cost of goods sold, marketing expenses and selling, general and administrative expenses. And normal

amounts of legal expenses would be included amongst those. Q. Now, in terms of legal costs, were those real

numbers that you used, or again were these artificial numbers based on a but for world? 1525

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A.

Well, as I explained yesterday, the way that we

would go about estimating the costs would be to try to determine what the relationship is between -- between costs and revenues. And so what I did was using SCO's data, real

data, from 2002 through 2007, I ran a progression analysis that helped me to determine what the relationship is between a dollar of revenues and how many cents of costs. And so

using that real data, I came up with an estimate of $0.46 per dollar. Q. A. Q. Or 46 percent, right? Yes. So you essentially suggested that SCO was

realizing a profit margin on its operations of 54 percent, right? A. Q. That is correct. Now, in terms of the base of your calculation, I

think you told us yesterday that