SCO Grp v. Novell Inc

Filing 864

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 19, 2010-Jury Trial before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Patti Walker, CSR, RPR, CP, Telephone number 801-364-5440. NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 business days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at 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 Three, # 2 Part Three)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

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SCO Grp v. Novell Inc Doc. 864 1576 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 vs. IN THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION THE SCO GROUP, INC., a Delaware corporation, Plaintiff, ) ) ) ) ) ) ) Case No. 2:04-CV-139TS NOVELL, INC., a Delaware corporation, Defendant. _________________________________) AND RELATED COUNTERCLAIMS. ) _________________________________) BEFORE THE HONORABLE TED STEWART --------------------------------March 19, 2010 Jury Trial REPORTED BY: Patti Walker, CSR, RPR, CP 350 South Main Street, #146, Salt Lake City, Utah 84101 1577 1 2 3 4 5 6 7 8 9 10 11 12 13 For Defendant: 14 15 16 17 18 19 20 21 22 23 24 25 For Plaintiff: APPEARANCES Brent Hatch HATCH JAMES & DODGE 10 West Broadway, #400 Salt Lake City, Utah 84010 Stuart Singer BOIES SCHILLER & FLEXNER 401 East Las Olas Blvd., #1200 Fort Lauderdale, Florida 33301 Edward Normand BOIES SCHILLER & FLEXNER 33 Main Street Armonk, New York 10504 Sterling Brennan WORKMAN NYDEGGER 60 East South Temple, #1000 Salt Lake City, Utah 84111 Eric Acker Michael Jacobs MORRISON & FOERSTER 425 Market Street San Francisco, California 94105 1578 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 Maureen O'Gara Andrew Nagle Witness Christopher Stone INDEX Examination By Mr. Singer Mr. Acker Mr. Singer (Deposition) Mr. Normand Mr. Jacobs Mr. Normand Mr. Jacobs (Direct) (Cross) (Redirect) (Recross) 1779 1785 1785 (Direct) (Cross) (Redirect) PAGE 1590 1624 1639 1579 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 EXHIBITS RECEIVED INTO EVIDENCE: Plaintiff's: 582 243 260 563 38 PAGE 1592 1615 1616 1641 1769 Defendant's: E-32 I-11 E-1 1609 1763 1771 1580 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SALT LAKE CITY, UTAH; FRIDAY, MARCH 19, 2010; 8:30 A.M. PROCEEDINGS THE COURT: Good morning, counsel. Are we ready for the jury? MR. BRENNAN: Your Honor, we just have a couple of brief housekeeping matters that we would like to raise with the Court, if we could. THE COURT: MR. BRENNAN: Go ahead. First of all, I wanted to inform the Court that Mr. Dana Russell, who has been Novell's client representative, the CFO, was not able to be in court today. Mr. Jim Lundberg, who is in-house general counsel, is with us today. I want to introduce you to Mr. Lundberg. Mr. Jacobs, has two matters, and I have a brief one that I would like to raise with Your Honor after that. THE COURT: MR. JACOBS: Go ahead, Mr. Jacobs. Your Honor, I will raise the ones that may relate to the activities in the next hour and a half and then at the next break we have a few other housekeeping matters. With respect to trial time, first of all the clock, which may relate to how both sides use their time in the next hour and a half. Our calculation of the clock so far is that SCO has used 14 hours, 40 minutes, Novell has used 15 hours, four minutes. SCO's calculation is that SCO 1581 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 has used 14 hours, 37 minutes, virtually identical to ours, and then Novell has used 15 hours and 38 minutes. Mindful of the Court's reminder that we need to be getting this case to the jury by Friday at noon, our calculation is then that closing arguments are on Friday morning and that evidentiary matters are finished by the close of the court day on Thursday, we're neck in neck in terms of use of the clock. And really what we now have to be looking at is not necessarily where we are on the clock to date, but how much time we have remaining and to budget our time accordingly based on what each side has used. The differences between us and our clock times, I don't mean to debate now, it's just to signal to Your Honor that we're close. Interestingly, we're also calculating the amount of evidentiary time each day is about three hours and 43 minutes on average. So in terms of sort of a warning to ourselves and to the other side about budgeting time going forward, we're going to adhere to the Court's schedule. The second matter, Maureen O'Gara's video deposition will be played today. We sent over last night an additional authenticating snippet of her testimony to authenticate a document that's already on the trial exhibit list. SCO objects to that. Then previously -- 1582 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. THE COURT: Let's deal with these one at a time. Why do you object, Mr. Normand? MR. NORMAND: Mr. Jacobs, can I ask you if you were just referring to SCO Exhibit 172 or Novell Exhibit C-29? MR. JACOBS: authenticate, C-29. MR. NORMAND: Your Honor, our understanding is May I I'm referring to that which would that Novell wants to put in this Exhibit C-29. approach and give Your Honor a copy of this proposed exhibit? THE COURT: Is this new? MR. NORMAND: This is not a new exhibit, Your I have it right here unless it's new. This is an exhibit that has at least two fundamental One, it's extremely prejudicial to SCO. It's an problems. e-mail string that refers -- the second page which is really a screet against SCO, and the third or fourth page which has testimony that we had previously agreed with Novell -actually, that Your Honor may have excluded as to the testimony from the deposition that prefers to Bill and Hillary Clinton and draws a comparison between that and the SCO situation. excluded. Now, as I understand it, Novell wants to put in That testimony in the deposition was 1583 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the e-mail chain that has both that reference and it has the reference with the screet against SCO that Your Honor can see is extremely prejudicial, and has nothing to do with the point that Novell wants to make, which the testimony will already make, which is there's a connection, Novell argues, between Blake Stowell from SCO and Maureen O'Gara. point will have been made. That So this is of very marginal probative value and extremely prejudice. MR. JACOBS: We have no problem with redacting that on the portions that Mr. Normand is referring to on the exhibit that goes to the jury. the jury. THE COURT: You're talking about the paragraph you We'll not highlight that for take SCO's side like Hillary took Bill Clinton's side, et cetera? MR. JACOBS: THE COURT: e-mail? MR. JACOBS: This e-mail is an e-mail in which Ms. That would not be shown to them. What is the probative value of this O'Gara says to the public relations guy at SCO, I want more pay because she has received an angry e-mail from a reader. It's part of our case that Ms. O'Gara and SCO had an unwholesome relationship in the way they interacted with each other and that therefore Mr. O'Gara was biased. THE COURT: Mr. Jacobs, I remember from the 1584 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 deposition testimony that was disputed and therefore I had the opportunity to read, regarding Ms. O'Gara. I think the Court allowed sufficient amount of deposition testimony to come in to really make that point. I see nothing to be gained by reinforcing it with this e-mail. MR. JACOBS: Thank you, Your Honor. Then another exhibit that's referred to in deposition testimony that was previously designated, we realized in reviewing the designations last night that the exhibit that's being referred to there was not on our exhibit list. Of course, the designations were done after That's S-45, and it is the the exhibit lists were done. e-mail in which SCO's public relations person says to Maureen O'Gara, I need you to send a jab PJ's way. So this is part of the discussion that you did allow, it's the e-mail. Otherwise the jury is going to be looking at this testimony and wondering where is the document that the witness is referring to. We redacted from that version of the e-mail, Your Honor, the actual typewritten references to Groklaw. MR. NORMAND: Your Honor, I don't know if Your Honor has a copy of this exhibit. THE COURT: MR. JACOBS: MR. NORMAND: It's P -S-45, Your Honor. Our concern with this, Your Honor, 1585 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 two or threefold. One, the deposition testimony will have already made the point that Novell wants to make, which is that Mr. Stowell asked O'Gara to send a jab to PJ. The testimony, as Your Honor will recall from the discussion last week, will already have mentioned Groklaw. We fought and lost on that front. redactions to Groklaw. THE COURT: MR. NORMAND: They are out. They are redacted. It's going to be The letter has multiple self-evident to the jurors what the letter is referring to. Although we appreciate Your Honor's instruction to the jury and we hope they will follow the instructions, we're getting to the point of really pushing the linex on both the marginal relevance of getting to the letter and really testing the capacity of the jury's curiosity not to follow up on this. In addition, it's a new exhibit that we hadn't seen until last night. The O'Gara depositions have been sitting around for three days and ready to go. THE COURT: It was apparently used at the deposition, though; is that correct, Mr. Normand? MR. NORMAND: THE COURT: MR. NORMAND: That's correct, yes. So it's not new to you? Oh, it's not, but we went through this exercise a week ago. 1586 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: I see what you're saying. But it's not totally new to you. It's unlike those exhibits that they sought yesterday, which were all brand new, which the Court did not allow. MR. NORMAND: never heard about. THE COURT: MR. JACOBS: THE COURT: Mr. Jacobs, do you want to respond? No, Your Honor. The Court will allow you to reference This is not an exhibit that we've it, but do not reference it showing the e-mail. MR. JACOBS: MR. NORMAND: MR. BRENNAN: Thank you, Your Honor. Thank you, Your Honor. Your Honor, just one other brief matter, and maybe I can outline the issue so if the Court would prefer to take this up a break, that might be something the Court would be mindful. We were told yesterday that the concluding witness of plaintiff will be Ryan Tibbitts, who is SCO's in-house counsel. During Mr. Tibbitts' deposition, there were a number of questions that were asked to which privilege or work product objections were asserted and no testimony was allowed. And we think exercising that shield will preclude those subject matters being raised during his examination. In addition, he was also -- that is Mr. Tibbitts, as I understand it, was also designated as SCO's 30(b)(6) 1587 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 witness with respect to certain categories. In connection with deposition examination, the representation was made that Mr. Tibbitts would not be a witness on the issue of any damages. So this is precautionary in that we think there are some subject matters that if they seek to elicit testimony, they have already objected or stated they would not present him as a witness, and I wanted to highlight that. THE COURT: Your point is if they, at the deposition, refused to allow him to answer questions, you do not think it would appropriate for him to be allowed to answer those questions? MR. BRENNAN: THE COURT: MR. NORMAND: Precisely, Your Honor. Mr. Normand. Your Honor, I propose that we speak with Mr. Brennan about what subject matters he thinks are off limits and come back to the Court if we can't agree. And Mr. Tibbetts is not planning to speak to the issue of damages. I would also flag for the Court that with respect to at least Novell witnesses, Mr. LaSala and Mr. Jones -- at least potential witnesses, the same issue is going to arise. THE COURT: Why don't the two of you visit at the first break and see if you can't take care of this. 1588 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 Jacobs? Honor. MR. BRENNAN: We'll do that. Thank you, Your MR. NORMAND: THE COURT: MR. SINGER: Thank you, Your Honor. Mr. Singer. Your Honor, we have two brief bits of We wanted to find out what evidence to present to the jury. the appropriate procedure from Your Honor is for doing this. There are three admissions in the answer, responses to three paragraphs in the complaint that we wish to present to the jury. I could, with the Court's permission if that was appropriate, just read the allegation and the answer, and they are obviously admissions of Novell. THE COURT: Are you going to object to this, Mr. MR. JACOBS: I think I would like to see what he's referring to and maybe Mr. Singer and I could work on that at the break. THE COURT: MR. SINGER: Would you do that, please, Mr. Singer? Yes. The other item, as Novell is aware, we now have a claim for punitive damages. There is one additional piece of evidence that relates solely to punitives but not otherwise would be in the case, and that is as of their most recent 10-K, what the market capitalization and shareholders equity is of the company, which would be relevant to the 1589 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 jury's consideration for damages. We would propose simply to mark a redacted version of the 10-K, have that stipulated into evidence, note what that amount is but not otherwise call a witness or have to deal with that point. MR. JACOBS: be dealt with later. Your Honor, I would propose that this We are going -- we have been planning ahead for what we're going to do by way of Rule 50 motions, and one thing that we are thinking of doing, even though there is a very short period between the close of SCO's case and the close of the case, is file a motion that the question of punitives should not go to the jury. I think, as a practical matter, if Mr. Singer wants to just move it into evidence, we'll stipulate that the document is in evidence -- maybe we shouldn't even do that. THE COURT: your Rule 50 motion. MR. JACOBS: THE COURT: MR. SINGER: THE COURT: MR. SINGER: MR. JACOBS: THE COURT: Sure. Thank you, Your Honor. Let's wait and deal with this after All right, Mr. Singer? Thank you. Anything else? No. No. Thank you, Your Honor. Ms. Malley. (Jury present) 1590 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 forward. THE COURT: Good morning, ladies and gentlemen. Red seems to be the color of the day for you here. Is this in protest of BYU's victory yesterday? The next witness. MR. SINGER: Thank you, Your Honor. We call as an adverse witness Mr. Chris Stone. THE COURT: Mr. Stone, if you would please come CHRISTOPHER STONE, Having been duly sworn, was examined and testified as follows: THE CLERK: If you would please state and spell your name for the Court. THE WITNESS: Christopher Stone. C-h-r-i-s-t-o-p-h-e-r, S-t-o-n-e. DIRECT EXAMINATION BY MR. SINGER: Q Good morning, Mr. Stone. My name is Stuart Singer. I'm one of the attorneys for SCO in this lawsuit. Am I correct that you served two periods of employment with Novell? A Q Correct. The first was as a senior vice president in corporate development from 1997 to 1999, correct? A That's correct. 1591 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 Then you left the company and returned in 2002; is that right? A Q That's right. In 2002, you were there until 2004, approximately two years or so? A Q That's right. The second time around your position was vice chairman, correct? A Q That's correct. Am I correct the position of vice chairman made you the number two man at the company, second only to Jack Messman? A Q That's correct. You were in that position as vice chairman in March 2004 when you addressed a business conference called the open source business conference? A Q That is correct. You delivered a speech to the conference; is that correct? A Q A Q That's correct. You are aware that that was videotaped? Yes. I would like to show you Exhibit 582. Mr. Stone, you were shown this before at your deposition. I'm going to ask if you can identify if this transcript of the videotape is correct with respect to the 1592 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 statement that appears on page 5 in the last paragraph, if that was, in fact, part of your address in March 2004 to the conference? A Yes, I said that. MR. SINGER: MR. ACKER: THE COURT: I move the admission of Exhibit 582. No objection, Your Honor. It will be admitted. (Plaintiff's Exhibit 582 was received into evidence.) MR. SINGER: Your Honor, 582 consists of the videotape together with the transcript and we would like at this time to play that excerpt of the videotape which is in question. THE COURT: Was that your understanding, Mr. Acker, that it was both? MR. ACKER: It wasn't my understanding, but I have absolutely no objection to the video, Your Honor. (Videotape played) BY MR. SINGER: Q A Q A Q A You said those words at the open source conference? Yes, I did. The we refers to Novell? That's correct. The Darl refers to Darl McBride? That's correct. 1593 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q The chief executive officer at the time. But when you made the statement we still own UNIX, sir, was that a true statement or a false statement at that time? A Q That's a true statement. So it's your position in March of 2004 that Novell still owned UNIX; is that correct? A That Novell owned the copyrights and patents, that's correct. Q Well, let's first stick with my question. Did you say copyrights in that statement? A Q No. I said own UNIX. Is that statement, we still own UNIX, a true or false statement? A It is true. I was referring to the copyrights, the patents. Q So you equate ownership of the copyrights to essentially ownership of the business; is that right? A Q Not the business. When you say we still own UNIX, in your view that is a correct statement because you were referring to the copyrights? A Q That's correct, copyrights and patents. Now with respect to the business of UNIX, was Novell selling any UNIX products in 2004? A Nope. 1594 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Q code? A Q Was Novell developing any UNIX products in 2004? No. Did Novell employ engineers in 2004 to develop the UNIX No. Now did you understand at the time of your speech that your claim, we still own UNIX, would be an important statement because there were questions on people's minds, the group that you were addressing, as to the ownership of UNIX copyrights? A Q Yes. That was a wide issue -- a widely interested issue, correct? A Q Every day. Now earlier in 2003, did you have conversations with Darl McBride about copyrights? A Q A Yes. You knew Mr. McBride, correct? I never had met Mr. McBride prior to -- actually I had We talked on the phone. never met him personally. Q You had conversations in the early part of 2003 regarding the UNIX copyrights, correct? A Q That is correct. Am I correct that in those conversations Mr. McBride never asked Novell to transfer copyrights to SCO but rather 1595 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 clarify that copyrights, in fact, were owned by SCO; is that correct? A When you said Novell, he never asked me specifically He may have asked other people in Novell. I that question. am not aware of that. Q I'm asking about the conversations you know of from your testimony -- from your personal knowledge with Mr. McBride. Did Mr. McBride ever ask you to transfer the copyrights from Novell to SCO? A Q No, he never said it as you said it. Did he ask, however, that there be some clarification that the copyrights were owned by SCO? A He asked for clarification many times on the copyrights with respect to the agreements, that's correct. Q Now I would like to talk about the press releases of As vice chairman, Mr. Stone, did you approve the Novell. Novell press releases before they were issued? A Q Yes. And I would like you to look at SCO Exhibit 525. MR. ACKER: MR. SINGER: evidence. Do you have copy? This has already been moved into I can give you It's the May 28th release. another copy. BY MR. SINGER: Q Mr. Stone, these points will be on the -- the documents 1596 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 will be on the screen, but I will also give you a hard copy. A Q Okay. Thank you. And you recognize this to be a This is in evidence. Novell press release issued May 28th, 2003? A Q A Q Yes, I do. You are familiar with this document, correct? Correct. You understand that in this document Novell says that it still owns UNIX copyrights and SCO does not, correct? A Q Correct. And you approved this May 28th press release before it was issued, correct? A Q That is correct. And at the time you approved it, you had not investigated what the actual intent of the transaction in 1995 was between Novell and Santa Cruz by talking with the people who negotiated that transaction; is that right? A Q I never personally spoke to anyone on that transaction. At the time when you released this press release on May 28, 2003, at that time you had knowledge that there was an unsigned Amendment No. 2 that changed the original APA, correct? MR. ACKER: Objection, it's argumentative as to change the APA, Your Honor. // 1597 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 Q That amended the APA? Correct. So you had a copy of Amendment No. 2 to the APA that was unsigned at the time you released this press release of May 28th, correct? A Q I did not. I personally did not. You had not seen an unsigned copy of the June 2 -- of Amendment No. 2 at that time? A Yes, I had seen it, but I did not have it in my possession. Q Just so we're precise here, prior to your approval of this press release, while you did not have a copy in your possession, you had seen and read the unsigned version of Amendment No. 2, correct? A Q Correct. Now at that time you didn't take any steps to determine whether Amendment No. 2 was signed before the press release was issued, correct? A Q Could you rephrase that? I'm sorry. Did you take any steps to see whether Amendment No. 2 had been executed and, in fact, was a signed agreement prior to issuing or approving this press release? A Q I did not personally. Our legal staff internally did. Well, as of the time that you released this press 1598 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 release, had you been told that Amendment No. 2 had been signed? A Q No. So you went ahead and approved the press release at that point without knowledge as to whether or not Amendment No. 2 was signed; is that correct? A Q That's correct. Did you understand that this press release by asserting to the world that SCO didn't own the copyrights in UNIX would harm SCO? A Q A Q Not at all. You didn't think that would harm SCO? No. Well, let's talk about the timing of the release. I am showing you here a calendar of 2004. both you and the members of the jury can see it. A I can see the calendar. THE COURT: to wherever you need. be asked. I can't see the dates. Hopefully Mr. Stone, if you need to, you can go I don't know what the questions will Don't hesitate to go look at it if you need to. BY MR. SINGER: Q If at any time you need to, please step down and ask me But I don't think we're going to be to identify a date. doing too many complex calculations on the calendar. Are you aware, sir, that earnings releases are 1599 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 important dates for a public company? A Q Yeah. That they are announced in advance to the investment community and the public, generally? A Q Yes. I would like you to assume that in 2003, earning release dates for SCO, when they announced their earnings, were the following dates: February 26th -- we'll put this You have no green -- May 28th, August 14, and December 22. reason to disagree with that assumption, do you? A Q I have no reason to disagree, no. Now I would like you to look at SCO Exhibit 254. This is in evidence. And do you understand this to be a press release that SCO issued on May 28th, 2003 reporting earnings for the period ending April 30th? MR. ACKER: Honor. THE COURT: He can look at it and reach his own Objection, calls for speculation, Your conclusion, can't he, Mr. Acker? MR. ACKER: his understanding. THE COURT: Mr. Singer. BY MR. SINGER: Q Would you take a look at the press release. He can, but the question was was that He hasn't laid a foundation for that. Fair enough. 1600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: THE WITNESS: BY MR. SINGER: Q Can you see it, Mr. Stone? Yes, I can see it. I'll show you the document. THE COURT: If you can read that, you've got better eyes than I do. BY MR. SINGER: Q Well, let's give you a hard copy of this document. This is -- you see that this a press release issued by the SCO Group on May 28th, 2003? A Q Yes. Do you see that it states, for the second quarter of fiscal 2003 ended April 30th, The SCO Group, Inc. reported net income of $4.5 million, or $0.33 per diluted share, on revenue of $21.4 million, compared to a net loss of $6.6 million, or $0.47 per diluted share, on revenue of $15.5 million for the comparable quarter of the prior year. Do you see that? A Q Yes, I do. Do you recognize this, then, to be what is considered in business to be an earnings release by SCO, a public company, that was issued on May 28th, 2003? A Q Yes. It looks to be that. Now do you claim that you didn't know that SCO was releasing on May 28th, 2003 its earnings? 1601 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q I had no idea. You had no idea. Do you know Maureen O'Gara? A Q A Q A Not personally. I know who she is. But you don't know her personally? No. Didn't have any type of business relationship with her? Only through the press. She was a journalist in the computer business. Q In fact, sir, you had given her your cell phone, correct? A A lot of people have my cell phone number, unfortunately. Q A Q You had given her your home phone number? No, I did not. And you had spoken to her previously as a reporter? MR. ACKER: BY MR. SINGER: Q A Q A Q A Q Previous to May 28th, 2003? Yes. Going back all the way to 1998, in fact, correct? Sure, yes. She was a very prolific reporter. Objection, vague. Previous to what? And she focused on the technology business, correct? Correct. Which was the business you were in? 1602 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q That's correct. Did you have a conversation with Maureen O'Gara on the evening of May 27th, 2003? A Q Yes, she called me. She told you that she had heard that there was going to be a press release issued by Novell the next day, correct? A Q That's correct. That press release would assert that Novell owned the UNIX copyrights, correct? A Q That's correct. And in that conversation, did you tell Maureen O'Gara that that was, in fact, true, that the press release was forthcoming? A Q A Q No. Didn't tell her that? No. Did you, in fact, then not tell her that the reason you were releasing the press release the next day was because it was the day of SCO's earnings? A Q Absolutely not. Absolutely not. I suppose, then, you didn't tell her that you were doing this to up end SCO's stock or throw a monkey wrench into SCO, or any words of similar effect? A No. 1603 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 You do agree that you spoke with Maureen O'Gara on the night of May 27th about this subject? A Q I prefer to say I listened to her. She knew that the press release was going to come out, correct? MR. ACKER: said she. BY MR. SINGER: Q Ms. O'Gara knew that this press release was going to be Objection, calls for speculation. You issued the next day, correct? MR. ACKER: BY MR. SINGER: Q A The May 28th, 2003 press release from Novell, correct? Yes, that's correct. She had an enormous amount of Objection, which press release? information. Q If you didn't tell her that the Novell press release was forthcoming on May 28th, 2003, do you have an understanding of how she knew that already when you spoke to her on May 27th? A She made a lot of insinuating statements to me along the lines of a hot and cold game, you know, am I getting warmer or am I getting colder. She kept quizzing me on product names, code names, press releases, talking to different journalists, you know, The Wall Street Journal and other places. She knew an enormous amount of information 1604 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 I was concerned about that. Q My question, sir, specifically was if you didn't tell her that the press release was coming out the next day, do you have an understanding of how she knew about it on May 27th? A Q No idea. Did you tell other press reporters, such as The Wall Street Journal, in advance that this press release was forthcoming? A The only people that we spoke with -- we, meaning myself and Harry Shuster, who was the PR representative for The Wall Street Journal. Q At least one element of the press, The Wall Street Journal, did know that the press release was forthcoming? A Yes. That's typical in our business is to alert the press the evening before. Q Sir, what is your testimony as when you first learned that May 28th, 2003 was also the date of a SCO earnings release? A Q A Q A Q After the release. How long after? A day or two. I'm not sure. You are not sure? It was after the release. I was not aware. In fact, sir, didn't you learn that very day, that you 1605 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 knew of it that very day, May 28th, 2003? A That day, after we had done our release, it was fairly in the public. Q Well, let's talk about that. May 28th, 2003 -- I'll put a red circle on -- that's when Novell put out one of these press releases. May 28th, 2003 you acknowledge, the same day that press release was issued by Novell, you did learn that day that SCO had issued a press release on its earnings, right? A Q A Q Later in that day. How did that come to your attention? Through the press. Well, can you be more specific as to how that came to your attention on May 28th, 2003? A Reading it in the press headlines on line on the Internet. Q Sir, were you aware that on May 14th that SCO had announced that on May 28th it would be announcing its earnings? A Q No. I would like to show you what has been marked as This is a press Exhibit M-14 and admitted into evidence. release on May 14, 2003. Can you see that indicates under conference call, the company will host a conference call at 9:00 a.m. Mountain 1606 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 Daylight Time. You were in Boston -- working in Boston for Novell; is that correct? A Back and forth, actually, between Provo and Boston. Most of the time I was in Provo. Q The headquarters of the company were in Boston, Massachusetts? A Q That's correct. And the press release was released by SCO at 9:00 a.m. Mountain Daylight Time, correct? MR. ACKER: Honor. BY MR. SINGER: Q The document suggests that it will be -- that a Objection, calls for speculation, Your conference will be held at 9:00 a.m Mountain Daylight Time on May 28th, 2003 to discuss second quarter fiscal 2003 results. A Q Do you see that? I see that. So would you agree with me that it was public information that SCO would issue its earnings releases and have a press conference on the 28th day of May? A Q Yes, that's what it says. But it is your position that you are announcing your press release regarding the ownership of the copyrights in UNIX which is coincidentally on that same day? A That's correct. 1607 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 Just a coincidence. I would like you to take a look at the June 6th press release, Exhibit 97. the press release. Let's take a look at the statement in I will give a hard copy, but I think this one is large enough to read on the screen. A Q It is, but thank you. You also -- well, sir, let's take a look at the press Do you recognize this to be a press release issued release. by Novell eight days after May 28th, on June 6th, 2003, correct? A Q Yes. In this press release Novell states the following -- in fact, can you read it out loud, first paragraph of the press release? A In a May 28th letter to SCO, Novell challenged SCO's claims to UNIX patent and copyright ownership and demanded that SCO substantiate its allegations that Linux infringes SCO's intellectual property rights. Amendment No. 2 to the 1995 SCO-Novell asset purchase agreement was sent to Novell last night by SCO. To Novell's knowledge, this amendment is The amendment appears to not present in Novell's files. support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996. The amendment does not address ownership of patents, however, which clearly remain with Novell. 1608 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 You approved this press release before it was issued by Novell on June 6th, 2003? A Q Yes. I was part of the team. And at this time you had -- by this time, on June 6th when this was released, you had seen a signed copy of Amendment No. 2, correct? A Q That is correct. I saw it the day before. And would you agree with me that the content of this press release is accurate? A Q A Q Yes, it is. In fact, you would not have written it any differently? No. It's very clear. And, in fact, you, sometime shortly after the events in question here, created a memorandum that discussed these events, for internal use, correct? A Yes. MR. SINGER: copy of that. THE COURT: MR. SINGER: BY MR. SINGER: Q A Q Is E-32 a memorandum that you created? Well, there's a lot of blank pages. I can show you the unmarked copy if you need that in What is this marked as? E-32. And I would like to mark a redacted order to assist you in your identification. 1609 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q It appears to be part of my notes, yes. And were these notes which you made for the purpose of documenting closer to the time in question what you thought about certain events? A It appeared -- I'm sorry. It was not what appeared. It was exactly the events as they took place. MR. SINGER: I move the admission of the redacted version of Exhibit E-32. MR. ACKER: We object to the redactions. We will be seeking the admission of the entire document, Your Honor. MR. SINGER: entire document. Your Honor, we can talk about the I'm using it for one purpose. You may go ahead. I will accept E-32 THE COURT: in the redacted portion and rule on the issue of what it will actually look like when it goes to the jury later. (Defendant's Exhibit E-32 was received into evidence.) BY MR. SINGER: Q Sir, if you turn to the last page, you wrote, quote, Novell -- June 6th -- responds that Amendment 2 does, in fact, appear to give some copyright ownership, but not patents, correct? A Q A Correct. That's a true statement, correct? It's a true statement. 1610 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q Now later did you take the position that Amendment 2 clearly means that SCO doesn't own any copyrights? A Q Yes, I did. Even though in your internal statement you stated, Novell responds that Amendment 2 does, in fact, appear to give some copyright ownership, but not patents; is that correct? A Q That is correct. I would like to talk a little bit about your IBM and Novell had a long term relationship with IBM. business relationship as of 2003, correct? A Q That's correct. And, in fact, in 2003, Novell and IBM worked together to promote Linux; is that right? A Q A Q That's right. You attended a meeting in spring '93 with IBM? I probably attended many meetings with IBM. Do you recall a specific meeting that you attended with Mr. Messman, your chairman, together with Jim Stallings of IBM and Bill Zeitler of IBM? A Q Yes. We had a number of meetings. Mr. Stallings was in charge of IBM's Linux business; is that correct? A Q That's correct. You were, would it be fair to say, one of the leading 1611 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 advocates of Linux inside Novell? A Q That's correct. Bill Zeitler was also a senior IBM officer in charge of all hardware and certain software; is that correct? A Q That's correct. That meeting was in IBM's headquarters in Armonk, right? A Q IBM? A Q A Q That's right. And part of your relationship building with IBM? That's correct. In June of 2003, are you aware that Novell sought to That's right. That was a discussion of Novell's relationship with waive rights that SCO was seeking to exercise regarding IBM's misuse of UNIX technology? A Q A Q Yes. Did IBM request Novell to do so? Not at all. Is it your testimony that no one from IBM had any conversation with anyone from Novell prior to the exercise of that waiver? A Q We acted on our own. No input from IBM at all. How did you happen to be aware of the fact that IBM had received a notice from SCO seeking to terminate its AIX 1612 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 license? A Q It's publicly known. And were you aware that there were conversations going on between IBM and SCO at that point? A Q Not at all. Now what consideration did you give to SCO's business interests in connection with exercising that waiver of their rights against IBM? A We were concerned more about the industry. We were concerned more about Novell support for Linux and support for the open source movement, if you will. Q You gave no consideration to SCO's interest; is that right? A Q No. In fact, by waiving those rights, you were trying to prevent the courts from resolving that issue itself, correct? A Q Not at all. Sir, if you hadn't waived your rights, ultimately a court would decide whether or not IBM had violated those rights on the merits, correct? MR. ACKER: Honor. THE COURT: // Sustained. Objection, calls for speculation, Your 1613 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 Sir, were you aware whether or not there was a lawsuit pending between SCO and IBM as of June of 2003? A Q It was very public, yes. Did Novell, through the waiver in June 2003 as well as subsequent waivers, take steps to try to prevent SCO from exercising rights under its software development agreements with IBM? A Q That's correct. And you understood that if you did nothing, IBM could defend itself in court, were able to do so, correct? MR. ACKER: Objection, calls for speculation as to what IBM can and cannot do. THE COURT: BY MR. SINGER: Q A Q Mr. Stone, can IBM defend itself in court? That's up to IBM. I would imagine they probably could. I'll overrule this objection. And if IBM's position was correct, they would have a If SCO's position was correct, then court to determine it. the court could determine that as well, correct? A Q I would imagine so. You tried to shortcut that process by Novell going in to waive SCO's rights under these agreements against IBM; is that right? A No, that's not right. We were not trying to shortcut 1614 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 any process. We were concerned about Novell and Linux and the open source movement in the industry, and this was damaging to that process. Q Sir, at the time -THE COURT: Excuse me, Mr. Singer. Mr. Acker, do you want to sit down? Are you through with the chart, Mr. Singer? MR. SINGER: I'm going to be going back to the chart, but I'll let you know when I'm doing that. MR. ACKER: BY MR. SINGER: Q Now in August and October of 2003, are you aware that I'll stand, Your Honor. Novell exercised other waiver claims or sought to claim it could waive other rights that SCO had against IBM? aware of that? A Q I was aware of that. I would like to show you Exhibit 413, October -- 691. MR. SINGER: Why don't we start with 243, Exhibit Are you 243, and can we expand this letter. BY MR. SINGER: Q This is a letter from Mr. LaSala. Had you approved this letter before it was sent? A Q No. Did you subsequently learn that Mr. LaSala was demanding that SCO drop certain claims against IBM? 1615 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q I was aware. And are you aware that after this occurred, SCO did not do so? A Q A That's correct. And that Novell sought to waive those claims for SCO? Yes. THE COURT: MR. SINGER: MR. ACKER: THE COURT: Are you going to offer -I will offer Exhibit 243. No objection, Your Honor. It will be admitted. (Plaintiff's Exhibit 243 was received into evidence.) BY MR. SINGER: Q So this was October 7th of 2003. Are you aware that on November of 2003, Novell bought a UNIX company called SuSE Linux? A Q Yes. If fact, you were very instrumental in that transaction, correct? A Q Yes, yes, I was. You paid over $200 million for SuSE Linux; is that correct? A Q That's correct. I would like you to take a look at Exhibit 260. Do you recognize Exhibit 260 to be an announcement, press release 1616 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of Novell's agreement to acquire a leading enterprise Linux technology company called SuSE Linux? A Q Yes. By enterprise Linux technology, did you mean to refer to a Linux business that would work with corporations? A Q That is correct. If we turn to the first paragraph -MR. SINGER: MR. ACKER: THE COURT: I move the admission of Exhibit 260. No objection, Your Honor. It will be admitted. (Plaintiff's Exhibit 260 was received into evidence.) BY MR. SINGER: Q And in the first paragraph it says, Novell expands its open source commitment and will become the first offer comprehensive Linux solutions for the enterprise from and desktop to the server. A Q I do. And do you see in the third paragraph -MR. SINGER: BY MR. SINGER: Q -- Novell today also announced that IBM intends to make One paragraph below that, Mr. Calvin. Do you see that? a $50 million investment in Novell convertible preferred stock? correct? That was announced exactly at the same time, 1617 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q That's correct. And that commitment was subsequently funded when the transaction closed in early 2004? A Q 2003. That's correct. Now I would like to go back for a moment to June of We're at June 6th where you had a public press We have seen that later in June -- you had the IBM Does that sound right to release. waiver on July 9th and July 12th. you? A Q Sounds right. I'll mark those in blue. We just looked at October 7th. And then November 14th that we were just looking at; is that correct? MR. ACKER: THE WITNESS: BY MR. SINGER: Q And back in June there was another statement by Mr. You took the exhibit down. It's not on the screen. LaSala with respect to copyright ownership issued on June 26th, Exhibit 103, correct? Take a look at that, sir. MR. ACKER: exhibit, Your Honor. THE COURT: MR. SINGER: THE WITNESS: Yes. I will give you a copy of that. Thank you. I think he should be able to see the 1618 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 Q Exhibit 103. And are you familiar with this document? Yes, I've seen it. It's a letter where Novell made further assertions with respect to the ownership of the UNIX copyrights, correct? A Q A Q Correct. This was not publicly released at that time, was it? I'm not aware of that. Are you aware of a letter of August 4th, which I'll show you, which Mr. LaSala wrote, Exhibit 105? A Q Thank you. This is already in evidence. Do you understand that the letter Mr. LaSala wrote on August 4th also made assertions of Novell's claims regarding UNIX copyrights, correct? A Q Yes, that's correct. Were you aware this wasn't also publicly released on August 4th, 2003? A Q I'm not sure. So we have June 26th, that isn't publicly released. You are not aware of any public release at the time, August 4th, of this letter, are you? A No, I'm not aware of any -- at this point I'm not involved in approval or participating in any of these letter writings. 1619 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q And are you aware that in September and October 2003 Novell sought to register UNIX copyrights with the U.S. Copyright Office? A Q A Q A Q A Q I'm aware. You are aware of that? I learned it, but I was not involved in that. You were not aware at the time of that? Nope. I would like to show you Exhibit F-21. Thank you. Mr. LaSala, have you subsequently seen that these copyright registrations that Novell obtained with respect to certain UNIX copyrights? MR. ACKER: I actually think he misspoke and called Mr. Stone Mr. LaSala. BY MR. SINGER: Q Mr. Stone, I apologize. Mr. Stone, do you recognize that these are copyright registrations that Novell obtained in August, September, October 2003? MR. ACKER: prior testimony. MR. SINGER: He may have seen these later and Calls for speculation. He gave his perhaps recognized them. THE COURT: Ask him. 1620 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE WITNESS: I've never reviewed or read these. I appreciate the upgrade to Mr. LaSala. BY MR. SINGER: Q You were aware at the time, though, that copyrights were being sought, or was that done without your knowledge? A I was not participating in any of this. At this point I was actually trying to build products. Q Did you know whether or not Novell made a public statement at the time in September or October 2003 that it obtained certain copyrights? A I'm not aware. Again, I was not participating in any I was more interested in of these issues at this point. building products. Q I would like you to take a look at the December 22, 2003 press release, which is Exhibit 517. MR. SINGER: you have copies of it. BY MR. SINGER: Q A Q A Can you see this sufficiently? I can. Will you read this press release out loud, please? Sure. Novell believes it owns the copyrights in UNIX, This is already in evidence. I think and has applied for and received copyright registrations pertaining to UNIX consistent with that position. detailed the basis for its ownership position in Novell 1621 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 correspondence with SCO. Copies of our correspondence, and Contrary to SCO's public SCO's reply, are available here. statements, as demonstrated by this correspondence, SCO has been well aware that Novell continues to assert ownership of the UNIX copyrights. Q Were you aware at the time that this was a press release that Novell put out publicly on December 22, 2003? A Q Yes. You, as vice chairman, approved this press release, correct? A I did not approve this one. I got to read them, but I did not approve this one. Q You were aware that this was being issued as an official statement? A Q Yes. And the correspondence which SCO referred to occurred in earlier dates, which we've been discussing, the June 26th letter, the August 4th letter, correct? A Q That's correct. And as we have seen, December 22, 2003, I asked you to assume, and you had not disagreed, was also the day of the SCO earnings release, correct? MR. ACKER: MR. SINGER: Calls for speculation, Your Honor. I would like him to assume that that is, in fact, the date of SCO's earnings release, okay. 1622 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 release. MR. ACKER: He's not an expert. I don't why he would be given a hypothetical question. MR. SINGER: Well, he can look at the press BY MR. SINGER: Q Look at A-24. MR. SINGER: THE COURT: BY MR. SINGER: Q Were you aware, Mr. Stone, that on December 22nd, 2003, I believe A-24 is in evidence. It is. SCO Group was announcing its earnings for the third quarter and for the year? A Q Not at all. Do you agree, if you look at this press release, that that, in fact, was what occurred on December 22nd, 2003, that was the day SCO released earnings? A Q case. Now December 22, 2003 is also the day that Novell publicly again asserts ownership of the UNIX copyrights, correct? A Q That's correct. And is it your position that the fact that occurred on Looks to be, yeah. We don't have to assume anymore. We see that's the December 22, 2003 is also a coincidence? 1623 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 Yes. MR. SINGER: THE COURT: Nothing further. Mr. Acker, will you be using the calendar? MR. ACKER: through without it. MR. SINGER: or two more questions. THE COURT: BY MR. SINGER: Q Mr. Stone, you subsequently left Novell in 2004; is Actually, Your Honor, I did have one If I may reopen my direct? Go ahead. No, Your Honor. I'm going to muddle that correct? A Q A Q A Q That's correct. Were you asked to leave? Yes, I was. You were given a severance package? Yes, I was. You were given a contract that had -- you had a contract that had continuing obligations to the company? A Q A Q No obligations. Well, you had a noncompete agreement? Excuse me. Yes, I have a noncompete. You have provisions regarding cooperation with the company? A Yes, I do. 1624 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 How much was the amount of the payment that you received at the time of your severance? A Over a period of time, it equated to $2 million. MR. SINGER: Thank you very much. CROSS-EXAMINATION BY MR. ACKER: Q A Q 2004. Good morning, Mr. Stone. Good morning. Let me ask you about the speech you gave in March of Could you first tell the ladies and gentlemen of the jury what the open source business conference was, what sort of gathering that was? A Sure. It was a gathering of business people, not technical people, in the open -- interested in open source computing. It was becoming a very popular way of writing software and developing software applications and software services. And it was the first conference of its kind to try to support the notion this was a good thing, and that it was a direction that the industry was heading in. had quite a good turnout. Q A And we It was mainly business people. What was the nature, what was the theme of your speech? The theme of my speech was very much to move -- to not be afraid of moving towards supporting the open source technology movement, and that older operating systems and development environments were closed and this provided a 1625 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 much more open and freer model of developing software applications. Q Between May 12th of 2003 up until this conference in March of 2004, was the issue of SCO's assertion that there was UNIX in Linux and SCO's attempt to obtain licenses on that theory, was that something that was prevalent in the software community? A Q It was the headlines every single day. Did it impact your business or the business you were running at Novell? A Q A Yes, it did. How so? It was clearly a distraction. It was affecting our ability to promote Linux in the open source movement as a development model, as a business for Novell going forward. I was very concerned that this was harming Novell's future business. Q I'm going to show you a clip again of your speech, the tail end of your speech, and I'm going to show you the whole tail end of your speech as opposed to what the plaintiff's counsel has shown to you. MR. ACKER: If we could do that, Mr. Lee. (Videotape played) BY MR. ACKER: Q Do you still believe each of those statements to be 1626 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 true today? A Q Absolutely. What was the basis for your belief that there is no UNIX in Linux? A I actually reviewed it. MR. SINGER: Your Honor, I think he claimed attorney/client privilege on this statement later in this deposition. MR. ACKER: THE COURT: I don't believe so, Your Honor. Let's pause for a moment, please. Do you have something I can be looking at, Mr. Singer? MR. SINGER: THE COURT: This would be in his deposition. All right. If you find it, I want you to show it to Mr. Acker before you say anything more about it. MR. SINGER: Yes. Also show a copy of the transcript to the Court. Page 68, line 16 -- and 15, through page 69, line 11. THE COURT: You don't need to show me, Mr. Singer. Let me ask Mr. Acker if he wishes to respond. MR. ACKER: THE COURT: // I will move on, Your Honor. All right. 1627 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. ACKER: Q Let's step back so the ladies and gentlemen -THE COURT: Mr. Acker, excuse me. Mr. Singer, I need to ask whether or not you want me to ask the jury to disregard the question and the answer? MR. SINGER: I would like, if Your Honor would, to explain what just happened here with respect to the invocation of privilege at the deposition and disregard the answer. THE COURT: Ladies and gentlemen, during the course of depositions, as you would have picked up, there are oftentimes objections made by the attorneys representing the parties for the other side during the course of the deposition. Apparently, in the deposition of Mr. Stone, questions of this sort were asked, an objection was made by his attorney saying that information is privileged because of attorney/client privilege. So for that reason, it would be inappropriate, since the privilege was requested during the deposition, it would be inappropriate for that testimony to now come before the jury. Does that accurately reflect what happened? MR. ACKER: BY MR. ACKER: Q Can we step back and can you tell the ladies and Yes, Your Honor. gentlemen of the jury, briefly, your educational background. 1628 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A I have an undergraduate degree in computer science. I have what is called an IMT, an executive MBA from Harvard business school. Q Now you explained two periods of time that you were at Can you explain for the ladies and gentlemen of the Novell. jury the first time you were at Novell and what your responsibilities were? A Sure. I was at Novell in early 1997. My I was responsibilities were as a senior vice president. responsible for our corporate development technology direction, business development, support, developer services. Q Who are was the CEO at that time when you were at Novell during the first period of time? A Q A Q Eric Schmidt. Where is Mr. Schmidt now? He is the CEO and chairman of Google. Did you leave Novell at some point during that first stint? A Q A Q A Yes, I did. When was that? 1999. Why did you leave? About 400,000 miles a year. I was traveling far too much and I wanted to get my life back after working so hard. 1629 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 So I decided I wanted to do a startup company in Boston. Q Then what did you do during the period of time after leaving Novell after the first stint and when you returned in 2002? A Q A I was running a software startup company in Boston. What caused you to come back to Novell? I received a phone call from Jack Messman, who was then chairman of the company, and he asked me to come back. Q A How did you know Mr. Messman? He was on the board of directors since the beginning of the company. Q During your first period of time at Novell, were you involved at all in the negotiation or execution of the asset purchase agreement or any of its amendments? A Q I was never involved. After coming back to Novell in 2002, when was your first recollection of issues arising with respect to Mr. McBride and SCO? A In the later part of 2002, e-mails were coming in to people that worked for me as well as the legal department from Mr. McBride with respect to whether or not Novell wanted to participate in a campaign that they were putting together called the SCOsource. Q At some point in time did you put together a document, E-32, that Mr. Singer showed to you that detailed your 1630 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 interactions with Mr. McBride? A Q A Q Yes, those are my notes. Let me show you an unredacted copy. This is redacted. If you could take a look at that and let the ladies and gentlemen of the jury know if you recognize it. A Q Yes, these are my notes. Were these notes -- when were these notes prepared, approximately? A I prepared them in -- well, I had been preparing -- writing them all along, but I prepared the notes in early June. MR. ACKER: We move for admission of the unredacted version of E-32, Your Honor. MR. SINGER: We object to E-32 as hearsay, it's his notes, the one part that previously was an admission. MR. ACKER: cross-examination. Well, he's here. He's subject to These are his notes prepared I think they contemporaneous with the time of the events. are admissible, Your Honor. At the very least he should be allowed to use them while testifying. THE COURT: Counsel, I agree they are hearsay, so I will not permit the unredacted version to go the jury, but he may use those certainly to refresh his memory during the course of his testimony. 1631 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. ACKER: BY MR. ACKER: Q Thank you, Your Honor. Do you remember the first time that you yourself had conversations with Mr. McBride? A Q A Yes I, do. When was that? According to my notes -MR. SINGER: Your Honor, I believe the appropriate procedure is for him to testify from his present recollection. If he doesn't have that, he may look at notes to refresh that recollection. THE COURT: That is correct, Mr. Acker. It will not be as efficient, but I do believe that is the way to proceed. BY MR. ACKER: Q A Q A Q A Do you have a memory without looking at your notes? Yes. When was the first time you talked to Mr. McBride? It was in early March of 2003. Who called whom? Mr. McBride called me with respect to a consortium called UnitedLinux. Q A What is UnitedLinux? It was a consortium of four companies that was promoting a version of Linux. 1632 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q A Q A Was SCO part of that consortium? Yes. What was Novell's interest, if any, in that consortium? Novell was interested in participating in that consortium because it was supporting and operating an environment for a distribution called SuSE, which we later acquired. Q A Why was Novell interested in being part of UnitedLinux? It was part of our strategy to support the open source movement and support Linux going forward, and we saw that as a public and business mechanism for us to support that environment. Q What was the substance of your conversation with Mr. McBride during this first call? A Whether or not we would like to participate in that organization as a board member. Q He was asking you that or vice versa, you were asking whether he would help you get -A He was asking whether or not we would like to participate, and then in return for that he was looking for money, and then he was looking for us to give up our $8 million royalty stream, so he was negotiating. Q A Q What was your response? No. Was there subsequent contacts with Mr. McBride in '02 1633 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 '03 between yourself and him? A Q A Yes, there were other e-mails and phone calls. When was the next contact, do you recall? I believe the next series of calls were in the April, There was one I recall where we had a May time frame. conversation with Mr. McBride, who was getting into a taxi in New York City. Mr. LaSala and I were in my office. Again, we were asking him what is going on with this whole SCOsource issue and copyrights and patents. He continued to ask us to, you know, if you could just clear up this issue, if you could just fix and address the copyrights and patents issue, it would be great. am I going on too long? Q A No. You're fine. We asked him if we could see -- We asked him if we could see the code he kept claiming And he asked me if I would meet with a was in Linux. gentleman named -- his chairman. Q A Q Who was that? A gentleman named Ralph Yarro. How did you leave the call with Mr. McBride when he was in New York and you and Mr. LaSala were in Massachusetts? A We left it primarily that I would meet -- that they would prepare a nondisclosure agreement and that I would meet with Mr. Yarro. Q Did you have other conversations with Mr. McBride or 1634 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mr. Yarro after that? A Yes. I met with Mr. Yarro, it was late May. It was in my office in Provo, Utah. conversation. Again, a relatively strange He came by asking the same questions that Mr. McBride was asking, if you just could take care of -- he was more explicit, if you could take care of this copyright issue. Q He also -- at that time he owed us $18 million. What was Mr. Yarro's position at that point with respect to SCO? A Q He was the chairman. When you say he owed you $18 million, who owed Novell $18 million? A Q A SCO. For what? If was an old lawsuit that had to do with a product And we had won a case. They clearly owed us called DR DOS. $18 million for a long period of time. Q A Q A Q What did Mr. Yarro say to you? He was trying to negotiate a price concession. What was your response? No. Was there any other conversation between yourself and Mr. Yarro? A He asked if I would like to meet with Darl -- with Mr. McBride and his team and review the code -- the offending 1635 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 code between UNIX and Linux, and I said absolutely. Q A Q A Did that ever take place? No, that never took place. Why not? Because we made a number of attempts -- this was in around May, I believe it was the 24th, we made a number of attempts to meet with Mr. McBride and his team. I asked for an NDA, I asked for it four or five times, the detail that we would be able to review the source code. Q A When you say NDA, what do you mean? A nondisclosure agreement that gave us the right to He had made -- he, meaning Mr. look at the source code. McBride, had made many public statements that they were going to show the offending code and never did. a legal agreement allowing me to see it. Q A Q A Q Was SCO or Mr. McBride willing to do that? He appeared to be, but I never received it. So what happened? I canceled the meeting. Now Mr. Singer asked you a number of questions -- let So I wanted me back up. On May 12th, you are aware that Mr. McBride sent a letter to Mr. Messman as well as a thousand other companies across the United States with respect to the accusations of there being UNIX in Linux? 1636 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A Q That is correct. What was the response inside Novell as well as across the industry when that occurred? A We were very concerned that he was damaging an industry and that it was hurting Novell's business. Q Was there some -- was a decision made at Novell to respond to it? A Q A Yes. What was that response to be? The decision was made to put up statements to the effect that Novell owns the copyrights and patents to UNIX. Q A Why did Novell do that? Enormous pressure. I was receiving no fewer than 250 e-mails a day on this topic, 30 to 35 phone calls from shareholders, from customers, from employees, from business partners, you know, Novell, why are you so quiet, why aren't you saying something. And I think we had reached a point that we believed it was time to state our case given that Mr. McBride, you know, was stating his. Q A Q Why was the press release put out on May 28th? That's when we were ready and done. Did you have any knowledge that SCO's earnings release was set for that day? A Q None whatsoever. Did you speak with Ms. O'Gara the evening prior to May 1637 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 28th, on May 27th? A Q A Yes, I did. What was the substance of that call? She kept quizzing me asking me questions about As I products, about press releases, about UNIX and Linux. said previously, she had an enormous amount of information that I was very concerned about. played the hot and cold game. I told her nothing -- she I told her nothing and that She she had to call our PR representative, Mr. Shuster. called me again the next morning, and I said nothing, please call Mr. Shuster. Q Did you ever tell Ms. O'Gara that Novell was intentionally putting out its press release on May 28th to somehow impact SCO's earnings release? A Q No, I did not. After the press release went out on May 28th, how did you become aware of Amendment No. 2 to the APA? A The signed Amendment No. 2 apparently went to The New I think it was sent to them by SCO, I'm not York Times. sure. Q I was aware of it the morning of June 5th. Had you ever seen an executed copy of Amendment No. 2 before that? A Q No. After reviewing Amendment No. 2, did it ch

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