SCO Grp v. Novell Inc

Filing 868

NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 25, 2010-Jury Trial before Judge Ted Stewart, re 567 Notice of Appeal,. Court Reporter/Transcriber Patti Walker, CSR, RPR, CP, Telephone number [phone]. NOTICE RE REDACTION OF TRANSCRIPTS: Within 7 business days of this filing, each party shall inform the Court, by filing a Notice of Intent to Redact, of the parties intent to redact personal data identifiers from the electronic transcript of the court proceeding. The policy and forms are located on the court's website at www.utd.uscourts.gov. Please read this policy carefully. If no Notice of Intent to Redact is filed within the allotted time, this transcript will be made electronically available on the date set forth below. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 5/10/2010. Redacted Transcript Deadline set for 5/20/2010. Release of Transcript Restriction set for 7/19/2010. (Attachments: # 1 Part Two, # 2 Part Three)(jmr) Modified by removing restricted text on 7/19/2010 (rks).

SCO Grp v. Novell Inc

Doc. 868 Att. 2

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 Novell.

THE COURT: MR. SINGER:

Mr. Jacobs, Mr. Singer, where are we? Your Honor, first with respect to

time, I think the parties have agreed that SCO has 52 minutes and Novell has 22 minutes. MR. JACOBS: MR. SINGER: from Novell? MR. JACOBS: MR. SINGER: That's correct. We would with the Court's approval That's correct, Your Honor. I assume there's no further witnesses

like to reserve the issue of Rule 50 motions that we have with respect to their case. And we would have two rebuttal

witnesses, the first of whom would be Robert Frankenberg and the second witness would be Christine Botosan. THE COURT: All right.

Anything to respond to that, Mr. Jacobs? MR. JACOBS: THE COURT: We're ready, Your Honor. All right.

Again, Mr. Singer, the times were? MR. SINGER: To be exact, 52 for SCO and 22 for

THE COURT:

All right.

Now, I have to ask those of you in the audience, when we put on the white noise, is that deafening to you? anyone suffered physical damage? some have said no. Has

Well, some have said yes and Is it too loud so that 2526

I need to know.

Dockets.Justia.com

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it's harmful? THE AUDIENCE: THE COURT: right. (Whereupon, the jury returned to the court proceedings.) THE COURT: Q. Go ahead, Mr. Hatch. Mr. Musika, just so we can get to No. All

Anyone who wants to say otherwise?

BY MR. HATCH:

the bottom line, you never actually calculated a number other than zero for damages; correct? A. correct. Q. did you? A. Q. I did not survey consumers, no. Okay. Now, you were here in the Court when And you never did an actual survey of consumers, I calculated the number as zero, yes, that's

Dr. Botosan stood in front of the jury and calculated damages; correct? A. Q. Yes, I was. And in response to questions from your counsel

today, you indicated that her analysis was somehow deficient; right? A. Q. A. Was somehow? Deficient. I don't agree that it takes into consideration all 2527

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of the factors that should be considered, yes. Q. Okay. Fair enough. You and Dr. Botosan both did

reports, expert reports during the course of this litigation; correct? A. Q. That's correct. All right. And you understood that Dr. Botosan

also did -- you reviewed her initial damages report; correct? A. Q. I did. All right. And then she had the opportunity to

review your report and criticize that; correct? A. Q. Yes, that's correct. All right. And she filed also a rebuttal report

that took issue with your report, as well; correct? A. Q. A. Q. A. Q. Yes. And you read that one, didn't you? Yes, I did. And that report was in July of 2007? I don't recall exactly when it was. You understand it was just shortly after your

report; correct? A. Q. I think that's right, yes. And you attended her deposition in this matter in

August of 2007; correct? A. Twice. She was deposed in 2007, and I attended

both times, and then again in 2010. 2528

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

Q.

Okay.

And you were impressed with her, weren't

A. Q. A. Q. A. Q.

I'm sorry? You were impressed with her work? No. Okay. I'm sorry to say. Well, in fact, weren't you so impressed that only a

few months after her first deposition and after she had issued a report criticizing your work, didn't you contact Dr. Botosan regarding your interest in hiring her to work for your expert consulting business? A. Q. A. No. I can explain. Did you or didn't you?

Well, that's a yes or no.

I contacted Dr. Botosan and had a discussion with The federal government had

her concerning accounting.

contacted me and asked me to be involved with specific -there's a new PCAOB board -MR. HATCH: THE COURT: MR. HATCH: Q. Your Honor, it's not responsive. He said no. I agree. Didn't you tell her, urge her to

BY MR. HATCH:

look at your firm's website and let you know if she would have an interest in discussing your firm's interest in her? A. Exactly, for the PCAOB work that the federal 2529

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government had contacted us about, because she is an accounting professor, and we did not have an accounting professor, so to respond to the federal government's request, to assist with the -- basically it's the federal government's review of accountants. And so I contacted her about that to

see if she would be interested in joining us to look at the accounting side, yes. Q. Well, you didn't say any of that when you

communicated with her that you wanted to hire her shortly after she had criticized your report? A. Q. I disagree with that. You disagree with that? Your Honor, can we have a side bar? THE COURT: You may.

(Whereupon, the following proceedings were held at the bench:) MR. HATCH: In the interest of time, I think I have And I have

a right I think under the rules to do impeachment.

handed you a copy, the Court a copy that directly contradicts his testimony here today. I think in the case law and

certainly in the rules that evidence offered solely for impeachment, it doesn't need to be disclosed prior to trial. And plus we just became aware of this. able to show it at this point. And I would ask to be

It doesn't mention anything

about accounting, and he specifically said, no, he didn't do 2530

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this. MR. BRENNAN: And I don't think (inaudible.)

Were you waiting for me, Your Honor? THE COURT: myself. MR. BRENNAN: (Time lapse.) THE COURT: I believe it is a close call as to That's what I thought. I'll wait. No, Mr. Brennan. I'm waiting for

whether or not this is impeachment, what this witness just said. MR. HATCH: THE COURT: He said -He did not deny that he talked to her And that is not --

about having her do some specific work.

there's nothing in this that would indicate he's asking her to come to work for him full-time. And that's the way to impeach

him because that seems to me the difference you're trying to make here. MR. BRENNAN: I would say if he says contrary to

what's here then perhaps he could, but he hasn't done that. THE COURT: He hasn't done that.

If you truly could impeach, it would be permitted. It would not have to be disclosed, it would be allowed. don't see that it's really impeachment. probably ought to move on. MR. HATCH: I'm talking about firm -- I'll ask him 2531 And I think we But I

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about it. THE COURT: If you want to go ahead, go ahead.

(Whereupon, the following proceedings were held in open court:) Q. BY MR. HATCH: When you talked, you had this

communication with Dr. Botosan, did you tell her that your firm's greatest challenge is finding qualified experts to handle the volumes of referrals that you receive? A. Concerning the accounting literature, yes. And I

put this in the context, too. judgment motion -Q.

This was after the summary

I don't have a question pending. I want to know if you said a specific thing.

Didn't you tell her that your firm's greatest challenge is finding qualified experts to handle the volumes of referrals that you receive? A. remember. That has always been a challenge for us. I don't

I know the reason I called her again was because of

the Public Accounting Oversight Board contacted me and asked for accounting experts. And I contacted her since this matter

had been concluded under summary judgment after I talked to counsel. And I don't know what else I said about the firm. I

don't remember. Q. So what we do know is shortly after your seeing her

report criticizing her, you made this offer to hire her? 2532

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A.

No, that is absolutely wrong.

It was after the

summary judgment motion was decided in this motion, and SCO had filed for bankruptcy. MR. HATCH: Your Honor, he's not responsive. He's

testifying to things I haven't asked him. THE COURT: I will agree, and first of all,

instruct the jury to disregard what Mr. Musika just said and instruct the witness to answer the question as directly as possible. MR. BRENNAN: THE COURT: Your Honor -If Mr. Hatch has not represented the

timeline, then you may say no. THE WITNESS: Q. BY MR. HATCH: No. But you were interested in hiring

her; correct? A. At some point I contacted her about interest

because of the special nature of the request from the government, yes. Q. Yes. Thank you.

That's all I have, Your Honor. MR. BRENNAN: THE COURT: Just a few questions, Your Honor. Go ahead. REDIRECT EXAMINATION BY MR. BRENNAN: Q. Mr. Hatch asked you a series of questions regarding 2533

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a possible relationship between Deutsche Bank and SCO, and you indicated that there was some reason to believe that there was a relationship between the authors of the Deutsche Bank report including Brian Skiba and Darl McBride? A. Q. Yes, that's correct. And what I'd like to do is have displayed to the

jury a demonstrative, Your Honor, and this indicates both Deutsche Bank disclosure and also an e-mail from Ms. Bingham of SCO. And I'd like to ask the witness a question or two

about that. Mr. Musika, what is your understanding or suspicion regarding personal relationships between the authors of the Deutsche Bank forecast and Mr. McBride? THE COURT: MR. HATCH: Mr. Hatch? Your Honor, I think, one, it's beyond,

beyond the scope, and I think also there's no foundation to talk about this. MR. BRENNAN: This is directly within the scope of

what he was asked about, the relationship issue. THE COURT: evidence? MR. BRENNAN: It's not been admitted as evidence, Has this e-mail been admitted as

but it is one that was relied upon in his report and cited in his report. MR. HATCH: And, Your Honor, it was -- there was a 2534

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lot of things that Mr. Musika put in his answers, a lot that was not responsive to my questions, and I don't think he gets to get anything in that he just chooses, just throws in. THE COURT: Did you ask him any questions about the

relationship between Brian Skiba and -MR. HATCH: Deutsche Bank. MR. BRENNAN: Honor. THE COURT: MR. BRENNAN: Q. All right. Thank you. So what do you understand or You may go ahead. That's what opened the door, Your I asked about the relationship with

BY MR. BRENNAN:

suspect may be the relationship between SCO and Mr. McBride and Brian Skiba and Deutsche Bank? A. As an auditor we are taught to exercise

professional skepticism or healthy skepticism when we're auditing or examining companies. In examining the record of

these two companies, Novell and SCO, I came upon two things that are presented here. One is that Deutsche Bank disclosed

in their 2004 report that they were not independent, that they actually make a market in the SCO stock. And then secondly, I found in SCO's records an e-mail correspondence that says: Please book a car in Rome for Darl -- that's Darl McBride -- for now. Also I'm going to pdf a 2535

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hotel reservation for Darl in Cannes, Nice, at Hotel Martinez. Please finalize and book for us

in as much as there is a good chance that Darl and Andrea may be staying with Brian Skiba in his place Oceanfront. Now, that is a serious red flag to me as an auditor. I don't come here to represent that there was a I don't come here to represent that

social relationship.

Darl McBride ultimately stayed there, but this is in the corporate records of SCO certainly indicating that there was some potential contact between the two. And that's a serious

red flag for me as an auditor that warrants further investigation and concern about the lack of independence of Brian Skiba in preparing that report SKIBA. MR. BRENNAN: THE COURT: MR. HATCH: Thank you. Mr. Hatch? Just quickly, Your Honor. RECROSS-EXAMINATION BY MR. HATCH: Q. Mr. Musika, I notice -- if you notice what's on the No further questions.

first page, there are two authors to this report; correct? A. Can you high- -- highlight that for me, please? So there's

There's Brian Skiba and Matthew Kelly, yes.

the same Brian Skiba that was in the e-mail. Q. Okay. But -- and as to Matthew Kelly, do you have 2536

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anything to say about him? A. Q. No, I don't. And he has qualifications and certification here, CFA? What does that stand for?

do you see that? A. Q.

Certified financial analyst. And that shows he's a professional in the financial

industry; correct? A. Q. A. You're speaking way fast. Tell me what certified financial analysts do. It's a certain certification like a CPA. It's just

a different certification.

It's -- you need to take a test

and qualify and pass the test. Q. A. Mr. Kelly. Q. You don't have anything bad to say about Mr. Kelly? I don't have anything good or bad to say about I don't have anything to say about him. Now, you said professional skepticism would have Is that the

looked into this relationship with Mr. Skiba. summary of your testimony? A. Q. A. Q. Yes. What's the date of this report? I got it. Okay. It's October 14, 2003.

And this conference that you're talking

about, you weren't there, you weren't at the conference that you say Mr. Skiba provided some housing for Mr. McBride? A. Well, I didn't say that. That's incorrect. 2537

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Q.

I didn't ask you that.

You weren't there, were

A. Q. conference. A. Q.

Weren't where? I'll tell you what. Give me the date of that

Wasn't that a year after this report of 2004? What conference are you talking about? You just testified about Mr. Skiba and

Mr. McBride -MR. BRENNAN: put it back up. THE COURT: MR. HATCH: Q. Put it back up, please. That would be helpful. You're talking here about a contact What's the date on that? Your Honor, if it would help, we can

BY MR. HATCH:

between Mr. Skiba and Mr. McBride. A. Q.

The date is September 20, 2004. Okay. Take that down and put up the other.

That's about a year later; right? A. Q. Yes, it is. So your skepticism that a report in '03 is not Is that what

accurate because something that happened in '04? you're saying? A. Yes.

That raises a red flag to me that there was

potentially a relationship that needs investigation before you could accept the representations of Brian Skiba as being -Q. You have no evidence of any relationship as of the 2538

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date of this particular report, do you? A. Q. No. Okay. Thank you. May this witness be excused, counsel? Yes. Thank you, Your Honor.

THE COURT: MR. BRENNAN: THE COURT: MR. HATCH: THE COURT:

Mr. Hatch? Thank you, Your Honor. Yes.

Mr. Musika, that means you do not need I would ask, however, that you

to worry about being recalled.

not discuss your testimony in the presence of any other witness or with a witness in this case. THE WITNESS: THE COURT: THE WITNESS: THE COURT: Yes, Your Honor. Thank you very much. Thank you. Let me ask, Mr. Brennan, do you have

any additional witnesses? MR. BRENNAN: witness, Your Honor. THE COURT: MR. BRENNAN: THE COURT: MR. SINGER: You rest your case? We do. All right. Your Honor, we have two rebuttal We don't have. That was our last

witnesses, the first of which is Robert Frankenberg. THE COURT: Mr. Frankenberg, you were already sworn So if you 2539

in this case, so you do not need to be sworn again.

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would take a seat. ROBERT FRANKENBERG, called as a witness at the request of Plaintiff, having been previously duly sworn, was examined and testified further as follows: THE COURT: MR. SINGER: Go ahead, Mr. Singer. Thank you, Your Honor. DIRECT EXAMINATION BY MR. SINGER: Q. Thank you, Mr. Frankenberg, for coming back to

provide a little more information in connection with this matter. First of all, was Jim Tolonen the chief financial officer of Novell at the time that Novell and Santa Cruz entered into an asset purchase agreement? A. Q. Yes, he was. Did Mr. Tolonen have responsibilities relative to

the asset purchase agreement? A. Q. A. He did, yes. What were they? Largely to make sure that financially this made

sense, that the revenue could be recognized, that we were appropriately taking into account any implications from shareholder -- from shareholder viewpoint, and any elements of taxation that might take place as a result of the sale. 2540

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Q.

Was Mr. Tolonen a key executive assigned by the

company to be the business executive on that transaction? A. Q. No, he was not. Whose responsibility at Novell was it to make the

decision on what technology assets and intellectual property would be transferred to Santa Cruz as part of that deal? A. the board. Q. A. And did Jim Tolonen have that responsibility? No, he did not; although he certainly could Ultimately it would be mine with the approval of

influence it. Q. And what about David Bradford, did he have that

responsibility? A. Q. A. No, he did not. Did Tor Braham have that responsibility? No. Tor Braham was an attorney in an outside legal

No, he did not have that responsibility. Q. Did any of these three people, Messrs. Tolonen,

Bradford or Braham, have the authority or responsibility to decide whether copyrights would stay with Novell or be transferred to Santa Cruz? A. Q. None. Who was the person that you put in charge of the

initial deal negotiations? A. Excuse me. That was Duff Thompson, and with him 2541

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Ed Chatlos. Q. Were the copyrights a critical part of selling a

software business? A. Q. Yes, they were. And, Mr. Frankenberg, I'd like you to take a look

at Exhibit 754, which has been put into evidence. Do you recognize this to be a memo that Mr. Bradford sent to the Novell board of directors on September 15, 1995, a few days before the board meeting? A. Q. Yes, I do. And I have a copy here. I think there may be a

copy already up there. A. Q.

If not, here's one.

On the screen there is. One of the items attached here is a term sheet for Mr. Calvin will move to that page of

a proposed transaction. this.

Do you see on this term sheet a discussion of what Novell transfers to SCO, what Novell retains and what Novell receives from SCO? A. Q. Yes. Do you see anywhere on the section of what Novell

retains any copyrights mentioned? A. Q. No, I do not. Now, did you rely on this information in a board

meeting on September 18, 1995, to provide an accurate summary 2542

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of what was in the transaction documents as of that time? A. Q. I'm sure we would have, yes. And did it inform your view that the copyrights

that were mentioned in the board resolution that you looked at a couple weeks ago when you were here that Novell would retain referring to something other than the UNIX copyrights? A. Q. Yes. And I think, did we discuss before that there was a

company, there was a business called NetWare which had copyrights that were owned by Novell? A. Q. Yes. To your best recollection, was an exclusion of any

of the UNIX copyrights discussed at the board meeting on September 18, 1995? A. Q. No. Is that something you would have remembered if that

had come up? A. I might have. There would have been a lot

discussed on a sale of this nature, but I do not recall any discussion of copyrights. Q. Well, if someone had said to you that, well, we're

trying to sell the software business but we're going to retain the copyrights, would that have been something you think would have gotten your attention? A. That definitely would have gotten my attention, 2543

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because it's ludicrous to think about selling software without selling the copyrights. If you don't have the copyrights, you

don't have the ability to freely use what you bought. Q. Did the intent to transfer the UNIX and UnixWare

copyrights ever change according to your understanding? A. Q. No. And when you were here in trial earlier, we

discussed briefly a dispute that arose a year later between Novell, IBM and SCO about a royalty buyout. that? A. Q. A. Q. A. I do, yes. And was Mr. Tolonen involved in that issue? Yes, he was. Do you recall what his involvement was? Again, this was a significant transaction, so Do you recall

Mr. Tolonen would have been involved in the financial aspects, any tax implications, the ability to recognize the revenue that would be derived from such a sale. Q. A. Q. I'd like you to look at Exhibit 123. Thank you. At some point was a term sheet prepared to address

these issues? A. Q. A. Yes. And do you recognize this document? I do, yes. 2544

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Q. A.

What is it? It's a proposed IBM term sheet for IBM's buyout of

their license to UNIX. Q. Do you recall seeing this sometime during the time

of that dispute when you were still chief executive officer of Novell? A. Q. A. I'm sure I did, yes. And do you recall who drafted this IBM term sheet? I do not. I'm sure Jim Sullivan was involved in

it, also potentially Mr. Tolonen, but I'm not sure who did the actual drafting. Q. A. Q. A. And Mr. Sullivan is also a Novell executive? Yes, he was. As was Mr. Tolonen; is that correct? Correct. MR. SINGER: Exhibit 123. MR. BRENNAN: Your Honor, I don't think this has I move for the admission of

been properly authenticated, nor has there been a foundation laid regarding this document. THE COURT: Exhibit 123. (Whereupon, Plaintiff's Exhibit 123 was received.) Q. BY MR. SINGER: Exhibit 123 is now in evidence, and This 2545 I will overrule the objection and admit

the jury will be able to see the document on the screen.

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was the term sheet. A.

Can you explain what this document is?

This would have been a term sheet or the iteration

of a term sheet for dealing with the key provisions offered to and hopefully agreed on with IBM to allow them to purchase, one-time purchase their royalty -- pay off their royalties in a one-time purchase for UNIX. Q. I'd like to point you to a specific provision in Would you look at the last paragraph? This is Item 6.

the term sheet.

Perhaps Mr. Calvin can highlight that.

Could you read that into the record, if you would, please, Mr. Frankenberg? A. IBM agrees to residual rights language to be SCO demands to limit IBM from studying

defined.

UNIX code while programming a non-AIX platform. IBM insists SCO is protected by copyright. Q. Where it says, IBM insists SCO is protected by

copyright, what did you understand that to mean? A. Well, what I understand it to mean is that SCO has

copyright protection. Q. A. Q. Would that be referring to the UNIX copyrights? Yes. Did you understand that whether SCO -- excuse me --

whether IBM wanted to limit what they could look at relative to SCO's UNIX code because they thought that SCO was protected by the UNIX copyrights? 2546

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A. Q.

I'm sorry, Mr. Singer. Yes. Right.

Could you try that again?

Do you understand that IBM did not want to limit what they could look at relative to SCO's UNIX code? A. Q. Yes. And what relationship did that have to the issue of

whether SCO was protected by UNIX copyrights? A. Well, if SCO were protected by UNIX copyrights,

then IBM could not use it without gaining permission of using the copyright. Q. A. Q. Even if they had taken a look at it? Yes. Did anyone at Novell including Mr. Tolonen tell you

that IBM's position was not correct because Novell had kept the UNIX copyrights? A. Q. No, not to my recollection. And to your knowledge, during this dispute with SCO

and IBM, did anyone at Novell ever tell SCO or IBM that Novell owned the UNIX copyrights? A. Q. Not that I heard, no. Thank you, Mr. Frankenberg. CROSS-EXAMINATION BY MR. BRENNAN: Q. A. Good afternoon, Mr. Frankenberg. Good afternoon. 2547

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Q. A. Q.

We meet again. We do, indeed. Good to see you again.

Nice to see you, as well. Is it your position that Novell would never sell

assets of a business involving software and retain copyrights with respect to that software? A. No. But it would be highly unusual, and I would

think it would require licenses back to the purchaser for the copyrights. Q. You're aware of what's called the TUXEDO

transaction; right? A. Q. Yes. And Novell sold certain assets relating to the

TUXEDO business to BEA; right? A. Q. Yes. And license and the technology.

And Novell retained ownership of the copyrights of

that software; right? A. Q. That's what I've been informed of, yes. And that transaction happened within a year of the

transaction involving Santa Cruz; right? A. I believe so, yes. I don't know. I don't remember

the exact time. Q. So within your experience at Novell, you'd be aware

that within a one-year period or less of the Santa Cruz transaction Novell did another transaction involving the 2548

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TUXEDO software, transferred assets relative to that software to the buyer BEA, but Novell retained the copyright ownership to that software; correct? A. I believe that was a licensing transaction as

opposed to an asset sale, but I'm not sure. Q. A. Q. You're not sure? I'm not sure. Now, I'd like to ask you a bit about, once again,

the board of directors meeting. A. Q. Okay. And if we could pull up Exhibit Z3. Now, you'll agree that at the September 18th, 1995, board meeting that both Mr. Bradford and Larry Sonsini, the senior partner at Wilson Sonsini, reviewed the terms of the asset purchase agreement with the board; right? A. Q. A. Q. Yes. You had chance to follow that discussion; right? Yes, I did. You had a chance to look at what the terms and

conditions were of the asset purchase agreement; correct? A. Q. Correct. And the asset purchase agreement that was entered

into included the exclusions that we looked at when you were here last time of, all copyrights and trademarks except for the trademarks UNIX and UnixWare; correct? 2549

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A. Q.

That's what it said, yes. So the very document that was before the board, the

very document that was discussed by two attorneys, one inhouse counsel Mr. Bradford, the other member of the board and senior partner Wilson Sonsini, that document had that expressed exclusion of copyrights; correct? A. Q. A. Q. Correct. And you followed that discussion, didn't you? Yes. And with respect to the minutes, let's focus again,

just so we can leave this trial without any question in anyone's mind, let's look at Page 2. And you will see in the

resolution once again the language, quote: Novell will retain all of its patents, copyrights, and trademarks except for the trademarks UNIX and UnixWare. Right? A. Q. That's what it says. And that was the resolution approved by the board

of directors; right? A. Q. A. Q. Yes. You were the chairman of that board; right? Yes. You recall this very resolution being approved at

the board meeting; right? 2550

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A. Q.

Yes. And after the board meeting you had a chance to

review the minutes that included this specific resolution; correct? A. Q. Yes, I did. And you believe that the board minutes are

accurate; right? A. I believe that they are accurate to the extent

that -- well, as I testified before, we were very concerned about copyrights on NetWare. And I'm sure that when I looked

at this and saw the provision, what I read was, NetWare copyrights, even though it doesn't say that. Q. minutes? A. Q. A. Q. Yes. But -That happens to all of us. It certainly might. So let me just see if I understand what you're saying. Is it your contention that although what was So you read something that didn't appear in the

discussed with the board was an expressed exclusion of copyrights and although the words that were in the asset purchase agreement expressly excluded the transfer of copyrights and the minutes of the board of directors meeting excluded all copyrights, somehow in your mind you either saw 2551

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or thought you heard something different than the expressed provisions; is that essentially what you're telling us? A. Q. Yes, it is. So is it correct, then, that somehow in your mind

you thought or pictured something different than was written in the words of the asset purchase agreement? A. Q. Yes. And is it possible in your mind you thought

something different than the words spoken at the board meeting? A. I don't recall the discussion of copyrights at the

board meeting. Q. A. Is it possible -I do recall a discussion of the deal and a review I don't recall a discussion

by Mr. Bradford and Mr. Sonsini. specifically about copyrights. Q. A. Q.

You do recall this resolution being discussed? I do, yes. And the resolution was actually presented to the

board; right? A. Q. It was, yes. And the words that we see in the resolution were

presented to the board as set forth in the minutes; right? A. Q. Yes. So is it possible, then, that although the words of 2552

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the resolution were spoken, somehow in your mind you didn't hear the words the same way that they're recorded in the minutes? A. Q. Yes. And you do acknowledge the possibility that, in

fact, what happened is that just as we've heard during the course of the trial that Novell expressly made a determination not to transfer the copyrights; correct? allowance open, don't you? A. Well, I wasn't here for the trial, and I wasn't You leave that

supposed to be listening in on anything, so I can't say -Q. A. Q. A. Q. A. Q. Fair enough. -- what happened during the trial. I appreciate that. Could you repeat your question? I'd be happy to. So that I can focus on it, please. You leave open the possibility that what happened

when the asset purchase agreement was signed by you in behalf of Novell and signed by Mr. Mohan in behalf of Santa Cruz Operation that the words that were used in the asset purchase agreement did, in fact, reflect the intent of both those parties. A. You leave open that possibility, don't you? No, I don't. It was not my intent. It could have

been somebody else's intent.

It was not my intent, nor what 2553

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we agreed on between Alok Mohan and myself. MR. BRENNAN: Your Honor, I would like to read from And

the deposition of the witness taken on February 10, 2007.

for the benefit of counsel, I'd like to read from Pages 84 and 85. And I can present it. THE COURT: MR. BRENNAN: Honor. THE COURT: Q. before you? A. Q. It is. Wonderful. Question. Thank you, Mr. Lee. So setting aside your personal intent, All right. So if you can see that. Is that Which line on Page 84? I think I'll start at Line 9, Your

BY MR. BRENNAN:

is it your testimony that the negotiating team acted outside of its authority in drafting an exclusion to the asset purchase agreement that was broader than just network copyrights? Answer. Question. Answer. Question. Answer. Question. That's possible. It's a possibility? It's a possibility. What other possibilities are there? A drafting error is another possibility. And does the fact that there was the

three-month period in which Amendment Number 1 had a chance to 2554

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be prepared in the wake of the signature of the asset purchase agreement and before the closing, does that affect your estimate of the probability that it was a drafting error? Answer. possible. I only said that both of those things were

I still think it's -- excuse me -- I think it's

still possible it was a drafting error or that they acted outside of their scope. Question. Answer. Question. I think either of those are possible.

Are there any other possibilities? Not that I can think of. Well, we discussed one, which was that

you gave them direction to try to make sure that they could protect their right to do buyouts; correct? Answer. Question. Correct. Is it possible that they effectuated

that direction by obtaining the UNIX copyrights? Answer. I guess that's possible, as well, yes.

And do you recall when your deposition was taken at least at that point in time your mind was open with the possibility that the asset purchase agreement as signed and executed by both parties and which had an expressed exclusion of copyrights was, in fact, done purposely so as to protect Novell's interests? A. Q. That was a possibility, yes. And you would acknowledge even today that that's a

possibility? 2555

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A.

And as I just testified, though, it remained my

intent through the entire process to sell UNIX including the copyrights. Q. Would you agree that the very best measure of one's

intent in negotiating a contract is to look at the report? A. Q. A. Q. A. Is what? Is to look at the report? I'm sorry. Look at the what?

The written words. If it's drafted properly, yes. MR. BRENNAN: THE COURT: No further questions, Your Honor. Okay. REDIRECT EXAMINATION

BY MR. SINGER: Q. Mr. Frankenberg, just a few additional questions. You were asked some questions about the TUXEDO transaction. And I think you said you believed that was a Would you look at SCO Exhibit 757.

license, you weren't sure. THE COURT: MR. SINGER: MR. BRENNAN:

You said 757? Yes. Your Honor, this is an exhibit that

has not been on the witness list, never presented before. MR. SINGER: recollection. THE COURT: He may use it to refresh, but it will 2556 I'd like to refresh the witness'

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

not be admitted, you're right. MR. BRENNAN: MR. SINGER: Q. Thank you, Your Honor. Yes. Will you take a moment to look the

BY MR. SINGER:

at document? A. Q. Which part of it? Yes. It may take more than a moment.

Just the title.

Have you done that? A. Q. Yes. Does this refresh your recollection of whether the

transaction with TUXEDO was a licensing agreement? A. Q. A. Q. Yes. No. Yes. And I can now ask you if your recollection having Can I say what it says? If you could put it aside.

been refreshed, are you now able to say whether or not the TUXEDO deal was a licensing agreement as opposed to a sale of assets? A. of assets. Q. Now, with respect to the transaction that we've all It was a licensing agreement as opposed to a sale

been spending a lot of time talking about, the asset purchase agreement in this case, are you aware of the license back of assets from SCO to Novell to use after the transaction? A. Yes, I am. 2557

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Q.

Would that have made any sense if the UNIX

copyrights weren't being transferred to Santa Cruz? A. Q. I don't think so, no. And when you were saying that it's a possibility

that some people were trying to act zealously to protect Novell's interest, there are a lot of things that are possible in this world; right? MR. BRENNAN: question. THE COURT: Q. possible? A. Q. A. interrupt. Q. Having established that, does it remain it was Yes. Having established that -You guys were having fun there, so I didn't want to Correct, it is. Are there a lot of things which are Your Honor, that's a leading

BY MR. SINGER:

always your intent, though, as the chief executive officer of Novell at the beginning of the transaction with Santa Cruz that the copyrights be transferred? A. Q. Yes. UNIX. Was it your intent throughout that

transaction that the copyrights be transferred? A. Q. Yes. Was it your intent at the end of that transaction 2558

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that the copyrights be transferred? A. Q. Yes. And if someone was whether zealously and well

intentioned or not acting otherwise to put that in the document, would that be outside of the scope of authority in your view? A. Yes. MR. SINGER: MR. BRENNAN: here, Your Honor? THE COURT: You may. RECROSS-EXAMINATION BY MR. BRENNAN: Q. Was the board of directors of Novell acting outside I have nothing further. Just one question, if might from

of the scope of its authority in approving the asset purchase agreement? A. No, they were not. MR. BRENNAN: THE COURT: Thank you. Mr. Frankenberg, thank you. You may

again be excused, except this time I think finally you're done. THE WITNESS: THE COURT: Finally. The same caution about discussing your

testimony, however, not discussing your testimony, to be more specific, apply until the case is over. 2559

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 back up.

THE WITNESS: THE COURT: THE WITNESS:

Okay. Thank you, Mr. Frankenberg. Thank you, Your Honor.

Thank you, ladies and gentlemen. MR. SINGER: Christine Botosan. Your Honor, our next witness will be

I should say our next witness and final

witness will be Christine Botosan. THE COURT: Dr. Botosan, if you would just come

You remain under oath, so you do not need to be If you would just take a chair, please. Thank you.

sworn again.

THE WITNESS:

CHRISTINE BOTOSAN, called as a witness at the request of Plaintiff, having been previously duly sworn, was examined and testified further as follows: DIRECT EXAMINATION BY MR. HATCH: Q. A. Q. A. Q. Welcome back, Dr. Sonsini. Thank you. You think. Yeah. You said it, not me.

I'll let you get your water. You had the opportunity to be here while Mr. Musika

gave his testimony; correct? A. I did, yes. 2560

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Q. A. Q.

Okay. I did.

And you were able to hear it okay?

All right.

Mr. Musika had made some statements Do

about the riskiness of an investment in SCO, SCO's stock. you remember that? A. Q. I do. Is SCO's stock price relevant to its loss -- the

calculation of its lost customer sales? A. No. My damages analysis is based on lost revenues.

And so the risks that Mr. Musika was referring to when he talked about the riskiness of the stock are completely separate from the risks that exist in SCO's product market. Those risks are very relevant. The risks, some of which he

mentioned, that there was hostility against SCO, that infringement hadn't been proven in the marketplace, all of those product market risks that are very relevant to my damage analysis and are incorporated in my damage analysis. Q. Did the Deutsche Bank forecast that you relied on

take market risk into consideration? A. Yes. It talked about -- it talked about all of

those risks.

Every one of the risks that Mr. Musika referred

to in his testimony are discussed in the Deutsche Bank report. They were just market factors that existed at the time that were commonly known and impacted the amount of revenues that the analysts forecasted for SCOsource. 2561

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Q. correct? A. Q. analysis? A.

Now, you considered Dr. Pisano's report, as well;

Yes. Did he take into account those same factors in his

He did.

I was here when Dr. Pisano testified, and

I can still picture him talking about purchasers of SCOsource, and that there were some people at one point that wouldn't purchase all of the sorts of factors that we've been hearing about this morning, and that was why he didn't assume market penetration of anywhere close to 100 percent. In fact, at the

low end his calculations assumed that SCO would only sell to about 1 in 5 Linux users. And given that his numbers, as I testified before, are very similar to the numbers that I came up independently using analysts forecasts, they provide support for each other. They're all consistent with both Dr. Pisano based on his expertise and the analysts at the time being aware of the fact that these market factors existed, and that as a result, only a fraction of the Linux users would purchase the SCOsource license. Q. Okay. Now, Mr. Musika talked about Dr. Pisano Did he use more than one survey?

using a survey that he used. A.

That's my understanding, is that he looked at

multiple surveys and had percentages from those multiple 2562

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surveys, and then I believe used the most conservative one. But he looked at multiple surveys, three. Q. A. Q. Dr. Pisano used more than one survey? That was my understanding. And you didn't hear Mr. Musika speak about the

other surveys; correct? A. Q. A. No, I did not. What is the significance in using three surveys? Just again, you want to try to get data from

multiple sources because it just provides you with comfort that the information you're using is reliable. Q. Now, you indicated you relied on Dr. Pisano. Did

you work directly with Dr. Pisano in doing his work? A. Q. A. No. We worked totally independently.

Why did you work independently? Because Dr. Pisano is an expert in the technology

market, in assessing the size of the market, in assessing penetration rates. accounting expert. That's not my expertise. I'm an

I'm an expert that knows how to look at

financial information, analyst reports and do damages analysis based on that type of input, and that was the type of analysis I did. So Dr. Pisano stayed out of my -- out of my area, and

I stayed out of his because we have different types of expertise. Q. But Doctor -- but Mr. Musika did both; right? 2563

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 mine. Q. Q. witness.

MR. BRENNAN:

Objection, Your Honor; leading the

THE COURT:

Sustained. Did Mr. Musika in doing his

BY MR. HATCH:

analysis, did he do more than just accounting? A. He provided a response to both Dr. Pisano's and

Now, you heard about price.

Does Deutsche Bank

forecast take price into account? A. Q. A. Yes, it does. And what was the importance of that? So in the Deutsche Bank forecast, they not only

looked at the number of RTE licenses that they thought SCO could sale under various scenarios, but they also talked about what the possible price range was going to be. provided a range from 100 to $300. And they

They stated in the report But

that they thought $200 would be the most likely price.

then in computing the forecast, they said, but we're going to be conservative because there's some uncertainties in the marketplace. We're going to go with $100. So that's the

price that they used. Q. So you had a choice on what you could use; right? MR. BRENNAN: THE COURT: MR. HATCH: Objection; leading the witness again. Sustained. Let me re-ask it. 2564

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Q. A.

BY MR. HATCH: I did, yes.

Did you have a choice? Throughout the Deutsche Bank report

there were a number of choices I had to make in which numbers I relied upon. And in making those choices, as I testified

before, I tried very hard to be conservative. Q. Okay. Now, Mr. Musika testified about statements Right?

in SCO's 10K. A. Q.

Do you know what a 10K is?

I do. And he said particularly regarding forecasting Did you hear that testimony?

SCO's SCOsource. A. Q. I did.

Forecasting SCOsource profits.

Was that a concern

to you, the statement in the 10K? A. It's not. So one of my main areas of expertise is That's one of the things And I spent a lot of time I've read thousands. My

in corporate reporting strategy. that I've studied a lot as a Ph.D. reading 10Ks and annual reports.

husband kind of thinks I'm kind of weird. kind of neat.

I think they're

But anyway, I spend a lot of time reading annual reports. And that type of boilerplate language that was in

their 10K was also repeated in their 10Q is used by companies for a variety of reasons. One reason that they would use that

type of boilerplate language back away from providing the forecast in their 10K is that they're worried about litigation 2565

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risk.

So they're concerned that they're going to get sued if And so they will use that

they provide forecast information.

type of language to say, look, we can't provide a forecast because we're concerned about litigation risk. Another reason they might use that type of boilerplate language is if they don't want to communicate a forecast because they don't want their competitors to know what it is that they think they can generate from this business. Or maybe they didn't want to sort of add fuel to

the fire for the Linux community by going publicly and saying, we think we're going to generate 100,000 -- you know, $100 million worth of revenues. So they'll put that type of language in their public reports to give them an excuse not to provide a forecast. SCOsource. did it. But clearly it was a possible forecast for Deutsche Bank did it. Other analysts at the time

Internals from SCO, they were doing it, and

Dr. Pisano did it ex-post. Q. A. Q. A. Q. So you -- did you look at more than one source? For forecasts? Yes. Yes, I did. Now, Mr. Musika also testified about the history of Do you recall that

profits of SCO, the SCOsource program. testimony?

2566

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A.

No.

But I recall him saying that the company had

not had a history of profits. Q. So when he was talking, he was talking about the

company and not exactly the SCOsource program? MR. BRENNAN: THE COURT: MR. HATCH: Q. Objection; leading again, Your Honor. It is. Sorry, Your Honor. What's the distinction he was making

BY MR. HATCH:

as you understood it? A. Oh, okay. So my understanding was that he was

talking about historically SCO had not been a profitable company and that that had implications for the forecasts. Q. A. Was that important to you? No, it wasn't; because the SCOsource program that

is the crux of the damages calculation was a new -- it was an extension of an existing line of business that they were in, but it was a new opportunity, and they were very excited about it. The external analysts were very excited about it for SCO, The analysts talked about how SCO was well

as well.

positioned to take advantage of this new opportunity that they were pursuing. And so even just if you look at sort of what was happening to SCO over that time period, the SCOsource program was generating quite a bit of profitability for SCO prior to Novell's slanderous statements. So there was no reason to 2567

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expect at that point in time that SCO was not going to do quite well with the SCOsource program regardless of its past history. Q. When you looked at the profitability of the

SCOsource program, how would you characterize the way you made your calculations? A. decisions. So in doing my calculations, I made a number of So if we go back to the vendor license revenues

that we talked about, that was one stream of revenue, I testified before that both internal to SCO and the independent external analysts felt they were up to 15 of those deals that SCO could do at $10 million a piece. So that's $150 million

was the total potential market vendor license revenues. The revenues that I picked up were a little more than half of that, 87,250,000. So I tried -- that was just

one example of how I tried to be conservative in doing the calculations. With the RTU license revenues, there were a number of decisions that I had to make. Did I go with the

Deutsche Bank forecast of 65 million or the 90 million or the 400 million? And I went with what they described as the

number that was reasonable but most conservative, and that was 65 million. Q. So there was a higher number or a lower number, you

took somewhere in the middle? 2568

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A. Q.

I did. Okay. Now, Mr. Musika, did you hear his testimony Do you

regarding attitudes of the OpenSource community? recall that? A. Q. A. Q. community? A. Q. A. I'm not sure. Okay. I do.

Was the OpenSource community SCO's customer base? No. SCO was targeting corporate customers.

So what was the relevance of the OpenSource

It wasn't relevant to my analysis.

And why not?

Because that was not the customer base that they They were selling to corporate

would have been selling to. users of Linux. Q.

Now, Mr. Musika suggested there might be a Do you recall that?

connection between Deutsche Bank and SCO. A. Q. I do.

Mr. Calvin, would you bring up, R21. Does the report in any place indicate whether there

was a connection or not? A. They have a disclosure statement at the back of the

report that talks about any potential sources of relationship between SCO and Deutsche Bank. Q. Okay. In reviewing Dr. Musika's report, did he

address that at all? 2569

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A.

He did.

So I think this is where some of the

confusion comes in on Mr. Musika's part about a lack of independence of SCO and Deutsche Bank. document. THE COURT: MR. HATCH: THE COURT: MR. HATCH: THE WITNESS: What page? Right there. What page is this? 24. It's still very tiny. If we could go to that

So what this is is a disclosure statement that Deutsche Bank attaches to the back of its -- to the back of the forecast which outlines where there might be potential conflicts of interest between the -- because of a relationship between the bank and its analysts and the company. THE COURT: MR. HATCH: get through it. THE COURT: Q. All right. Thank you. Excuse me. Can you read this?

I'll try to blow up parts of it as we

BY MR. HATCH:

Before we do that, just so we

understand, this is something -- this is something that Mr. Musika raised today in trial and in his report; correct? A. Q. That's correct. So --

And to give us some context, what did he say about

the lack of independence? A. So in his report he expressed some concern that I 2570

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had relied on the Deutsche Bank report because he said that all 11 of these sources of conflict existed between Deutsche Bank and SCO. But that was just factually incorrect.

If you'll notice right at the top of the disclosure check list where it says, SCO Group Inc., ticker symbol -Q. A. Can you bring up the top part, Mr. Calvin? Recent price, and then disclosures, it says none.

So what Deutsche Bank was stating on this document was that there were 11 potential sources of conflicts, but none of them applied with respect to the relationship between Deutsche Bank and SCO. Q. Just so we're clear, Mr. Musika said how many of

the 11 applied? A. Q. A. Q. A. Q. A. Q. A. All of them. And how many applied? None of them. He got it completely wrong? Right. Okay. Now, how do you know that?

Well, a couple of -Other than the none? Right. So first of all, when I was looking at the

disclosure statement, there were a few in here that were real red flags that it was clear that they couldn't have applied in this case. So, for example, I think it might be Number 5, 2571

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yeah: An employee of Deutsche Bank and/or its affiliate serves on the board of the directors of the company. It was obvious that that one couldn't apply because if you go back a few pages in this document it lists the board of directors, none of whom are affiliated. Q. Let's do that. I think it's Page 17. A. Q. A. There it is. Could you expand the board of directors? So it listed the board of directors, and none of There it is.

those were either Mr. Skiba or Mr. Kelly or anyone else that was affiliated with Deutsche Bank. Q. So how far is Mr. Musika -- how far -- how much

work would he have had to have done to determine whether that was an actual conflict that Deutsche Bank had with SCO? A. the report. Q. about that? A. And the other thing I did because I just wanted to Okay. Let's go back. Do you have more to say So he would have had to flip back a few pages in

make sure that I hadn't, you know -Q. A. Let's go back. Back to the disclosure. 2572

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Because when I received Mr. Musika's report that had so, you know, completely differently interpreted this document the way that I had interpreted it, I called Deutsche Bank, and I asked them, I said, when you say none, do you mean none? okay. And they said, yes, we mean none. So I said,

None means none.

And so that was the other piece of

evidence that I gathered. Q. A. Okay. And did you have trouble doing that? But other than that,

It was a little embarrassing.

because they kind of treated me like I was -- anyway. Q. testimony. A. deposition. Q. A. Q. A. We heard some testimony at the end of Mr. Musika's Did Mr. Musika ever contact you during this case? He contacted me -- he e-mailed me after my I think it was in November of 2007. So it wasn't a phone call? No. And how did you respond to his e-mail? So I received an e-mail that I interpreted based on

what he stated in the e-mail that they were -Q. A. Q. A. Maybe I should put this in context. November of 2007. Okay. Go ahead. When was this?

So after my deposition.

And so the e-mail just indicated that they were

always interested in finding qualified experts, that they had a big caseload, international caseload, and that he would like 2573

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to speak to me about it.

I was flattered, but I wrote back

and just said that I was not interested in pursuing any other opportunity at that time. Q. Okay. You were here for his testimony and his Was that accurate?

characterization of that e-mail. A. Q. A. Q. A. No. Okay. It was not. In what way?

I mean, maybe it was in his head, PCAOB, but it was

never communicated to me in that fashion. Q. A. interested. Q. Okay. Now, we talked about all of -- we went Were there any of the risk What was your response? Just I responded respectfully that I was not

through all of these risk factors.

factors that Mr. Musika spoke with during the day that were not included in the report? A. No. All of the risk factors that he identified,

the product risks that are relevant to the profit analysis, every single one of them he raised is discussed in the Deutsche Bank report. It was known at the time. And I feel

very comfortable it was incorporated into those forecasts for a number of reasons. One is because you can look at the

number of RTU licenses that the Deutsche Bank analysts were 2574

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forecasting would be sold.

And again it was nowhere close to, It was again about

you know, a large portion of the market. 1 in 5 Linux customers.

So clearly they, you know, took into

consideration that not everybody would buy a SCOsource license. They were also -- those factors were taken into consideration explicitly by Dr. Pisano in his analysis. And

as I said before, his numbers and my numbers are consistent with one another. Q. Okay. And let's by you -Mr. Hatch, so you know, you've got

THE COURT:

about four minutes left. MR. HATCH: Q. I think that's all I need, Your Honor. You were asked to calculate damages

BY MR. HATCH:

in this case; correct? A. I was. MR. BRENNAN: Your Honor. MR. HATCH: Q. case? A. Q. that? A. No. The only direction that I was given was that I 2575 I was asked to calculate damages. And were you given any direction on that, how to do Background question. What were you asked to do in this Objection; leading the witness again,

BY MR. HATCH:

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

was to assume that SCO owned the copyrights, and that for purposes of calculating damages that Novell did not slander of title, because I have to be in a but-for world and say that didn't happen, but for there to be damages in the first place I have to assume that they did. And I know that seems kind of

weird to think about it that way, but that's just the way that we have to do a damages analysis. We have to assume the bad

thing happened, but then when it comes to calculating the damages number say, what would the world have looked like if the bad thing hadn't happened? Q. And in doing that, that was the same assignment you

understood that Mr. Musika was to do as well; right? MR. BRENNAN: Honor. Q. BY MR. HATCH: What was your understanding that Objection; leading once again, Your

Mr. Musika was to do? A. Q. My understanding was he was to do the same thing. Now, in making your damage analysis, would it have

been possible for you to come to a larger number? A. Q. A. Yes, quite possible. And what number did you come to? At the bottom end 137 million, and at the top end

215 million. Q. And if you were to describe those numbers in one

word, what would that word be? 2576

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 have.

A. Q.

Conservative. Now, you heard Mr. Musika here indicate that his

number was what? A. Q. A. Q. A. Zero, is my understanding. Did you hear him do any calculations? No. Do you consider zero to be a reasonable number? Absolutely not. MR. HATCH: THE COURT: MR. BRENNAN: THE COURT: That's all I have, Your Honor. Mr. Brennan? Thank you, Your Honor. So that you know, according to my

calculations you have nine minutes. MR. BRENNAN: Thank you. That's the same number I

THE COURT:

Thank you. CROSS-EXAMINATION

BY MR. BRENNAN: Q. A. Q. Good afternoon, Dr. Botosan. Good afternoon. I'd like to ask you about your assumptions. I'd

like you to assume that SCO does not prevail in litigation against IBM. What does that do to the number that you

presented to the jury? A. Well, that's not relevant because that's not in the 2577

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but-for world.

So in the but-for world, the only thing that

changes from the real world is whether SCO slandered the title or not. MR. BRENNAN: Your Honor, I'd ask the witness to

directly respond to the question. MR. HATCH: THE COURT: MR. BRENNAN: again. Q. BY MR. BRENNAN: Assume that SCO does not prevail Does that change any I think she did. I believe she just did. Well, my apologies. I'll try it

in its litigation against IBM.

assumption or projection that you've given whatsoever? A. Q. No. Okay. Your analysis is premised upon projections

by Deutsche Bank; right? A. Q. SCO; right? A. I also used internal projections by SCO plus That's one of the inputs that I used. And the other inputs are internal projections by

another forecast, as well. Q. Now, you understand that Deutsche Bank's analysis

is premised upon SCO being able to establish that a UNIX is infringed by Linux; correct? A. Q. No. You don't read the Deutsche Bank report as being 2578

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premised upon prevailing in the litigation? A. No. In fact, they talk specifically about the fact

that SCO had not proven infringement at the time that they were making the forecasts. Q. And what does Deutsche Bank say if SCO is not able What is their prognostication

to prevail in that litigation? regarding the future of SCO? A. Q. A.

I'm not sure what litigation you're talking about. The IBM case. So in terms of the company as a whole, they talked

about it being a binary investment, that there was the potential that SCO could be worth a ton of money or it could be worth nothing, depending on what happened not only in the IBM case, but also with respect to their SCOsource program. So they identified both of those. Q. So you understand that at least Deutsche Bank

suggests that if SCO does not prevail in its IBM litigation it will be a worthless company? A. But that's not relevant again to the but-for case. THE COURT: Dr. Botosan. THE WITNESS: question? Q. BY MR. BRENNAN: I'd be happy to. Sorry. Could you repeat the That was not the question to you,

Do you understand that Deutsche Bank in its 2579

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prognostication indicated that if SCO does not prevail in the IBM litigation SCO will be worthless? A. Q. report. That's what they said, yes. Now, I'd like to ask you a question about this 10K I'd like to -- excuse me -- the 10Q report. I

believe it's Exhibit Q22. First of all, I want to ask you a quick question about securities and exchange filings. Do you believe that a

party is free to make misrepresentations to the government in a filing such as a Form 10K? A. Q. No. Do you believe that a company has a legal

obligation both to the federal government, securities exchange commission and the investing public to make truthful, honest statements in its filings? A. Q. Form 10K. I would hope so, yeah. So let's look at Exhibit 19, if we might, of the And we'll highlight the language that I believe

Mr. Hatch had you focus on without actually showing it to you. THE COURT: MR. BRENNAN: it's actually Page 39. THE COURT: MR. BRENNAN: THE COURT: 30 what? 39. 39. Thank you. 2580 Page 19, you said? I misspoke, Your Honor. I believe

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.

MR. BRENNAN:

My mistake, Your Honor. So this is the statement. Do you

BY MR. BRENNAN:

consider what's highlighted here to be boilerplate? A. Q. language? A. No. What I'm saying is that I've seen any number The general flavor of it, yes. And you consider boilerplate to be meaningless

of companies provide similar statements when it comes to forecasting the future. Q. filings. So let's look at what SCO did say in its public And you understand that this document is

electronically signed by the officers of SCO; right? A. Q. A. Q. Correct. Including Mr. McBride; right? Correct. It states: We initiated the SCOsource licensing efforts in January of 2003 to review the status of UNIX licensing and sublicensing agreements. effort resulted in the execution of two significant vendor license agreements during the fiscal year 2003 and generated $25,846,000 in revenue. Now, I'd like you to focus on this. Due to the lack of historical experience and 2581 This

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the uncertainties related to SCOsource licensing revenue, we are unable to estimate the amount and timing of future SCOsource licensing revenue, if any. Now, you're aware that this public filing was made after what you -- I think your term was, Novell made slanderous statements; right? A. This was -- what's the date on this document? It

was January? Q. A. Q. A. Q. This is the 10K of 2003; right? That was filed in January of 2004? Right. Yes. So you understood that even, and again your words,

Novell slanderous statements, that even after that here we have a public filing by SCO saying that because of uncertainties SCO would not be able to estimate the amount and timing of the SCOsource licensing revenue; right? A. Q. A. That's what it says there. But you think you can? I think that there were a number of people that did Deutsche Bank did. REG did. Internal

that I relied upon.

SCO did, and Dr. Pisano did via his market analysis. Q. SCO continues, quote: If we do receive revenue through this source, 2582

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it may be sporadic and fluctuate from quarter to quarter. Our SCOsource initiatives are unlikely

to produce a stable or predictable revenue stream for the foreseeable future. Additionally, the

success of this initiative may depend on the strength of our intellectual property rights and contractual claims regarding UNIX including the strength of our claim that unauthorized UNIX source code and derivative works are prevalent in Linux. Do you see that? A. Q. I do. So would you acknowledge at the least that SCO

itself believed that the success of its SCOsource licensing program was a function of whether it would be able to establish that UNIX was infringed by Linux? A. I think I've acknowledged that several times, that

that was one of the market risks that existed at the time the forecasts were produced. That is why nobody, not myself, not

Dr. Pisano, not Deutsche Bank, not REG, not any of the other forecasts that we examined, ever assumed that 100 percent of the people that owned Linux were going to purchase a SCOsource license. Q. And if SCO were not to prevail in establishing that

Linux infringes UNIX, there would be no one that would buy a 2583

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SCOsource license; right? A. happened. examining. Q. Outside of your but-for world, in the real world If we had gotten to that point. But that has never

That is not in the but-for world that I'm

had SCO been able to establish that Linux infringes UNIX? A.