Week 3, Day 11 SCO v. Novell - SCO Rests after Tibbitts, Novell Begins with LaSala

Chris Brown

March 23 2010

Part 1 - Initial matters and Testimony of SCO's Mr. Ryan Tibbitts.

The day started with me dazed and confused about what motions counsel and Judge Stewart were discussing though it was evident there were quite a few. Not knowing the motions made note-taking more difficult. I'm getting some of the context from briefly looking at the motions after the fact.

Make what you will of my notes which read "SCO not to preclude DeFazio, deny motion. Reviewed like other testimony to meaning of APA. Personal involvement to negate APA. Court decided."

Regarding Novell's motion to examine witness regarding prior rulings, the court denied it, stating the probative value is very slight for the time period (2003-2004?), but that the prejudicial value is very high. Judge Stewart said that it might be relevant if it was related to punitive damages. Will allow a witness to testify why statements still remain on Novell's website and may refer to rulings, but may not read them.

On Troy Keller the judge said he has not yet seen a response (reply brief) from SCO. SCO wants to call him but Novell said no deposition has been taken from him yet. Novell stated further that they can do a deposition this afternoon. SCO did not have him on the witness list. Singer indicated they'd noticed Novell on Thursday of the first week of trial. Judge Stewart said he would allow his testimony and that counsel are to depose him today.

On SCO's motion regarding Novell's privilege objections, Novell's Mr. Jacobs states he wants to make clear from the outset... asserting that general privilege to the APA negotiations, but not necessarily to specifics. (something regarding Wilson Sonsini). Novell said regarding Mr. LaSala's internal emails, the emails are redacted. The internal legal advice is redacted on privilege but not to facts. Novell is concerned about SCO's framing of cross examination may lead witnesses to discuss privilege issues. Judge Stewart rules no testimony before jury on any issue of privilege.

Novell's Mr. Brennan regarding prior rulings said that Mr. Tibbitts had communicated with customers after the 2004 ruling. SCO says they will not discuss or mention contact after commencement of the Novell case. This resolved whatever the contention was.

Mr. Singer said he wants to read a statement to the jury regarding the Unix/UnixWare issue. Judge Stewart says if it comes up in the course of examination, he may do so. Judge Stewart stated that he doesn't want Mr. Singer just reading it "out of the blue." He believes it will confuse the jury. Mr. Jacobs brings up the statement "at the time of the APA..."

The jury enters and Judge Stewart addressed them and said he appreciates their paying attention and staying alert.

SCO's Mr. Normand then called Mr. Tibbitts to the stand (live as opposed to my prior report indicating deposition testimony).

Mr. Normand asks where he's employed.

Tibbitts: The SCO Group Inc. since 2003.

Mr. Normand asked of his background and Mr. Tibbitts answers starting with high school in Idaho, then eventually to BYU obtaining a business and law degree. He served 16 years at a large local law firm, the last six years as president. When he left there he went to Lineo, then Center 7 (reporter's note: both are former Canopy-invested companies).

When asked, Mr. Tibbitts replied that he started at SCO only a few days after the "Novell statements." He further testified that since he was still new, the significance of the statements was probably lost on him, but that he observed the reaction of the other employees.

Mr. Normand asked what happened then, and Mr. Tibbitts said that a secretary found Amendment 2. Mr. Normand refers to exhibit (number unknown, but already admitted, and in our prior reports), the Novell press release. Mr. Normand calls attention to the last sentence of the second paragraph where Novell reports that based on Amendment 2, it appears copyrights transferred.

Mr. Tibbitts indicates there was correspondence over the next months. (My note next reads: "Changed mind? No.")

Mr. Normand refers to exhibit 109 dated September 10, 2003, a letter from Mr. Tibbitts to Novell's Mr. LaSala. He directs attention to the middle paragraph reading "we have reviewed..." and asks Mr. Tibbitts if they reflect his views at the time.

Tibbitts: Yes, we reviewed all documents in their entirety, especially Amendment 2.

Q: Did you review the TLA?

Tibbitts: Yes.

Q: Any other documents?

Tibbitts: Yes, the APA, both amendments, the TLA, the joint SCO-Novell press release issued at the time the IP transferred, Novell's letters to customers that went out a couple months later.

When asked, Mr. Tibbitts stated that anyone who knows source code knows the IP is copyrights.

Mr. Normand refers to another exhibit, SuSe document: "SCO, which owns the copyright to Unix..." regarding InfoWorld article.

When asked, Mr. Tibbitts states that IBM (is/was?) a large owner of SuSe.

Mr. Normand asks about the IBM case. It's described as a breach of contract case. IBM announced they would donate all of AIX to Linux if they wanted it.

Mr. Normand refers to SCO exhibit 242 and asks if Mr. Tibbitts recognizes it.

Tibbitts: Yes. It's identified as a letter from Novell's Mr. LaSala to Mr. Tibbitts in October 2003. (already admitted). He directs attention to the last page, two paragraphs, and asks, What did you understand Mr. LaSala to be saying, the object of letter?

Mr. Tibbitts reads "in accordance with section 1.16B..." Judge Stewart interjects, asking Mr. Tibbitts to look at it again. Mr. Tibbitts, on prompting, reads again, "section 4.16B of APA... directs SCO to take action by..."

Mr. Normand asks, Did SCO take action?

Tibbitts: No.

Mr. Normand states the letter has a "cc" line to Ron Lauderdale, VP and assistant general counsel at IBM, and asks Mr. Tibbitts if this concerns you, that he was copied on email?

Tibbitts: Yes. He answers further that when seeing two large companies arrayed together against you, you have to stand up to them.

Mr. Normand refers to SCO exhibit 110 and asks if he recognizes it.

Tibbitts: Yes, it's a letter he sent to Mr. LaSala on October 9th, 2003. Novell indicates the letter is not redacted and Mr. Brennan then reviews a redacted version provided by Mr. Normand and has no objections. The redacted version is then shown. Mr. Normand calls attention to the second paragraph, second to last and last line, and reads "... you claim that any result other than... defies logic." Mr. Normand asks, Why the term "defies logic?" Mr. Tibbitts answers that it was (Novell's) term that (SCO's) claims "defied logic."

Mr. Normand refers to SCO exhibit 691 and Mr. Tibbitts answers that he recognizes it. It's a letter dated October 10, 2003 addressed to him and Mr. Lauderdale from Novell's Mr. LaSala. (I believe he read some from letter) Then Mr. Normand asked, Did you react to IBM being copied?

Tibbitts: Yes, to companies locking arms against us.

Q: Have you ever complied with the letter?

Tibbitts: No.

Mr. Normand refers to SCO exhibit 108 and Mr. Tibbitts says he recognizes it. It's a letter from Mr. LaSala to him with the subject "Sequent Computer Systems." They were another Unix licensee; Sequent was then purchased by IBM, but it had a separate license agreement. They were donating part of their Unix to Linux. (We) terminated their license too, because IBM was doing same with Sequent that they were doing with their own Unix.

Mr. Normand refers to the last paragraph... "Pursuant to section 4.16 of APA, Novell directs SCO to waive..." Mr. Normand asks, Did you comply?

Tibbitts: No.

Mr. Normand shows SCO exhibit 500 and Mr. Tibbitts says he recognizes it as a letter to him from Mr. LaSala, a follow-up letter regarding Sequent, where Novell indicates they are taking action on their own. Reads, "SCO has failed to take action..."

Mr. Normand says, on a different topic, the SCOsource program. He asks if Mr. Tibbitts was involved.

Tibbitts: Yes.

Q: What first direct involvement did you have?

Tibbitts: First part of August 2003. (My notes say they'd "just obtained lice from Computer Associates")

Mr. Normand reports that his prior employment had a dispute with Computer Associates and that while they were settling at the end, a party came in and said they know Mr. Tibbitts is now with SCO and they want a license. A few days later there were negotiations that led to an agreement. It was the first license to go into, what became, the RTU program.

Mr. Normand asks, What did you view the SCOsource license program to target?

Tibbitts: Corporate (users).

Mr. Normand asks, Was SCO collecting evidence of Linux infringement?

Tibbitts: Yes.

Q: What materials had (SCO) been collecting? Mr. Normand starts providing a story of an individual in the company... Mr. Brennan objects, hearsay. Judge Stewart sustains and tells Mr. Tibbitts that, You know what hearsay is, (and to not use it).

Mr. Tibbetts then said that Miguel de Icaza wrote to them sometime in 2003 asking if SCO would donate ELF to Linux... Mr. Brennen objects that it's not an answer to the question (sustained). Mr. Tibbitts states that, We collected a letter from this gentleman.

Mr. Normand asks, Did you create a "code room?"

Tibbitts: Yes. "malloc" code, Unix code donated by Silicon Graphics was directly copied. He states it may be viewed in the code room.

Mr. Normand asks, Did salespeople have access to this for customers?

Tibbitts: No.

Q: Did people outside the company view code?

Tibbitts: Yes.

Q: Were they impressed?

Tibbitts: Yes, it was pretty glaring.

Mr. Normand asks, Were you at SCOforum?

Tibbitts: No.

Q: He asks further, Did SCO present this information in SCOforum? Novell objects, hearsay -- he just said he wasn't at the show. Sustained.

Mr. Normand refers to a slide from SCO exhibit 748 and asks to admit one slide. Judge Stewart says exhibit already in evidence. Novell says only one slide is. Normand, moves to admit this slide. Objection, hearsay. Judge Stewart and Novell review the slide and Mr. Brennan states it's pure hearsay. Judge Stewart sustains the objection, that it's hearsay.

Mr. Normand asks Mr. Tibbitts, Do you recall discussion of SMP?

Tibbitts: Yes, it's one of the infringing technologies.

Mr. Normand shows Novell's exhibit R23, and Mr. Tibbitts indicates he recognizes it. Mr. Normand directs attention to the last line and asks, Is that your signature?

Tibbitts: Yes.

Q: Do you recall sending this to Linux users?

Mr. Tibbitts said, Not just Linux users, but corporations, regarding Linux infringing. Novell objects, hearsay, document not properly executed, (more). Overruled.

Mr. Normand directs Mr. Tibbitts' attention to the bottom part of letter regarding Linux. Mr. Tibbitts reads the part. Mr. Normand refers to a slide from exhibit 575, "What Makes Linux Different" Mr. Tibbits says the slide presentation came in several formats, including by download from IBM. It's by IBM's Dan Frye who, he says, runs their entire Linux division. Mr. Brennan objects, relevance. Mr. Normand counters that it's one of the things we showed people and asks it be admitted. Mr. Brennan objects to source, origin, that it's hearsay. Judge says there's not proper foundation, but that Mr. Normand can avoid hearsay.

Mr. Normand asks, How did you obtain it? Mr. Tibbitts says an employee found it (online). A few days later it disappeared. Mr. Normand directs his attention to the bottom right of the slide and Mr. Tibbitts indicates it is IBM's logo and a (Linux) penguin. In center Mr. Tibbitts reads "Linux Attributes" and to the right "Derived from Unix."

Mr. Normand turns to the next slide from 575, and Mr. Tibbitts says he recognizes it. Mr. Brennan objects (to extent being used for truth). He said the slides are being misused. Overruled. Mr. Tibbitts reads, Unix was a pre-write of Linux." Mr. Brennan makes a motion to strike and Judge Stewart sustains and directs jury to ignore Mr. Tibbitts' previous statement. Mr. Tibbitts says slide is another way of saying Linux is derived from Unix. Mr. Brennan objects, speculation. Sustained.

Mr. Normand asks about the Questar meeting in 2003. Yes, they entered into a SCOsource license.

Do you have a view that the copyrights are required to run your Unix business?

Tibbitts: Yes, absolutely. He states that a critical part of the business is to protect IP.

Mr. Normand asks, Without copyrights what couldn't you do?

Mr. Tibbitts answers, they could not develop the product. Could not protect their crown jewels.

Novell's Mr. Brennan then cross-examines Mr. Tibbitts asking, you joined SCO in 2003?

Tibbitts: Yes.

Q: Were you awarded shares (when you joined)?

Mr. Tibbitts replies he was awarded options.

Mr. Brennan asks how may shares do yo own?

He says he doesn't know.

Q: Estimate?

Tibbitts: A few thousand purchased through the employee plan.

Mr. Brennan asks if combined, the options and shares, they amount to about 420,000?

Tibbitts: Yes.

Mr. Brennan asks if Mr. Tibbitts has a financial interest in (SCO) prevailing?

Tibbitts: Yes.

Q: Were you involved in the APA or amendments?

Tibbitts: No.

Q: Was SCOsource directed at Linux users?

Tibbitts: Corporate Linux users.

Q: And the core basis is that Linux contains Unix code?

Tibbitts: Yes.

Q: And the alleged code in Linux is Unix System V?

Tibbitts: Yes.

Mr. Brennan asks, The premise is Linux infringes Unix System V?

Tibbitts: Yes.

Q: Is it SCO's contention that Linux users infringe UnixWare?

Tibbitts: As I understand it, yes.

Mr. Brennan refers to the "malloc" code. (I missed question formulation and answers, but it referred to the number of lines of code in malloc, how many lines in Linux, 14 million(?) and comparison)

Mr. Brennan, You contend that SCO cannot conduct its business without copyrights?

Tibbitts: Yes, its total business.

Q: Was SCO attempting to sell the Unix business without the copyrights?

Tibbitts: Yes, a part.

Q: SCO was proposing to sell the Unix product business but not the copyrights?

Tibbitts: Yes, and retain the IP business.

Mr. Brennan asks if SCO (in their examination) only showed a portion of the letters with Mr. LaSala?

Tibbitts: Yes, there was quite a barrage of letters.

Q: So, he didn't show the August or later letters?

Tibbitts: I believe that's correct.

Mr. Brennan asks if Novell was directing SCO to act in accordance with APA section 4.16B? (I believe he affirms this, though he could have mentioned 4.16A).

Mr. Brennan shows SCO's exhibit 1, (the APA) and directs attention to 4.16B. Mr. Brennan reads through about two-thirds of the section, reading sentence by sentence, asking Mr. Tibbitts to confirm the APA says what he read. Where it states "buyer" and "seller," he has Mr. Tibbitts confirm they are referring to Santa Cruz and Novell respectively.

Mr. Brennan asks, Novell is giving direction pursuant to this section?

Tibbitts: Yes, that's my understanding. Mr. Tibbitts states that what Novell did is not authorized by this agreement.

Mr. Brennan asks, Are you aware of any court ruling that confirms that Linux infringes Unix?

Tibbitts: No, that case is still alive.

Q: You told customers that in order to determine infringement, they should look to the public information that is available?

Tibbitts: Not necessarily.

Q: One of the things you told customers was to go to the public information and make their own determination?

Tibbitts: Yes.

Q: You believed that reasonable minds would be able to determine who has the better argument?

Mr. Tibbitts answers, In some situations, that's true.

Mr. Brennan asks, There are claims by SCO that Linux is infringing Unix or UnixWare?

Mr. Tibbitts answers that he doesn't have answer to that. The System V versions, but don't have specific answers to (UnixWare). He states he went to meetings with tech people who had that information.

Mr. Brennan asks, Was SCOsource a new business?

Mr. Tibbitts answers that it's a new division in SCO.

SCO's Mr. Normand then questions Mr. Tibbitts on re-direct, Do you recall being questioned on section 4.16B?

Tibbitts: Yes.

Q: When you answered, you referred to section 4.16A?

Tibbitts: Yes.

Q: Why?

Mr. Tibbitts answers, Because you can't get anything out of 4.16B. It's conditional, is SVRX, there are definitions. They show how broad their rights are. (The read some from APA regarding definitions and assets).

Mr. Normand refers to Amendment 2, all paragraph B and subsections, and asks, Did Amendment 2 change Novell's rights?

Tibbitts: Yes.

Q: How so?

Mr. Tibbitts reads, Novell may not interfere with SCO's rights to...

Mr. Normand refers to item 6 of schedule 1.1A at bottom, and asks, How did you believe this relates to what you just said?

Mr. Tibbitts responds, All contracts listed below, well, they're not contracts -- it points to products. A subset of all products that relate to this. Refers to paragraph five at bottom and read, This agreement does not give Novell the right to... Does not give Novell... with respect to SVRx source code..." Mr. Tibbitts states again that this SVRx code is the crown jewels.

Mr. Normand asks, Regarding court orders relating to source code infringement, did SCO present experts... Novell's Mr. Brennan objects. Some brief discussion, and SCO asks for sidebar. Judge then calls a recess and the jury leaves.

Mr. Normand states he's just asking if SCO has presented evidence in that case in support of their claim. Mr. Brennan says, but then they must present evidence to counter. Mr. Normand suggests to Judge Stewart that he (Judge Stewart) doesn't want a mini-trial. Novell says they are OK with Mr. Normand's limited statement, provided he may counter that IBM has also presented evidence against it. Judge Stewart says he will be given an opportunity.

Following the break, Judge Stewart asks what's up next? SCO's Mr. Singer indicates they will be resting their case. Novell says they will be calling Joseph LaSala.

Mr. Singer says he believes he may elicit a "joint defense agreement" between Novell and IBM. Novell objects, saying it's not relevant. Judge allows. Mr. Acker says he'll ask for definition of "joint defense agreement" on redirect. The two sides are satisfied.

Mr. Singer brings up issue of attorney-client communications. It's regarding facts vs. advice. Novell states it's "past recollection recorded." Judge Stewart says they may use documents for witnesses to refresh recollection without admitting into evidence. He says he will see how it plays out on examination.

The jury is brought back in, and SCO's Mr. Normand states, No further questions.

Novell's Mr. Brennan asks, When you were presenting to potential customers, you were referring to pre-APA versions?

Mr. Tibbitts answers, In part, yes.

Mr. Brennan refers to section 1.16 VI Products, subpart 2, "except as provided in 'c' below, any potential transactions which concerns a buyout... by terms below..." and confirms it.

Mr. Brennan has no further questions.

Mr. Singer says they have future witnesses, but he will step down.

End of part 1, Next part is beginning of Novell's case, beginning with Mr. Joseph LaSala.

Part 2 - Testimony of Mr. Joseph LaSala

SCO having stepped down (provisionally, pending additional witness), Novell begins presenting their case.

Novell's Mr. Acker calls Mr. Joseph A. LaSala, Jr. to the stand and asks if he can tell the jury what he does.

He replied that he's the General Counsel for Discovery Communications since January 2008. Mr. Acker asks, That's the parent of the Discovery Channel? Yes. Mr. Acker asks, The home of "Deadliest Catch?" Yes.

Mr. LaSala continues that he was the General Counsel of Novell from 2001 to 2008. When asked, he responds that in 2003 to 2004 he worked with Jack Messman, Chris Stone, (others). And you left Novell in 2008, why?

LaSala: Yes, I was recruited by Discovery.

Mr. Acker asks, In the fall of 2002, did you come to be aware of issues regarding Darl McBride?

LaSala: Yes, communications.

Anything prior to fall 2002? No.

Mr. Acker presents Novell exhibit K11, a (December 3rd, 2002?) email from Mr. Jones to Mr. LaSala and a colleague. It reported on Mr. Jones contact with Mr. Darl McBride's assistant contacting him to gather up information related to agreements in mid-1990s. What was your reaction to initial communications?

LaSala: Well, it was just one thing in a very busy day. He'd said he appreciated (Mr. Jones) telling him and asked him to keep him informed.

Mr. Acker presents Novell exhibit R11 and Mr. LaSala said he recognizes it. He identifies it as an email from Mr. Jones on December 4th, 2002 updating him on Mr. McBride's request: that he wants Novell's assistance getting copies of agreements to support their licensing program related to Linux. Mr. Acker asks what his reaction was. Mr. LaSala says he had a heightened interest and concern. He relates that at this time Novell was interested in Linux. He told Mr. Jones to keep him appraised. He said that he had a raised awareness.

Mr. Acker presents Novell exhibit N12. It is identified as a January 22nd, 2003 press release by SCO announcing their licensing IP. Mr. Acker asks what his reaction was. Mr. LaSala answers that he had a very high concern. Because it fulfills Mr. McBride's promise to introduce campaign. Mr. Acker asks why the concern? He answers that Novell previously announced its interest in getting into Linux. Novell say Linux as something where they could really create value.

In response to questioning, Mr. LaSala says, This could throw roadblocks in way of our own business and affect our relationship with existing customers as well as potential customers.

Mr. Acker presents Novell exhibit W12 identified as a February 20, 2003 (?) email from Mr. Jones to Mr. LaSala regarding Mr. McBride continuing to request documents. Mr. McBride indicated he knows Mr. Messman and that he'll have to take it to him. And what was your reaction? Mr. LaSala answers that he had a heightened concern that Mr. McBride was pursuing this.

Mr. Acker asks, did you review the APA? Yes, in February 2002, and determined that copyrights did not transfer to SCO. Mr. Acker asks what portion of the APA led him to this? He identified section 1.1B excluded assets and copyrights are expressly excluded.

Mr. Acker asks if he's aware of the March 2003 lawsuit SCO filed against IBM? Yes. He reports he learned of it in the press. Mr. Acker asks if there was publicity? Yes, there was significant press interest. Mr. Acker asks, did this concern you? Yes, showed SCO was serious about its campaign against Linux. He says he was concerned about this because of Novell's business prospects.

Mr. Acker asks, Was there communications from IBM? Yes, a few days later from Mr. David Marriott, outside counsel for IBM.

Mr. Acker asks, He called asking if you were aware of the case?

LaSala: Yes. He asked if I was aware Novell had certain rights under the APA that were useful.

Q: Did he make any demands that Novell take any action?

LaSala: No.

Mr. Acker asks, How long was the call?

LaSala: About five minutes.

Mr. Acker asked if he had a telephone conversation with SCO?

LaSala: Yes, in mid-May. Mr. Stone returned a call from to Mr. McBride.

Mr. Acker asks, What was the substance of the conversation?

LaSala: He reiterated his request for agreement to transfer copyright.

Q: And what was your response?

LaSala: I stated that Novell had no interest in supporting SCO's campaign.

Q: Did you see the APA Amendment 2?

LaSala: I saw an un-executed copy of Amendment 2. I concluded it had no legal effect since it was not executed. Mr. LaSala indicates in the course of his legal career he sees lots of agreements drafted that are never executed.

Mr. Acker asks, Did you ask your legal team if there is an executed version?

LaSala: Yes, I asked Mr. Lundberg. I asked him to turn the company upside down. He reported back that they could not find an executed copy in the company files.

Mr. Acker refers to Novell exhibit H14 and Mr. LaSala says he recognizes it. He identifies it as a letter dated May 12th, 2003 from Mr. McBride to Mr. Messman. Mr. LaSala says he later became aware that it was sent to about 1,500 other businesses.

Q: And what was your reaction?

LaSala: "Game on here." That Mr. McBride decided, incorrectly, to pursue rights against Linux. There was a lot of commentary within Novell and on the web, and industry. Mr. LaSala stated that the industry was very concerned.

Q: Did you make a response? Was it public or private?

Mr. LaSala answers that we had to make an announcement in public since SCO's campaign is in full force. Novell hadn't made any public statements previously. We wrote a letter to Mr. McBride and a simultaneous press release. They went out on May 28th.

Mr. Acker asks, Why that day?

Mr. LaSala answers, That's when it was ready.

Mr. Acker asks, Was it because of SCO's earnings statements (that day)?

LaSala: No.

Q: Were you even aware of their announcement?

LaSala: No.

Q: Was this sent to harm SCO?

LaSala: No, this campaign had potential to harm Novell. He said he was concerned with Novell's business.

Mr. Acker presents Novell exhibit J15 and describes it as Novell's response to Mr. McBride and also Novell exhibit K15, the press release that day. SCO said this exhibit was already admitted as a SCO exhibit. Judge Stewart directed Novell to ensure there is only one copy when it goes to the Jury. Mr. Acker refers to the first paragraph of the press release and read it aloud. He asks Mr. LaSala if the statement was true? To defend Novell's interest?

LaSala: Yes.

Q: Was there anything subsequent to change your opinion that to defend Novell?

LaSala: No.

Q: Did you believe your statement that copyrights did not transfer?

LaSala: Yes.

Q: Do you still believe that today?

LaSala: Yes.

Mr. Acker asks about SCO's assertion that Linux infringes Unix, Was your request of SCO to produce evidence of infringement meant to damage SCO?

LaSala: No.

Did anyone at IBM or Novell tell you to put out press release on May 28th, 2003?

LaSala: No, no one at all.

Q: Would you as general counsel believe this was required to protect Novell?

LaSala: Yes, it was required to protect Novell.

Q: Did you subsequently learn of an executed version of Amendment 2?

LaSala: Yes, Mr. Messman told him that Mr. McBride found one and is faxing it. Mr. LaSala said he read it that night.

Q: Mr. Acker asks, Did you subsequently receive a letter from SCO?

LaSala: Yes.

Mr. Acker refers to Novell exhibit Z15 and Mr. LaSala identified it as a fax dated June 6th, 2003 wherein Mr. McBride made numerous demands of Novell.

Mr. Acker reads the letter, "SCO will hold a press conference..." and asks Mr. LaSala what his reaction was?

He answers that Mr. McBride alleges our press release violated securities laws, and we took them quite seriously. I believed the assertion was quite outrageous. We felt quite pressed about it because of the 11 AM press conference. He wrote a letter back to Mr. McBride quite quickly regarding the (alleged) securities violations and another (letter) regarding Amendment 2.

Mr. Acker refers to SCO exhibit 97, a letter dated June 6th, 2003 written by Mr. LaSala, reading "...I've received your letter to Jack Messman... absurd allegations..."

(There was a short discussion of deposition objections. I don't recall what precipitated it.)

Mr. Acker asks, So what were you referring to as absurd allegations?

Mr. LaSala responds, That Novell violated securities laws.

Mr. Ackers says, In the press release Novell states... (reads about Amendment 2 appearing to transfer copyrights).

Q: And later you found an executed copy (of Amendment 2) in file?

LaSala: Yes.

Q: So your efforts to find it failed to locate it before June 6th?

LaSala: Yes.

Q: What was your motivations for putting out the announcement of June 6th?

Mr. LaSala answers that he felt it important to make. He said they'd been getting numerous calls that morning from the press. That Mr. McBride had scheduled a conference call that morning.

Mr. Acker asks, (something like what did you do then)? Mr. LaSala answers, We then set out to understand the APA and Amendment 2. He said they spent (quite) some time on it.

Mr. Acker refers to SCO exhibit 672 and Mr. LaSala says he recognizes it. Mr. Acker asks him to tell us about it. Mr. LaSala says it's a letter from him to Mr. McBride on June 9th, 2003. He said he advised SCO what Novell's rights are under section 4.16. He said he told SCO (that) Novell will be exercising its rights with regard to IBM.

Mr. Acker asks, you had a prior conversation with IBM?

LaSala: Yes, a conference call with IBM's general counsel Mr. Rosenberg, Mr. Marriott, and Michael Jacobs. Mr. Marriott expressed his views of what the APA means. Mr. Jacobs stated we will review the agreement statement by statement and take action as we determine.

Q: Did that result in the June 9th letter?

LaSala: Yes. Novell had obtained significant revenue from the IBM agreement, $10 million for a fully paid up, irrevocable, license. SCO threatened to revoke (IBM's) AIX license by date certain of June 13, 2003. We believed that should SCO revoke, then IBM might come back to us to recoup the $10 million.

Mr. Acker asks, Did you act to harm SCO or to protect Novell? Mr. LaSala answers, only to protect Novell. I could forsee a demand coming in for $10 million plus 10 years of interest.

Mr. Acker refers to exhibit S16, dated June 24th. Mr. LaSala says he wrote the letter to Mr. McBride asking SCO for copies of SVRx licenses that SCO had announced to public it had entered into.

Mr. Acker asks, You referenced Amendment 2? What were you asking for?

LaSala: The Microsoft and an, at that time, unnamed party.

Q: Why did you make this simple request?

LaSala: Because their securities filing said that they had done so. We believed we had an economic interest in them.

Mr. Acker asks why?

LaSala: Because we had rights to royalties. SCO was required to obtain our agreement before entering into any agreements. Mr. LaSala states to the effect that although they didn't ask then, Novell would still be entitled to royalty stream.

Mr. Singer asks for sidebar, after wards Mr. Acker refers Mr. LaSala to Novell's exhibit T16, SCO's exhibit 678. Mr. LaSala says he recognizes it as a letter dated June 26, 2003. Mr. Acker states, You wrote to Mr. McBride regarding SCO stating that SCO owns "patents, copyrights, ..." You state that their statements were wrong.

Mr. LaSala responds that it became a practice of theirs to rebut every misstatement of SCO. He reports it was quite a chore as he was making a lot of statements. Mr. LaSala states, Let me be clear, we were making these statements privately. We were making it clear that we believed their statements were wrong.

Mr Acker asks, Were you making these statements to harm SCO?

LaSala: No, we were looking out for Novell's business interest.

Mr. Acker refers to Novell's exhibit D18, SCO's exhibit 103. It is identified as a letter to SCO on August 4th, 2003 regarding SCO's registration of copyrights (to Unix). Mr. Acker asks, You became aware of (SCO's registration) in August 2003?

LaSala: Yes.

Mr. Acker reads from the letter the 1.1B exclusions and Amendment 2 saying "except as required..."

LaSala: Copyrights not transferred because Santa Cruz has not demonstrated requirement for rights..."Unless and until SCO is able to establish ... ownership remains with Novell."

Mr. Acker asks, This was your understanding in 2003?

LaSala: Yes.

Q: And (still) today?

LaSala: Yes.

Q: Did you express this belief to SCO?

LaSala: Yes, we did.

Mr. Acker asks, In this letter?

LaSala: Yes.

Q:Was it public or private?

LaSala: It was private, in this letter. Mr. LaSala continues, We believed we needed to make our position clear and believed we did so throughout the summer.

Q: And Novell registered the copyrights?

LaSala: Yes.

Mr. Acker asks, Was it an attempt to harm SCO?

LaSala: No, It was done in furtherance of protecting Novell's business interests.

Mr. Acker refers to SCO exhibit 243, Novell's exhibit F21. Mr. Acker indicates there is no date on the first page, but that the second page reads October 7th, 2003. It is a letter to Mr. Tibbitts. Mr. Acker asks, Why, Why is it in Novell's interest?

Mr. LaSala answers, Because if SCO could make claims for third party code then it would allow SCO to disrupt our interests.

Mr. Ackers asks if the letter was written to hurt SCO?

LaSala: No, only to protect Novell's business interests.

Judge Stewart called a break. After the jury left, the judge asks Mr. Acker how much longer he has and he responds about 30 more minutes.

Judge Stewart asks about jury instructions. It seemed he's given the court's proposed instructions back to counsel. He said he wants any responses by Wednesday afternoon. Then he will determine if there is a need for a jury instruction conference.

Judge Stewart asked how long for finding of facts and conclusions of law? Mr. Jacobs replies, two weeks after jury verdict. SCO says 20 days. Judge Stewart directs they be 20 days and that they will exchange simultaneously.

After break and jury returns, Mr. Acker refers to Novell's exhibit G21 which Mr. LaSala says he recognizes. Mr. Acker indicates it's a letter from Mr. LaSala to SCO dated December(?), 2003.

Mr. Acker asks, Tell us what you were doing?

LaSala responds that the letter concerns SCO's threat to terminate SGI's rights due to alleged breaches by SGI.

Q: Is there any relation to IBM?

LaSala: None. Novell was contacted by SGI general counsel asking if we would take a look at SCO's claims and see if there is anything Novell can make of them.

Mr. Acker, Why? Mr. LaSala answers that it was in Novell's business interest. If SCO were allowed to terminate, it would affect Novell's business, their Linux business. He goes on to say that, in August 2003 we had acquired Ximian and were in discussions to purchase the number two distribution, SuSe Linux. He said that Novell had completed the acquisition in November. Mr. Messman was looking for market affirmation of the acquisition. Jack Messman asked IBM for investment in Novell, that as a major technology company, it would show affirmation.

Mr. Acker asks, Was there any relation to SCO?

LaSala: No.

Mr. Acker produces SCO exhibit 523, a press release dated December 22, 2003 announcing publication (on website). It goes on to report that, Novell believes it owns the copyrights to Unix. He asks Mr. LaSala if this is correct in 2003?

LaSala: Yes.

He asks if it is till correct today?

LaSala: Yes.

Mr. Acker further asks, Novell filed the copyright registration?

LaSala: Yes.

Q: Published the agreements and provided the link?

LaSala: Yes.

Q: And published Mr. Tibbitts' reply?

LaSala: Yes.

Mr. Acker then asked why he'd done that?

Mr. LaSala replies that SCO was making statements in public. He believed it was important for public to see both sides. ALso that they were making responses all the time. That's why we did this.

SCO's Mr. Singer cross examines Mr. LaSala and asks, You testified earlier that Novell waived SCO's rights, not IBM's?

LaSala: That's correct.

Mr. Singer asks, You were asked in your deposition if IBM asked you to waive those rights? Mr. LaSala responds that he would have to refresh his memory.

Mr. Singer plays an excerpt of his video deposition where Mr. LaSala is asked, Did IBM ask you to take these steps?

Mr. LaSala responds in the deposition, No.

In more video testimony, Mr. LaSala is asked, Did IBM ever ask you to take the steps? (I believe he responded, No).

Mr. Singer then asks, You were asked... Mr. Acker objects that it wasn't the same question. Judge Stewart replies that the jury can make up their own mind on the question asked.

Mr. Singer asked further. Mr. LaSala answers that IBM asked Novell to waive *all* claims they might make. He says this was a broader request than what Novell did.

Q: Did IBM ask Novell to block termination of AIX? Mr. Acker asks for a sidebar.

After the sidebar, Mr. Singer asks to play a clip from Mr. LaSala's May deposition in which Mr. LaSala is asked, "You state that IBM's Mr. Marriott asks that Novell exercise it's rights under 4.16" (If there was a response, I missed it). Mr. Singer refers to SCO exhibit 530, a document he states Mr. LaSala created in relation to the deposition. He says there was a conference call with Mr. Jacobs, IBM's Mr. Marriott (possibly others). Lawyer (Mr. Marriott?) asked Novell to "waive SCO's rights regarding IBM."

Mr. Singer asks, You wrote a letter June 9th directing SCO to not terminate (IBM's license)? Yes, but their request was broader, to waive *all* claims. Mr. Acker asks that Mr. LaSala to answer directly. Judge Stewart directs Mr. LaSala to only answer as directly as possible, that Mr. Acker will expand if requested.

Mr. Singer asks, You then directed SCO to waive all claims?

LaSala: No, I don't believe all.

Q: You understand SCO is pursuing a lawsuit against IBM?

LaSala: Yes.

Mr. Singer asks, You were attempting to short-circuit the court process? Mr. LaSala answers, No, not short-circuit. There was $10 million at stake.

Mr. Singer says, Lets talk about that $10 million. Mr. Singer then asks to the effect, Has IBM ever requested the $10 million? Mr. LaSala said no. Mr. Singer then asks if IBM paid $50 million to Novell. Mr. LaSala said that IBM invested $50 million in Novell.

Mr. Singer asks, You are aware that SGI admitted they were wrong and (that they) contributed code to Linux and then took it out?

LaSala: Yes.

Mr. Singer turns to Sequent. He refers to Novell exhibit O8, SCO's exhibit 165. He identifies it as the IBM-Santa Cruz Amendment X and asks, Novell was party to agreement regarding dispute in 1997?

Mr. LaSala answers, That's true.

Mr. Singer reads, "there were no additional royalties upon payment to SCO by IBM. IBM will have... Notwithstanding the above... not to limit SCO's rights(?)..." He asks, Do you see that? Mr. LaSala says he does.

Mr. Singer asks, Were you aware of this when you sought to have SCO waive SCO's contract rights with IBM?

LaSala: Yes.

Mr. Singer refers to SCO exhibit 651, a draft document from SCO to Novell. Mr. Singer asks if he recognizes it and Mr. LaSala answers that he does not believe he has seen it before. He further states, My recollection is (that) I have not seen it.

Mr. Singer asks, Anytime between conversations regarding hearing of SCOsource and May 28th, 2003, you did not tell SCO they could not proceed with SCOsource?

Mr. LaSala answers, Correct (or words to that effect).

Mr. Singer asks, You joined Novell in 2001, so you were not involved in the agreements?

LaSala: Correct.

Q: You were aware of the un-executed Amendment 2 before you put out (the press release)?

LaSala: Yes.

Mr. Singer asks, And you turned Novell upside down and couldn't find it?

Mr. LaSala says he directed Mr. Lundberg to do so.

Mr. Singer asks, And you didn't ask Wilson Sonsini? Mr. LaSala states that he didn't.

And Amendment 2 was found in executive files? Mr. LaSala answers that it was not his understanding.

Mr. Singer asks where?

LaSala: In the Tax department.

Mr. Singer asks further, It was not in offsite (storage)?

He answers, I don't know.

Mr. Singer asks, You didn't wait to find it?

LaSala: No.

Q: The unsigned copy would replace the language of the APA?

Mr. LaSala answers it would replace or add to (it).

Q:Do you believe SCO required copyrights for the Unix business?

LaSala: No.

Mr. Singer asks that deposition clip 3 be played where Mr. LaSala is asked, Does SCO need copyrights...? In the deposition, Mr. LaSala answers, I don't know.

Mr. Singer asks, Do you believe the TLA and APA could be interpreted as inconsistent?

He answers, That's correct.

Mr. Singer asks that another video clip be played. To me it sounded like the question and Mr. LaSala's answer were the same.

Mr. Singer refers to the June 6th press release, a "public statement" that "Amendment 2 appears to transfer..." Mr. Singer says, Later you say it "raises as many questions as it answers."

Mr. Singer plays video clip 4 where Mr. LaSala is asked, "What did you mean about 'raises as many questions as it answers?'" Mr. LaSala answers at the deposition that in context of statements Mr. McBride made, that it was intended to point out that it was not as clear as he was suggesting." The clip then asks, Anything specific in mind? Mr. LaSala answers, No.

Mr. Acker objects and asks for sidebar. On return Mr. Acker states that there was additional testimony. Mr. Acker asks, go to Page 54 (starts on bottom of 53).

The video clip plays from before the first question above, then after the question, Mr. LaSala is asked in the depo, What questions did you have in mind? He answers, I don't recall, I'm sure I had questions, but cannot remember. The next question, Anything specific in mine? No.

Mr. Singer asks, Does SCO require license to use Unix?

LaSala: Yes.

Q: Does SCO require license to continue to develop?

LaSala: Yes.

He asks further, There's no statement in the APA giving a license?

LaSala: That's correct, it's an implied license.

Mr. Singer asks, Can SCO bring suit to protect their business?

LaSala: Yes, to protect its business.

Mr. Singer inquires, For an exclusive license it must be in writing?

LaSala: Yes.

Mr. Singer asks, In September/October you directed Novell to register copyrights to Unix?

LaSala: Yes.

Q: Did you go public (with that)?

Mr. LaSala responds that copyright registration is public.

Mr. Singer asks, No press release?

LaSala: No.

He inquires further, So not in October, November? Went public on December 22nd?

LaSala: Yes.

He asks, You didn't know December 22nd was the day of SCO's earnings statement?

LaSala: Correct.

Mr. Singer asks, So it was a coincidence, Both May 28th and December 22nd earnings statements?

LaSala: Yes.

Mr. Acker then questions Mr. LaSala on re-direct asking, When did you first learn SCO had an earnings release on December 22nd?

Mr. LaSala answers, "Yesterday."

Mr. Acker asks, You recall statements where Mr. McBride was appearing to make statements on behalf of Novell?

Mr. LaSala answers, Yes, in an interview saying "If you ask Novell, they would say...".

Mr. Acker asks if he felt it was important we tell the public about your position?

LaSala: Yes.

Mr. Acker hands Mr. LaSala a document that lists all conversations between SCO and Novell. Mr. Acker asks if this document was produced to SCO in discovery. Mr. LaSala says, Yes. Mr. Acker asks, They've had it for several years? Yes.

Mr. Acker refers to Novell exhibit L19, a document dated August 2003 from Mr. LaSala to Mr. McBride, regarding the Technology License Agreement, and asks Mr. LaSala to explain the TLA to Jury. He does so. The document is requesting source and binary code due to Novell under the APA. Makes reference to (something) including Unix and Unixware.

Mr. LaSala was asked if, in August 2003, he was asking for source code, not copyrights. (confirmed).

Mr. Singer then re-cross examines Mr. LaSala, referring to Novell exhibit L19, 2nd paragraph, and reads "It follows from the foregoing to copies... under SCO's control" Mr. Singer asks if they were under SCO's control because they owned it?

Mr. LaSala answers, No.

Mr. Singer turns to third page and reads regarding ownership, "The ownership shall reside with SCO."

Mr. Singer asks regarding the consistency of Mr. LaSala's statements regarding contacts with IBM. He refers to SCO exhibit 530. (Some discussion of whether it's in evidence or not; it's admitted, something about February 2007). May 2007, deposition, where he stated "IBM had not requested ..." Mr. Singer asks if that was from the February 2007 testimony? Correct. Mr. Singer asks, And at the time of your testimony, you did not have 530 before you? Mr. LaSala answers, correct.

Mr. Singer says he has nothing further. Mr. Acker asks for one additional question, "just one." Judge Stewart says that each side gets a third serving only once in trial. He asks Mr. Acker if he wishes to use it now. Mr. Acker says, No, and sits down.

Judge Stewart holds the court in recess until 8:30am the next day. After the jury departs, counsel for both sides say they have nothing for him.

End of day's report.

12:44 AM EDT

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