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                             STATE OF MICHIGAN

            6TH JUDICIAL CIRCUIT COURT FOR THE COUNTY OF OAKLAND



     THE SCO GROUP,  

                    Plaintiff,

                                         File No. 2004-056587-CK
     v

     DAIMLER-CHRYSLER CORPORATION,

                    Defendant.

     ______________________________/




                               MOTION HEARING

          BEFORE THE HONORABLE RAE LEE CHABOT, CIRCUIT COURT JUDGE

                Pontiac, Michigan - Wednesday, July 21, 2004


     APPEARANCES:

     For the Plaintiff:       BARRY ROSENBAUM (P26487)
                              2000 Town Center, Suite 1500
                              Southfield, MI 48075
                              (248) 353-7620

     For the Defendant:       JAMES FEENEY (P13335)
                              35980 Woodward Avenue, F12
                              Bloomfield Hills, MI 48304
                              (248) 594-0301


     TRANSCRIBED BY:     Theresa's Transcription Service
                         Sheila Burger, CER 6651
                         P.O. Box 21067
                         Lansing, Michigan 48909-1067



         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               1



                             TABLE OF CONTENTS

     WITNESSES:   PLAINTIFF

     None






     WITNESSES:   DEFENDANT

     None





     OTHER MATERIAL IN TRANSCRIPT:

     None






     EXHIBITS:                          INTRODUCED   ADMITTED

     None




















         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               2



 1                  Pontiac, Michigan

 2                  Wednesday, July 21, 2004 - 09:46:25 a.m.

 3                  UNIDENTIFIED SPEAKER: Now calling 2004-056587-CK,

 4        SCO versus Daimler-Chrysler.

 5                  THE COURT: Good morning.

 6                  MR. ROSENBAUM: Good morning, your Honor, Barry

 7        Rosenbaum appearing on behalf of the Plaintiff, the SCO

 8        Group, Inc.

 9                  MR. FEENEY: James Feeney appearing on behalf of

10        Daimler-Chrysler, your Honor.

11                  MR. ROSENBAUM: And, your Honor, we have some

12        counsel from out of State that would like to be admitted for

13        purposes of this matter.

14                  THE COURT: Okay.

15                  MR. ROSENBAUM: Motions have been filed on behalf

16        of the P1aintiff, we have Mr. Mark Hice (ph) from Miami, a

17        member of the --

18                  MR. HICE: Your Honor?

19                  MR. ROSENBAUM: -- Bar of the State of Florida.

20        Mr. Steven Fruit (ph) from a member of the State Bar of New

21        York.

22                  THE COURT: Hi.

23                  MR. ROSENBAUM: The motion contains the required

24        allegations and I'd ask that the Court admit them to

25                  Tape No. 04-108A, 07-21-04, 09:47:08


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               3



 1        practice in this jurisdiction,

 2               THE COURT: And you are sponsoring them?

 3               MR. ROSENBAUM: I am sponsoring them, your Honor.

 4               THE COURT: Okay.  Any opposition?

 5               MR. FEENEY: No, your Honor.  We have--I am

 6        sponsoring Mr. Mark Matuchiak (ph) from--who is a member of

 7        the Massachusetts Bar and I would ask that he be admitted,

 8        your Honor.

 9               THE COURT: Okay.  Motion granted as to all three

10        counsel.

11               MR. FEENEY: Thank you.  Your Honor, this is

12        Daimler-Chrysler's motion for summary disposition and I know

13        the Court has read the papers.  It's a little--for me, it's

14        --probably not for the Court, but for me, it's a little bit

15        technical dealing with software and computers.  I didn't

16        grow up in the age of computers so if I could just take 30

17        seconds to frame the issue for you, because really, at the

18        end of the day, your Honor, this is a very simple, straight

19        forward breach of contract case.

20               The issue, your Honor, before the Court today is

21        whether this section, 2.05 of the software license

22        agreement, requires a certification of compliance with the

23        agreement in the detailed enumeration that is set forth in

24        the letter requesting compliance, or, does that section

25               Tape No. 04-108A, 07-21-04, 09:48:31


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               4



 1        require, as it plainly states, that the party to whom the

 2        certification is--from whom the certification is sought

 3        merely state that the licensee has, in all respects,

 4        complied with the agreement.  That's really the long and the

 5        short of it, your Honor.

 6               And the license agreement itself, which is

 7        attached as Exhibit A to the Plaintiff's complaint, in

 8        section 2.05 plainly states as follows.  "On AT & T-IS's

 9        request"--and for purposes of this motion it is not disputed

10        that SCO is a successor and interest to AT & T, but "no more

11        frequently than annually.  Licensee, that's now Daimler-

12        Chrysler, at the time that this agreement was entered into,

13        your Honor, it was Chrysler Motor Corporation, shall furnish

14        to AT & T/IS a statement certified by an authorized

15        representative of licensee listing the location, type and

16        serial number of all designated CPU's hereunder and stating

17        that the use by licensee of software products subject to

18        this agreement has been reviewed and that each such software

19        product is being used solely on designated CPU's, or

20        temporarily on backup CPU's, or such software products, in

21        full compliance with the provisions of this agreement."

22               Now, the letter that was sent to Chrysler--to the

23        chief executive officer of Chrysler Motors Corporation in

24        Highland park on December 18th, 2003, which is attached as

25               Tape No. 04-108A, 07-21-04, 09:50:20


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               5



 1        Exhibit B to the complaint, on the second page of the letter

 2        accurately set forth the literal language of paragraph 2.05

 3        but then proceeded to enumerate a demand, which the letter

 4        claimed was required by that paragraph, requiring

 5        certifications setting forth paragraphs 1 through 7 in some

 6        detail of what it was required to do, including a bunch of

 7        certifications pertaining to the use or non-use of an

 8        operating software system called Lennox (ph).

 9               Now, that was what was sent to Daimler-Chrysler.

10        Daimler-Chrysler did not respond to that request until after

11        the lawsuit was filed.  But the lawsuit itself was filed

12        basically claiming that Daimler-Chrysler had breached the

13        software license agreement because it had not provided the

14        certification that was demanded.  So clearly, the Court can

15        see that a fundamental issue is, well was what was demanded

16        was what was set forth in section 2.05?  I mean, that's

17        really the ultimate issue.

18               Daimler-Chrysler, before responding to the

19        complaint, and the Plaintiffs were gracious enough to give

20        us an additional time to respond, before responding to the

21        complaint and filing this motion, in part, your Honor, to

22        clarify and frame the issue properly, Daimler-Chrysler

23        responded to the letter on April 6th and that response is

24        set forth as Exhibit A to Exhibit 1, which is an affidavit

25               Tape No. 04-108A, 07-21-04, 09:52:04


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               6



 1        signed by Paul Eichbauer (ph) attached to our motion.

 2               In the response, your Honor, there are some

 3        reservations that are provided, but most importantly, the

 4        response specifically says in the third paragraph--second

 5        full paragraph, "As a result and without waiving, any of its

 6        rights under the SA," software agreement, "or under

 7        applicable law, including without limitation its right to

 8        assert that SCO has no rights under the SCA--under the SA,

 9        that SCO has no right to seek the certified statement that

10        its letter requests, that licensor has waived intentionally

11        any right to seek a certified statement," etcetera,

12        "Daimler-Chrysler provides the attached information to SCO."

13        And the attachment simply states that on April 6th, 2004

14        that--signed by Norman Powell, who's a senior manager, tech

15        services for Daimler-Chrysler, he certifies that as of the

16        date indicated there is no designated CPU or any CPU on

17        which the software product, as defined by the agreement, is

18        being used.  And that this has been the case for more than

19        seven years.

20               And he further certifies that the use of the

21        software product licensed under the agreement has been

22        reviewed, which is the exact language of section 2.05 and he

23        further states that it is--that none of the software product

24        is being used or has been used for more than seven years,

25               Tape No. 04-108A, 07-21-04, 09:53:39


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               7



 1        and as a result, Daimler-Chrysler is in full compliance with

 2        the provisions of the subject agreement.  Section 2.05

 3        requires a statement that the licensee is in full

 4        compliance.

 5               So, where does that leave us?  I think it leaves

 6        us in this place.  If the Court agrees that section 2.05 is

 7        unambiguous, then this is certainly an appropriate matter

 8        for summary disposition.  SCO, in their response to the

 9        motion, acknowledges that section 2.05 is unambiguous.  This

10        is a question of what section 2.05 requires.  If it requires

11        --if it requires the enumerations of all these paragraphs

12        that were set forth in their letter, then obviously our

13        letter that we submitted does not satisfy or meet those

14        requirements.  But if, as we say, your Honor, what section

15        2.05 requires is exactly what it says, which is a statement

16        that we are in compliance, we have complied.  And the issues

17        that have been raised in response are really immaterial and

18        have nothing to do with this.

19               Quibbling about whether we responded within 30

20        days when there's no provision for the time period, or 105

21        days really doesn't matter.  We haven't used the software

22        for more than seven years.  That's really immaterial to the

23        issue of the question of breach, and they don't even allege

24        any harm resulting from a delay of, under their theory, 60

25               Tape No. 04-108A, 07-21-04, 09:55:09


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               8



 1        days.

 2               And second, your Honor, the issue of the failing

 3        to list CPU's.  Number one, they didn't even ask for a list

 4        of CPU's in their letter, and number two, listing CPU's that

 5        aren't using software when we've certified that we're not

 6        using it and haven't used it for seven years, is certainly

 7        immaterial as well.  Therefore, your Honor, we would ask the

 8        Court to find that there is no genuine issue of material

 9        fact and grant the motion.

10               THE COURT: Thank you.

11               MR. HICE: Morning, your Honor.  Your office

12        indicated that you've thoroughly read everything and for us

13        to keep it brief.  I'm not gonna be as brief as your first

14        hearing--or first motion--

15               THE COURT: Right.

16               MR. HICE: --but I will keep it brief and limit my

17        response.  However, before getting into that I think it's

18        important as counsel for Daimler stated, that there be a

19        fundamental understanding of this license agreement and why,

20        in fact, to simply assert, we're not using it and as a

21        result we're in full compliance, is inadequate and not

22        allowed for under the agreement.

23               Under the software agreement that was entered into

24        in the 1980's between AT & T and Chrysler at the time, they

25               Tape No. 04-108A, 07-21-04, 09:56:22


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060               9



 1        got much more than what is being ascribed--or described to

 2        you today in the Court.  What they got under this software

 3        agreement is, they got full access to source code.  They

 4        also got the right to use that source code, to modify it, to

 5        create derivative works and they agreed that they would keep

 6        the source code confidential, they would keep the derivative

 7        works and the modifications confidential if they contained

 8        any of the original source code, they also agreed to keep

 9        the methods and concepts confidential and there were all

10        sorts of requirements to protect the integrity of this

11        software.

12               And so unlike the situation where your Honor may

13        be familiar, for example, at a personal level where you get

14        Microsoft and you load that on your computer, they give you

15        a CD and they say here, load it on and you're good to go.

16        What companies like Chrysler in the corporate enterprise

17        world get is, they get that CD but they also get everything

18        that underlies it.  Microsoft will not ever give you or

19        anyone else their source code, it's the crown jewels.

20        That's the same case here with the UNIX source code and the

21        enterprise or corporate computing market.  But the

22        difference is, they got that source code and they were

23        required to treat that confidentially.  And it's much more

24        than just, we had the CD on a computer, we stuck it in a

25               Tape No. 04-108A, 07-21-04, 09:58:42


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              10



 1        closet seven years ago and haven't looked at it since then

 2        so we therefore must be in full compliance.  They are

 3        obligated to treat all of that product, the source code,

 4        their modifications to it, their derivative works, the

 5        methods and concepts and keep the related documentation that

 6        goes with all of that confidential.

 7               They are required to instruct their employees that

 8        they must keep all of this confidential.  And what they have

 9        done, in their certification, which they've acknowledged, as

10        they must, that they did not ever provide one, and they're

11        required to do so by the agreement.  And I don't think

12        there's any case that supports that as a matter of law

13        waiting almost four months and beyond 30 days after suit was

14        filed it is sufficient.  So on that grounds, certainly

15        summary disposition is incorrect.

16               But on the more fundamental issue of, is the

17        certification that they did provide adequate, because where

18        they say we are not using it, have they complied--does that

19        comply with the terms of section 2.05.  And clearly it does

20        not.  The 2.05 says that it must be solely on such

21        designated CPU's and in full compliance with the provisions

22        of this agreement.  There has to be a statement that they're

23        in full compliance with the provisions of this statement.

24        And the question for the Court is, can they unilaterally

25               Tape No. 04-108A, 07-21-04, 09:59:59


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              11



 1        limit what they're providing the certification to.  Can they

 2        say, we're not using it, so therefore, we must be in full

 3        compliance?  They're obligated to identify where this code

 4        appears on any CPU, whether it's the designated CPU or any

 5        others.  They state that they're not using it.  If it's

 6        stored on a CPU, we're entitled to know where that is

 7        because if they don't know where it is, how can they certify

 8        that they are keeping it confidential and secure so that

 9        it's not being made publicly available.

10               So it's a fundamental and incorrect limitation on

11        the requirement of the certification.  They have to be able

12        to provide a full and complete certification.

13               The items that are enumerated in items 1 through 7

14        of the letter correspond directly to limitations that they

15        agreed to in the agreement, to keep it confidential, to

16        inform their employees to keep it confidential, to make sure

17        that the source code stays in the United States, that it

18        does not get exported outside the United States, so, for

19        example, in this case, that it's not appearing in Germany

20        now that Daimler is part of this company.

21               And they have wholly failed to provide that type

22        of certification that makes clear that they are, in fact,

23        complying with all of the requirements, to keep the source

24        code, the modifications to that source code, to keep it to

25               Tape No. 04-108A, 07-21-04, 10:00:18


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              12



 1        the--keeping all that confidential.

 2               If we were to accept the proposition that we're

 3        not using it and they don't want to have to go through the

 4        burden of providing the certification, the agreement

 5        specifically addresses how that operates.  Under section

 6        6.02 of the agreement it specifically states what--if you

 7        are not going to use it and you want to terminate under the

 8        license, you have to return all the source code and related

 9        documentation or certify that you've destroyed it.  They've

10        not done that.

11               So either they have to provide the full

12        certification indicating that the source code, the methods

13        and concepts, the modifications, all of that has been kept

14        confidential, it's not being used on any other CPU's in any

15        manner whatsoever, or, they can take advantage of 6.02 of

16        the agreement and terminate and specifically identify that

17        they have destroyed all of the source codes so that we, at

18        AT & T, now SCO, know that our source code is not in a

19        position to be made publicly available by Daimler, and that

20        they have, in fact, throughout the years, instructed their

21        employees to maintain the confidential nature of this source

22        code, the derivative works, the modifications.  Because it

23        quite simply is not the situation where one can say, we

24        haven't used that computer over there in seven years so as a

25               Tape No. 04-108A, 07-21-04, 10:01.42


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              13



 1        result, we must be in compliance.  That is not what section

 2        2.05 says.  It does not give you a, we're not using it

 3        exception so it automatically translates into, we are in

 4        full compliance.

 5               They are only in full compliance if, in fact, they

 6        have maintained it in confidence, if they have not exported

 7        it outside of the United States, that they have informed

 8        their employees that they must keep it confidential, that

 9        they're not using it in whole or in part in any other place,

10        which is much more than just that one CD.  They can't take

11        the source code, the written documentation, and use it now

12        in this new operating system that they've publicly stated

13        that they're using, Lennox, and assist in that.  If they do

14        that, they must tell us about it.  It's as simple as that.

15        They've absolutely--they initially absolutely refused to do

16        it, then they decided to prepare this letter that equates

17        non-use with full compliance, which is clearly inadequate

18        under the terms of this agreement.

19               So under the undisputed facts before your Honor,

20        they have not provided any notification in the required time

21        limit, they have not identified the CPU's where it's either

22        being stored or where any of the other documentation is

23        located within Chrysler, and they have failed to certify

24        full compliance.  They've merely said we're not using it,

25               Tape No. 04-108A, 07-21-04, 10:02.54


         Theresa's Transcription Service, P.O. Box 21067
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 1        and as a result, we're in full compliance.  And that is

 2        clearly not a statement of being in full compliance.  Thank

 3        you, your Honor.

 4               THE COURT: Okay, I understand.  Anything else?

 5               MR. FEENEY: Very briefly, your Honor.  Your Honor,

 6        this is a fishing expedition.  There is no basis for any

 7        claim of any breach of the confidentiality provision.  They

 8        don't even make that claim in the complaint.  There's no

 9        basis to claim that Daimler-Chrysler has disclosed any of

10        this material improperly.  That's not what this lawsuit--the

11        lawsuit, as filed, was a lawsuit claiming a breach of

12        section 2.05.  And it doesn't require certification as to

13        confidentiality, it doesn't require certifications as to

14        anything else.  If they think they've got a breach of duty

15        or some sort of a lawsuit that they want to bring against

16        Daimler-Chrysler, that's their choice to make.  But to bring

17        a lawsuit asserting a breach of section 2.05, given what

18        they asked for, is not the right way to go about it, your

19        Honor, and we'd ask that the motion be granted.

20               THE COURT: Okay.  This is Defendant, Daimler-

21        Chrysler's motion for summary disposition pursuant to MCR

22        2.116(c)(10).  Apparently the agreement and the parties

23        indicate that Michigan procedural law applies to this case

24        but New York substantive law applies to the dispute at

25               Tape No. O4-108A, 07-21-04, 10:04.25


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              15



 1        issue.  Thus, Michigan Court Rules govern the application of

 2        New York law.

 3               In this case, the Court is going to grant the

 4        motion for summary disposition pursuant to (c)(10) as to all

 5        claims except for alleged breach of contract for failing to

 6        respond to the request for certification in a timely manner.

 7        The agreement is silent as to the time period Defendant is

 8        allotted to respond to the request for certification and

 9        thus, the law implies a reasonable time period.  The issue

10        of what is reasonable must be decided by a finder of fact,

11        thus making summary disposition inappropriate pursuant to

12        (c)(10) as to the timeliness issue.  However, the contract

13        very clearly does not require certification of the various

14        clauses contained in the agreement as 2.05 relates to the

15        current use of the software by its unambiguous terms.

16               Thus, Defendant is not required to certify, for

17        example, that it has not exported the software to a

18        prohibited country.  Specifically, Defendant is not required

19        by 2.05 to certify compliance with 2.06, 4.01, 7.05, 7.08,

20        7.09.  I assume you mean two point zero six, four point zero

21        one, seven point zero five, seven point zero eight, seven

22        point zero nine, as requested by Plaintiff's correspondence.

23               Therefore, any claim for failing to certify

24        compliance with those sections of the agreement are properly

25               Tape No. 04-108A, 07-21-04, 10:05.55


         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              16



 1        dismissed pursuant to (c)(10) as defendant has no

 2        contractual obligation to make such certifications.

 3               As to the claim seeking a declaratory judgment,

 4        this is also dismissed pursuant to (c)(10) as there is not a

 5        controversy at issue requiring any such declaratory

 6        judgment, nor has Plaintiff addressed this requested relief

 7        in its response to the motion for summary disposition.

 8               Regarding Defendant's motion to strike certain

 9        paragraphs of the affidavit, this motion is denied.  The

10        Court has reviewed the affidavit and given the statements

11        contained therein, the appropriate weight.

12               MR. FEENEY: Thank you, your Honor.

13               THE COURT: Thank you.

14               MR. ROSENBAUM: Thank you.

15               MR. HICE: Thank you, your Honor.

16               (At 10:06:38 a.m., hearing concluded)

17


















         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              17



                               CERTIFICATION


          This is to certify that the attached videotaped proceeding,

     consisting of eighteen (18) pages, before the 6th Judicial

     Circuit Court, Oakland County in the matter of:



       THE SCO GROUP

       v

       DAIMLER-CHRYSLER CORPORATION



       Location: Circuit Court

       Date: Wednesday, July 21, 2004



    was held as herein appeared and that this is testimony from the

    original transcript of the videotape thereof, to the best of my

    ability, for the file of the Bureau.

         I further state that I assume no responsibility for any

    events that occurred during the above proceedings or any

    inaudible responses by any party or parties that are not

    discernible on the video of the proceedings.



                             _____________________________

                             Sheila Burger, CER 6651
                             Certified Electronic Recorder

    Dated: July 28, 2004




         Theresa's Transcription Service, P.O. Box 21067
            Lansing, Michigan 48909-1067, 517-882-0060              18



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