Novell and Microsoft enter into late night spitting match over $40M "IP payoff"

Novell and Microsoft enter into late night spitting match over $40M "IP payoff"

Summary: It's getting ugly. Something has apparently gone terribly awry in the recent legal pact between Microsoft and Novell.


It's getting ugly. 

Something has apparently gone terribly awry in the recent legal pact between Microsoft and Novell. No doubt, as it was signed, hands were being shaken and there was some agreement over the messaging that would go out once the agreement was made public.

But now, the two companies couldn't be more out of lockstep. At issue? Why did the cash flows involve a $40 million payment from Novell to Microsoft. Novell has been very public about its belief that it is not infringing on any Microsoft patents. But Novell has yet to explain why, if it believed this, it has agreed to pay Microsoft $40 million. Is it not in recognition of Microsoft's intellectual property? Or is it? Is there copyright infringement? Trademark infringement?

Meanwhile, Microsoft has been saying the opposite: that this all about Novell respecting its patents. With all sorts of speculation flying about in the press about what could be going on, Novell CEO Ron Hovsepian as issued an open letter to the open source community. Even stranger, Microsoft has responded with a letter of its own saying that it appears as though the two companies are agreeing to disagree. First, Novell's letter. Then, Microsoft's response:

Open Letter to the Community from Novell
November 20, 2006

On November 2, Novell and Microsoft announced a significant, multi-part agreement to work together to improve the interoperability between Linux and Windows and for Microsoft to redistribute more than 350,000 subscriptions for SUSE Linux Enterprise to the Windows customer base over a five-year period. This agreement is at the heart of what IT users demand – to deploy both Linux and Windows, and to have them work well together – and many companies have spoken out in support of this new cooperation.

Customers told us that they wanted Linux and Windows to work together in their data centers, nd so we agreed to develop new technologies and standards in server management, virtualization and document file format compatibility. CIOs want to focus on their business, and they want their suppliers to focus on improving operating system interoperability. The Linux community will benefit from the creation and release of the open source code toimprove Linux's interoperability with Windows that will result from this agreement.

Our interest in signing this agreement was to secure interoperability and joint sales agreements, but Microsoft asked that we cooperate on patents as well, and so a patent cooperation agreement was included as a part of the deal. In this agreement, Novell and Microsoft each promise not to sue the other's customers for patent infringement. The intended effect of this agreement was to give our joint customers peace of mind that they have the full support of the other company for their IT activities. Novell has a significant patent portfolio, and in reflection of this fact, the agreement we signed shows the overwhelming balance of payments being from Microsoft to Novell.

Since our announcement, some parties have spoken about this patent agreement in a damaging way, and with a perspective that we do not share. We strongly challenge those statements here.

We disagree with the recent statements made by Microsoft on the topic of Linux and patents. Importantly, our agreement with Microsoft is in no way an acknowledgment that Linux infringes upon any Microsoft intellectual property. When we entered the patent cooperation agreement with Microsoft, Novell did not agree or admit that Linux or any other Novell offering violates Microsoft patents.

Our stance on software patents is unchanged by the agreement with Microsoft. We want to remind the community of Novell's commitment to, and prior actions in support of, furthering the interests of Linux and open source, and creating an environment of free and open innovation. We have a strong patent portfolio and we have leveraged that portfolio for the benefit of the open source community.

Specifically, we have taken the following actions:

Topic: Enterprise Software

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  • Leverage or Over a Barrel

    From the text of Hovsepian's Open Letter:

    [i]"We have a strong patent portfolio and we have leveraged that portfolio for the benefit of the open source community."[/i]

    I find the use of the word 'leverage' most interesting.

    Do you suppose Novell has 'leverage'? What kind?

    I happen to believe this 'deal' was 'leveraged' by Novell's legal position on Unix and the failure of the failed proxy SCO vs IBM suit.

    It's a concession by MS to have even came to the table and reached any form of accord with any Linux Distro.

    MS needs Linux and Novell has the Unix card--Novell own it, not SCO.

    Things are not always as they are made to appear.
    Ballmer wants it to appear that Linux patent infringement is the crux of the agreement.

    We don't have all the details for the Novell-MS agreement, the quid pro quo.

    It will be interesting to see where this winds up--but I'll wager that in the end MS will be on the short end of the stick with no legal standing against Linux whatsoever, Mono doesn't enter into Linux, the kernel. But Mono does play a large part in Novell's strategy in Linux-centric solutions--most notably ZENWorks.

    It's business as usual at Novell Folks.

    Hang in there!
    D T Schmitz
    • Not so

      Look dietrich,

      I used SuSE for years and loved it. I was quite happy with the progress made by Novell. It was the best out-of-the-box distro for people who want to just install and go.

      However, they made a big mistake with this deal. Clearly, with Hovsepian's letter I think Novell realizes they made a mistake. Contrary to your claim that it's "business as usual at Novell" it's now evident that Novell is in full-tilt damage control mode. The deal and Ballmer's mouth have greatly complicated things for Hovsepian and co.

      Novel needs the community in order to survive. The vast majority of the community is now at odds with Novell. However I believe that the community can also be forgiving. If Novell were to take the right steps very soon they still have a chance. First Novell should repudiate this deal and make it clear that any future threats on the part of MS will kill any chance for real cooperation. Second, Novell should pledge to use their assets (including their Unix assets) to protect not just themselves but also the entire community on which they rely.

      You can make all the claims you like about "business as usual at Novell" dietrich butthe simple fact of the matter is that under the current circumstances Novell is operating on borrowed time. Even Hovsepian is starting to realize this.
      Tim Patterson
      • Not quite.

        "Clearly, with Hovsepian's letter I think Novell realizes they made a mistake."

        No, Hovsepian is merely correcting the M$ FUD. It is in no way an acknowledgement of a mistake. You and your groklaw ilk are mistaken on this one.
    • Absolutely!!

      You are so right. Don't forget, M$ made an investment into the Canopy Group, SCO's parent company. Now that they are finding out that that attack point didn't work, they are falling back into a defensive posture. Because they know that they've been anti-competitive and probably infringe just as many (if not more) of Novell's patents, than vice versa. In fact, maybe the strategy was to kill off Novell before Novell could sue M$ for infringement...but it failed.
  • David, your first sentence here says it all...

    [i]"It's getting ugly."[/i]

    Not even a month and already they are shouting over what the deal is about. Here's what Groklaw's Pamela Jones suggested what should be done:
    [i]"What in the world was this deal about then? It seems at this point that it was Microsoft angling for a FUD opportunity. In any case, the deal is falling apart, I'd say. Microsoft's statement alleges that they don't have to agree to go forward. But if the parties themselves don't know what they agreed to or what the words mean, how valid is the contract? [b]Here's my suggestion in all seriousness: drop the patent cooperation agreement and all its peculiar addenda. Work on interoperability and marketing deals if you wish. Then the storm is over[/b]."[/i]

    I'd tell them to go one further and call Microsoft's bluff by asking for a declarative judgement for Microsoft's patents in question. After all, patents are supposed to be public, so let's see 'em if they got 'em.
    Tony Agudo
    • Novell can't request a Decl. Judgement

      [i]I'd tell them to go one further and call Microsoft's bluff by asking for a declarative judgement for Microsoft's patents in question. After all, patents are supposed to be public, so let's see 'em if they got 'em.[/i]

      Novell can't. Microsoft is using SCO tactics, vaguely saying, "We think that Linux infringes our IP," without specifying just [i]what[/i] patents, copyrights, or trade secrets they're referring to. IANAL, but I think for a Declaratory Judgement you'd have to specify just what patents you want Linux cleared of infringing. Unless Microsoft gets specific about their allegations (which they won't do, as it would destroy the FUD value they're trying to build and use) it just comes down to a "he said, she said" deal: Novell says that no patents are infringed, Microsoft says that there is "IP" which is infringed.
      • Interesting

        "Microsoft is using SCO tactics, vaguely saying, "We think that Linux infringes our IP," without specifying just what patents, copyrights, or trade secrets they're referring to"

        Now this sounds identicle to the arguement Microsoft is using in its dealing with the EU.
        In reverse; of course in this case it is the EU being vague etc.

        Seems like Microsoft is still able to learn new tricks, All be it Parrot fashion.

        Fud is Fud Is Fud.
  • questions

    David, I wish you would contact Microsoft and ask them a couple of questions.

    1) Why don't you reveal the specific IP that you claim Linux violates, so that everyone can see if you claims are valid, and, if any are, Linux might have a chance to re-write its code to make itself legal?

    2) You say that other Linux companies are free to enter into similar no-sue deals. But what about non-commercial organizations like Debian?
    • If it turned out to be FAT, how would you "re-write" it?

      Seeing as USB mass storage devices use FAT, how would Linux copy (rewrite) it whilst removing the IP violation?
      • It wouldn't be FAT, just an aspect of VFAT.

        As I understand it, only the Win95 "Long Filename" support might be affected.
      • you do not

        You use e sata as it is destined to replace usb for mass storage. Why use usb if you can us e sata for an external harddrive at the same speed as your internal drives?
      • Something like that would most likely

        be disallowed due to prior art. This is why software patents are really silly. As many have stated here, to start a software patent war for any company is pure suicide.
        Jim Blaine - Bellingham WA.
      • I don't see how that would be a problem

        It's not a Linux issue to pay for FAT. It's the USB drive manufacturers problems.

        Think about it like this. If you install Linux and install FAT with out paying Micrsoft you may be infringing on IP. It's not Linux that is the issue here it's the user taking the action. The abiltiy for Linux to interoperate with Windows is not really the issue here, it's how you interoperate.

        In the end this is why software patents dont' work.
      • No need, there are workarounds!

        I have been using EXT3 successfully on several USB external drives for some time. Should work with other formats too. The controller in the USB external disk boxes seems to be fairly transparent as far as the file system is concerned. The old disk from my laptop is currently mounted in a USB box to allow data recovery, as Win2000 became hopelessly corrupt and would not boot. That has FAT32 (VFAT), NTFS and EXT3 partitions, and the host machine, if running Linux, can see them all. Windoze can't see the EXT3 partitions, of course, without a special driver that I have never needed to try.

        As usual, the FOSS way of doing things is far more flexible than closed source.
      • FAT patent is open to challenge....

        For prior art, IIRC.
      • by formatting it as ext2...

        and installing the driver on other machines...arguably it would be a pain in the a**, but at least it would keep the world cleaner...
  • Yes, it looks like MS is getting desperate and has decided to start with

    FUD about Linux legal problems. But, they have to remember, any action against Linux will just drive customers into the open arms of Sun, which will likely GPL Solaris so that all of the drivers and other things from Linux can be brought over. This will also allow things like DTrace to come over to Linux.

    Actually I think this would be the perfect time for Sun to GPL Solaris.

    Funny to watch Billy and Stevie squirm.
    • MS are getting desperate? Oh clueless one <sigh>

      What drivel you come out with.
      Explain why you think MS has a reason to be "desperate". Is it because they are running out of money? Maybe it is because their desktop OS is so far out in front in terms of market share that nobody in the next 10 years will ever have a hope of catching up. Maybe it is because Solaris will be the godsend that the spotty geek brigade are hoping for?


      MS is doing what it is so successful at. They already have the Linux community divided, just by signing a deal with Novell. Dead Rat supporters are attacking openSuSE users because of it, the rabid lunatics are calling for everyone to boycott SuSE (even though the openSuSE developers had NO say whatsoever in the deal). MS know what they are doing, and this is the perfect way to dispel the uprising.

      [i]divide et impera[/i]

      Whether you love it or hate it, it is proving to be successful...
      • aahhhh and that's why

        Novel made a 200 million dollar profit. It payed MS 200 million and it recieved 400 million. Do the math.
        If you think ms is in front then look at the hardware requirement for aeriglass and compare them to the new xgl enviroment for linux wich does more with less hardware requirements.
        • What's that got to do with it?

          Scrat's comment has nothing at all to do with the relative quality of the products. It addresses the effectiveness of this latest round of FUD.