Microsoft gets Novell's Patents rights but must share them with Open-Source Software

This is not the deal Microsoft wanted, but it's what the Department of Justice insisted on.
Written by Steven Vaughan-Nichols, Senior Contributing Editor

Well, this is almost certainly not the Novell patent deal that Microsoft and its CPTN Holding Partners-Apple, EMC and Oracle-wanted . The U.S. Department of Justice (DoJ) announced today, April 20th, that in order to proceed with the first phase of their acquisition of certain patents and patent applications from Novell, CPTN Holdings has altered their original agreements to address the department's antitrust concerns. In particular, "The department said that, as originally proposed, the deal would jeopardize the ability of open source software, such as Linux, to continue to innovate and compete in the development and distribution of server, desktop, and mobile operating systems, middleware, and virtualization products. Although the department will allow the transaction to proceed, it will continue investigating the distribution of the Novell patent to the CPTN owners."

According to the DoJ, which worked in concert with the Germany's Federal Cartel Office (Das Bundeskartellamt), "CPTN and its owners have revised their agreements to provide that:"

Microsoft will sell back to Attachmate all of the Novell patents that Microsoft would have otherwise acquired, but will continue to receive a license for the use of those patents, the patents acquired by the other three participants and any patents retained by Novell;

EMC [Which owns VMWare] will not acquire 33 Novell patents and patent applications that have been identified as related to virtualization software;

All of the Novell patents will be acquired subject to the GNU General Public License, Version 2, a widely adopted open-source license, and the Open Invention Network (OIN) License, a significant license for the Linux System;

CPTN does not have the right to limit which of the patents, if any, are available under the OIN license; and

Neither CPTN nor its owners will make any statement or take any action with the purpose of influencing or encouraging either Novell or Attachmate to modify which of the patents are available under the OIN license.

As it happens, the OIN, an organization designed to protect Linux and open-source software with a shared patent pool, announced today that its membership has vastly increased in recent months. In a statement, the OIN said that "In the first quarter, OIN experienced 28% growth in its community of licensees , boosting the community to 334 corporate supporters. OIN licensees … benefit from leverage against patent aggression and access to enabling technologies through OIN's shared intellectual property resources." To be exact, "Patents owned by Open Invention Network are available royalty-free to any company, institution or individual that agrees not to assert its patents against the Linux System."

These are not just small companies. New members of the OIN include Facebook, Fujitsu, HP, Juniper, and Rackspace.

So, no matter what Microsoft may have in mind, the Novell patents will be under both GPLv2 and OIN protection. Indeed, Microsoft won't even own Novell's patents, but instead will only license them. Even before these changes in the deal were announced, I was told by an OIN representative that, "Regarding Novell: If a company is a member/licensee of OIN prior to the closing on the Attachmate deal, then, they will be covered in perpetuity on all relevant Novell patents. All companies signed on as an OIN licensee prior to the closing, will receive the benefit of the license to those patents."

I strongly suspect that's why so many major companies joined up with the OIN. Now, though, it appears to me, that OIN members who come aboard after the Attachmate/Novell deal is done will also be covered.

So what does it all mean? Andrew "Andy" Updegrove, founding partner of Gesmer Updegrove, a top technology law firm, said, "This is a rather breath-taking announcement from a number of perspectives. Among others, the granularity of the restrictions imposed demonstrates a level of understanding of open source software in general, and Linux in particular, that has not been demonstrated by regulators in the past. It also demonstrates a very different attitude on the part of both the U.S. and German regulators, on the one hand, and Microsoft, on the other, from what we saw the last time that Microsoft was under the microscope. In the past, Microsoft was more disposed to fight than negotiate, and the U.S. and the European Commission were far apart in their attitudes. This announcement conclusively places open-source software on the U.S. regulatory map."

Even though the CPTN companies have agreed to the deal, don't think that the DoJ isn't going to pay attention how Microsoft and friends use those patents. In the statement, Sharis A. Pozen, Deputy Assistant Attorney General of the Justice Department's Antitrust Division, said, "The parties' actions address the immediate competitive concerns resulting from the transfer of Novell's patents. To promote innovation and competition, it is critical to balance antitrust enforcement with allowing appropriate patent transfers and exercise of patent rights. Although we recognize that the various changes to the agreement recently made by the parties are helpful, the department will continue to investigate the distribution of patents to ensure continued competition."

With these objections out of the way, I anticipate that the Microsoft-sponsored purchase of Novell by Attachmate will soon be completed.

Related Stories:

Microsoft-backed CPTN alters Novell patent acquisition terms to appease antitrust authorities

Microsoft Patent Case in the Supreme Court's Hands

Novell's Stockholders approve Attachmate buyout but the Deal's far from done

Novell shares more specifics on patents it is selling to Microsoft, Apple

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