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

It's getting ugly. Something has apparently gone terribly awry in the recent legal pact between Microsoft and Novell.
Written by David Berlind, Inactive

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:

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