Novell to detail Microsoft patent pact

Delayed annual report will offer details of Novell's patent, interoperability and sales partnership with Redmond.
Written by Stephen Shankland, Contributor
SAN FRANCISCO--Novell will share details of its patent pact with Microsoft this month in a regulatory filing that had been delayed by a stock option investigation.

Novell plans to reveal the details in conjunction with filing its upcoming annual report with the Securities and Exchange Commission, spokesman Bruce Lowry said Wednesday at the Open Source Business Conference here. The report had been held up by Novell's investigation into its stock option compensation practices.

"We will be filing our SEC filing by the end of this month. We will be publishing the Microsoft agreements as attachments," Lowry said during a panel discussion. The agreements will have some details redacted, he said.

The details are at the heart of a controversial patent partnership that Novell and Microsoft announced in November. Under the pact, Microsoft agreed to sell coupons entitling customers to use Novell's Suse Linux Enterprise Server without fear of a patent infringement suit from Microsoft. The partnership also involves interoperability work in directory software, office document formats and virtualization software.

Novell faced criticism from open-source advocates--Red Hat attorney Mark Webbink called it "appeasement," for example--and it spawned open-source licensing work that could prohibit some such deals in the future. And the controversy took on a new dimension when Microsoft said last week that it believes Linux and other open-source software infringes 235 of its own patents.

Microsoft's patent tally news both pleased and displeased Novell, said Justin Steinman, the company's marketing director for Linux.

On the displeased side, Novell saw the news as "another round of, '0h no, here we go again.' We generally think comments like that aren't productive," Steinman said.

On the pleased side, Novell potentially can profit from the saber-rattling. "If Microsoft is going to go out and raise concerns, we are comfortable we can offer (customers) coverage," Steinman said. Overall, though, Novell wasn't pleased. "Do we wish the tone of the article had been different? I think so."

The financial effect has been notable. "Microsoft is Novell's No. 1 (sales) channel in the first quarter of 2007," Steinman said.

One developer who's offended is Jonathan Corbet, a Linux kernel programmer and executive editor of LWN.net. During the panel discussion, he said Novell effectively has legitimized accusations of open-source code impurity.

"We are proud about the quality of our code. If Novell comes along and says my code is not mine and cannot be distributed without paying a tax to Microsoft, I feel I have been called a thief," Corbet said. "It is divisive to the community."

Some have criticized Microsoft for not detailing which 235 patents it believes the open-source software infringes, but others believe ignorance is bliss.

"As the architect of a virtual machine for a dynamic language"--a technology potentially similar to Microsoft's .Net software--"I don't want to know, because if they say it publicly, then we have to start taking legal action," said Allison Randal, an open-source evangelist with O'Reilly Media and project manager of the Perl 6 core development team. "We don't want to go there."

Regarding Novell's stock option situation, the review "did not find any evidence of intentional wrongdoing by any former or current Novell employees, officers or directors," Novell said in a statement Wednesday.

The review found that Novell didn't report $19 million in compensation expenses from fiscal 1997 through 2005, the Waltham, Mass.-based company said. However, because the amounts weren't materially significant during the related periods, the company won't restate its earlier financial results.

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