November 20th, 2006
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. 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, 2006On 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:
â—? We have stated our commitment to use our own software patents to protect opensource technologies. (www.novell.com/company/policies/patent/).
â—? We have spoken out against EU legislation that would liberalize the standards for
granting software patents (www.novell.com/company/policies/patent/european.html).
â—? We offer indemnification to our Linux customers accused of intellectual property
infringement (http://www.novell.com/licensing/indemnity/).
â—? We have teamed with the United States Patent and Trademark Office and other
industry leaders to reduce the issuance of “bad patents” in the software area (See
www.eweek.com/article2/0,1895,1911979,00.asp).
â—? In 2005, we co-founded Open Invention Network (“OIN”), "an intellectual property company that was formed to promote Linux by using patents to create a collaborative environment." (See www.openinventionnetwork.com). Novell's substantial contributions to OIN were made to benefit not only ourselves, but also other Linux vendors, distributors and developers, and anyone else willing to commit not to assert their patents against Linux.In closing, we wish to be extremely clear that Novell is committed to protecting, preserving and promoting freedom for free and open source software. We recognize that the community if open source developers is essential to all our activities in Linux, and we welcome dialog with the community as to how we can continue to work together toward these common goals.
Ron Hovsepian
Chief Executive Officer
Novell, Inc.
And here is how Microsoft responded (attributable only to a spokesperson):
Microsoft and Novell have agreed to disagree on whether certain open source offerings infringe Microsoft patents and whether certain Microsoft offerings infringe Novell patents. The agreement between our two companies puts in place a workable solution for customers for these issues, without requiring an agreement between our two companies on infringement.
Both of our companies are fully committed to moving forward with all of the important work under these agreements. The agreements will advance interoperability between Windows and Linux and put in place a new intellectual property bridge between proprietary and open source software. Customers and participants throughout our industry will clearly benefit from these results.
We at Microsoft respect Novell's point of view on the patent issue, even while we respectfully take a different view. Novell is absolutely right in stating that it did not admit or acknowledge any patent problems as part of entering into the patent collaboration agreement. At Microsoft we undertook our own analysis of our patent portfolio and concluded that it was necessary and important to create a patent covenant for customers of these products. We are gratified that such a solution is now in place.
It's late. I'm not going to offer much in the way of an analysis. I'll leave that up to you for now. On thing is for sure, truth is sometimes stranger than fiction.
