DOJ forces changes in Novell patent deal

A partnership that includes Microsoft and Apple agreed to modify the terms of its acquisition of some Novell patents in order to satisfy antitrust regulators worried about the impact on open-source software.

The Department of Justice announced today that CPTN Holdings altered the original agreement, requiring that it license rather than buy some of the 882 patents and patent applications. And all of the patents that are purchased will be bought under the GNU General Public License and the Open Invention Network License, according to the agency, which worked closely with Germany's Federal Cartel Office.

Microsoft established CPTN, which it owns equally with Apple, Oracle, and EMC, to acquire the Novell patents as part of Attachmate's $2.2 billion bid for Novell last November. CPTN planned to pay $450 million for the patent portfolio.

The deal, though, drew attention from the open-source community. Both the Open Software Initiative and the Free Software Foundation urged regulators in January to investigate, worried about patents owned by Novell, a backer of open-source software, falling into the hands of companies that made their fortunes with proprietary software. The fear is that the companies would change the terms of using the Novell patents.

Earlier this month, the Open Software Initiative detailed its correspondence with German regulators, saying it was "alarmed that four companies with dominant market positions and a mixed attitude toward open-source software could redeploy what the open-source community had considered to be a friendly asset--Novell's patent portfolio--into a weapon against open-source software."

Regulators apparently agreed. The Justice Department said in its announcement that the original 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." The agency said it will allow the modified deal to proceed, but that it will continue to investigate the distribution of the Novell patents.

"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," said Sharis A. Pozen, deputy assistant attorney general of the Justice Department's Antitrust Division.

In addition to acquiring the patents under open-source licensing, the revised deal also requires Microsoft to sell back to Attachmate all of the Novell patents that Microsoft would have otherwise bought. The agency said Microsoft will continue to receive a license for the use of those patents, the patents acquired by the other three companies, and any patents retained by Novell. Additionally, EMC, which owns virtualization leader VMware, will not acquire 33 Novell patents and patent applications related to virtualization.

CPTN organizer Microsoft gave little insight into the amended agreement. "We are pleased that the CPTN transaction has been approved and that Novell's merger is also moving ahead. Microsoft looks forward to continuing our collaboration with Novell into the future, to bring mixed source IT solutions to customers," the company said in a statement.