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Microsoft paying Novell $308 million for Linux pact

Novell disclosed details of its five-year partnership with competitor Microsoft in a Securities and Exchange Commission filing.

Stephen Shankland principal writer
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Stephen Shankland
2 min read
In one of the more complex examples of "cooptition" in the computer industry, Microsoft will pay Novell a net amount of $308 million to market and distribute its competitor's product.

The five-year Microsoft-Novell partnership, unveiled last week, involves a mix of patent, technology and business issues. Novell disclosed details of the partnership in a Securities and Exchange Commission filing Tuesday.

Microsoft will pay Novell $240 million for 350,000 coupons--70,000 per year--entitling customers to support and maintenance for Novell's Suse Linux Enterprise Server, Novell Chief Executive Ron Hovsepian said Tuesday. In addition, Microsoft will spend $94 million over the five-year deal on its own sales and marketing work for Suse products.

Microsoft hopes the partnership will help the fortunes of its management software for virtualization, technology that lets different operating systems run simultaneously on the same server, said general counsel Brad Smith. "The principal purpose of this is to enable us to take our virtualization solution to market," he said.

The deal also involves patent-related payments. Microsoft will pay Novell a net amount of $108 million in an agreement under which both companies release each other from patent claims from past actions, Hovsepian.

However, that will be offset by Novell payments of at least $40 million over the course of the deal to ensure Microsoft won't sue Suse customers for patent infringement. The Novell payments are based on how much revenue Novell garners from sales of its Linux and Open Enterprise Server products.

"There are two things in the patent deal. We had to address proprietary code and we had to address open-source software," said Microsoft General Counsel Brad Smith. "We addressed the proprietary issues through the net up-front payment. The open-source (part) we addressed through the percentage of revenue."

Also Tuesday, Novell said its agreement with Microsoft doesn't violate the General Public License (GPL), the license that governs the Linux kernel.

Eben Moglen, the attorney representing the Free Software Foundation, which created the GPL, raised the concern that Novell's pact with Microsoft could violate the license.

"In the context of negotiating this agreement with Microsoft, we very much had as a motivating factor continuing compliance with the GPL," said Novell General Counsel Joseph LaSala, Jr. "We're not prohibiting the royalty-free copying or distribution of code. This agreement does not affect the freedom that Novell or distributors or customers have on code."

Under the agreement, Microsoft directly provides Suse Linux customers a covenant that the company won't sue for patent infringement, Novell said.

Novell also posted a question-and-answers Web page addressing the patent issue. In it, Novell said it won't begin including code covered by Microsoft patents and that its Mono project, an open-source version of Microsoft's .Net software, doesn't infringe Microsoft patents.