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Linux camp rages over Novell pact

Microsoft accord could leave other open-source software companies more vulnerable to patent suits

Last year's surprise partnership between software titan Microsoft Corp. and leading Linux distributor Novell Inc. was supposed to be a kind of peace treaty. Instead, it's brought the open-source software community to the brink of civil war, over a provision that could help Microsoft sue other open-source software companies for patent violations.

As part of the deal, Novell agreed to compensate Microsoft for features in Linux that Microsoft claims to have patented. Critics say Novell has betrayed other Linux vendors and made it easier for Microsoft to threaten Linux companies with patent infringement suits.

"Anybody who has not signed a deal now . . . is somehow under a cloud," said Peter Brown, executive director of the Free Software Foundation, a group that oversees the creation of most Linux code. "When will Microsoft act against them?"

But for renowned open-source programmer and former Novell employee Jeremy Allison, the deal came at too high a price. Allison helped develop Samba, a popular program that lets Linux computers interact with machines running Windows. In December, Allison quit . "I left Novell over the deal because I felt it was not consistent with the responsibilities of an open-source company or an open-source programmer," Allison said.

The deal with Microsoft amounts to a $308 million lifeline for Waltham-based Novell, a company brought to the brink of ruin thanks to years of fierce rivalry with Microsoft. Originally based in Utah, Novell invented the first system to link desktop computers into networks. It grew into the world's third-largest software company, at one time employing 10,000 workers.

But Novell's business was gutted when Microsoft added networking capability to its Windows operating system. Novell then challenged Microsoft with an alternative operating system and office software suite. Both ventures were costly failures. Today, Novell has just 4,800 employees, mostly in Utah. Only about 200 are based in the Boston area. Still Novell is one of the biggest technology companies based in Massachusetts.

Novell now hopes to become the leading distributor of Linux software to businesses -- a position held by Red Hat Inc. of Raleigh, N.C. Red Hat officials say they're unworried by the Novell-Microsoft deal. At a technology conference earlier this month, Red Hat's chief financial officer, Charlie Peters, said he sees no sign that an alliance between Novell and Microsoft is hurting Red Hat's sales. "Just in the last week or two you've seen several good customer wins from us," Peters said. "This clearly is not an issue."

Open-source supporters favor some features of the deal. Microsoft paid $240 million for Novell Linux licenses, which it will distribute to customers who want to use both Windows and Linux in their data centers. The two companies also will cooperate on ways to make Linux work better with Windows . After all, even companies that use Linux for high-end server applications still use Windows on most of their desktop machines. Microsoft will also pay $108 million to Novell for permission to use Novell patents in Microsoft's products.

But it's Novell's $40 million patent payment to Microsoft that infuriates open-source specialists. That's because Novell's SUSE Linux, like all versions of Linux, is made up of hundreds of pieces of software produced by the GNU Project, an open-source development group led by the Free Software Foundation in Cambridge. Linux companies like Novell and Red Hat compete by selling support for their Linux products. Meanwhile, the Free Software Foundation insists that no version of Linux violates patents held by Microsoft or anybody else.

Brown, the foundation's executive director, said that those who buy Novell's version of Linux will be shielded from Microsoft patent litigation. But people who buy from other Linux companies are still exposed to patent lawsuits, even though all versions of Linux are nearly identical.

Brown said that Microsoft singled out Novell because the company's sales and profits are weak. . Novell revenue fell from $1.2 billion in fiscal 2005 to $967 million in 2006. The company posted a $376.7 million profit in 2005, but that was mainly due to a $536 million payout from Microsoft to settle an antitrust dispute between the two longtime enemies. Last year, Novell's net income dropped to $32 million.

The company's financial woes made it a prime target for Microsoft, said Brown. He thinks Novell entered into negotiation in good faith, but learned too late about Microsoft's patent tactics. "They wave a big check under their noses, they get Novell desperate for the money, and then they spring the patent provision on them."

Novell says the critics are wrong. Susan Heystee, the company's vice president of global strategic partnerships, said Novell does not believe that Linux contains any Microsoft-patented code. "There is definitely no statement that we're making that there are any patents being infringed," she said. "We do not acknowledge that there is any issue there."

But within days of signing the deal with Novell, Microsoft chief executive Steve Ballmer told guests at a software industry conference that Linux contains Microsoft intellectual property. "In a sense you could say that anybody who has got Linux in their data center has an undisclosed balance-sheet liability," he said, suggesting that Microsoft might demand compensation from Linux users not covered by the Novell agreement. Microsoft agrees that Novell did not concede any patent violations in Linux, saying that the companies have "agreed to disagree" on the issue.

Leaders of the open-source movement are at work on a legal strategy that could let Novell retain the benefits of the deal, while preventing Microsoft from using it to attack other open-source firms. They're drafting a new version of the General Public License or GPL, the Free Software Foundation's legal rulebook, which governs how Linux and other open-source code can be used.

Under the new license, called GPL3, if a company waives its patent rights over GPL software distributed by one company, that waiver will apply to all other companies distributing the software. If the provision had been in place when Novell and Microsoft struck their deal, the patent protection won by Novell would have applied as well to Red Hat, Ubuntu, and other Linux versions. Microsoft would have forfeited its patent infringement claims against all Linux distributors.

The foundation hopes to have the new license completed within a couple of weeks. It can then issue future versions of Linux code under the license. As they're upgraded over time, the hundreds of programs that make up Novell's Linux will be covered by the new license.

Brown said GPL3 would ensure that no other Linux company will be able to make a separate peace with Microsoft. "We want to attempt to stop these type of deals being struck," he said.

Hiawatha Bray can be reached at bray@globe.com.

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