When Microsoft signed a patent agreement with Novell, owner of SuSE Linux, it thrust itself onto the horns of a dilemma. It seemed to be saying that Linux contains patent exposures. If you're a Linux user, Microsoft may sue you for using its intellectual property, unless you use SuSE.Now Microsoft President Steve Ballmer has made it explicit,. The Seattle Post Intelligencer presents him in his own voice saying: "Anybody who has got Linux in their data center today sort of has an undisclosed balance sheet liability." What does that mean--"sort of?"

The recent patent agreement between Microsoft and Novel was meant to give Microsoft a share of the growing role of Linux in the data center. Microsoft is cooperating with Novell and open source virtualization vendor XenSource to make it easier to run Linux in the form of Linux virtual machines under Windows, and vice versa.

By doing so, Microsoft takes its existing strong position in Windows and extends it into a next generation of computing, which will have virtualization as its centerpiece. To fail to achieve interoperability with Linux in virtual machines threatens to start pushing Windows toward the sidelines. Virtualization increases the cost disparity between Windows and Linux. As virtual machines multiply, so do software costs. Microsoft charges for Windows licenses in virtual machines; Linux of course does not. Why did Microsoft strike such a deal as it did with Novell at this time, after years of opposing open source in general and Linux in particular? "To the degree that people are going to deploy Linux, we want SuSE Linux to have the highest percent share of that because only a customer who has SuSE Linux actually has paid properly for the use of intellectual property from Microsoft," Ballmer told the Post Intelligencer.

But Microsoft's own customers have more Red Hat than SuSE. Red Hat has refused to put itself and the Linux community in the position of paying royalties to Microsoft based on claimed patents, even though Microsoft would like to have such a deal. If Red Hat doesn't sign, Microsoft faces a lot of customer questions about its intentions toward Red Hat Linux. It's possible Microsoft will continue raising questions about Linux and issuing thinly veiled threats until it actually has to sue someone. Alternatively, it could get its own act together on the virtualization front and stop yielding so much advantage to Linux. Red Hat offers powerful virtualization technology, through its partnership with VMware.

Microsoft is finding it difficult to play there on two fronts. Linux is freely available as a virtual machine operating system, and a growing interest in virtual appliances-those combinations of applications with a version of an operating system configured for them-are so far uniformly Linux-based. Linux lends itself to being stripped down and packaged with an application much more readily than Windows.

To avoid suing Linux users, Microsoft needs to be able to match VMware's ability to produce an effective hypervisor and further reduce charges for Windows virtual machines. It needs to find a way to distribute its software, as it's taken tentative steps toward doing, as a virtual file package, the way virtual appliances are.

Otherwise, it will grow and more alarmed at the trends running against it and its militant saber rattling will have to give way to action. Suing software users could have consequences that neither Microsoft nor Linux users can with any certainty foresee. There would be fall-out for Red Hat, definitely, but an unpredictable level of fall-out for Microsoft itself as well.

For example, both Red Hat and Novell distribute Samba, a file and print server that translates between Windows and Linux. The Samba team took a strong stand against the Microsoft/Novell agreement.