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Novell Says Open Source License Changes Could Kill Microsoft Deal

Novell said that proposed revisions to the General Public License could force the company to modify its relationship with Microsoft or find alternatives to the deal.
Linux vendor Novell said that licensing changes under consideration by the body that governs open-source software could undermine a controversial but commercially significant distribution deal that the company struck with Microsoft last year. In a regulatory filing, Novell said that proposed revisions to the General Public License could -- in their current draft form -- force the company "to modify our relationship with Microsoft" or "explore alternatives" to the deal.

Under the latest draft of version 3 of the GPL, Linux distributors like Novell would not be allowed to "convey a covered work if [they] are a party to an arrangement with a third party that is in the business of distributing software"--if the arrangement provides patent protection in exchange for cash.

Microsoft has long claimed ownership over some of the computer code used in the Linux operating system and other open-source software. But under an accord struck in November, Microsoft and Novell agreed not to sue each other, or each other's customers, for patent violations. The deal also gives Microsoft the right to resell Novell's SUSE Linux products and services at a markup.

The GPLv3 draft does offer one possible out for Microsoft and Novell.

It states that open-source software distributed prior to March 28, 2007, would not fall under its terms. However, it's questionable whether Novell's Linux customers -- a group that includes Wal-Mart -- would agree to remain in a program under which they could not receive or use upgrades to the Linux kernel released after that date.

GPLv3 could go into effect this summer, according to the Free Software Foundation.

Implicit in its deal with Novell is the notion that Microsoft reserves the right to sue Linux users who are using a distribution of the operating system from a vendor other than Novell.

As a result, the deal was widely criticized by free software advocates, who argue that it represents a type of protection racket.

The condemnation prompted the Free Software Foundation -- which controls the open source licensing process -- to insert the deal-busting language into the GPLv3 draft.

Microsoft raised the stakes earlier this month, when for the first time the company put a specific figure on the number of patents it claims are violated by Linux and other open-source software programs. In total, free and open-source software infringes on 235 Microsoft patents, the company said.

Novell's comments, contained in an annual report filed Friday with the Securities and Exchange Commission, are the company's first acknowledgment that the changes to the open source license contemplated by GPLv3 could have a significant impact on its Linux distribution business and its relationship with Microsoft.

For Novell, the stakes are high. The company lost $20 million in the first quarter, according to a separate SEC document, also filed Friday.

In that document, Novell noted that the Microsoft deal has already significantly boosted its Linux business. The company said it recorded $7.6 million in gross revenue related to the Microsoft agreement and deferred revenue from the agreement of $338.5 million.

But as Novell now acknowledges, the extent to which Wal-Mart and other customers that purchased SUSE Linux certificates from Microsoft will be willing to continue their Linux implementations could be determined by the final draft of GPLv3 and future court rulings on the issue, should it come to that.