Novell says it benefits from Microsoft IP deal

Think Novell is sending more money to Microsoft under the vendors' intellectual property agreement than the other way around? Think again, a Novell executive said at the TechEd 2007 conference in Orlando, Fla., on Monday.

As part of a multifaceted arrangement forged in November 2006, the two companies agreed not to sue each other's customers over IP issues. Included in this understanding was a series of payments going between the companies pertaining to this matter. It might seem that Microsoft, with its recent complaints about open source and Linux allegedly violating 235 Microsoft patents, would be getting more money from the deal. But that is not the case, said Justin Steinman, director of product marketing for Linux and Open Platform Solutions at Novell.

"Actually, Novell gets more money," Steinman said.  Even when discounting Microsoft payments to Novell for access to Novell's Suse Linux, Novell still gets more, he said. Steinman attributed the disparity to Microsoft simply having more customers than Novell. 

"They're paying for coverage for more customers," Steinman said. He said he did know the difference in the amount of money changing hands.

Steinman recited the often-repeated mantra that the deal with Microsoft was what customers wanted. They wanted the IP issue to go away and they want Linux interoperability with Windows, he said.

Microsoft, in a statement, said the dollar amount of the arrangement will vary.

"Both Microsoft and Novell have patent portfolios, and as part of the patent agreement, each is paying the other for access to these patents. There is an upfront payment from Microsoft to Novell," Microsoft said.  "Then, Novell will pay Microsoft on an ongoing basis. The total dollar amount depends on how big certain Novell businesses grow over time. It is impossible to say how all payments will net out until Novell's business performance over the next several years is factored in."

Microsoft under its agreement with Novell is selling Suse Linux subscriptions certificates to Microsoft customers wanting Linux. Other parts of the agreement have had the companies working to support virtualization of each other's operating systems. They also are aligning on standards-based systems management and directory and identity interoperability. Additionally, the companies are ensuring document formatting compatibility between Microsoft Office and Novell OpenOffice documents.

Asked about the Novell-Microsoft agreement, an industry analyst Monday said he did know its financial details. "I don't know what the numbers work out to," said analyst Al Gillen, research vice president at IDC. But he said the contract makes sense in that customers would not want Microsoft suing them over IP issues.

"In that context, from a customer's perspective it's good," Gillen said. "I realize the [open source] community dislikes it."

Xandros and Microsoft announced a similar arrangement regarding Linux at TechEd on Monday.