Novell acquired by Attachmate

The big news in the Linux world this week is Novell's agreement to be acquired by Attachmate. While the financial terms of that agreement seem—at first blush anyway—to be a fairly reasonable deal for Novell shareholders, there is something of an odd addition: a concurrent sale of "intellectual property assets" to a newly formed holding company. That CPTN Holdings LLC was organized by Microsoft makes the acquisition more than a little worrisome to many in the Linux and free software communities.

Novell has been trying to find the right buyout offer since at least March, when Elliott Associates made an unsolicited offer to buy the company for $5.75/share. Attachmate offered $6.10/share, but it also gets an influx of $450 million from the asset sale to CPTN, so it is, in effect, putting up less money than Elliott Associates would have. In any case, the Novell board, and presumably its stockholders, are likely pleased with the extra $0.35/share they will receive.

In the 8K filing that Novell made about the acquisition, the assets that are being sold to CPTN were specified as 882 patents. Which patents those are is an open question. While the idea of more patents in the hands of Microsoft and a "consortium of technology companies" is somewhat depressing, it's too early to say whether they are aimed squarely at Linux. Novell has been in a lot of different businesses over the years, so it's possible—though perhaps unlikely—that these patents cover other areas.

While Attachmate is not a well-known company in the Linux and free software world—or even outside of it—it has made all the right noises about what it plans to do with Novell once the acquisition is completed. The press release says that Attachmate "plans to operate Novell as two business units: Novell and SUSE", which may imply that there isn't a plan to break up the company and sell off the pieces—it certainly makes logical sense to split those, basically unrelated, parts into separate business units. Mono project lead Miguel de Icaza has said that Mono development will continue as is. Attachmate also put out a brief statement to try to reassure the openSUSE community: "Attachmate Corporation anticipates no change to the relationship between the SUSE business and the openSUSE project as a result of this transaction".

The 8K mentions some interesting escape clauses for Novell, including the ability to void the asset sale if a better offer for the company and those patents come along. In addition, if the acquisition by Attachmate does fall through for some other reason, CPTN can continue with patent purchase but it must license the patents back to Novell. That license will be a "royalty-free, fully paid-up patent cross license" of all patents that both Novell and CPTN hold (including the 882 in question) on terms that are "no less favorable" than those offered to others outside of CPTN. Essentially, Novell wants to ensure that it can still use those patents if it doesn't get acquired by Attachmate.

Though the 8K is silent about what rights Attachmate will get to the patents, one plausible scenario is that Attachmate is already a member of CPTN. If that's the case, it may be exempt from any patent lawsuits using the 882 Novell patents. That could set up a situation where an attack on various other distributions—but not SUSE—is made. Given the cross-licensing language that is in the 8K, it's a bit hard to believe that Attachmate wouldn't have some kind of agreement in place. That, in turn, could imply that some of those patents are potentially applicable to Linux and free software.

It is tempting to speculate about what this means for our communities—we have done a bit of that here and many are going much further—but it is rather premature. The escape clause certainly raises the possibility that there are other Novell suitors out there, so this acquisition and asset sale may not even take place. If they do, we will find out which of Novell's patents are affected and be able to see what impact, if any, they might have on Linux and free software.

Taken at face value, Attachmate's statements about its plans seem to pose no threat to our communities or to the many members who are employed by Novell. CPTN, on the other hand, may be a potent threat if the patents are used offensively against Linux and free software. While it always makes sense to be prepared for the worst, one can always hope that this particular transaction (or set of transactions) will be fairly neutral. With luck, it may actually increase the income and profits for SUSE and lead to more investment in free software. We will just have to wait and see.