My response to Novell/Microsoft

My response to Novell/Microsoft

Posted Nov 4, 2006 4:39 UTC (Sat) by jonabbey (guest, #2736)
Parent article: Various responses to Microsoft/Novell

From <a href="http://jonabbey.livejournal.com/142997.html">my blog</a>:

So, <a href="http://web.archive.org/web/20210413040252/http://www.groklaw.net/article.php?story=20061103201234813">Novell, meet Faust</a>. Novell has signed a deal with Microsoft wherein Novell will pay protection money to Microsoft in exchange for Microsoft threatening to sue all Linux users who aren't paying Novell customers, on the grounds of heretofore undemonstrated patent liabilities.

This is the SCO scam writ larger (and more credible). It will redound to Novell's benefit in the short term, possibly, but it comes at a tremendous long-term strategic cost. By entering into this deal, Novell has endorsed Microsoft's unsubstantiated claims of ownership over patents covering Linux, as well as put their own product at risk. Novell doesn't own their own IP, you see.. the Linux kernel is an amalgam of the work of many thousands of people, licensed under the GPL. Under clause 7 of the GPL, Novell cannot distribute GPL-licensed code to some parties if they do not have the same rights to redistribute without acquiring a patent license. At the press conference between Novell and Microsoft, there were some claims made to the effect that the deal was carefully designed not to run into conflict with the GPL, but the only real attempt to deal with clause 7 seems to be the use of the term 'covenant not to sue', rather than 'license'. I doubt that would fly in court, if push came to shove. Novell might well lose the right to distribute Linux at all if they try to push this.

Of course, it's not all sour vinegar. To sweeten the deal some, Microsoft has promised not to sue any individual developers who work on open source products without getting paid for it, so long as <a href="http://web.archive.org/web/20200407131927/http://www.groklaw.net/article.php?story=20061103073628401">they don't do anything gauche</a> such as, you know, actually try to distribute their work.

And this last was touted in the credulous press as a great fluffy bunny rainbow puppy dog concession by Microsoft.

Incredible.

Apparently, Novell had some heavy duty patents that Microsoft was on the wrong side of, so you'd think that they could have come out of the deal better than they went in to it. Microsoft did pay them a lot of money, apparently, but that money was a lump sum, while Novell is on the hook to pay that money back, and more, in royalties over the next five years. The more successful Novell is at screwing Red Hat, the more business they accumulate, the less of that lump sum they'll have left in the bank. Cost to Microsoft in this circumstance? Zero.

Or, as Mastercard would put it:

Resolving patent liabilities by paying Novell: $500 million
Gaining a per-unit royalty on all Linux sold: priceless

Of course, neither party announced the amount that Novell got out of the deal, but one has to presume that it'll show up in their SEC filings before too long.

Now. To look at this from another angle, and assuming for the moment that Novell will not lose their right to redistribute the Linux kernel due to a GPL violation, there are some things to be said about this deal from Novell's point of view.

First, Novell gets a huge stick to use against Red Hat. In an instant, they may gain some credibility in the corporate world, particularly in heterogeneous environments with Microsoft installations. This could be the sand on the snow they need to really grab some traction and start being a force in the market.

Second, as shitty as this deal is by any Open Source standard, it's a hell of a lot better deal than anyone else has ever got from Microsoft. Novell is in control of their own API's, and is free to configure and sell distributions without Microsoft's permissions. In a world where an HP or a Dell can't chose to sell Windows boxes without Microsoft revenue streams attached, (to say nothing of actual components like Internet Explorer), this is an extraordinary amount of freedom. If Novell were to actually catch fire with this deal and start selling in the high tens of millions of units shipped, that's a lot of money that Microsoft is letting go to a relatively independent vassal, and I don't think they've ever let that happen before.

In effect, Microsoft is attempting to trade ownership and control of the operating system for ownership and control over the rights to sell the operating system. Assuming their royalty rates are non-trivial, this could be the cheapest money Microsoft's ever made.

Best of all, from Microsoft's perspective, is that this is a time-limited deal, set to expire in five years. If Novell really does somehow become a Linux colossus, the Microsoft of five years from now will just decline to re-up on the deal, or will drastically spike the royalties, and Novell will be up against the wall, alone, without a viable industry of Linux companies to partner with.

Microsoft has done this sort of thing from day one. Microsoft famously forced Apple to give them the rights to the Windows interface in exchange for Microsoft allowing Apple to continue to have Applesoft BASIC back in the early 80's, after the initial licensing agreement expired. Apple wasn't expecting to lose Applesoft at the time, wasn't prepared for it, couldn't afford to let it die, and so gave Microsoft the keys to the kingdom that would power them for the next 20 years. And two years later, the Apple ][ was completely irrelevant in the market, and the value that they had traded for was dust.

Negotiating with Microsoft is like dining with Hannibal Lecter. They're smarter than you, and they're a whole lot more vicious. No matter what you think you're getting out of the deal, you're in grave danger.

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