Microsoft backs off Novell patent buyout after US government intervention

The DOJ limits Microsoft's purchase of Novell patents.


Microsoft will not be able to keep patents it proposed to buy from Novell under an agreement with the US Department of Justice.

Novell, distributor of the SUSE Linux OS, has agreed to change its proposed deal to sell patents to CPTN Holdings, a Microsoft-organised consortium of companies, in order to satisfy DOJ concerns about the impact on open source software, the DOJ said.

The agreement with the DOJ will require Microsoft to sell the Novell patents back to Attachmate, which announced in November it was merging with Novell. Microsoft will receive a licence to use those patents, and patents acquired by the other three owners of CPTN.

Novell has no comment on the agreement with the DOJ, a spokesman said. Microsoft said it was pleased that the patent sale and Novell's merger are moving forward.

Open source approval

The Open Source Initiative (OSI), a nonprofit that reviews open source licences, said it approves of the DOJ deal. The agreement shows "open source is a crucial market force, ensuring strong competition and as such deserves regulatory recognition and protection," Simon Phipps, an OSI director, wrote.

The agreement from both Novell and CPTN to modify the deal will not end a DOJ investigation into the sale, the DOJ said. But the changes will allow the first phase of the $450 million deal to proceed, the DOJ said.

CPTN, owned by Microsoft, Oracle, Apple and EMC, filed paperwork in November announcing its plan to buy 882 Novell patents.

The patent sale, as originally proposed, would have jeopardised the ability of open source software to innovate and compete in middleware, virtualisation and server, desktop and mobile OS markets, the DOJ said.

"The parties' actions address the immediate competitive concerns resulting from the transfer of Novell's patents," said Sharis Pozen, deputy assistant attorney general in the DOJ's Antitrust Division. "To promote innovation and competition, it is critical to balance antitrust enforcement with allowing appropriate patent transfers and exercise of patent rights."

Attachmate merger

CPTN sought to buy the patents in a two stage transaction related to Novell's planned merger with Attachmate, also announced in November. In the first phase, CPTN would acquire the patents and applications, and in the second phase, CPTN would distribute the patents to each of its four owners.

Under the agreement with the DOJ, EMC will not acquire 33 Novell patents and patent applications that have been identified as related to virtualisation software.

In addition, all of the Novell patents will be subject to the GNU General Public Licence, Version 2 and the Open Invention Network (OIN) Licence, a significant licence in Linux, the DOJ said. CPTN will not have the right to limit which of the patents are available under the OIN licence, and CPTN and its owners will be prohibited from encouraging Novell or Attachmate to modify which patents are available under the OIN licence, the DOJ said.

Deal inevitable?

The deal with the DOJ has been in the works for weeks, said Florian Mueller, an open source advocate and blogger. While some in the open source community were unhappy with the agreement, Mueller downplayed the impact of the patent sale.

"The Novell patent deal got a lot of attention but in the greater scheme of things even the original deal wouldn't have had huge impact on the competitive landscape," Mueller said. "There are countless software patents out there one way or the other."

The agreement with the DOJ appears to show that Microsoft was most concerned about getting licences to the Novell patents, and not in owning them, Mueller added. "Considering that Microsoft files thousands of patent applications every year, they don't need to acquire a couple hundred Novell patents to beef up their portfolio," he said.

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