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Worst-Case Scenario or Sure Shot? - More on the Novell-MS Deal
Tuesday, May 29 2007 @ 05:01 PM EDT

I see a number of journalists have now read the patent peace agreement and the accompanying technical and marketing agreements that Novell filed on Friday with its 10K. And most are noticing that Novell has expressed in its risks section in that annual report that if the GPLv3 does what it currently says, then it could impact the Novell-Microsoft deal:
If the final version of GPLv3 contains terms or conditions that interfere with our agreement with Microsoft or our ability to distribute GPLv3 code, Microsoft may cease to distribute SUSE Linux coupons in order to avoid the extension of its patent covenants to a broader range of GPLv3 software recipients, we may need to modify our relationship with Microsoft under less advantageous terms than our current agreement, or we may be restricted in our ability to include GPLv3 code in our products, any of which could adversely affect our business and our operating results. In such a case, we would likely explore alternatives to remedy the conflict, but there is no assurance that we would be successful in these efforts.

Kevin Murphy in his CBR Online article, Novell outlines GPLv3 worst-case scenario, noticed that this seems discordant with what Novell told him in March:

A Novell spokesperson had told us in late March: "Nothing in this new draft of GPL3 inhibits Novell's ability to include GPL3 technologies in SUSE Linux Enterprise, openSUSE, and other Novell open source offerings, now and in the future."

Obviously, something doesn't match up. Why? I think it's simply because there is a new factor discovered since March -- namely that the vouchers have no expiration date.

As Murphy puts it in his article, GPLv3 "outlaws" the type of patent covenant Novell entered into with Microsoft, which I call the NotaDuck agreement. Here's one section in the GPLv3 that talks about such deals:

You may not convey a covered work if you are a party to an arrangement with a third party that is in the business of distributing software, under which you make payment to the third party based on the extent of your activity of conveying the work, and under which the third party grants, to any of the parties who would receive the covered work from you, a patent license (a) in connection with copies of the covered work conveyed by you, and/or copies made from those, or (b) primarily for and in connection with specific products or compilations that contain the covered work, which license does not cover, prohibits the exercise of, or is conditioned on the non-exercise of any of the rights that are specifically granted to recipients of the covered work under this License[, unless you entered into that arrangement, or that patent license was granted, prior to March 28, 2007].

Notice the word "unless" at the end? And the date? You might at first conclude that this clause means Novell "gets away with it" and in fact on first reading I thought that also. I think Novell may have understood it that way, too, judging by the March statement. The new filing makes me think that they understand now the danger better, as do I, since learning about the vouchers.

We only just learned this month that the vouchers it sold to Microsoft have no expiration date. And Eben Moglen has explained the significance of that fact. I reported it here on May 18. Todd Bishop broke the story that day on his Seattle PI blog, having listened to the OpenLogic webinar where Moglen spoke (you can listen too). It's the first I knew this, and it may be the first Novell knew it too. By that I mean, it may be the first Novell realized the importance of that fact, how it would all play out. I don't like this patent deal, but I don't believe for one second that Novell would mislead anyone about it deliberately. To understand why this new information is so important, let's read another paragraph in GPLv3:

If, pursuant to or in connection with a single transaction or arrangement, you convey, or propagate by procuring conveyance of, a covered work, and grant a patent license providing freedom to use, propagate, modify or convey a specific copy of the covered work to any of the parties receiving the covered work, then the patent license you grant is automatically extended to all recipients of the covered work and works based on it.

This is a description of what Microsoft is doing with the vouchers. Notice that it doesn't actually outlaw such behavior. You can enter into deals like this, but GPLv3 will make such deals unappealing. To Microsoft, the deal becomes toxic, if it wishes to use patents to damage Linux or whatever the plan is. So it doesn't really outlaw anything. Microsoft is free to do such a deal, still, if it wishes to give its 235 patents freely to the Linux and FOSS community. And of course, I wish it would. Why not solve the interoperability problem, as it views it, that way? That plus standards, and shazaam. The problem is solved.

David Berlind correctly noted that Microsoft isn't giving the vouchers away. It sells them, and it is free to make a profit and keep the change:

Novell acknowledges and agrees that Microsoft may exercise its sole discretion in determining how and whether to use and/or distribute the Prepaid Subscription Rights to best implement Microsoft’s internal business strategies for driving incremental revenue growth and otherwise furthering Microsoft’s business interests. Accordingly, Microsoft, in its sole discretion, will establish the price it will charge Shared Customers and other SLES licensees for such Prepaid Subscription Rights. Novell acknowledges that it is not entitled to share in any revenue (if any) generated by Microsoft from the distribution of the Prepaid Subscription Rights.

These aren't just coupons that they throw into the box, freebies they hope you'll decide to use one day to try out SUSE. People pay for the vouchers, up front, and they pay Microsoft, not Novell. Anyone out there still think that Microsoft isn't distributing, even under GPLv2? And of course, under GPLv3, it doesn't need to be, although it also still would be, by my understanding. GPLv3 describes behavior that Microsoft is involved in. So that is why it would be stuck like a dead butterfly to an exhibit wall under GPLv3.

So, with the deadline for GPLv3 just around the corner, Microsoft is facing a dilemma I doubt it anticipated when it entered the deal, and Moglen remarked on how Microsoft seems to be trying to get rid of the vouchers as fast as it can. The Dell deal comes to mind. So what will happen to Microsoft once GPLv3 is active? Here's a portion of what Moglen said about this at the webinar:

Microsoft's activity will begin to disperse patent defenses into the community. When GPL 3 goes into effect, every Microsoft coupon handed to somebody, which results in the shipment of a Novell Server Edition product to that coupon-holder, will result in a conveyance of broad patent defenses to parties throughout the community....

You have been watching for months as Microsoft gave away these coupons -- which were supposed to be valuable to Microsoft, and for which it paid a lot of money -- as though the coupons themselves were hot, as indeed they are. All of this giving away coupons activity by Microsoft is meaningless and useless. The coupons have no expiration date, and Microsoft can be sure that some coupons will be turned into Novell in return for software after the effective date of GPL 3. Once that has happened, patent defenses will, under the license, have moved out into the broad community and be available to anybody who Microsoft should ever sue for infringement.

So, the way this all adds up to my understanding is that it's certain to happen. It's not just a worst-case scenario. It's a train coming straight at Microsoft's patent threats, and I'm guessing Microsoft is trying to figure out how to untie itself from the track. No doubt Microsoft will in time address the matter and say something, but I can't help but think that the current "but we never meant to rattle our patent saber" talk may stem from an awareness that the game is over, or at least this part of the game. Moglen has already said he'll issue a statement after he's had time to review all the agreements and analyze them. So this is just li'l ole me talking about how I understand things so far.

I'm still analyzing the agreement myself, but from what I see, the promise being offered doesn't cover anywhere near what I thought it did. But that's for a later article.

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