May 31, 2007 / 12:06 AM / 12 years ago

Novell won't be punished for Microsoft deal: source

BOSTON (Reuters) - A foundation that owns rights to much of the code behind Linux software has decided not to carry out threats to punish Novell Inc. NOVL.O over a deal with Microsoft Corp, a person familiar with the matter said.

The nonprofit Free Software Foundation had threatened to take punitive action against Novell for entering into a patent agreement with Microsoft (MSFT.O), whose Windows operating system is a rival to Linux and is seen as a foe by the open source community.

Some saw the deal as endorsing Microsoft’s claims that it holds patents to intellectual property behind some open source software.

The foundation was reviewing whether to block Novell from getting access to the foundation-controlled components of Linux that will be distributed under the terms of a new licensing agreement that is being finalized.

One of the pioneering forces behind the open source software movement, the foundation has decided not to include any language in the final draft of the agreement that will punish Novell, according to the person familiar with the foundation’s deliberations.

“This is good news for Novell,” said Katherine Egbert, an analyst with Jefferies & Co.”

The foundation controls rights to a group of programs known as the GNU operating system, an important part of Linux.

The group does not control the software’s namesake, the Linux kernel, which is owned by another nonprofit, the Linux Foundation.

Free Software Foundation Executive Director Peter Brown would not discuss the foundation’s decision, but confirmed that it had finalized its proceedings.

Novell and its main rival Red Hat Inc. RHT.N sell standardized versions of Linux with custom features, maintenance plans and technical support.

The two companies also sell other types of open source software, including OpenOffice, which competes with Microsoft Word; Excel and PowerPoint programs; and XenSource, a rival to EMC Corp.’s EMC.N VMware software that boosts the efficiency of server computers.

Sales of Novell’s SUSE Linux products accounted for 5 percent of the $967 million in revenue that the company reported last year. The deal with Microsoft has turned into a far bigger cash generator, bringing in two upfront payments totaling $348 million.

The two companies agreed to sell their products jointly, develop technologies that make it easier for businesses to use Linux alongside Windows software, and not sue each other’s customers for any patent violations when using their software.

Some members of the open source community said that deal would undermine the patent security of Linux software and give Microsoft an edge in persuading businesses to use Microsoft products over Linux and other types of open source software.

The foundation is scheduled to disclose its decision on the Novell matter by June 4 on its Web site, www.fsf.org, when it will post the final draft of the new license, which is known as the General Public License version 3, or GPLv3.

Novell Chief Financial Officer Dana Russell declined comment on the matter.

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