Microsoft to pay Novell $308m for Suse deal

Microsoft is to pay Novell a net amount of $308m to market and distribute its competitor's product.

The five-year Microsoft-Novell partnership, unveiled last week, involves a mix of patent, technology and business issues. Novell disclosed details of the partnership in a Securities and Exchange Commission filing on Tuesday.

Microsoft will pay Novell $240m for 350,000 coupons - 70,000 per year - entitling customers to support and maintenance for Novell's Suse Linux Enterprise Server, said Novell chief executive Ron Hovsepian. In addition, Microsoft will spend $94m over the five-year deal on its own sales and marketing work for Suse products.

Microsoft hopes the partnership will help the fortunes of its management software for virtualisation - technology that lets different operating systems run simultaneously on the same server - said general counsel Brad Smith. "The principal purpose of this is to enable us to take our virtualisation solution to market," he said.

The deal also involves patent-related payments. Microsoft will pay Novell a net amount of $108m in an agreement under which both companies release each other from patent claims from past actions, said Hovsepian.

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However that will be offset by Novell payments of at least $40m over the course of the deal to ensure Microsoft won't sue Suse customers for patent infringement. The Novell payments are based on how much revenue Novell garners from sales of its Linux and Open Enterprise Server products.

Microsoft's Smith said: "There are two things in the patent deal. We had to address proprietary code and we had to address open source software. We addressed the proprietary issues through the net up-front payment. The open source [part] we addressed through the percentage of revenue."

Novell said its agreement with Microsoft doesn't violate the General Public Licence (GPL) - the licence that governs the Linux kernel. Novell's general counsel, Joseph LaSala, Jr, said: "We're not prohibiting the royalty-free copying or distribution of code. This agreement does not affect the freedom that Novell or distributors or customers have on code."

Under the agreement, Microsoft directly provides Suse Linux customers a covenant that the company won't sue for patent infringement, Novell said.

Stephen Shankland writes for CNET News.com