Novell: GPLv3 Could Be Risky Business

Public companies are required to note possible risk factors that investors need to be aware of, and one of the risk factors reported by Novell notes the uncertainty of the effects of the new and upcoming GNU General Public License (GPLv3), according to the company’s annual U.S. Securities and Exchange Commission Form 10-K, released last week.

The latest version of that license, which is due out this summer, is delivered by the Free Software Foundation (FSF), and governs code that is used on a royalty-free basis in Linux distributions. The only reason the new version of the license might have an affect on Novell is that the FSF has added new patent-related requirements as a direct effort to combat Microsoft’s recent threats over open source solutions violating its software patents.

The FSF believes that the patent agreement between Microsoft and Novell, in which both parties agree not to sue each other’s customers for patent violations, is a collusion that undermines the goals of the FSF. GPLv3 is designed to prevent other such agreements from occurring between patent holders and open source distributors.

10-K Notes

In its 10-K filing, Novell notes:

“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.”

Risk Factors

“There were 23 risk factors that we outlined over seven or eight pages of our annual report, and this was one of them. There was a lot of initial reporting that suggested this was language that was in the agreements with Microsoft, which is not the case,” Bruce Lowry, Novell director of global public relations, told LinuxInsider.

“This is just one of those standard things in an SEC filing where you identify any known risks,” he added. “This is pretty standard practice. The risk factors are pretty broad, pretty high-level. Things like, ‘our sales strategy on indirect sales might not work the way we want.'”

Indeed, while the risk factors are more specific than noting that meteors may strike its headquarters, some are nearly as unlikely. For instance, the 10-K also notes that, “We benefit from the open source contributions of third-party programmers and corporations, and if they cease to make these contributions, our product strategy could be adversely affected.”

What’s Next?

Novell won’t offer specific interpretations of the draft for public comment, the company asserted. It is firmly committed to continuing its partnership with Microsoft, it added, in addition to supporting the free and open source software world.

“This is a still a draft, and it still has to come out in a last-call draft, and when it is in fact final, we’ll know what we’re dealing with and proceed on that basis,” Lowry said.

“We’re pleased that the current draft doesn’t exclude us from shipping Linux, and if there are things that are ultimately impacted, we’ll address them with Microsoft,” he added. “We definitely are not out there saying we are worried about this — we’re just observing it and we’ll react accordingly.”

Regardless of the GPLv3 outcome, it should be noted that Microsoft and Novell are two large companies with plenty of attorneys — if they want to do business together over Linux and Microsoft products, it’s not hard to imagine that they’ll be able to find a way.

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