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Re: Novell-MS Pact: "intentional interference with contractual relation

From: Alexander Terekhov
Subject: Re: Novell-MS Pact: "intentional interference with contractual relations" comes to Esq. Mettler's mind
Date: Fri, 24 Nov 2006 16:02:15 +0100

Microsoft's illegal conduct in the patent agreement

I have mentioned this before but it bears repeating.

When Microsoft agreed with Novell to cross their promises not to sue
customers, Microsoft (and Novell) have likely violated the law.

They can both stand up and make it sound like it is just another cross
marketing agreement. But, that might not be the case.

As for Novell, the charge is rather simple. The agreement violates GPL
2. It certainly does so in spirit if not the letter. But, I think a case
can easily be made that it also violates the letter.

As for Microsoft it is a bit more complex. Microsoft has not signed the
GPL license (as no licensee or redistributor does). But, it is also not
bound by the GPL terms since it does not distribute it. Actually, I am
sure Microsoft is in possession of a number of copies of Linux and I am
sure they were not all boxed sets. And I am sure they (their Linux lab)
has not limited themselves to those distributions available in boxed
sets either. So legally speaking Microsoft most likely has not violated
the GPL. It is not doing anything with Linux other than what is granted
to it under the GPL. As least as far as their lab is concerned.

But what about making an agreement with Novell?

At first blush this is likely to be an intentional tort. A tort is like
a civil wrong. Taking someone's property could be theft. But it is also
“conversion”. Simply put, conversion is taking the property of someone
else. And you may sue someone for doing so in civil court. In other
words, the cops are not involved at all. You just sue them for taking
your stuff. The remedy is that they must give it back or pay for its
value. But, if it is an intentional tort (such as conversion), punitive
damages may also apply. So when Microsoft engages in an intentional tort
they do run the risk of punitive damages. And I would think that
punitive damages for attempting to take or harm IP of a competitor could
be substantial indeed.

But, what tort has Microsoft committed? And does it matter that Novell
apparently called them first? At the present time “intentional
interference with contractual relations” comes to mind. I have mentioned
this before. And while you rarely see this cause of action as the sole
reason for a law suit it is often times tossed in on top of other major

Intentional interference is an intentional tort. When you have parties A
and B in a contract and a third party “C” comes along making an
agreement with A with the intent to destroy the relationship with B (or
cause A to breach the agreement with B), then you have the basis for
such a charge.

And what has Microsoft done here?

Microsoft has entered into an agreement with Novell with the intent of
sabotaging the GPL. Microsoft clearly has the intent to disrupt the deal
between the FSF and Novell. At least they have certainly done that since
the FSF is claiming it may have been breached and Novell is claiming at
least publicly that it has not. And it does not matter that Novell
thought it made monetary sense to violate the GPL. In almost all of
these cases, the third party, company C, does make a tempting offer to
seal the interference. And the eventual test is whether or not company C
(Microsoft) sought to disrupt the preexisting relationship. Of course,
the harm is felt by B (i.e. FSF).

In Microsoft's case, this could also be the basis for an antitrust
violation. Almost any act can form the basis for a violation of the
antitrust laws if the act was intended to preclude a competitor from the
marketplace or seriously disadvantage a competitor. Of course, the
details are more complex than that. But, that is the basic premise.

Microsoft just can not restrain itself from illegal activity. As far as
the antitrust angle is concerned, Microsoft engaged in illegal acts when
it caused SCO to be financed. Its only interest in that case was to
finance someone attacking a competitor. And normally that is not a
problem. But when a monopolist does so with the intent to restrain a
competitor, the situation is different. That is why Microsoft came up
with their "we are just licensing UNIX" argument. But, of course, that
argument does not apply to the financing Microsoft "backedup".

Now it would appear that the FSF (Free Software Foundation) as holders
of many of the copyrights relating to the Linux kernel and other
applications has decided not to pursue legal redress against Novell or
even Microsoft. Or, at least that is the current position. That may
change however. And, of course, the FSF does not hold all of the
copyrights related to possible GPL violations. I fully assume that many
individuals hold their own copyrights. But, individuals are less likely
to engage in major litigation in order to protect their own interests.
They do have that right however. And, of course other copyright holders
include Red Hat, IBM, Novell itself and other well known Linux
distributors. But, I assume the FSF is going to take the lead position

Keep in mind that I do agree with the apparent FSF strategy of trying to
work with Novell on this issue and at the same time amending the wording
for GPL 3 to be more clear on just what conduct is acceptable for
licensees. And as for those individuals holding copyrights on work
contributed to the Linux kernel or other applications, this patent
agreement puts some extra emphasis on the care to be used in drafting
GPL 3.

In summary, has Microsoft again engaged in illegal conduct? Yes, they
have. And has Novell violated the GPL? I think that is true as well.
Although it may only have violated the spirit rather than the letter.

However, Linux distributors have to learn that when their business
relies upon the redistribution of work contributed by others, the spirit
of the agreement is just as important as the letter. Otherwise, those
contributions can cease. And if the letter is likewise violated, the
right to distribute can terminate completely.

It is nice to see Novell do as much as they do in regard to patents.
However, working with patents does not permit nor excuse violations of
the GPL. And in that regard, it is the perception of the violation that
is important. It would not matter if a court of law approved the patent
deal or agreed it did not violate the GPL if contributors see it another

And I have to risk saying the obvious. If a third party such as
Microsoft (a non-contributor) is collecting royalties on Linux sales,
independent contributors will always see that as a violation of the
rights they have extended. That would be true even if IBM (for example)
were collecting royalties on Linux.

Novell needs to wake up and realize what market it is in. And the
benefits it receives for being in that market. And it has to respect the
rights of those who have contributed the work that Novell distributes
and supports. Their recent agreement with Microsoft does NOT do that.
That agreement only disrespects the work contributed by others.

He he.


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