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Will Legal Fears Freeze the Penguin?

By Eric Wahlgren Linux's bid to become a serious rival in Europe to Microsoft's (MSFT) dominant Windows operating system hit a bit of a snag this week. On Aug. 4, the city of Munich's plans to switch 14,000 computers to Linux's open source system was put on hold. The city had made headlines when it announced the scheme last May. Technology research outfit Gartner at the time called it one of the largest desktop migrations to Linux ever disclosed.

However, Munich says it's freezing the plan for fear that running Linux could potentially expose it to patent-violation charges. The municipality worries that it could be stuck with costly licensing fees and legal expenses. Before going any further, the city says it wants time to review all the legal implications.

LITIGATION HELL. This latest turn of events in the high-stakes battle over which operating system will rule supreme could have a big impact on Linux's fortunes in Europe. The outcome will depend on how the European Union decides to deal with patent law. The EU is currently considering a law to allow the filing of patents on software. Presently, there's no clear European legislation on the subject, analysts say.

The Continent's cities have been some of the larger Linux adopters, says Andrea Di Maio, a Gartner research vice-president in Milan who studies open source software implementation. Paris, Vienna, and Bergen in Norway are also either considering a move to Linux or are already switching from Windows.

However, Di Maio doubts that the EU legislation, if passed, would thrust Munich into litigation hell. Any future patent law in Europe would cover only state-of-the-art software developments rather than the more frequent incremental improvements to software, he believes, limiting the threat to users. What's more, European governments and companies are expected to lobby the EU to keep from making any potential patent legislation too severe. "I don't think there's going to be any big impact on users," Di Maio says. "This may delay migration, but I don't think it will stop it."

PROCEED WITH CAUTION. Despite the latest hiccup in Germany, tech watchers believe European governments and corporations will continue to embrace Linux. Cities and corporations alike are drawn to the software because unlike Microsoft's product, Linux is distributed by scores of companies, often for free. Linux suppliers make their money instead peddling things like modifications and maintenance.

Munich is "right to proceed with caution.," says Gabriel Lowy, an analyst with Blaylock & Partners in New York who follows publicly traded companies offering the Linux system. "But will this have a true chilling effect on other potential customers? I don't think so," he adds.

Di Maio says he was surprised by Munich's announcement, given that the city has already spent a year planning for the migration. "It's not clear why they suddenly discovered this after a year," Di Maio says. While a decision to move to open source software for a corporate client is based exclusively on costs, a municipality such as Munich may also consider the potential social benefits, he notes. When a city moves to Linux, for instance, the switch may give local software developers business, which would not be the case if a local government stuck with Microsoft, he says. "Maybe Munich realized it hadn't fully worked out the business case for migration and needed a reason to take another look," he says.

POTENTIALLY INFRINGEMENT. Munich officials could not immediately be reached for comment. But a spokesman for Linux software provider SuSe, a Novell company which bid on a Munich software-migration contract, put a happy face on the news. "We as a company take the issue of patents seriously," says spokesman Peter Joseph, who is based in Britain. "It's my understanding that this is a delay as opposed to a ceasing" of the project. SuSe also counts among its customers the Norwegian city of Bergen, which announced in June that it was trading Unix and Microsoft Windows applications for Novell's SuSe Linux servers.

The city's decision comes shortly after Open Source Risk Management, a San Francisco company that sells insurance against patent claims, released a study on Aug. 2 contending that the Linux kernel potentially infringed 283 U.S. patents, 27 of which are held by Microsoft. These patents have been issued but not yet validated by the courts. And looming in the background is software developer SCO Group's multibillion dollar suit against IBM (IBM) for allegedly using SCO's intellectual property in the development of a Linux operating system. Delays have pushed any court action on that case back to 2005.

The pause on the Munich Linux project pending investigation of the legal implications "is a very good lesson to other governments to weigh the business case of such a move," says Di Maio. Indeed, failing to fully anticipate the ramifications of a big information technology project has landed governments and companies alike in a lot of trouble. However, adds Di Maio, "Munich has spent too much face on doing this to not go through with it." So, the slugfest with Microsoft over control of computer operating systems on the Continent will only intensify. Wahlgren is a reporter for BusinessWeek Online in Paris

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