"We've had an issue, a problem that we've had to confront, and because open-source Linux does not come from a company -- Linux comes from the community -- the fact that that product uses our patented intellectual property is a problem for our shareholders," Ballmer said, according to transcripts of the speech released by Novell.

Big Bucks Deal

The deal with Novell involves an arrangement to increase the interoperability between the companies' competing software products and calls for Microsoft to pay Novell $440 million for coupons entitling users to a year's worth of maintenance and support on SuSE Linux.

In addition, Microsoft has agreed to recommend SuSE for Windows users looking for Linux options.

"We agreed on essentially an arrangement under which they pay us some money for the right to tell the customer that anybody who uses SuSE Linux is appropriately covered," said Ballmer.

"They've appropriately compensated Microsoft for our intellectual property, which is important to us," Ballmer went on to say. "In a sense, you could say that anybody who has got Linux in their data center today sort of has an undisclosed balance sheet liability, because it's not just Microsoft patents."

Not Everyone Happy

The controversial indemnity deal has been ripped in some corners, with critics accusing Novell of jeopardizing the future of Linux for its own short-term gains. Although Ballmer also said Microsoft is interested in creating similar deals with other major Linux distributors, including Red Hat, so far there have not been any other takers.

Red Hat maintains that it has already rejected a similar deal and considers such an agreement to be a form of intellectual property extortion. Red Hat has condemned the Novell pact as an "innovation tax" that could potentially "isolate communities or limit upstream adoption," according to a posting on the Red Hat Web site.

In his speech, Ballmer made it clear that, even with the agreement in place, Microsoft and Novell are still competitors.

"When it comes down to calling Goldman Sachs, the first thing I'm going to tell them is, let's get those Linux machines out of there and get some Windows in here," he said. "If you want to use Linux, let's make sure that you get a version of Linux that respects our intellectual property, and I will even help you with that because of the commitment we made."