Microsoft and Novell Thursday announced a wide ranging business and technology partnership designed to make it easier for companies to run, integrate and manage Linux and Windows in their environments while steering clear of patent and intellectual property concerns.

The companies said an agreement not to assert patent and intellectual property rights would run through 2012. The agreement applies to independent and other open source developers who have often feared patent suits from Microsoft.

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Financial terms of the partnership were not announced, but both companies said they will make upfront payments in exchange for a release from any potential liability for use of each other’s patented intellectual property.

On the technology side, the agreement focused on virtualization, Web services for managing physical and virtual servers and the integration of document formats specifically in Microsoft’s Office and Novell’s OpenOffice.

“I think this will make our respective products more attractive to customers,” said Microsoft CEO Steve Ballmer during a press conference in San Francisco where he was joined by Novell CEO Ronald Hovsepian.

While the two thanked each other for their respective cooperation, they repeatedly said the agreement was hammered out under the urging from customers who desperately needed interoperability for their mixed environments.

“It is great to see these leaders combining to solve key compatibility issues,” said Randy Cowen, the CTO of Goldman Sachs, who appeared on stage with Ballmer and Hovsepian.

Microsoft said it will provide a covenant not to assert its patent rights against customers who have purchased SuSE Linux Enterprise Server or other covered Novell products. Meanwhile, Novell will provide an identical covenant to customers who have a licensed version of Windows or other covered Microsoft products.

“This new collaborative relationship was only possible with the intellectual property bridge we built between the proprietary and open source model,” said Ballmer. He added that the deal protects Microsoft’s intellectual property while ensuring that the open source development community can continue to innovate.

Microsoft general counsel Brad Smith said the companies worked for nearly six months to hammer out the complex legal agreement. “We had to do something no one has done before. We will ensure that every customer that purchases a subscription for SuSE Enterprise Linux will get not only service and support from Novell but a patent covenant from Microsoft.”