Business users of Linux's low-cost open-source software could owe Microsoft money for using its intellectual property, the firm's chief executive, Steve Ballmer, has warned. He says that the deal struck recently with Novell could be seen as proof that Linux has been using Microsoft's intellectual property.

Novell sells software based on the Linux operating system, designed by the Finnish engineer, Linus Torvalds, and available free. Microsoft claims to have identified elements in Linux that come from its operating system. Novell has settled with Microsoft but Ballmer has now issued a warning to companies using other software based on Linux.

Two weeks ago, The Business reported that Microsoft was plotting an attack on Linux. This followed a deal Microsoft signed freeing business users of Novell's SUSE Linux from any liability for copyright infringement.

Companies using other variations of Linux could find their IT systems becoming casualties in Ballmer's battle to protect Microsoft's intellectual assets.

"The fact that that product [Linux] uses our intellectual property is a problem for our shareholders," said Ballmer, speaking at an industry conference at Microsoft's Seattle base. "In a sense you could say that anybody who has got Linux in their data centre has an undisclosed balance sheet liability."

But he said business users of Novell's Linux software are now in the clear. "We've struck a deal under which we can provide patent agreements to Linux customers in which Microsoft's intellectual property is respected and we are appropriately compensated for the use of our intellectual property," said Ballmer.

Novell was anxious to sign a deal with Microsoft because some of its business customers feared that they could face legal problems. Red Hat, which sells its own version of Linux, is understood to have refused to sign a similar deal with Microsoft.

But Novell chief Ron Hovsepian says that the agreement with Microsoft was not an open acknowledgement that Linux impinges on any Microsoft intellectual property.

Ballmer stuck to his guns and responded that Microsoft and Novell had "agreed to disagree" on the point.