It seems to me M$ would have to reveal its source code if it wants to prove that Linux has stolen it.
According to the article, MS is claiming PATENT INFRINGEMENT. This can be demonstrated by an examination of the patent and the Linux source code in question. Any pertinent MS source code would not have to be divulged.
Now that's a good point. The lawsuit would end right there.
No, because that's not what they are saying. Patents are on things like software algorithms - it wouldn't matter if you wrote the source code for a certain algorithm from scratch, on your own, with no other references. If that algorithm is patented, you would need to license it from the owner of the patent.
For example, Microsoft was granted a patent on the FAT file system, a format for storing data files on disk (http://news.com.com/Microsofts+file+system+patent+upheld/2100-1012_3-6025447.html).
If Linux contains code that reads and writes from a FAT file system, it may be in violation of that patent. It's not saying Linux "stole" the code from MS. Even if it was written from scratch, it is implementing algorithms that have been patented.
They don't have to publicly reveal it. Both sides would have experts who are allowed to look at it. I know because my company when through a $1M dollar lawsuit for something similar. We had to allow their expert total access to our code. We ended up kicking their butts in court!