Microsoft is suing Salesforce.com, alleging nine cases of patent infringement. While Microsoft's public statements cast the case as purely one of patent infringement, analysts suggest that the company's actions could be based on a need to monetize its patent portfolio, or to show its willingness to litigate under certain circumstances. While Salesforce.com focuses primarily on cloud-based applications, Microsoft's own recent moves in the cloud put the two companies at strategic odds.
Microsoft filed an intellectual property suit against Salesforce.com May 18,
alleging infringement on nine of its patents. Patent-infringement suits are a
regular occurrence in the tech industry, and larger companies often use this
type of suit as part of a broader strategy. The question is, What sort of
motive lies behind Microsoft's legal action against the cloud-based software
provider?
According to Microsoft, the case is straightforward patent infringement.
"Microsoft has been a leader and innovator in the software industry for
decades and continues to invest billions of dollars each year in bringing great
software products and services to market," Horacio Gutierrez, Microsoft's
corporate vice president and deputy general counsel of Intellectual Property
and Licensing, said in a May 18 statement. "We have a responsibility to
our customers, partners and shareholders to safeguard that investment, and
therefore cannot stand idly by when others infringe on our IP rights."
A Salesforce.com representative had no comment on the lawsuit.
While Microsoft offers cloud-based solutions such as its xRM platform, the
company continues to invest heavily in on-premises software and hybrid
environments. By contrast, Salesforce.com-which has the corporate tagline,
"No Software"-has aggressively pushed cloud-based platforms as the
way of the future. Given the two companies' focus on the business audience, and
their radically different philosophies on software, a collision was perhaps
foreordained.
Salesforce.com's recent strategic moves include the launch of AppExchange 2,
the next generation of its online enterprise-application storefront, which will
include a new ChatterExchange with social enterprise applications built by
third-party developers. The company's Chatter platform, which allows
Facebook-style social collaboration among enterprise workers, is currently
undergoing a round of private beta testing.
Salesforce.com's push to enlist third-party developers also includes its
partnership with VMware to create VMforce, a platform that 6 million enterprise
Java developers can potentially use to work with the cloud environment. That
sort of maneuvering puts Salesforce.com even more at odds with Microsoft, which
encourages developers to build applications based on .NET.
While the amount of damages sought remains unspecified, Microsoft's
patents in the lawsuit cover specific areas such as, "Method and
system for mapping between logical data and physical data," "Method
and system for stacking tool bars in a computer display" and "System
and method for providing and displaying a Web page having an embedded
menu."
But what lies behind Microsoft's decision to pursue a lawsuit now?
"It may be there's a tactical angle to this-where Microsoft puts a
stick in Salesforce's spokes," Roger Kay, an analyst with Endpoint
Technologies Associates, told eWEEK in a May 19 interview. "But I don't
think Microsoft's motive here was, 'Hey, how can we mess these guys up?'"
Instead, Kay said, Microsoft may be seeking ways to "monetize" its
large patent portfolio, by exploring where a rival company's technology
potentially conflicts with its existing intellectual property.
Kay added: "It doesn't seem as if Microsoft is challenging the core
intellectual property of Salesforce. It's really about Microsoft having looked
over Salesforce's operations and seen some pieces of plumbing that looked like
it could belong to them."
Nonetheless, other analysts suggest that the patents cited by Microsoft are
particularly valuable.
"Microsoft considers these to be core patents, ideas that differentiate
Microsoft's offerings broadly," Rob Enderle, principal analyst of the
Enderle Group, wrote in a May 19 e-mail to eWEEK. "They won't license
these and approached Salesforce and Salesforce evidently [blew] them off,
likely thinking that Microsoft wouldn't litigate because they rarely do."
According to Enderle, that move could translate into a protracted legal
battle.
"Microsoft uses the threat of litigation, and to use that threat
effectively and not have to litigate broadly it has to be real and
frightening," Enderle wrote. "This means from time to time they have
to make an example of a company so that the threat works and they don't have to
incur massive legal fees every time there is a problem like this."
Salesforce.com, Enderle added, "will not be that example and
Microsoft's investment in this effort will be significant. They've been doing
this for decades."
In any case, this isn't the only intellectual property battle engaging
Microsoft's attention. The company's current legal woes include a patent-infringement
lawsuit leveled against it by i4i, which alleges a violation of its custom XML-related patents; on May 11, the
U.S. Patent and Trademark Office confirmed the validity of the patent in
question, limiting Microsoft's options after months of judgments and appeals.
In addition, Microsoft announced on March 17 that it would pay $200 million
to settle a patent-infringement suit leveled against it by VirnetX, which
builds communication and collaboration technologies. In March, a Texas
jury found that Microsoft
had infringed on two U.S. patents held by VirnetX, and ordered the software
giant to pay $105.7 million.
Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.
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