Salesforce.com CEO Marc Benioff used strong language during a recent earnings call to describe a patent-infringement lawsuit leveled against his company by Microsoft, which he equated with "alley thugs." Microsoft alleges that Salesforce infringed on nine of its patents related to cloud-based applications. Benioff also hinted that Microsoft's lawsuit could grievously affect other cloud vendors. Although Microsoft has traditionally focused on hybrid and on-premises solutions, its increased attention to the cloud brings it into competition with companies such as Salesforce.
Salesforce.com CEO Marc Benioff minced no words in
describing the recent patent-infringement lawsuit leveled against his company
by Microsoft, using the pulpit of a May 20 earnings call to compare the legal
action to a late-night mugging.
"The reality is that these patent trolls are unfortunately
just part of doing business in technology these days," Benioff told analysts
and reporters, according
to an earnings-call transcript published on Seeking Alpha
alleges that Salesforce, which markets cloud-based applications for business
intelligence and other areas, violated
nine of its patents.
From there, Benioff's language escalated:
"They're basically the alley thugs. Every thriving economy
has alley thugs, and we do, too, and that's fine," Benioff said, "Personally,
I'm just disappointed to see this from a former leader of our industry, but
it's imminently resolvable, and it's not material to our day-to-day business."
Benioff suggested that the lawsuit could have a broad impact
on companies developing similar cloud-based platforms: "I think it probably has
more ramifications for other cloud vendors than it, honestly, does for us
because we're strong. And a lot of other cloud CEOs have been contacting me,
and my heart goes out to them and because I feel like that's the real impact is
that if you go through it, you can see where this is going. And there's
obviously a next step here, and it's not about us, it's about others."
The amount of damages claimed by the lawsuit remains
unspecified, although the patents contested by Microsoft cover very 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
While Microsoft continues to play out its legacy in
desktop-based and hybrid software, the cloud has become an area of increased
focus for the company, as more and more businesses gravitate toward receiving
applications over the Web as opposed to running them on-premises. Meanwhile,
Salesforce has been at the vanguard of pushing cloud-based platforms as the way
of the future-placing it on a collision course with Microsoft as the software
giant tries to adopt a suitable strategy in that market.
Salesforce's recent push to attract developers also puts it
at odds with Microsoft, which has pushed application development using its .NET
framework. For its part, however, Microsoft is framing the lawsuit against
Salesforce as a straightforward case of 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, wrote 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."
But Benioff's comments cast the lawsuit as a more strategic
move by Microsoft, a point of view supported by some analysts.
"Microsoft considers these to be the core patents, ideas
that differentiate Microsoft's offerings broadly," Rob Enderle, principal
analyst of the Enderle Group, wrote in an 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."
In that spirit, Enderle theorized, Microsoft could be
choosing to make an example of Salesforce, if only to flex its litigation
muscle: "Microsoft's investment in this effort will be significant. They've
been doing this for decades."
The Salesforce lawsuit comes at a time when Microsoft finds
itself embroiled in other legal action, including a patent-infringement lawsuit
leveled against it by Canadian firm i4i that has already passed through several
rulings and appeals. On May 17, Microsoft announced that it would pay $200
million to settle a patent-infringement suit leveled against it by VirnetX,
which builds communication and collaboration technologies.