Microsoft has been on the wrong side of a couple patent issues recently–the case with i4i over XML in Microsoft Word, and its recent settlement with VirnetX over VPN networking technology patents–but Microsoft does have an exhaustive portfolio of intellectual property and its not afraid to use it. Microsoft has filed a lawsuit against Salesforce.com alleging infringement of patents related to software efficiency.
At the heart of the lawsuit is a battle for the customer relationship management–or CRM–market. CRM tools are a huge business software market, and Salesforce.com is a leader–raking in $1.3 billion in sales last year. However, Microsoft has its own CRM software and it would like to knock Salesforce.com down a notch and capture a bigger piece of that lucrative pie.
The suit, filed in U.S. District Court in Seattle, claims that Salesforce.com’s CRM software violates nine different Microsoft patents and seeks an injunction as well as significant monetary compensation. An injunction would force Salesforce.com to cease using any technologies judged in violation of Microsoft’s patents, perhaps denting the capabilities of Salesforce.com’s CRM product and boosting the value of Microsoft’s competing Dynamics CRM software.
Horacio Gutierrez, corporate vice president and deputy general counsel of Intellectual Property and Licensing for Microsoft said in a statement “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. We have a responsibility to our customers, partners, and shareholders to safeguard that investment, and therefore cannot stand idly by when others infringe our IP rights.”
Microsoft also recently alleged that the Linux-based Google Android mobile operating system infringes on Microsoft intellectual property, but it entered into an amicable licensing agreement with HTC and is ostensibly in talks with other Android smartphone manufacturers. The fact that Microsoft is seeking an injunction in this case demonstrates that Microsoft sees Salesforce.com as a direct competitor and a threat to the success of Dynamics CRM software, and that it would rather hinder the capabilities of Salesforce.com than profit by its success through a licensing agreement.
Had Salesforce.com been more amenable, though, perhaps it wouldn’t have come to this. According to the annual SEC regulatory filing of Salesforce.com, it acknowledged that a large tech company had contacted it regarding patent infringement allegations, but that an examination of the merits of the claims was still ongoing. If Salesforce.com would have agreed on the merits of the patent claims and entered into negotiations with Microsoft, its possible Microsoft’s intellectual property could have been licensed.
Businesses that rely on Salesforce.com don’t need to panic. Should Salesforce.com ultimately lose this battle, it will most likely result in minor modifications to the functionality of the software related to the Microsoft patents.
From Microsoft’s perspective, if it is successful in both stripping functionality from Salesforce.com’s competing CRM software with an injunction, and simultaneously hitting it in the wallet with substantial penalties and damages, it provides a win-win that can give Microsoft’s Dynamics CRM a strategic window of opportunity to seize some market share.