Microsoft on Tuesday filed a patent-infringement action against Salesforce.com in the U.S. District Court for the Western District of Washington. Microsoft claims Salesforce.com's customer relationship management (CRM) product trespasses on nine of its patents.
The patents in question work to make CRM software more efficient. But by targeting Salesforce.com with the suit, it appears Microsoft is going for the jugular. CRM is at the heart of Salesforce.com's business model.
Microsoft is seeking a court order that would prohibit Salesforce.com from offering features in its software suite that infringe on its patents. If Microsoft succeeds, it could damage the core of Salesforce.com's business.
Microsoft vs Salesforce.com
"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," said Horacio Gutierrez, corporate vice president and deputy general counsel of intellectual property and licensing. "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."
Salesforce.com Director of Public Relations Gordon Evans declined to comment on the lawsuit. However, the company's recent regulatory filing mentions a "large technology company" alleging patent infringement in 2009. In the regulatory filing, Salesforce.com said it was in talks with the company.
"The resolution of this claim is not expected to have a material adverse effect on our financial condition, but it could be material to the net income or cash flows or both of a particular quarter," Salesforce said in the filing. Unless there are additional IP-infringement allegations that have not yet been revealed, it appears that "large technology company" could be Microsoft.
Is Salesforce.com a Threat?
It's very unusual for Microsoft to file a patent-infringement suit. In fact, Microsoft has only filed four such suits in its history, though the company has been the defendant in scores of suits. Could Microsoft be threatened by Salesforce.com's Software-as-a-Service model? It's possible.
Charles King, principal analyst at Pund-IT, said many see CRM as a growing opportunity in the Software-as-a-Service arena -- partially due to Salesforce.com's success and high profile in the market.
"CRM is an area that has almost by definition become increasingly contentious over time, especially as upstart service vendors like Salesforce continue to infringe on the turf of established software vendors like Microsoft and many others," King said.
As King sees it, packaged business software tends to swell over time. Business consumers who purchase a productivity package, for example, may end up buying more than they really need. King said, "One of the underlying benefits that a company like Salesforce offers is to provide companies the ability to tailor their CRM suites to exactly the sorts of services and applications and solutions that they need rather than buying a more overarching suite, much of which goes unused."