No long, drawn-out IP battle for Microsoft, which said Wednesday it has settled the patent-infringement cases Salesforce.com brought against it. Salesforce also settled with Microsoft in a countersuit.
The companies inked a patent agreement in which Salesforce will get broad coverage under Microsoft's patent portfolio for its products and services as well as its back-end server infrastructure. In return, Microsoft gets coverage under Salesforce's patent portfolio.
Microsoft filed a patent-infringement action against Salesforce in the U.S. District Court for the Western District of Washington in May. Microsoft claimed Salesforce's CRM product trespassed on nine of its patents. Salesforce countersued in June, alleging Microsoft willfully infringed on its intellectual property.
Salesforce Pays Microsoft
Nevertheless, the companies came to an agreement. The financial terms of the settlement were not disclosed, but Microsoft said Salesforce is making a payment based on the strength of Microsoft's patent portfolio in the areas of operating systems, cloud services, and customer relationship management (CRM) software.
"We are pleased to reach this agreement with Salesforce.com to put an end to the litigation between our two companies," said Horacio Gutierrez, corporate vice president and deputy general counsel of intellectual property and licensing at Microsoft. "Today's agreement is an example of how companies can compete vigorously in the marketplace while respecting each other's intellectual-property rights."
The Cloud's IP Shootout
Dana Gardner, principal analyst at Interarbor Solutions, said the Microsoft-Salesforce spat and settlement demonstrates how the cloud-computing era changes the way vendors compete with each other.
With commercial software, vendors competed on the basis of the functionality of the software and customers knew precisely what they were buying. With the cloud, customers focus on the service and the service-level agreement without necessarily knowing what goes on behind the scenes.
"The way in which these vendors compete with each other is largely based on a legal shooting gallery of who can control and dominate intellectual property," Gardner said. "It's an interesting concern for enterprises. When they go to procure cloud services, they need to have an assurance that these legal issues have already been worked out."
Gardner believes Microsoft and Salesforce moved to settle the cases quickly to avoid the element of risk or unknown in the marketplace that neither company can afford to project to its customers. Enterprises that set out to procure cloud services don't want to find out a year from now that their provider is at legal risk, he said.