A couple of hours ago Microsoft announced that they are filing legal action against Salesforce.com for the infringement of nine of their patents. This is only the fourth time that Microsoft has proactively filed a patent infringement action. The patents Microsoft has included are:
- A system for mapping between logical and physical data
- A system for displaying a web page with an embedded menu
- A method for stacking toolbars
- Automated, template-driven generation of web pages
- Aggregation of system settings into objects
- Timing and velocity control for displaying graphical information
- System for identifying and obtaining software from a remote computer
- System and method for controlling data entities on a computer network
“During fiscal 2009, we received a communication from a large technology company alleging that we were infringing upon some of their patents. We continue to analyze the potential merits of their claims, the potential defenses to such claims and potential counter claims, and the possibility of a license agreement as an alternative to litigation. We are currently in discussions with this company and no litigation has been filed to date. However, there can be no assurance that this claim will not lead to litigation in the future. 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 of a particular quarter.”
Of course, patents need to be run through the courts nowadays before their claims can be considered valid. But just assuming for a minute that Microsoft’s patents do hold up in court I think Salesforce.com statement in the 8-K filing, assuming they’re talking about Microsoft, is a little on the optimistic side regarding the potential impact. Microsoft is claiming that Salesforce.com is infringing in such critical areas as data mapping, permission management, software updating and user interface design. That cuts to the heart of many of Salesforce.com’s key value propositions.
Additionally, when I spoke with Horacio Guiterrez, Microsoft’s Corporate Vice President and General Counsel, a couple of hours ago he clarified that there is one important part of Microsoft’s patent portfolio where they’re not inclined to pursue patent cross-license agreements – user interface technology. So odds are that unless Salesforce.com is willing and able to alter key areas of the user experience to Microsoft’s satisfaction than this is likely to end up in court.
And that is exactly where I’d like to see this go! Microsoft has consistently claimed that their patent portfolio is of the highest standard. But when pushed, most organizations prefer to take Microsoft up on a license agreement than fight things out in court. This time we might have a solid opportunity to see Microsoft’s claims of patent quality put to the test. Nine patents do not a portfolio make mind you. But I think a big, ugly and high stake case involving Microsoft’s own patents is exactly what this industry needs to see.
The other observation I can’t help but make is the nature of the competitive relationship between Microsoft and Salesforce.com that this action implies. This legal action seems to me to be a level of hardball that well eclipses their patent position relative to Linux. In that area Microsoft has tended to focus a lot more sabre-rattling and license agreements than a direct “see you in court.” I also can’t help but think, given the nature of the patents stated, that there are plenty of other SaaS providers also infringing. Why not announce legal action against a couple of SaaS vendors to stake a position relative to the SaaS market overall?
Personally I find it very hard to believe that the strategic value of who is being sued does not, at times, factor into Microsoft’s total calculus of determining where to aim their patent infringement actions. And if that reading is correct than clearly Microsoft has some deep concerns about Salesforce.com’s trajectory and what it means to their own cloud aspirations.
It looks likely that this case will weigh heavily in determining how that battle shakes out.
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