h1

Microsoft Sues Salesforce.com over Patent Infringement

May 30, 2010

You might have seen in the news that Microsoft has filed a lawsuit against Salesforce.com alleging that Salesforce has used Microsoft patents without license.  Microsoft has only filed lawsuits like this three other times in its history, so it was a bit funny this week that Mark Benioff demonized Microsoft as “alley thugs” in his investor conference call.  Beyond the name calling, Benioff went on to say, “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. It’s basically a no-impact situation. It’s not something that, I think, anyone needs to make anything of. I think it probably has more ramifications for other cloud vendors than it, honestly, does for us because we’re strong.”

If I were on a conference call with investors, that’s probably what I’d say, too…but if you dig a bit deeper into the actual patent violation suit, this may pose a big problem for Salesforce and its ability to retain its user interface and current feature set.  Eight patents are included in the lawsuit.  None of the patents violated really have anything specifically to do with CRM itself of anything in the Dynamics line.  The patents in question are for pretty basic things — like the automatic updating of software.  Here’s the summary from one of the patents:

Creators of computer software provide the most up-to-date versions of their computer software on an update service. A user who has purchased computer software calls the update service on a periodic basis. The update service automatically inventories the user computer to determine what computer software may be out-of-date, and/or need maintenance updates. If so desired by the user, the update service computer automatically downloads and installs computer software to the user computer. By making periodic calls to the update service, the user always has the most up-to-date computer software immediately available. The update service may also alert the user to new products (i.e. including new help files, etc.), and new and enhanced versions of existing products which can be purchased electronically by a user from the update service.

So, back on December 1, 1998 when this patent was granted, automatic updates for software wasn’t something that everyone had.  Back in 1998, it’s possible that you didn’t have high-speed internet at your office, and it’s likely that you didn’t have it at home.  Microsoft pioneered that technology, and automatic updates provide one of Salesforce.com’s biggest strengths.  The whole “no software” concept is centered around their ability to deliver updates quickly and without the users intervention. 

The eight other patents in the Microsoft suit deal with a variety of underlying web and computing technologies, including “Method and system for mapping between logical data and physical data,” and “System and method for providing and displaying a web page having an embedded menu.”

We’ll see how this lawsuit plays out, but I suspect that Salesforce has picked a fight that it should have tried to avoid.  This fiscal year, Microsoft spent 9.5 billion (with a ‘b’) on research and development.  That’s more money than Salesforce has made.  Ever.

Advertisements

2 comments

  1. Thanks for the fascinating post. As I read the WSJ article, it states the lawsuit filed a couple of weeks ago “willfully infringed on patents related to methods including mapping data and displaying menus on Internet pages.”

    What I can’t get over is the value of the two stocks, as of May 28th, Friday’s close:

    – Microsoft Corp.(MSFT) 25.80
    – Salesforce.com Inc.(CRM) 86.53

    I did a double take when I saw that. There’s no way that Salesforce has three times the value of MSFT! Shorting stock is not my game, but if I had the inclination to be bold, this would be the play.

    V~


    • Salesforce doesn’t have three times the value of the MSFT. The individual stock shares may trade at different prices, but there are a *lot* more shares of MSFT. Microsoft is the largest software company in the world…



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: