Microsoft on Tuesday fired a major shot across the bow at Salesforce.com, filing a federal lawsuit against the online software company claiming it infringes on nine patents.
The lawsuit, filed in federal court in Seattle (PDF or see end of post), seeks both monetary damages as well as temporary and permanent injunctions. Specifically, the company seeks a jury trial and also asks that the damages be tripled and that Salesforce be ordered to pay legal fees and other costs, arguing that the company's patent infringement is willful.
"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," deputy general counsel Horacio Gutierrez said in a statement. "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."
The patents cover a variety of back-end and user interface features, ranging from one covering a "system and method for providing and displaying a Web page having an embedded menu" to another that covers a "method and system for stacking toolbars in a computer display."
Microsoft sells its own online CRM software, though none of the patents it is suing over are specifically related to that product.
A Salesforce.com representative declined to comment on the case.
The software maker first notified Salesforce more than a year ago related to the alleged infringement, according to Microsoft. A Microsoft representative declined to comment on whether Microsoft has notified any other online software makers that it believes infringe on its patents.
In a January filing with the Securities and Exchange Commission, Salesforce said, without naming Microsoft, that a large tech company had said that it was infringing on their patents as part of a list of risk factors that could affect the company.
"During fiscal 2009, we received a communication from a large technology company alleging that we were infringing upon some of their patents," Salesforce said in the regulatory filing, known as an 8-K. "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."
At the time, the company said that it could offer no assurances that it would be able to prevent a suit, but added that "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."
It also said that the outcome of any litigation can be uncertain.
"Our technologies may not be able to withstand any third-party claims or rights against their use," it said. "Any intellectual property claims, including the one referenced above, with or without merit, could be time-consuming and expensive to resolve, could divert management attention from executing our business plan, and could require us to change our technology."
Although Microsoft has aggressively been trying to license out its own patents--and has been frequently the target of patent infringement suits--the Salesforce.com suit marks only the fourth time that the company has initiated a patent action against a rival. Other recent actions include litigation against Belkin and TomTom. Both the Belkin and TomTom cases were quickly settled.
Ray Wang, an analyst with Altimeter Group, called the suit a surprise, noting that Microsoft rarely sues other companies over patents, but says it is hard to say where things stand since Salesforce hasn't commented.
"Until Salesforce responds it's pretty tough to make a judgment," he said. "The question is 'Why haven't they responded?'"
Wang noted that the two companies have been seeing increased competition with one another, which could have been the impetus for Microsoft's legal action.
"We see Salesforce and Microsoft CRM battling head-to-head very often," he said. "It could be related to that."
This post was updated at 3:28 p.m. PDT with a Saleforce.com representative declining to comment and at 4:30 PDT with comments from analyst Ray Wang.