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Microsoft, Salesforce suits are over who rules the cloud

Companies sue each other over software patents

By Robert Mullins on Fri, 06/25/10 - 5:05pm.

The lawsuits brought by Microsoft and Salesforce.com against each other will ultimately determine who owns the intellectual property (IP) rights to software once delivered on-premise that is now, increasingly, being delivered in the cloud.

Cloud computing represents a major shift in how enterprises use software to run their business. Traditional software and newly-created software service providers are scrambling to get a piece of the rapidly growing cloud market and, almost inevitably, competition will take place in courtrooms as well as in the market.

Salesforce’s federal patent lawsuit against Microsoft filed Thursday in Delaware is in response to a lawsuit filed May 18 by Microsoft against Salesforce in Seattle. In the countersuit, Salesforce accuses Microsoft of infringing on five Salesforce patents, one of them described as “work sharing and communicating in a web site system.”

So in a legal battle that pits the software pioneer Microsoft against the software-as-a-service pioneer Salesforce, the courts will have to sort out competing claims about whose cloud delivery model is protected.

Microsoft’s initial suit targeted Salesforce’s customer relationship management software, the 11-year-old company’s initial software-as-a-service offering; it’s since expanded to offer multiple software applications over the Web. Microsoft legal counsel Horacio Gutierrez said in a statement at the time that the company “cannot stand idly by” when Salesforce steps on nine of its patents.

Salesforce CEO Marc Benioff, ever the showman, was dismissive of the Microsoft suit in an earnings call a few days after the filing, snarkily referring to Microsoft as “a former leader of our industry” and a “patent troll” and “alley thug.”

On that last point, Benioff may be referring to the episode of “The Simpsons” in which Bill Gates acquires Homer Simpson’s nascent Internet business and immediately tells his aides, “Okay boys, bust it up!”

Benioff has long argued that the days of on-premise software are numbered. In 2008, I saw him debate SAP co-founder Hasso Plattner before an audience at the Computer History Museum in Mountain View, Calif., and tried to get Plattner to convert the enterprise software giant to software-as-a-service.

As if to rub things in further, Salesforce hired Microsoft nemesis David Boies as the lawyer to press Salesforce’s suit, which alleges that Microsoft’s .NET framework and its SharePoint collaboration platform violate Salesforce’s patents. Boies successfully led the U.S. Justice Department antitrust case against Microsoft in the 1990s. Less successfully, Boies represented then Vice President Al Gore in Bush v. Gore in 2000.

In an e-mail, Salesforce spokeswoman Jane Hynes declined to comment on the suits beyond what the company will say in court, but downplayed their significance. “We do not see this as material to our business.”

However, software-as-a-service providers have a material interest in following the outcome of these cases to determine the impact they will have on how they compete in the cloud and what IP rights they have to respect.

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