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Microsoft Accuses Salesforce.com of Patent Infringement

Microsoft Corp. sued Salesforce.com Inc. yesterday, accusing the company of infringing nine patents for ways to make software more efficient.

The complaint targets the customer-relationship management software that is the hallmark of Salesforce.com’s business. It seeks a court order that would prevent the San Francisco-based company from providing features that Microsoft claims it invented.

Salesforce.com, founded in 1999, sells subscriptions to Internet business software that runs marketing campaigns and tracks sales leads. It competes against Microsoft’s Dynamics programs and “has profited through infringement of the Microsoft patents-in-suit,” according to the complaint, filed in federal court in Seattle.

“More and more, we’re seeing Dynamics compete with Salesforce in deals,” said Ray Wang, an analyst with Altimeter Group in San Mateo, California. “Long term, Salesforce and Microsoft are on a collision course for all enterprise software.”

Customer-relationship management software is the fastest- growing part of the $250 billion corporate-software market, with a value of $7 billion to $8 billion a year, he said. The patent dispute pits the world’s largest software maker against the biggest seller of Internet-based customer-management programs. Salesforce.com had more than $1.3 billion in sales last year.

Jane Hynes, a Salesforce.com spokeswoman, declined to comment.

Salesforce.com fell $2.56, or 3 percent, to $81.60 at 4 p.m. in New York Stock Exchange composite trading. The shares have almost doubled in the past year. Microsoft dropped 36 cents to $28.24 on the Nasdaq Stock Market.

Navigation Features

Some of the patents cover how the software operates, such as a way to determine which version a person is using to see if it needs to be updated, or features that make the software easier to use, including tool bars and navigation of menus.

“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,” Horacio Gutierrez, the Redmond, Washington-based company’s deputy general counsel for intellectual property and licensing, said in a statement. Microsoft “cannot stand idly by when others infringe” our intellectual property rights, he said.

In a regulatory filing, Salesforce said it was contacted last year by a “large technology company” alleging patent- infringement and said it was in discussions with the company.

Previous Lawsuits

“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 or both of a particular quarter,” Salesforce said in the filing.

Salesforce.com Chief Executive Officer Marc Benioff, who founded the company, has said he wants customers and software developers to write online applications on his system, dubbed Force.com, much the way personal computer programs run on Microsoft’s Windows operating system.

Microsoft is typically the target of patent lawsuits, with four dozen cases pending at any given time. The Salesforce case is the fourth patent-infringement suit Microsoft has filed in the company’s history where it wasn’t sued first.

The company filed complaints against Belkin International Inc. in 2006, Primax Electronics Ltd. in 2008 and TomTom NV. last year. All those cases settled.

The case is Microsoft Corp. v. Salesforce.com Inc., 10cv825, U.S. District Court, Western District of Washington (Seattle).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Rochelle Garner in San Francisco at rgarner4@bloomberg.net.

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