Microsoft vs. Salesforce.com: Microsoft’s Litigation Strategy
Like the majority of large traditional technology companies, Microsoft generally uses its patent portfolio defensively rather than offensively.
Every once in awhile a major vendor like IBM or HP does go off the reservation and tries to mine their portfolio and go offensive but the effort seldom lasts long as the firms discover just how distracting the legal expenses and discovery practices can be. Executives tend to get really tired of having their email read out of context and multi-day deposition sessions.
This Microsoft vs. Salesforce.com action isn’t, as others have argued, an offensive move because they aren’t going after deep pockets with Salesforce.com nor is it a competitive attack on the company (otherwise they would be CRM patents). It is defensive but to understand this you have to understand the underlying strategy behind the move.
The Threat of Litigation
Large companies survive in markets that have lots of folks who accidently or intentionally take advantage of them and where litigation costs are high by maintaining the image of being too powerful to mess with. Law enforcement works pretty much the same way.
For instance if a major part of any population suddenly decides to break the rules you generally call that a revolt and governments fall. The same thing could happen to a company if a large number of potential competitors or consumers decided to illicitly take a firm’s property there really isn’t much the firm can do about it either through law enforcement or the legal system.
Look at the RIAA and the MPAA (music and movies) against piracy particularly in Asia and Eastern Europe. It’s a joke; in fact I think they are generally just making the problem worse; look at Pirate Bay (who now has a political party).
So firms have to create and maintain the threat of litigation so that people don’t, in mass, take advantage of the firm and they can avoid the pain of the disclosure that often goes with litigation.
But, to have a credible threat they have to actually go after a firm from time to time otherwise folks start to think they are all bark and no bite. In effect the threat has to be real.
Picking a Target
To make this work you generally pick a company that is infringing that has a brand folks will recognize but can’t afford to litigate indefinitely. In fact you want them to very visibly object but exit the process before deposition gets out of hand. You also want to pick a battle you are sure to win otherwise you’ll actually make the problem worse.
The last company that Microsoft targeted as an example was TomTom, a navigation company that was well known but had few resources. They made a lot of noise before publically folding and giving in. However, in that case Microsoft was looking for a license, this time they are making a different point and picking a more difficult target.
The Importance of Look and Feel
You’ll notice that the patents Microsoft is defending with Salesforce.com generally have to do with the look and feel of things. This is core to what can define entire categories of product and as Microsoft itself demonstrated with Lotus decades ago, if you can successfully adopt another company’s look and feel you can more easily displace that company’s products. Neither Apple nor Microsoft (nor any other well run company) will let another firm duplicate without challenge their look and feel and firms like this will defend vigorously any attempt to do so.
But, even here, they would rather use the threat of litigation than having to sue everyone to stop the behavior. This is what makes Salesforce.com different than TomTom, for while TomTom could license the infringing code, Salesforce.com will have to stop using it to settle with Microsoft and that won’t be as settled.
Wrapping Up: Why This Will Be Important and Expensive
Microsoft wants to set an example and losing isn’t an option. In addition the patents in question are key to being able to defend Microsoft’s existing market making the combination into one of the most important legal efforts that Microsoft is likely to undertake. This means they probably won’t settle, will fund the effort fully, and will do whatever it takes to make it successful.
The lesson here is that, when companies use the threat method (and most do) of managing litigation you can likely get away with a lot as long as you fly under their radar. However, if you suddenly become visible and they feel they need to make an example of you, the result is likely to be a near Armageddon experience that will go beyond what you expect.
This is because, to you, you would appear to be a little problem, but to them you are the nail in the horseshow that could cause them to lose the war. Or, another way of saying this is you don’t pull on Superman’s cape and you certainly wouldn’t dress up as the guy and attempt to get really friendly with Lois. Unfortunately for Software.com they got a little too friendly with Lois.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies. The opinions expressed in this commentary are solely those of the writer.