News

Court Gives Microsoft Reprieve in Motorola Patent Fight

• By Kurt Mackie
• April 12, 2012

A U.S. District Court on Wednesday gave Microsoft a temporary reprieve in its intellectual property dispute with Motorola.

The two companies have mostly been fighting in German courts over the royalties demanded by Motorola, which could affect the cost of using certain wireless LAN and video playback features in Microsoft products, particularly the Xbox gaming console. Motorola wants 2.25 percent of the net selling price of the product units to satisfy its claims; otherwise, Motorola wants the German courts to ban sales of the infringing products in that country.

According to a Microsoft announcement on Wednesday, a Seattle U.S. District Court judge has granted a motion by Microsoft that affects the German case. Microsoft had filed a "preliminary injunction and temporary restraining order against Motorola in Germany" in the Seattle court. Now, with the Seattle judge's decision in place, "Motorola will not be able to seek an injunction against Microsoft's products in Germany after the upcoming court decision on April 17," according to an e-mail from a Microsoft spokesperson.

Microsoft had earlier offered to float a $300 million bond to stave off an injunction on its products in Germany, but that move was rejected by Motorola.

Microsoft portrays Motorola as being at fault in the case for not adhering to "fair, reasonable and nondiscriminatory" (FRAND) licensing terms (also known as "RAND"). This notion is associated with the concept of "standards-essential patents," in which companies holding patents affecting common standards (such as 802.11 Wi-Fi and the H.264 video codec) agree to license them to other companies on "fair and reasonable" terms. The 2.25 percent per unit that Motorola is demanding isn't in accordance with FRAND principles, according to Microsoft.

Behind the scenes of this dispute lurks Google, a Microsoft competitor in the search and mobile operating system markets. Google is currently seeking regulatory approvals to consolidate its proposed purchase of Motorola Mobility. Hence, Microsoft's dispute with Motorola might be better characterized as a fight with Google, and it appears to be payback time on the legal front. Google likely has a bone to pick over Microsoft's legal claims on Android, which is the Linux-based mobile operating system that Google helped to foster.

Microsoft has been extracting royalties from Google's hardware partners for several years now by claiming that the use of Android violates certain Microsoft patents  --  although those patents are described as being of the non-FRAND variety. In other words, they aren't essential to any standards-based technologies implemented in a product. It's estimated that Microsoft may make as much as $15 per Android device in its agreements with hardware companies, although the prices aren't disclosed by Microsoft. Investment banking firm Goldman-Sachs estimated last year that Microsoft is making $444 million on its Android royalty claims. Microsoft boasted early this year that about 70 percent of original equipment manufacturers using Android in their products had agreed to sign Microsoft licensing agreements.

FRAND licensing is a just a different case altogether, Microsoft argues, and it shouldn't have to pay $22.50 to Motorola for every $1,000 laptop that plays back video. Under FRAND licensing, Microsoft expects to pay just $0.2 per unit for that capability, according to Dave Heiner, vice president and deputy general counsel for Microsoft's Corporate Standards and Antitrust Group. He argued in a blog post that Google (or Motorola) is trying to "kill video on the Web."

It's an odd position to take because Google owns the ad revenue-generating YouTube portals that distribute video content. However, regulatory authorities at the European Commission are looking into whether Motorola is stepping over the line on its FRAND license pricing and making the technologies unaffordable.

The Seattle court decision postpones an injunction on the sales of Microsoft's potentially infringing products in Germany, should that decision be made on April 17, according to Microsoft. It gives regulatory authorities time to decide on reasonableness of Motorola’s FRAND licensing.

"Motorola promised to make its patents available to Microsoft and other companies on fair and reasonable terms," said David Howard, deputy general counsel at Microsoft, in a released statement on Wednesday. "Today's ruling means Motorola can't prevent Microsoft from selling products until the court decides whether Motorola has lived up to its promise."