Microsoft Gets Legal Reprieve in Patent Dispute With Motorola
Microsoft today got temporary legal relief in its dispute with
Motorola over Wi-Fi and H.264 intellectual property claims.
The two companies have mostly been fighting in German courts over the
royalties demanded by Motorola, which could affect the price of the use of
certain wireless LAN and video playback features supported by Microsoft
products, particularly Microsoft's 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 issued today, 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 the
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
"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. "Today's ruling means
Motorola can't prevent Microsoft from selling products until the court
decides whether Motorola has lived up to its promise."
Kurt Mackie is senior news producer for 1105 Media's Converge360 group.