Microsoft accuses Motorola Mobility of unfair licensing on Patents

Microsoft argued to today in federal court that Motorola Mobility is unfairly demanding $4 Billion in annual patent royalties. At the heart of the dispute is a claim by Microsoft that Motorola Mobility failed an obligation to offer fair licensing on patents it holds on technology essential to industry standards on Wi-Fi and video technology.

Motorola is seeking injunctive relief to ban Microsoft products in both the United States and Europe. At particular risk would be Microsoft’s widely popular Xbox trading gaming console, which was the top selling gaming console in the United States last year. According to Rutgers Law School professor Michael Carrier, “It could take a lot off the table. . .it could affect what’s going on in both the courts and agencies.”

At issue is whether Motorola fulfilled its obligation to make a fair offer to Microsoft for use of these patents, and whether Microsoft subsequently lost its right to complain because it made no counteroffer to Motorola when the royalty payments were initially discussed.

Motorola is seeking sales bans in both actions, but have also stated that they will not seek a ban on standard-essential patents as long as there are licensing talks underway. Microsoft and Apple have pledged not to use such bans against competitors and have requested that other companies do the same.

In a related action, Microsoft has filed patent-misuse complaints against Motorola Mobility. They are seeking to limit the use of standard-essential patents. Companies that receive a significant revenue from licensing oppose the changes, arguing that regulators and courts could make significant changes that ultimately hurt the industry and discourage companies from working together. Professor Carrier believes that judges “could set a broad rule that could really have unforeseen circumstances considering how fragile a lot of these arrangements are. . . Standard-essential patents should have special obligations, but those obligations should stem from the rules of the organization.” Another concern industry observers have is that high-stakes litigation in which millions of dollars are spent in legal fees could ultimately discourage small business, and as a result, innovation. According to analyst Carl Howe, “there are some broad questions about what the future of these patents holds,” Howe said. “Maybe the idea of having industry standards has gone by. A patent is no longer something to promote innovation, but simply a weapon to be used in a court of law.”

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Source: Susan Decker, Bloomberg