updated 06:30 pm EDT, Thu July 19, 2012
Low-risk maneuver stands to gain foothold in Microsoft negotiations
Late Wednesday, Motorola Mobility filed a motion with the Western District of Washington court for a summary judgement hoping to limit the scope of the trial. Motorola Mobility and its parent, Google, propose that one issue be evaluated at trial—whether Motorola Mobility violated fair, reasonable, and non-discriminatory (FRAND) licensing terms by demanding its standard 2.25 percent royalty. Motorola argues that the court does not have the authority under Washington state law to set the terms of a FRAND license agreement, as it can only make an addition to an existing agreement. It further argues that Microsoft's claim of FRAND abuse didn't ask specifically for the court to set the terms of the agreement.
Quotes from the filing make Motorola's intentions clear. From the filing: "If the jury finds no breach, then the relief actually requested by Microsoft (damages) should be denied, Microsoft’s complaint should be dismissed, and the parties should be instructed to continue good-faith, bilateral negotiations, as expected by the SSOs and outlined in their policies."
Motorola continues with "If on the other hand the jury finds breach, it can determine damages (if any) and the Court can enjoin Motorola from enforcing its 802.11 and H.264 standard essential patents against Microsoft unless and until Motorola makes an offer that is consistent with RAND. If necessary (i.e., if Microsoft refuses Motorola's final offer), the Court can review Motorola’s final offer for the purpose of determining if Motorola's final terms are consistent with its RAND commitments. If it is, Microsoft can either accept the offer (as it has told the Court it will do) or forego the right to a RAND license and be subject to all available remedies."
Patent analyst Florian Mueller calls the first paragraph Mototola's "red herring." He reiterates that Motorola has always believed that Microsoft should have never brought the FRAND complaint, but should have negotiated, despite the nearly extortionary rates Motorola proposed.
Mueller sees possible gains for Motorola in implementing this strategy. It would potentially make Microsoft's FRAND license dependent on the breach-of-contract claim. If Motorola lost, and was found to be in breach of contract, it would be able to delay resolution of the FRAND license for a very long time. At some point, it would still have to make a "final offer," and Microsoft would deny this offer at its own peril, and potentially face a product injunction for refusal.
Motorola may be fighting an uphill battle with the recent attention brought to FRAND abuse during the Motorola and Apple court battle with Judge Posner at the helm. The judge said he couldn't see "how you can have an injunction against the use of a standards-essential patent," a succinct summation of Apple's and Microsoft's publicly stated position that FRAND patents are being abused in lawsuits by Motorola, Google, Samsung and others.
Google and Motorola are currently under investigation by the FTC for FRAND abuse, in part because of this case. Motorola has historically asked for 2.25 percent of the cost of an entire device that uses one of their patents, and not just the price of the infringing software. For example, the current requested rate for Microsoft's Xbox 360 is $4.50 of the $200 retail price per base unit sold.
Previous demands for Windows' use of the H.264 patent asked for 2.25 percent of each PC sold, and not just the retail value of Windows. Conservative estimates by Microsoft places the amount they would owe for the video playback patent in the billions of dollars, assuming the average PC was conservatively worth $500. The rate Motorola demands is several orders of magnitude larger than the capped license fee maximum of $6.5 million per year demanded for the patent by the MPEG LA group, and the rate that Motorola's owner Google is said to have promised in a license to Microsoft for the patent, prior to the search engine's acquisition of Motorola Mobile.