updated 07:40 pm EDT, Fri October 26, 2012
Only remaining patents held against the Xbox 360 are H.264
For reasons known only to itself, Motorola Mobility has dropped two Wi-Fi-related patents from its ITC complaint against Microsoft's XBox 360 gaming console. Only two H.264 patents remain in the complaint. As listed in the court filing, no agreement between the two parties are in place, so the reason for the withdrawal is unknown. The ITC should complete the investigation and initial remand hearing by the summer of 2013.
For the remaining two patents, Motorola has allegedly offered to pay Microsoft 33 cents for each of its Android devices that uses Microsoft's ActiveSync technology, but demands 2.25 percent (at least $4.50) per Xbox and 50 cents on each copy of Windows that uses its H.264 video playback patents. Microsoft has sold 600 million copies of Windows 7 through June 2012, and 66 million Xbox 360 units through January 2012, leading to $300 million owed for Windows 7, and $297 million for the Xbox. Best estimates place an average of 16 million Motorola smart phones and tablets sold per year, so Motorola would owe Microsoft $5 million annually, versus $597 million owed to Motorola with estimated another $120 million annually, if the deal had been accepted.
The going rate for an H.264 playback license through MPEG LA is no royalty owed or for the first 100,000 units, 20 cents per unit up to 5 million. and 10 cents per unit after that, with an annual limit of $6.5 million per year. Assuming Microsoft wouldn't negotiate even better terms for itself, $6.5 million is still an order of magnitude smaller than what Motorola is demanding for the same patents.
A Microsoft filing with the US International Trade Commission (ITC) claims that Google, Motorola's new parent company, committed to license two of the H.264 video encoding patents to Microsoft as a virtue of the search engine giant's participation in the MPEG LA AVC patent pool. This contract issue by itself may negate the remaining patents in the ITC complaint during the March 2013 judicial hearing.
Motorola's H.264 (and the previously included Wi-Fi) patents are considered standards-essential, and licensing for these patents must be attempted on a fair, reasonable and non-discriminatory (FRAND) basis by law. Motorola is on the losing end of statements given to the ITC by industry magnates in support of both Apple and Microsoft's use of Motorola's standards-essential patents. As a result of the 2.25 percent request and other issues, both Motorola and parent company Google are under investigation by the FTC for FRAND patent abuse.