(CN) - Google-owned Motorola cannot force Microsoft to pay it $4 billion a year for wireless technology, a federal judge ruled, finding that the licenses are worth less than half that.
U.S. District Judge James Robart's order adds a new wrinkle in the acrimonious battle between the two tech giants, which sued each other over royalties for Motorola's wireless patents. Microsoft claimed Motorola demanded exorbitant licensing fees in breach of industry-wide agreements, while Motorola cried patent infringement against Microsoft over the disputed technology.
Agreements with the Institute of Electrical and Electronics Engineers (IEEE) and International Telecommunication Union (ITU) require both companies to license high-demand, essential technology on a reasonable and nondiscriminatory (RAND) basis. Microsoft argued that Motorola's proposed royalty of $2.25 per unit for use of its patents was unreasonable and amounted to a breach of the RAND agreement.
At a hearing on the issue last year, Robart chided both sides for being "arrogant" and profit-driven throughout the proceedings.
"The court is well aware that it is being played as a pawn in a global industry-wide business negotiation," Robart said this past spring, as reported by tech blog GeekWire. "The conduct of both Motorola and Microsoft has been driven by an attempt to secure commercial advantage and, to an outsider looking in, it has been arbitrary, it has been arrogant and frankly it appears to be based on hubris."
Robart decided months ago that Motorola's agreements with IEEE and ITU entitled Microsoft to a license. A German judge further complicated the case then by finding finding that Microsoft had breached its licensing agreement with Motorola and would have to pull the Xbox 360 from the market there.
This led the Seattle-based Robart to issue a restraining order that would let Microsoft sell its products in Germany, and the two companies next landed in the 9th Circuit. That court expressed its discomfort over being dragged into what it deemed a patent dispute since such issues are normally reserved for the Federal Circuit.
In the end, the 9th Circuit ruled Motorola couldn't enforce the German injunction barring Microsoft from marketing its Xbox 360, Windows 7 and other products. Robart ended Motorola's further attempts at barring Microsoft's sales worldwide late last year.
Robart's latest attempt at settling the dispute over the licensing of Motorola's H.264 and 802.11 patents "adopts a modified version of the Georgia Pacific Corp. v. United States Plywood Corp. factors to recreate a hypothetical negotiation between the parties," according to the opinion.
"Importantly, the court determines that the parties in a hypothetical negotiation would set RAND royalty rates by looking at the importance of the SEPs [standard essential patents] to the standard and the importance of the standard and the SEPs to the products at issue," Robart wrote.
Microsoft - which offered Motorola $1 million annually to use the patents - had suggested using an incremental value approach, or focusing on the period before the standard was adopted and implemented and comparing alternatives that could have been written into the standard. Robart noted, however, that neither IEEE or ITU require settling RAND terms that way and in fact avoid doing so because of antitrust concerns.