Microsoft Tops Motorola in Tech Royalty Dispute

     (CN) – The Ninth Circuit upheld a $15 million judgment for Microsoft in its patent dispute with Motorola over technology used in the Xbox 360 and Windows 7 operating system.
     Both Motorola and Microsoft made agreements with standard-setting organizations to ensure that products made through their different manufacturing processes will function with one another.
     “Without standards, there would be no guarantee that a particular set of headphones, for example, would work with one’s personal music player,” wrote U.S. Circuit Judge Marsha Berson in a 64-page opinion announced Thursday.
     Agreements with the Institute of Electrical and Electronics Engineers and International Telecommunication Union require both companies to license high-demand, essential technology on a reasonable and nondiscriminatory basis.
     Microsoft argued that Motorola’s proposed royalty of $2.25 per unit for use of its video-coding and wireless local area network patents was unreasonable, and amounted to a breach of their agreement.
     In deciding the case at the trial stage, U.S. District Judge James Robart, emphasized the value of Motorola’s work, but ultimately found that its $4 billion royalty demand was unjustified, especially given that Microsoft only used 11 of the 24 of Motorola’s standard essential patents in its Xbox 360, Windows 7, and other products – and none of these patents contributed essentially to the technology.
     Robart’s opinion was the first decision by a federal judge to determine what should happen when patent-holders and patent-users disagree on an appropriate royalty rate.
     He decided on a far lower rate than that sought by Motorola – 0.5 cents per end unit for its video compression patents, and 3.7 cents per unit for its WiFi patents.
     The Ninth Circuit upheld that ruling on Thursday, dismissing Motorola’s argument that a jury – not Robart – should have decided an appropriate royalty rate.
     Motorola consented to a bench trial, the Ninth Circuit found, and its “contention on appeal that it consented to adjudication of the RAND rate only for purposes of a court-created license is diametrically opposed to its position before the district court,” Judge Berzon said.
     At an earlier phase in the litigation, the Ninth Circuit ruled that Motorola could not enforce a German injunction barring Microsoft from marketing its alleged infringing products in Germany.
     Berzon affirmed Thursday that Motorola must pay the costs of moving Microsoft’s European distribution facility out of Germany, after a jury found Motorola’s seeking of the injunction breached its licensing obligations.
     Given the Motorola had refused Microsoft’s offer to pay the licensing rates, “the jury could have inferred that [Motorola’s] real motivation was to induce Microsoft to agree to a license at a higher-than-RAND rate.”
     Motorola felt that it had this leverage because people would be unwilling to purchase a Microsoft computer that lacked Wi-Fi ability or could not play high definition video.
     Berzon also approved of the award of $3 million in attorneys fees to Microsoft, to encourage the next licensor instead to negotiate directly with the licensee rather than litigate the dispute.
     “If every SEP holder could force standard implementers into court to defend against injunctive actions without consequence, it would expose those implementers to a flood of litigation, and could discourage such implementers from adhering to standards in the future,” she said.
     The ruling is another blow for Google, which has so far paid $13 billion for Motorola’s 17,000 patents – and has since suffered a string of legal defeats over them.

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