Once Again, Motorola Gets Slapped Around Over Attempt To License Standards Patents At High Rates To Microsoft

from the just-drop-it-already dept

Microsoft and Motorola have been fighting over patents for many years, predating Google purchasing Motorola Mobility. One thing that’s never made any sense at all is why Google continued this strategy. While it may have been a short-term money grab, and a way to poke Microsoft in the eye, it seemed like Google could make a much stronger overall statement about abusing patents by changing course. And, even for those who don’t think that there’s a principled stand to take here, there’s the other side of it: the patent fight has been a complete disaster for Google/Motorola.

The ITC has sided with Microsoft, the FTC dinged Google for how it handled Motorola’s standards essential patents, the EU has sided with Microsoft and a US court did as well. And, the latest is that a jury in that trial has, once again, sided with Microsoft over Motorola, saying that Motorola was seeking licensing fees for standards essential patents that were way out of line.

This is a key battle over what “FRAND” (fair, reasonable and non-discriminatory) licensing terms on standards essential patents (SEPs) should be. Historically, Google has been pretty good about pushing back against patent abuse, including the ridiculous licensing demands that get thrown around for SEPs. But when it inherited the Motorola case, it kept Motorola’s bad strategy going, and now it’s suffering the consequences. Google had a chance to make a really strong statement early on, chose not to, and now is getting slapped around pretty much everywhere for trying to charge ridiculously high licensing fees. This seems like a financial, strategic and legal mistake all wrapped in one.

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Companies: google, microsoft, motorola

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Comments on “Once Again, Motorola Gets Slapped Around Over Attempt To License Standards Patents At High Rates To Microsoft”

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23 Comments
Bergman (profile) says:

Re: Re:

Basically, imagine you build high-end cars. You buy your parts from suppliers who each license the technology in their respective parts from someone else. You do build a few parts in-house, and pay licensing fees on those directly to the patent owner. Each car you sell brings in $100,000.

Say one of those parts is a Widget. Each Widget costs you $5 to buy. A standard fee for the patent owner behind the Widget’s technology is about 2%, so you pay them 10 cents per Widget. Suddenly, they notice how well your cars are selling and demand 2% of the finished product instead of 2% of the part they sell you.

So they’re demanding $4,000 of every $100,000 sale you make because you have a $5 Widget built into the car that relies on a patent they own. Naturally, you refuse. If you paid $4,000 per Widget, then the people who own patents on Thingies, Odd-Parts and Even-Parts will want the same rate as well…and there are more than 50 parts in your cars. Eventually, doing so would mean you owe more than 100% of the cost of the car in licensing fees. Since you refused, they sue you.

That’s pretty much what Motorola has been up to lately, and it’s not just Microsoft they’ve been doing it to.

Arthur Moore (profile) says:

Court Precedent

Here’s my conspiracy theory of the day.

Google wanted to loose. Now there are precedents for most major courts regarding frand patents. Microsoft’s mobile division makes a huge amount of money of threatening to sue Android phone makers. Combine that with the Cisco ruling preventing Google from being directly involved in any lawsuit that does crop up, and losing these Motorola cases actually helps Google.

Designerfx (profile) says:

I disagree completely

They never got to asking for a rate, Mike. There was no negotiation. MS asked them for an offer and then sued, claiming the rate was exorbitant and in bad faith. Not only that, but it was the same rate they charged anyone else. The standards essential pricing. Oh, and MS got a judge so favorable to them that we have to wait until appeals to get rid of the biased guy. Did I mention the judge tried to decide on what Motorola can do internationally in germany?

Don’t you read groklaw? sheesh.

Anonymous Coward says:

Re: I disagree completely

Ditto’ing this – TD’s post on this is remarkably devoid of information.

Motorola went to Microsoft, who had already been using Motorola’s H.264 patents in the Xbox (360, i think) since its inception. Motorola then asked Microsoft for the same rate which had been licensed to all other users of this patent of 2.25% of the unit price.

Microsoft, rather than negotiating, immediately went to sue

Anonymous Coward says:

Re: Re: I disagree completely

I guess there are length limits on the comments? Adding this:

Microsoft and Apple, particularly, have been exploiting F/RAND patents by implementing them, refusing to negotiate in good faith*, and reaping the benefits of the patented technology without paying. While, on the other hand, patenting obvious and non-novel technologies, not bound by F/RAND obligations, and using these to bludgeon competitors.

*Microsoft went straight to court as above, Apple told a district judge they would not consider themselves bound by a court-ordered licensing rate unless it was at or below what Apple had already offered in negotiations

blaktron (profile) says:

Re: I disagree completely

Actually, Motorola only ever offered a flat zero out deal, tied to their non FRAND patents. They never once offered an FRAND offer on just the SEP patents, and this is the problem.

The long and short of it is that they wanted to leverage their GSM patents against Microsoft to get the operating system patents Microsoft owns (non standard essential) but it backfired on them, rightfully so.

Dean William Barnes (profile) says:

Re: Re: I disagree completely

And what is wrong with Motorola leveraging their GSM patents against MS? You make it would like a bad thing. That is what negotiations are supposed to be about. The problem here is MS was never intending on negotiating any licensing agreement with Motorola. Instead they ran to court crying foul instead of attempting to negotiate. This will eventually backfire on Microsoft.

Celtic Hackr says:

Motorola and unfriendly Courts

Mike, I’m sorry, but you’re just trolling for Microsoft here. You obviously haven’t followed the history of this case. The judge, who happens to be in Microsoft’s backyard has shown clear bias in this case. Even other lawyers not involved have noticed this.

Secondly you’re disregarding the facts. One this started when Microsoft sued Motorola over patents it holds. It then sucker punched Motorola by asking them to send an offer to license for several patents and to do it quick so it could be settled before the court dates. Motorola didn’t demand anything. They just sent the initial offering they send to EVERYONE. MS then immediately sued. In bad faith.

Very few ever pay the 2.25%, it’s an initial offer. Usually no money changes hands at all and patents are cross-licensed. So you entire hypothesis is flawed and skewed for MS. I agree with Groklaw on this.

crizh (user link) says:

Why does nobody read the last word of that acronym?

reposted from grokthelaw on request.

Blaargh!!

I’ve been moderating the discussion of this on Slashdot and I’m beginning to wonder why I waste my time.

Dozens and dozens of idiots who clearly understand the issues but can’t see the wood for the trees.

Non Discriminatory!!!

Motorola were required to license their H.264 patents in a Non Discriminatory fashion. They have to treat each potential licensee the same way. They made the same opening offer they made to everybody.

All these idiots are acting like that opening offer was an extortionate demand. Well it was neither extortionate nor a demand. It was an opening offer, the same opening offer they routinely made for those patents because they are required to treat each license ‘applicant’ the same way.

To accept Microsoft’s demands would have been a breach of Motorola’s duty under the SEP agreement. They cannot give Microsoft a better deal than everybody else because that would be Discriminatory to their other licensees.

Google ought to consider having their other licensees get together to file an amicus brief for the appeal pointing out that Microsoft’s sweetheart deal discriminates against all those that negotiated in good faith with Motorola for these patents and thus breaches the terms of the SEP agreement.

[/rant]

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