Microsoft and Motorola kicked off a trial today in Seattle, in which Microsoft is accusing Google-owned Motorola of overcharging for patents it is required to license at reasonable rates. As The Wall Street Journal reports, at issue are an assortment of patents associated with H.264 video and the 802.11 Wi-Fi standard. According to Microsoft, it sought to license the patents in question back in 2010, only to have Motorola request a royalty of 2.25 percent of the retail price of any device using the patents (the Xbox 360, Windows 7, and Windows Phone 7 were all mentioned in Microsoft's original complaint).
However, the patents in question are what is known as standards-essential patents — they cover inventions that have been rolled into various industry standards, like H.264 video — and as such need to be licensed under fair, reasonable, and non-discriminatory (FRAND) terms. Microsoft argues that the Motorola was seeking a disproportionate royalty for the patents, and was thereby in violation of its promise to license the patents fairly.
Microsoft is happy to pay a "proportionate" royalty
In court today, Microsoft attorneys stated in front of US District Judge James Robart that the company would be happy to pay a license fee for the patents, but only one that was "proportionate" with the actual value the patents added to the products. According to the WSJ, Motorola's legal team signaled that it would be arguing that the fair value of the patent licenses should be determined by what price they'd previously fetched in the marketplace — and that Motorola offered Microsoft the deal it offers everyone else. Despite previous licensing activity being such an important part of the discussion, however, both parties have asked that any documents detailing previous agreements not be released to the public. While Judge Robart agreed to that request, any numbers or figures discussed in the trial itself will be part of the public record.
Motorola's agressive behavior on the FRAND front isn't limited simply to Microsoft. In fact, the company's behavior drew attention from the Federal Trade Commission earlier this year when the FTC decided to launch an investigation into its practices. With FRAND licensing an important part of a large number of consumer electronics equipment we use today, the result of the Motorola and Microsoft case has the potential to impact many different manufacturers and devices moving forward. The trial will resume tomorrow, with the proceedings expected to wrap up before the Thanksgiving holiday; the judge won't be deciding on the case until sometime in December.