Motorola successfully convinced an administrative law judge (ALJ) at the ITC back in April to rule that Microsoft's Xbox 360 infringed US patent number 6,980,596, but how things can quickly change. Microsoft immediately appealed that decision up to the full panel of the ITC, which has now remanded the decision back to the ALJ for further consideration. That's significant because it means that at the very least a final decision on a potential Xbox import ban has been delayed for several more months — probably until sometime in 2013.
A legal nuance may save the Xbox
While the ALJ will have an opportunity to revisit other issues, it seems the full commission panel was ultimately concerned with the ALJ's determination that Microsoft could infringe the '596 patent at all. Namely, the commission specifically directed the lower judge to consider its legal precedent in another ITC case between S3 Graphics and Apple that held "importing a device that may be used to perform a patented method does not constitute direct infringement of a claim to that method." On that issue, the ITC and the appellate courts have held that "the act of shipping a device that is capable of performing a patented method is not an act of infringement" alone because "the act of importation is not an act that practices the steps of the asserted method claim." It may seem like a technical distinction without a difference, but that's the law.
As you've probably guessed by now, Motorola's '596 patent is directed to a method of encoding, or decoding, digital video content. So it seems the panel may take issue with holding Microsoft liable for infringement for importing Xbox devices that are simply capable of performing the patented encoding / decoding method, without definitive proof of direct infringement of the method. Again, if nothing else, it's a delay Microsoft will surely embrace. We'll just have to see how it plays out in the end.
Update: Microsoft deputy general counsel David Howard has provided us with a statement on the development:
"Today's decision by the Commission directs the judge to re-consider arguments made by Microsoft. In our view this should result in dismissal of Motorola's entire case against the Xbox. On three patents the commission directed the judge to apply clear legal authority that should result in dismissal of those patents. In addition, the Commission directed the judge to consider whether certain contractual commitments made by Google should result in dismissal of the remaining patent."