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Appeals court ruling offers Microsoft a key win in its legal battle against Android

Microsoft Corp. (MSFT) appears to have dodged a major bullet in its legal battle against Android operating system maker Google Inc. (GOOG).

I. German Windows Ban Dealt a Deathblow

While most Android OEMs have caved to Microsoft's licensing demands, Google vowed to fight back.  It has been using its $12.5B USD acquisition -- patent-rich Motorola Mobility -- as a key tool in that battle.  

A win would likely free Motorola's fellow Android OEMs from licensing fees, while a loss would mean that Google would be forced to accept that part of the revenue from every Android phone sold go to Microsoft (typically, $10 or more per phone).

Motorola was seemingly on the verge of a major win, thanks to a German court's decision to ban the Xbox 360 and certain versions of Windows for possibly infringing on Motorola's patents.  However, that ban was called into question when U.S. District Court for the Western District of Washington Judge James Robart -- a judge in Microsoft's home state -- ordered that it would be illegal for Google to enforce the ban in Germany.

Google on Motorola
A judge has blocked Google from banning Microsoft products in Germany via Motorola.
[Image Source: TechnoBuffalo]
Now, a panel at the 9th U.S. Circuit Court of Appeals in San Francisco has upheld that ruling, commenting, "At bottom, this case is a private dispute under Washington state contract law between two U.S. corporations."

II. Microsoft Can Ban Motorola, but Motorola Can't Ban Microsoft: Fair?

The message is that Google/Motorola cannot fight their war by proxy in Germany, a nation with a reputation for "banning first, asking questions later."

But the ruling also raises certain questions, as it did not prohibit Microsoft from enforcing its own German ban on Motorola's products.  Much like Motorola, Microsoft secured the ban from a German court months ago.  As a result Motorola's Android handset stock in the German nation may soon be taken to disposal locations and destroyed.

While it may seem puzzling how a U.S. court can prevent a German court from banning products, it can effectively do so as Motorola resides in the U.S. and could face fines and other penalties if it refuses to comply.  Thus U.S. courts can in roundabout fashion prevent foreign court rulings, when the ruling is made in favor of a domestic company and the American court opposes it.

Motorola h.264
Motorola's German suit involved two patents covering the h.264 codec. [Image Source: Joker Blog]

The now-defunct German ruling was based on a pair of h.264 patents -- EP0538667, a patent on an "adaptive motion compensation using a plurality of motion compensators" (filed in 1992), and EP0615384 a patent on an "adaptive compression of digital video data" (filed in 1994).  As these are standards patents, Motorola may face additional punishments following an antitrust investigation by EU inquisitors regarding FRAND licensing abuses (as Motorola potentially should not have been able to sue with the patents).

Source: NBC News

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RE: Opening a can of worms.
By Solandri on 10/1/2012 8:38:59 PM , Rating: 2
The issue here is that Motorola Mobility and Microsoft had a matter in federal court here that addressed the dispute (regarding licensing a portfolio of 100 patents). Only after that matter was filed here did Motorola Mobility file their claim in Germany over 2 specific patents.

Are those US patents or EU patents they filed claims under in Germany? That would seem to me to be the crucial factor. Since the US and EU have different patent systems, Microsoft could be found guilty of infringement in the EU but cleared in the US.

What this decision seems to be saying is that foreign patents are irrelevant and non-binding for U.S. companies. Which makes no sense.

RE: Opening a can of worms.
By KPOM1 on 10/2/2012 12:14:08 AM , Rating: 3
They are German patents obtained pursuant to EU law. However, that's irrelevant to the case before the US court. Under common contract law in place in most states in the US, including Washington, there is a concept of a "third party beneficiary." I am not a lawyer, but as I understand it, essentially it means that a third party, in this case Microsoft, has the contractual right to enforce an agreement between two other parties (in this case Motorola Mobility and the ITU) from which the third party would benefit.

It boils down to this. Motorola Mobility entered into a binding agreement with the ITU that in exchange for the ITU incorporating its patented technology into a new standard, Motorola Mobility would grant worldwide licenses to that technology on FRAND terms. Microsoft is saying it wants to enter into a license on those FRAND terms. The court is adjudicating whether Microsoft has third party beneficiary rights, and if so, what those FRAND terms should be. They don't want Motorola Mobility doing an end-around by forum shopping in an important foreign market in an attempt to essentially blackmail Microsoft into accepting a settlement.

Think of it this way. What if, 5 years ago, Microsoft and Motorola Mobility entered into a 20 year agreement to cross-license all of their patents at set terms, and to adjudicate any disputes through binding arbitration in London. If a case were brought before a court, that court would likely rule that the parties needed to bring the case before the arbitrator as they agreed. They likely wouldn't take too kindly to an attempt by one of the parties to seek an injunction that would effectively overturn the intent of the contract.

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