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Motorola expert witness claims Microsoft scored $94B USD using its patents without paying a dime

Google Inc. (GOOG) and Microsoft Corp. (MSFT) have had their say in a patent case playing out in U.S. District Court for the Western District of Washington.  Federal Judge James Robart presided over the case, which wrapped up this week and is expected to give a ruling regarding licensing fees owed to Google by Microsoft and vice versa.

I. Motorola Expert: Microsoft Made $94B USD Using Moto's Patents

Attorneys for Google subsidiary Motorola Mobility and their expert witness Michael Dansky flew in to Microsoft's home state this week to give pivotal testimony.   

Key parts of the testimony were delivered in a packed Washington state courtroom, which is open to reporters and the public.  During his testimony, Mr. Dansky argued that Microsoft has garnered $94B USD in revenue from Xbox gaming consoles and the Surface tablets (both of which he says use, without proper license, wireless technology Motorola Mobility developed and patented).

Comments Mr. Dansky, "You will have a difficult time selling smart phones or tablets [without Motorola Mobility's technology]."

Microsoft Surface
Motorola's expert witness claims Microsoft has made $94B USD off Xbox consoles and its Surface tablet. [Image Source: IGN]

Microsoft has alleged in past testimony that Motorola Mobility and its parent Google are trying to price gouge it when it comes to royalties.  Microsoft argues that it should only be obligated to pay a low royalty rate for the mobile device maker's video and wireless patents -- around $0.02 USD per device.  Microsoft says it should be allowed to charge Motorola up to a 1,000x higher licensing rates as its patents are not part of industry standards.

Judge Robart is set to rule on the Motorola royalties phase of the case, one of the most important parts, in the next several weeks, after both sides have had time to file some final briefs.

If the federal judge decides on a larger royalty, it could help Google justify the $12.5B USD purchase cost for the patent-rich, but struggling Android phonemaker, which it is currently restructuring.  If the judge tosses out a lower royalty, it not only hurts Google's revenues directly, it also sets a precedent for lower royalty rates that other rivals like Apple, Inc. (AAPL) could take advantage of in future cases.

Google on Motorola
Google is hoping the case helps it monetize its Motorola acquisition.
[Image Source: TechnoBuffalo]

It is unclear if the judge will release the exact royalty figure to the public, given corporate secrecy concerns.

Both sides have been surprisingly cooperative in jointly supporting keeping details of Microsoft, Motorola Mobility, and their respective partners' licensing agreements out of the public eye.  Legal scholars say supporting such an approach is dangerous as exposure is a major incentive to corporations to settle their patent differences out of court, rather than wasting taxpayer time.

Indeed, Judge Robart initially said before the trial that the information should be made public.  However, this week the Judge reversed his own ruling, deciding that he was unable to order the sessions be made public due to appellate precedent.  In other words, judges in higher courts have ruled that such secrecy is mandated in similar cases, so as a District Judge, Judge Robart was unable to defy the secrecy precedent without risking his own reputation.

II. Lawsuits, Junk Patents Swell

The last two years have seen a wild slew of lawsuits and trade complaints bandied about by three of the four leading powers in the smartphone industry -- Google, Microsoft, and Apple -- along with their OEM backers.  Some signs -- such as Apple and HTC Corp.'s (TPE:2498) recent licensing truce -- point to an easing of tensions.  

However, the mobile operating system makers continue to file questionable software patents at a frenzied pace.  One example: both Google and Apple filed patents on a page turn animation (Google filed for a utility patent, Apple for a design patent).  Apple was actually granted the patent last week.  However, countless examples of prior art exist.  

Apple Page Turn
Apple recently patented an animation of turning pages. [Image Source: USPTO]

For example, an Hewlett-Packard Comp. (HPQ) demo site, which first went live in 2002 had a page turn animation that precisely resembles Apple's iPad animation, which it now "owns" rights to.  Apple did not cite that earlier and identical work.  But at the end of day one must ask -- how can someone patent how turning pages looks and works?  

A similar principle applies to many of Google and Apple's recent patents, but the problem looks to only grow as they continue to bombard an overloaded U.S. Patent and Trademark Office with new applications, hoping some squeak through the cracks.

Source: Reuters



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That's the real danger here
By Solandri on 11/22/2012 6:01:27 AM , Rating: 3
quote:
Microsoft argues that it should only be obligated to pay a low royalty rate for the mobile device maker's video and wireless patents -- around $0.02 USD per device. Microsoft says it should be allowed to charge Motorola up to a 1,000x higher licensing rates as its patents are not part of industry standards.

If you make industry standard patents worth 1000x less than other patents, the obvious outcome is that nobody will be willing to license their patents as industry standards. The standards bodies which work to make everything interoperable will die, and the whole industry becomes a proprietary mess. Want to connect to a wireless router? Well your Dell laptop's wireless works with DLink routers, but not Netgear.

The rationale behind patents which are part of a standard having a lower royalty rate is that the patent holder will make up the difference in volume - additional patent licenses because it's now part of a standard. If the royalty rate for a standardized patent is going to be 1/1000th that of a regular patent, then the number of licenses the patent holder receeives has to be more than 1000 greater due to it being part of the standard.

If you violate this simple premise, the entire process of creating standards falls apart because nobody will want to contribute their patents to a standard. You can make more money by ignoring the standards and just licensing independently.




RE: That's the real danger here
By sviola on 11/22/2012 8:50:18 AM , Rating: 2
My understanding is that FRAND patents (and the patent holders submit their patents to be industry standards) have low royalties so they can be widely adopted by the industry. If Motorola's WiFi patents were expensive, I doubt the industry would have chosen it as the standard.


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