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Motorola Patents Could Cost Microsoft Millions A Year

December 18, 2012 - Written By Crystal Kube

The patent trial between Microsoft and Motorola over the use of video and wi-fi technologies used by Windows 7 and the Xbox 360 is nowhere near over, despite the trial being held November 13-20. The trial was meant to decide the amount Microsoft should pay Motorola for use of the H.264 video compression patent and their 802.11 Wi-Fi technology. Both companies can’t agree on the amount of royalty to be paid, despite attempts the court made to have it settled privately. U.S. District Judge James Robart said that the “court was well aware it is being played as a pawn in a global industry-wide business negotiation” and scolded both companies for arrogance.

On one side there is Microsoft, who thinks the offer of $502,000 per year for the video patent and $736,000 per year for the wi-fi is more than fair. They argue that Motorola made an unreasonable royalty request of 2.25 percent of the end product price – a sum that could equal as much as four billion a year. Microsoft insists that the royalty payment should be more in proportion with the actual contribution of the technology patents used in the products.

On the other side, Motorola believes Microsoft shouldn’t have filed the lawsuit in response to the royalty request and therefore gave up their right to a more reasonable royalty. They would be willing to settle for $100 million to $125 million per year in a fair cross-licensing deal, just for the H.264 video compression patent of course. For the 802.11 wi-fi technology patent, they claim a net payment of as much as 1.73 percent of end product prices. Since Microsoft’s new Surface tablets only uses the wi-fi technology to access the Internet, it is essential to the product. Without it, consumers will be likely to purchase other tablets. Motorola also wants the Judge to include any new and possible future products from Microsoft in his decision.

The trial is being closely watched because of the implications to the technology industry as a whole. The amount of royalty the Judge requires Microsoft to be paid could affect the importance of the patents in the final product. It will determine the “fair, reasonable and non-discriminatory” (FRAND) royalty rates for the wi-fi and video compression patents.

The outcome of the trial is expected to by determined sometime early next year.