Google bought Motorola Mobility knowing that the division was not doing all that well. It was going to take some work to turn things around at the company and turn it into what Google wanted it to be. Google also had to deal with some legal issues that were plaguing Motorola. One of those legal matters was settled yesterday in Seattle, Washington.
Microsoft had filed a suit against Motorola Mobility over the issue of some patents. According to court records, Motorola had failed to provide Microsoft with certain technology on fair and reasonable terms. Because of this patent agreement breach on Motorola's part, Google now has to pay up. This dispute was arose from a 2010 request by Motorola for Microsoft to pay royalties on Motorola technology that contributes to the H.264 video compression standard, as well as the 802.11 wireless networking standard. Microsoft agreed to pay some kind of a royalty, but disagreed on the amount. Motorola wanted to charge 2.25% of the product price, and Microsoft thought this was a little too much to pay. Microsoft argued in this current court hearing that Motorola had designed their terms to make sure that Microsoft would not pay the fee, and then Motorola could sue for an injunction to get Microsoft to stop using these products.
The patents in question are standard-essential patents, meaning that there is an understanding amongst industry competitors that they will be licensed under fair, reasonable, and non-discriminatory (FRAND) terms. The Seattle courts ruled that Motorola was in violation of these FRAND terms when they refused to license their standard-essential patents to Microsoft in a fair and reasonable way.
The misuse of these standard-essential patents has been something that the Federal Trade Commission and U.S. Department of Justice have been scrutinizing in recent years. When these patents are not licensed under FRAND terms, it can disrupt competition. The FTC has stated that the use of standard-essential patents specifically to seek injunctions on sales of products is something that it will not permit.
Google now has to pay Microsoft $15 million in damages. That is roughly half of the damages Microsoft sought in the case. All of this happened before Google purchased Motorola Mobility in 2012, but Google still has to deal with the consequences and pay the fines. While Motorola is surely disappointed in the outcome, having fair and reasonable access to standard-essential patents is something that companies need to compete. Consumers ultimately will benefit if these patents are not abused.