he closely-watched, two-year international patent dispute in which Motorola Mobility threatens
Microsoft's (
Nasdaq: MSFT) Xbox and the software giant's place in the German IT marketplace will be likely adjudicated, at least in part, by the U.S. Court of Appeals for the Ninth Circuit.
Microsoft last week asked the San Francisco-based appeals court to affirm a lower court ruling that blocks Motorola Mobility from enforcing a German court's import ban on Microsoft products determined to violate Motorola technology patents.
In its June 27 appellee brief to the Ninth Circuit, Microsoft argued that a U.S. district court judge in Seattle correctly hamstrung Motorola with an injunction, preventing the company from enforcing a German court's trade-ban affecting the Windows 7 operating system and Xbox video-game console, among other Microsoft products.
WEBINAR NOW AVAILABLE ON-DEMANDJoin SevOne for this informative webinar that will illustrate current best practices used by enterprises and service providers for successfully deploying and assuring cloud and virtualization while controlling overall network performance. Register Now! "The district court properly preserved its jurisdiction to interpret and
apply Motorola's worldwide license commitments, as squarely presented by Microsoft's complaint," Microsoft counsel Carter Phillips, partner at Sidley Austin LLP, wrote in the company's brief.
Meanwhile, Motorola says on appeal it will argue against the trial court's order. On the Ninth Circuit's Mediation Questionnaire filed May 4, Motorola attorney Kathleen Sullivan wrote that Motorola's principle argument for tossing the injunction is that Motorola fairly won the German judgment.
"The district court erred as a matter of law in entering this anti-suit injunction and that the injunction poses undue affront to comity and proper respect for the distinct sovereign function of the German court," wrote Sullivan, former dean of Stanford Law School and now partner at Quinn Emanuel.
Motorola, she added, asked the Ninth Circuit to hear the appeal "expeditiously," so "at the earliest opportunity," the company can enforce the Mannheim Regional Court judgment against certain Microsoft imports.
The legal wrangling between Microsoft and Motorola--now a Google (
Nasdaq: GOOG) company--stems from disagreement over what constitutes reasonable royalty on the sales of Microsoft products that use Motorola's patented WiFi and video technologies.
Microsoft asserts it's entitled to a reasonable, worldwide licensing agreement to Motorola's standard-essential patents. The Redmond, Wash.-based company has sought to exert third-party rights to Motorola's agreement with two technology standard-setting bodies to license essential
wireless patents on reasonable terms.
"Microsoft, all agree, is a third-party beneficiary of those contractual commitments and is therefore entitled to such RAND licenses," Microsoft's brief reads. "Nevertheless, Motorola has steadfastly refused to provide those licenses, instead making outrageous demands, including seeking annual royalties of more than $4 billion for worldwide licenses to two sets of Motorola standard-essential patents."
The breach-of-contract lawsuit was filed in October 2010, in U.S. District Court for the Western District of Washington, after Motorola sent two letters to Microsoft, demanding royalties of 2.25 percent of the sale price for products using its IEEE
H.264 patented video-compression technology and the ITU
802.11 patent to enable wireless local area network (WLAN) computer communication in certain frequencies.
The following month, Microsoft
filed a civil complaint against Motorola, headquartered in Libertyville, Ill., and eight months later, in July 2011, Motorola filed H.264 and ITU 802.11 patent-infringement claims in Germany.
Mannheim Regional Court Judge Holger Kircher's
May 2 ruling in General Instrument Corporation v. Microsoft, banned the sale of Microsoft products that allegedly infringe Motorola's standards patents, through a non self-executing injunction that Motorola would have to initiate to actually halt Windows and Xbox gaming-system sales in Germany.
The preliminary injunction issued by U.S. District Judge James Robart in Seattle prevents Motorola Mobility from enforcing the order.
In its Ninth Circuit filing, Microsoft noted that it offered Motorola to post a $300 million bond in the federal court to cover royalty damages that might be found, if the company pledged not to enforce any injunction awarded in Germany.
"Motorola flatly refused, leaving Microsoft with no choice but to seek preliminary injunctive relief from the district court," Microsoft's appellate counsel wrote.
In the Western District of Washington, Microsoft argued that Motorola, to induce the Institute of Electrical and Electronics Engineers Standards Association (IEEE-SA) and the International Telecommunication Union (ITU) to include its patented technology in global technical-standards, the company made "binding contractual commitments" to license its standard-essential patents on FRAND (fair, reasonable, and nondiscriminatory) terms.
At a summary-judgment hearing in May, Robart scolded the parties, saying: "The court is well aware it is being used as a pawn in a global, industry-wide business negotiation." Robart ruled June 6, ultimately, that it was not clear if Motorola Mobility had flouted FRAND licensing obligations.
"While the court will not at this time set forth a legal standard with respect to Motorola's duty to offer its patents in good faith, it is likely that any analysis of Motorola's duty will involve, at least in part, an examination of the intent behind Motorola's offers," the judge's 28-page order read.
Denying parties' motions for partial summary judgment, Robart set trial for Nov. 19, to determine the FRAND royalty for a worldwide license for Motorola's patent on the IEEE 802.11 WLAN standard and the ITU H.264 advanced video-coding technology standard.
FOSS Patents dissected the motion ruling in
Microsoft v. Motorola this way: The judge determined that Microsoft's motion raised issues that were not yet ripe.
"While Microsoft had argued that Motorola's royalty demands were blatantly unreasonable to an extent that no reasonable finder of fact could conclude otherwise, the judge believes there are genuine issues of material fact,
i.e., issues that a jury needs to establish,"
FOSS Patents founder and noted intellectual-property analyst Florian Mueller noted in his lengthy analysis.
In October 2010, Microsoft filed a U.S. International Trade Commission (ITC) complaint against Motorola, alleging the cell-phone makers Android devices infringe on nine Windows Mobile and Windows Phone patents related to smartphone functionalities, including email synching and ActiveSync, which allows for group scheduling from a mobile device.
On May 18, the ITC issued a notice finding--
Inv. No. 337-TA-752--that affirmed ITC Administrative Law Judge David Shaw's finding that Microsoft's Xbox 360 infringes on Motorola's relating to encoding and decoding of digital video content. Shaw recommended a U.S. import ban Xbox consoles because of alleged infringement of four H.264 patents.
On Friday, the six-member Federal Trade Commission
remanded the case--
In the matter of Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof--back to the ITC judge for reconsideration.
If a final determination is made, President Barack Obama or his successor will have 60 days to overturn the finding on policy grounds.
The appeals court case is
Microsoft Corporation v. Motorola Inc., et. al.,
No. 12-35352, 9
th Cir. (San Francisco). The district court case is
Microsoft v. Motorola, No. 2:10-cv-01823-JLR, W.D. Wash. (Seattle).
