Reporting from federal court: Microsoft’s patent dispute with Motorola focuses largely on technologies used by Windows and the Xbox 360, but the Redmond company’s new Surface tablet computer has been the subject of a couple questions today, on the opening day of the closely watched patent trial at U.S. District Court in Seattle.
Why? It turns out that Motorola wants the judge to also consider new and future Microsoft products that implement Motorola’s patented technology as he figures out how to set the royalty rates that Microsoft should pay for Motorola’s patents.
In a brief filed in advance of the trial, Motorola contends that 802.11 WiFi technologies are critical to Surface, because it doesn’t have an Ethernet port or cellular broadband.
Lawyers for Motorola write, “Microsoft’s new Surface tablet will use only 802.11, instead of cellular or wired connections, to connect to the internet. Without 802.11 capability, the Surface tablet would be unable to compete in the market, because consumers can readily select tablet devices other than the Surface that have 802.11 capability.”
Motorola contends that the judge’s deliberations “would need to account for the likely use of Motorola 802.11 SEPs [standard-essential patents] in future products (e.g., Microsoft’s recently released Surface tablet product).”
That’s important because the amount Microsoft is required to pay could depend on the significance of the particular patent in the final product. A lawyer for Microsoft told U.S. District Judge James Robart this morning that the amount paid by Microsoft in licensing fees should be proportionate to the contribution of Motorola’s patents to the relevant industry standard, and to the role of the patented technology in the Microsoft products that implement the standard.
Making the case for higher royalties, the Motorola brief also noted that Microsoft “apparently is working on its own smartphone, which undoubtedly will have Wi-Fi capabilities,” citing a Wall Street Journal story as evidence.
On the stand this morning, Windows executive Jon DeVaan also acknowledged that Surface incorporates H.264 video technologies, which are also at issue in the case, covered in separate Motorola patents.
Microsoft argues that Motorola’s original offer to license patents to Microsoft for 2.25 percent of the end product price was outrageous — potentially totaling $4 billion a year — considering Motorola’s promise to standards bodies to offer access to the “standard essential” patents on fair and reasonable terms.
Motorola contends that Microsoft gave up its right to a reasonable royalty by filing the lawsuit in response to Motorola’s initial royalty demand.
The case is being closely watched as a potential blueprint for other patent disputes, and also because it’s effectively a dispute between Microsoft and Google, which has acquired Motorola Mobility.
Much of the testimony today has focused on talks among Microsoft, Motorola and others to create a patent pool related to H.264 technologies. According to the testimony from Microsoft intellectual property licensing GM Garrett Glanz, Motorola withdrew from that patent pool after initially arguing for royalty caps.
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