How far apart are Microsoft and Motorola these days? They can’t even agree on what they’re arguing about.
The trial under way between the companies in U.S. District Court in Seattle is ostensibly about patents needed to implement wireless and video standards, but the primary focus this afternoon was something different — Microsoft’s separate patent assertions against makers of Android devices, including Motorola.
Horacio Gutierrez, Microsoft’s intellectual property chief, was questioned on that topic for much of the afternoon under cross-examination from Motorola lawyer Bill Price of Quinn Emanuel — who told the jury earlier this week that Microsoft was “trying to put Motorola out of business” by filing a patent lawsuit over Android technologies in 2010.
Gutierrez pointed out on the stand that the Android-related patent licensing program wouldn’t be worthwhile for Microsoft if the royalties put companies out business.
Price responded, “Unless you were trying to make an example of them, right?”
Gutierrez said, “I can’t think of any scenario in which I would try to put someone out of business.”
Later, the lawyers for both companies had a long sidebar with U.S. District Judge James Robart after Price asked to enter into evidence a 2010 Wall Street Journal interview in which Microsoft CEO Steve Ballmer was asked about the company’s patent claims against Android device makers. Microsoft has since signed patent licensing deals with many of those companies, with Motorola being a notable exception.
In fact, Microsoft’s Android licensing campaign appears to be more successful, financially speaking, than its own Windows Phone product. Without explicitly calling it a case of sour grapes, Motorola’s lawyers, in laying out a timeline for the jury, have noted that the extensive legal disputes between Microsoft and Motorola followed Motorola’s decision to shift away from Microsoft’s prior Windows Mobile operating system and embrace Android.
At one point today, the judge cut off the Motorola lawyer’s line of questioning on Android, telling the jury, “I’m going to try to keep this centered on the issue that’s before you, as interesting as the rest of this might be.”
The actual case to be decided by the jury is a breach of contract dispute. Microsoft alleges that Motorola broke its promises to standards-setting organizations when it offered to license Microsoft the patents needed to implement the H.264 video and 802.11 wireless standards for royalties equaling 2.25 percent of the end sales of Windows PCs and Xbox consoles. Standards groups require participating companies to offer their “standard-essential” patents on reasonable and non-discriminatory terms, or “RAND” in the industry shorthand.
“For us, this is a really important issue,” Gutierrez said on the stand. “People that violate the promises that they make and the contracts that they make with others in the context of standards setting, they need to be held accountable for that.”
During his direct testimony, Gutierrez called Motorola’s initial offers “outrageous” and described the proposal for the 802.11 and H.264 patents as a “sham letter” that Motorola couldn’t have expected Microsoft to accept.
However, when asked about the offers on the stand yesterday, Motorola IP chief Kirk Dailey said, “At the time, based on what I knew, I thought that what I sent was a RAND offer.”
Judge Robart, who is presiding over the jury trial, ruled previously that a fair and reasonable licensing deal would require Microsoft to pay only a fraction of what Motorola originally offered — less than $1.8 million a year, compared with $4 billion a year if Motorola’s original offers were taken at face value, Microsoft says.
Motorola’s lawyers are seeking to show the jury the broader context for the initial offers, which were preceded by Microsoft’s lawsuit against Motorola over Android. Much of the cross-examination focused on Microsoft’s behind-the-scenes talks with Motorola, including Gutierrez’s conversations with his Motorola counterpart, Dailey.
When Gutierrez called Dailey to inform him of the Android suit, “He was clearly very agitated. He was upset,” said Gutierrez on the stand today. “He told me that Microsoft made a grave mistake. He said if Microsoft wanted war, they would sue, and in the end Microsoft would come to regret its actions.”
This case is part of a broader set of disputes between Microsoft and Google, which acquired Motorola for $12.5 billion last year. After Motorola presents its side, the jury is expected to get the case and start deliberations around the middle of next week.
After the jury left the courtroom today, Motorola lawyer Price asked the judge if Motorola could get a list showing the order of Microsoft’s upcoming witnesses.
“Go over and talk to him,” Robart responded from the bench, referring to a member of Microsoft’s legal team. The judge added, “It’s a novel concept for you guys, I know.”
