CA0096-G-2003-00055
(Photo: U.S. General Services Administration)

SAN FRANCISCO – Attorneys for Microsoft and Google faced off in the Ninth Circuit Court of Appeals today over a set of patents previously owned by Motorola Mobility. Google is appealing a pair of setbacks in the case: U.S. District Court Judge James Robart’s ruling that Google was only owed $1.8 million per year for Microsoft’s use of Motorola’s standard-essential patents; and a jury’s ruling that Google owed Microsoft $14.5 million in damages for bad faith conduct related to its patent negotiations.

Kathleen Sullivan
Kathleen Sullivan

The majority of the court’s time was dominated by questions over when and whether Google consented to Robart’s determination of patent licensing fees. Kathleen Sullivan, a partner at Quinn, Emanuel, Urquhart and Sullivan who was representing Google, argued that the company only agreed to Robart determining license fees for its patents in the event the trial would result in a patent license.

Instead, Robart determined the fees, and then let them be introduced to the jury in the damages trial as an “inarguable finding,” according to Sullivan. Doing so biased the jury against Google, she claims, because the license fees calculated by Robart were well below the rate initially offered to Microsoft. Sidley Austin partner Carter Phillips, who was representing Microsoft, argued that Google had consented to Robard determining the fees, and had not objected clearly to their inclusion in the jury trial.

In addition to the wrangling over license fees, Sullivan argued that the jury’s ruling against Motorola should be reversed because the company’s actions were permissible under the law. Motorola asked for a cut of sales equivalent to $4 billion (with $20 billion in back payments) in an initial offer letter, and filed for injunctions that would have prevented sales of the Xbox and copies of Windows.

“What I’d like to focus on is that you can’t put two permissible activities together and create an impermissible activity,” Sullivan said.

Carter Phillips
Carter Phillips

Unsurprisingly, Microsoft took a different view. Phillips argued that Motorola’s initial demand, coupled with a related lawsuit in Germany, amounted to a “hold-up effort” by Motorola.

“To me at least, Motorola’s position here is much like a loan shark finding somebody to whom he’s loaned money – 20 dollars – and (saying) ‘I’ve got a gun, I want a hundred dollars,'” he said. “And the expectation is that the person who’s got a gun (pulled) on him is going to say ‘well, let’s talk.’ That’s just not what happens.”

It’s hard to tell what the outcome of the case will be. The three judge panel appeared more skeptical of Google’s arguments, and questioned Sullivan for a much longer time than they spent with Phillips. However, they didn’t really drop hints about how they plan to rule. There’s plenty of reason for them to spend time contemplating the issues in this case, since it has far-reaching consequences for future patent agreements.

Several other tech giants, including T-Mobile and Apple, have weighed in on the case, saying that the decision will affect future negotiations over standards-essential patents like the ones in this case.

Google, which acquired Motorola before selling the cell phone company to Lenovo, remains the owner of the patents in dispute in the case.

A video of the hour-long proceedings is embedded below.

Like what you're reading? Subscribe to GeekWire's free newsletters to catch every headline

Job Listings on GeekWork

Find more jobs on GeekWork. Employers, post a job here.