SEATTLE, WA – On Wednesday a federal jury found that Motorola Mobility (now a subsidiary of Google, NASDAQ:GOOG) failed to properly license standard patents at a reasonable rate to Microsoft (NASDAQ:MSFT) and ordered the handset maker to $ 14.5 million in damages. The decision is the second of two federal decisions to determine the level of royalties that Motorola Mobility can charge Microsoft for what is called ‘standard-essential’ patents in Microsoft products, such as the Xbox.
While the award was a victory for Microsoft it was less than what the company had originally sought – Microsoft had originally asked for $ 29 million in damages. After the ruling, representatives for Microsoft hailed the decision, saying it was a clear signal to ‘Google to stop abusing patents.’ However, this particular patent dispute predates Google’s ownership of Motorola Mobility as Microsoft first filed the lawsuit in 2010.
Wednesday’s decision followed an earlier decision in April when a federal judge ruled that Microsoft had to pay $ 1.8 million per year in royalties instead of the billions that Motorola Mobility had originally sought.
The rulings deal with patents owned by Motorola Mobility that are part of H.264 and 802.11 wireless standards, both of which are used in Xbox Consoles and the Windows operating system. Microsoft contended that the royalties, which amount to approximately 2.25 percent of the product price where too high and the decisions in both instances agreed with that contention.
According to David Howard, deputy general counsel of Microsoft, ‘this is a landmark win for all who want products that are affordable and work well together. The jury’s decision is the latest in a growing list of decisions by regulators and courts telling Google to stop abusing patents.’
The decisions are expected to have a significant impact on future patent cases as they have set a standard for what is considered fair, reasonable, and nondiscriminatory (also known as FRAND) rates that patent holders are allowed to charge for the use of their patents in instances where the usage is considered ‘standard-essential.’ The impact could immediately be felt in the mobile industry where all of the key players are locked in an ongoing dispute over the use of patents. However, the precedent might be short-lived as, representatives for Motorola Mobility said they would appeal the decision. As such, the ongoing dispute of what is considered ‘standard-essential’ and what is fair compensation looks set to continue for some time.