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Microsoft off the hook for billions in Motorola Mobility payout

Court case hinges around patents used in Xbox

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Microsoft has triumphed in a court battle after a judge dismissed claims it owed Motorola Mobility billion-dollar royalties for technology used in the Xbox 360. The judge broke new ground by determining specific royalty fees to be paid for the use of standard-essential patents, which he said should amount in the millions rather than the billions.

Motorola Mobility had wanted 2.25 per cent of the revenue made on the sale of each Xbox, potentially amounting to $4bn. The games console uses Motorola's patented video-decoding and Wi-Fi technology.

In a Seattle courtroom yesterday, US District Judge James Robart told Microsoft it must pay Motorola Mobility, which is now owned by Google, half a cent per unit for the video-decoding patent and three-and-a-half cents for the wireless patent, amounting to about $1.8m a year.

In a statement, David Howard, deputy general counsel for Microsoft, said: “This decision is good for consumers because it ensures patented technology committed to standards remains affordable for everyone."

Microsoft uses Motorola Mobility's patents which adhere to the 802.11 wireless local area networking standard and the H.264 advanced video coding technology standard.

Standard essential patents are crucial in technology. They are maintained by standards-setting organisations, who seek commitments from companies to supply technology fitting these standards at "fair, realistic and non-discriminatory rates" (FRAND).

The court case started in 2010, when Microsoft claimed Motorola had breached its FRAND obligations by asking for 2.25 per cent per unit to license its wireless and video-decoding technologies. The court then set out to decide what constituted a fair payment for the patents.

According to Redmond, which reported $73.7bn in revenue over the course of 2012, Motorola's fees would mean Microsoft would have to hand over more than $4bn a year.

After yesterday's ruling, Matt Kallman, a spokesman for Motorola Mobility, said in a canned statement: “Motorola has licensed its substantial patent portfolio on reasonable rates consistent with those set by others in the industry."

Now Microsoft must face its opponent once again in court in August, when a judge will decide if Motorola Mobility breached its obligation to license standard patents to Redmond. ®

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