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February 23, 2012

Microsoft continues attack on Google, complains to EC

Microsoft's products threatened by Motorola/Google?
In the latest round of the patent wars, Microsoft announced that that it has filed a formal complaint with the European Commission against Motorola Mobility and Google. Microsoft claims that Motorola wants extraordinarily high patent fee of 2.25% of every devices price and could block sales of Windows PC, XBOX and other such Microsoft products.

In a blog post titled Google: Please Don’t Kill Video on the Web Microsoft indicated that the patents in question reltae to the video technology H.264. They are thus standards essential patents and must be licensed under FRAND (Fair, Reasonable And NonDiscriminatory) licensing terms.

Earlier, Motorola had indicated in its 2011 annual report that "Apple had complained to EU against Motorola regarding the enforcement of standards-essential patents against Apple allegedly in breach of Motorola's FRAND commitments."

Flash back
This is the not the first time Microsoft and Motorola/Google are fighting over patents.
Back in October 2010, Microsoft sued Motorola citing Android patent infringements and again sued on November 9 claiming that Motorola wants excessive royalties for wireless and video coding patents.

Motorola than hit back and sued Microsoft on November 10 citing patent infringements on 16 patents. According to Motorola press release the patents included:

"The Motorola patents directed to PC and Server software relate to Windows OS, digital video coding, email technology including Exchange, Messenger and Outlook, Windows Live instant messaging and object oriented software architecture. The Motorola patents directed to Windows mobile software relate to Windows Marketplace, Bing maps and object oriented software architecture. The Motorola patents directed to Xbox relate to digital video coding, WiFi technology, and graphical passwords. Motorola Mobility has requested that Microsoft cease using Motorola's patented technology and provide compensation for Microsoft's past infringement."

Reasons for filing with EC
The current case relates to the patents filed above. According to the Microsoft blog post
"We (Microsoft) have taken this step because Motorola is attempting to block sales of Windows PCs, our Xbox game console and other products."

Potential EC stance
EU has not been very happy with Motorola and will frown usage of essential patents to fight legal battles. Even while approving the Google-Motorola's acquisition, EU Competition Commissioner Joaquin Almunia was quoted as saying
"This merger decision should not and will not mean that we are not concerned by the possibility that, once Google is the owner of this portfolio, Google can abuse these patents, linking some patents with its Android devices. This is our worry. … We might be obliged to open some cases in the future. This is not enough to block the merger but we will be vigilant."
There is a significant probability that EU already unhappy with Motorola/Google could take a tougher stand. If the case ever gets as serious as Microsoft's, Google's search monopoly could also come under scanner.

Similar concerns were voiced by US DOJ which stated (in regards to FRAND patents) that
"The division determined that the acquisition of the patents by Google did not substantially lessen competition, but how Google may exercise its patents in the future remains a significant concern."

Value of patents?
Microsoft charges and collects hefty amount from Android devices and collect royalties from ~70% of the Android devices sold in the US from most major device manufacturers like Samsung, HTC, Acer and LG.

But it believes that since the patents under question are essential patents they should be covered under FRAND and be available at sharply reduced prices. And what price should that be? According to Microsoft...less than 2 cents.

"For a $1,000 laptop, Motorola is demanding that Microsoft pay a royalty of $22.50 for its 50 patents on the video standard, called H.264. As it turns out, there are at least 2,300 other patents needed to implement this standard. They are available from a group of 29 companies that came together to offer their H.264 patents to the industry on FRAND terms. Microsoft’s patent royalty to this group on that $1,000 laptop?
Two cents."
The post further goes on to say that:

"Imagine if every firm acted like Motorola. Windows implements more than 60 standards, and a PC supports about 200. If every firm priced its standard essential patents like Motorola, the cost of the patents would be greater than all the other costs combined in making PCs, tablets, smartphones and other devices. Obviously, this would greatly increase the prices of these devices for consumers."
In a reply to ArsTechnica Google said that
"We haven't seen Microsoft's complaint, but it's consistent with the way they use the regulatory process to attack competitors. It's particularly ironic, given their track record in this area and collaboration with patent trolls."

Just the beginning...
While prima-facie, at least in this case, it seems that Microsoft (and Apple) have a stronger case, patent issues are never simple. It's difficult to identify each and every patent, their usefulness and potential fair licensing terms. Though it's very clear here that Motorola owns the patents, as Microsoft is not debating about the validity rather on the licensing terms.

Also there are many battles and war being fought right now in the Great Tech Patent Wars with companies having different and conflicting agendas, strange bedfellows (Apple and Microsoft) and worried regulators.

Only thing which we can be sure of is that two separate battles will be fought, one in the marketplace where currently Apple dominates, Google is a strong player and Microsoft is trying to make a mark and the other in the courtrooms where Android is on shaky ground.
In the end the strategy of using essential patents might not help Google at all and it could actually backfire if the regulators take a sterner position. Let's wait to see how Google responds and takes this forward.

This is just the beginning of the Great Tech Patent Wars...

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