Later today (unless there's a delay) the ITC will decide on Apple's and Microsoft's petitions for review of the preliminary findings on Motorola's complaints against them. I also saw that Microsoft filed a motion for partial termination of the Xbox investigation, but the document itself is inaccessible to the public. I venture to guess that Microsoft proposed termination with respect to Motorola's FRAND-pledged standard-essential patents (SEPs).
Since the wholly-owned Google subsidiary faces an import ban over a Microsoft patent, it recently made a "settlement" offer that would theoretically avoid import bans between those two players. But I explained in a recent post why that offer wasn't truly meant to bring about an agreement.
Basically, Motorola wants to create a situation in which it hopes that the ITC will hesitate to deny an Xbox import ban while Microsoft gets to enforce an import ban over a particular meeting scheduler feature. The fact patterns are, however, very different. Motorola is under huge pressure after lawmakers, the FTC and major industry players (most of whom have no involvement at all in the smartphone patent disputes, not even indirectly) warned against the consequences of import bans and other forms of injunctive relief based on SEPs.
Facing so much backlash for its highly problematic conduct, Google/Motorola went on a PR offensive last week centered around its "settlement" proposal. While Google has every right to defend its interests, I don't think it helps its cause by making false claims that can be easily debunked. If it wants to publicly disagree with lawmakers, regulators and large parts of the industry, it should do so on the basis of reasonable arguments -- not demonstrably false ones.
ArsTechnica quotes the following claim:
"'Both Microsoft and Apple need to show that they're willing to be reasonable as well by respecting the contributions Motorola has made in literally creating the mobile phone industry,' said Kirk Dailey, corporate vice president of IP Licensing at Motorola."
Actually, both Microsoft and Apple have told affirmatively to different courts that they want to take a license to Motorola's SEPs on FRAND terms. Elsewhere in the interview, Mr. Dailey says that "they seemingly won't accept any price", which is also wrong in light of their desire to take FRAND licenses.
Mr. Dailey's reference to Motorola's role "in literally creating the mobile phone industry" ignores two key facts. One is that the patents it's asserting against Microsoft aren't cellular patents. The other, more fundamental one, is that Motorola's pioneering of cellular telephony took place way back in the 1970s, but patents have a maximum term of 20 years from application or, for older U.S. patents, 17 years from the date of grant. These days there aren't any patents left from the 1970s. They all expired a long time ago. And since its heyday, Motorola has gone through periods in which it was anything but the number one innovator in wireless technologies.
Even if Motorola had been consistently at the forefront of innovation in this industry, it still wouldn't have a right to seek injunctions in breach of its own FRAND licensing commitments.
The second major issue I have with the claims Motorola made in the AllThingsD interview is that it now denies its earlier $4 billion demand:
"'Microsoft says we demanded $4 billion a year from them, and that's simply not true,' said Kirk Dailey, VP of intellectual property for Motorola Mobility. 'We never asked for anything like that.'"
The same Mr. Dailey actually wrote letters to Microsoft less than two years ago that made this demand, beyond the shadow of a doubt. He doesn't do his credibility by favor by now denying what he himself demanded in 2010.
Those letters are in the public record. Microsoft filed them with the United States District Court for the Western District of Washington. I have uploaded both of them to Scribd: the one relating to IEEE 802.11 (WiFi, or WLAN) and the one relating to H.264.
Both letters share a common structure. Both clearly state that royalties are calculated based on the price of the end product. For WiFi, the letter states that the end product is the Xbox. For H.264, a standard that Microsoft implements in more products than just the Xbox, it states more examples (click on the image to enlarge or read the text below the image):
"Motorola offers to license the patents on a non-discriminatory basis on reasonable terms and conditions ('RAND'), including a reasonable royalty of 2.25% per unit for each H.264 compliant product, subject to a grant back license under the H.264 patents of Microsoft, and subject to any Motorola commitments made to JVT in connection with an approved H.264 recommendation. As per Motorola's standard terms, the royalty is calculated based on the price of the end product (e.g., each Xbox 360 product, each PC/laptop, each smartphone, etc.) and not on component software (e.g., Xbox 360 system software, Windows 7 software, Windows Phone 7 software, etc.)."
This royalty base was also referenced by the ITC's Administrative Law Judge David Shaw, who concluded that it was unreasonable.
United States District Judge James Robart in Seattle said at a hearing that those letters looked like a 20-day ultimatum rather than an invitation for negotiation.
With Motorola irrefutably having demanded 2.25% of the price of "each PC/laptop" running Windows, Microsoft's $4 billion estimate was actually conservative. Microsoft conservatively assumed an average selling price per PC of $500, but it's actually even higher. So if Microsoft's $4 billion was "not true" (as Mr. Dailey says), it was simply "not true" in the sense of Motorola demanding even more.
Going forward, Motorola's public 50-cent offer certainly takes care of the original demand with a view to, for example, the FRAND trial scheduled to take place in Seattle in November. But the fact that Motorola made this demand, and didn't modify it until last week, is still relevant in some ways -- otherwise Mr. Dailey wouldn't care to deny the undeniable.
For example, regulatory agencies will also look at Motorola's overall behavior, not just at whatever the latest offer is at a given point in time. And there could be implications in some pending litigations. Motorola's own counsel conceded in the Seattle FRAND case that a "blatantly unreasonable" demand would constitute a breach of a FRAND contract. If a court concurs with Judge Posner's understanding of FRAND, injunctive relief is unavailable in connection with SEPs no matter what offers were made or refused, and there are lawmakers, regulators and major industry players who share that view. But if someone wanted to take the course of events during a FRAND negotiation into account, then Motorola's initial demand would become part of the consideration.
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