Tuesday, July 10, 2012

Microsoft and Google agree to stay three U.S. patent lawsuits until FRAND issues are resolved

Microsoft and Google subsidiary Motorola Mobility have reached an agreement on a procedural course of action: as far as their three lawsuits pending in the Western District of Washington are concerned, they are now going to focus on their dispute over the latter's FRAND licensing obligations. Until that part of the dispute has been resolved, the district court and the parties are not going to do any more work on their mutual patent infringement claims pending in Seattle, with only one small exception (a claim construction hearing next week).

The proposed stay will take at least until a decision comes down on the FRAND licensing issues, which will go to trial in mid-November, and would also remain in place during any appeals. The stay is limited to the patent infringement claims at issue in three lawsuits in that district but does not relate to any other litigations such as the parties' ITC cases (Microsoft won an import ban in May and has meanwhile appealed certain parts of the ruling in order to win even more, while Motorola's case targeting the Xbox was just remanded to an ITC judge) or their German lawsuits.

A minute order by Judge James L. Robart indicated that a case management conference call took place in the afternoon of Monday, July 9. The motion to stay was noted for a decision on that day. It was filed on July 10, presumably as a follow-up to the conversation the parties had with the judge, who may have brokered the parties' agreement on this motion.

Litigation over FRAND terms raises a number of questions, such as the following ones:

  • What's an appropriate royalty rate?

  • How much value do those patents add to the standard at issue, and what's the value of the standard as a whole?

  • What's the right royalty base?

  • What's discriminatory in light of other agreements that have been concluded? Or why are those other agreements not comparable to the present case?

A debate over all of this, involving economists and other experts, is a whole lot of work even for well-resourced parties like these, and especially for a trial court. The motion to stay underscores the pivotal importance of the FRAND part of the case to the overall dispute, which started because of Android's alleged infringement of Microsoft patents. Unlike 70% of the market, Motorola has so far refused to take a license, and that attitude doesn't appear to have changed after Google completed the acquisition in May.

An agreement on a motion to stay is a procedural thing. Litigants can sometimes agree on such procedural matters even if they are worlds apart on the issues underlying their dispute. The outcome of the FRAND part of the dispute was always going to be key. That's nothing new, but if there was even the slightest doubt, it has been removed by this turn of events.

Procedural detail: the scope of the proposed stay and the key milestones

These are the three federal lawsuits affected by the stay:

I mentioned before that the only exception to this stay of federal patent infringement claims is a claim construction hearing. That one is related to the former Florida case. Other than that, the parties' focus is all on FRAND, including an upcoming decision on a Microsoft motion to dismiss Motorola's claim for injunctive relief, everything that relates to the mid-November FRAND trial and the build-up to it, and Motorola's Ninth Circuit appeal of the injunction that bars it from enforcing a German ruling.

The stay will remain in place until the later one of two milestones:

  1. the Ninth Circuit's decision on Motorola's aforementioned appeal, and

  2. the final decision on the FRAND issues pending in Seattle, including possible appellate proceedings.

Under normal circumstances, the second milestone will be the one that matters. Preliminary injunction appeals are faster than other appeals, and the FRAND issues haven't even gone to trial yet.

Microsoft v. Motorola Mobility (Google) is an important Android-related patent dispute. This motion has a number of practical implications. In those respects, it's a somewhat important development. Still, a purely procedural agreement like this one is unrelated to the merits of the parties' claims. It's only about the course of action. Here's a copy of the motion:

12-07-10 Microsoft-Motorola Joint Motion to Stay

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