Microsoft, Google to do battle over patent royalty rates

A U.S. judge will decide on a fair royalty rate for Motorola's patents, which could have implications for other cases

By , IDG News Service |  IT Management, Google, Microsoft

If the court orders Motorola to license the patents at a particular rate, Motorola should then turn to Apple and offer them the same rate, McKenna said. "Apple can then take or leave it."

In a broader sense, the case could establish a methodology for calculating royalty rates for standards-essential patents, which could then be used in other cases. That's less certain, however, since individual cases differ, in terms of the number of patent holders involved and the relative contribution of any one company's patents.

It's not clear that judges are in the best position to set royalty rates, particularly because they're often not experts in the area of technology involved. But standards bodies aren't necessarily the best choice, either.

"There are concerns that standards bodies tend to be dominated by the parties who hold the most standards-essential patents," McKenna said.

Google inherited this lawsuit when it bought Motorola Mobility last year, and a Google spokeswoman said the company declined to comment on it. Microsoft called it "an important issue for consumers and industry" and said it was glad of the chance to present its case.

In trial briefs filed last week, each company advances its own method for calculating the royalties. Motorola advocates for a "hypothetical license," or figuring out how much Microsoft would have had to pay if the companies had sat down to make a deal two years ago.

Microsoft prefers to look at royalty rates established by companies in other patent pools, such as the one established for the MPEG LA standard.

The outcome is unlikely to affect the prices consumers pay for Microsoft's products, said David Mixon, a partner with the law firm Bradley Arant Boult Cummings, which is not a party in the case. Even if Motorola were to score a big win, Microsoft probably would absorb the extra costs rather than pass them onto consumers, he said, given the price-sensitive markets it plays in.

Mixon doesn't think a big win for Motorola is likely, however. Using its hypothetical license theory probably would lead to an unfair royalty rate that would make the standards too costly to implement, he said.

"I imagine they'll settle on something closer to what Microsoft is advocating, but probably at a slightly higher rate than Microsoft is offering," Mixon said.

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