Microsoft Ends German Partnership Over Patent Infringement Fears

By Joseph Mandour on April 11, 2012

microsoft-200x132 Orange County – Software giant Microsoft has ended its partnership with German company Arvato over concerns about a possible patent infringement ruling in a case filed by Motorola Mobility. Arvato has been providing logistics services to Microsoft and is a subsidiary of German-based Bertelsmann.

Microsoft will reportedly move its logistics services to the Netherlands, resulting in dozens of lost jobs for Arvato employees.

The preemptive move apparently stems from an ongoing patent infringement allegations between Microsoft and Motorola Mobility. Later this month, a German court is scheduled to rule on a patent infringement complaint filed by Motorola against Microsoft over its H.264 video standard. In the complaint, Motorola alleges that Microsoft’s Xbox 360, Windows 7, and Internet Explorer all violate patents related to the video standard. Motorola is seeking a injunctive relief order to ban Microsoft from selling the infringing products in Germany.

In response to the patent infringement claims, Microsoft is arguing that by suing over the H.264 patent, Motorola is not complying with reasonable and non-discriminatory licensing terms, or fair, reasonable, and non-discriminatory terms (FRAND). The FRAND terms are set by standard-setting organizations in the industry that set common standards in order to ensure compatibility and interoperability between the manufacturers in that industry.

Last month, Microsoft’s deputy general counsel stated that Motorola hasn’t held up its end of the bargain. According to Microsoft, on a typical $1,000 laptop, Microsoft must pay Motorola $22.50 in royalties for use of fifty patents related to H.264. Microsoft added that in order for the H.264 to be fully functional in its products, the company must license an additional 2,300 patents from other companies for which its pays two cents for each laptop to use those patents.

Motorola claims that it attempts to obtain licensing deals with any company that it becomes legally engaged with, even third parties. However, Motorola added that it has recently been left with no other option other than protecting its intellectual property through litigation.

The decision to move its logistics operations comes on the heels of Microsoft posting a $300 million bond in a United States court to delay any ban on imports that may come down from the German court. The bond should cove any revenue Motorola could lose during the time between the Germany ruling and any decision that comes from the U.S. court.

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Posted in: Patent Infringement