Judge to Decide Reasonable Royalty Rates for Essential, Industry-Standard Patents

cellphone-flip-isolated-in-white-200x148 San Diego – For the first time, a federal judge will determine what constitutes a reasonable royalty rate for patents that have become an industry standard.  The case, which begins Tuesday in the U.S. District Court in Seattle, started when Microsoft filed a lawsuit against Motorola in November 2012 claiming that Motorola breached its contract to provide use of its patents at a reasonable rate.  The technology relates to online-video viewing and wireless usage.

Private companies that hold industry-standard patents may be required to license them under FRAND or “fair, reasonable, and nondiscriminatory” terms as part of joining international-standards groups.  Microsoft claims that Motorola Mobility, a subsidiary of Google, demanded excessive royalties for the use of its industry-standard patented technologies.  Microsoft claims that Motorola required 2.25 percent of the sale price of every Xbox and Windows sale, which it claims would amount to Microsoft paying Motorola $4 billion annually.

Motorola disputes the $4 billion figure and claims that the 2.25 percent royalty rate was simply an opening figure for negotiations.  Judge Robart is expected to give an opinion about what constitutes a reasonable royalty fee for all industry-specific patents.  A jury trial, planned for the spring, will then compare the reasonable rate determined by Judge Robart with Motorola’s rate.

The decision will have an impact on other cases between the two companies in Washington, D.C. and in Germany.  Motorola is currently seeking an import ban on Xbox consoles from the U.S. International Trade Commission (ITC), as they contain some of the industry-standard patents being disputed in the Seattle trial.  Motorola has already won an injunction from a German court that bans the sale of certain Windows and Xbox products in those countries.  Judge Robart has barred Motorola from enforcing the injunction until the Seattle case is settled.

Microsoft has already said that it will pay Motorola whatever the court decides is a reasonable royalty rate.  If Motorola agrees, the cases before the ITC and the injunction in Germany will likely go away.





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