Bloomberg News

Motorola Mobility Can’t Act in Microsoft Case in Germany

April 12, 2012

A visitor speaks on a mobile handset near a display of Motorola devices. Photographer: Chris Ratcliffe/Bloomberg

A visitor speaks on a mobile handset near a display of Motorola devices. Photographer: Chris Ratcliffe/Bloomberg

Motorola Mobility Holdings Inc. (MMI:US) can’t seek to ban Microsoft Corp. (MSFT:US)’s Windows products or Xbox gaming systems from the German market, a U.S. judge presiding over a contract dispute between the two companies ruled.

Motorola Mobility, which owns patents related to industry standards for video compression and WiFi, petitioned a German court to ban Microsoft products that comply with those standards. Microsoft asked U.S. District Judge James Robart in Seattle to bar Motorola Mobility taking any further steps in the German case until after a trial can be held on the contract dispute between the two companies.

A German court in Mannheim is scheduled to issue a ruling May 2 that might have allowed Motorola Mobility to exclude Microsoft from the German market. Robart ruled in a hearing yesterday in Seattle that Motorola Mobility can’t take any steps to seek such a ban of Windows or Xbox, according to a statement from Microsoft.

“Motorola promised to make its patents available to Microsoft and other companies on fair and reasonable terms,” Microsoft Deputy General Counsel David Howard said in the statement. The “ruling means Motorola can’t prevent Microsoft from selling products until the court decides whether Motorola has lived up to its promise.”

The U.S. court has to decide whether Microsoft is entitled to a license that is based on terms that are “reasonable and non-discriminatory,” an obligation that is pledged by participants in standard-setting boards, Motorola Mobility said in a statement.

Contract Dispute

If so, then “Microsoft has committed to take a license under MMI’s patents essential to certain standards,” Motorola Mobility said. “Our focus from the outset has been to receive fair value for our intellectual property based on Microsoft’s use of MMI’s patented technology.”

Microsoft argued that Motorola Mobility failed to abide by an obligation to license its industry-standard patents on fair terms. It filed the breach-of-contract lawsuit in Seattle after Motorola Mobility demanded royalties of 2.25 percent of the retail price of products incorporating the industry standard.

The Redmond, Washington-based company said in a March 30 filing that complying with the Motorola Mobility demand could force it to pay $4 billion a year based on sales of devices including the Xbox gaming system and computers that use Microsoft products, such as the Windows operating system.

Distribution Center

Microsoft, the world’s largest software maker, said it was moving its European logistics center to the Netherlands from Germany because of the patent fight. The German center is the central distribution point for software and other Microsoft products destined for European markets, so a ban in Germany could limit sales through much of the continent.

A court in Mannheim was scheduled to issue a ruling April 17 on whether Motorola Mobility can have Microsoft products excluded from the German market. The ruling was postponed to May 2, Joachim Bock, the tribunal’s spokesman, said by phone today.

Under German law, if Motorola Mobility wins an order banning the products and Microsoft appeals, Motorola Mobility can only enforce such an order if it posts collateral and files some paperwork. Robart ruled that he could preclude Motorola Mobility from taking those steps because the offer letters to Microsoft covered both U.S. and international patents, according to a transcript of yesterday’s hearing.

Robart, in an order issued today, said his decision remains in effect until he rules on Microsoft’s request that Motorola Mobility be found in breach of its obligations. A hearing on that issue is scheduled for May 7 in Seattle.

Licensing Offer

Motorola Mobility contends that the licensing offer made in October 2010 was the same one it has presented to every company over the past decade as a starting point for negotiations. Microsoft failed to respond with a counteroffer or take actions allowed under German law to challenge the request for a court ban, the Libertyville, Illinois-based phone maker said in an April 6 filing.

The case is part of a broader dispute between the companies over devices that run on Google Inc. (GOOG:US)’s Android mobile operating system. Microsoft wants a U.S. trade agency to ban U.S. imports of Android phones made by Motorola Mobility, while Motorola Mobility is asking the agency to block imports of the Xbox.

Android Dispute

Microsoft and Motorola Mobility had worked together to develop smartphones that used Microsoft’s Windows Mobile operating system. Motorola Mobility said it turned to Android instead because the Windows Mobile operating system was “slow to evolve.”

Google, based in Mountain View, California, has received U.S. and European regulatory approval to buy Motorola Mobility for $12.5 billion. It’s still awaiting approval from Chinese regulators.

The U.S. case is Microsoft Corp. v. Motorola Inc., 10cv1823, U.S. District Court for the District of Washington (Seattle).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net;

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • MMI
    (Marcus & Millichap Inc)
    • $33.39 USD
    • -0.29
    • -0.87%
  • MSFT
    (Microsoft Corp)
    • $47.88 USD
    • -0.26
    • -0.54%
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