A Solid Foundation for Patent Peace

July 18 marked the effective date for the International Trade Commission’s order excluding from the U.S. market Motorola’s Android devices that implement Microsoft’s ActiveSync technology. In addition, Microsoft has secured two injunctions against Motorola devices in Germany for its infringement of other Microsoft patents.

Over the last few weeks, with the imminence of the ITC exclusion order, Google mounted a public relations and lobbying campaign deflecting attention from its refusal to honor its promise to standards bodies to license standards-essential patents on fair, reasonable and non-discriminatory (FRAND) terms, a practice that has prompted regulators on both sides of the Atlantic to investigate its conduct. Unfortunately, we have no reason to believe that Google’s diversionary tactics will cease any time soon, and in fact expect more of them in the future.

Microsoft has always been, and remains open to, a settlement of our patent litigation with Motorola. As we have said before, we are seeking solely the same level of reasonable compensation for our patented intellectual property that numerous other Android distributors – both large and small – have already agreed to recognize in our negotiations with them. And we stand ready to pay reasonable compensation for Motorola’s patented intellectual property as well.

But a lasting solution of these disputes will not be reached by leaking settlement positions through the press. In fact, this type of conduct is far more likely to hinder rather than facilitate a resolution. Ultimately, patent peace will be found through good faith engagement that is based on two simple, common sense principles:

First, any agreement must be comprehensive. Any approach that does not lead to the cessation of all the pending litigation will be short lived. Motorola’s public proposal to take a license for only a small sub-set of the large number of Microsoft patents used in its products will not result in durable patent peace. That proposal was cleverly designed by Motorola to sidestep the ITC exclusion order by “cherry picking” the ActiveSync proprietary technology that gave rise to that order, while continuing the remaining lawsuits against Microsoft in the U.S. and Germany. This is not a recipe for patent peace, but only for selectively disarming an opponent.

Second, any agreement must be based on market rates. There are good objective benchmarks to value the patents involved in our disputes. For example, Motorola has asserted patents that it claims are essential to the H.264 industry standard, a video codec standard that is used to encode and decode more than 80 percent of the video on the Internet. Twenty-nine companies owning more than 2,400 patents essential to the standard license them via a patent pool, and more than 1,100 companies (including Google) are licensees. Clearly, this pool provides a widely accepted market rate for H.264 patents. Likewise, Microsoft has licensing agreements with makers of a majority of Android handsets sold in the U.S. These agreements show broad industry acceptance of our licensing rates. These and other well-established market rates, along with appropriate safeguards to ensure Google lives up to its FRAND commitments in the future, provide the basis for a durable settlement between the parties of their existing patent disputes.

This particular litigation now stands at a crossroads. With its phones and tablets now subject to injunctions in the U.S. and Germany, Google can no longer doubt the relevance of Microsoft’s patent portfolio to Motorola’s products. Google can take one of two paths: it can choose either to engage in serious discussions to search for patent peace or persevere in its diversionary tactics. We hope it will choose the first course, and we stand ready to engage in good faith if it does.

About the Author

Executive Vice President & General Counsel and Corporate Vice President & Deputy General Counsel, Microsoft