Motorola claims it's the victim in patent cases vs. Microsoft, Apple

Motorola Mobility, Google's new $12.5 billion acquisition, has been criticized in many corners for using patents that it pledged to standards groups to block sales of products or win lucrative licensing deals.

But Motorola is really the victim in battles against both Microsoft and Apple, the company's head of intellectual property licensing said in some of his first public comments since the Google acquisition. Google held some sway over Motorola in the nine months leading up to last month's merger, as the merger agreement prevented Motorola from launching new lawsuits or settling existing ones without Google's permission. But the restriction seemed to have little impact on Motorola's public actions, and Motorola is giving no indication that its strategy will change under Google's ownership.

"We created the mobile phone industry"

?Both Microsoft and Apple need to show that they?re willing to be reasonable as well by respecting the contributions Motorola has made in literally creating the mobile phone industry," said Kirk Dailey, corporate vice president of IP Licensing at Motorola.

Earlier this week, Motorola proposed a settlement with Microsoft, offering to pay Microsoft 33 cents for every smartphone Motorola ships with ActiveSync software?a price Motorola is obligated to pay anyway as a bond during the review period of an International Trade Commission ruling. At the same time, Motorola lowered its demand for licensing fees from Microsoft to 50 cents per unit on Windows PCs, and maintained its demand of 2.25 percent of the retail price of each Xbox 360, which is facing the threat of an import ban. US District Court Judge James Robart reportedly said the offer is more like "an ultimatum."?Also this week, prominent patent judge Richard Posner scolded Apple and Motorola for seeking injunctions against each other.

In both cases, Motorola is the victim, Dailey said in an interview conducted via e-mail and phone with Ars yesterday.

?Microsoft?s strategy of using patent trolls to do its bidding in a mobile market it's lost, and Apple?s ?thermonuclear? threats, make it very hard to believe we?re dealing with good-faith negotiators," he said.

We asked Microsoft and Apple for comment last night. Microsoft gave us a statement indicating it won't accept Motorola's offer. ?While we welcome any good faith settlement effort, it?s hard to apply that label to a demand that Microsoft pay royalties to Google far in excess of market rates, that refuses to license all the Microsoft patents infringed by Motorola, and that is promptly leaked to the press," Horacio Gutierrez, Microsoft?s deputy general counsel for intellectual property, said in the statement.

Microsoft has previously complained that Motorola stalled in paying licenses for ActiveSync patents, saying "Microsoft sued Motorola in the ITC only after Motorola chose to refuse Microsoft?s efforts to renew a patent license for well over a year. We?re pleased the full Commission agreed that Motorola has infringed Microsoft?s intellectual property, and we hope that now Motorola will be willing to join the vast majority of Android device makers selling phones in the US by taking a license to our patents.?

After this story was published, Apple declined our request for comment. But in previous cases?Apple has said Motorola repeatedly refused to license standards-essential patents to Apple on reasonable terms.

A fair price for standards-essential patents?

Motorola has sought licensing fees its rivals claim are excessively high given that Motorola is asserting patents that are pledged to international standards bodies, such as H.264 video and WiFi patents. Motorola committed to licensing such patents on fair, reasonable, and non-discriminatory (FRAND) terms, in exchange for having its technology included as part of industry standards.

There seems to be no numerical definition of "fair and reasonable" in this context. MPEG-LA, an organization that licenses pools of standards-essential patents, names a price of 10 to 20 cents per unit for H.264, and zero cost for the first 100,000 units sold each year. Microsoft says it pays just 2 cents per unit to MPEG-LA to use H.264 in Windows, as part of a volume discount. Microsoft has claimed Motorola's earlier demands would have amounted to $4 billion a year.

But Motorola appears to believe MPEG-LA policies (and the fact that Google took a license from MPEG-LA) are irrelevant to its own lawsuits. The 2.25 percent fee asked of Microsoft appears to be Motorola's standard demand, and many other companies such as Nokia, Ericsson, RIM, Samsung, LG, and HTC have played ball. "More than 50 companies?including, big, household names?have worked out licenses with us," Dailey said. "Just two are complaining, not because they don?t like our price, but because they seemingly won?t accept any price.?

A Motorola spokesperson later clarified that those companies have agreements with Motorola's licensing program as a whole, and may not all be licensing the H.264 technology.

Motorola's just playing defense, it says

Motorola seems to believe its patent lawsuit strategy is defensive rather than offensive.

"We're defending ourselves against Microsoft. They sued us and we're trying to just respond to their lawsuit," Dailey said, referring to a suit filed by Microsoft in 2010. "They want to tax Android and we're just asking them to pay a reasonable royalty on our IP."

Motorola's lawsuit against Apple in October 2010 has been called a "preemptive strike," as Apple had already sued Android vendor HTC and filed suit against Motorola later in October 2010.

Microsoft and Apple didn't sue with standards-essential patents carrying FRAND obligations, as Motorola has done, however. On the question of whether Motorola might shift strategy now that it's owned by Google, Dailey indicated the answer is probably no.

"Our long-term goal has always been to get freedom of action for our product business," he told Ars. "That fits nicely with Google's goals as well."

Judge: Patent system is "chaos"

Although Motorola has gotten some favorable rulings by suing with standards-essential patents, Judge Posner criticized the company this week for seeking to block sales of Apple products. "I don't see how you can have an injunction against the use of a standard essential patent," Posner told Motorola's attorneys, according to Reuters. Posner also called the entire US patent system "chaos," and said Apple's bid to bar the sale of Motorola phones would have "catastrophic effects."

Dailey agrees injunctions are an extreme outcome, but says Motorola has been left with little choice.

?Injunctions are an extreme remedy, but not when you?ve been negotiating with someone for years with no movement, and who is actively seeking to destroy a competitor ecosystem," he said.

"We always attempt to negotiate prior to litigation in seeking an injunction," Dailey further said. "But how long do you have to wait to get a resolution? At some point it becomes a necessary tool."

In one quote some legal observers might find surprising, Dailey said, "I think we could better spend the money on innovation rather than litigation." That's a sentiment most people would agree with?but the major actors in the patent wars, including Motorola, are a long way from living up to that ideal.

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