A Seattle jury today hit Motorola with a $14 to $15 million damages award for bad faith in negotiating to license patents that Microsoft's Xbox and Windows products infringe.
The dispute involved patents that Microsoft holds on technologies relating to wireless local area networks and video coding.
Two standard-setting organizations (SSOs) incorporated the Motorola technologies into standards that they set — H.264 and 802.11 – making the patents "standard-essential". Anyone who practices the standards necessarily infringes standard-essential patents (SEPs).
Motorola had promised the SSOs to license the patents on a "reasonable and non-discriminatory basis" — which goes by RAND, although Europeans tend to add "fair" to the front of RAND, rendering it FRAND.
Microsoft accused Motorola of breaking its RAND/FRAND promise, partly by using the SEPs to persuade a German court to enjoin Microsoft from distributing infringing products in Deutscheland. It sought $29 million in damages — $23 million for moving a distribution center from Germany to the Netherlands and $6 million in legal expenses. Microsoft also fussed about Motorola's opening offer of a 2.25 percent royalty rate.
The jury cut the amounts to $11 million and $3 million, respectively.
The verdict post-dates a ruling by U.S. District Judge James L. Robart on reasonable royalty rates for the SEPs at issue in April. Judge Robart set the rates as follows:
- The RAND royalty rate for Motorola's H.264 SEP portfolio is 0.555 cents per unit; the upper bound of a RAND royalty for Motorola's H.264 SEP portfolio is 16.389 cents per unit; and the lower bound is .0555 cents per unit. This rate and range are applicable to both Microsoft Windows and Xbox products. For all other Microsoft products using the H.264 Standard, the royalty rate will be the lower bound of .0555 cents.
- The RAND royalty rate for Motorola's 802.11 SEP portfolio is 3.471 cents per unit; the upper bound of a RAND royalty for Motorola's 802.11 SEP portfolio is 19.5 cents per unit; and the lower bound is 0.8 cents per unit. This rate and range are applicable to both Microsoft Windows and Xbox products. For all other Microsoft products using the 802.11 Standard, the royalty rate will be the lower bound of 0.8 cents per unit.
Blawgletter has a couple of thoughts.
First, Motorola couldn't use the David v. Goliath angle very well, partly because Microsoft brought suit first and assumed the plaintiff's side of the "v." and partly because the jury knew that another gigantic company, Google, controls Motorola.
Second, we doubt the verdict turned on the opening demand for 2.25 percent by Motorola. It seems instead to have resulted from the fact that Motorola got the German injunction.