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Jury Finds Google Guilty of Standards-Essential Patents Abuse Against MS
recoiledsnake writes "A federal jury in Seattle ordered Google to pay Microsoft $14.5 million in damages for breach of contract for failing to license at reasonable terms standard essential patents covering wireless and video technology used in the Xbox game console. Motorola had demanded Microsoft pay annual royalties of up to $4 billion for use of patents that are part of the H.264 video and 802.11 wireless standards, which are baked into Windows and the Xbox video game console. Microsoft said it was willing to pay royalties but not at the 2.25 percent of the product price that Motorola sought. We previously covered Motorola's exorbitant demands."
with some real reporting
As far as I know thins is the sequence of the events: Microsoft asked Motorola for a quote on a licence for the patents in object. Motorola quoted a 2.25% licensing fee on the product price. Microsoft sued motorola. Now, generally here someone acting in good faith would at least first complain that the fee is too much, and ask for a renegotiation. Microsoft just sued, as if this was their intention right from the start. (IIRC at this point Motorola countersued in Germany and won a temporary injunction on sales, that was overruled by an US judge. Apparently the US justice system overrules the european courts, but that's nothing new, I guess.)
in the mean time microsoft has no issue charging a similar percentage to android manufacturers
http://bgr.com/2013/05/01/microsofts-android-licensing-agreements-earnings/
If an experiment works, something has gone wrong.
Motorola requested royalties up to $4 billion, sure.
But "demanded" does not reflect that this was their initial offer.
Standard practice for licensing is
1-owner offers to license for $x
2-potential licensee offers to pay $y
3-owner lowers price
4-potential licensee raises offer
5-haggle over what is covered and what it's worth
The impression given is that this was after step 5.
It actually was after step 1; Microsoft sued before they made a counter-offer.
Can I ask about the FAT patents that are part of a standard (SD Card)? Why Microsoft is able to force OEMs into big cross licensing agreements for dumb patents like that?
I really miss Groklaw's coverage and analysis of this whole thing.
TCP: Why the Internet is full of SYN.
And we all lose.
Microsoft makes money off Android, for what I suspect is patents they've never disclosed. Google was trying to make money from Microsoft.
In the end, we all pay more, and the market is locked up by large incumbents who won't let anybody else play in the sandbox.
If the intent of the patent system was to 'foster innovation', we're not seeing that actually happen.
Lost at C:>. Found at C.
Yes, the demands were exorbitant. The problem is that MS decided to immediately go to court rather than negotiate. Usually companies go back and forth and settle on a price. MS decided to short circuit that give and take and instead went straight to a court in Seattle. MS has never been one to compromise with anybody, and now all of a sudden when they have to negotiate with large companies they throw temper tantrums.
Believe nothing -- Buddha
That would be a problem... ...if $4 billion weren't an initial offer that MS never bothered making a counter offer on.
2% of the console's price is pretty exorbitant for open standards patents. The whole deal with (F)RAND stuff is "Reasonable and Nondiscriminatory". Now you don't have to license your stuff under that model, but that's how open standards like MPEG-4 and 802.11 are done. Companies pool their patents and set up a standard, and the licenses are fixed. The idea is that anyone can license it for the same amount, and that amount is fair and reasonable.
The reason companies do that is to get their patents used and licensed. I mean if I develop some cool new video compression, but I won't set licensing terms, everyone has to come to me and I decide if you get a license, and if so what it costs, well that will hamper adoption. Many companies will give that a miss since they don't know why it'll cost them. However if it is all out in the open, then it is much more likely to get used and licensed.
Also a lot of standards agencies require it. If you want your IP to be part of whatever standard they make, you have to disclose it, and license it under RAND terms. You don't want to, then it is excluded from the standard.
Well, if you decide to do that, you can't then go and decide to try and stick it to a company you don't like. You can't say "Yes, all our stuff is available under this fair license for all to use, oh except for you, we don't like you so you pay more." Sorry, you gave up that ability when you decided to do the open standards thing and RAND licensing.
Hence, the court decision. Google wanted to play hardball with MS, but they were doing it with patents they'd said they wouldn't do that with. So they got slapped down.
So ya, exorbitant demands. Particularly in context of what we are talking about. Remember Google doesn't own H.264 or 802.11. They only have a small number of the patents on it. So if their share was like 2%, then total cost could easily be 10-20%. If that was the kind of money demanded for those standards, they'd not be used. Google just wanted to screw MS.
The missing information is that Google bought Motorola Mobility, the Motorola unit involved in this case, in 2011.
Actually, 2.25% was the opening request - the same opening request they made to Nokia, Sony, and a bunch of other companies. MS ran to the courts to complain rather than negotiate. Not sure how it's abusive to make an initial offer that's higher than you expect to get. Now, had Motorola/Google refused to negotiate that 2.25%, it might be abusive - but that's not what happened.
Motorola.
If you bought a company that did something prior to your buying it, are you evil?
In any case, Microsoft is the evil one in this case because, if you followed the case at all, you would have noticed that Motorola actually asked for a reasonable amount by industry standards but Microsoft didn't even attempt to negotiate and, instead, went straight to a court challenge arguing things that aren't quite even law.
This is factually wrong. MS did negotiate. In fact the judge sent the parties to negotiate but obviously Google did not want money from MS but for MS to stop suing Android manufacturers. In this case they were expecting MS to trade patents worth millions for patents worth pennies (you may not agree with patents but this is the current law).
This has nothing to do with the USPO.
Motorola filed the patents which is perfectly in their rights, however what they choose to do was try to extort a lot of unreasonable royalties and licensing fees out of Microsoft which thankfully the courts have found in favour of Microsoft. Yes Microsoft ain't no saints, but thankfully the courts are waking up and stopping this kind of anti-competitive bullshit.
The USPO is not involved in setting the conditions of licensing, royalties, or any other arrangement or agreement for two parties to share or exchange patent IP. A patent filed does not come with a set of conditions on how it should be used, shared, or what fee schedule is applied for royalties or licensing. I am tired of people ignorant of the patent process just throwing out stupid diatribes about the patent office and patents in general. Sure if the USPO grants a patent in the first place that is trivial in nature or duplicates existing work, then by all means slam the USPO. This case is not the time for that.
There is nothing wrong with a patent. Someone that "invents" something has full right to protect their IP. They have a right to be compensated for the effort, time and money that went into creating the idea. I don't care if its a trivial bit of nonsense, or some elaborate mechanical wonder, everyone has a right to invent and turn that into a money making enterprise. The alternative is communism where all your ideas belong to the state and you just get some stale bread for all your effort. Do you want to live in that communist state? Keep slamming patents and decrying for their absolution and everything to do with capitalism and democracy in general.
However what has happened to the humble patent today is they are now are used in a cold war of stockpiling of ideas in a direct effort to prevent competition. The company that succeeds today will have the largest patent portfolio and hopes that the only way for their competition to survive is to have to pay them obscene royalties, or go out of business. Companies like Apple rarely even share their patents, they just make so much obscene profit that they patent every little stupid idea that comes into their heads and hope that each one cuts a tiny slice out of the ability for their competition to create a successful product.
The patent has been weaponized.
There is nothing about the patent that needs to be changed, but the laws surrounding how patents are shared, exchanged, that is the business surrounding the patent, needs to change and its up to courts to start setting precedent that extorting ANY company using and anti-competitive pricing structures or withholding a patent that is necessary to support the standardization of products and services should no longer be tolerated.
I haven't thought of anything clever to put here, but then again most of you haven't either.
Someone that "invents" something has full right to protect their IP.
No they don't. In neither law nor philosophy does anyone have a "right" to the exclusive use of an idea. Patents are justified because they are believed to be a net benefit to the public. The US Constitution states this explicitly.
The alternative is communism where all your ideas belong to the state and you just get some stale bread for all your effort. Do you want to live in that communist state?
This is a ridiculous argument. Capitalism has existed without patents in the past, and totalitarian communism is not the only alternative to our current IP laws.
Agreed. It's a pretty common tactic to open negotiations that way though. Patent holder says 2.25%, Licensee counteroffers 0.0001%, and eventually they arrive at a reasonable number. In this case though Microsoft didn't even make a counteroffer, they just went straight to the courts.
--- Most topics have many sides worth arguing, allow me to take one opposite you.