The Microsoft-Motorola patent license gulf: $100M a year
Microsoft doesn't think it should pay more than $502,000 a year to license Motorola's video patents. Motorola still wants between $100M and $125M annually.
Microsoft and Motorola aren't even close to agreeing on how much the software giant should pay for the right to use patents held by its Google-owned rival.
In court filings released yesterday and obtained by Reuters, Microsoft indicated that it would be willing to pay as much as $502,000 per year to license Motorola's H.264 video patents. The company would also pay as much as $736,000 for Motorola's 802.11 wireless technology.
Motorola, meanwhile, insists that a simple fee isn't enough -- it wants Microsoft to pay a percentage of its revenues derived from the allegedly infringing products. Motorola wants a 2.25 percent royalty on H.264 technology, which would yield somewhere between $100 million and $125 million per year in fees. Similarly, Moto wants a royalty payment of 1.15 percent to 1.73 percent for its Wi-Fi patents, potentially earning it tens of millions of dollars more each year.
Microsoft, meanwhile, argues that Moto's H.264 and Wi-Fi patents should be offered at a "fair rate" because they are standard-essential intellectual property. In order for companies to license standard-essential patents, they must request fees that are considered fair, reasonable, and nondiscriminatory (FRAND).
Microsoft has long argued that Motorola's 2.25 percent royalty request is unfair. In a blog post in February, Microsoft vice president and deputy general counsel Dave Heiner said that Motorola wants $22.50 in royalties for each Windows-based laptop sold on the open market. Those laptops, he said, rely on 50 H.264 patents from Motorola. However, in order to get H.264 onto laptops, Microsoft needs to license over 2,300 patents from 29 other companies that also own some intellectual property related to the technology. Altogether, those companies charge "2 cents for use of more than 2,300 patents."
Motorola has also charged that the Xbox violates its patents.
Motorola and Microsoft last month went to trial over patent royalties. The court is expected to deliver a final verdict on how much Microsoft will have to pay next year. The same court attempted to have Microsoft and Motorola solve the royalty issue out of court, but the companies couldn't come to an agreement.