The judge's ruling sets a template for future royalty negotiations for standards-essential patents and will form the basis of a forthcoming jury trial to determine whether the difference between what Motorola had demanded and the final price determined by the judge constitutes a breach of its contract to Microsoft. Motorola maintained that it licenses its patents at "reasonable rates consistent with those set by others in the industry". It may still appeal the ruling.
The companies started negotiations in October 2010 on Microsoft licensing the video-player software and wireless networking technology for its Windows and Xbox products. Microsoft claimed Motorola's 2.25 percent royalty rate on the price of each personal computer, smartphone or console sold using each of the standards was "unreasonable" and sued the mobile-phone maker for breaching its commitments to offer essential patents on RAND terms.
The latest court ruling sets a per-unit rate of 0.555 cents for the video patents, compared with the 0.2 cent rate Microsoft had proposed and the USD 1.69 implied by Motorola’s 2.25 percent rate, based on the average price of Windows. For the Wi-Fi patents, the judge set a rate of 3.5 cents per Xbox, below the 6.5 cents Microsoft had suggested and the roughly USD 6 Motorola had demanded. The ruling may encourage more technology firms to join patent pools, as the judge put greater weight on rates set by groupings with larger numbers of participants. The judge argued that if Motorola’s original terms had been used for ever standard-essential patent used in the Xbox, the royalty cost would have been more than its retail price.
