Skewed Patent Laws Force Microsoft To Ditch The Germans For The Dutch
April 3, 2012

Skewed Patent Laws Force Microsoft To Ditch The Germans For The Dutch

Jedidiah Becker for

Despite a few relatively quiet weeks in the tech industry's ongoing global patent wars, Microsoft announced Monday that it will be relocating its European software distribution center from Germany to the Netherlands in an attempt to avoid becoming further embroiled in patent disputes with smartphone maker Motorola Inc.

According to Microsoft spokesman Thomas Baumgaertner: “We would have preferred to keep our European distribution center in Germany, where it has been for many years. But unfortunately the risk from disruptions from Motorola's patent litigation is simply too high.”

Baumgaertner alleged that Motorola had not been “living up to its promises about its patents,” hinting at the company's strategy of vaguely agreeing to allow competitors to tinker with patented technology and then launching legal offensives once those competitors bring their products to the market.

The abrupt move is believed to have been prompted by a lawsuit Motorola filed against Microsoft over video technology known as the H.264 standard, which Microsoft uses in several of its most popular products including Windows 7 and Xbox.

Both sides are currently awaiting the decision of a Mannheim court, which is expected to announce its verdict in two weeks.

If the court rules in Motorola's favor, they could potentially have an injunction placed on all Microsoft products using the disputed patent. Because the German center serves as the principle hub for the distribution of Microsoft products across the continent, such a ban would for all intents and purposes shut the ailing Washington-based software giant out of the European market.

Although at the moment it remains anyone's guess as to how the German courts will decide on the case, Baumgaertner nonetheless referred to the company's preemptive translocation as a “prudent move” on the part of Microsoft's upper management.


German-based patent guru and blogger Florian Mueller believes that, unfortunately, Baumgaertner is probably right.

As news headlines from the past year corroborate, Mueller observed that Germany has become the “epicenter” for tech giants' escalating patent wars in recent years, a fact that he attributes to the country´s faulty intellectual property laws.

“The German legal system lends itself to the abuse of standard-essential patents, by strategic patent holders like Motorola as well as so-called patent trolls, like no other jurisdiction I know,” he explained in a blog post after the news was announced Monday.

Mueller sees four principle legal issues that make German courts so conducive to frivolous patent suits:

First, he explained, Germany's statutory law essentially makes it possible for any company to have injunctions placed against a defendant found guilty of patent infringement. Secondly, its so-called 'bifurcated system' lets companies file claims on even pending patents, regardless of whether or not they are eventually granted.

Thirdly, he says, was a “disastrous” decision by Germany's Federal Court of Justice to adopt the so-called Orange-Book-Standard which allows the holder of these pending patents do demand inordinately large licensing fees. Because the defendants in such cases — though not yet proven guilty of patent infringement — can be slapped with an injunction if they refuse to pay these astronomical fees, Mueller believes this to be a form of legalized extortion.

Finally, the precedent set by lower regional courts in recent years in interpreting the Orange-Book-Standard have been “constantly moving the goalposts in favor of standard patent abusers instead of holding them responsible for a breach of the commitments they made to offer licenses on FRAND (fair, reasonable and non-discriminatory) terms.”

Mueller notes that such laws create a hostile environment for companies seeking to set up shop in Germany, adding that Microsoft's decision today is just one instance of how these laws can cost the country jobs and ultimately damage its economy.

“Microsoft's decision to move a substantial logistics operation out of the country is only the beginning. Lawmakers, judges and competition regulators should use the means at their disposal to fix the system before it destroys more jobs,” he pled.

As for the exact location of the new distribution plant in neighboring Netherlands, Microsoft´s Baumgaertner said he did not yet know where it would be.

The German regional court in Mannheim is expected to announce its decision on Samsung v. Microsoft on April 17. Regardless of ruling, however, Mueller expects that Microsoft is likely to find a more hospitable business environment among the Dutch, whose courts he says are traditionally less conciliatory to claimants in dubious patent disputes.

“Instead, the (Dutch) courts evaluate whether an injunction is fair and reasonable.”

Now there's a novel concept.