Microsoft To Google’s Motorola: “Are You Serious?”
Michael Harper for redOrbit.com
Google is an odd duck. Quite successful, sure, but an odd duck nonetheless. After all, no normal company pays a team to take the Ultimate American Road Trip, traversing nearly every road in the States as they take thousands of pictures every hour. No normal company, when bidding on a stack of patents, (on which they can bolster further legal battles) bids numbers like Brun’s constant, the distance between the Earth and our Sun, or pi.
So perhaps Microsoft is well acquainted with Google’s games, prompting them to ask “are you serious?” when their new acquisition, Motorola, presented a new offer to settle in their little patent dispute.
As you may remember, Microsoft is suing Motorola over the use of their ActiveSync software. Motorola, in turn, sued Microsoft over their use of the H.264 video codec in their Xbox gaming system, as well as other PC games. Both companies are seeking injunctions against one another, hoping to keep their respective products from getting to the customers who are often not privy to these kinds of battles.
Motorola has already received one injunction against Microsoft’s Xbox in Germany early last month, resulting in a ban of Windows 7 and Xbox 360 sales there.
In order to prevent them from returning the favor, Google’s Motorola offered a settlement to Microsoft yesterday, saying they’d pay 33 cents for every phone which uses ActiveSync sold. To “sweeten the pot,” they also said they’d lower their demand for royalties to just 50 cents on Windows OS devices which use the H.264 codec.
They’d also still like to get 2.25% of the cost of every Xbox 360 sold, by the way.
According to BusinessWeek, Microsoft asked, “are you serious?”
Feeling confident in their settlement offer, Kirk Dailey, Motorola’s vice president of intellectual property, told BusinessWeek yesterday, “We’re hopeful they’re going to respond positively. We should have a response in two weeks.”
What makes this settlement offer so preposterous?
While Motorola’s offer of 50 cents per unit (in addition to their 2.25% cut) may seem kind in gesture, (“Hey, for you, 50 cents. You seem like a nice company…”) Microsoft says the price is still higher than normal market rates. Making them look even more like a petulant child is their refusal to just license the Microsoft patents their already using. According to Microsoft’s deputy general counsel Horacio Gutierrez, “While we welcome any good faith settlement effort, it’s hard to apply that label to a demand that Microsoft pay royalties to Google far in excess of market rates, that refuses to license all the Microsoft patents infringed by Motorola.”
Motorola first offered to license their patents at the 2.25% rate, but Microsoft balked at the offer, saying that rate would net Motorola around $4 billion a year.
Google’s Motorola, by the way, has until July 17th to remove ActiveSync software from their Android phones, lest they have their phones stopped at the border. Right now, the case is under a presidential review period and can be overturned before the 17th if Mr. Obama sees fit. As for that 33 cent offer by Google’s Motorola? That’s the bond price they’re already paying during this presidential review period, though it is a bit higher than what they previously paid for an ActiveSync license.
Amidst all this talk of injunctions and bans, it’s important to remember the FTC is still asking the ITC to limit these bans on standard-essential patents, like the H.264 codec.
Microsoft’s Gutierrez thinks the Google/Motorola offer is nothing more than a distraction from this case.
“At a time when the FTC, prominent members of Congress and leading companies from across the industry are expressing concern about Google’s refusal to honor its obligations to standards bodies, this appears to be little more than an effort to change the subject,” Gutierrez said.