Recent US court ruling may have nudged Google, Microsoft to settle patent disputes

An appeals court rejected in September a Google appeal on a ruling that would favor Microsoft

A few days before Microsoft and Google announced that they were dropping their patent disputes, a decision in an appeals court may have helped the two companies focus on a lasting compromise over their expensive lawsuits over smartphone and other patents.

On Sept. 15, the U.S. Court of Appeals for the Ninth Circuit denied Motorola's appeal for a full-bench rehearing on its petition.

The appeals court had earlier upheld an order of a district court in Seattle setting royalty rates for Motorola's standard essential patents in the areas of H.264 video-coding standard and the 802.11 WLAN standard, at rates lower than expected by Motorola. The appeals court also upheld a subsequent jury verdict finding breach of contract and awarding Microsoft US$14.5 million in damages, including $3 million in attorneys’ fees because of Motorola's “conduct in seeking injunctive relief” for Microsoft's use of the patents in some of its products.

Standard-essential patents are patents that are included in standards on the understanding that they will be licensed on fair, reasonable and non-discriminatory (FRAND) terms.

Microsoft and Google announced last week an agreement on patent issues, by which the companies would dismiss "all pending patent infringement litigation between them, including cases related to Motorola Mobility." The companies also said that they have agreed to collaborate on certain patent matters and expect to work together in other areas in the future to benefit their customers.

The companies said that there were some 20 lawsuits around the world that would be dropped, so it is not certain that the setback in the Ninth Circuit brought the two companies closer to a settlement.

"I can't comment specifically on the influence of the Ninth Circuit's decision" on the settlement, said a Google spokeswoman.

Google sold Motorola Mobility to Lenovo in October last year, but retained a majority of the patents that were also licensed to the Chinese company.

Besides the Motorola patents that it hoped would give it leverage in an already litigious environment, Google also inherited the lawsuit between Motorola and Microsoft when it acquired the handset maker in 2012.

Judge James L. Robart of the U.S. District Court for the Western District Of Washington at Seattle had made waves by deciding that the court would arrive at the royalty rate for the SEPs ahead of a jury trial on whether Motorola had breached its FRAND agreement with standards bodies by seeking an injunction on Microsoft products that used the patents.

Motorola had also filed patent-enforcement suits with the U.S. International Trade Commission, asking for an exclusion order against importing Microsoft’s Xbox products into the U.S., and with a German court, seeking an injunction against the sale of Microsoft’s H.264-compliant products. The Seattle court barred Motorola from enforcing any injunction granted by the court in Germany until it had taken a decision on an injunction.

The lawsuits over SEPs had brought Google some trouble on other fronts, including from the U.S. Federal Trade Commission. A complaint of the FTC alleged that the company and Motorola engaged in unfair methods of competition by breaching its commitments to standard-setting organizations to license its SEPs in the areas of cellular, video codec, and wireless LAN standards on FRAND terms. "Google violated its FRAND commitments by seeking to enjoin and exclude willing licensees of its FRAND-encumbered SEPs," according to the complaint.

Under a settlement reached with the FTC in 2013, Google agreed to meet its prior commitments and give competitors access on FRAND terms to patents on critical standardized technologies. Google also arrived at a settlement over patents with Apple last year, which included SEPs.

Last Thursday, Microsoft and Google both submitted petitions that the case in Seattle be dismissed. Each party shall bear its own costs and attorney fees.

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