Microsoft sues Motorola over patent fees on Xbox

Microsoft Corp., the biggest software maker, accused Motorola Inc. of breaching contractual obligations to fairly license patents on wireless networking and video coding to be used in the Xbox gaming system.

Motorola is violating a pledge to license on reasonable terms patents that are deemed essential to industry technology standards, Microsoft said in a lawsuit filed today in federal court in Seattle. Royalty demands made by Motorola are out of line with the terms of the industry standard-setting body in which the companies are participants, Microsoft said.

“Motorola has refused to extend to Microsoft a license consistent with Motorola's promises for any of Motorola's identified patents,” Redmond, Washington-based Microsoft said in the complaint. “Instead, Motorola is demanding royalty payments that are wholly disproportionate to the royalty rate that its patents should command under any reasonable calculus.”

The two standards at issue are incorporated in Microsoft's Xbox, and the video coding technology also is used in the Windows 7 and Windows Phone 7 operating systems, according to the complaint. The wireless and video standards aren't the main features of the products and yet Motorola said in Oct. 21 and Oct. 29 letters the royalty would be based on the price of the end product and not on the component software, according to Microsoft.

“We worked with Microsoft to reach an agreement that would have allowed Microsoft to use our proprietary technologies without infringing Motorola's patents,” Jennifer Erickson, a spokeswoman for Schaumburg, Illinois-based Motorola, said in an e-mail. “Unfortunately, despite a fair offer from Motorola, Microsoft was unwilling to enter into a licensing agreement.”

Royalty Demands

“Motorola's patent portfolio and licensing agreements are critical to our business, and we will continue to take all necessary steps to protect the company's intellectual property,” she said.

The royalty demands were sent to Microsoft three weeks after the company filed patent-infringement claims against Motorola at the U.S. International Trade Commission in Washington and in federal court.

In the patent cases filed last month, Microsoft is seeking to block U.S. imports of Motorola's Android phones. It's one of many cases before the agency in Washington over the burgeoning market for phones that also have Internet access.

The new case is Microsoft Corp. v. Motorola Inc., 10-1823, U.S. District Court for the Western District of Washington (Seattle).