EU Puts Motorola on the Hot Seat
"In general, companies use their patent holdings to extract as much money from competitors as they can," said Ryan Radia, an analyst with the Competitive Enterprise Institute. That Motorola -- and eventually, Google -- will use or leverage this patent portfolio to either get more revenue from or exclude Microsoft and Apple completely from their portfolio is not at all unusual. It is how the software patent system has worked for years now."
04/04/12 5:00 AM PT
The European Commission has opened two formal investigations of Motorola in response to grievances Apple and Microsoft filed against the company. The licensing fees Motorola charges for patented technologies used in products like the iPhone and Xbox are set unfairly high, the companies have alleged.
The EC approved Google's US$12.5 billion acquisition of Motorola Mobility in February -- with a warning that it would be watching to make sure Google did not abuse its newly expanded patent portfolio. The deal has also been approved by the U.S. Department of Justice, but it is still pending in other countries, including China.
The Fee Flap
Microsoft laid out its case against Motorola several weeks ago in a blog post by Deputy General Counsel Dave Heiner that began with the eye-catching headline, "Google: Please Don't Kill Video on the Web."
Motorola had refused to make its patents available at anything remotely close to a reasonable price, Heiner maintained.
The patents in question are essential for 2G and 3G wireless technology standards. They also support WiFi connectivity and H.264 video compression.
For a $1,000 laptop, Motorola requires Microsoft to pay a royalty of $22.50 for 50 patents associated with the video standard H.264, Heiner said in his post.
There are at least 2,300 other patents needed to implement this standard, he said, and those patents are available from a group of 29 companies on FRAND (Fair and Reasonable Non-Discriminatory) terms for a royalty of 2 cents.
Posturing or Real Problems?
These days, the reaction to any complaint about patent infringement -- especially in the mobility space -- is often an eye roll and a snort of derision. That is the price companies pay when they automatically reach for patents as a weapon to bludgeon their competitors, Ryan Radia, an analyst with Competitive Enterprise Institute, told the E-Commerce Times.
Much of this -- on both sides -- can be assumed to fall under the category of posturing, he said.
"In general, companies use their patent holdings to extract as much money from competitors as they can. That Motorola and, eventually, Google will use or leverage this patent portfolio to either get more revenue from or exclude Microsoft and Apple completely from their portfolio is not at all unusual. It is how the software patent system has worked for years now."
By the same token, it is in Microsoft's and Apple's best interests to drag out Google's acquisition of Motorola Mobility, Radia continued. It is unclear whether these investigations could derail that deal, especially after European authorities have signed off on it.
"It can't help though," he said.