back to article Microsoft v Google judge could shape the world in new patent punchup

The next case that could finally tell tech companies how much a standards-essential patent is worth is about to kick off in the US. Microsoft filed a lawsuit in 2010 that challenges Google-owned Motorola over the its use of standards-essential patents (SEP) in court cases. The trial starts today at 9.00 PST (17.00 GMT). Apple …

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Or...

It'll get thrown out of court on the same basis as the Apple - Motorola case.

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Re: Or...

No, it won't Microsoft has said they will pay whatever the court determines. Motorola has failed, it has tried, to get the case dismissed. No idea what the final figure will be but Google will never be allowed to get away with what is basically blackmail.

Apple said "we will pay up to this amount and nothing more" so the judge said "fine fuck you, you 2 work it out between yourselfs or go to court"..

If Microsoft wins this the Google and for that matter Samsungs cases fall apart in the USA and Microsoft has a very strong case. In fact I can't see how Google can win without chucking out the last 100 years of antitrust law. Still we will find out in a couple of weeks and if Google wins you want be able to buy a game's console, smartphone or tablet in the USA as everyone else that are part of the same patent pool, including Microsoft & Apple, will demand the same 2.25% of the end product value, which means not much change from $1500 for an Xbox or Wii or playstation and a hell of a lot more for any smartphone.

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Re: Or...

The appeal judge will rule that Moto is only obliged to "Negotiate a rate" rather than have one shoved down their throats by MS in their home town court.

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"Negotiation" only takes place when the law is inadequate. FRAND should be unequivocal and standardized with the same level of payments regardless of vendor.

Set FRAND at whatever X percentage and apply it uniformly. You either pay that amount or THEN you get taken to court. Just that will eliminate all the malarkey and back and forth BS.

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WTF?

Is that X percent per patent, X percent per patent-holder or X percent regardless of how many SEP patents are used (then distributed evenly based on who holds which patent)?

None of the above are workable, though the second seems it at first glance. Negotiation is the correct way IMHO, where it falls down is where certain companies refuse to negotiate at all (wonder who they are?).

The idea of paying (say 2%) per patent holder seems great until those holders do a Nokia and pass some of their patents onto subsidiaries. If they split them 50-50 you're still paying 100% more than originally expected, let alone if they split between a few.

The thing about contracts is there's supposed to be negotiation. Licensing a patent is a contract, so why would you think that it's a failure in law?

Not that I don't think the patent system is mental mind, but the idea that negotiation is bad is a failure to understand the alternatives IMHO. What would be helpful, though, is if the standards bodies (i.e. not the courts, would give guidelines for what's reasonable).

What would be even more helpful is if certain large companies fulfilled their obligation to enter into negotiation if they don't like the initial price, rather than screaming abuse of patents and running to the nearest court. That is the failure in the system. FRAND was working as well as it could until the Microsoft's and Apple's of the world decided to get involved, but found they only had utility patents.

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Holmes

FRAND as a percentage!!!

This case, as I see it is a reasonable place to try and iron out these problems.

When you license a "technology" then, each time you use this in a device, you should have to pay the royalty. This should be a fixed cost per time not a variable charge dependant upon the cost of the product.

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"it wouldn't stick with the court's decision on a patent rate unless the rate was less than $1"

It's not a rate, it's a value expressed in a currency that is being inflated away.

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HTC

Isn't HTC paying MS $10 'license fee' on every android phone they sell?

And MS are complaining about paying out a couple of dollars.

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Re: HTC

Maybe HTC are paying $10 for every device, I would guess that that rate may cover multiple patents, whereas the couple of $ one could be just for one patent.

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Mushroom

Perhaps it's time that Standards Essential Patents are automatically assigned over by the standards body and released as public domain.

Patents in principle protect intellectual property theft and exploitation, however if they then form part of a standard then maybe the greater good of the world takes precedence. If not assigned for free, a fixed fee scheme could be used - fixed NOW, not negotiated later.

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Simple solution

No patent holders would participate in the standardization process.

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Vic
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> Patents in principle protect intellectual property theft and exploitation

A truer word was never spoken...

Vic.

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Aren't the microsoft patents on the FAT file system? which you could argue is a standard essential patent in itself since you need to be able to read/write FAT partitions to get anything on/off a Windows PC which MS have a monopoly on.

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not if this article still true

http://www.wired.com/wiredenterprise/2012/03/ms-patent/

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Anonymous Coward

"n amount that's widely considered too high"

By whom?

The initial value might be deemed too high but that's the opening position and you negotiate from there.

Both MS and Apple seem to have decided that they are too important to negotiate and used SEP patents without wanting to make a payment at all.

The judge in this case has shown some very odd decisions which would suggest a potential lack of impartiality....

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You seem to have forgotten about the ND part of FRAND

You're not allowed to start high and negotiate down, you should have a fixed menu price available to everyone. Googorola have to prove that this is the rate paid by its other licensees, and that this is both fair and reasonable.

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Re: You seem to have forgotten about the ND part of FRAND

Missed the various rulings that contradict your statement did you Steve?

The negotiations have to be in good faith, and the end price must be Fair Reasonable and Non Discriminatory. The opening offer must be made in good faith, but you are allowed to start at the higher end of the scale and negotiate down. In fact, it's more or less essential if you don't want to massively undersell.

It's only in negotiations that you can weigh things that the otherside can offer (cross-license your patents and we'll knock 20% off) which may actually be more beneficial than the licensing money. If you offer $1 per patent then there's far less room to do that.

Go and read how FRAND actually works (according to courts and the ITC amongst others) then re-read the MS and Apple versions. Do you see a fairly large difference in the stances? A lot of other people seem to.

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Re: You seem to have forgotten about the ND part of FRAND

Got that the wrong way around. The OPENING price must be Fair, Reasonable and Non Discriminatory. You can offset the value of your own patents against that price (so if your patent has a list price of $10 per device and my patent has a list price of $5 per device then we could, for example, do a deal where I pay you $5 per device) or cross license if you want, but a manufacturer who brings nothing but cash to the table must nominally get the same deal. Without that theoretical equality a companies' competitors can be discriminated against.

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Re: You seem to have forgotten about the ND part of FRAND

Hon. James L. Robart ruled in the MS v Moto case that

Certainly, Motorola’s commitments to the IEEE and ITU require that it negotiate in good faith towards RAND terms, but those commitments go one step further and require Motorola to eventually grant a license on RAND terms. Thus, the RAND license must eventually execute between the parties, and interminable good faith negotiation by Motorola will not uphold its end of the bargain. As the court previously explained, any other conclusion would be contrary to the purpose

In other words, you need to work towards RAND but you don't have to start at that level (clarified later in the ruling). Bear in mind this is a Judge that many are saying is favouring MS (I try to avoid accusing judges of bia myself!).

From the ITC Ruling

Patents have the attributes of personal property. 35 U.S.C. § 261. Their value, in terms of licensing, varies according to a myriad of factors, and it is not enough for Apple to say that Samsung's license offer was unreasonable based on Apple's rationale. Remarkably, even though Apple complains that Samsung's license offer was not FRAND, Apple has not shown that, as a member to ETSI, it ever availed itself of the process and procedures of the ETSI under Clause 4.3 of the ETSI Guide on IPRs, which provides for mediation by ETSI Members or the Secretariat. ............. Furthermore, negotiations often involve a process of offer and counteroffer before the parties arrive at an agreed price, but Apple's evidence does not demonstrate that Apple put forth a sincere, bona fide effort to bargain with Samsung.

So, whilst you're correct in that I can't demand $10 from you if I'm asking everyone else for $5, the rest doesn't affect anything but the final price (which if I refuse to negotiate may be the opening price) both members must (if they don't agree with the opening price) enter into negotiations or use ETSI mediation. In both the MS and the Apple cases, this hasn't happened.

Whether or not the price is reasonable is obviously highly subjective. From a business perspective, I'd consider $10 reasonable for something I created but $2 equally reasonable if you created it.

I am curious to know how you think a company will know exactly what a competitor has in their portfolio before beginning negotiations?

The opening price has to be a good-faith offer, but it doesn't have to be FRAND per se. So I can ask for $7 (assuming I'm licensing to others for $5 - $7) but I can't really justify asking for $15 or $20 (Even $10 is likely to be pushing it).

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Anonymous Coward

What part of Non Discriminatory...

....means I can't start at 2.5% If I start it at that and say I'm willing to negotiate how is that being discriminatory?

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WTF?

Re: What part of Non Discriminatory...

"Don't you want to haggle?"

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Re: What part of Non Discriminatory...

The part that says the same rate should apply to all customers. You're discriminating against the ones who don't have any bargaining power to negotiate downwards.

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Re: What part of Non Discriminatory...

Burt!

This Bloke won't Haggle

Won't 'aggle?

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In the earlier case, Apple got spanked by an ITC judge. Samsung said, "you owe us X for these standards essential patents." Apple said, "see you in court." The judge said, "That's not negotiation, Apple. Go away." Microsoft has adopted a similar tactic of trying to dictate rather than negotiate prices. If this judge sees it the same way, it could get interesting.

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Shurely Shome mishtake

If I have read the figures here correctly then MS offered just over a million but claim that 2.25% would cost them billions????

So that would make their offer in the region of 0.0025%

And they are surprised that Google said 'see you in court?'

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Anonymous Coward

Re: Shurely Shome mishtake

So you think licensing a patent that might be used in a $2 component should be based upon a percentage of the completed item's value? What if that one $2 component were used in a Boeing 747? I think that is essentially Microsoft's position - they are willing to pay a reasonable cost but not a percentage of the containing item's sale price.

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Re: Shurely Shome mishtake

I think you are using a poor comparison here. This is a product which Microsoft apparently want a license fee of $10 per item for use of their patent(s) and taking an 'unlocked' street value of around $500 this is 2%. Google are looking for 2.25% for a license for their patent(s) but MS only want to pay around 0.002%.

To use your example it would be like MS asking $8million per 747 because the on-board computers use FAT or similar.

Only offering one-thousandth of the requested license fee as a 'bargaining position' is only one step removed from just saying Get Stuffed

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Re: Shurely Shome mishtake

If that one component is the key to keeping the 747 in the air or saves the airlines $20 million a year in fuel costs, damn straight it's worth more than $2 per piece.

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Re: Shurely Shome mishtake

There is a problem with this example - the 2.25% would be applied to the first "part" in the process that uses the patent. Hence if I use a $2 part whose manufacture requires a patent, then the manufacturer would have been the one paying the patent (on the $2), not me. One the other hand, if I use that part to build a device which then uses a patent, it is up to me to pay for the patent.

So, if I buy a CPU which uses (for example) an Intel patent, I expect that the fee would have already been paid to Intel. If I then make my computer able to read FAT filesystems (because, for example, I wrote my own OS) then *I* would have to pay MS for the privilege. If, however, I use a commercial OS which can already read FAT, then the company which made the OS would be responsible for paying the fee.

Or at least, this is how it should work. Lately, there has been attempts to hit the end-user for things which should have been paid for way up the line (e.g., phone manufacturers using Android having to pay MS for things which Google baked into the OS).

Bottom line - payment of patent fees should occur at the point of first inclusion, and nowhere else.

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Simple solution

When a patent becomes SEP, then as part of that process a price is set on said patent (either fixed or percentage-of-product) and is applied to *everybody* who uses it. The heavy negotiations over pricing as part of the SEP process would make it "Fair" and "Reasonable", and the price being set at the onset would make it "Non-Discriminatory".

Instead we have companies arguing with each other over the price of SEP patents *after* they have been made standard.

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Fair and reasonable.

You need this one patent to make any of your shit work? I'd say 50% seems pretty fair. After all, without this patent, you don't have a product.

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Re: Fair and reasonable.

And you'll never be asked or allowed to join a standard-setting body every again.

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Re: Fair and reasonable.

"And you'll never be asked or allowed to join a standard-setting body every again."

That should be the core sanction. If the h.264, 3G, LTE etc bodies had some sort of patent defence written in - so if company X comes along saying "ha, I have a patent you need for 3G which isn't in your pool, give me $345bn or you can't use 3G", the reply would be "ok, but you can't use 3G, GPRS, GSM or USB either. See you in bankruptcy court."

Ironically, though, that would be effective against anyone *but* a pure patent troll. Any handset manufacturer would have to join the patent pool, play nicely and accept their fair share of the standard body's royalties - but if an "outside" company somehow got hold of an essential patent but didn't need to use it themselves, they could still hold others to ransom.

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