Motorola Mobility Loses Appeal in Microsoft Xbox Lawsuit

Google’s Inc.’s Motorola Mobility can’t enforce a German court order preventing Microsoft Corp. (MSFT) from selling its Xbox gaming software in Germany, a U.S. appeals court ruled.

A three-judge panel in San Francisco upheld a Seattle judge’s order blocking Motorola Mobility’s enforcement of the sales ban it won in May in its lawsuit against Microsoft pending in Germany. The panel said the lower court’s order was narrowly tailored.

Motorola Mobility and Microsoft are locked in legal battles over patents for Xbox and smartphone software in the U.S. and Germany. Microsoft contends all devices that run on Google’s Android operating system use its technology and seeks royalties from Motorola Mobility. Motorola Mobility says it’s owed royalties on the Xbox for use of the company’s Wi-Fi and video- compression technology.

To enforce the German sales ban, Motorola Mobility would have to post a security bond covering potential damages to Microsoft, the appeals court said. Microsoft could also avoid the injunction by taking steps towards entering a licensing agreement with Motorola with a specific rate or rate determined by Motorola.

Representatives of Mountain View, California-based Google, didn’t respond to an e-mail message to the company’s media office seeking comment on the ruling.

Seattle Judge

Microsoft obtained the Seattle judge’s order blocking Motorola Mobility form enforcing a German injunction before Motorola Mobility won the lawsuit in Germany.

U.S. District Judge James Robart in Seattle said an existing contract lawsuit between the two companies in his courthouse will help determine a royalty rate, so putting the German injunction on hold is appropriate, the appeals court said.

“It is clear that there is a contract, that it is enforceable by Microsoft, and that it encompasses not just U.S. patents but also the patents at issue in the German suit,” the appeals court said.

Motorola Mobility, based in Libertyville, Illinois, has submitted offers to license its patents, some of which relate to standards established by industry groups for video compression and Wi-Fi technology. It also has offered to take a license to the coordination feature known as ActiveSync, that it has previously licensed from Microsoft before 2007.

Standard Demand

Motorola Mobility sent letters to Microsoft with what it said was a standard demand for a 2.25 percent royalty on the end price of products that use the inventions, including the Xbox and Windows products. Microsoft contends that would add as much as $4 billion in annual royalties, a figure Motorola Mobility disputes.

Microsoft contends the offer doesn’t meet Motorola Mobility’s obligation to license such patents on fair and reasonable terms, and the licensing offer should be based on “market rates.” It filed a breach of contract suit that’s scheduled for trial in November in federal court in Seattle, near Microsoft’s headquarters in Redmond, Washington.

“We’re pleased that Judge Robart’s decision has been affirmed by the Ninth Circuit Court of Appeals, preventing Motorola from enforcing an injunction in Germany until its use of standard essential patents can be closely examined,” David Howard, corporate vice president and deputy general counsel for Microsoft, said in an e-mail. “It continues to be our hope that Google and Motorola live up to their promises to standards organizations.”

The case is Microsoft Corp. v. Motorola Mobility Inc., 12-35352, U.S. Court of Appeals for the Ninth Circuit, San Francisco.

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net