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There's At Least One Thing Microsoft Will Love About The Google-FTC Deal
The FTC is forbidding Google from charging big bucks for certain critical patents it gained when it bought Motorola Mobility for $12.5 billion last May.
That's a big win for Microsoft. Also Apple, but mostly Microsoft.
Microsoft has been duking it out with Google and Motorola for months over these patents.
For instance, last spring, Microsoft said that Motorola Mobility wanted to charge it $4 billion a year in royalties for patents Motorola holds on Wi-Fi and video technology and that such fees were completely unfair.
The issue is that Motorola had previously agreed to put its patented technology into standards in those areas. In order for different tech products to work well with each other—like a smartphone connecting to a home router, for example, or a website displaying an embedded video—they all must follow the same technical standards, which sometimes inevitably involves the use of companies' patents.
Typically the owner of patents on such technology must license it to anyone who wants it, for a very small fee—sometimes pennies or fractions of a penny per unit. It's a practice called FRAND, or fair, reasonable, and nondiscriminatory terms.
Motorola was trying to charge its competitors like Microsoft a lot of money to gain access to patents covered by FRAND agreements. After Google bought Motorola, it continued the battle. Pundits even said that Google bought Motorola mostly for access to these patents, so it could tie up rivals in court or maybe even get injunctions against their products.
When Microsoft refused to pay high fees—as much as $22.50 per unit sold—a mess of legal activity ensued, including complaints filed with the International Trade Commission which could have banned Microsoft from selling Xbox consoles in the U.S.
Apple had filed similar complaints last year against Motorola in Europe, too.
Today, the FTC has forced Google to stop "extortion" level fees on patents covered by FRAND and to drop the ITC battles, FTC chairman Jon Leibowitz said in a press conference.
That's good news for the tech industry. Had Google been allowed to ditch FRAND like that, it would have set a dangerous precedent for all tech products.
While there's plenty about today's ruling that Microsoft won't be happy about—namely that the FTC is not going to make Google change some of its search-engine practices—when it comes to FRAND, Microsoft walks away a big winner.
And Microsoft was really the one that picked this fight. Microsoft has been attacking Android by going after the companies that build Android devices. It managed to get more than a half dozen Android/Linux device makers to agree to pay it royalties on every device they made. Microsoft has reportedly been asking for $5–$15 per unit—hardly pennies.
The difference is that those patents were not part of standards covered by FRAND.
So Google was attempting to give Microsoft a taste of its own medicine.
But Google is the one eating crow. Here's its statement from a blog post by top Google lawyer, David Drummond:
"We’ve agreed with the FTC that we will seek to resolve standard-essential patent disputes through a neutral third party before seeking injunctions. This agreement establishes clear rules of the road for standards-essential patents going forward."
The FTC will allow the public to comment on its investigation into Google's FRAND practices for the next 30 days, it says.
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