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Google Gets Pennies on Patent Dollars in Microsoft Fight

Google Gets Pennies on Patent Dollars in Microsoft Fight
By Jennifer LeClaire

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Motorola in its legal claim asked for 2.25 percent of the sales price for every Xbox and every copy of Windows sold. Microsoft figured that would equal about a $4 billion payment to Motorola every year. Instead, the judge set the royalty rates at $1.8 million a year. Microsoft had estimated fair value at $1.2 million a year for licensing the patents.
 


Motorola may have won the patent battle, but it appears Microsoft won the war -- at least from a financial perspective. Instead of shelling out billions in royalties, the software giant, which boasts a huge patent portfolio of its own -- is paying pennies on the patent dollar.

That's thanks to a Seattle federal judge who issued a ruling in favor of Microsoft in its heated patent battle with Google-owned Motorola.

U.S. District Judge James Robart ruled in Motorola's favor, agreeing that Microsoft had trespassed on its patents and then decided how much Microsoft should pay for its violation of intellectual property laws. In the end, Robart settled on a figure much closer to what Microsoft proposed than what Motorola wanted.

Wanted: $4 Billion

Motorola in its legal claim asked for 2.25 percent of the sales price for every Xbox and every copy of Windows that Microsoft sold. Microsoft figured that would equal about a $4 billion payment to Motorola every year.

Robart didn't award Motorola anywhere near that much. He decided to set the royalty rates at $1.8 million a year. Microsoft had estimated fair value at about $1.2 million a year for licensing the Motorola patents.

"This decision is good for consumers because it ensures patented technology committed to standards remains affordable for everyone," David Howard, Microsoft's deputy general counsel, said in a statement.

Matt Kallman, a spokesman for Motorola Mobility, said in a statement after the ruling, "Motorola has licensed its substantial patent portfolio on reasonable rates consistent with those set by others in the industry."

Lengthy ROI

Google acquired Motorola about a year ago for $12.5 billion, or $40 a share, after losing a bid for Nortel Networks' patent portfolio. Google described the acquisition as a move to supercharge its Android ecosystem. Many observers believe it really meant the company needed to beef up its patent portfolio.

At the time of acquisition, Google CEO Larry Page noted that Motorola has a history of more than 80 years of innovation in communications technology and products, and in the development of intellectual property, that helped drive a mobile-computing revolution. Motorola introduced the first portable cell phone about 30 years ago and was a founding member of the Open Handset Alliance that worked to develop Android.

But Motorola's patent portfolio hasn't really paid off for Google, at least not yet. A $4 billion a year royalty from Microsoft would have been a boon, but it will take a long time for the tech giant to make up for the $12.5 billion it spent at a pace of less than $2 million a year. Still, the patents could come in handy to defend Android, which many believe was the entire point of the acquisition.
 

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