Microsoft sues Motorola over Xbox patent licensing terms

Microsoft sued Motorola on Tuesday in a Washington court, alleging that Motorola is refusing to licence patents on a reasonable basis, as it promised during standards-setting processes.

Motorola is asking Microsoft to pay too much for patents related to video decoding and WLAN technologies built into several Microsoft products, including the Xbox, Windows Phone 7 and Windows 7, Microsoft alleges in the suit.

"In willful disregard of the commitments it made to IEEE and the ITU, Motorola has refused to extend to Microsoft a license consistent with Motorola's promises for any of Motorola's identified patents. Instead, Motorola is demanding royalty payments that are wholly disproportionate to the royalty rate that its patents should command," Microsoft wrote in the suit, filed in the US District Court for the Western District of Washington.

Motorola pledged during standards-setting processes at the IEEE and ITU to license its patents relevant to the WLAN and H.264 video technologies on a reasonable and non-discriminatory basis, Microsoft says.

Motorola maintains that it offered Microsoft reasonable rates.

"Consistent with Motorola's normal licensing practices, we worked with Microsoft to reach an agreement that would have allowed Microsoft to use our proprietary technologies without infringing Motorola's patents. Unfortunately, despite a fair offer from Motorola, Microsoft was unwilling to enter into a licensing agreement," it said in a statement.

Microsoft cites a letter that it says is from Motorola's vice president of intellectual property that states the royalty for Motorola's patents must be based on the price of the end product, for instance, an Xbox 360. Microsoft argues that the royalty should be based on the cost of the chips and components that provide wireless connectivity for the Xbox 360, which make up a small fraction of the overall cost of the device.

Microsoft is also arguing that the pertinent Motorola licenses aren't actually even essential to WLAN or the H.264 video technology.

The companies are already embroiled in a patent dispute over mobile phones. In October, Microsoft sued Motorola, claiming patent infringement in Motorola's Android phones.