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Appeals court upholds Microsoft’s legal win over Motorola

Moto's 2.25 percent royalty demand was an overstep, no matter who threw the first punch.

The US Court of Appeals for the 9th Circuit has upheld (PDF) a 2013 jury verdict finding that Motorola must pay Microsoft $14.5 million for violating its commitments to license certain standard-essential patents on a "fair, reasonable and non-discriminatory" (FRAND) basis.

Today's decision ends one major front in a patent battle between Microsoft and Motorola that began in 2010. Microsoft has long claimed it has patents that must be licensed by all Android device makers, and Motorola has long been the biggest holdout. When Microsoft sued Motorola over patents in 2010, Motorola shot back with its own patent licensing demands, suggesting it should be paid a 2.25 percent royalty on Windows and Xbox machines, which would have added up to around $4 billion.

This massive damage demand was clearly a response to Microsoft's opening salvo—but two courts have now found that doesn't matter. Moto's duty to license on a "fair and reasonable" basis for those standard-based patents didn't disappear when Microsoft sued. A Seattle federal judge held a bench trial in 2012 and found that the fair FRAND rate would have been just a tiny fraction of what Motorola asked for. Subsequently, a jury found Motorola had breached its contract and should pay Microsoft $14.5 million, which includes about $3 million in legal fees.

The Microsoft-Motorola trial was highly technical, but it was important in that no federal judge had before decided just what the oft-used "fair, reasonable and non-discriminatory" standard meant. Turns out, it means a pretty darn low rate.

Now that the decisions of both district court judge and jury have been upheld by the 9th Circuit, it's a sure thing that big companies will think twice before using standards-essential patents against their competitors. In a sense, today's decision will mostly neutralize such patents as viable ammunition in future patent wars.

Channel Ars Technica