Earlier today, Microsoft filed a formal competition law complaint with the European Commission (EC) against Motorola Mobility and Google. We have taken this step because Motorola is attempting to block sales of Windows PCs, our Xbox game console and other products. Their offense? These products enable people to view videos on the Web and to connect wirelessly to the Internet using industry standards.
You probably take for granted that you can view videos on your smartphone, tablet, PC, or DVD/Blu-ray player and connect to the Internet without being tied to a cable. That works because the industry came together years ago to define common technical standards that every firm can use to build compatible products for video and Wi-Fi. Motorola and all the other firms that contributed to these standards also made a promise to one another: that if they had any patents essential to the standards, they would make their patents available on fair and reasonable terms, and would not use them to block competitors from shipping their products.
Motorola has broken its promise. Motorola is on a path to use standard essential patents to kill video on the Web, and Google as its new owner doesn’t seem to be willing to change course.
So much for their "Don't be Evil" mantra.
This can't bode well for standards going forward...
In legal proceedings on both sides of the Atlantic, Motorola is demanding that Microsoft take its products off the market, or else remove their standards-based ability to play video and connect wirelessly. The only basis for these actions is that these products implement industry standards, on which Motorola claims patents. Yet when the industry adopted these standards, we all were counting on Motorola and every contributor to live up to their promises. Watching video on the Web is one of the primary uses of computers these days. And we’ve all grown accustomed to “anytime, anywhere” access to the Internet, often made possible by the Wi-Fi standard. Imagine what a step back it would be if we could no longer watch videos on our computing devices or connect via Wi-Fi, or if only some products, but not others, had these capabilities. That would defeat the whole purpose of an industry standard.
Anything but fair and reasonable terms
Unfortunately, Motorola has refused to make its patents available at anything remotely close to a reasonable price. For a $1,000 laptop, Motorola is demanding that Microsoft pay a royalty of $22.50 for its 50 patents on the video standard, called H.264. As it turns out, there are at least 2,300 other patents needed to implement this standard. They are available from a group of 29 companies that came together to offer their H.264 patents to the industry on FRAND terms. Microsoft’s patent royalty to this group on that $1,000 laptop?
Two cents.
That’s right. Just 2 cents for use of more than 2,300 patents. (Windows qualifies for a nice volume discount, but no firm has to pay more than 20 cents per unit.) Motorola is demanding that Microsoft pay more than 1,000 times that for use of just 50 patents.
And that is for a mid-level, $1,000 laptop. For a $2,000 laptop, Motorola is demanding double the royalty - $45. Windows is the same on both laptops, and so is the video support in Windows. But the high-end laptop will have a bigger hard drive, more memory, perhaps a titanium case—and Motorola is demanding a hefty royalty on all of this, even though none of these features implements Motorola’s video patents.
Imagine if every firm acted like Motorola. Windows implements more than 60 standards, and a PC supports about 200. If every firm priced its standard essential patents like Motorola, the cost of the patents would be greater than all the other costs combined in making PCs, tablets, smartphones and other devices. Obviously, this would greatly increase the prices of these devices for consumers.
http://blogs.technet.com/b/microsoft_on_the_issues/archive/2012/02/22/google-please-don-t-kill-video-on-the-web.aspx
Both Microsoft and Apple have filed complaints with the European Commission, hopefully sanity prevails wrt FRAND patents.
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