If you stopped reading at page 21 of the 28-page summary judgment ruling that U.S. District Judge James Robart issued
Wednesday in Microsoft's contract case against Motorola, you'd
figure Microsoft had won the all-important dispute over
Motorola's standard-essential patents. But this is an opinion
you have to read all the way to the end.
Microsoft, as you probably recall, accused Motorola in
federal court in Seattle of breaching its agreement with two
standard-setting bodies to license essential wireless patents on
reasonable terms. Microsoft and its lawyers at Danielson
Harrigan Leyh & Tollefson and Sidley Austin contended that when
Motorola contacted Microsoft about a licensing deal, it demanded
unreasonable fees -- more than $4 billion, according to
Microsoft's calculations. Microsoft asked Robart to rule that,
as a matter of law, Motorola's offer was so manifestly absurd
that it amounted to a breach of those contracts.
At a May 7 summary judgment hearing, Motorola's lead
counsel, Jesse Jenner of Ropes & Gray, challenged two previous
rulings by Robart that would have undone Microsoft's argument.
Motorola contended that its contracts with the standard-setting
bodies didn't require it to reach licensing agreements with
third parties but merely to make an offer. Robart disagreed,
upholding his own prior rulings that Motorola had promised to
license its patents and that Microsoft was a third-party
beneficiary of those contracts.
Robart also ruled that Microsoft had not repudiated its
third-party rights under the contracts when it refused to
negotiate with Motorola and sued instead. Motorola had asked the
judge to grant summary judgment on that point, arguing first
that Microsoft never requested a license -- Motorola suggested
terms to Microsoft before Microsoft approached Motorola -- and
second, that Microsoft refused to engage with Motorola in good
faith. Robart said Motorola's contract with the standard-setting
bodies didn't require either condition, which would "run
contrary to the purpose of Motorola's commitments."
If Motorola had prevailed on the repudiation point, that
would have been the end of Microsoft's case -- a devastating
result for Microsoft, which had won a preliminary injunction
from Robart that could insulate it from adverse rulings in
Germany and at the ITC that threaten the import and sales of the
Xbox. It was hugely important for Microsoft, and for its fellow Motorola foe Apple, that Robart concluded Microsoft didn't give
up its rights to a fair license when it filed a
breach-of-contract suit against Motorola.
But Robart showed at the conclusion of the May 7 hearing
that he's nobody's patsy. "The court is well aware that it is
being played as a pawn in a global industrywide business
negotiation," he said, according to Geekwire. "The conduct of
both Motorola and Microsoft has been driven by an attempt to
secure commercial advantage, and to an outsider looking in, it
has been arbitrary, it has been arrogant and frankly it appears
to be based on hubris."
So in the final pages of Wednesday's ruling, Robart took a
hard look at Microsoft's summary judgment argument and found it
insufficient. Microsoft had asserted that Motorola's licensing
offer was patently unreasonable, but according to Robart
Motorola offered evidence of other licensing deals on supposedly
comparable terms. To determine the relevance of those
agreements, Robart said, "the court must engage in a factual
comparison between the circumstances of each prior agreement and
the circumstances that exist between the parties to this
litigation with the benefit of complete briefing."
Nor, he ruled, had Microsoft shown that Motorola made its
initial licensing offer in bad faith. Robart said that's also a
factual dispute that has to be explored at trial. He set a trial
date of Nov 19, 2012.
A Microsoft spokesman sent an email statement from Microsoft
deputy general counsel David Howard: "Today's decision
underscores that Motorola made a promise to the industry which
it now must keep and we look forward to the November trial to
determine the appropriate licensing royalty."
Motorola said in a statement: "Motorola Mobility has acted
in good faith and we will prove that at trial. We are pleased
that the court is holding Microsoft to its word -- to license
our essential patents just as the vast majority of the industry
Robart's preliminary injunction, which Motorola has
appealed, is expected to remain in place until the contract case
(Reporting by Alison Frankel)
Follow us on Twitter @AlisonFrankel, @ReutersLegal | Like us on Facebook