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Microsoft’s Shift Over Industry-Standard Patents Timed to Undercut Google

Microsoft Corp. (MSFT)’s vow to negotiate with competitors over industry-standard patents, instead of trying to block their products, marks a change from the company’s position less than a year ago.

The policy announced yesterday by Microsoft came the same day that Google Inc. (GOOG) made its own promise regarding standard- essential patents to appease regulators scrutinizing its $12.5 billion acquisition of Motorola Mobility Holdings Inc.

Microsoft, Google and Apple Inc. (AAPL) are staking out positions on standard-setting patents amid global litigation over wireless devices and tighter regulatory scrutiny. The Microsoft pledge, and an Apple policy made public Feb. 7, were timed to undermine Google, said Andrew Updegrove, a lawyer with Gesmer Updegrove in Boston.

“You already have Google increasingly under the spotlight,” said Updegrove, who advises standard-setting boards on intellectual property policies. “They’re living in a tighter and tighter confinement just because their market power is increasing.”

By issuing policies that contrast with Google, Microsoft and Apple “are playing to the marketplace and they’re playing to the regulators,” he said.

Google sent letters to standard-setting boards yesterday saying it would seek a royalty fee of no more than 2.25 percent of the net cost of devices using its patents, and would try to resolve any disputes through negotiation before asking courts to block use of the Motorola Mobility technology. It didn’t match Microsoft’s pledge to not pursue bans on technology that’s essential to industry standards.

Microsoft Shift

Microsoft will also make its industry-essential patents available without requiring companies to cross-license their own non-essential technology, according to a posting yesterday on the company’s website.

“Patent holders should not seek to block shipments of competing products just because they implement an industry standard -- a license on reasonable terms is always available,” Dave Heiner, who heads Microsoft’s corporate standards and antitrust groups, said in a blog posting.

That’s different from what Microsoft told the U.S. Federal Trade Commission in June. The company said the existence of a pledge to offer patent licenses on fair terms “should not preclude a patent holder from seeking preliminary injunctive relief or commencing an action in the International Trade Commission just because the patent holder has made a licensing commitment.”

A requirement to not seek any ban “may reduce any incentives that implementers might have to engage in good faith negotiations with the patent holder,” according to a written statement submitted by Heiner in June and posted on the FTC’s website.

EU Scrutiny

Motorola Mobility has accused Microsoft and Apple of infringing patents that are covered partly by standards in which companies agree to share technology that is common across their industry. Google, which has drawn scrutiny over the acquisition, sent letters to standard-setting groups reassuring them it will maintain Motorola Mobility’s licensing program.

The European Union’s antitrust regulators will rule on the acquisition by Feb 13, Antoine Colombani, a spokesman for the commission in Brussels, said Feb. 7. The agency could clear the deal or open an in-depth probe that would last about 90 working days.

That same agency is investigating whether Samsung Electronics Co. broke a 1998 commitment to license standard- essential patents on fair terms. Samsung accused Apple of infringing such patents, part of a global patent battle between the two companies.

Apple Letter

In a November letter to the European Telecommunications Standards Institute, Apple said the “industry suffers from a lack of consistent adherence” to policies that require companies to license standard-essential patents on “fair, reasonable and non-discriminatory” terms.

In that letter, reported Feb. 7 by the Wall Street Journal, Apple said companies that pledge to license their patents on fair terms can’t seek to prevent use of the inventions without being in violation of their commitment.

Motorola Mobility has sought sales bans in Germany on Apple products using standard-essential patents, and is seeking to halt U.S. imports of Microsoft’s Xbox gaming system. Microsoft has argued that the U.S. International Trade Commission shouldn’t impose import bans when there is a violation of standard-essential patents.

Microsoft’s policy doesn’t bar the company from seeking bans on the use of patented technology that isn’t part of an industry standard or from suing to demand compensation for the use of the essential patents.

Microsoft has a patent-infringement case against Motorola Mobility at the ITC that seeks to block imports of Motorola Mobility phones that run on Google’s Android operating system, and is in the midst of a trial on patent claims over Barnes & Noble Inc.’s Nook reader. Those cases don’t involve industry- standard technology.

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Edmund Lee in New York at elee310@bloomberg.net

To contact the editors responsible for this story: Michael Shepard at mshepard7@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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