Microsoft Wins Ruling Forcing Change in Motorola Phones

Microsoft Corp. (MSFT) won a federal trade ruling that will force Motorola Mobility Holdings Inc. (MMI) to alter software on some of its Android-based mobile phones to keep bringing them into the U.S.

A U.S. International Trade Commission judge found that Motorola Mobility infringed a patent covering a program by Redmond, Washington-based Microsoft called ActiveSync, which lets users generate meeting requests among a group. Six other patents weren’t violated, the judge ruled.

The ruling still must be reviewed by President Barack Obama, who can override the order on public policy grounds.

“We hope that now Motorola will be willing to join the vast majority of Android device makers selling phones in the U.S. by taking a license to our patents,” David Howard, Microsoft’s deputy general counsel, said in an e-mailed statement.

An exclusion order would affect Droid 2, Droid X, i1, Cliq XT, Devour, Backflip, Charm and Clip models, according to a filing with the ITC.

Android Fight

Motorola Mobility said it was disappointed and would explore options including an appeal. “Motorola Mobility will not experience any impact in the near term,” Jennifer Erickson, a company spokeswoman, said in an e-mail.

The ruling probably will push Motorola to reach a settlement and pay Microsoft a licensing fee instead of having to modify the phone software, said Charlie Wolf, an analyst with Needham & Co in New York.

“These cases usually end up with the parties settling,” Wolf said.

The case is part of a broader effort by Microsoft and Apple Inc. to curtail the growth of mobile devices that run on Google Inc. (GOOG)’s Android operating system. Google licenses Android for free to further its mobile-advertising business.

The platform has become the most popular for smartphones, with more than half of a market for mobile devices that Yankee Group has projected will reach $360 billion this year.

Licensing Deals

Microsoft contends it should be paid royalties by makers of mobile devices that run on Android. The software maker has reached licensing deals with Samsung Electronics Co. and HTC Corp. (2498)

Motorola Mobility, which is being bought by Google, refused to pay and instead struck back in a case at the trade agency.

Microsoft’s willingness to license is different from Apple, which wants makers of Android smartphones to make changes to its devices, Wolf said.

“I would expect Motorola to get together with Microsoft to resolve this,” he said.

Xbox, Windows

Microsoft has capitalized on patents it said cover features of Android, and said it has struck licensing agreements with makers of more than 70 percent of all Android devices sold in the U.S. Microsoft’s only litigation with Android-device makers is with Motorola Mobility, following a settlement reached last month with Barnes & Noble Inc. (BKS)

The software maker filed the ITC complaint in October 2010. Motorola Mobility responded by sending letters demanding royalties on Microsoft products, including the Xbox and Windows operating system. The legal battle has since escalated, with Microsoft accusing Motorola Mobility of misusing its patents in a lawsuit pending in Seattle and before regulators in the U.S. and Europe.

Motorola Mobility has filed its own patent-infringement claim against Microsoft at the agency, seeking to block sales of the Xbox. An ITC judge said Microsoft was infringing four Motorola Mobility patents; Microsoft wants the commission to review that decision.

Microsoft’s case against Motorola Mobility is In the Matter of Certain Mobile Devices, Associated Software and Components Thereof, 337-744, while Motorola Mobility’s case against Microsoft is In the matter of Gaming and Entertainment Consoles, 337-752, both U.S. International Trade Commission (Washington).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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