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Microsoft’s Xbox Not Blocked From Import in Google Loss

Microsoft Corp. (MSFT)’s Xbox video-gaming system won’t be blocked from entering the U.S. after a trade panel found it doesn’t infringe a patent owned by Google Inc. (GOOG)’s Motorola Mobility unit.

The U.S. International Trade Commission yesterday in Washington found the Xbox doesn’t infringe Motorola’s patent for a way to establish communication between the gaming-system and accessories, such as the controllers, ending a case filed in November 2010. The agency upheld a March ruling that cleared the Xbox, which is made in China, of the infringement claim.

The case is part of a global dispute between the companies over who is using whose patented inventions. Microsoft wants Motorola Mobility to pay royalties on smartphones running on Google’s Android operating system. Google claims Microsoft owes Motorola Mobility royalties on the Xbox and Windows operating system.

Microsoft, based in Redmond, Washington, has argued that, even if it violates the Motorola patent, banning the Xbox would be an extreme remedy that would reduce consumer choice and hurt game developers.

“This is a win for Xbox customers and confirms our view that Google had no grounds to block our products,” Microsoft Deputy General Counsel David Howard said in a statement.

Matt Kallman, a spokesman for Google, said the company was disappointed and evaluating its next steps. The case can be appealed to a court that specializes in patent law.

Top Seller

The Xbox has been the top-selling U.S. game console for more than two years. Microsoft’s entertainment unit, which includes the Xbox, generated $9.6 billion in sales last year, or 13 percent of the company’s revenue, according to data compiled by Bloomberg.

Microsoft unveiled a new version, called Xbox One, earlier this week that employs voice commands and motion sensing to recognize users and let them switch seamlessly between games, live television and Skype video calling.

The system is scheduled to go on sale later this year as part of Microsoft’s strategy to fend off competition from Sony Corp. (6758)’s PlayStation 4 and Nintendo Co.’s Wii U, as well as new devices from Apple Inc., Facebook Inc. and Amazon.com Inc.

Microsoft won a trade commission case last year limiting Motorola Mobility’s ability to include on its phones a feature called ActiveSync, which lets users coordinate schedules between their phones and personal computers.

Patent Disputes

Google, based in Mountain View, California, and Microsoft also have patent disputes in Germany and Seattle. Microsoft and Apple have also filed complaints in the U.S. and Europe accusing Motorola Mobility of demanding unfair royalty rates for some patents that relate to widely used technology like Wi-Fi connections or video transmission.

Other patents that originally were part of the Xbox case fell into that category. Two patents that were part of the original complaint were on standard technology for video decoding, and led to accusations by Microsoft and regulators that Motorola Mobility was misusing patents to thwart competition.

Motorola Mobility dropped those two after Google reached an agreement with the U.S. Federal Trade Commission over the use of standard-essential patents. Two other patents were dropped because they are expiring this year.

The agreement with the FTC also covered a review of the company’s search business. Google is facing a new antitrust probe by the FTC into whether the company is using its leadership in the online display-advertising market to illegally curb competition, people familiar with the matter said.

The case is In the Matter of Gaming and Entertainment Consoles, Related Software and Components Thereof, 337-752, U.S. International Trade Commission (Washington).

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

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

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