This hasn’t been the best month for Microsoft. After posting significant declines in Xbox 360 sales, you’d think that things couldn’t get much worse. Unfortunately, thanks to a lawsuit filed by Motorola, you’d be wrong.
As reported on Bloomberg, Microsoft is facing a ban on imports of Xbox 360 units to the United States. On Monday, International Trade Commission judge David Shaw ruled that the Redmond, Washington company was in violation of four Motorola Mobility patents related to integration of Wi-Fi and the H.264 video codec in the gaming console. The worst part for Microsoft is that the suit was, apparently, filed in retaliation to a mobile patent case levied against Motorola.
Microsoft’s defense is that Motorola, which has an obligation to offer licensing at a reasonable rate that does not discriminate based on licensee, has demanded exorbitant sums. They have requested 2.25% of end-user sales of affected Xbox and Windows devices. Based on $8.9 billion in global sales from the entertainment devision, this amounts to an approximate $200 million. It’s undeniable that this is no small amount of money, but the matter at hand is whether the rate Motorola is demanding is the same as it would request from other licensees and if that sum is considered “reasonable.”
Those matters are being investigated by a commission of six individuals that, upon reaching a determination, have the ability to ban imports of infringing products. It’s unlikely that, even if the commission reaches a punitive decision of this nature by the August 23 deadline, that we’ll see Xbox 360s disappearing off of store shelves here in the US. More likely, the two will reach some agreement, especially as Motorola claims its request for 2.25% was an opening bid intended to start negotiations. Microsoft never replied.
Motorola doesn’t have anything to gain from shutting the doors on Xbox 360 imports. There’s no money in it for them. Likewise, Microsoft would never allow it to happen. This will drive the two back to the negotiating table and will probably see Microsoft gritting its teeth before writing a big ol’ check and signing the licensing papers.
You know who really loses in this whole thing, though? That’s right. Gamers. One way or the other, these costs are going to get passed on. It might not be today, but if you see commercials on Xbox Live or a $70 price tag on games next generation, remember that it was petty patent squabbling that helped make it happen.