Last week, Judge James L. Robart briefly reopened the trial record in the Microsoft-Motorola RAND breach of contract case, in order to allow the parties to submit additional evidence regarding the RAND rate for Motorola’s patents. Yesterday, Judge Robart issued another short minute order, this time allowing additional briefing on a different issue. Yesterday’s order concerns the terms of Google’s license with the MPEG LA AVC/H.264 patent pool, which Microsoft claims are dispositive of the appropriate RAND rate for Motorola’s H.264 patents. (For more background on this particular issue, see our earlier post on the parties’ briefing leading up to oral arguments.). Judge Robart has now allowed the parties to submit letter briefs of up to six pages by March 1 in light of certain “novel arguments” regarding the MPEG LA agreement that were apparently raised by the parties at the January 28 oral argument.
Judge Robart’s order directs the parties to address specific issues that may be raised by Section 3.1.7 regarding “Enterprise Licenses.” This section reads:
Enterprise Licensees. Pursuant to Article 2.7 and notwithstanding anything to the contrary in Article 2.9 hereof, and in lieu of the royalties specified in Articles 3.1.2, 3.1.3, 3.1.4 and 3.1.5, a Licensee and its Affiliates which are licensees under the AVC Patent Portfolio License and are identified in writing to the Licensing Administrator by Licensee shall pay no more than the following total amounts in each Calendar Year for all such licenses for the combined Sales of Licensee and its Affiliates during such year:
[Prescribing royalty amounts and caps.]
(emphasis in court order, not license agreement)
Judge Robart notes that “[f]rom the italicized language of Section 3.1.7, it appears to the court that Licensee and its Affiliates fall under the royalty cap prescribed therein only if the Affiliates are themselves licensee under the AVC Patent Portfolio and are identified by the Licensee in writing to the Licensing Administrator.”
The court is seeking arguments specifically on:
- Whether the court’s understanding of the italicized language is correct; and
- Whether this section only addresses royalty caps paid by Google under the license, or whether this also has an effect on other provisions of the agreement — namely, the grantback license that Microsoft has argued extends to Motorola Mobility’s patents (as a subsidiary of Google) and the appropriate RAND rate for those patents.
Although it’s hard to tell at this point, this could be welcome news for Motorola. Motorola has previously argued that not all of Google’s affiliates (i.e., not Motorola Mobility) fall within the scope of the MPEG LA agreement, so any grantback to Microsoft would not apply to Motorola Mobility. But there is also the issue of royalty caps. Microsoft argued that because the MPEG LA agreement includes a royalty cap, a RAND royalty for Motorola’s H.264 patents would likewise be capped. If Judge Robart finds that the language of Section 3.1.7 means that royalty caps do not apply to Motorola’s patents, that could dramatically increase the amount of RAND royalties owed by Microsoft to Motorola for H.264-essential patents.