Microsoft Puts Up $300 Million Bond to Protect Products

By Steve Anderson March 29, 2012

With Microsoft and Motorola Mobility entering the final stages of a lawsuit over patent infringement, decisions that will affect the fates of both companies are currently in the pipeline. Microsoft, out to keep its products available, has just put up a $300 million bond to make sure their products remain available.

The issues in question revolve around FRAND patents, a common sticking point in several recent patent cases. FRAND – Fair, Reasonable And Non-Discriminatory – patents are issued to products for sale in Europe that are judged as essential to an industry.

FRAND patent holders are expected to make licensing terms consistent with what their name stands for, allowing competitors to enter the market while still respecting the original development of the patent holder. In this case, the issue is one of Motorola's patent known as the video standard H.264 patent, which Windows 7, Microsoft Internet Explorer and the Xbox 360 all use.

Motorola demands that Microsoft either remove its products from shelves, or remove their ability to play video and make wireless connections, and neither move is one Microsoft wants to make. Microsoft responded that not only is Microsoft only using Motorola's patents for industry standardization purposes, but that Motorola charges significantly more than similar patents elsewhere.

Microsoft fully licenses 2,300 H.264 patents from other companies, paying just two cents on every $1,000 laptop, while Motorola's 50 H.264 patents come at a cost of $22.50 per $1,000 laptop.

Thus, in a bid to keep their products on shelves without pulling out important functions, Microsoft posted a $300 million bond to Motorola, which in turn will guarantee Motorola receives payment, should Microsoft's products cause Motorola to lose revenue.

A German court is expected to rule on the matter April 17, while a U.S. court will hold a hearing April 20. Even when a verdict is reached, appeals will likely follow from the losing side, so chances are customers won't need to worry about losing access to Microsoft products any time soon.

Edited by Braden Becker

Contributing TechZone360 Writer

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