Planning on picking up an Xbox 360 any time in the near future? You might want to hop on it. If Motorola has its way, future shipments of Microsoft’s popular gaming console will be blocked from entering the United States. It’s just another day in the zany landscape of intellectual property law.
On Tuesday, the United States International Trade Commission ruled that the Xbox 360 violated four patents held by Motorola Mobility Holdings. Motorola claimed that the console actually infringed on five patents, but Judge David Shaw let one slide. His ruling will be review by a six-member commission that has the ability to ban imports like the Xbox 360.
The patents in question are related to the video encoding, the wireless technology that lets the Xbox communicate with devices like controllers, and Wi-Fi technology used in the Xbox. Motorola’s patents though are considered industry standards for the technology and it typically licenses that technology to partners. Microsoft claims that the company broke its licensing obligations. A federal judge in Seattle will actually rule on May 7 whether or not Microsoft’s claim is valid, but ITC judge Shaw dismissed the argument siding with Motorola.
Motorola isn’t looking to halt the sale of the Xbox 360, it’s just interested in getting a piece of the pie that it feels it’s entitled to. Microsoft’s Entertainment & Devices division brings in nearly $9 billion per year thanks to the Xbox 360, Kinect, and other goods. Prior to Shaw’s ruling, Motorola demanded that Microsoft pay a 2.25% royalty rate. Microsoft however says that if it met all of Motorola’s demands, it would ultimately pay an annual sum of around $4 billion.
Astute readers may recall that Google also has a horse in this race. That company is in the process of purchasing Motorola Mobility for a cool $12.5 billion, an acquisition made entirely because Google wants its hands on patents like these and nearly 17,000 others.
The battle between the two companies goes beyond the Xbox as well. In Germany, Motorola is trying to block the sale and distribution of the Windows 7 OS and Windows Media Player in that country.
What will happen? It’s unlikely that Microsoft will be blocked from bringing new Xbox 360s into the United States. It will likely find a way to monetarily settle its dispute with Motorola. Whether or not that means that Microsoft has to fork over $4 billion per year, around 6% of it total annual revenue, remains to be seen.