FTC Orders Google to Stop Charging High Royalties on FRAND-Related Patents

The Federal Trade Commission issued a Consent Order (PDF) this week forbidding Google from charging a lot of money for certain critical patents it gained when it bought Motorola Mobility for $12.5 billion in May 2012. This is good news for both Apple and Microsoft, but particularly for Microsoft because (according to Microsoft) Motorola Mobility wanted to charge $4 billion a year in royalties for patents Motorola holds on Wi-Fi and video technology. Microsoft has argued that such fees are completely unfair.

Motorola had previously agreed to put its technology patents into standards. With the type of patents being used against Microsoft, patent owners typically must license it to anyone who wants it for a very small fee. Patents of this nature fall under FRAND agreements, but Motorola was trying to charge Microsoft a lot of money to gain access to these patents. After Google bought Motorola, it continued trying to collect bigger royalties from companies like Microsoft and Apple.

Microsoft refused to pay the high fees Motorola was asking for. For example the company wanted to make Microsoft pay as much as $22.50 per every Xbox 360 unit sold. Microsoft said no and a legal battle ensued – with Motorola even filing a complaint with the International Trade Commission asking it to ban the sale of the Xbox 360 in the U.S.

The Consent Order forces Motorola to stop trying to charge large fees on patents that are covered by FRAND and to drop its ITC complaint.

A blog post by Google lawyer David Drummond notes that the company will comply with the FTC's order:

"We’ve agreed with the FTC that we will seek to resolve standard-essential patent disputes through a neutral third party before seeking injunctions. This agreement establishes clear rules of the road for standards-essential patents going forward."

The FTC will allow the public to comment on its investigation into Google's FRAND practices for the next 30 days.

Source: Business Insider

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