Microsoft vs. Motorola: Legal Battle Escalates, ITC Judge Bans Motorola Android Devices from Entering the U.S.

By Alexandra Burlacu | May 19, 2012 06:41 PM EDT

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A federal trade ruling on Friday, May 18, sided with Microsoft Corp. in its patent battle against Motorola Mobility Holdings. The ruling will force Motorola to either alter software on some of its Android phones in order to bring them into the U.S., or obtain a license.

On Friday, a U.S. International Trade Commission (ITC) judge ruled that Motorola Mobility infringed a patent covering a Microsoft program called ActiveSync, which enables users to send meeting requests among a group of contacts. Motorola did not infringe the other six patents, ruled the judge. The ruling will be final after a 60-day waiting period, during which President Barack Obama can override the order on public policy grounds. According to a filing with the ITC, an exclusion order would include Motorola's Droid 2, Droid X, i1, Cliq XT, Devour, Backflip, Charm, and Chip devices. "The Commission has issued a limited exclusion order directed to the infringing products of Motorola and has terminated the investigation," the ITC stated in a written decision.

Motorola to Consider Options

"We hope that now Motorola will be willing to join the vast majority of Android device makers selling phones in the U.S., by taking a license to our patents," said David Howard, Microsoft's deputy general counsel, in an emailed statement to Bloomberg. Motorola Mobility expressed its disappointment at the ruling, and said it would consider options, including an appeal. "Motorola Mobility will not experience any impact in the near term," Jennifer Erickson, a spokeswoman for the company, told Bloomberg.

Charlie Wolf, an analyst with New York-based firm Needham & Co, spoke with Bloomberg and said the ruling will likely urge Motorola to reach a settlement and pay Microsoft a licensing fee rather than altering the phone software. "These cases usually end up with the parties settling," said the analyst.

ITC Ruling

Microsoft filed its complaint with the ITC in late 2010. Moreover, Friday's ITC ruling follows another court ruling back in December that Motorola's Atrix, Droid and Xoom models infringed a patent Microsoft owned regarding Exchange ActiveSync technology. The official order on Friday bans "the unlicensed entry for consumption of mobile devices, associated software and components thereof covered by claims 1, 2, 5, or 6 of the United States Patent No. 6,370,566 and that are manufactured abroad by or on behalf of, or imported by or on behalf of, Motorola."

The case is part of a greater strategy by Microsoft and Apple to halt the rapid growth of rival mobile devices that run on Google's popular Android operating system. Android has become the most popular platform for smartphones, holding more than half of the market for mobile devices, which is expected to reach $360 billion this year, according to Yankee Group.

Licensing War

Microsoft demands makers of mobile devices running on Android to pay royalties. The company has already reached licensing deals with Samsung Electronics and HTC Corp. Motorola Mobility, however, refused to pay royalties and fired back with its own case at the ITC. Rather ironical, Friday's decision follows another ITC ruling that Microsoft is infringing on four Motorola Mobility patents, and Motorola also won a sales ban on Windows 7 PCs and Microsoft's Xbox 360 in Germany on patent infringement grounds. Microsoft is appealing both of those rulings.

Meanwhile, Microsoft said it reached agreements with makers of more than 70 percent of all Android devices sold in the United States. After reaching a settlement with Barnes & Noble last month, the only litigation Microsoft still has with Android device makers involves Motorola Mobility.

The legal dispute has escalated since October 2010, when Microsoft first filed the complaint. Motorola responded to the complaint by demanding royalties on Microsoft products, including the Xbox and Windows OS, and in a lawsuit pending in Seattle and before regulators in the U.S. and Europe Microsoft claimed Motorola is misusing its patents.

Microsoft's case against Motorola Mobility is In the Matter of Certain Mobile Devices, Associated Software and Components Thereof, 337-744. Meanwhile, Motorola's case against the software maker is In the Matter of Gaming and Entertainment Consoles, 337-752. Both cases are with the U.S. International Trade Commission.