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February 22, 2012

Microsoft v. Google - So Much for Playing 'Nice'

By Peter Bernstein, Senior Editor

We are all human and make mistakes once in a while. I am going to admit to wearing rose-colored glasses a few days ago when I wrote an article about an outbreak of kindness in the intellectual property wars, particularly in regards to Microsoft (News - Alert) and Google. Just when it seemed it was safe to go back in the water, lo and behold, news came today on a blog posting from Dave Heiner, Vice President & Deputy General Counsel, Corporate Standards & Antitrust Group, Microsoft, that the company filed a formal competition complaint with the European Commission (EC) today against Motorola (News - Alert) Mobility and its ostensible (still pending although approved by U.S. and EU regulators) owner Google.

As the blog states: 

We have taken this step because Motorola is attempting to block sales of Windows PCs, our Xbox game console and other products. Their offense? These products enable people to view videos on the Web and to connect wirelessly to the Internet using industry standards…

You probably take for granted that you can view videos on your smartphone, tablet, PC, or DVD/Blu-ray player and connect to the Internet without being tied to a cable. That works because the industry came together years ago to define common technical standards that every firm can use to build compatible products for video and Wi-Fi. Motorola and all the other firms that contributed to these standards also made a promise to one another: that if they had any patents essential to the standards, they would make their patents available on fair and reasonable terms, and would not use them to block competitors from shipping their products.

 Motorola has broken its promise. Motorola is on a path to use standard essential patents to kill video on the Web, and Google (News - Alert) as its new owner doesn’t seem to be willing to change course.”

So much for playing nice!

The entire blog, which is in the process of going viral around the world, is worth a read. Heiner spares no scorn for Google, which, at the time of this writing, has yet to comment. He has once again raised a legal term of art — fair, reasonable and nondiscriminatory (FRAND) —which is at the crux of the matter. The blog claims that: “Unfortunately, Motorola has refused to make its patents available at anything remotely close to a reasonable price. For a $1,000 laptop, Motorola is demanding that Microsoft pay a royalty of $22.50 for its 50 patents on the video standard, called H.264. As it turns out, there are at least 2,300 other patents needed to implement this standard. They are available from a group of 29 companies that came together to offer their H.264 patents to the industry on FRAND terms. Microsoft’s patent royalty to this group on that $1,000 laptop? Two cents. That’s right. Just two cents for use of more than 2,300 patents.”

Best yet, as with any good lawyer presenting his or her case, the closing is a powerful call for what passing in our industry as justice: “Google’s unwillingness so far to make this commitment (to FRAND) is very concerning. That’s why you can pretty well count on a chorus from across the industry: ‘Google: Please don’t kill video on the Web.’”

With the EC’s top regulator, Competition Commissioner Joaquin Almunia, already publicly on board about everyone taking their FRAND commitments seriously, this promises to be much bigger than a food fight between 800 pound gorillas. This is way more than just a concern about which corporate entity should get paid what. If companies cannot/will not either share intellectual property in a private version of the public commons such as the 2,300 patents Microsoft cites in this case, or accept what regulators believe are FRAND-friendly accommodations, innovation to be polite will be stifled. 

Whether it be in the area of getting around browser tracking policies which Google stopped for Apple (News - Alert) Safari this past week and which today it turns out they were doing with Microsoft’s IE browser as well, or seemingly seeking to prevent competitors from creating an interoperable Internet for next generation services, Google needs to tread lightly or could suffer significant consequences. 

Finally, as the blog also noted, the recent Motorola defense in a German court proceeding that it is trying to protect Android (News - Alert) device manufacturers against Microsoft and others rings a bit hollow. This is not because of the reasons Microsoft’s attorney cites, but because Google is hardly a nice benefactor to its Android partners on the tablet side of things where they cannot undersell Apple because the profit they make on their hardware is all they get because they derive no revenues from the apps in the Market.  

It may be early in the year, but my early candidate for term of the year in our industry is FRAND. Think of it as the modern version of the French revolution slogan, “liberty, equality, fraternity.”   For the moment, we have none of the above, and that is not a good thing of anyone.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest and best known brands, and has served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.

Edited by Rich Steeves
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