{26} Courts Rule Against High Pricing Patent Licenses

Judge James L. Robart has taken a ruling for pricing patents deemed vital for communications and data-handling in devices like smartphones, tablets and online game consoles. These standard-essential patents that corporate owners have pledged to license to others on RAND terms of "reasonable and nondiscriminatory" are actually extracting rich sums from companies and competitors.  While the owners may think the price is reasonable, it may seem like extortion to the licensee depending on the extremity of the price, especially if the two companies in the deal are industry rivals. According to NY Times, "With clear prose and some clever math, Judge Robart concluded that when a company has made a RAND commitment to an industry standards organization, the price should be low. That is especially important, he said, for the intellectual property in complex digital devices that are bundles of many hardware and software technologies."
This comes after many courts have been rejecting attempts by patentees to charge high royalty figures even when the patent in question is just a small piece of the product.  There is a currently breach-of-contract dispute between Microsoft and Motorola as Microsoft contends that Motorola's first offer would have resulted in payments of more than $4 billion a year if used on a wide range of products. "In essence, Microsoft argued that Motorola bargained in bad faith by initially offering outlandish terms to license its patents on a wireless communication standard, 802.11, and another standard for video compression, H264." Motorola contended that initial offers are always negotiated substantially down, and that "Motorola was mainly seeking a license deal on Microsoft’s Xbox video console rather than Microsoft’s wider product portfolio." Judge Robart determined a reasonable rate to be under $1.8 million a year, not far from what Microsoft was offering at $1.2 million a year. "In his ruling, the judge set out some basic principles. An important one, he said, is that “a RAND royalty should be set at a level consistent with the S.S.O.s’ (standard setting organizations) goal of promoting widespread adoption of their standards.”