In an unusual case, a U.S. judge ruled on Wednesday that Motorola cannot enforce an injunction that would prevent Microsoft from selling Windows products in Germany, should a German court issue such an injunction next week.
Microsoft asked the judge for the ruling in anticipation of an injunction that a German court is expected to issue related to a patent infringement suit that Motorola filed against Microsoft in Germany. The suit centers primarily on Motorola licenses that have been declared essential to the H.264 video standard. The German injunction is expected on April 17.
Judge James Robart, who is overseeing a related patent dispute between the companies in the U.S. District Court for the Western District of Washington, said that until a May 7 hearing Motorola can't act to enforce an injunction from the German court without further leave to do so from his court. He also ordered Microsoft to post a bond of US$100 million in connection with the order.
Microsoft argued that if the judge would allow that German injunction to go forward, which ultimately might compel Microsoft to negotiate a license according to German law, the U.S. court would lose its opportunity to make its own ruling on similar licensing issues. The U.S. court should be the one to rule on that issue, Microsoft argued, because Microsoft filed its lawsuit against Motorola over the terms of a licensing deal before Motorola filed its suit in Germany.
"If Motorola's sharp tactics are allowed to unfold, Microsoft will be denied a meaningful remedy in this action. Microsoft seeks a preliminary injunction here to preserve the status quo, to preserve this Court's ability to grant Microsoft meaningful relief, and to prevent irreparable harm to Microsoft and the public in the meantime," Microsoft wrote in its motion asking for a restraining order to prevent Motorola from executing the injunction in Germany.
Robart said it is important that he be able to preserve his right to resolve this dispute. If he were to give up that right, it would lead companies to file frivolous lawsuits around the globe in search of a ruling in their favor, he said.
Issuing the order preventing Motorola from enforcing a German injunction caused the least amount of harm, Robart said. If he had allowed Motorola to enforce a German injunction, Microsoft might have needed to remove its Windows products from the German market, or the company could have decided to negotiate a license, but only with the threat of an injunction hanging over its head. Granting Microsoft's request, however, simply requires Motorola to maintain the status quo, he said.
At a hearing on Wednesday, Motorola's lawyer argued that Robart shouldn't interfere in the German case because the actions in the German court will have no impact on any ruling the U.S. judge might make in the future. Should the German court set a licensing rate that the U.S. court later ruled was too high, the U.S. courts could compel Motorola to pay back Microsoft for what it overpaid, said Jess Jenner, a lawyer with Ropes and Gray who represents Motorola.
Robart didn't support that reasoning. "The court is not persuaded by this argument," Robart said.
In addition, Jenner argued that the U.S. could set different rates for different regions of the world.
Motorola has offered Microsoft a worldwide license that would require Microsoft to pay Motorola 2.25 percent of the end-user price of the product. Motorola assumed that that percentage would change and that Microsoft would ask for different rates in different countries, Jenner said. "Parties in a negotiation situation always make an opening offer. Nobody assumes that Microsoft will say 'that's great, where do we send the check,'" he said. Typically, the licensee examines each company's patent holdings in different countries and negotiates different rates in different markets, he said. Motorola has negotiated "dozens" of license agreements like that, he said.
But both Microsoft and the judge noted that Motorola's offer to Microsoft was for a worldwide license. The judge also pointed out that Motorola's offer included both U.S. and international patents. "If Motorola didn't want foreign patents subject to this court it would not have offered them to Microsoft," he said.
Art Harrigan, an attorney with Danielson Harrigan Leyh and Tollefson who is representing Microsoft, suggested that Motorola filed the case in Germany for leverage. "They want the threat of an injunction so they can extract something," he said. Otherwise, he argued, it doesn't make sense for Motorola to choose just two patents to charge infringement of in Germany, out of the 100 patents the companies are disputing.
Motorola argued strongly against the U.S. injunction. "You are being asked to interfere with a German court," Jenner said. "It's an intolerable intrusion on another country's prerogative."
In the end, the judge seems to have decided that preserving his power to rule on this issue was too important. But he implied it was a difficult decision in part because there is little precedent to guide him. "Jenner's description of this as a murky area is a bit of an understatement," he said.
The next hearing in the U.S. court is scheduled for May 7. A jury trial is scheduled for late November.