The grant-back provision in a license agreement between Google and patent pool administrator MPEG LA could effectively determine the license fees Microsoft will have to pay for certain Motorola patent families that have been declared essential to the H.264 video codec standard. On New Year's Eve, Judge James L. Robart, the federal judge presiding over a Microsoft v. Motorola FRAND contract lawsuit in the Western District of Washington, scheduled a hearing on this question for January 28 and ordered the parties to submit briefing on January 23. Besides the MPEG LA license agreement the hearing will also address a summary judgment motion that could result in the invalidation of three H.264-related Google patents (which are being asserted through offensive counterclaims).
An administrative hearing related to this matter took place yesterday (Friday, January 18, 2013) after Microsoft and Google disagreed on an evidentiary issue. Microsoft told the court that it (in the court's words) "intends to submit a declaration from an individual at MPEG LA regarding MPEG LA's understanding of the MPEG LA-Google license agreement". Google then wanted to take a deposition of the MPEG LA official, but for practical reasons such deposition wouldn't take place before the briefing deadline on Wednesday.
After the Friday hearing Judge Robart told Google in an order that its request to take a deposition of an MPEG LA official is too late. The United States District Court for the Western District of Washington will neither postpone its FRAND rate-setting decision (following a first trial held in November 2012 and paving the way for a second one on a breach-of-contract question) nor deprive Microsoft of the opportunity to address statements made at any relevant depositions in its January 23 briefing (and, as a result, deprive itself of the benefit of reading both sides' related briefing). Judge Robart notes that "the MPEG LA declarant is in no way a surprise witness" (Google could have figured that "MPEG LA would have an opinion as to the interpretation of its own agreement with Google"), and Motorola already contacted MPEG LA after the December 31 order that scheduled the January 28 hearing: "Motorola thus could have noticed and taken the deposition of MPEG LA regarding MPEG LA's understanding of the Goo[gl]e-MPEG LA license agreement at any time since the court's minute order, but chose not to do so".
Given that Google's litigation department is extraordinarily sophisticated and that Google contacted MPEG LA shortly after the New Year's Eve order, I can't help but suspect that the belated request for a deposition is an act of gamesmanship rather than a result of an oversight. Google was probably hoping that it could either delay the resolution of this case or impair Microsoft's ability to brief the court before the January 28 hearing.
The implications of the Google-MPEG LA license agreement are still very relevant, but at this stage this is only about rate-setting and no longer about sales or import bans. In late November Judge Robart granted a Microsoft motion for summary judgment against Google's prayers for injunctive relief over standard-essential patents. And in early January Google withdrew two H.264 declared-essential patents from its ITC complaint over the Xbox gaming console in the aftermath of reaching an agreement with the antitrust enforcers at the FTC. But there is still a huge discrepancy between the parties' positions on royalties, with Google more recently taking the position that the annual royalty cap should be in the range between $100 million and $125 million, while the royalties it can demand under the MPEG LA reciprocity clause would amount to no more than a six-digit figure per year.
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