Microsoft Corp. v. Motorola Inc.

Microsoft claimed that Motorola's licensing offers breached its agreement to provide reasonable and non-discriminatory terms to all potential licensees. Microsoft contended that the 2.25% royalty rate was blatantly unreasonable and that a royalty rate based on the final products' price was unfair for products that were not centered around incorporating the relevant standards. If Motorola initially offered blatantly unreasonable terms - irrespective of whatever terms were eventually agreed upon - then it would be acting in bad faith with regards to its obligation to provide reasonable terms of licensing on a non-discriminatory basis and breaching its contracts with the IEEE and ITU.[3]

Microsoft sought for anti-suit injunction arguing that the injunctive relief in Germany was inappropriate because:[5]

• Motorola's October 21 and 29 letters sought monetary payments for a worldwide license to Motorola's patents related to the 802.11 and H.264 standards demonstrated that monetary relief would suffice as an alternative remedy to an injunction.
• Microsoft sought to obtain a license for Motorola's patents, was entitled to a RAND license as a third-party beneficiary, and such a RAND licensing arrangement would eventually take place between the parties either through negotiation or by the court setting the terms.

In the original suit, Motorola defended that its terms were reasonable, as they were the standard terms of licensing that many other licensees had agreed to. Additionally, Motorola argued that its agreement to provide RAND terms was contingent upon a licensee contacting Motorola and negotiating terms of a license, while Microsoft's interpretation was that all potential licensees were granted RAND terms by default. Because Microsoft had failed these conditions necessary to be eligible for RAND licensing terms, Motorola claimed that it was not under any obligations to give RAND terms and thus could not have breached any contract.[3]

Against Microsoft's motion for a preliminary anti-suit injunction, Motorola maintained as follows:[2]

• It was improper that the court determined the RAND rate at least before the patent licenser and licensee had failed to produce a rate with good-faith bargaining.
• The German litigation couldn't be described as "vexatious" because the German court had ruled in Motorola's favor.
• The anti-suit injunction offends comity intolerably because its German patent claims have merit under German law, and because German courts, which had different legal opinions from the U.S. court, did not interpret the RAND commitment to creating a contract with third parties.
• The anti-suit injunction had disabled Motorola from enforcing its German patents in the only forum in which the patents can be enforced.

On May 14, 2012, the district court granted Microsoft the anti-suit injunction in Germany, along with the anti-suit injunction framework from E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984 and Applied Medical v. The Surgical Company, 587 F.3d 909, which included three factors:[2][5]

• Whether or not the parties and the issues are the same in both the domestic and foreign actions, and whether the first action is dispositive of the action to be enjoined.
• Whether the foreign litigation would (1) frustrate a policy of the forum issuing the injunction; (2) be vexatious or oppressive; (3) threaten the issuing court's jurisdiction over things (such as property); or (4) where the proceedings prejudice other equitable considerations.
• Whether the injunction's impact on comity is tolerable.

Along with the framework, the court held as follows:[2][5]

• The case on the contract, including Motorola's RAND commitment to ITU, at U.S. court, would be dispositive of the German court's decision. The district court found that Microsoft's contract-based claims would encompass the patent case and injunctive relief in Germany.
• Judging from the timing of the filing in Germany and the circumstances that Motorola claimed over only the two of the amount of a hundred of its standard-essential patents, Motorola's German litigation raised the concern of forum shopping and vexatious or oppressive effect on Microsoft. Moreover, the district court concluded that Motorola's action had frustrated the district court's ability to properly adjudicate the contract lawsuit.
• The anti-suit injunction's impact on comity would be tolerable because the German action was filed after the U.S. action, the scope of the anti-suit injunction did not affect Motorola's legal except for the injunctive relief of the alleged patent infringement, and U.S. court had a strong interest in the case because both companies were U.S. based and disputed on the contract which took place within the U.S.

The ninth circuit adopted the same framework, and reviewed the district court's decision for abuse of discretion. On September 28, 2012, after reciting the factual and procedural history of the parties' lawsuits in the U.S. and Germany, the court reaffirmed Microsoft's anti-suit injunction claim, stopping Motorola from preventing sales of many Microsoft products in Germany. In its holding, the court discussed each of Motorola's arguments above, and rejected them as follows:[2]

• An injunction banning sales was not the only remedy consistent with the contractual commitment to license users of ITU standard-essential patents.
• Litigation still might be "vexatious" even if there were some merit. Motorola's action was able to be interpreted as a maneuver by the district court.
• The mere fact that different jurisdictions answered the same legal question differently did not generate an intolerable comity problem.
• The scope of the anti-suit injunction was on only the injunctive remedies that Motorola had obtained in Germany, and Motorola was able to continue litigating its German patent except for its granted injunction.

As the anti-suit injunction was only meant to stop Microsoft from suffering damages while the case was decided, it was only in effect until a final decision was made and only stopped Motorola from enforcing the injunction from the German patent infringement case. After the ninth circuit reaffirmed that the anti-suit injunction was within the court's jurisdiction and necessary to protect Microsoft, the entire case was then returned to the district court to be concluded.[2]