24/7 Wall St.

The U.S. District Court in Seattle today kicks off the latest patent royalty payment battle, this one between Microsoft Corp. (NASDAQ: MSFT) and Google Inc. (NASDAQ: GOOG). The two combatants have locked horns over a reasonable royalty rate for essential patents that have become industry standards. There is no issue about the validity or enforceability of the Motorola patents now owned by Google, just over how much Google can charge to license the technology.

Microsoft filed the suit in 2010 against Motorola claiming that Moto’s proposed royalty rate of 2.25% for each Xbox and copy of Windows was not reasonable. Microsoft said that a rate that high would cost it $4 billion annually.

Motorola argues that 2.25% is the going rate and that, in any case, it was just an opening gambit in discussions with Microsoft, which apparently made a take-it-or-leave offer of about $1.2 million. Google left it, and here we are today.

A decision in the bench trial would put the first stake in the ground for what the law will say is a fair and reasonable royalty rate for essential patents. The Redmond software giant has said that it will pay whatever the judge decides is a reasonable royalty rate. Of course the losing side may appeal the judge’s decision.

Paul Ausick