Judge Recommends Xbox 360 be Removed From U.S. Stores

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Following a patent case in Germany that went badly for Microsoft, the case comes to the U.S. shores.

by Andy Patrizio

A judge with the International Trade Commission has recommended that the Xbox 360 should no longer be imported into the U.S. for sale and all sales of unsold stock be barred.

The decision comes on the heels of a patent dispute between Microsoft and Motorola that resulted in an injunction banning multiple Microsoft items from being sold in Germany. Those products include Windows 7 and the Xbox 360.

Fortunately for Microsoft, a U.S. court has issued an injunction saying Motorola cannot enforce any action until the matter is considered further in the U.S. It also holds a victory over Motorola in a separate case before the ITC.

On Friday May 18, the ITC ruled that Motorola’s Android phones violate a Microsoft patent and ordered an import ban on the phones, the same steps being taken against Microsoft now for the Xbox.

In the case of the Xbox, the dispute stems over Microsoft?s use of H.264 video compression technology for high definition video. In April, the ITC ruled (<a href=”http://www.usitc.gov/press_room/documents/337_752_ID.pdf”>here</a> in PDF format) that Microsoft has infringed on four Motorola patents.

Microsoft contends that three of those patents are considered “essential” patents that fall under FRAND (fair, reasonable and non-discriminatory) licensing obligations. FRAND is an agreement in the industry that if a patent on technology becomes so essential to a product, such a must-have, the patent holder should make every effort to license that technology, even to major rivals, at a reasonable price.

Microsoft isn’t disputing the validity of Motorola’s patents, it just feels Motorola is asking for too much over the typical FRAND rate. It issued the following statement regarding the judge’s decision:

“The recommendation by the Administrative Law Judge is the first step in the process leading to the Commission?s final ruling and has no immediate effect on the availability of Xbox 360 in the U.S. We remain confident the Commission will ultimately rule in Microsoft?s favor in this case and that Motorola will be held to its promise to make its standard essential patents available on fair and reasonable terms.”

There’s no need to rush out and get an Xbox 360 just yet, though. The full ITC panel will meet in August to review the judge’s recommendation and has up to 60 days to review it. The final decision can even be reviewed by President Obama, although he might be a little distracted with the election by that point.

Still, Microsoft has a challenge ahead of it, says Maurice Ross, a partner with the IP law firm of Barton LLP in New York. “Tthe recommendations of administrative law judges are more often than not affirmed. I can see no reason why this one would not be. It comports with U.S. public policy, the patents are infringed,” he said.

The only time the commission would be reluctant to ban an item is if there is no other market substitutes, said Ross, but there are two console competitors out there who would be happy to take Microsoft’s business.

“The bottom line is Microsoft’s product was found by a very experienced administrative law judge to infringe this patent. That’s a very serious matter,” said Ross.

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