Would-be European dictators learned the hard way that fighting wars on two fronts at the same time is a recipe for disaster. Now Motorola Mobility, soon to be part of Google, is doing those aggressors one better. It's fighting wars with regulators on three fronts: Europe, the United States, and Australia. Like those dictators, Motorola isn't satisfied with just a bit of territory; rather, it wants to swallow whole countries or, in this case, whole industries.
On Tuesday, the European Commission opened two antitrust cases against Motorola Mobility for possible patent abuses, following complaints by Apple and Microsoft. The action by the European Uniion's executive arm would be a lot less interesting if it weren't for the astonishing attempt by Motorola to extract billions of dollars from Microsoft -- and ultimately consumers and businesses -- with wildly inflated patent claims.
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Motorola wants to charge a royalty of 2.25 percent for every Windows computer that uses a common video codec standard known as H.264. According to legal papers filed by Microsoft, that would amount to $4 billion a year. If Motorola were to get away with that extortion, it would, as patent expert Florian Mueller points out, take a bit more than three years to equal the $12.5 billion Google will pay for Motorola Mobility when the deal wins final approval.
Even crazier is the demand that Microsoft pay a royalty of $4.88 on every Xbox 360 it sells. That's because the patent Motorola seeks to exercise covers a $3 or $4 chip that implements the 802.11 Wi-Fi standard, says Mueller. The royalty would, in fact, be higher than the value of the component.
Apple too, is the target of this patent extortion. Motorola wants a 2.25 percent cut of the selling price of iPhones and iPads that use 3G connectivity because of Motorola's patents.
No doubt Motorola would be willing to scale back its demands, after every party involved has wasted huge amounts of time and money on legal expenses. Before long, though, the damage could spread beyond the companies and consumers who are directly affected. We got a glimpse of that earlier this week, when Microsoft announced it was moving a logistics center from Germany to the Netherlands because of the barrage of legal claims against it in Germany, where the legal system favors aggressive patent enforcement. Only 50 jobs are affected, according to reports, but the move is yet another indication of the kind of damage the patents wars could inflict on the world economy.