In February of this year, we posted a report titled "The Engineering Group Known as the IEEE has Ruled on Changing Mobile Chip licensing that will Benefit Apple & Others." The report noted that "A particularly controversial change in its bylaws states that reasonable rates should reflect the "smallest salable implementation" of a patented invention." We further noted in that report that "That concept ran counter to customary practices in mobile phones. Qualcomm, for example, charges smartphone makers that use its chips a royalty based on a percentage of the wholesale price of their handsets, which often cost hundreds of dollars. The new IEEE policy suggests that a reasonable rate should apply the percentage to the relevant chip, which might cost tens of dollars." There are now two cases before the courts where Apple and Microsoft are challenging the FRAND standard. While it's questionable at this point in time as to whether the new IEEE policy will assist either Apple or Microsoft in their court battles with Ericsson and Google respectively, the showdown between Microsoft and Google is going to be the first landmark patent case to challenge it. The case begins tomorrow and all of the industry players will be following this case as it could shift the power balance in the technology industry.

The Financial Times reports today that "The case, pitting Microsoft against Google, has already involved a lower court in setting patent rates for the first time, in a move that critics warn will upend the balance of power between leading tech companies."

The heart of this case, as the Financial Times frames it, is that "Microsoft sued Motorola after the handset maker asked for 2.25 per cent of the final product price for use of several of its patents that are included in standards for WiFi and video compression technology. Microsoft said the demand would have cost it $4bn a year. Judge James Robart, in a federal court in Seattle, laid out a different method for calculating the royalties that would instead cost Microsoft less than $2m a year."

If upheld, Judge Robart's approach could tilt the balance of power in negotiations away from companies that own large portfolios of commonly used patents and instead favour those — like Microsoft or Apple — whose businesses are based more on implementing technology standards in their products.

Beyond Google, the opposition to the new calculations from both Judge Robart's and the Institute of Electrical and Electronic Engineers (IEEE) includes Ericsson and Qualcomm.

About Making Comments on our Site: Patently Apple reserves the right to post, dismiss or edit any comments. Comments are reviewed daily from 4am to 7pm PST and sporadically over the weekend.

Other Related Reports

One: Court Filing Details First of Two Ericsson Patent Lawsuits against Apple

Two: Ericsson goes Nuclear on Apple Filing 7 Patent Infringement Lawsuits with more to follow