Xbox 360 victorious at end of year-long Microsoft-versus-Motorola patent battle

By Anthony John Agnello Published March 25, 2013

xbox-360 — Image used with permission by copyright holder

When it comes to fighting back lawsuits related to the Xbox 360, Microsoft’s got a pretty spectacular track record. After more than a year of back and forth battling with Google’s Motorola, the International Trade Commission (ITC) officially cleared Microsoft of having infringed on Motorola-owned patents in the design of the Xbox 360. “It is held that a violation of section 337 of the Tariff Act, as amended, has not occurred,” wrote ITC Judge David Shaw on Friday. Put another way: Motorola can take its proposed royalty fees and stuff them in an old Razr flip phone.

It all started back in 2012 when Motorola claimed that a number of Microsoft products infringed on five patents held by Motorola. The patents in question related to video encoding technology as well as ActiveSync tech, the apps in Microsoft products that let them sync with mobile phones and tablets. The Xbox 360 was one of the products that came under fire.

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Microsoft didn’t deny that it used technology patented by Motorola, only that Motorola wasn’t allowing Microsoft to license said technology at a reasonable rate as dictated by FRAND commitments. Motorola instead wanted Microsoft to pay a 2.25-percent royalty fee on every Xbox 360 and other infringing Microsoft product sold, which would cost, according to Microsoft, about $4 billion per year.

It’s surprising that Shaw ultimately determined that the Xbox 360 wasn’t guilty of infringing on those precious patents. It was Shaw who suggested that the Xbox 360 be banned from sale in the United States until the matter was settled, even going so far as to say that Microsoft should be blocked from importing consoles from its Chinese manufacturers. A number of companies came to Microsoft’s defense, particularly Acitvision Blizzard, which was worried about how an Xbox ban might affect its Call of Duty: Black Ops 2 sales. (Seeing as how the majority of annual Call of Duty sales are on Xbox 360, the ban would have hurt CoD sales.)

Microsoft won a decisive victory in the battle against Motorola in December, though, preventing the Xbox 360 from getting banned in both the U.S. and Germany. Judge James Robart took Microsoft’s side, claiming that Motorola was demanding unreasonable licensing fees on FRAND-type tech. Now the matter is wholly settled.

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Anthony John Agnello

Former Digital Trends Contributor

Anthony John Agnello is a writer living in New York. He works as the Community Manager of Joystiq.com and his writing has…

Gaming

Microsoft beat the FTC. Here’s what the controversial court ruling means for Xbox

You’ve probably heard that the Federal Trade Commission (FTC) lost its case against Microsoft after an exciting and revelatory trial. On Tuesday, Judge Jacqueline Scott Corley denied FTC's motion for a preliminary injunction to block Microsoft’s acquisition of Activision Blizzard before its potential completion by July 18. Ultimately, Corley did not believe that Microsoft owning Call of Duty would “substantially lessen competition” in the game industry. It was major win for Microsoft after months of regulatory hoops and roadblocks, but the FTC quickly moved to appeal the decision. This all raises an important question: What’s next?

Over the next week, Microsoft, Activision Blizzard, and the FTC will determine the fate of the gaming companies involved in this acquisition and set a precedent for the future of the game industry. On top of that, Microsoft still has to deal with the next moves made by the U.K.'s Competition and Markets Authority (CMA), which wants to block the acquisition due to its impact on cloud gaming. Following the release of Judge Corley’s Preliminary Injunction Opinion, I spoke to two analysts and a lawyer with knowledge of the video game industry to better understand what lies ahead for Microsoft and Activision, the FTC, and the CMA. The battle isn't quite over yet, even if the end is finally on the horizon.
What’s next for Microsoft and Activision Blizzard
Currently, Microsoft and Activision are in a solid position, as a Judge has ruled that Microsoft is unlikely to pull Call of Duty from PlayStation or lessen competition in the game console, cloud gaming, or game subscription markets by acquiring Activision Blizzard. There’s a temporary restraining order in place until July 14, which the FTC hopes to successfully appeal during. As soon as that order is up, though, Microsoft and Activision Blizzard have until July 18 to complete the acquisition.

Gaming

Microsoft wins FTC case, removing Xbox’s biggest Activision Blizzard acquisition hurdle

Characters shooting in Call of Duty: Modern Warfare 2.

Following a multi-week court case, Microsoft has won its battle with the Federal Trade Commission regarding its proposed Activision Blizzard acquisition. The ruling is a major win for Microsoft's troubled deal, clearing the biggest hurdle it faced.

Last January, Microsoft announced its intention to acquire Activision Blizzard for $69 billion. The blockbuster announcement immediately raised antitrust concerns, which resulted in the FTC filing a legal challenge in December 2022. Microsoft has not been able to proceed with the acquisition since then, as its faced similar scrutiny in the U.K.

Gaming

Why cloud gaming is the linchpin in Microsoft’s troubled Activision Blizzard acqusition

Key art showing multiple devices playing games via the cloud.

The United Kingdom’s Competition and Markets Authority (CMA) delivered a shocker this week when it blocked Microsoft’s acquisition of Activision Blizzard on Wednesday. While a lot of focus on Microsoft’s fight was centered around whether or not the acquisition would give Xbox consoles an unfair advantage over PlayStation consoles, what ultimately decided it was a much smaller market: cloud gaming.
The idea of being able to stream the game you’re playing from the cloud has existed for well over a decade. Cloud gaming’s relevance to the video game industry has only grown over the past several years thanks to both failed and successful efforts from big tech companies like Google, Amazon, and, most importantly, Microsoft. Still, cloud gaming is considered relatively niche, with Activision Blizzard Bobby Kotick calling it "inconsequential" in an interview with Bloomberg and UCL Associate Profession Joost Rietveld saying it’s not a distinct market in a submission to the CMA.
Despite those pleas, the CMA claims that cloud gaming is a “nascent market” and that “already strong incumbent in this market even stronger” in its 418-page report on the matter. Following the CMA’s decision on Wednesday, I spoke to several different analysts to find more clarity about how big Microsoft is in the cloud gaming space and why the CMA should feel compelled to intervene. While experts mostly side with Microsoft over the CMA on this decision, one greater truth emerged from these discussions. Whether one thinks cloud gaming is relevant to this acquisition or not, this emergent style of gaming has reached a point of no return where it'll be instrumental to the video game industry going forward.
Microsoft, king of cloud gaming
Cloud gaming may sound like a niche within the industry, but that's not entirely accurate. BrandFinance Managing Director Laurence Newell tells Digital Trends that “cloud-based services account for over 70% of Microsoft’s brand value, amounting to a staggering $137.5 billion.” That’s quite an eye-catching number that understandably would raise a regulator's alarm bells. However, Newell admits that gaming only makes up 8.5% of Microsoft’s revenue, and cloud gaming is an even smaller amount of that slice.
Despite its relatively small impact on the wider company, most of the experts I spoke to agreed that Microsoft has emerged as a cloud gaming leader thanks to its compatibility with a large segment of the Xbox Game Pass Ultimate library. Conversely, Activision Blizzard has had almost no cloud gaming presence outside of one Sekiro: Shadows Die Twice port on Google Stadia before that service’s shutdown. If it were to be acquired, it is inevitable that more Activision Blizzard games would likely come to cloud-based gaming services.

Despite the shutdown of Google Stadia and the relatively small brand value received from cloud gaming compared to the rest of the company, the CMA still points out in the press release about its decision that “monthly active users in the U.K. more than tripled from the start of 2021 to the end of 2022. It is forecast to be worth up to 11 billion British pounds globally and 1 billion pounds in the U.K. by 2026.” Associate Professor of Strategy and Entrepreneurship at the UCL School of Management Joost Rietveld, who has also been a consultant for Microsoft during its acquisition process, challenges the notion that cloud gaming as a whole is a single market.
Instead, Rietveld splits it into four categories, placing Xbox Game Pass into a category called “cloud gaming as a feature,” which is when it’s “offered as part of a consumer-facing distribution platform” or “included within a bigger bundle of services provided by the platformer.” Under Rietveld’s view, services like Nvidia GeForce Now, Ubitius, and EE -- all of whom Microsoft has made individual deals to bring Activision Blizzard and Xbox Game Studios titles to -- fall into different categories and thus shouldn’t be considered or directly compared to Xbox Game Pass. No matter how they’re categorized now, the real question mark looming over the technology is its future growth, according to Omdia Senior Principal Games Analyst Steve Bailey.
“Will it remain a niche additional service or become the gaming platform of the future?” Bailey asks in his statement to Digital Trends. “Our projection is that cloud gaming is growing rapidly (revenue should more than double by 2026), but it’s still a long way from taking over the games market, so it remains arguable either way.”
“Arguable” stands out as the keyword to me here. Like any emergent technology, we’re heavily debating the positives and negatives of cloud gaming, specifically through the lens of this acquisition. But what exactly is it that the CMA sees in Microsoft that worries them?
The CMA’s problem with Microsoft
“The CMA’s argument is not that acquiring Activision Blizzard would allow Microsoft to dominate the console market as a whole, where Sony and Nintendo have strong positions relative to Xbox, but only that it would help it to achieve a dominant position in cloud gaming specifically,” Bailey tells Digital Trends. “Microsoft and Activision Blizzard will likely argue that this is disproportionate, given the relatively small scale of the cloud gaming market.”