US one step closer to devastating Xbox 360 ban

US one step closer to devastating Xbox 360 ban

By Rob Crossley

May 23rd 2012 at 10:24AM

Options running out for Microsoft with ITC now one step away from prohibiting console sales, but verdict not yet enacted

Microsoft is feverishly trying to escape one of the most disastrous legal rulings imposed on the company in its thirty-seven-year history, after the International Trade Commission (ITC) was advised on Tuesday to ban the import and sale of Xbox systems in the United States.

Judge David Shaw said Microsoft should be handed a cease-and-desist order on sales of Xbox 360 Slim consoles across the country, as part of an increasingly complex and bitter legal dispute between the company and Motorola Mobility.

The legal war – fought in courtrooms in Germany, the US and an ITC panel – has proven to be extraordinarily expensive for both parties. A Seattle judge recently claimed that attorney fees already spent “could finance a small country”.

But Judge Shaw’s recommendation to the ITC now threatens to throw the Xbox US business into disarray.

He believes Microsoft should not only cease Xbox imports from China, as well as ban general sale of the console across the country, but also pay Motorola Mobility 7 per cent of the value of any unsold systems remaining in stores.

The ITC commissioners can either allow the initial determination stand, or amend certain terms, or send it back for a rewrite. If Shaw's recommendation is enacted, President Barack Obama will have 60 days to review the decision, according to the Courthouse News Service.

At the heart of the issue is a patented Motorola Mobility technology that Microsoft uses across a number of devices and technologies such as Windows 7, Internet Explorer, Windows Media Player and Xbox 360 S.

Microsoft alleges that Motorola Mobility breached contract by demanding “unreasonable licensing fees” for use of the patents. It is believed the royalty rate would have been 2.25 per cent for each unit sale, something which is argued would cost Microsoft some $4 billion each year.

Motorola’s counter-claim is that Microsoft gave up its right to negotiate on the royalty rate as soon as it began lawsuit action.

In April, a court in Germany declared Microsoft consoles should be banned across the country. This verdict will not come into effect until the US lawsuit is concluded.

Microsoft, which has defied all major outcomes of the case, has warned the ITC that banning Xbox 360 across the US would not serve the public interest, because it would leave the market with a choice between PlayStation 3 and Nintendo’s Wii.

Shaw rejected the argument, claiming that enforcing intellectual property rights takes precedence.

Most Xbox 360s in the US are imported from China – a business practice considered vital in driving down production costs.

Motorola Mobility is currently in the process of being acquired by Google.