Insider: Assemble Moto X in the US to Avoid Patent War with Microsoft

by anonymous on 2013-08-08 10:43:03

There must be a reason why Google chose to assemble Moto X in the U.S. instead of China like other electronic product manufacturers. Of course, Google would take the market into consideration, but Florian Mueller, an intellectual property expert from Foss Patents, gave his interesting insight here.

In the 2011 patent dispute between Apple and S3 Graphics, the U.S. International Trade Commission (ITC for short) clarified the manufacturing boundaries. If the imported products infringe on valid intellectual property rights, it is not an infringement that occurs after importation, then ITC can ban the importation of devices violating patents. For Moto X, multiple components will be shipped to the U.S. in unassembled form, so this might be Google's way of ensuring that Android software is installed only in the U.S., not before importation.

If future disputes over infringement arise concerning Moto X, more information about the manufacturing supply chain of this device will come to light. Now, Google's position is clear: it believes that final assembly of Moto X in the U.S. can keep it out of the scope of ITC exclusion orders. If Google's strategy is correct, then once infringement occurs, patent owners can only protect their rights by filing lawsuits in U.S. federal courts (or foreign jurisdictions). Just look at the disputes between Samsung and Apple, and you'll understand how difficult and time-consuming this process is.

This is some background provided by Florian regarding the real reasons behind assembling Moto X in the U.S.: no wonder Microsoft has been trying hard to get on the Android success train, because these Android device manufacturers and sellers need to pay its patent licensing fees.

According to reports, in 2011, Microsoft claimed that Samsung infringed on its patents, demanding $15 per Android phone as compensation. Reports said that Samsung thought $10 was reasonable. Although the actual amount has not been disclosed, Samsung did sign an agreement with Microsoft. While the exact compensation figure remains unclear, there is no doubt that Microsoft earns more in patent licensing fees (not to mention profits) from Android phones than from Windows Phone revenue.

Integrating the above two points into the story of assembling Moto X in the U.S.: there are two ways to enforce U.S. patents. One is through court enforcement: but Mueller has pointed out that it requires a lot of time and money, and whether it will succeed is uncertain. The other is to seek advisory rulings from the ITC: the advantage of this is that it resolves issues faster and can enforce rules prohibiting the importation of infringing products.

Microsoft makes more profit from Android licenses of its patents than from its own mobile operating system, Windows Phone. But because Google hasn't sold Android devices in recent years, it has abandoned them, so Google doesn't have to pay Microsoft any fees for Android, leaving Microsoft without grounds for claims. However, perhaps Microsoft would choose to claim damages from smartphone manufacturers installing Android rather than targeting the operating system itself.

Now, Google has launched its own Android-powered phone, Moto X. This could lead to Google being charged with infringement by Microsoft. To some extent, it comes down to the issue of compensation. Then Microsoft will have two options: choosing the slow and expensive regular court; or seeking the fast and cost-effective ITC prohibition on imports. And this is the real intention behind Google's decision to assemble in the U.S.

If Moto X possibly infringes on Microsoft's patents, then there is no reason for ITC to ban the importation of Moto X. Since the importation does not violate the patent, it is something that happens after importation.

The U.S. "Forbes" magazine website published an article by patent writer Tim Worstall, the original author of this piece, who still doubts if this is the sole reason for assembling Moto X in the U.S. It may also be possible that Moto X focuses on personalization, which Chinese manufacturers cannot achieve well. At the same time, there are also good marketing opportunities in the U.S. But the author has no doubt, as Mueller said, that this step must be the result of careful consideration by Google.