Microsoft 2012 Annual Report Download - page 72

Germany
In July 2011, Motorola filed patent infringement actions in Germany against Microsoft and several Microsoft subsidiaries.
• Two of the patents are asserted by Motorola to be essential to implementation of the H.264 video standard,
and Motorola alleges that H.264 capable products including Xbox 360, Windows 7, Media Player, and Internet
Explorer infringe those patents. Motorola seeks damages and an injunction. In May 2012, the court issued an
injunction relating to all H.264 capable Microsoft products in Germany. However, due to orders in the separate
litigation pending in Seattle, Washington described above, Motorola is enjoined from taking steps to enforce
the German injunction. Damages would be determined in later proceedings. Microsoft has appealed the rulings
of the first instance court.
• Motorola asserts one of the patents covers certain syncing functionality in the ActiveSync protocol employed
by Windows Phone 7, Outlook Mobile, Hotmail Mobile, Exchange Online, Exchange Server, and Hotmail
Server. Motorola seeks damages and an injunction. In May 2012, the Court invited further argument and
evidence from the parties relating to Microsoft’s “prior use” defense. If the court rules in favor of Motorola, an
injunction could be issued immediately relating to these products employing the ActiveSync protocol in
Germany, which Motorola could then take steps to enforce. We expect the court to issue a ruling in August
2012. Damages would be determined in later proceedings.
• Should injunction orders be issued and enforced by Motorola, Microsoft may be able to mitigate the adverse
impact by altering its products so they do not infringe the Motorola patents.
In lawsuits Microsoft filed in Germany in September, October, and December 2011 and in April 2012, Microsoft asserts
Motorola Android devices infringe Microsoft patents. Microsoft seeks damages and an injunction. In May 2012, the court
issued an injunction on one patent against Motorola Android devices in Germany and ruled against Microsoft on a second
patent. If the court rules in favor of Microsoft in a given case, an injunction could be issued immediately relating to the sale
of the infringing devices in Germany, which Microsoft could then take steps to enforce. Damages would be determined in
later proceedings. Motorola has appealed the first instance court’s ruling in Microsoft’s favor.
United Kingdom
In December 2011, Microsoft filed an action against Motorola in the High Court of Justice, Chancery Division, Patents
Court, in London, England, seeking to revoke the UK part of the European patent asserted by Motorola in Germany
against the ActiveSync protocol. In February 2012, Motorola counterclaimed alleging infringement of the patent and
seeking damages and an injunction. A trial is expected in December 2012.
Other Patent and Intellectual Property Claims
In addition to these cases, there are approximately 60 other patent infringement cases pending against Microsoft.
Other
We also are subject to a variety of other claims and suits that arise from time to time in the ordinary course of our
business. Although management currently believes that resolving claims against us, individually or in aggregate, will not
have a material adverse impact on our financial statements, these matters are subject to inherent uncertainties and
management’s view of these matters may change in the future.
As of June 30, 2012, we had accrued aggregate liabilities of $384 million in other current liabilities and $220 million in
other long-term liabilities for all of our contingent legal matters. While we intend to defend these matters vigorously,
adverse outcomes that we estimate could reach approximately $550 million in aggregate beyond recorded amounts are
reasonably possible. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact
on our financial statements for the period in which the effects become reasonably estimable.