Yesterday’s order concerns the terms of Google’s license with the MPEG LA AVC/H.264 patent pool, which Microsoft claims are dispositive of the appropriate RAND rate for Motorola’s H.264 patents.... Judge Robart has now allowed the parties to submit letter briefs of up to six pages by March 1 in light of certain “novel arguments” regarding the MPEG LA agreement that were apparently raised by the parties at the January 28 oral argument.

Although it’s hard to tell at this point, this could be welcome news for Motorola. Motorola has previously argued that not all of Google’s affiliates (i.e., not Motorola Mobility) fall within the scope of the MPEG LA agreement, so any grantback to Microsoft would not apply to Motorola Mobility. But there is also the issue of royalty caps. Microsoft argued that because the MPEG LA agreement includes a royalty cap, a RAND royalty for Motorola’s H.264 patents would likewise be capped. If Judge Robart finds that the language of Section 3.1.7 means that royalty caps do not apply to Motorola’s patents, that could dramatically increase the amount of RAND royalties owed by Microsoft to Motorola for H.264-essential patents.

The court directs the parties to Section 3.1.7 of the Google-MPEG LA license which states in relevant part:

Enterprise Licensees. Pursuant to Article 2.7 and notwithstanding anything to the contrary in Article 2.9 hereof, and in lieu of the royalties specified in Articles 3.1.2, 3.1.3, 3.1.4 and 3.1.5, a Licensee and its Affiliates which are licensees under the AVC Patent Portfolio License and are identified in writing to the Licensing Administrator by Licensee shall pay no more than the following total amounts in each Calendar Year for all such licenses for the combined Sales of Licensee and its Affiliates during such year:

[Prescribing royalty amounts and caps.]

(Google-MPEG LA License § 3.1.7 (emphases added).) From the italicized language of Section 3.1.7, it appears to the court that Licensee and its Affiliates fall under the royalty cap prescribed therein only if the Affiliates are themselves licensee under the AVC Patent Portfolio and are identified by the Licensee in writing to the Licensing Administrator.

No later than March 1, 2013, the parties may submit letter briefs of no more than 6 single-spaced pages in length addressing:

(1) whether the court’s understanding of the italicized language is correct; and

(2) whether Section 3.1.7 of the Google-MPEG LA License Agreement is a stand- alone royalty cap provision or whether the section affects other provisions of the license agreement, and in particular whether Section 3.1.7 has an affect Motorola’s obligation to license its standard essential patents as an Affiliate of Google.