Microsoft Closes German Distribution Centre Over Patent Risk

Microsoft has shut its German distribution centre and will move to the Netherlands as a result of a patent dispute with Motorola.

The company said staying in Germany just wasn’t worth the risk amid fears the company could be banned from distributing its products.

More jobs at risk

Motorola is demanding Microsoft pay it royalties for using its patents related to the H.264 video codec standard, with a court in Mannheim expected to rule on 17 April whether Microsoft violated an agreement by using the codec in its products

Microsoft said the demands mean it would have to pay Motorola £14 in royalties for a £638 laptop, and along with Apple filed an antitrust complaint with the European Commission in February, claiming the soon-to-be Google-owned mobile manufacturer was using FRAND patents to block product sales.

The worst case scenario could see Microsoft unable to distribute products such as Windows 7 and Xbox 360 in Germany and neighbouring countries served by the supply centre, a risk that was deemed too great a risk for the company to take.

Around 50 jobs are expected to be affected by the move, with IP activist Florian Mueller warning that more are at risk if German authorities continue to allow the country to become a battleground for patent disputes.

Patent war epicentre

Last year, a Dusseldorf court permanently banned the sale of the Samsung Galaxy Tab 10.1 in the country following a complaint from Apple that it violated its patents, whereas a Dutch court refused to ban the device.

“I regret to say that certain developments in patent enforcement have really turned Germany into a dangerous location for business, a problem that other high-tech companies, such as Apple, are also experiencing,” commented Mueller. “Once a patented invention becomes a mandatory part of a standard, the patent can no longer be engineered around. A country in which such patents can be easily abused to win injunctions is not an advisable place for a European distribution operation.”

Mueller places the blame firmly on the German legal system for the abuse, arguing that it makes injunctions available to any patent holder who wins an infringement ruling and that it allows patents which should never have been granted to be enforced before they are, much later, proved to be invalid.

“Those and other factors have made Germany the new epicentre of the smartphone-related patent wars,” he added.

Are you a patent expert? Find out with our quiz!