Motorola has won round one. On Monday, the International Trade Commission (ITC) issued a preliminary ruling that Microsoft infringed Motorola Mobility's patents in making its popular Xbox gaming consoles. The ruling bolsters Motorola Mobility's chances to block imports of Microsoft's Xbox into the U.S.

ITC Judge David Shaw ruled on Monday that Microsoft was infringing four out of five Motorola Mobility patents. The preliminary ruling will be reviewed by the full six-member commission, which has the authority to ban imports that infringe U.S. patents. The commission has set a target to complete the investigation by August 23.

Retaliation

Motorola Mobility had filed the lawsuit against Microsoft in response to the software maker's patent infringement claims against Motorola Mobility phones that run on Google's Android mobile operating system.

"Microsoft continues to infringe Motorola Mobility's patent portfolio, and we remain confident in our position," Motorola Mobility spokeswoman Becki Leonard said in an e-mailed statement to Bloomberg. "This case was filed in response to Microsoft's litigate-first patent attack strategy, and we look forward to the full commission's ruling in August."

Microsoft Keeps Faith in Final Ruling

However, Motorola may have won the battle but not the war. Microsoft is waiting for the six-member commission to review the case, and is confident the final ruling will vindicate it. "Today's recommendation by the administrative law judge is the first step in the process leading to the commission's final ruling," read an e-mailed statement from Microsoft. "We remain confident the commission will ultimately rule in Microsoft's favor in this case and that Motorola will be held to its promise to make its standard-essential patents available on fair and reasonable terms."

According to Motorola, Microsoft is infringing two patents that cover aspects of an industry standard for video decoding, two patents for Wi-Fi technology, and one it used to establish communication between the Xbox and accessories. The ITC judge ruled that the second Wi-Fi patent was not violated, and one aspect of the video-coding patents was invalid. Shaw will give both sides a chance to redact confidential information before releasing the full findings.

Motorola Mobility Demands Royalties

In letters to Microsoft, Motorola Mobility demanded the software maker pay a 2.25 percent royalty on the end price of products that use the patented inventions, including Windows products and the Xbox. Microsoft argued that Motorola Mobility does not have the right to bring patents covering essential aspects of an industry standard in a case at the agency. According to Microsoft, Motorola Mobility has violated its commitment to license those patents on "reasonable and non-discriminatory" terms.

Before the International Trade Commission case was filed, Microsoft filed its own breach-of-contract lawsuit against Motorola Mobility. The software maker alleged that Motorola Mobility's royalty demands would result in $4 billion a year in royalties. Motorola Mobility dismissed the numbers as misleading, and claimed the offer is typical of the offers it makes to start negotiations. Motorola Mobility said Microsoft never made a counter-offer.

(reported by Alexandra Burlacu, edited by Dave Clark)