Court Document Unveils Royalty Rate Motorola Sought From Apple

Motorola Mobility Holdings Inc. (MMI) asked Apple Inc. (AAPL) to pay a potential royalty of 2.25% of sales for some iPhones last year, representing potentially billions of dollars in licensing fees.

In a letter filed in a California court last month, a lawyer said Motorola, which is being acquired by Google Inc. (GOOG), had "demanded" the royalty for a license of its patents.

The letter, which was dated Oct. 17 of last year, gives a glimpse into the ongoing patent struggles between mobile device makers. Apple in particular has locked horns with titans of industry, including Samsung Electronics Co. Ltd. (005930.SE, SSNHY) and HTC Corp (HTCXF, 2498.TW), over patents for mobile devices.

Each company has suggested much is at stake, but this document gives the first sense of potentially how much. A royalty of 2.25% on Apple's iPhone sales would amount to more than $1 billion in 2011, though the court letter doesn't specify which devices would be affected nor whether it would be retroactive.

Apple declined to comment. Motorola didn't immediately respond to a request for comment.

Royalty rates are a closely guarded secret among technology makers, lawyers say, and it is unusual for companies to divulge such information. Additionally, because such rates are so rarely discussed in public, lawyers and industry insiders said it was hard to tell whether the amount Motorola was asked for was reasonable.

"People ask for these royalty rates based on fundamental inventions," said Ron Epstein, chief executive of Epicenter IP Group, which helps companies license patents. "There is no debate that Motorola was the inventor of the mobile phone."

But some lawyers said the rate Motorola asked for seemed pricey, and may be designed to either force a settlement or disrupt business. Apple briefly suspended sales of some mobile devices through its German online store after Motorola enforced an injunction from a local court banning Apple from importing devices that allegedly infringed on its patents. The injunction was lifted within a day.

Florian Mueller, an intellectual property consultant who first uncovered the court document, said Motorola's royalty rate appeared high, and was likely offered only because it is required to offer licenses for its industry-standard patents.

"[Motorola] wants Apple to refuse it so they can pursue injunctions against Apple," he said.

-By Ian Sherr, Dow Jones Newswires; 415-439-6455; ian.sherr@dowjones.com

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