Federal trade commission clears Microsoft of patent infringement accusations

Microsoft Corp avoided a potentially costly setback to its mobile phone business on Friday as the U.S. International Trade Commission declined to block the import of its devices in a longstanding patent dispute.

The decision rejected a ruling in April by a U.S. trade judge who found that Microsoft had infringed two InterDigital Inc wireless patents, and recommended an import ban.

The commission's action is good news for Microsoft, which has been struggling to compete with Apple Inc and Samsung Electronics Co Ltd devices. The Redmond, Washington-based company has captured just 3 percent of the smartphone market in the United States and globally, according to recent estimates.

Microsoft last month posted a record quarterly loss as it took a $7.5 billion charge on its handset business, which it bought from Nokia last year.

InterDigital's Chief Executive Officer William Merritt said in a statement that the decision was disappointing but would have limited impact "given the decline of the Nokia mobile device business under Microsoft’s control and its limited market position."

A Microsoft spokesperson said the company was "grateful the Commission stopped InterDigital from trying to block our products."

InterDigital stock was down 3 percent after hours on Friday.

The two companies are at odds over how much InterDigital should be able to charge to license its patents, which are considered essential to cellphone technology.

Wilmington, Delaware-based InterDigital first accused Nokia in 2007 of infringing its technology for optimizing a cellphone's power to connect to a network.

In April, the U.S. trade judge ruled that Microsoft used InterDigital's patents, considered standard in the industry, but refused to pay for a license to them. An import ban would have affected any Microsoft phone using 3G cellular technology, including its Lumia smartphones.

After reviewing that ruling, the commission said on Friday that Microsoft did not violate the patents, but it did not address the issue of fair licensing for essential patents.

Earlier this month, Microsoft sued InterDigital in Delaware federal court, claiming InterDigital violated U.S. antitrust law by breaking promises to offer licenses on reasonable terms.

Companies frequently sue both at the ITC, which has the authority to block the import of products that infringe a U.S. patent, and in district court to win monetary damages.

The case at the ITC is No. 337-613.

(Reporting by Andrew Chung; Editing by Matthew Lewis)