With the patent lawsuit war heating up, a possible huge blow to Microsoft and the Xbox 360 was dealt today by the The US International Trade Commission. The ruling about the case, which was filed in 2010, stated that Microsoft's Xbox 360 does violate 4 out of the 5 complaints that Motorola filed for. The complaints center around H.264 video encoding. "Infringing technology includes the Xbox 360, Windows Media Player, Internet Explorer, and Windows 7 – basically anything that Microsoft makes that plays video from the internet."
Microsoft has remained fairly optimistic in the face of the ruling saying in an email response to an AFP inquiry: "Today's recommendation by the administrative law judge is the first step in the process leading to the Commission's final ruling," They also added that, "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."
Expect a full ruling on this later in the year, also expect Microsoft to settle, because in reality, the US International Trade Commission has the power to completely stop all sales of the Xbox 360 which would obviously severely hurt their business. Also if they do not settle they could be forced to pay the FRAND (“Fair, Reasonable, and Non-Discriminatory” ) licensing fee for every one of the 50 million plus Xbox 360's sold, which could be in the hundreds of millions of dollars.