Microsoft has rejected a settlement offer from Motorola in an ongoing Xbox 360 patent suit. The offer would have Motorola take 2.25% of royalties on every 360 sold. Microsoft balked at the proposal, saying the royalties would be well above market rates and that the settlement doesn't account for Motorola's own infringements.

Horacio Gutierrez, Microsoft's deputy general counsel, e-mailed a statement to Reuters (via Gamasutra). "While we welcome any good faith settlement effort," it read, "it's hard to apply that label to a demand that Microsoft pay royalties to Google far in excess of market rates, that refuses to license all the Microsoft patents infringed by Motorola, and that is promptly leaked to the press."

Last month, a judge recommended a ban of Xbox 360s to the International Trade Commission (ITC). While Microsoft still has legal avenues available to it, it makes sense for Motorola to use its advantage as a bargaining chip. Last week, various corporations rallied behind Microsoft in opposition of the ban with public submissions to the ITC.