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Microsoft and Motorola have been in a nasty patent battle this year, and a new development from the U.S. International Trade Commission suggests that a sales and import ban against the Xbox 360 is on the table.

According to Wired, the legal red tape goes back to last April, when ITC Administrative Law Judge David Shaw ruled that Microsoft violated four Motorola Mobility (owned by Google) patents that cover H.264 video compression codecs used in Xbox 360s and gaming accessories. As a result, there is a pending ban on Xbox 360 sales in Germany, but it’s on hold until the rulings in the U.S. are settled.

That final ruling was made this past Monday, and here’s how the case will move up the legal ladder:

• The ITC Board of Commissions will decide to either change the ruling by August 23rd, or let the Executive Branch (President Obama’s office) handle it.

• President Obama’s office then has 60 days to sign-off on the ITC’s ruling, or overturn it.

While a ban isn’t very likely to happen (Microsoft argues that technology in the patent should be available for use), Judge Shaw did say that “the public interest in enforcing intellectual property rights outweighed giving consumers the choice of buying an Xbox.” It’s also unlikely that consumers will only be able to purchase Nintendo Wii Us and PlayStation 3s come holiday season, but if the ruling is upheld by all levels of government—well, things will get pretty dicey.

As a side note, Google recently announced that they were legally in the clear to buy Motorola for $12.5 billion, so this fight with Microsoft is now officially their fight. Considering that Motorola is also facing a sales ban due to a patent lawsuit from Microsoft, the ITC is in position to dramatically shake up the gaming and tech markets.

Worse case scenario: Xbox 360s are banned in the U.S. and Germany., Microsoft shells out millions (maybe billions) of dollars to compensate Motorola, while Motorola itself shuts down sales in America. Brrr.

Source: Wired