Motorola Mobility, which is owned by Google, suggested Microsoft paid a royalty of 2.25% on the sale of every Xbox 360 console and $0.50 per copy of Windows using its ActiveSync technology.
Microsoft claims the demands are in excess of market rates, but faces a potential Xbox 360 sales ban if an agreement can't be reached.
"While we welcome any good faith settlement effort, 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," Microsoft told Reuters.
> Xbox 360 'facing US sales ban', judge favours Motorola in dispute
Last month a US judge recommended that Xbox 360s be removed from sale in the region and that Microsoft post a bond of 7% on all unsold Xbox 360 consoles.
Judge David Shaw of the International Trade Commission believes that the console should no longer be imported into the US and that current stock be removed from stores.
The judge's recommendation followed an earlier ruling that Xbox software infringes on Motorola's intellectual property.
Microsoft argued that a sales ban would be unfair to the consumer, limiting their options at retail.
If the ITC backs the judge and enforces the ban, the case will be taken directly to President Obama and a team of staff, who will have 60 days to review the decision before it is enforced.
Motorola Mobility recently won an injunction to prevent the distribution and sale of several Microsoft products in Germany.
Microsoft's legal team also ordered the removal of leaked Xbox 720 documents from various websites.