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Microsoft sues Samsung over Android royalties

Microsoft (NASDAQ:MSFT) has sued Samsung (OTC:SSNLF) for alleged breach of contract over unpaid Android royalty payments related to the companies' 2011 licensing deal.

Microsoft suggests Samsung stopped paying per-device royalties in late 2013 due to the Nokia deal, with Samsung arguing the deal nullifies the 2011 pact. Microsoft wants a ruling on Samsung's claim, and is also seeking unpaid interest.

Likely at issue: Samsung and Nokia have a patent cross-licensing deal in place for each others' patents, one that was extended for 5 years last November. Though the deal involves payments from Samsung to Nokia, Nokia's phone unit (now a part of Microsoft) has made use of Samsung's IP through it. That opens the door to Samsung arguing a new/separate cross-licensing deal with Microsoft is needed.

The financial implications of the legal spat could be big: Though struggling a bit lately, Samsung still had a 25.2% Q2 smartphone unit share (per IDC).

Surging Android royalties led Microsoft's "Windows Phone" revenue to rise $1.2B in FY13 (ended June '13). With Samsung apparently halting payments midway, "Windows Phone" licensing revenue grew by $822M in FY14 to $2.54B. Nokia payments accounted for $382M of the total.

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Comments (15)
  • thekazu4u
    , contributor
    Comments (2) | Send Message
    Could somebody explain why samsung was paying android royalties to Nokia?
    1 Aug 2014, 09:24 PM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (1078) | Send Message
    They've been paying royalties to Nokia's for Nokia's patents rather than Microsoft's. Nokia still owns most of them.
    1 Aug 2014, 10:17 PM Reply Like
  • Shaduc
    , contributor
    Comments (2209) | Send Message
    Didn't Nokia keep most of the patents and not the phone company acquired by Microsoft?
    1 Aug 2014, 10:45 PM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (1078) | Send Message
    Yep. Microsoft got Nokia's design patents, but Nokia kept everything else.
    1 Aug 2014, 10:52 PM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2130) | Send Message
    Samsung currently pays Nokia for Nokia's IP related to some SEP tech (non Android tech). That is, tech mostly related to 3G, 4G etc fundamental tech.


    Nokia is increasing its IP monetization aggressively, and in 2015- we are likely to see from Nokia 1) a new/renewed SEP license agreement with Samsung (i.e. a renewal of the current agreement with Nokia but on new terms), where Samsung will have to pay Nokia more 2) and (at least the beginning of) aggressive non-SEP IP monetization where the compensations/royalties can be much higher than with SEP patents. Samsung as one of the leading smartphone manufacturers (in volume) will of course be one of Nokia's main targets.


    Samsung pays (seemingly does not pay anymore) Microsoft for IP primarily related to Android OS. This IP is owned by Microsoft has nothing to to with Nokia's IP...


    2 Aug 2014, 02:28 AM Reply Like
  • chintan1671
    , contributor
    Comments (70) | Send Message
    This is going to be interesting
    2 Aug 2014, 12:01 AM Reply Like
  • jpintoctr
    , contributor
    Comments (591) | Send Message
    Samsung made several serious strategic mistakes in their Smartphone business.


    First putting all its eggs on Google's "free" open source Android software that is plagued with issues that are beyond Samsung's reach.


    Second, coping so carelessly Apple iPhone and iPad, specially been a long term Apple supplier and partner, therefore tarnishing its brands as a reliable supplier.


    Third, expending billions in unsustainable PR and publicity campaigns, thinking that a “cool” culture could be acquired (i.e. a lavish launching of Galaxy 4 at Radio City NY two years ago was a major disaster with bad taste, enormous panels in visible expensive sites like London Heathrow airport, etc)


    Now a fight with Microsoft regarding royalties for phones that already have thin margins and are also based on Android's commoditised ecosystem.


    Samsung can repair its relations with Apple and Microsoft, but having its own Smartphone software is tricky, but strategically key to survive in an Android flooded market and a brewing conflict with Google.
    2 Aug 2014, 12:22 AM Reply Like
  • jdadyfinance
    , contributor
    Comments (195) | Send Message
    Samsung business ethics are just criminal. If they stopped paying MS then according to the augment they should have just started paying Nokia. How does MS buying Nokia phone ops change anything ? Are we to believe there was no change of ownership clause in this agreement ? Come on, with all the lawyers that were undoubtedly in the room when this was drawn up ! Suppose it's just par for the course for Samsung. Business is war in the culture and every opening is to be exploited. No fan of MS here but pay someone for their IP Samsung you know it's not yours!
    2 Aug 2014, 12:37 AM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4363) | Send Message
    It's not as bad as it looks to you. Samsung's cross-licensing agreement was originally with Nokia and was apparently nontransferable. Nokia was using Samsung's IP as well as Samsung using Nokia's, but Nokia's was considered more valuable so they got the payments. Microsoft bought the business unit including the IP from Nokia, so Samsung is entitled to renegotiate (under terms of the agreement) since Microsoft is now making use of Samsung IP, and to withhold payments until a new agreement is reached. This is like withholding rent until the landlord fixes the leaky roof. It's not a permanent situation, and doesn't mean that Samsung gets out of paying back rent.
    2 Aug 2014, 03:56 AM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2130) | Send Message
    Microsoft did not buy Nokia's IP, they only bought a 10 year license/right to use Nokia's IP related to mobile phone tech. Nokia kept all technology IP to itself to monetize it aggressively in future.


    Microsoft did buy/get from Nokia some 6000 or so 'design patents' (defining shape and form, looks of Lumia etc phones) which strictly speaking are not patents.
    3 Aug 2014, 01:20 PM Reply Like
  • AI2
    , contributor
    Comments (157) | Send Message


    Microsoft has access to Samsung's patent portfolio already through cross licensing in the contract that is being disputed.


    Secondly, Microsoft didn't buy a lot of IP from Nokia. Just some design patents.


    Samsung isn't "entitled" to negotiate anything, as the appropriate analogy is closer to buyer's remorse.
    3 Aug 2014, 01:25 PM Reply Like
  • Ruffdog
    , contributor
    Comments (2316) | Send Message
    when do you think can we expect a decision?
    2 Aug 2014, 09:43 AM Reply Like
  • Just Some Guy
    , contributor
    Comments (1754) | Send Message
    This is just a few millions of dollars that is entirely eaten up by the respective legal staffs. Could Samsung have avoided the whole thing and developed their own software? Probably no cheaper, these patent games getcha in any case.
    2 Aug 2014, 12:40 PM Reply Like
  • techy46
    , contributor
    Comments (8975) | Send Message
    The tangled web of technology IP and patents is beyond unbelievable. It would be very interesting to see a breakout of a $600 smart phone and tablet in terms of hardware, software and IP licensing costs. What happens when the average smart phone of tablet price is between $100 and $200 like a small screen LCD TV?
    3 Aug 2014, 11:10 AM Reply Like
  • Seppo Sahrakorpi
    , contributor
    Comments (2130) | Send Message
    Foss Patents:


    "Microsoft sues Samsung over Android royalties -- a contract dispute, not an infringement case"

    3 Aug 2014, 03:14 PM Reply Like
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