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Microsoft Hits Samsung with Lawsuit Over Royalty Fees
Microsoft Hits Samsung with Lawsuit Over Royalty Fees
By Jennifer LeClaire / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
AUGUST
04
2014

And the smartphone patent wars continue. Microsoft on Friday filed legal action against Samsung in the U.S. District Court, Southern District of New York. Redmond is sending a clear message to the electronics giant: We’re enforcing our contract for royalty payments on the intellectual property you use on your Android devices. The companies inked a patent-sharing deal in 2011.

David Howard, Corporate Vice President and Deputy General Counsel at Microsoft, wrote a blog post explaining Microsoft’s reasoning behind taking legal action against Samsung.

“We don’t take lightly filing a legal action, especially against a company with which we’ve enjoyed a long and productive partnership. Unfortunately, even partners sometimes disagree,” Howard wrote. “After spending months trying to resolve our disagreement, Samsung has made clear in a series of letters and discussions that we have a fundamental disagreement as to the meaning of our contract.”

Deal’s Off!

Howard rightly stated that Samsung and Microsoft are both large and sophisticated companies before going on to explain the crux of the matter. According to Howard, after months of “painstaking negotiation” in 2011, Samsung voluntarily entered into a legally binding contract with Microsoft to cross-license IP. Howard described the agreement as “extremely beneficial for both parties.”

Apparently, Samsung was complying with the contract and paying to use Microsoft’s intellectual property until recently. What happened? Samsung claimed a breach of contract when Microsoft acquired Nokia. But Redmond argued that it hasn’t hurt Samsung’s fortunes in the marketplace.

As Howard explained it, Samsung’s smartphone sales have quadrupled since entering into the agreement, making it a worldwide player in the smartphone market.

Howard also pointed to statistics from IDC’s Worldwide Quarterly Mobile Phone Tracker for the first quarter of 2014. When Samsung entered into the agreement with Microsoft in 2011, it shipped 82 million Android smartphones. Just three years later, IDC reports, it shipped 314 million Android smartphones.

“Samsung predicted it would be successful, but no one imagined their Android smartphone sales would increase this much,” Howard said. “After becoming the leading player in the worldwide smartphone market, Samsung decided late last year to stop complying with its agreement with Microsoft.”

Muddy Water

After Microsoft announced it was acquiring the Nokia Devices and Services business in September 2013, Samsung starting “using acquisition as an excuse to breach its contract,” Howard said.

“Curiously, Samsung did not ask the court to decide whether the Nokia acquisition invalidated its contract with Microsoft, likely because it knew its position was meritless,” Howard said. “Microsoft and Samsung have a long history of collaboration. Microsoft values and respects our partnership with Samsung and expects it to continue. We are simply asking the court to settle our disagreement, and we are confident the contract will be enforced.”

Samsung could not immediately be reached for comment, but Adam Yates, a spokesman for the company, said in a published statement that, “We will review the complaint in detail and determine appropriate measures in response.”

We caught up with Roger Entner, a principal analyst at Recon Analytics, to get his take on the lawsuit. He told us the smartphone market is a very competitive field and companies look at patents to provide competitive advantages. Although he could not comment on the specifics of this case, he said there are always issues when a handset manufacturer licenses its technology to a competitor.

“If you license your OS to others and you are also a competitor in that field, it becomes very muddied and the loyalties become very divided and unclear,” Entner said. “In the end are you going to help your own brand or are you going to help all brands equally? That’s one of the big challenges.”

Tell Us What You Think
Comment:

Name:

AB:
Posted: 2014-08-05 @ 11:03pm PT
It is a best known policy of Microsoft, when they are unable to compete with its rivals, then it buys them or else tries to put them in some trouble....

Mohsin:
Posted: 2014-08-05 @ 8:58am PT
Microsoft has Filed Lawsuit Against Samsung, guaranteeing the South Korean tech monster owes it cash. Samsung should pay Microsoft (MSFT, Tech30) an eminence.

RK:
Posted: 2014-08-04 @ 4:53pm PT
This is not a patent suit, it's a contract enforcement suit.
Samsung had already licensed the patents, but it stopped paying.

TheMasses:
Posted: 2014-08-04 @ 4:48pm PT
Microsoft obviously can no longer innovate so it has to get its billions from somewhere: might as well sue companies' whose products are actually worth something.

TGS:
Posted: 2014-08-04 @ 1:20pm PT
Whenever two civilizations collide, it does not end well. -Arthur C. Clarke?

Editor:
Posted: 2014-08-04 @ 1:16pm PT
Thanks, Tee jay, for pointing out the mistake. We've fixed it.

Tee jay:
Posted: 2014-08-04 @ 1:09pm PT
It's September 2014 already ??

John Sellers:
Posted: 2014-08-04 @ 12:38pm PT
It has been understood for over a hundred years that a constraint in trade hurts everyone.

And that is what this is.

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