Wednesday, October 1, 2014

Microsoft And Samsung In Lawsuit Over $1 Billion Royalties Agreement

According to a recent court document it appears as if Samsung has been paying Microsoft $1 billion per year in royalties in order to use its technology in Samsung's Android smartphones and tablets. In addition to that, the filing also shows that Microsoft also offered to reduce Samsung's payments if the company developed Widows tablets and phones in addition to Android ones.

This information was recently brought to light during a lawsuit that Microsoft filed against Samsung back in August. The original complaint from Microsoft was partially blacked out in order to hide confidential business information, though the revised filing that was made available is unredacted. Both companies signed an agreement in the latter part of 2011 where Samsung agreed to pay royalties to Microsoft for seven years for the use of its patented technologies.

For years Microsoft has claimed that Android infringes its patents and that many other companies, in addition to Samsung, have signed such agreements. These contracts are usually highly confidential, meaning that it is unusual to get a peek at any of the numbers behind them.

According to the filing, for the second year of the agreement that spanned July 2012 to June 2013, Samsung was required to pay Microsoft a little over $1 billion in royalties. That number is based on the number of Android devices Samsung sold and the prices it charged for them. Microsoft is claiming that Samsung was lagging behind and was late on the payment. Part of the lawsuit was so Microsoft could recover nearly $7 million in interest that it says Samsung still owes it.

An the other half of the argument, Samsung claims that Microsoft invalidated the agreement due to the fact that it bought Nokia's handset business. As a result, Samsung is refusing to make further payments for this year and the years to follow. This would mean billions of dollars in lost revenue for Microsoft.

Microsoft is retorting, stating that its acquisition of Nokia's handset business does not breach the agreement it made with Samsung and says that there are "explicit provisions" that cover the acquisition of other companies. The original deal between Samsung and Microsoft was a cross-license agreement, meaning that Samsung was also agreeing to license technologies to Microsoft. With this deal broken, Samsung is threatening to sue Microsoft for using Nokia's technology.

Google developed Android and is currently the world's most popular smartphone operating system. However, Microsoft believes that the company infringes on a lot of its patents and, in 2010, it started a licensing program in order to collect royalties from Android smartphone makers. Samsung isn't the only company to pay Microsoft royalties. Twenty-four additional companies also pay royalties, including HTC, Acer and Barnes & Noble.

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