Dispute centers on royalties
By Kim Yoo-chul
Microsoft has filed a lawsuit against its longtime partner Samsung Electronics, accusing the Korean company of breaching a contract concerning patent royalties.
Microsoft filed the lawsuit Friday with the U.S. District Court in the Southern District of New York. The suit alleges that Samsung failed to pay Microsoft for the use of its technology in Android-based smartphones and tablets.
Microsoft is seeking an undisclosed sum.
According to the complaint, Samsung has been late in paying the royalties it owes Microsoft for use of its technology. The trouble started late last year, after Microsoft announced plans to acquire Nokia.
"In September 2013, after Microsoft announced it was acquiring the Nokia Devices and Services business, Samsung began using the acquisition as an excuse to breach its contract," said David Howard, Microsoft's deputy general counsel, in a blog post.
"Curiously, Samsung didn't ask the court to decide whether the Nokia acquisition invalidated its contract with Microsoft, likely because it knew its position was meritless," he added.
The two companies signed a comprehensive licensing agreement in 2011, allowing both companies to use each other's patented technologies.
In a statement, Samsung responded: "We will review the complaint in detail and determine appropriate measures in response."
Market analysts were surprised because Samsung had maintained a solid partnership with the U.S. company in a variety of areas ranging from Windows software to cloud computing ― areas in which Samsung is relatively weak.
They speculate that Samsung may have refused to pay the royalties because smartphone market conditions have changed drastically since the two countries signed the contract.
The development suggests Samsung is confident that its business is essential to Microsoft, according to the analysts.
At the time, the two companies reached a patent deal in 2011, Samsung's total smartphone shipments weren't very high compared with the previous year, a Samsung official told The Korea Times.
"Samsung wants to cut its payments to Microsoft," the official said. "Attorneys from the two sides will find a way to narrow their differences."
He said Samsung did not want the suit to undermine the company's partnership with Microsoft.
In his blog post about the case, Howard from Microsoft also pointed to the phenomenal growth of Samsung's smartphone business as a factor in Samsung's change of stance.
Since the two companies signed the agreement in 2011, Samsung's smartphone sales have quadrupled and it is now the leading worldwide player in the smartphone market, Howard wrote.
In 2011, Howard continued, Samsung shipped 82 million Android smartphones. Just three years later, that figure had increased to 314 million.
"Samsung predicted it would be successful, but no one imagined their Android smartphone sales would increase this much," said Howard.
FossPatents owner Florian Mueller, a leading intellectual property expert based in Germany, said Microsoft still hoped to continue its partnership with Samsung despite this disagreement.
"Microsoft's Android patent licensing program is a huge deal-making success," said Mueller. "It's possible that Samsung now feels it would have been a better choice to do things the Google-Motorola way and take its chances in court than to agree three years ago to pay royalties."
By Kim Yoo-chul
Microsoft has filed a lawsuit against its longtime partner Samsung Electronics, accusing the Korean company of breaching a contract concerning patent royalties.
Microsoft filed the lawsuit Friday with the U.S. District Court in the Southern District of New York. The suit alleges that Samsung failed to pay Microsoft for the use of its technology in Android-based smartphones and tablets.
Microsoft is seeking an undisclosed sum.
According to the complaint, Samsung has been late in paying the royalties it owes Microsoft for use of its technology. The trouble started late last year, after Microsoft announced plans to acquire Nokia.
"In September 2013, after Microsoft announced it was acquiring the Nokia Devices and Services business, Samsung began using the acquisition as an excuse to breach its contract," said David Howard, Microsoft's deputy general counsel, in a blog post.
"Curiously, Samsung didn't ask the court to decide whether the Nokia acquisition invalidated its contract with Microsoft, likely because it knew its position was meritless," he added.
The two companies signed a comprehensive licensing agreement in 2011, allowing both companies to use each other's patented technologies.
In a statement, Samsung responded: "We will review the complaint in detail and determine appropriate measures in response."
Market analysts were surprised because Samsung had maintained a solid partnership with the U.S. company in a variety of areas ranging from Windows software to cloud computing ― areas in which Samsung is relatively weak.
They speculate that Samsung may have refused to pay the royalties because smartphone market conditions have changed drastically since the two countries signed the contract.
The development suggests Samsung is confident that its business is essential to Microsoft, according to the analysts.
At the time, the two companies reached a patent deal in 2011, Samsung's total smartphone shipments weren't very high compared with the previous year, a Samsung official told The Korea Times.
"Samsung wants to cut its payments to Microsoft," the official said. "Attorneys from the two sides will find a way to narrow their differences."
He said Samsung did not want the suit to undermine the company's partnership with Microsoft.
In his blog post about the case, Howard from Microsoft also pointed to the phenomenal growth of Samsung's smartphone business as a factor in Samsung's change of stance.
Since the two companies signed the agreement in 2011, Samsung's smartphone sales have quadrupled and it is now the leading worldwide player in the smartphone market, Howard wrote.
In 2011, Howard continued, Samsung shipped 82 million Android smartphones. Just three years later, that figure had increased to 314 million.
"Samsung predicted it would be successful, but no one imagined their Android smartphone sales would increase this much," said Howard.
FossPatents owner Florian Mueller, a leading intellectual property expert based in Germany, said Microsoft still hoped to continue its partnership with Samsung despite this disagreement.
"Microsoft's Android patent licensing program is a huge deal-making success," said Mueller. "It's possible that Samsung now feels it would have been a better choice to do things the Google-Motorola way and take its chances in court than to agree three years ago to pay royalties."
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