By Kim Yoo-chul
Microsoft (MS) has offered to cut annual patent fees for Samsung and LG Electronics, sources said Monday.
"MS approached Samsung and LG Electronics to provide them with sizable discounts to the licensing fees in an attempt to sell more of its cloud computing and software products," a source said.
Experts say such offers will benefit all as MS seeks to promote its corporate products, while Samsung Electronics and its chief rival LG could spend money that is saved from the updated agreement for the development of their next projects.
"MS also has a competitive Google Android patent portfolio. MS is trying to crack down on Google's dominance by promoting its software to be used in companies and consumers to leading smartphone manufacturers. MS exactly knows what its clients want and I believe this company is really smart," said another source.
In the case of Samsung, the world's biggest smartphone vendor decided to install MS's office programs such as OneDrive on its Galaxy S6 and S6 Edge devices. Both of them are powered by the Google Android system.
Samsung said it paid about 1 trillion won to MS for patent fees in 2013. Samsung paid between $2.6 and $2.7 to MS for fees on every Samsung tablet and smartphone that are sold.
Similarly, Samsung also recently agreed with Qualcomm to produce the latter's Snapdragon 820 processors in return for Qualcomm's offer to reduce Samsung's annual payment to the San Diego-based mobile chip titan.
The sources also stressed MS's latest approach is also in line with its change in corporate strategy to promote its "patent business".
Florian Mueller, a renowned patent expert in Germany, said about nine percent out of 222 patent dispute cases in courts in Europe and the United States were approved.
That means that the chances a major patent holder to collect more money from manufacturers has been lowered.
Darryn Lim, director at MS's trade and innovation policy, said its cloud systems are secure and stressed that it is talking to business partners whether to open up customer data or not according to requests.
LG Electronics is also considering installing MS's software and cloud systems on its upcoming budget models, in contrast to Samsung which plans to install the Office programs on Galaxy Note5 and future flagship models.
Unlike S6 and S6 Edge, LG's G4 has Google programs.
"From our side, a reduced royalty payment to MS will help us improve profits and bolster our presence in emerging markets as the demand for cheaper Android device shipments is rising amid the industry's shift toward cheaper phones with better specifications," said an official at LG Electronics.
Experts said the discount given to Android products is a step towards increasing the usage of MS applications in the mobile devices.
Through the discount, MS has decided to return income to hardware vendors in exchange for a pre-installation agreement of its applications on Android products.
Samsung representatives in Seoul declined to comment, while MS Korea said it won't give any comments on client-related issues.