Microsoft Sues Samsung Over Android Royalty Payment Disagreement

Microsoft Sues Samsung Over Android Royalty Payment Disagreement

Samsung tries to renege on a contract

Microsoft and Samsung are frenemies—both competitors and partners—but the tone of the relationship edged closer to the enemy category on Friday: Microsoft has sued Samsung, alleging that the mobile device giant is trying to illegally back out of the Android patent licensing contract the two firms signed in 2011.

"Even partners sometimes disagree," Microsoft deputy general counsel David Howard explained in a post to the Microsoft on the Issues blog. "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."

Samsung is only one of many Android device makers that has signed patent licensing deals with Microsoft, but it is also by far the biggest. So any disagreement between the two will be closely watched.

According to Microsoft, Samsung began delaying its regularly scheduled licensing payments in late 2013, and it has since refused to make good on interest payments related to the delays. Furthermore, Microsoft alleges that Samsung has threatened to break the licensing agreement because Microsoft purchased Nokia, an act Samsung claims is a breach of contract.

But Microsoft says that argument is ruse: Microsoft's purchase of Nokia doesn't violate their licensing agreement and Samsung knows this position is "meritless," the software giant says. What's really happening is that Samsung's Android device sales have quadrupled since 2011. And now Samsung simply doesn't want to pay the correspondingly higher licensing fees.

"When Samsung entered into the agreement in 2011, it shipped 82 million Android smartphones," Mr. Howard wrote. "Just three years later, it shipped 314 million Android smartphones. Samsung predicted it would be successful, but no one imagined their Android smartphone sales would increase this much."

As for the lawsuit, Microsoft says it simply had no choice.

"Microsoft and Samsung have a long history of collaboration and we value and respect our partnership with Samsung and expect it to continue," Howard continued. "We are simply asking the Court to settle our disagreement, and we are confident the contract will be enforced."

The (heavily redacted) lawsuit filing that is available online spells out Microsoft's grievances nicely as well, and details how the two reached a voluntary agreement on Android.

"Android infringes many Microsoft patents," the filing notes. "Rather than exercise its legal right to exclude Android-based devices from practicing that technology, Microsoft licenses its patent portfolio to companies that utilize Android, including Samsung, the world's largest producer of Android-based smart phones and tablets."

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