Microsoft filed a lawsuit Friday against Samsung, seeking to enforce an agreement in which the hardware manufacturer pays royalties to Microsoft for each Android phone it produces.
Microsoft contends that certain features in the Android operating system uses patented Microsoft technology. The software giant has reached agreements with a number of hardware manufacturers in which the manufacturers pay Microsoft royalties for each Android device they produce.
Samsung was one of those companies after it reached a cross-licensing agreement with Microsoft in 2011 that gave Samsung the right to use certain patented Microsoft technologies in its Android smartphones and tablets, and gave Microsoft the right to use certain patented Samsung technology in Microsoft’s products.
Initially, Samsung made the royalty payments.
But last year, Samsung, which pays Microsoft once a year, was late with its payment and did not pay Microsoft interest for those late months.
And Microsoft is concerned Samsung will not make its payments in the future, contending that Samsung is using Microsoft’s acquisition of Nokia’s phone business as “an excuse to breach its contract,” David Howard, a Microsoft corporate vice president and deputy general counsel, said in a blog post.
“Upon hearing the formal announcement of Microsoft’s intended Nokia acquisition, which had been the subject of industry press speculation for more than two years, Samsung claimed that Microsoft’s agreement to acquire Nokia’s Devices & Services Business had breached the license agreement in various ways,” Microsoft contends in the its complaint.
It is unclear on what grounds Samsung is claiming that Microsoft’s acquisition of Nokia invalidates Samsung’s agreements with Microsoft. (In addition to the licensing agreement, Samsung and Microsoft have a separate agreement under which the two companies collaborate on the development and marketing of Windows Phones.)
Microsoft’s complaint says Samsung has asserted “an ever-expanding list of reasons why the announced acquisition allegedly violated” its agreements with Microsoft, but the complaint does not list those reasons.
Microsoft is seeking a court judgment that its acquisition of Nokia’s phone business does not invalidate its agreement with Samsung. And it’s seeking interest on the late payment.
In addition, Microsoft is seeking a court judgment that the 2011 agreement allowing it to use certain Samsung patented technologies also applies to the Nokia businesses that it acquired. Microsoft says in the complaint that Samsung is claiming that smartphones made or sold by Microsoft after the Nokia acquisition are not covered by the license agreement and that Samsung is therefore entitled to seek damages for patent infringement.
Samsung sent a statement, saying: “We will review the complaint in detail and determine appropriate measures in response.”
“We don’t take lightly filing a legal action, especially against a company with which we’ve enjoyed a long and productive partnership,” Microsoft’s Howard said in his blog post. “Unfortunately, even partners sometimes disagree. 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.
Microsoft believes that Samsung originally agreed to make royalty payments back when it was a smaller player in the smartphone market, but is balking now that its smartphone sales have quadrupled since 2011 and is now the world’s largest smartphone manufacturer.
“Consider this: When Samsung entered into the agreement in 2011 it shipped 82 million Android smartphones. Just three years later it shipped 314 million Android smartphones,” Howard said in his blog post.
The lawsuit was filed in the U.S. District Court, Southern District of New York.
Microsoft has never disclosed how much it gets in royalties, but Brad Smith, the company’s general counsel, said in 2011 that $5 per device “seems like a fair price.”
Microsoft has reached Android-related patent licensing agreements with more than 25 companies. It is embroiled in court battles with one company — Motorola — over such patents.
Microsoft’s (heavily redacted) complaint is here.