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Sue You! … Microsoft takes Samsung to court

04 Aug 14

Microsoft has filed legal action against long-time partner Samsung, accusing the South Korean tech giant of breaching a contract over the licencing of smartphone technology.

Making the move in the US Court, Southern District of New York, Redmond officials claim Samsung has stopped complying with its agreement since late last year - suggesting the company is dodging payments for patented Microsoft technology.

“After becoming the leading player in the worldwide smartphone market, Samsung decided late last year to stop complying with its agreement with Microsoft,” says David Howard, Corporate Vice President & Deputy General Counsel, Microsoft.

“We don’t take lightly filing a legal action, especially against a company with which we’ve enjoyed a long and productive partnership.

“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.”

According to Howard, in 2011, after months of “painstaking negotiation”, Samsung voluntarily entered into a legally binding contract with Microsoft to cross-license IP – an agreement.

“Samsung had been complying with the contract and paying to use Microsoft’s IP,” adds Howard, who claims the agreement has been extremely beneficial to both parties.

Announced on September 28, 2011, Microsoft signed a definitive agreement with Samsung to cross-license the patent portfolios of both companies, providing broad coverage for each company’s products.

Under the terms of the agreement, Microsoft received royalties for Samsung’s mobile phones and tablets running the Android mobile platform.

In addition, the companies agreed to cooperate in the development and marketing of Windows Phone.

So what changed?

“Since Samsung entered into the agreement, its smartphone sales have quadrupled and it is now the leading worldwide player in the smartphone market,” Howard adds.

“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. Samsung predicted it would be successful, but no one imagined their Android smartphone sales would increase this much.”

Yet Howard says 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.

“Curiously, Samsung did not ask the court to decide whether the Nokia acquisition invalidated its contract with Microsoft, likely because it knew its position was meritless,” he adds.

“Microsoft and Samsung have a long history of collaboration. Microsoft values and respects our partnership with Samsung and expects it to continue.

“We are simply asking the Court to settle our disagreement, and we are confident the contract will be enforced.”