Microsoft sues Samsung for breaching 2011 patent-licensing deal

Microsoft (NASDAQ: MSFT) sued Samsung Electronics for violating an agreement the two companies struck in 2011 to cross license each other's patents. According to Microsoft, Samsung has been using Microsoft's $7.3 billion deal to acquire Nokia's (NYSE:NOK) devices and services business as an "excuse" to break their contract.

Under the terms of the September 2011 deal, the companies said they would cross license their entire patent portfolios, and Samsung agreed to pay Microsoft an undisclosed royalty fee for every smartphone and tablet it sells running Google's (NASDAQ: GOOG) Android platform. Interestingly, the deal with Samsung also called for more collaboration between the two companies on Microsoft's Windows Phone platform.

The software giant filed its complaint against Samsung in U.S. District Court in the Southern District of New York. Microsoft wants the court to decide whether its deal with Nokia invalidates its deal with Samsung. Microsoft also wants unpaid interest from Samsung, related to a time last year when Samsung withheld patent royalties from Microsoft, though Samsung later paid the royalties, according to ZDNet.

In a company blog post, David Howard, Microsoft's deputy general counsel, wrote that "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."

Howard noted that the deal has been "extremely beneficial for both parties" but that since the agreement was made Samsung has easily become the world's largest smartphone maker. He wrote that Samsung "decided late last year to stop complying with its agreement with Microsoft." After the Nokia deal was announced in September 2013, "Samsung began using the acquisition as an excuse to breach its contract," according to Howard. "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."

In a statement to ZDNet, Samsung said it will "review the complaint in detail and determine appropriate measures in response."

Samsung is the largest of the more than 20 vendors that have signed patent-licensing agreements over the last four years with Microsoft related to their sale of Android and/or Chrome OS devices.

For more:
- see this Microsoft post
- see this Reuters article
- see this Bloomberg article
- see this ZDNet article

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