Samsung Electronics and Ericsson (NASDAQ:ERIC) reached a patent-licensing settlement in which Samsung will likely pay Ericsson hundreds of millions of dollars. However, the exact terms of the deal are unclear.
The cross-licensing agreement covers patents relating to GSM, UMTS and LTE standards for both networks and handsets. The settlement ends complaints made by both companies against each other before the U.S. International Trade Commission as well as lawsuits they filed in U.S. District Court for the Eastern District of Texas.
Ericsson said details of the agreement are confidential and will not be disclosed, but that the deal includes an initial payment and ongoing royalty payments from Samsung to Ericsson for the term of the new multi-year agreement. Specifically, Ericsson said the deal will result in an extra $512.8 million in net income in the fourth quarter.
Samsung previously licensed Ericsson's patents in 2001 and renewed the licenses in 2007. However, Ericsson sued Samsung in November 2012 after the two companies reached an impasse over how much Samsung would pay Ericsson to license Ericsson's wireless standards patents. Then, in March 2013 Samsung filed a patent-infringement lawsuit against Ericsson for the same thing.
Ericsson argued Samsung refused to renew its license to Ericsson's patent portfolio on the same FRAND terms that its competitors have previously accepted. FRAND is shorthand for Fair, Reasonable and Non-Discriminatory terms. Ericsson said reducing fees for Samsung would give Samsung an unfair advantage over other companies that have licensed Ericsson's patents. At the time, Samsung said it disagreed with that characterization of the negotiations. In its lawsuit against Ericsson, Samsung said it was "a willing licensee," but that "Ericsson demands unreasonable terms and conditions…Ericsson no doubt has plans to extract unreasonable fees from the rest of the industry unless stopped by Samsung here."
Ericsson is the world's largest network equipment vendor and Samsung is the world's biggest handset maker.
In an interview with FierceWireless, Kasim Alfalahi, Ericsson's chief intellectual property officer, said pursuing litigation was a "tough decision to make" since Ericsson would rather pursue licensing deals for patents; he said Ericsson has more than 100 such agreements with both large and small mobile players.
"During the litigation we continued our conversations with each other because we wanted to find an amicable solution," he said.
Alfalahi said Ericsson is committed to licensing its standard-essential patents on FRAND terms and that the deal with Samsung is within that framework. He said the deal includes royalty payments Samsung will make to Ericsson over the lifetime of the agreement. While he declined to say how long the deal will last, he noted that such agreements typically span four to seven years.
Samsung's agreement with Ericsson is noteworthy because Google and Samsung just forged a wide-ranging, patent-licensing deal that covers the companies' existing patent portfolios and all patents they will each file over the next 10 years. Click here for that story.
For more:
- see this release
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