Samsung and Microsoft Settle Contract Dispute

In a statement made by the software giant on Monday, Microsoft Corp announced that a contract dispute of the company with Samsung Electronics regarding patent royalties had been settled. However, the terms of the settlement were declared as confidential and not mentioned to the public. Last year, the South Korean smartphone giant had been sued by Microsoft in a federal court in New York. The company had been accused of breaching a collaboration agreement by its refusal of making royalty payments initially after the US firm had announced its intention of acquiring the handset business of Nokia in September of 2013.

According to the lawsuit, the South Korean technology giant had delayed the payment of royalties amounting to $1 billion so it owed Microsoft interest of about $6.9 million. In response, Samsung had said that the collaboration deal with Microsoft made in 2011 was violated by the firm’s acquisition of Nokia. In 2011, it had been estimated by a technology analyst that $5 was being earned by Microsoft for every handset that was sold by Taiwanese smartphone maker HTC because of a patent agreement. The company hadn’t made any other patent deals with other smartphone makers and the analyst said that it was interested in getting as much as $12.5 per handset.

While these figures have never been confirmed by Microsoft, the company hasn’t declared them to be out of line either. If the $5 price tag is applied to the devices sold by Samsung, the Korean company would be paying Microsoft about $1.6 billion every year, considering the shipment numbers published by IDC, which show that Samsung sold about 318 million smartphones in 2014 alone. Samsung said that in 2011, the company had come to an agreement with Microsoft when they had agreed to pay royalties in exchange for a patent license that covered devices based on the Android operating system of Google Inc.

The court filings also show that the South Korean firm had also agreed to share confidential business information with Microsoft and even develop Windows Phones, as part of the deal. However, Microsoft became a direct competitor of the company in the hardware market after its acquisition of Nokia. Thus, the filings said that Samsung had refused to share some confidential information with Microsoft after the acquisition because of antitrust concerns. The Nokia acquisition had been approved by antitrust regulators in the United States as well as other countries.

Regardless, the companies have finally come to a settlement as per the statement made on Monday. This also puts an end to the request made to the International Court of Arbitration of the International Chamber of Commerce’s offices in Hong Kong, by Samsung for arbitration. This is a relief for the South Korean company as it has enough worries on its plate and doesn’t need to add more. The company is losing market share to Apple Inc. in terms of high-end smartphones in different parts of the world, including China, which doesn’t bode well for its future.