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Samsung faces lawsuit from Microsoft over patent royalty payment issues

By Michael Low & Sidney Wong - on 4 Aug 2014, 9:31am

Samsung faces lawsuit from Microsoft over patent royalty payment issues

 Cracks have begun to form in the partnership between Microsoft and Samsung.

2014 is shaping up to be a bad year for Samsung as it faces another lawsuit from its long-time partner, Microsoft.

According to a blog post by Microsoft's deputy general counsel David Howard, the company was forced to file legal action against Samsung after the latter failed to pay its royalties on time. Apparently, the problem started in September 2013 after Microsoft announced that it was acquiring Nokia's Devices and Services Unit.

Microsoft - " 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."

Both companies spent months trying to resolve the issue, but Samsung made it clear that there is "a fundamental disagreement" to the meaning of the contract it signed with Microsoft in 2011. Microsoft states that it is asking the Court to settle the disagreement and remains confident that the contract will be enforced. Shortly after, Samsung issued a statement on the matter:

Samsung - “We will review the complaint in detail and determine appropriate measures in response.”

It is noteworthy to mention that many Android phone makers such as HTC are in patent license agreements with Microsoft. For now, there seems to be no valid reason for Samsung to stop complying with the license agreement.

This year hasn't been smooth sailing for Samsung. The latest earning reports saw Samsung's first year-over-year drop in net profit in almost three years and its flagship GALAXY S5 smartphone failed to take off as expected. Last month, robbers took off with 400,000 Samsung products in Brazil and the total value is estimated at US$6.3 million.

In its ongoing patent lawsuit with Apple, Samsung took a major loss in May when the jury found it guilty of patent infringement and was ordered to pay US$120 million in damages. Apple is also cutting its reliance on Samsung; it was reported to have inked a deal with Taiwan Semiconductor Manufacturing Company (TSMC) to manufacture its A8 processor.

Sources: Microsoft via Android Police and re/code.