It is a sad time when best friends needs to face off in legal battles, but when it comes to royalty payments, Microsoft doesn't play around. The software giant is suing Samsung after the South Korean hardware manufacturer did not pay its royalties in full last fall.
Samsung is supposed to pay Microsoft on patent licenses and stopped doing so after Microsoft made its announcement to acquire Nokia. The lawsuit papers filed on Friday in Manhattan state that the company is seeking the money owed but do not disclose the actual amount.
After the papers were filed, Microsoft took to its corporate blog to talk about the matter. David Howard, Microsoft's deputy general counsel, posted a full assessment of what went down. He mentions how Microsoft doesn't like to fight, especially with its partners, but will do so when agreements are broken.
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...
Since Samsung entered into the agreement, its smartphone sales have quadrupled and it is now the leading worldwide player in the smartphone market. 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...
After becoming the leading player in the worldwide smartphone market, Samsung decided late last year to stop complying with its agreement with 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.
Howard goes on to mention that Samsung did not ask the courts if the acquisition was indeed a breach of contract and instead simply stopped paying. So to combat this, Microsoft is asking the courts to settle the issue that Samsung seems to have a problem with. All things considered, it makes sense for Microsoft to go after this money, especially when sales have almost quadrupled and those patent license payments are directly tied to sales and performance.
With the smartphone market shifting after Samsung has taken the top spot and Microsoft has acquired a huge competitor, the ruling here will be a crucial one. Microsoft is still in battle with Motorola over the Android patent royalties and have been since 2010. Up until now, Samsung, LG and HTC have all agreed to the fees. If Samsung comes out the victor, it could be the catalyst for the rest of the group to stop paying as well.