Microsoft Corp is demanding that Samsung Electronics pay $6.9 million in interest after it paid royalties for patents late, according to a lawsuit unsealed on Oct. 3 by a federal court in New York.
The companies reached an agreement over a patent battle in 2011 and as a result Samsung has agreed to pay royalties over the course of seven fiscal years to continue using Microsoft's patented technologies.
When Microsoft acquired Nokia in 2013, however, Samsung refused to pay its dues, saying the acquisition breached the agreement the two companies had signed. Samsung had already paid what it is obligated for the first and second fiscal years, but the year two payment was late so it incurred interest.
This is the $6.9 million that Microsoft is seeking from Samsung. Alongside getting paid for interest, Microsoft also filed the suit to ensure that Samsung continues paying royalties for fiscal years three to seven, as previously agreed.
With the contract supposedly breached, Samsung is claiming that it shouldn't have to pay for anything beyond Nokia's acquisition. Additionally, it wants the agreement to be redone, not only reducing the amount Samsung has to pay in royalties but potentially eliminating the need to as well.
The Android operating system was developed by Google but Microsoft has successfully argued that it infringes on many patents it already had prior to being launched. This is why hardware manufacturers are paying royalties to Microsoft.
It is estimated that about 80 percent of Android smartphones in the United States have been licensed to use Microsoft patents. In fact, with more than 25 companies paying, Microsoft earns more indirectly from Android devices than what it makes from selling its Windows Phones.
According to Microsoft, the license agreement it entered with Samsung has an anti-assignment provision but that was not breached when Nokia was acquired.
"Because the Nokia Acquisition did not breach the License Agreement, Samsung has no right to terminate or modify the License Agreement due to the Nokia Acquisition," said court documents.
A Collaboration Agreement was also signed by the two companies, but Microsoft reiterates that the Nokia acquisition does not breach any provision in that contract either, giving Samsung substantial reason at all that it would allow it to break free from its agreements with Microsoft.
The amount Samsung has to pay in royalties vary from year to year because it is based on the number of Android devices that were sold for a particular year and at what price they were sold. Samsung has not made an official comment about the issue.
