Samsung Sued by Microsoft After It Stops Paying Android Royalties

Microsoft has sued Samsung over an Android royalties dispute. David Howard, Corporate Vice President & Deputy General Counsel at Microsoft explained the case yesterday in a company blog post.

Samsung had signed a contract to license Microsoft patents to use towards its Android-based handsets. However, as Microsoft details, Samsung decided to stop paying royalties late last year:

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. 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.

Redmond-based Microsoft says over 25 companies currently license their patents, including the likes of Acer, ZTE and Samsung, which covers about 80 percent of Android smartphones sold in the U.S., according to the Washington Post.

The Post also notes after Samsung decided to make late payments on royalties (after deciding to not make any payments at all), they didn’t bother paying interest on the owing amounts:

After initially refusing to pay royalties in the second year of the deal, Samsung made a late payment in November but did not add on interest, according to a redacted copy of the complaint filed in federal court in New York and provided by Microsoft.

The complaint also alleged that Samsung has asked South Korean competition authorities to change the contract to reduce or eliminate its payments to Microsoft.

Who does that? Sign a contact and just refuse to pay? This action by Samsung reminds me of the Vanity Fair piece which invested the company’s shady business practices, which included using countersuits when sued as a defense strategy, all while sucking time as it grabs marketshare from competitors:

But that may have been Samsung’s intent all along. According to various court records and people who have worked with Samsung, ignoring competitors’ patents is not uncommon for the Korean company. And once it’s caught it launches into the same sort of tactics used in the Apple case: countersue, delay, lose, delay, appeal, and then, when defeat is approaching, settle. “They never met a patent they didn’t think they might like to use, no matter who it belongs to,” says Sam Baxter, a patent lawyer who once handled a case for Samsung. “I represented [the Swedish telecommunications company] Ericsson, and they couldn’t lie if their lives depended on it, and I represented Samsung and they couldn’t tell the truth if their lives depended on it.

Stay classy, Samsung.