Copy Of The Microsoft’s Complaint Filed Against Samsung Now Available, Reveals More Details

Last night we reported that Microsoft has filed a legal action against Samsung in U.S. District Court, Southern District of New York. The reason was that Samsung has stopped paying patent royalties as per the contract it signed in 2011 citing lame reasons like Microsoft acquired Nokia’s Devices and Services business. David Howard, Corporate Vice President & Deputy General Counsel at Microsoft said, “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.” Microsoft’s complaint to the court is now available online. You can read it below. Here is the summary of the document,

  • Samsung signed patent cross licensing agreement with Microsoft and agreed to pay royalties to Microsoft for its Android based products.
  • Samsung is now refusing to pay this year’s royalty along with the interest for late payment.
  • Samsung’s main reason for not paying royalty this year is that they believe Microsoft has breached the contract by acquiring Nokia’s business.
  • Microsoft’s argument is that Nokia related acquisition does not affect the patent licensing agreement it had with Samsung.
  • Also, Samsung has finally paid the FY2 royalty but refusing to pay the interest for late payment.
  • Samsung believes that Microsoft’s smartphones (after Nokia’s acquisition) are not covered under Samsung patent licensing agreement. Microsoft disagrees on that front as well.
  • Samsung is also trying to take this commercial patent licensing agreement issue into a regulatory issue in Korea.
  • Samsung has asked Korean competition authorities to change relieve Samsung from paying Android related royalty payments to Microsoft.

The most interesting thing from of the document(Thanks to Todd from GeekWire) is that Samsung is threatening to sue Microsoft for Lumia based devices.

Microsoft vs. Samsung

  • donzebe

    Sammy honor your contract and pay.

    • Krinos

      Gotta recoup those falling profits somehow!

      • bibleverse1

        My thoughts exactly.

      • wat

        What, Microsoft’s? hahaha

    • wat

      This is batshit retarded. They cannot change the nature of their business and still expect to rape Samsung’s patent portfolio.

      • Tips_y

        What on earth are you babbling about. Samsung signed an agreement with Microsoft to use some patents which was licensed to them for a fee. Change of business does not change patents involved nor signed and binding contracts.

        • wat

          It was not a patent licensing deal! Can you not bloody read? It was a >CROSS< PATENT LICENSING DEAL where they cross share patents and Samsung paid the difference but now that Microsoft own Nokia and would get infinitely more from the deal than they previously would, Samsung want the conditions of the deal to change. Understandably.

  • indian

    Distroy android and its alies so that Microsoft can rule smartphone, phablet, tablet and desktop market share.

    • wat

      Except the opposite is happening. Windows is on 14% of computing devies and Android 60%+.

      • NGM123


        • wat

          Source: Microsoft LOL

  • Alan

    Actually I can see the argument that Samsung is putting forward, prior to the acquisition Nokia had two of the Nokia X range available using Android but they weren’t paying patent license fees to Microsoft.

    I do, however, feel that Samsung should honour the agreement with Microsoft regardless of the double standard that Microsoft have shown in this case.

    • SategB

      I see their point too, with MS buying Nokia it fundamental changed the nature of MS business model & it’s relationship towards Samsung.

      More and more it seems that Ballmer push to buy Nokia was ill conceived and the entanglements will continue to have more downside ramifications then upside flavor.

      • Socius

        If buying Nokia was wrong, then buying Motorola was wrong. In this market…patents are key. Buying Nokia at rock bottom prices was one of the smartest moves made by Microsoft in the mobile phone field in many many years. Just as with their Surface tablet range. OEM’s weren’t putting out quality products to rival Apple. They’d use the OS, but wouldn’t care about much else.

        I’ve owned Windows phones and Windows tablets/laptops before. I’ve owned android phones and own a tablet. And I’ve owned every iPhone except the 5s, and I’ve owned every single iPad and currently own the iPad Air. I now have a Surface Pro and I love it. And I have a Lumia 1520 which is a very good phone, but not up to the standards of the Surface line of products. So I think Microsoft owning and branding their products can create better synergy between Software and Hardware, and allow a product with the type of quality we normally see from Apple.

        Regarding this lawsuit…remember that Samsung has done this to many companies over the years. It likes to copy ideas, but doesn’t like to pay for them. And in the vast majority of suits against it, they’ve lost. Because they are in fact…just thieves.

        • SategB

          I agree Google buying Motorola was an expensive mistake too, Google as a Service and Software company has no expertise with hardware.

          The same holds true about a Service and Software company like Microsoft. Surface proves Microsoft can make good hardware, after enough tries, but just as Zune it also shows they can not make any profit trying to sell it. In this market it’s profits that matter. Leaving the only synergies we see is the accumulation of layoffs.

          • Socius

            I would have to disagree with you. I’ll try to point-form my disagreements for simplicity:

            – Thinking of short-term Shareholder profits can massively shrink and kill a business

            – Buying Nokia was vital for long term Microsoft growth

            – Microsoft is always innovating. They have a lot of ambitious goals and ideas. Innovation comes at a cost. Not every project works (like Zune, that you mentioned…although Zune was a good device). But some do. Note: Xbox. Back when Xbox came out, I bet you’d have said it was stupid for Microsoft, a software company, to try and compete with the likes of Sony and Nintendo. In fact…many shareholders are still saying that MS needs to let go of Xbox because it’s not as profitable as some of their other services.

            – Microsoft was losing user base due to the iPhone. People who had iPhones and iPads were more and more likely to make their next PC a Mac/MacBook.

            – Microsoft is leveraging Windows and Xbox popularity to expand the Synergy in their product line. You have a Windows PC/Laptop? You have an Xbox? You should definitely have a Windows/Xbox Powered phone.

            This is one of the reasons I hate shareholder-driven companies, and why I was a big supporter of Dell buying back all his company stock. Windows Phone, Xbox, Surface, Skype, these things are all there to help each other grow and make it less likely that someone will want to leave the Windows ecosystem. Remember with the PS3…Sony took a huge initial loss with the inclusion of the expensive Bluray drive. But as a result…Bluray won the format wars. So I think you need to look at long-term strategy, and look at current market trends. You’ll understand why Microsoft is doing what it is. And why it’s become necessary to not leave the fate of Windows completely in the hands of OEM’s.

            As a side note…remember Intel tried to get OEM’s to build higher quality laptops similar to the MacBook Pro/Air by Apple with the launch of their “Ultra Book” branding. And while that came with some decent devices…none of them were as good as what Microsoft themselves did. But now that the Surface is out, OEM’s have to try much harder to build good quality products in order to compete.

            There’s still a lot more work to be done. Windows One Core, for example, is absolutely critical in terms of app compatibility and complete system familiarity, making Windows Phone an easier sell. Who wouldn’t want a phone that operates just as their computer does and can do (almost) all the same things?
            Hope this explanation helps.

          • SategB

            Like your post, a company can lose it focus, try to do to much & neglect it core business.

            Investment in growth opportunities is important. There is good investments & poor ones. Good ones; Azure, Data Centers, touch base Office for iPad; profitable, relevant and within core business operations.

            Bad investments; Nokia, XBox, WP; unprofitable, unsuccessful, unfocused from core competencies.

            It important for Management, and best intentioned but misinformed supporters to see the difference.

  • LexicoRed

    Samsung has proven not to be a honorable company. I sure others with their false sense of legion to MS criticized Apple so going after Samsung, it was right to sue them, so is Microsoft doing the right thing.

    • Alan

      Yes, they are doing the right thing but I can see the point Samsung is making. Apple were suing over trivial things like quick links, Microsoft is suing over unpaid interest.

      • LexicoRed

        Unpaid interest on payments from a former agreement regarding similar trivial patents, an agreement that if not signed would have resulted in a earlier lawsuit over the use of those patents, as was the case Apple pursued.

      • Tips_y

        Read the second bullet in the article because you are not mentioning the other half, purposely or otherwise.

  • Asgard

    I think this has nothing to do with the acquisition. For past few quartals Samsung has get their ass kicked by rivals pushing cheap phones in Asia. Since MS made WP free to licence and Android is not free (Google apps are not free and royalties must be paid to MS + Nokia), it makes it even more difficult to Samsung to compete in a market where they are already losing.

    • MrTrunky

      Yeah because Samsung is losing, of course..

      • Tips_y

        You should read Samsung’s latest financial report for the fiscal year because there you will see that although they have increased revenue overall, they have actually lost sales not just in smartphones but also in tablets. The downtrend in smartphone sales was also reflected in last year’s fiscal report.

        • MrTrunky

          They are the number 1 in smartphones sales, far away from Apple. This is not what I call “losing”..

          • Asgard

            -25%… Still on top but that one i definitely call losing.

          • MrTrunky

            You are talking about earnings. Samsung sold 75 million smartphones last Q2, and Nokia only sold 7.5 million, and that’s what really matters.

  • Socius

    I’m so surprised that Samsung has yet again refused to use something they don’t own without paying for it. Haha. Thieving bastards. They should learn to innovate instead of imitate.

    • Alan

      Did you even read the article, this is about unpaid interest on a late payment of license fees.

      • Socius

        Yes. Unpaid interest because of their refusal to pay up when they were supposed to. Yet again showing their reluctance to pay for things they don’t own.

        • Alan

          It’s not as clear cut as that, you’re forgetting about the Nokia X range that were released before the acquisition.

          Nokia weren’t paying patent license fees to Microsoft for using Android, yet Microsoft was expecting other OEMs pay up.

          Then, when Microsoft acquired the Devices Division which included the Nokia X OEMs were still being expected to pay for the use of the patents which should have been made essential.

          • Tips_y

            It’s actually clear cut. You’re the only one confused. When you sign a contract, you abide with what you have signed. That’s clear as daylight. Nokia X, or Microsoft’s agreement or non-agreement with Nokia has no bearing on the signed and executory contract between Microsoft and Samsung. What they should do is ask Microsoft for renegotiation not just stop paying because that’s a breach of contract.

          • Socius

            I disagree with your assessment. Why would Microsoft charge Nokia when Nokia took a severe beating for committing to Windows Phone for years? Most would agree that with the losses incurred as part of Elop’s Nokia/Microsoft ties, Microsoft gained more and Nokia lost more than under any standard patent license agreement.

            Speaking of Nokia X…perhaps you’re unaware but Microsoft didn’t actually want the Nokia X to launch. But they had to, because otherwise their acquisition of Nokia would have met difficulties due to anti-competitive/anti-consumer behavior exhibited according to EU courts.

            Keep in mind that license patent fees have to be reasonable. That means…everyone has to pay roughly the same for them. You can’t, for example, charge Samsung 5x more for those mandatory patents while you charge standard price from their competitors like LG. However…while there is protection against price hikes…there is no protection against agreements between companies for patent sharing or other forms of subsidization or incentivization. If that were illegal…then Microsoft could take Google to court for providing Android for free.

            You honestly sound like a Samsung/Android fanboy who knows nothing about patent laws or contract law.

      • Tips_y

        Did YOU even read the article yourself ?!! You obviously have not read it or have understood it correctly. Read the second bullet again because it’s not only the interest in last year’s late payment that is in question but the refusal to also pay this year’s royalty.

  • whisky

    There is quite a lot blacked out in the PDF above, especially the relevant quotes from the contract.
    Since Microsoft explicitly asks the court to declare that the old contract also covers the new Nokia bussines units, I suspect that this point is not clearly described in the original contract.

    Microsoft has refused to pay EU fines for many years, and finally has now paid a small portion of these fines, while continuing to break the same rules. Even if Microsoft is right in this case, they should be a bit more modest when making similar causations about Samsung.