Yesterday, the US District Court in the Southern District of New York unsealed Microsoft's legal complaint against Samsung. This follows Microsoft and Samsung signing a deal in 2011 whereby the two businesses agreed licencing terms so that Samsung could incorporate some of Microsoft's patents into its Android devices. This deal is reported to be worth over a billion dollars a year so the amount in the complaint, is just $6.7 million. It feels wrong to use the word "just" in the same sentence as "6.7 million" right? This is the interest on a delayed payment from Samsung to Microsoft earlier in the year and it seems that our report at the end of September, that both chief executives were in discussion, has not helped matters.
The licencing deal is not a straightforward money-for-device arrangement. The two technology giants signed a separate business collaboration agreement, which Microsoft claim is unique to their relationship with Samsung. This deal is aimed at promoting the development and sale of Windows smartphones and tablets by Samsung as it reduces the amount paid by Samsung if they develop and sell their own Windows Phone models. And then Microsoft bought Nokia, so now make their own Windows Phone devices. That's why Samsung delayed the licencing fees and, in Microsoft's eyes, may renege on the deal later this year, which marks the end of year three in a seven year arrangement.
$6.7 million is not much in the context of another four years of the patent licencing arrangement: this is worth considerably more. Samsung's suggestion that Microsoft has broken the business collaboration agreement by acquiring Nokia is going to be fought out in the courts. Microsoft have said that, "We are confident that our case is strong and that we will be successful. At the same time, Microsoft values and respects our long partnership with Samsung, is committed to it, and expects it to continue."
To my mind, this disagreement runs to a much higher cost than a few billion dollars. Microsoft's Windows Phone is a distant third in the mobile operating system world behind Android and iOS. Manufacturers have been "encouraged" to use Windows Phone by either a stick or a carrot. We'll never know how much of an impact financially penalising Samsung for using a competitor product and softening the blow by encouraging the different operating system has made to the market, but Windows Phone has not been taken up so quickly despite Microsoft pouring millions into the platform. Microsoft's confidence is fighting talk: they believe they're going to win and Samsung will have to keep paying the licence fees for the next four years. So far, we've no word from Samsung on the matter.