Lawsuit reveals Samsung paid Microsoft $1 billion a year for Android patents

Microsoft sued Samsung in August, alleging that the Korean firm had failed to make payments that were contractually owed. At the time, the documents were sealed, obscuring the value of the payments. Today, those documents were unsealed, revealing the full scale of the suit.

In September 2011, the two companies entered a seven-year cross-licensing agreement for mobile-related patents. The payments for the first year were made without fuss. In August 2013, Samsung told Microsoft that it had assessed the value of the royalties owed for the second year as over $1 billion. Payment of this fee was due in October, but Microsoft says that no payment was received until late November 2013. Redmond's complaint says that Samsung owes more than $6.9 million in interest fees for the late payment (per the terms of the original licensing agreement).

What changed between August and October? In September 2013, Microsoft announced that it was buying Nokia's Devices division. The software giant asserts that Samsung is both claiming that Nokia's devices are not covered by the cross-licensing deal—and hence violating Samsung's own patents—and that the Nokia purchase voids the licensing agreement in its entirety.

In addition to all this, Microsoft claims that Samsung has asked Korean regulators to change the royalty terms contractually agreed between the two parties.

In November 2013, prior to making the late payment to Microsoft, Samsung was ordered to pay $290 million to Apple in the conclusion of one patent suit between those two companies. In May 2014, the Korean firm was ordered to pay a further $120 million to the Cupertino company. These payments arguably make a contractually stipulated $1 billion a year look like extremely poor value.

Update: Microsoft tells us that Samsung is claiming that the Nokia purchase voids not the cross-licensing agreement, but a separate business collaboration agreement. The publicly released court documents, however, clearly state that Samsung is arguing that the terms of both the cross-licensing agreement and the business collaboration agreement have been violated. The documents supporting this position, however, are apparently not public.