Ericsson patent settlement with Samsung boosts Q4 profit

Infrastructure vendor Ericsson has settled with Korean firm Samsung over global essential patent licences relating to GSM, UMTS and LTE standards for both networks and handsets, putting to bed another of the industry’s long running disputes.

The settlement will see Samsung make an initial payment to Ericsson followed by ongoing royalty payments for the duration of the licence agreement. The initial payment will boost Ericsson’s sales by SEK4.2bn ($651m) in 4Q13 and its net income in the quarter by SEK3.3bn ($512), the vendor said.

The Swedish firm filed a patent infringement lawsuit in the United States against Samsung in November 2012, claiming that Samsung had refused to sign a licence agreement on fair, reasonable and non-discriminatory (FRAND) terms, despite two years of negotiations.

Samsung previously licensed Ericsson’s patents in 2001 and renewed them in 2007, but the Swedish firm said that those licenses have now expired.

“We are pleased that we could reach a mutually fair and reasonable agreement with Samsung. We always viewed litigation as a last resort,” said Kasim Alfalahi, chief intellectual property officer at Ericsson. “This agreement allows us to continue to focus on bringing new technology to the global market and provides an incentive to other innovators to share their own ideas.”

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Ericsson said that it has licensed hundreds of its patents on FRAND terms. It added that such terms incentivise firms to innovate and contribute technology to open standards at reasonable royalty rates, which allow new entrants access to the market.

The settlement ends legal disputes made between the firms before the International Trade Commission (ITC) and the US District Court for the Eastern District of Texas. Ericsson added that further details of the agreement are confidential and will not be disclosed.

Samsung also announced that it has signed a global patent cross-license agreement with Google covering both firms’ existing patents as well as those filed over the next ten years.

According to Samsung, the agreement gives each firm access to the other’s patent portfolio and will help the two to collaborate deeper on research and development for future technologies and products.

Allen Lo, deputy general counsel for patents at Google said: “By working together on agreements like this, companies can reduce the potential for litigation and focus instead on innovation.”

Dr. Seungho Ahn, head of Samsung’s Intellectual Property Center, added that the agreement is significant for the technology industry. “Samsung and Google are showing the rest of the industry that there is more to gain from cooperating than engaging in unnecessary patent disputes,”  he said.