Samsung paid Microsoft $1 billion

Samsung paid Microsoft $1 billion in Android patent-licensing royalties in 2013

Summary: A newly unsealed legal document indicates that Samsung paid Microsoft $1 billion in Android patent-licensing royalties in 2013 alone.

So we knew Microsoft's Android-patent-licensing business was big. But it's even bigger than many had estimated.

Thanks to a filing unsealed on October 3 in the Microsoft vs. Samsung U.S. District Court patent-royalty case filed in early August 2014, we now know that Samsung paid Microsoft $1 billion in 2013 for a single year's worth of patent-licensing royalties.

Samsung agreed in 2011 to pay Microsoft a then-undisclosed amount for licensing patents upon which Android allegedly infringed. That agreement was structured as a cross-licensing and business-collaboration agreement.According to the unsealed filing, Microsoft is contending that "(U)nder the License Agreement, Samsung agreed to make patent royalty payment to Microsoft for a period of seven fiscal years, in exchange for the right to use patented Microsoft technology in Samsung smartphones and tablets that use the Android operating system."

The filing says that Samsung failed to make its year-two royalty payment on time and to pay interest for not doing so. Samsung, for its part, claimed it shouldn't have to make good on the contract because Microsoft bought Nokia's devices and services business.

Microsoft said Samsung owed interest in excess of $6.9 million for its late Android-patent fee, which it still hadn't paid as of the date of the filing. That amount is calculated on the $1 billion that Samsung owed Microsoft in Android patent licensing royalties as of August 29, 2013, according to the unsealed documents.

Samsung is claiming that it shouldn't have to pay Microsoft the patent-licensing fees upon which it agreed for anything beyond the post-Nokia acquisition period -- even though it did pay the second-year amount late. Samsung claims the deal it signed with Microsoft should be redone so that the amount it owes is reduced or eliminated because the patents covered were granted almost entirely by countries other than Korea and used in products sold to consumers in countries other than Korea.Microsoft announced publicly its plans to acquire Nokia's devices and services business on September 3, 2013. Samsung is claiming that the Nokia acquisition would breach the patent license agreement. (Update: A Microsoft spokesperson said that Samsung is claiming the Nokia acquisition would breach the business collaboration part of the agreement.) But, according to the unsealed court documents, Samsung did pay Microsoft its agreed-upon $1 billion second-year patent royalty amount on November 29, 2013, but still hasn't paid the third-year one that was invoiced in June 2014, but is still not yet due.

Microsoft's contention: "Samsung is attempting to convert a commercial contract dispute governed by U.S. law into a Korean regulatory issue."

(It's probably worth noting that Samsung and Nokia in November 2013 agreed to extend their own patent-licensing deal through 2018, with Samsung paying Nokia undisclosed royalties. That extension was forged after Microsoft announced intentions to buy Nokia's handset business, and a few months before Microsoft officially took possession of that part of Nokia.)

Stay tuned for the next chapter in this saga... And remember: Samsung is just one of nearly two dozen companies that are paying Microsoft Android and Chrome OS patent licensing fees.