Microsoft sues Samsung

Microsoft is suing Samsung over breach of its 2011 patent cross-licensing agreement (the so-called "Microsoft tax"). Microsoft is claiming that Samsung wrongfully used Microsoft's Nokia acquisition as an excuse to break the contract. According to court documents, Samsung delayed payment after learning about the Nokia acquisition and has asked the Korean anti-competitive regulator to eliminate the need to pay fees. Microsoft wants interest on the delayed payment and claims that regulatory has no authority to break the contract.

This case will be closely watched by other Android manufacturers who pay the "Microsoft tax". Although Microsoft has not disclosed how much money it makes from Android patent licenses, analysts expect the amount to be between $1 billion and $2 billion per year. If Samsung is allowed to break its contract, other Android manufacturers will likely follow.

Samsung's profits have been decreasing each year as a result of increased competition from lower-priced Chinese competitors such as Xiaomi. Breaking free from the contract would save money.


The outcome at stake goes beyond financial compensation, however. Currently, Microsoft (quite ironically) receives royalties for each Android device sold, but gives away Windows Phone for free. To device manufacturers, Windows Phone is royalty-free, but Android has a "Microsoft tax". If Samsung succeeds and other Android manufacturers follow, Windows Phone will lose its free license advantage. Furthermore, to compensate for lost revenue, Microsoft might charge a license fee for Windows Phone.

I think we're seeing a recurring trend, similar to the Apple-Samsung lawsuits. Smartphone patent claims aren't necessarily about receiving direct monetary compensation, but often about protecting one's market share or harming that of a competitor.