Microsoft is seeking $15 for each Android device Samsung sells, highlighting the potentially lucrative profits patent litigation can gain in the tech industry.
In targeting Samsung, the second largest handset maker in the world, Microsoft stands to pull in a windfall from the deal. If the deal also demands restitution for Samsung’s back sales, the company may also have to shell out about $45 million to Microsoft for past Galaxy S 2 sales.
Samsung is hoping to negotiate a lower fee of $10, in exchange for a deeper partnership with Microsoft to create smartphones using the Windows Phone platform.
The South Korean company isn’t Microsoft’s only target. Microsoft, which accumulated a vast stable of patents over the years, often uses patent suits to rake in money from other tech companies.
In April 2010, the company settled with Taiwan-based HTC over intellectual property infringement. Under the terms of the deal, HTC agreed to pay $5 for every Android device it shipped. Since the agreement was put in place, HTC has sold 30 million handsets, thus putting about $150 million in Microsoft’s pocket.
Licensing agreements are money makers in the mobile industry. While it appears companies primarily sue one another over intellectual property to protect their software and designs, they also garner a piece of each other’s pies with such suits. Settlements bring in revenue as well as territorial rights in a surging, and lucrative, market.
Other companies are also reaping the benefits from patent payments. Apple and Samsung are currently at war, arguing each stole the other’s design ideas.
Apple argues Samsung copied the iPhone 4 and iPad designs to make smartphones and tablets, and Samsung claims the reverse for Apple. Yesterday, Apple filed an injunction against Samsung, asking the company to halt production on four of its most popular devices because it allegedly violates four Apple patents.
Apple is battling Nokia, too. In April, Finnish-based Nokia filed a patent infringement suit against the iPhone maker. Apple lost the lawsuit and now must pay royalties to Nokia for patents that have to do with multi-tasking operating systems, data synchronisation and call quality.
Patent paydays are currently more profitable for Microsoft than the Windows Phone line. The HTC deal has set a course for Microsoft to pursue these settlements with rivals, and with the latest demand upon Samsung, other companies may show their willingness to settle as well.