Ericsson filed a lawsuit in the U.S. against Samsung that alleges it violated agreements to negotiate patent agreements in good faith.
Ericsson has filed a lawsuit in the U.S. against Samsung that alleges the South Korean company violated agreements to negotiate patent licenses royalty payments in good faith.
The lawsuit, which was filed in U.S District Court for the Eastern District of Texas, said Samsung violated contractual commitments to negotiate patent license patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.
As it seeks to obtain a ruling by the court that it has complied with its own commitments, Ericsson said the case addresses breaches of FRAND obligations by Samsung
In tandem with a slowdown in the smartphone market, Ericsson said the delayed royalty payments and the potential legal costs could reduce its operating income by SEK 1 to 1.5 billion ($118-$177 million) per quarter starting in the first quarter of 2021.
According to a story by Reuters, patent portfolio royalties are expected to account for about a third of Ericsson's SEK 29 billion of operating profit next year, which could slash its earnings by about 20% per quarter.
Ericsson has more than 54,000 patents granted, which have been supported by annual R&D spending of SEK40 billion.
"The FRAND system is a fundamental building block of a rich ecosystem that has allowed global cellular connectivity to scale to more than 8 billion interoperable connections. It allows access to intellectual property, developed by contributors like Ericsson, under global mobile standards, on FRAND terms and conditions. It also rewards those contributors for their significant up-front investment in R&D in each mobile generation," Ericsson said in a statement.
“Once we receive the complaint, we will review it and determine an appropriate response,” said a Samsung spokesperson, according to Reuters.
After the news broke of Ericsson's filing on Friday, its shares dropped by as much as 8% after trading opened in Stockholm.
It's not the first patent dust-up between Samsung and Ericsson. In 2012, Ericsson took legal action against Samsung over alleged patent infringements. Two years later, the two vendors reached a patent-licensing settlement that included Samsung paying Ericsson $650 million.
Patent and royalty lawsuits have become somewhat common in the telecommunications industry. Samsung, Qualcomm and Apple have been involved in several lawsuits over royalty payments and patents.
Last year, Huawei cited FRAND in its $1 billion patent infringement lawsuit against Verizon. At a time of political tensions between the U.S. and China, Huawei said it wouldn't "weaponize" its portfolio of patents, but would instead adopt an open and cooperative attitude using the FRAND principle.
While Verizon wasn't a Huawei customer, the Chinese company claimed that Verizon should pay the hardware and software licensing fees because Verizon relied on more than 20 vendors that use technology owned by Huawei. Huawei accused Verizon of violating 238 patents that cover core, wireline and IoT technologies being used in Verizon's network.