Samsung Over Licensing
December 11, 2020
Ericsson filed a lawsuit in the U.S District Court for the Eastern District of
Texas, against Samsung, for violating contractual commitments to negotiate in
good faith and to license patents on Fair, Reasonable and Non-Discriminatory (FRAND)
terms and conditions.
The case addresses breaches of FRAND obligations by Samsung and seeks to obtain
a ruling by the court that Ericsson has complied with its own commitments.
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.
Several license renewal negotiations may delay the payment of IP royalties if
they extend beyond the expiry of existing licenses into an unlicensed period
(noted in Q2 and Q3 2020 reports). Once renewed, unpaid royalties are expected
to be recovered and recognized as revenue at the time of renewal.
Current geopolitical conditions are impacting handset sales volumes as is the
shift from 4G to 5G handsets. This, in combination with delayed royalty payments
from unlicensed periods and potential costs of litigation, may impact Ericsson’s
operating income by SEK 1 – 1.5 b. a quarter beginning in the first quarter
2021. The actual financial impact will depend on the timing and terms and
conditions of new agreements.
The value of Ericsson’s IP portfolio extends to more than 54,000 granted patents
and is strengthened by annual investment in R&D of approx. SEK 40 b. With a
leading global position in 5G, the company is confident of growing its IPR
revenues long term, thereby further maximizing the value of the overall patent