Microsoft vs. Samsung
This is interesting. Sure patent litigation is boring. But this one is actually unusual.
When one big player in the market buys another there is generally some contention. But the content usually has *some* basis with regards to contract over IP. And that is for two reasons. Firstly, just about every tech company within a given sphere is licensing *something* from someone else. And those rates are virtually never identical for the same IP being licensed to different corporations. Also, there are often contracts made during harsh times where company promised a perpetual license to all IP.
Those sorts of cases are generally fairly easy to resolve, but do sometimes come down to battles in court simply because of greed.
This doesn't seem like one of those cases though. The first issue I see is that Microsoft didn't buy Nokia. Though it is often worded that way, what really happened was Nokia was broken up into at least 2 companies. And Microsoft bought just the hardware division. So, even if Nokia had some sort of license with Samsung that Microsoft could have adopted, it would only be the case if that contract didn't remain in the hands of the parent Nokia company which is still a distinct entity from Microsoft.
Also, while it seems reasonable that such a think might have occurred, it is again unlikely. Nokia would have the stronger patent portfolio out of Samsung and Nokia. Samsung may be bigger now than Nokia, but Nokia was bigger back when phones and smart phones were much younger. Also, Samsung isn't one for innovation, they primary copy others which would limit the quantity and quality of patents anyway. Meaning, most of the big powerful patents between the two are likely in Nokia's possession. As a result, if anyone got the short end of a contract between the two for IP, it is more likely it is Samsung than Nokia. Therefore, it is unlikely there was anything contractually conflicting for Microsoft to pick up.
So, the next possible place for a conflict to arise is in the contract between Microsoft and Samsung. This too seems unlikely. Samsung agreed to pay licensing fees for Android because it thought Microsoft had a chance of winning in court. Again, it seems unlikely that MS would have the short end of the stick. And again, MS would have the more valuable IP assets of the two. It also seems weird that such a contract would be conditional on Microsoft not owning an competitor, since, at the time that contract was made Microsoft wasn't even a self-labelled "devices and services" company. They were still a strictly software/OS company.
The final issue is due diligence. Before closing a deal like the one between Microsoft and Nokia, both sets of lawyers and executives would be doing their research to ensure that the deal was worth what they wanted to pay. And while contracts can generally be overlooked. given that Samsung and Nokia are in the same market and Samsung's contract with Microsoft was likely one of the most valuable it is hard to believe that Microsoft would have gone through with the deal if there was reason to believe it would compromise their existing contracts with Samsung.
That contract with Samsung is no ordinary contract. It is a MAJOR source of revenue for Microsoft. And I can say that even without knowing the terms. According to Microsoft's blog, Samsung's device sales have quadrupled over the past few years and is now production over 300 million phones a year. The average estimates of Microsoft's licensing fees for Android OEM's ranged from $7-15. And while Samsung would probably have been able to negotiate the most favorable terms based on their size and clout, even the smallest number there would result in 2.1 BILLION DOLLARS A YEAR.
For shiggles lets say all of the hype was wrong and Samsung negotiated to pay just $1 per Android license activated. That is still $300 million a year. That is undoubtedly more than enough to finance Microsoft's entire Windows Phone group.
Obviously, I don't know all of the details of the contract or the amount of due diligence taken in the acquisition of Nokia's hardware division. But the numbers are pretty easy to read. Revenue from this contract with Samsung is a major source of revenue for Microsoft. It seems highly unlikely that they wouldn't have considered contractual conflicts specifically with Samsung prior to the acquisition. And if they had known it was a possibility it should have resulted in Microsoft acquiring Nokia for a much lower price. Losing this contract would wipe out any value MS could possibly get from owning Nokia's hardware.
To me, it seems like a greed play from Samsung. That money would not only be a substantial revenue stream for Microsoft. It would be a substantial savings for Samsung. The OEM phone market is competitive and tough to make money in. And every contract you cut for IP makes that an even greater reality.
I'll be interested to see where this one lands. Though it probably doesn't have broader sweeping consequences or meaning in the industry.
When one big player in the market buys another there is generally some contention. But the content usually has *some* basis with regards to contract over IP. And that is for two reasons. Firstly, just about every tech company within a given sphere is licensing *something* from someone else. And those rates are virtually never identical for the same IP being licensed to different corporations. Also, there are often contracts made during harsh times where company promised a perpetual license to all IP.
Those sorts of cases are generally fairly easy to resolve, but do sometimes come down to battles in court simply because of greed.
This doesn't seem like one of those cases though. The first issue I see is that Microsoft didn't buy Nokia. Though it is often worded that way, what really happened was Nokia was broken up into at least 2 companies. And Microsoft bought just the hardware division. So, even if Nokia had some sort of license with Samsung that Microsoft could have adopted, it would only be the case if that contract didn't remain in the hands of the parent Nokia company which is still a distinct entity from Microsoft.
Also, while it seems reasonable that such a think might have occurred, it is again unlikely. Nokia would have the stronger patent portfolio out of Samsung and Nokia. Samsung may be bigger now than Nokia, but Nokia was bigger back when phones and smart phones were much younger. Also, Samsung isn't one for innovation, they primary copy others which would limit the quantity and quality of patents anyway. Meaning, most of the big powerful patents between the two are likely in Nokia's possession. As a result, if anyone got the short end of a contract between the two for IP, it is more likely it is Samsung than Nokia. Therefore, it is unlikely there was anything contractually conflicting for Microsoft to pick up.
So, the next possible place for a conflict to arise is in the contract between Microsoft and Samsung. This too seems unlikely. Samsung agreed to pay licensing fees for Android because it thought Microsoft had a chance of winning in court. Again, it seems unlikely that MS would have the short end of the stick. And again, MS would have the more valuable IP assets of the two. It also seems weird that such a contract would be conditional on Microsoft not owning an competitor, since, at the time that contract was made Microsoft wasn't even a self-labelled "devices and services" company. They were still a strictly software/OS company.
The final issue is due diligence. Before closing a deal like the one between Microsoft and Nokia, both sets of lawyers and executives would be doing their research to ensure that the deal was worth what they wanted to pay. And while contracts can generally be overlooked. given that Samsung and Nokia are in the same market and Samsung's contract with Microsoft was likely one of the most valuable it is hard to believe that Microsoft would have gone through with the deal if there was reason to believe it would compromise their existing contracts with Samsung.
That contract with Samsung is no ordinary contract. It is a MAJOR source of revenue for Microsoft. And I can say that even without knowing the terms. According to Microsoft's blog, Samsung's device sales have quadrupled over the past few years and is now production over 300 million phones a year. The average estimates of Microsoft's licensing fees for Android OEM's ranged from $7-15. And while Samsung would probably have been able to negotiate the most favorable terms based on their size and clout, even the smallest number there would result in 2.1 BILLION DOLLARS A YEAR.
For shiggles lets say all of the hype was wrong and Samsung negotiated to pay just $1 per Android license activated. That is still $300 million a year. That is undoubtedly more than enough to finance Microsoft's entire Windows Phone group.
Obviously, I don't know all of the details of the contract or the amount of due diligence taken in the acquisition of Nokia's hardware division. But the numbers are pretty easy to read. Revenue from this contract with Samsung is a major source of revenue for Microsoft. It seems highly unlikely that they wouldn't have considered contractual conflicts specifically with Samsung prior to the acquisition. And if they had known it was a possibility it should have resulted in Microsoft acquiring Nokia for a much lower price. Losing this contract would wipe out any value MS could possibly get from owning Nokia's hardware.
To me, it seems like a greed play from Samsung. That money would not only be a substantial revenue stream for Microsoft. It would be a substantial savings for Samsung. The OEM phone market is competitive and tough to make money in. And every contract you cut for IP makes that an even greater reality.
I'll be interested to see where this one lands. Though it probably doesn't have broader sweeping consequences or meaning in the industry.
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