Microsoft strikes patent deal with LG and Samsung for reduced Android royalties

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In a deal brokered by the Korean Fair Trade Commission, Microsoft has agreed to cap patent royalties levied on Korean smartphone companies like LG and Samsung and to follow strict FRAND guidelines, even for non-Standard-Essential Patents.

Ironically the deal is still an outcome of anti-trust actions related to the disastrous purchase of Nokia’s handset division, which has now been more than written off, and which has seen more than 25,000 people being laid off my Microsoft.

“In return for approving MS’s planned $7 billion acquisition of Nokia’s handset business, MS agreed to put a cap on the royalties Samsung and other local domestic handset firms pay for patents of the merged entity over the next seven years,” the Fair Trade Commission (FTC) said in a statement.

“MS agreed to cut fees that it annually collect from Korean handset makers on even non-SEPs and commercial patents. Imposing sales or import bans against products produced by local tech companies is also impossible according to the mutual agreement,” said the statement.

The deal also requested changes to Microsoft’s business practices which prevents Microsoft from making some exclusive deals with individual Korean companies.

“The FTC ordered MS not to share confidential data with its business partners for fair competition,” Sun Joong-kyu, director at the FTC’s M&A division said, stressing the latest agreement will protect the rights of consumers.

The agreement may limit Microsoft’s ability to engage in tough negotiations, or to leverage Windows Phone handsets from OEMs in return for reduced royalties. On the other hand it may be that this is an older business model which Microsoft has now fully abandoned, with Microsoft now settling on a more amicable relationship with their OEMs.

The latest decision by the FTC comes a few months after MS separately agreed with Samsung on patent disputes over licensing fees in return for Samsung’s decision to promote MS’s own Office programs on new Samsung handsets.

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