Ericsson has brought a lawsuit against Samsung for what it is calling a violation of contractual obligations. The company is accusing Samsung of not adhering to contractual commitments for an assortment of licensing patent agreements.
The lawsuit was raised at District Court in the US. Ericsson says that Samsung did not adhere to fair, reasonable, and non-discriminatory terms and conditions (also known as FRAND).
In the legal complaint, the company said it wants to get a declaration that it complied with its FRAND commitment and that Samsung has not. Samsung’s FRAND commitment is a contract between the European Telecommunications Standards Institute and Samsung.
Ericsson sees challenging times ahead
Ericsson claims in the complaint that it has a right to enforce the commitment as a third-party beneficiary. The application for this FRAND commitment concerns several worldwide cross-licenses covering both parties’ patents for 5G, 4G, 3G, and 2G cellular standards.
Several of the licensing deals will expire in 2021, with negotiations underway, that Ericsson says will delay IP royalties’ payment.
If that happens, coupled with the cost of litigation, Ericsson predicts that its operating income could tumble by SEK 1 to 1.5 billion per quarter, beginning 2021 and beyond. To make the prediction, the company said that the shift to 5G and current geopolitical conditions could see its bottom line take a hit.
A wave of Samsung
The Swedish company noted, correctly, that it expects unpaid royalties to be recovered as revenue if the agreements successfully go through renewal.
As the two networking giants are about to duke it out in court, Strategy Analytics says that Samsung S20+ 5G was the best-selling 5G-enabled handset by revenue for the first half of this year. Those numbers account for 9% of global 5G sales revenue.
As 5G rolls out, only time will tell what impact it will have on this case’s outcome.