Telecommunications equipment vendor Ericsson has asked a U.S. court to block sales of a variety of Samsung Electronics cameras, Blu-ray Disc players, televisions and phones, including the Galaxy S III and the Galaxy Note II, alleging that they infringe its patents.
Ericsson said it had negotiated for over two years with Samsung to reach a licensing deal on fair, reasonable and non-discriminatory (FRAND) terms for the patents, which it claims are essential to implementation of a number of industry standards. After failing to reach agreement, it filed two lawsuits in the U.S. District Court for the Eastern District of Texas on Tuesday.
The equipment vendor said it asked Samsung to pay the same rate as its competitors, but Samsung refused.
Instead, Ericsson said in the court filing, Samsung asked it to renew its license for a small fraction of the rate other similarly situated companies pay. Refusing to pay for licensing gives Samsung an unfair competitive advantage over competitors that did license the patents, Ericsson added.
Samsung had previously licensed patents Ericsson had declared essential to certain industry standards in 2001, and renewed the license in 2007. That license has now expired, Ericsson said.
Many industry standards bodies require companies participating in the standards definition process to declare any patents they hold that they consider essential to implementation of the standards. In return for the standard potentially mandating use of their patents, they are required to license such standards-essential patents on fair, reasonable and non-discriminatory (FRAND) terms.
Ericsson filed two complaints with the court detailing a total 24 patents that Samsung allegedly infringes. The patents cover inventions relating to telephones, base stations, televisions, computers, Blu-ray players, cameras, and other devices for use in a wireless network, infringed by dozens of Samsung devices that are being imported into the U.S., according to the filing.
Among the allegedly infringing devices are several Galaxy Players, several LED and Plasma TVs as well as the Samsung Galaxy Note II, the Galaxy S III and several models of Galaxy Tab including the Tab 10.1 and the Tab 7.0.
Ericsson is one of the older players in the mobile industry, and claims that some of its more than 30,000 patents worldwide are essential to implementation of standards including GSM, GPRS, EDGE, WCDMA, LTE and IEEE 802.11.
The company has been licensing its patents for over a decade, and has agreements with all major players, said its Chief Intellectual Property Officer, Kasim Alfalahi.
The company invests license fee income in new products, he said. However, he declined to say how much of the company's 2011 research and development spend of US$5 billion came from patent income, citing confidentiality agreements with licensees.
Suing Samsung is a last resort, Alfalahi said, adding: "We are suing in the U.S. because it is the most important market with respect to intellectual property." He declined to say whether other companies had refused to license Ericsson patents.
"We have faithfully committed ourselves to conducting fair and reasonable negotiations with Ericsson over the past two years, but this time Ericsson has demanded significantly higher royalty rates for the same patent portfolio," Samsung said in an emailed statement. "As we cannot accept such extreme demands, we will take all necessary legal measures to protect against Ericsson's excessive claims."
Ericsson asked the court for a jury trial and an injunction that Samsung and its partners refrain from further infringement of the patents. It wants Samsung to pay damages for the infringement and to agree to a licensing deal on FRAND terms.
The fact that Ericsson is demanding a sales ban is a negotiating tactic, and common practice in such cases, said John Strand, CEO of Strand Consult.
Ericsson hasn't been seen in court as much as other players in the industry like Apple and Samsung, said Strand. The same goes for companies such as Nokia and chip manufacturer Qualcomm, he said.
"The reason that you don't hear often about those companies involved in court cases is that they are sitting on the standard-essential patents," said Strand. "That is a fantastic bargaining deal."
Ericsson and Nokia are under heavy financial pressure, so they are looking to their patent portfolio to make money, said Strand. By starting lawsuits like this, they also can make the value of their patent portfolio more visible to their shareholders, he added.
"There are definitely going to be more lawsuits like this. I think we have just seen the top of the iceberg."
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