Monday, November 4, 2013

Samsung and Nokia extend patent license agreement for five years -- scope unclear for now

Nokia just issued a press release announcing an extension of its patent license agreement with Samsung for five years:

Samsung extends the patent license agreement between Nokia and Samsung for five years; companies will enter into binding arbitration to settle the amount of additional compensation


Espoo, Finland - Nokia announced that Samsung has extended a patent license agreement between Nokia and Samsung for five years. The agreement would have expired at the end of 2013. According to the agreement, Samsung will pay additional compensation to Nokia for the period commencing from January 1, 2014 onwards, and the amount of such compensation shall be finally settled in a binding arbitration which is expected to be concluded during 2015. "This extension and agreement to arbitrate represent a hallmark of constructive resolution of licensing disputes, and are expected to save significant transaction costs for both parties", said Paul Melin, Chief Intellectual Property Officer of Nokia.

Nokia will retain its industry-leading patent portfolio following the proposed transaction to sell substantially all of its Devices & Services business to Microsoft and sees further opportunity to create value by investing in innovation, and by actively managing its patent portfolio and licensing activities.


So far, so good. Congratulations to the two deal partners.

The announcement says nothing about the scope. There's no doubt that this agreement involves at the very least Nokia's cellular standard-essential patents (SEPs).

Nokia's SEPs are broadly-licensed, while its non-SEPs are not. The announcement does not say that this patent license agreement covers Nokia's entire portfolio. It just says "a patent license agreement between Nokia and Samsung".

As far as I know, most of Nokia's existing license agreements -- and presumably also the one with Samsung that is now going to be extended -- are SEP-only deals. The announcement refers to "additional compensation" to be settled in binding arbitration, but that would also make sense for a SEP-only renewal. I can't rule out that a non-SEP royalty rate would be arbitrated, but it would be unusual. Non-SEPs are not subject to FRAND licensing obligations, and while an arbitration panel could theoretically set license fees, companies usually work out non-SEP disputes differently, especially since non-SEP holders are free to seek injunctions.

I'll try to find out more. For now I assume that this is merely an extension of a SEP-only license agreement, in which case the parties still have to work out a non-SEP agreement. In that case, Nokia would now have the same situation with Samsung as it already has with HTC and ViewSonic, two companies that have a license to Nokia's SEPs but not to any of its non-SEPs. Nokia is suing HTC in six countries on three continents and ViewSonic in the U.S. and Germany. HTC had a SEP license with Nokia before litigation started; ViewSonic took a SEP-only license under a partial settlement. All Android device makers are ultimately going to need a non-SEP license from Nokia.

Even prior to this morning's announcement it was known that Samsung and Nokia had been negotiating a patent license deal. A court filing by Nokia in the U.S. (in an Apple-Samsung case) indicated that the parties were having secretive talks involving patents. A month ago a court order relating to the "Patentgate" scandal over improper disclosures of highly confidential business information quoted from a sworn declaration by Nokia's Paul Melin (the executive quoted in the above press release) relating to a negotiation with Samsung in June.

[Update] Nokia declines to comment on the scope of the agreement. All terms are confidential. I continue to believe it's a SEP-only license, including the "additional" compensation. [/Update]

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