Ericsson announced in December that it filed a lawsuit against Samsung in the US for allegedly violating its contractual commitments related to patent licences and royalty payments. The patent dispute may negatively affect the Swedish company’s operating income by SEK 1- 1.5 billion ($118-$177 million) per quarter starting from 2021 due to the delay of royalty payments and the potential costs of litigation.
Ericsson’s royalties from its patent portfolio is expected to amount to one-third of the companies’ estimated SEK 29 billion (around $3.5 billion) operating profit next year and the lawsuit against Samsung could cut Ericsson’s earnings by approximately 20% per quarter, according to a report by Reuters.
The lawsuit, filed in the US District Court for the Eastern District of Texas, concerned alleged breaches on Fair, Reasonable and Non-Discriminatory (FRAND) obligations by Samsung. The FRAND system allows access to intellectual property (IP) developed by contributors such as Ericsson under global mobile standards. Ericsson stated that under the FRAND system, contributors are also rewarded for their R&D investments.
Ericsson previously sued Samsung in 2012 in a similar patent royalty dispute. The lawsuit was only resolved in 2014, with the South Korean tech giant reportedly paying $650 million for patent infringement.
The Swedish telecom noted that the license renewal negotiations can lead to delays in the payment of IP royalties in 2021 but it expects to recover unpaid royalties once the dispute is settled and licensing is renewed.
Ericsson has over 54,000 patents in its IP portfolio and the company continues to invest in R&D, with an annual allotment of SEK 40 billion($4.8 billion). The company notes that it has a leading position in the 5G space globally and that it expects to further maximize the value of its patent portfolio through IP revenue growth.
With 5G starting to become more prevalently used by consumers, Ericsson’s 5G patents may turn into a profitable revenue stream for the company. Its plans to maximize its patent portfolio and its assertion of its patents against a major player in the mobile and technology sector suggests that Ericsson could similarly engage other companies that use its patented technology. Patent assertion in the 5G telecommunications sector could potentially be an emerging trend as 5G devices become more readily available.
Image thumbnail source: Ericsson