Samsung to Pay Royalties to Microsoft on Smartphones

Samsung Electronics will pay $4-5 for each smartphone it sells to settle Microsoft’s claim that the Android operating system used in Samsung smartphones infringes Microsoft’s patents. That could add up to about $240-$300 mil. a year.

The deal also calls for cross-licensing of each other’s patent portfolios.

The dispute began in July when Microsoft demanded royalties based on its contention that the Android operating system infringes its patents. Google has made the Android operating systemf or mobile devices free to phone makers but requires them to deal with any patent disputes.

Samsung has been facing similar patent infringement claims from Apple, causing a holdup in the European sales of its Galaxy II smartphones and Galaxy Tab tablets. Google has been arming phone makers like HTC and Samsung with the patents it bought from Palm, Motorola and Openwave Systems so they can bring their own patent-infringement suits against Apple.

Last April Taiwanese smartphone maker HTC agreed to pay Microsoft $5 in royalties for each smartphone for a total of $150 million for last year’s sales alone.

“I can’t talk about the exact amount,” said a Samsung executive, “but we’ll pay a lower royalty than HTC for each smartphone.”

Microsoft stands to earn about $840 mil. a year if it can extract $5 in royalties for each mobile phone sold by major brands, according to the Seattle Times.