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InterDigital to defy Samsung's bid to vacate arbitration award

Posted: 07 Nov 2006 ?? ?Print Version ?Bookmark and Share

Keywords:InterDigital Communications Corp.? Samsung Electronics Co. Ltd? Nokia Corp.? 2G? 2.5G?

InterDigital Communications Corp. announced that Samsung Electronics Co. Ltd has filed with the International Chamber of Commerce (ICC) a request for a new arbitration with InterDigital regarding the ongoing patent royalty dispute between the parties.

By its arbitration request, Samsung seeks to have a new arbitration panel establish new royalty rates for Samsung's 2G/2.5G GSM product sales based on the April 2006 agreement between Nokia Corp. and InterDigital (Nokia Resolution) that implemented the June 2005 arbitration award rendered against Nokia by the ICC. Samsung further requests that such new rates be applied retroactively to the period 2002 through April 2006 and prospectively for the remainder of 2006.

In effect, Samsung is seeking to avoid complying with the September binding arbitration award issued this year by the ICC, which awarded InterDigital $134 million in past royalties on Samsung's sales of 2G GSM/TDMA and 2.5G GSM/GPRS/EDGE handsets through 2005 and set forth additional royalties to be paid by Samsung for sales of such equipment for the remainder of 2006.

The royalty amount in dispute for sales after April 27 is estimated to be below $20 million, or about 10 percent of the entire amount owed by Samsung though the end of 2006. This amount would be offset in large part by interest that would accrue on the unpaid amount, said InterDigital's announcement.

Moreover, Samsung is also seeking to have the September 2006 arbitration award vacated by the U.S. district court for the Southern District of New York, said the InterDigital's announcement. In that case, InterDigital is seeking to have the court convert the arbitration award into a judgment so that InterDigital can collect the amounts due to it.

Previous proceedings
In January 1996, Samsung entered into agreements with InterDigital which covered both technology development and a patent license agreement, according to InterDigital. As per agreement, Samsung paid approximately $35 million up front to InterDigital.

As part of an arbitration proceeding concluded in 2002, Samsung elected, pursuant to its Most Favored Licensee clause, to have its royalty obligations starting Jan. 1, 2002 for its 2G TDMA-based wireless communication products be determined according to the terms of InterDigital's patent license agreement with Nokia, according to InterDigital's announcement.

Patent licensing agreements signed in March 2003 between InterDigital and Ericsson and Sony Ericsson established the framework for Nokia's royalty obligations for 2G GSM/TDMA and 2.5G GSM/GPRS/EDGE handset and infrastructure sales. After these patent license agreements were signed, InterDigital notified Nokia and Samsung of their royalty payment obligations. Nokia and Samsung disagreed with InterDigital's interpretation of the impact of these patent license agreements and separately requested binding arbitrations.

Nokia's arbitration request was issued in July 2003 and in June 2005, the Arbitral Tribunal, operating under the auspices of the International Court of Arbitration of the ICC, rendered its award in the Nokia dispute. Following an enforcement proceeding in December 2005, the U.S. District Court for the Southern District of New York confirmed in its entirety the June 2005 Final Award in the Nokia dispute. In April 2006, Nokia paid $253 million to InterDigital to resolve the 2G dispute.

Following Samsung's November 2003 arbitration request, the tribunal in the Samsung dispute conducted a hearing in January 2006 and rendered its final award in September this year. Subsequent to the award, InterDigital filed an action seeking to enforce the award in the U.S. District Court for the Southern District of New York.

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