Impact of Google-Samsung licensing deal is yet to be seen

Samsung Electronics has recently entered a couple of big patent-licensing agreements. One was with Google on a broad agreement to cross-license each other's patents while the other was with Ericsson. Samsung, which had been accused of infringing Ericsson's range of patents including LTE, has now agreed to pay Ericsson $650 million in compensation and royalty payments thereafter. This, basically ends the ongoing battle with the Swedish telecom company.

While the two separate licensing deals are very different, these Samsung moves signal the company's eagerness to get back into the business of innovation, rather than getting stuck in the downward spiral of competition-by-lawsuit.

Is the mobile industry suddenly seeing the wisdom of "patent peace"?

It's likely. Or, more to the point, the mobile industry is maturing to the point where more cross-licensing agreements seem almost inevitable among key players in the smartphone market.

Ron Epstein, principal at Epicenter IP Group, calls this "a fair assessment." Epstein, who formerly served as director of licensing at Intel Corp. and saw how the PC industry's patent battle played out, told EE Times in a phone interview, "The platform battle [in smartphones], initiated by patent wars, is coming to an end."

However, the Google-Samsung cross-licensing deal, struck Sunday, appears to raise more questions than answers. It is said to cover existing patents as well as some that would be filed during the next 10 years. Neither company disclosed which patents/technologies are covered. Nor did they disclose the amount of money that exchanged hands.

Not knowing which patents will be covered by this exclusive cross-licensing agreement between Google and Samsung could concern other Android OEMs, said Francis Sideco, senior director of consumer electronics and communications technologies at IHS. Depending on the content of the deal, "this could be a non-event or a big event for OEMs," noted Sideco. System OEMs should want to know, he told us, how available those new innovations, coming out of the cross-licensing agreement between the two giants, will become to other Android OEMs.

Epstein is less worried. "Look, 99.9 percent of innovations are based on transfers [of expertise and knowledge] between companies and plagiarism." In other words, Epstein holds a long view that the innovations that emerge in the future from the Google/Samsung cross-licensing agreement will eventually trickle down to other OEMs.

Further, noting that 99.9 percent of smartphones, either by Apple, Samsung or Microsoft, are using "the same features," Epstein calls the ongoing Apple-Samsung patent suits "laughable." The principle that the Google/Samsung agreement represents is, "You borrow from me and I borrow from you."

In essence, Epstein describes the Google/Samsung deal as "more like a NAFTA treaty than an armistice agreement." Given the reality that Google and Samsung do an awful lot of business together, "the two companies decided to trade patents and cooperate with each other," Epstein stated.

While cross-licensing agreements of this magnitude in the mobile industry seem rare, they are quite common among players in more mature industries. Japanese consumer electronics companies such as Sony, Panasonic, JVC and others have been hip-deep in cross-licensing among each other for decades. Cross-licensing deals also became common among PC OEMs, said Epstein, when mini-computer companies such as Digital Equipment and Data General went after the emerging vendors of personal computers.

Sideco also observed that cross-licensing is relatively common even in smartphones and the mobile industry, although on a scale much smaller than the Google/Samsung deal.

Epstein predicted, "Expect companies like LG and HTC" to join the mobile cross-licensing fray.

It is not just premature but false to frame the Google-Samsung cross-licensing agreement in reference to the Rockstar Consortium, warned both industry analysts. Although the media love to paint a picture that pits two diverging camps against each other (Google-Samsung vs. Rockstar Consortium), "the two have nothing to do with each other," according to Epstein.

It is easy to paint the false picture, though, because the Rockstar Consortium, a group including Apple, Microsoft and Sony that paid $4.5 billion for a set of Nortel patents in a 2011 auction, sued Google, Samsung and six other smartphone makers that use Android.

Noting that the genesis of the Rockstar Consortium is based on a "two-year-old idea" when everyone was still in the mode of using patents against each other, Epstein said the reality today is that the so-called platform battle in the smartphone is coming to an end, and key players in the smartphone market are coming to understand that it's time to create "an open playing field for everyone."

Sideco agrees.

The Google/Samsung cross-licensing agreement can only work against the Rockstar Consortium if the deal can help the two companies indemnify each other on the use of their patents, explained Sideco. "It's a big if, because we don't even know if the cross-licensing agreement has such an indemnification clause."

In the end, he cautioned, "We need to look at the Google-Samsung deal in isolation."

- Junko Yoshida
??EE Times