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October 6, 2014

Microsoft’s Android licence revenue outstrips Xbox income

Court documents reveal $1bn a year Samsung patent royalties.

By Ben Sullivan

Thanks to the high number of licensing agreements Microsoft has dished out to Android device makers, the Windows giant has netted itself a record bonus in patent-licensing royalties in 2013.

Samsung paid Microsoft £1bn last year for the free use of patents used in the Android OS, court documents have revealed.

The two firms are currently stuck in a licensing legal battle over a cross-licensing contract and a business collaboration agreement, signed in 2011. Samsung wants to leave the deal, citing Microsoft’s Nokia buyup as fair reason to walk out.

Microsoft has said that Samsung still owes it the $6.9m interest from that $1bn 2013 payout. The court filing from Microsoft said: "(U)nder the License Agreement, Samsung agreed to make patent royalty payment to Microsoft for a period of seven fiscal years, in exchange for the right to use patented Microsoft technology in Samsung smartphones and tablets that use the Android operating system."

Deputy General Counsel David Howard stated on Microsoft’s website: "We are confident that our case is strong and that we will be successful.

"At the same time, Microsoft values and respects our long partnership with Samsung, is committed to it, and expects it to continue."

Microsoft’s plans to acquire Nokia devices and services were revealed on September 3 2013, and Samsung is arguing that the acquisition breaches the business collaboration agreement signed in 2011. The unsealed court document from the current case shows that Samsung has not paid its third year (2014) $1bn patent royalty. Samsung was invoiced for this amount in June, but it is not due until later this year.

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The amount of money that Microsoft has been paid from Samsung in 2013 is more than than the company made for its entire Entertainment and Devices division, a division which includes the Xbox games console and Skype. Microsoft had an operating income of $848m last year, over over $150m less than the amount of royalties received from Samsung.

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