Cisco Systems, Inc. (NASDAQ:CSCO) inked a 10-year patent cross-licensing agreement with Samsung Electronics. The deal was described as a “cross-licensing agreement covering a broad range of products and technologies which will come into effect immediately. However, the financial terms of the deal have not been disclosed.
Earlier this week, Cisco entered into a similar deal with Google Inc. (GOOG) and just before that Google and Samsung entered into a 10-year cross licensing patent deal. With the growing number of litigations, such cross-licensing patent deals avert the risk of unnecessary lawsuits and instead enable companies to focus on building new products.
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Lawsuits are a costly affair as it not only hurts company financials but also negatively impacts a brand. It is therefore sensible and cheaper to enter license agreements and sell more devices minus the fear of getting sued.
Per the recent agreement, both Cisco and Samsung will be able to access each other’s patent portfolios. The agreement is intended to oppose the patent deals of other firms that have engaged in “patent privateering.”
At times, technology companies transfer their patents to a patent assertion entity, which is not bound by the same laws and is therefore able to extract bigger licensing fees from competitors. These entities, or patent trolls as they are called, engage in significant litigation that wastes time and money of the competitors. This process is referred to as privateering.
Cisco is a part of an alliance called the Coalition for Patent Fairness that seeks to minimize litigation between technology companies and thereby devote more energy to innovation. Google, Samsung, Dell and Adobe (ADBE) are other major players that have joined this coalition.
The coalition appears to be a direct attack on tech firms that are part of the Rockstar Consortium, including Microsoft Corp. (MSFT) and Apple Inc. (AAPL) that are involved in multiple patent litigations.
For Cisco, its focus on cross-licensing comes after a number of high-profile fights against shell companies that abuse the patent system whereas this is Samsung’s third cross-licensing deal this year.
Cisco, a San Jose-based company founded in 1984, designs, produces and sells Internet Protocol (IP)-based networking equipment to the information technology industry worldwide.
Currently, Cisco holds a Zacks Rank #4 (Sell).