Microsoft has successfully come to an agreement with the Fair Trade Commission of Korea for lowering the royalties it charges on the patents it holds related to Android devices. Korean firms LG and Samsung, which are two of the world’s largest handset makers, will be affected the most by it.
A give and take deal
Apart from capping the royalties for the coming seven years, Microsoft also agreed not to sue the companies based in Korea. In return, Korean authorities gave their approval for the Nokia acquisition. Microsoft was also asked by the Korean FTC to scrap a business collaboration agreement, under which the U.S. firm shared secretive information with its rivals. The FTC took this step so as to protect the rights of consumers, as reported by the Korea Times.
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“Imposing sales or import bans against products produced by local tech companies is also impossible according to the mutual agreement,” the FTC said in a statement.
Microsoft uses its patents related to Android devices to charge device makers for all the Android handsets they manufacture. Royalties on Fair, Reasonable and Non Discriminatory (FRAND) patents and Standard Essential Patents (SEP) will both be capped under this agreement with the FTC.
Microsoft’s deal with the Korean agency comes a few months after it struck an agreement with Samsung to resolve patent disputes over licensing fees. In return, the Korean firm offered to promote Microsoft’s Office programs on its new handsets.
Will Microsoft benefit from this deal?
It’s ironic that this agreement is an outcome of anti-trust actions related to the purchase of Nokia’s handset division, which has been more than written off now by Microsoft. It’s also strange that it took the FTC almost two years to give its approval. Comparatively in the U.S. and Europe, the approval came much quicker.
Nevertheless, Microsoft will be able to move ahead in Korea now and fully utilize the leftovers from its Nokia acquisition for marketing its new phones, although it loses its ability to engage in tough negotiations with vendors. It is possible that the reduced royalties may act as a barrier in the leveraging of Windows Phone handsets from OEMs. Contrary to this, it is possible that Microsoft will abandon this old business model, and it could be working towards a more amicable relationship with its OEMs.