Samsung inked a licensing agreement covering both 3G and 4G with Qualcomm back in 2009 for use of the latter’s CDMA2000, WCDMA, TD-SCDMA and OFDMA patents. The company would pay $1.3 billion for use of Qualcomm’s patents. The $1.3 billion upfront payment granted Samsung a license to use Qualcomm’s patents for 15 years while also paying additional royalties but the royalty rate was not disclosed. Qualcomm’s royalty rate is said to be different for every company and Samsung reportedly pays some of the lowest rates due to massive volumes.
Qualcomm and Samsung today announced an expansion of the 2009 global patent cross-license agreement covering mobile devices and infrastructure equipment. Qualcomm is yet to provide specifics of the new deal but the head of its licensing division Alex Rogers said during the earnings call today that Samsung will continue to pay royalties on handset sales, instead of combining the royalty agreement with its chip purchases.
Samsung agrees to drop regulatory action
Qualcomm was hit with a $825 million fine by the South Korean Fair Trade Commission in December last year after a three-year investigation. The KFTC accused Qualcomm of having an “unfair business model” and creating a monopoly. The company was also ordered to negotiate with rival chipmakers on patent licensing in good faith and to renegotiate its chip supply agreements with handset makers if requested.
Samsung was one of the few companies enlisted for reference by the KFTC during its investigation and the company also filed its interventions in Qualcomm’s appeal of the regulator’s decision. Samsung will now be withdrawing its interventions in Qualcomm’s appeal of the KFTC decision in the Seoul High Court as part of this new agreement.
This deal comes at a crucial time for Qualcomm as it looks to solve its legal matters while trying to fend off a hostile takeover bid from Broadcom. It will hope that this deal with Samsung sends a signal to investors that it’s capable of mending its relationships with customers without Broadcom’s help.
“We believe this amended agreement provides the foundation for a long-term, stable relationship with Samsung following the KFTC investigation,” said Rogers.
Qualcomm and Samsung have also inked a multi-year strategic relationship agreement to enhance cooperation in various technology areas and across a range of mobile devices. This agreement extends the companies’ relationship through the transition to 5G.