STOCKHOLM / NEW YORK - South Korea'sSamsung Electronics Co and Sweden'sEricsson have decided to end years of patent fight by entering into a cross licensing deal on cellular technologies, Swedish communications technology and services major said in a statement Monday.
This agreement ends cases filed by both companies against each other before the International Trade Commission (ITC) as well as the lawsuits before the U.S. District Court for the Eastern District of Texas.
Ericsson, leading global mobile network equipment maker, had sued Samsung in 2012 on the grounds that the Korean firm had infringed patents involving technology for clearer voice transmission, touchscreen functions and network efficiency.
In retaliation, smart phone maker Samsung, which is increasingly active in network equipment, had filed a counter suit.
"We are pleased that we could reach a mutually fair and reasonable agreement with Samsung. We always viewed litigation as a last resort," said Kasim Alfalahi, Chief Intellectual Property Officer at Ericsson.
"This agreement allows us to continue to focus on bringing new technology to the global market and provides an incentive to other innovators to share their own ideas."
Under the agreement, Samsung will make an initial payment and ongoing royalty payments to Ericsson for the term of the new multi-year license agreement.
Ericsson, which invests about 30 billion crowns annually in research and development, has over 33,000 patents covering key technology for 2G, 3G and 4G networks and handsets. It has more than 100 license agreements with major players in the industry.
Though the terms of the deal were not disclosed, Ericsson said the initial payment in the agreement will lift its 2013 fourth-quarter sales and net income by 4.2 billion Swedish kronor ($651 million) and 3.3 billion Swedish kronor ($512 million) respectively.
The cross-license agreement covers patents relating to GSM (Global System for Mobile Communications), UMTS (Universal Mobile Telecommunications System), and LTE standards for both networks and handsets, according to Ericsson.
Ericsson declined to give further details of the agreement or what royalties Samsung would pay. Alfalahi would not comment on the duration of the licensing agreement with Samsung, but indicated that patent agreements generally cover four to seven years.
"Ericsson's settlement with Samsung is going to be an important future driver of its earnings," JP Morgan analyst Rod Hall said in a note.
"The ongoing revenue could be approx 2.1 billion Swedish crowns annually and, with these revenues having 70 percent ongoing margin, they could add 5.4 percent to 2014 EPS."
Ericsson shares rose 2.2 percent by 1244 GMT, outperforming European technology stocks which were up 0.8 percent. Shares in Samsung, which declined to comment, fell 1.2 percent.
Samsung is also embroiled in a legal battle with Apple in several countries, with Apple alleging that various Samsung products had infringed its patents.
The Korean firm signed a licensing deal with Ericsson in 2001 covering handset and network patents and renewed that deal in 2007.
However, the two could not agree terms in 2011 when the deal ran out, with Samsung accusing Ericsson of demanding prohibitively higher royalty rates to renew the same patent portfolio. The new agreement resolves the pending patent issues between the two companies.
Samsung on Sunday also unveiled a broad, long-term cross-licensing deal with Google that will cover their existing patents as well as those filed over the next 10 years.