Summary
The South Korean Fair Trade Commission conditionally approved Microsoft’s acquisition of Nokia’s handset business, imposing a cap on royalties for Korean manufacturers such as Samsung and LG. This move aims to prevent Microsoft from leveraging its patent portfolio to disadvantage local Android device makers. Microsoft agreed to apply the fair, reasonable, and non-discriminatory (FRAND) principle to royalty charges for the next seven years. The approval aligns with earlier decisions by Chinese authorities, which also sought to protect local manufacturers from higher royalty fees. Industry experts suggest the FTC's conditions may support Microsoft’s ongoing patent dispute resolution with Samsung.
The Fair Trade Commission (FTC), South Korea’s antitrust authority, conditionally approved Microsoft’s acquisition of Nokia’s handset business earlier this month. The conditions attached to the merger state that Microsoft will put a ceiling on the royalties paid by major Korean handset manufacturers like Samsung and LG for Nokia patents. The agreement between Microsoft and Nokia will allow Microsoft to directly manufacture handsets and tablets based on its broad patent portfolio.
Microsoft had submitted its request for the acquisition of Nokia’s mobile division in November, 2013. The regulator accepted the request to begin the official settlement process to review the merger, anticipate any potential market distortions and establish fair competition. Microsoft’s Windows phones did not pose any threat to the domestic handset manufacturers, but its merger with Nokia will put them in direct competition with Android device manufacturers like Samsung and LG. FTA wanted to ensure that Microsoft doesn’t discriminate against local handset manufacturers by taking advantage of its broad range of Standard Essential Patents (SEP), which can have an impact on the operations of Android phones.
Microsoft has given their consent to charge local handset manufacturers royalties on the basis of fair, reasonable and non-discriminatory (FRAND) principle for the next seven years. They will not levy any additional charges above the cap during the period. Earlier, Chinese Ministry of Commerce had approved the deal as long as it did not cause higher royalty fees payments for the domestic Smartphone makers.
Industry experts feel that FTC’s conditional approval might also help Microsoft settle their ongoing patent dispute with Samsung. Microsoft had filed a lawsuit related to payment of outstanding royalties against Samsung last year. Last year Samsung paid royalties to the tune of $1 billion to Microsoft for using the Android patents owned by Microsoft.
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