Samsung, Ericsson End Patent Tussle

Samsung and Ericsson (Nasdaq: ERICY) have agreed to end patent infringement lawsuits against each other, signing an agreement to cross-license their mobile technologies instead.

The cross-licensing agreement covers a host of patents relating to second- and third-generation, or 2G and 3G, mobile services.

South Korea's Samsung, the world's third-largest maker of handsets by volume, disclosed the settlement in a filing with regulators in its home country.

No details of the licensing terms were released; Samsung told regulators the deal included an agreement between the two parties not to discuss the deal in depth. Samsung did say the deal would result in all outstanding lawsuits in various jurisdictions, including the United States, being dropped. Neither company returned calls seeking comment on the deal.

Ericsson makes a host of telecommunications gear and is the top maker of wireless network products used by carriers. It also produces mobile phones through a joint venture with Sony (NYSE: SNE) under the Sony Ericsson brand.

Year-Old Complaint

The settlement puts to rest legal complaints first made public in February 2006, when Sweden-based Ericsson filed suit against Samsung in the U.S., the UK, Germany and the Netherlands. In August, the company expanded the original complaint to include more allegedly infringed patents; Samsung also filed a countersuit.

The claims arose after a previous licensing agreement between the two companies expired at the end of 2005.

The claims were believed to cover a number of specific parts in mobile phones, as well as technology that enabled handsets to take full advantage of both the all-digital second-generation networks and the faster 3G, which allow high-speed data downloads.

Settling the cases will enable both companies to focus on their market positions and Samsung in particular could be poised for a major move, according to Gartner (NYSE: IT) Research Director Carolina Milanesi.

Recent trends have seen both Nokia (NYSE: NOK) and Samsung making gains on Motorola (NYSE: MOT), with Samsung shrinking Motorola's second-place lead in the first quarter of this year, when Motorola held 18 percent of the market and Samsung 12.5 percent, Milanesi said. Sony Ericsson ranked fourth, according to Gartner, with a 8.4 percent market share.

Excitement over the Apple (Nasdaq: AAPL) iPhone is also seen boosting other handset makers, including Samsung, which has unveiled some similarly sleek designs and has focused on making ever-slimmer smartphones.

With mobile phone sales projected to grow some 16 percent this year to 1.15 billion units, the two companies may have recognized they had little to gain from a protracted legal squabble.

"The opportunities for growth are there for the companies that can roll out the product to take advantage," Milanesi told the E-Commerce Times.

More of the Same

The Samsung-Ericsson battle is one of several intellectual property disputes to hit the mobile handset sector in recent years.

Qualcomm (Nasdaq: QCOM) finds itself the focus of the most heated of those battles, with the U.S. International Trade Commission recently imposing a ban on the import of some Qualcomm chips inside mobile handsets, part of a penalty handed down after Qualcomm was found to have infringed on technology patents held by rival Broadcom (Nasdaq: BRCM).

Qualcomm is also locked in a dispute with Nokia, with whom it once had technology-sharing agreements in place.

The technology disputes are not surprising, given that handset makers have all converged on the same growth areas in the market and are usually building devices to work with the same mobile standards, telecom analyst Jeff Kagan told the E-Commerce Times.

The technology has also increased in importance as phones become more powerful and as consumers tastes change.

"Phone makers have devoted as much energy to style and design as they have to technology over recent years," Kagan said. Onetime friendly competitors that may have shared technology may also see their fortunes change, adding to the friction. "As the pendulum swings, competition can make allies into enemies."