Samsung To Pay Ericsson $650 Million To End Patent Feud

Ericsson will be paid $650 million by Samsung Electronics along with years of royalties to end a technology license spat, the Swedish company said on Monday.

On grounds that Samsung had infringed patents involving technology for clearer voice transmission, touchscreen functions and network efficiency, the world's No. 1 mobile network equipment maker had sued the Korean firm in 2012, Reuters reported.

The smartphone and tablet maker, which is increasingly active in network equipment, made a counter claim.

According to Reuters, "The initial payment will lift fourth-quarter sales by 4.2 billion Swedish crowns ($652 million) and net income by 3.3 billion, Ericsson said in a statement."

Fourth quarter net sales of 65.1 billion crowns and net income of 4.0 billion had been forecast by analysts in a Reuters poll.

As markets anticipated billions of crowns of extra revenue for the Swedish firm for years to come, Ericsson's shares rose 2.4 percent by 1123 GMT (6.23 a.m. ET). Details about the agreement or what royalties Samsung would pay were not answered by Ericsson, according to Reuters.

Kasim Alfalahi, Ericsson's Chief Intellectual Property Officer, would not say how long the agreement with Samsung was, but said 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."

Bernstein analyst Pierre Ferragu estimated annual revenues from the royalties at 1.7 billion crowns, according to Reuters.

In industries such as telecoms, patent infringement suits have become frequent in recent years.

"While equipment such as handsets share much of their technology, forcing rivals to take out licenses from one another, companies are also desperate to protect any advantages they have and maximize incomes that are under pressure from fierce competition, leaving plenty of room for dispute," Reuters reported.

In several countries, Samsung is also embroiled in a legal battle with Apple, who has alleged that various Samsung products 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, Reuters reported.

However, when the deal ran out in 2011, the two could not agree to terms. Samsung accused Ericsson of demanding prohibitively higher royalty rates to renew the same patent portfolio.

"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," Alfalahi said.

Samsung said on Sunday it had signed a cross-licensing agreement with Google and signed a license deal with Nokia in November last year, Reuters reported.