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Dec. 11, 2020, 2:41 a.m. EST

Ericsson files Samsung lawsuit and warns on income

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By Dominic Chopping

STOCKHOLM--Ericsson AB on Friday filed a lawsuit against Samsung Electronics Co. in the U.S. for violating contractual commitments, and cautioned that delayed royalty payments and legal costs could cost the company between 1 billion and 1.5 billion Swedish kronor ($118.1 million-$177.2 million) a quarter.

The telecommunications equipment vendor said it has filed a lawsuit against Samsung in the U.S. District Court for the Eastern District of Texas for violating contractual commitments to negotiate in good faith and to license patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

"The case addresses breaches of FRAND obligations by Samsung and seeks to obtain a ruling by the court that Ericsson has complied with its own commitments," Ericsson said.

The FRAND system allows access to intellectual property, developed by contributors like Ericsson, on FRAND terms and conditions, and rewards contributors for their up-front investment in research and development.

Ericsson added that it is in talks over several license renewals which could lead to a delay in receiving intellectual property royalties, though unpaid royalties are expected to be recovered when talks conclude and the contracts are agreed.

"Current geopolitical conditions are impacting handset sales volumes as is the shift from 4G to 5G handsets," Ericsson said.

"This, in combination with delayed royalty payments from unlicensed periods and potential costs of litigation, may impact Ericsson's operating income by SEK1 billion-SEK1.5 billion a quarter beginning in the first quarter 2021."

Write to Dominic Chopping at dominic.chopping@wsj.com

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