Back in July, Nokia and Samsung struck a major deal to expand upon the two companies’ earlier cross-licensing agreements to “cover certain additional portfolios of both parties”. AsIAM reported at the time, the deal significantly added to Nokia’s bottom line and could exert pressure on Huawei, which not long before had filed infringement lawsuits against Samsung and had itself been targeted by Nokia’s Solutions & Networks (NSN) unit in apparent retaliation for its attack on T-Mobile.
It seems that Nokia got even more out of the Samsung agreement than what is indicated in the accompanying press release. An assignment recorded with the USPTO a few weeks ago, but dated to 12thJuly – the day before Nokia announced the deal – shows that the Korean company transferred 15 US patents to NSN, all of which cover wireless telecommunications infrastructure. None of these assets are currently involved in NSN’s litigation with Huawei, though it is somewhat intriguing that Samsung has made the assignment to the Finnish company at this time.
Speaking more generally, this transfer comes at a time when the Korean company is increasingly looking at its patents actively as dispensable assets, that can be traded in an attempt to gain strategic benefits, rather than passively as properties that must be held onto mainly for defensive and cross-licensing purposes. Previously, Samsung has rarely transferred its patents to third parties outside of contexts such as joint ventures, spin-outs or collaborations with industry or academia. But in an unprecedented move for the Korean company, it agreed to sell its printer business to HP for $1.05 billion last month. A major component of that deal is the 6,500-plus patent portfolio that will be winging its way to the US buyer.
For several years now, Samsung has been a dominating force across a wide range of consumer product segments, from smartphones to printers to televisions to refrigerators. But the emergence of price-competitive alternatives, particularly from China, India and southeast Asia, means that it is now looking tostreamline its vast business and refocus on what it sees as its most promising future growth areas.
This process looks to have become even more urgent in the wake of Samsung’s recall and eventual withdrawal of its malfunction-prone Galaxy Note 7 phablet, and the Korean company’s rather calamitous handling of the whole situation. The full extent of the damage done to Samsung’s brand by this episode remains to be seen at this stage – just today, the company reported a 30% drop in operating profits for the past quarter – but it would seem clear that the company faces an uphill battle in trying to win back the trust of many consumers.
With all of these factors at work, it is perhaps unsurprising that Samsung’s immense trove of patents is coming into play in a way that it hasn’t previously. Samsung holds the largest portfolio of in-force US patent assets – even taking the planned divestiture to HP into account – and, based on filing figures from other major jurisdictions, we can assume it owns one of the largest worldwide portfolios among private companies. That’s an awful lot of patents that it may turn to in order to drive M&A transactions or sweeten licence agreements – as it appears to have done, respectively, with HP and NSN. Moreover, it could look at selling some of its non-core patents in standalone deals, or open new revenue streams through assertion-based licensing, in its search for value. If Samsung were to begin putting significant patent packages on the market, or launching more aggressive licensing campaigns, the effects on fluidity in the Asia-focused patent market would be felt far and wide.
Then there are Samsung’s key competitors. When it comes to smartphones, the Korean company still dominates the market. But its share has gradually eroded over recent years; and the Galaxy Note 7 fiasco could well contribute to even greater losses, at least over the near term. The most significant growth is further down the table; in the second quarter of this year, China’s Huawei posted year-on-year growth of 8%, while more recent Chinese entrants Oppo and Vivo took fourth and fifth spots with growth of 136.6% and 80.2%, respectively. Not far behind are the likes of Lenovo and Xiaomi.
If these companies want to stake their claim to Samsung’s diminishing market share, they will need to look beyond their home patch and up their presence in mature foreign markets. To do that, they will need patent protection – and more quickly than organic growth is likely to afford them. That means portfolio purchases, licence deals and IP-focused M&A activity – a course of action that several are already pursuing.
The Galaxy Note 7 debacle was clearly a major PR, brand and safety issue that will shake-up the smartphone market. For patent licensors, the near-term results could be negative. But, if the episode encourages one of the world’s largest patent holders to sell and some of its closest competitors to buy, it may also have a lasting positive impact on Asia’s IP landscape.