Ericsson has filed a lawsuit in the United States against Samsung in a dispute over royalty payments and patent licences, sending Ericsson’s shares sharply lower on Friday as it warned the quarrel could hit earnings.
Delayed royalty payments and potential legal costs could reduce Ericsson’s operating income by 1-1.5 billion Swedish crowns ($118-$177 million) per quarter beginning in the first quarter of 2021, the telecoms equipment maker said.
Any halt in payments could be recouped once the dispute is resolved.
Royalties from its patent portfolio are expected to account for about a third of Ericsson’s forecast 29 billion crowns of operating profit in 2021, and this lawsuit could cut earnings by around 20% per quarter, said Liberum analyst Janardan Menon.
Ericsson shares fell around 7%.
The Swedish company also said a shift in sales from 4G to 5G handsets would impact royalty payments as well.
“Once we receive the complaint, we will review it and determine an appropriate response,” a Samsung spokeswoman said.
The last here patent royalty dispute between the two companies was in 2012 when Ericsson took legal action against the South Korean company over alleged patent infringements.
It took two years to resolve, with Samsung paying the Swedish company $650 million along with years of royalties to end the battle.
Lawsuits over royalty payments are common in the technology industry. Samsung has also been involved in lawsuits with Qualcomm and Apple over patents and royalty payments.
Samsung signed a licensing deal with Ericsson in 2001 covering handset and network patents, renewed that deal in 2007 and again in 2014 after a years-long legal battle.