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Samsung loses bid to freeze Microsoft's U.S. lawsuit over royalties

Reuters
People are silhouetted as they pose with mobile devices in front of a screen projected with a Samsung logo, in this picture illustration taken in Zenica October 29, 2014. REUTERS/Dado Ruvic

By Joseph Ax

NEW YORK (Reuters) - A U.S. judge has rejected Samsung Electronics Co Ltd’s bid to put Microsoft Corp's lawsuit over smartphone patent royalties on hold while the South Korean company pursues an arbitration proceeding in Hong Kong.

In a brief order, U.S. District Judge Jed Rakoff in New York said the lawsuit would proceed despite the arbitration. Rakoff said he would explain his reasoning in a subsequent opinion.

Microsoft sued Samsung in August, accusing it of breaching a collaboration agreement by initially refusing to make royalty payments after the U.S. company announced its intention to acquire Nokia’s handset business in September 2013.

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The lawsuit claimed Samsung still owed $6.9 million in interest on more than $1 billion in patent royalties it delayed paying.

Samsung has countered that the Nokia acquisition in April violated its 2011 deal with Microsoft.

Samsung filed the request for arbitration with the Hong Kong office of the International Court of Arbitration of the International Chamber of Commerce.

In a previous court filing, Samsung said it had agreed in 2011 to pay Microsoft royalties in exchange for a patent license covering phones that ran Google Inc’s Android operating system.

Samsung also agreed to develop Windows phones and share confidential business information with Microsoft, according to the filing.

Once Microsoft acquired Nokia, it became a direct hardware competitor with Samsung, the filing said, and Samsung refused to share some sensitive information due to antitrust concerns.

Antitrust regulators in the United States and other countries approved the Nokia acquisition.

Samsung did not immediately respond to a request for comment. A Microsoft spokeswoman said the company was "pleased that the court agrees that New York is the appropriate venue for this dispute."

The case is Microsoft Corp vs. Samsung Electronics Co Ltd, U.S. District Court, Southern District of New York, No. 14-6039.

(Reporting by Joseph Ax; Editing by Lisa Von Ahn, Bernard Orr)