Ericsson has filed a lawsuit against Samsung after the companies failed to agree new terms for patent licensing. Ericsson warned that problems renewing licensing deals and weaker royalties in the handset market may reduce its operating profit by SEK 1 billion or more from the first quarter of 2021.

Ericsson filed the lawsuit against Samsung in the US District Court for the Eastern District of Texas, which is known for handling patent disputes. It accuses Samsung of violating contractual commitments to negotiate in good faith and to license patents on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions. In addition to alleged FRAND obligations by Samsung, the case seeks a court ruling that Ericsson has complied with its own commitments.

Ericsson previously sued Samsung in the same court in 2012 when the companies were unable to reach a licensing agreement. That case took until 2014 to resolve, when the companies last agreed a deal to license each other's technology. 

Ericsson warned that "several" license renewal negotiations may delay the payment of IP royalties from next year, if it's unable to reach new deals by the time existing licences expire. The company said it had flagged the potential problems already in its Q2 and Q3 2020 reports. It expects to renew the licences eventually and then recover any unpaid royalties. 

In addition to the licensing problems, the company blamed weaker royalty revenues on "current geopolitical conditions" impacting handset sale volumes. Handset royalties have also been impacted by the shift from 4G to 5G. Altogether, along with the costs of litigation, this may reduce the company's operating profit by SEK 1.0-1.5 billion a quarter beginning in the first quarter of 2021, Ericsson said. The actual financial impact will depend on the timing and terms and conditions of new agreements.