Cross License: Samsung & Sharp Agree to Stop Suing Each Other

By Charles Annis – Vice President, Manufacturing Research, DisplaySearch

On February 5, top-tier LCD makers Sharp Corporation and Samsung Electronics “signed a settlement agreement to end ongoing patent infringement disputes over LCD panels and modules,” according to a press release dated February 8 on Sharp’s web site. The two companies had been suing and countersuing each other since 2007 over intellectual properly claims related to LCD manufacturing.

Cross-licensing deals are frequently used to resolve patent infringement controversies. Companies may file patent applications or sue as part of a business strategy with the specific goal of achieving a cross licensing agreement.

Cross-licensing deals often make big news, but the terms and conditions often remain undisclosed. From the outside, it may be nearly impossible to tell what patents and technologies are covered, time limits or financial provisions of the contract. Unfortunately, the terms of the February 5 agreement were not disclosed.

Although the contract was under negotiation for months, DisplaySearch was not exactly sure how it would all play out. Because we think Sharp holds some of the key patents related to the production of PSA (Polymer Sustained Alignment) and Optical Alignment (what Sharp calls UV²A)-critical technologies for improving LCD transmission and contrast-we thought Sharp held a very strong negotiating position and might even opt to continue the legal battle.

We do not really know what patents were included in the deal. The Sharp press release only makes the vague statement that “This settlement will allow the two companies to mutually utilize the disputed patents relating to LCD panels and modules, owned worldwide by each company.” But since we recently began hearing that Samsung finally started commercial PSA panel shipments (what Samsung calls S-VA) after months of delays, we infer that at least PSA patents are covered.

Why would Sharp cross license its crown jewels? Sure, Samsung has a huge and valuable patent portfolio, and Sharp was probably tired of the protracted legal conflict. But the short answer likely comes down to money. Frankly, this is speculation, but we assume Samsung made a one-time cash payment in the range of $500 million to Sharp to facilitate the agreement.

The announcement of the cross license between Sharp and Samsung leaves us with many unanswered questions. But one thing is for sure. Now that the world’s largest LCD maker has a green light to at least mass-produce PSA-based LCDs, the standards for high contrast and high transmission panels will continue to rise. This will enable faster adoption of LED backlights and improve image quality. And LCD panel makers that don’t have access to high contrast/high transmission technologies will be scrambling to play catch up.