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Microsoft sues Foxconn and says it owes royalty payments plus interest

Microsoft sues Foxconn and says it owes royalty payments plus interest


Foxconn chairman Terry Gou fired back today and said Microsoft was trying to bully the underdog

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President Trump Attends Groundbreaking Of Foxconn Factory In Wisconsin
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Microsoft sued Foxconn’s parent company on Friday for failing to honor a patent-licensing agreement from 2013. Foxconn, best known as one of Apple’s suppliers, was supposed to make royalty payments to Microsoft, but Microsoft alleges it didn’t pay on time and still owes the money, plus interest.

The suit targets FIH Mobile, a subsidiary of Foxconn parent Hon Hai, which makes phones for Xiaomi, Huawei, and other companies. It alleges that Hon Hai has “continually failed” to honor obligations such as submitting royalty reports and cooperating with independently conducted audits. The lawsuit demands Hon Hai submit royalty reports, comply with the audit, and hand over late royalty payments.

Foxconn’s chairman Terry Gou responded to the lawsuit with anger today and called it “wrongful,” as reported by Bloomberg. At an impromptu press conference in Taiwan, Gou described Microsoft as outdated, releasing Windows phones that “no one wanted.” At one point, he forgot the name of Microsoft’s operating system, before dismissing it as one that lagged behind macOS and Android. He continued, “Microsoft is falling behind in the smartphone era faced with the rise of Android so now it is adopting such a bad strategy. I really sympathize with them.”

Gou accused Microsoft of using the suit to steal Android software royalties. He painted Foxconn as an easy target for Microsoft to go after, saying: “[Microsoft] was too scared to sue Google for Android royalties, so instead, it’s going after suppliers ... This should be a fight between Google and Microsoft.” He also made reference to the 15-hour time difference between California and Taiwan: “Why did you wait until we all got off work to sue us?”

Microsoft alleges Foxconn owes it money

Back in 2013, Microsoft licensed Android-related patents to companies like Foxconn’s Hon Hai and Taiwanese computer company Acer. Microsoft receives royalties from most Android smartphone makers, and it’s a profitable business. Sometimes, the relationships end in disputes, though, like in 2014, when Microsoft took Samsung to court to try to enforce its Android royalty contract. They settled in 2015, keeping the terms of the agreement confidential.

Frederick Herold, a lawyer for Microsoft, did not immediately respond to a request for comment. Microsoft told The Verge in a statement:

Microsoft takes its own contractual commitments seriously and we expect other companies to do the same. This legal action is simply to exercise the reporting and audit terms of a contract we signed in 2013 with Hon Hai. Our working relationship with Hon Hai is important, and we are working to resolve our disagreement.

Update March 12th, 8:10PM ET: This article has been updated with a statement from Microsoft.