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Microsoft Sues Hon Hai for Defaulting on Patent Licensing Fees

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Microsoft (MSFT - Free Report) recently filed a lawsuit against Foxconn’s parent company Hon Hai.Foxconn, also known as Hon Hai Precision Industry Co. Ltd.,is an electronics contract manufacturing company.

The tech giant in a court filing with United States District Court for the Northern District of California stated that the Taiwan-based Foxconn didn’t abide by the patent-licensing agreement inked in 2013.

Per the filing, Foxconn is accused of defaulting on “twice-yearly royalty” payments. Per CNBC, “Microsoft is suing for royalty repayment with interest, a review of Hon Hai’s books and attorney fees.”

Additionally, Foxconn is alleged to have not furnished the required documents as requested by third party audit firm, Deloitte. Reportedly, in 2017, Foxconn had approved a deal to comply with the audit terms of Deloitte.

Into the Headlines

Per the terms of the pact inked in 2013, Hon Hai is supposed to pay royalty payments to Microsoft on gaining Chrome and Android patent licenses.

Although the content covered in Microsoft’s patent portfolio has been kept confidential from public domain, the copy of the agreement has been reportedly attached with the lawsuit.

It is to be noted in this regard that several Android device makers including LG, Samsung , HTC, to mention a few, are part of Microsoft’s patent licensing program.

Microsoft Rides on R&D

Microsoft’s research and development (R&D) initiatives set it apart from its peers. On an annual basis, the company invests around 13% (fiscal 2018) on R&D for reaping the high growth and high-value opportunities.

Microsoft Corporation Revenue (Quarterly)


Microsoft Corporation Revenue (Quarterly) | Microsoft Corporation Quote

In fact, in December 2003, Microsoft introduced IP (intellectual property) licensing program with an aim to offer licensing partners access to its considerable R&D investments and expanding IP and patent portfolio. The company has inked almost 1,200 licensing agreements per latest data.

Additionally, the company has so far issued approximately 60,000 U.S. and international patents and has 36,000 patents pending. The patents represent inventions in artificial intelligence (AI), cloud, and other strategic growth areas.

We believe Microsoft is well poised to benefit from its active stance in protecting its IP.

Zacks Rank & Key Picks

Microsoft currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Computer and Technology sector are Synopsys, Inc.(SNPS - Free Report) and Symantec Corporation (SYMC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Synopsys and Symantec is projected to be 10% and 7.9%, respectively.

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