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Delayed licensing payments cost much more than meets the eye

| Dec 23, 2020 | Patent Law

Lost revenue from licensing isn’t the only price a company may have to face. While it could be the most obvious, other costs are likely to join the fray.

Ericsson, the Swedish telecommunications company, has filed suit against Samsung over royalty payments and patent license fees. While the missed payments may come eventually, the company will likely lose money in other ways in the meantime.

Missing the mark

Missing fees can weigh heavily on investors, and releasing reports that come up short of expectations could be costly. Ericsson, who earns $3.5 billion every year from patents, will be missing upwards of $177 million from this single deal. That vacated capital was enough to cost them a 7% dip in shares when they announced the news.

Late payments cost more

But that could be just the beginning. Even with smaller entities, the cost of reduced funds can be enormous. Small and mid-sized businesses worldwide lose up to $3 trillion every year due to late payments. And patent licensing prices are no different.

You may have to put a hold on reinvesting in your business, working on new innovations and paying suppliers while you’re settling the dispute. That’s time, money and progress you may never get back, even if the original funds are eventually recouped.

Licensing a patent is rarely a simple deal and can grow more complicated with the agreement’s breadth. This is why it’s essential to draft a contract that protects your interests and allows you to quickly prove disagreements in your favor should the matter appear in court.