Foxconn rejects Microsoft patent lawsuit, says never had to pay royalties

TAIPEI (Reuters) - Taiwan’s Foxconn on Tuesday responded to a patent infringement lawsuit filed against it by Microsoft Corp, saying as a contract manufacturer, it has never needed to pay royalties for the U.S. company’s software.

Microsoft filed the complaint against Foxconn subsidiary FIH Mobile Ltd in the Northern District of California on Friday. It is claiming unpaid royalties for patents used in devices for clients including a top Chinese smartphone vendor.

Foxconn founder and Chief Executive Terry Gou told an impromptu news conference in Taipei that “patent infringement” is not an issue for his company, which “will suffer almost no any loss” as a result of the lawsuit.

Foxconn “has never paid any patent fees to Microsoft,” Gou said.

FIH could not immediately be reached for comment. In a statement, Microsoft said the legal action was related to the royalty reporting and audit terms of a contract it signed with Foxconn parent Hon Hai in 2013.

“Microsoft takes its own contractual commitments seriously, and we expect other companies to do the same,” the company said in a statement “Our working relationship with Hon Hai is important, and we are working to resolve our disagreement.”

Foxconn, formally Hon Hai Precision Industry Co Ltd, rose to global prominence as assembler of Apple Inc’s iPhone.

It received notice of the lawsuit on Tuesday, said a person with direct knowledge of the matter, who was not authorized to speak with news media and so declined to be identified.

Gou was “furious” and will fight back, the person said.

In a Facebook post earlier on Tuesday, Gou questioned why a software company would not earn patent royalties from vendors that made use of software.

“They should not pick on manufacturers,” Gou said at the news conference.

Shares of both Hon Hai and FIH were up around 1 percent in afternoon trade, roughly in line with the benchmark share price index.

Reporting by Jeanny Kao and Yimou Lee in Taipei and Stephen Nellis in San Francisco; Writing by Anne Marie Roantree; Editing by Richard Borsuk, Christopher Cushing and Jonathan Oatis