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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
MICROSOFT CORPORATION AND
MICROSOFT LICENSING GP,
Plaintiffs,
-against-
SAMSUNG ELECTRONICS CO., LTD.,
Defendant.
Case No. 1:14-CV-6039 (JSR)
Hon. Jed S. Rakoff
Oral Argument Requested



DEFENDANT’S MEMORANDUM OF LAW IN SUPPORT OF
MOTION TO COMPEL ARBITRATION AND STAY THE CASE

O’MELVENY & MYERS LLP
George A. Riley
Andrew Frackman
Ian Simmons
John Kappos
Gary Svirsky
Ryan Yagura
Brad M. Elias
Jeffrey A.N. Kopczynski
Times Square Tower
7 Times Square
New York, New York 10036
Telephone: (212) 326-2000
Facsimile: (212) 326-2061
Attorneys for Defendant
Case 1:14-cv-06039-JSR Document 42 Filed 10/10/14 Page 1 of 20
TABLE OF CONTENTS

Page
PRELIMINARY STATEMENT ................................................................................................... 1
BACKGROUND ........................................................................................................................... 2
A. The agreement between Samsung and Microsoft
is embodied in two interconnected contracts. ............................................ 2
B. The parties agreed to arbitrate disputes concerning
Annual Invoices and Royalty Reports. ...................................................... 5
C. The Amended Complaint asks this Court to relieve Microsoft
of its obligations while enforcing Samsung’s obligations. ........................ 5
ARGUMENT ................................................................................................................................. 6
I. MICROSOFT AGREED TO ARBITRATE ITS CLAIMS AGAINST SAMSUNG. ..................... 6
A. The parties’ arbitration agreement
is enforceable under the FAA. ................................................................... 6
B. The arbitrators must decide
any questions of arbitrability. .................................................................... 7
C. The parties’ dispute is arbitrable
under the BCA’s plain language. ............................................................... 9
i. Both counts in the Amended Complaint
fit within Section 3.3 of the BCA. ................................................. 9
ii. Both counts in the Amended Complaint
fall under the BCA, not the PLA. ................................................ 12
D. The agreements’ forum-selection provisions
do not apply to Microsoft’s claims. ......................................................... 13
II. THIS CASE SHOULD BE STAYED PENDING ARBITRATION. ....................................... 14
CONCLUSION ............................................................................................................................ 15
i
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TABLE OF AUTHORITIES
Page
CASES
Bank Julius Baer & Co. v. Waxfield Ltd.,
424 F.3d 278 (2d Cir. 2005), abrogated on other grounds by Goldman, Sachs
& Co. v. Golden Empire Sch. Fin. Auth., 2014 U.S. App. LEXIS 16155
(2d Cir. Aug. 21, 2014) ........................................................................................................... 13
Cendant Corp. v. Forbes,
72 F. Supp. 2d 341 (S.D.N.Y. 1999)....................................................................................... 14
Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co.,
189 F.3d 289 (2d Cir. 1999)...................................................................................................... 6
Deloitte Noraudit A/S v. Deloitte Haskins & Sells, U.S.,
9 F.3d 1060 (2d Cir. 1993)........................................................................................................ 6
Ecopetrol S.A. v. Offshore Exploration & Prod. LLC,
2014 U.S. Dist. LEXIS 126829 (S.D.N.Y. Sept. 10, 2014) .................................................... 14
First Options of Chi., Inc. v. Kaplan,
514 U.S. 938 (1995) .................................................................................................................. 7
Goldman, Sachs & Co. v. Golden Empire Schools Fin. Auth.,
2014 U.S. App. LEXIS 16155 (2d Cir. Aug. 21, 2014) .......................................................... 13
Green Tree Fin. Corp.-Ala. v. Randolph,
531 U.S. 79 (2000) .................................................................................................................... 6
JLM Indus. v. Stolt-Nielsen SA,
387 F.3d 163 (2d Cir. 2004).................................................................................................... 11
Khanna v. Am. Express Co.,
2011 U.S. Dist. LEXIS 146542 (S.D.N.Y. Dec. 14, 2011) ...................................................... 9
McAllister Bros. v. A & S Transp. Co.,
621 F.2d 519 (2d Cir. 1980).................................................................................................... 11
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1 (1983) ................................................................................................................ 9, 12
Oldroyd v. Elmira Sav. Bank, FSB,
134 F.3d 72 (2d Cir. 1998)........................................................................................................ 6
Personal Sec. & Safety Sys. v. Motorola Inc.,
297 F.3d 388 (5th Cir. 2002) .................................................................................................. 13
ii
Case 1:14-cv-06039-JSR Document 42 Filed 10/10/14 Page 3 of 20
TABLE OF AUTHORITIES
(continued)
Page
Seed Holdings, Inc. v. Jiffy Int’l AS,
2014 U.S. Dist. LEXIS 38565 (S.D.N.Y. Mar. 24, 2014) ...................................................... 12
Severstal US Holdings, LLC v. RG Steel, LLC,
865 F. Supp. 2d 430 (S.D.N.Y. 2012)..................................................................................... 11
Shaw Grp. Inc. v. Triplefine Int’l Corp.,
322 F.3d 115 (2d Cir. 2003)...................................................................................................... 8
Smith/Enron Cogeneration Ltd. P’ship v. Smith Cogeneration Int’l, Inc.,
198 F.3d 88 (2d Cir. 1999).................................................................................................... 2, 7
United Steelworkers of Am. v. Warrior & Gulf Navigation Co.,
363 U.S. 574 (1960) ................................................................................................................ 12
Variblend Dual Dispensing Sys., LLC v. Seidel GmbH & Co.,
970 F. Supp. 2d 157 (S.D.N.Y. 2013)................................................................................... 6, 8
VRG Linhas Aereas S.A. v. MatlinPatterson Global Opportunities
Partners II L.P.,
717 F.3d 322 (2d Cir. 2013).................................................................................................. 2, 8
STATUTES
9 U.S.C. § 201 ................................................................................................................................. 2
9 U.S.C. § 206 ................................................................................................................................. 8
9 U.S.C. § 3 ................................................................................................................................... 15
OTHER AUTHORITIES
Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
June 10, 1958, 21 UST 2517, TIAS 6997, 330 UNTS 3 .......................................................... 8
iii
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Defendant Samsung Electronics Co., Ltd. (“Samsung”) submits this memorandum of law
in support of its motion to compel arbitration of the Amended Complaint filed by Microsoft
Corporation and Microsoft Licensing GP (together, “Microsoft”) and to stay this lawsuit.
PRELIMINARY STATEMENT
When Samsung and Microsoft entered into a licensing, development, and marketing
agreement, they recognized that they might one day have a dispute. But rather than waste
resources on litigation, and to protect the confidentiality of commercially sensitive information at
the heart of the agreement, the parties specified that they would arbitrate certain disputes in
Japan under the Rules of Arbitration of the International Chamber of Commerce (“ICC Rules”).
Arbitration was the parties’ clear and unmistakable intent then, and arbitration is what Second
Circuit precedent mandates now.
Microsoft’s claims in this action fall squarely within the parties’ agreement to arbitrate.
Under Section 3.3 of the parties’ Confidential Business Collaboration Agreement (“BCA”), the
arbitrable issues include any dispute with respect to “Annual Invoices” or “Royalty and Credit
Calculation Reports”—both of which form the basis of Microsoft’s claims. As its Amended
Complaint alleges, Microsoft seeks approximately $7 million in interest for Samsung’s delay in
paying the 2013 Annual Invoice while the parties sought to resolve their royalty dispute. And
Microsoft seeks a judicial declaration that Samsung’s reason for the delay—that Microsoft’s
merger with a Samsung competitor breached the parties’ agreement—does not excuse Samsung
from submitting royalty reports and making future invoice payments. Regardless of the
Amended Complaint’s merits (and there are none), there is no question that Section 3.3 requires
the parties to submit this dispute to binding arbitration under ICC Rules.
The parties’ agreement to arbitrate must be enforced under Chapter 2 of the FAA,
9 U.S.C. § 201, which implements the Convention on the Recognition and Enforcement of

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Foreign Arbitral Awards (the “New York Convention”), because the BCA satisfies the four
requirements set forth in Smith/Enron Cogeneration Ltd. Partnership v. Smith Cogeneration
International, Inc., 198 F.3d 88, 92 (2d Cir. 1999). The agreement (i) is written, (ii) provides for
arbitration in a country that is a signatory to the Convention (Japan), (iii) concerns a subject
matter that is commercial, and (iv) is not entirely domestic in scope.
Moreover, by agreeing to arbitrate under ICC Rules, the parties committed to submit any
questions about the arbitrability of their claims to the arbitrators. The Second Circuit reaffirmed
this settled principle just last year in VRG Linhas Aereas S.A. v. MatlinPatterson Global
Opportunities Partners II L.P., 717 F.3d 322, 326 (2d Cir. 2013), holding that “an arbitration
clause subjecting disputes to the rules and procedures of the [ICC] clearly and unmistakably
commits to arbitration any questions about the arbitrability of particular disputes.” It is thus no
defense for Microsoft to argue that its claims fall outside the scope of the BCA’s arbitration
provision—that is a question for the arbitrators to decide. Therefore, the FAA, the New York
Convention, Second Circuit precedent, and the parties’ agreements all require Microsoft to
arbitrate its claims under ICC Rules, and this case should be stayed pending the conclusion of
that arbitration.
BACKGROUND
A. The agreement between Samsung and Microsoft
is embodied in two interconnected contracts.
On July 1, 2011, Samsung and Microsoft executed two contracts: the BCA and the
Confidential Patent Licensing Agreement (the “PLA”).
1
Samsung is a Korean corporation with
1
See Declaration of Brad M. Elias (“Elias Decl.”), Ex. 1 (PLA); Elias Decl., Ex. 2 (BCA).
2

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its principal place of business in Suwon, South Korea.
2
Microsoft is a Washington corporation
with its principal place of business in Redmond, Washington.
3

Under the PLA, Samsung and Microsoft agreed to cross-license their patent portfolios
and release each other from any existing liability for patent infringement.
4
Samsung agreed to
pay annual royalties to Microsoft for seven years based on Samsung’s per-unit sales of Android
smartphones and tablets.
5
Microsoft, in turn, agreed to reduce Samsung’s annual royalty
payments in accordance with a fixed schedule of “Microsoft License Fee Credit[s].”
6

Under the BCA, the parties agreed to collaborate on the “development and marketing of
certain Samsung Windows devices” and the use of Microsoft search services.
7
Microsoft
committed to provide Samsung with “Success Credits” for meeting certain sales goals for
Windows phones and tablets.
8
And Microsoft committed to provide Samsung with annual
“Collaboration Credits” for creating and executing a plan to develop and market Windows
phones and tablets and for using Microsoft search services.
9
The amounts owed by Samsung to
Microsoft under the agreements must be reported to Microsoft on an annual “Royalty and Credit
2
See Elias Decl., Ex. 1 (PLA) at 1. Pursuant to the Court’s October 8, 2014 instruction,
Samsung has filed the BCA and PLA provisionally under seal. Samsung and Microsoft
continue to meet and confer concerning the redaction of commercially sensitive information
from those agreements, and Samsung hopes to present a joint sealing proposal to the Court.
Samsung respectfully requests that the Court defer any action with regard to sealing until the
hearing on this motion, which is scheduled for November 7, or until such other time that the
parties are provided an opportunity to be heard on the sealing issue.
3
See id.
4
See id. §§ 2.1, 2.2, 3.1.
5
See id. § 4.2.2.
6
Id. § 4.2.1 & Ex. B.
7
Elias Decl., Ex. 2 (BCA) at 1.
8
Id. § 3.1.2 & Ex. E.
9
Id. § 3.1.1 & Exs. B, C, D.
3

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Calculation Report” (the “Royalty Report”) pursuant to the BCA.
10
After receiving the Royalty
Report, Microsoft is required to issue an “Annual Invoice” that includes, among other things, the
net amount owed by Samsung for the fiscal year under the BCA and PLA.
11
Under the BCA, the
“Royalty and Credit Calculation Report . . . will be deemed to constitute, include, supersede and
be in lieu of any ‘Royalty Report’ otherwise due under Section 4.2.3 of the PLA.”
12

Because the BCA and PLA are interconnected, the parties agreed to an “Entire
Agreement” provision that integrates the terms of the BCA, the PLA, and the parties’ non-
disclosure agreement.
13
That interconnectedness is also reflected in Section 8.5 of the BCA,
which permits Samsung to terminate the PLA in the event that Microsoft breaches Section 9.7 of
the BCA.
14
BCA Section 9.7 prohibits either party from assigning “any rights or obligations
hereunder, whether by operation of law, contract or otherwise, including by way of a change of
Control.”
15
As relevant here, where the “assignment is to a competitor of the other party,” the
“assignment” is defined to include any “merger of a party with a third party.”
16
Part of the
parties’ dispute about the Annual Invoice concerns whether Microsoft’s acquisition of Nokia’s
Devices and Services business and subsequent integration of that business into its existing
operations constitutes a “merger” with a Samsung competitor within the meaning of Section 9.7.
10
Id. § 3.1.4 & Ex. F. Because Microsoft has failed to fulfill its Success Credits obligations,
Samsung is separately arbitrating that issue under ICC Rules in accordance with BCA
Section 3.3.2. See Notice of Arbitration (Oct. 7, 2014 ECF No. 38).
11
Elias Decl., Ex. 2 (BCA) § 3.2.1.
12
Id. § 3.1.4; see also id. at Ex. F (Form of Royalty Report).
13
Id. § 9.12 (“This agreement, together with the [non-disclosure agreement] and PLA,
constitutes the entire agreement between the parties with respect to the subject matter,
including any prior letters of intents or term sheets.”).
14
See id. § 8.5 (“If Samsung terminates this Agreement pursuant to Section 9.7, then Samsung
may terminate the PLA by giving Microsoft written notice terminating the PLA . . . .”).
15
Id. § 9.7.
16
Id.; see also Am. Compl. ¶¶ 15, 42, 43, 51.
4

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B. The parties agreed to arbitrate disputes concerning
Annual Invoices and Royalty Reports.
The BCA prescribes how the parties must resolve certain disputes. Under sections 3.3.1
and 3.3.2, the parties must meet in person and discuss listed disputes in good faith, and if the
parties cannot resolve their disagreement, they shall submit the dispute to “binding arbitration
under the auspices and in accordance with the Rules of Arbitration of the International Chamber
of Commerce” (with certain modifications to ICC Rules concerning the selection of
arbitrators).
17
The parties also agreed that any arbitration will be heard in Japan before three
arbitrators.
18
The arbitrable issues include “any dispute between the parties with respect to any
Royalty and Credit Calculation Report . . . or any Annual Invoice.”
19
And while the BCA also
contains a forum-selection provision in which the parties consented to jurisdiction and venue in
the Southern District of New York,
20
that provision explicitly carves out disputes “covered under
Section 3.3”—i.e., disputes that the parties agreed to arbitrate.
21

C. The Amended Complaint asks this Court to relieve Microsoft
of its obligations while enforcing Samsung’s obligations.
With this lawsuit, Microsoft seeks to retain for itself the full amount of Samsung’s
payment for Fiscal Year 2, as well as amounts due under future invoices.
22
First, Microsoft
asserts that Samsung breached the PLA by failing to pay the Fiscal Year 2 Annual Invoice on
time, and seeks to recover interest on the late payment.
23
Second, Microsoft seeks a declaration
that Samsung’s stated reason for delaying payment of the Fiscal Year 2 Annual Invoice—that
17
Elias Decl., Ex. 2 (BCA) § 3.3.2; see also id. §§ 3.3.1, 3.3.3.
18
See id. § 3.3.2.
19
Id. § 3.3.1 (emphasis added).
20
See id. § 9.5.
21
Id.; see also id. § 3.3.
22
See Am. Compl. ¶ 51.
23
See id. ¶¶ 45–48.
5

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Microsoft improperly “merged” with a Samsung competitor—does not excuse Samsung from
submitting royalty reports and making future invoice payments.
24
While Samsung vigorously
disputes the merits of both Microsoft claims, both counts must be resolved in an arbitration under
ICC Rules in accordance with BCA Section 3.3.
ARGUMENT
I. MICROSOFT AGREED TO ARBITRATE ITS CLAIMS AGAINST SAMSUNG.
A. The parties’ arbitration agreement
is enforceable under the FAA.
If Microsoft wishes to pursue its claims against Samsung, it is obligated to submit them
to binding arbitration. Chapter 2 of the FAA, which implements the New York Convention,
governs commercial, non-domestic agreements like the BCA and the PLA. See Variblend Dual
Dispensing Sys., LLC v. Seidel GmbH & Co., 970 F. Supp. 2d 157, 163 (S.D.N.Y. 2013). The
FAA reflects the “strong federal policy favoring arbitration as an alternative means of dispute
resolution,” Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998), and makes that
bias “even stronger in the context of international transactions.” Chelsea Square Textiles, Inc. v.
Bombay Dyeing & Mfg. Co., 189 F.3d 289, 294 (2d Cir. 1999) (quoting Deloitte Noraudit A/S v.
Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1063 (2d Cir. 1993)). Thus, when a dispute’s
arbitrability is in question, the “party resisting arbitration bears the burden of proving that the
claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S.
79, 91 (2000).
As the Second Circuit has explained, the FAA’s implementing provisions set forth four
requirements for enforcing arbitration agreements under the New York Convention: “(1) there
must be a written agreement; (2) it must provide for arbitration in the territory of a signatory of
24
See id. ¶¶ 49–51.
6

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the convention; (3) the subject matter must be commercial; and (4) it cannot be entirely domestic
in scope.” Smith/Enron, 198 F.3d at 92 (affirming order granting motion to compel arbitration
under the New York Convention). Each of those requirements is satisfied here:
(1) the BCA and PLA contain written agreements to arbitrate under
ICC Rules;
25

(2) the arbitration must take place in Japan, which is a signatory to the
New York Convention;
26

(3) the subject matter of the dispute is plainly commercial in nature; and
(4) the dispute between Microsoft, a Washington corporation, and Samsung, a
South Korean corporation, is international in scope.
27

Because the parties’ agreement to arbitrate is enforceable under Chapter 2 of the FAA,
this Court has jurisdiction to compel arbitration. See 9 U.S.C. § 206 (“A court having
jurisdiction under this chapter may direct that arbitration be held in accordance with the
agreement at any place therein provided for, whether that place is within or without the United
States.”).
B. The arbitrators must decide
any questions of arbitrability.
Where the parties agreed to submit the threshold question of arbitrability to the
arbitrators, federal courts will enforce that agreement. See First Options of Chi., Inc. v. Kaplan,
514 U.S. 938, 944 (1995). And the Second Circuit has repeatedly held that where, as here, the
parties agreed to arbitrate under ICC Rules, they have “clearly and unmistakably” agreed to
submit the question of arbitrability to the arbitrators. Only last year, in VRG Linhas Aereas S.A.,
25
See Elias Decl., Ex. 2 (BCA) § 3.3.2; Elias Decl., Ex. 1 (PLA) § 4.2.5.
26
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958,
21 UST 2517, TIAS 6997, 330 UNTS 3, at UST 2563 (listing Japan as a signatory); see also
Elias Decl., Ex. 1 (PLA) § 4.2.5, Ex. 2 (BCA) § 3.3.2.
27
See Elias Decl., Ex. 1 (PLA) at 1 (listing Samsung as a “Korean corporation” and Microsoft
as a “Washington corporation”).
7

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the Second Circuit held “that an arbitration clause subjecting disputes to the rules and procedures
of the ICC International Court of Arbitration clearly and unmistakably commits to arbitration
any questions about the arbitrability of particular disputes.” 717 F.3d at 326 (emphasis added).
That echoed Shaw Group Inc. v. Triplefine International Corp., where the Second Circuit held
that “because [the agreement] provides for arbitration to be conducted under the rules of the ICC,
which assign the arbitrator initial responsibility to determine issues of arbitrability, we conclude
that the agreement clearly and unmistakably evidences the parties’ intent to arbitrate questions of
arbitrability.” 322 F.3d 115, 122, 124–25 (2d Cir. 2003) (emphasis added).
28
This Court too has
held that because parties agreed to ICC Rules, “any questions as to the scope of the arbitration
provision or the arbitrability of particular disputes are . . . properly committed to arbitration.”
Variblend Dual Dispensing Sys., 970 F. Supp. 2d at 170.
Here, just as in VRG, Shaw, and Variblend, the parties expressly contracted to arbitrate
disputes listed in Section 3.3.1 of the BCA under ICC Rules. Under BCA Section 3.3.2, “the
parties agree[d] to exclusively settle such dispute by binding arbitration under the auspices and in
accordance with the Rules of Arbitration of the International Chamber of Commerce.”
29

Similarly, under PLA Section 4.2.5, “the Parties agree[d] to exclusively settle such disputes by
binding arbitration under the auspices and in accordance with the Rules of Arbitration of the
International Chamber of Commerce.”
30
Therefore, under binding Second Circuit precedent,
28
In reaching its decision, the Court cited the ICC rule regarding determining arbitrability,
which provides that “[i]f the Respondent does not file an Answer . . . or if any party raises
one or more pleas concerning the existence, validity or scope of the arbitration agreement,
the [ICA] Court may decide, without prejudice to the admissibility or merits of the plea or
pleas, that the arbitration shall proceed if it is prima facie satisfied that an arbitration
agreement under the Rules may exist. In such a case, any decision as to the jurisdiction of
the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself.” 322 F.3d at 122.
29
Elias Decl., Ex. 2 (BCA) § 3.3.2.
30
Elias Decl., Ex. 1 (PLA) § 4.2.5.
8

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the arbitrability of Microsoft’s claims against Samsung is a question for the arbitrator and not
this Court.
C. The parties’ dispute is arbitrable
under the BCA’s plain language.
i. Both counts in the Amended Complaint
fit within Section 3.3 of the BCA.
While the Court need not decide the arbitrability of Microsoft’s claims, if the Court elects
to consider that question, it should direct the parties to arbitration under a plain reading of the
BCA. As the Supreme Court observed, the FAA “establishes that, as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the contract language itself or an allegation of
waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24–25 (1983). This Court too has held that under the FAA, “courts
must compel arbitration where the parties have agreed to arbitrate and the scope of that
agreement encompasses the claims presented.” Khanna v. Am. Express Co., 2011 U.S. Dist.
LEXIS 146542, at *5 (S.D.N.Y. Dec. 14, 2011) (Rakoff, J.) (granting motion to compel and stay
case and holding that rushing to court cannot defeat such a motion because it “contradicts the
language of the [agreement] by effectively removing [defendant’s] right to elect arbitration”).
By its terms, the BCA demonstrates that both causes of action in the Amended Complaint
fall into the list of issues that the parties agreed to arbitrate under Section 3.3.1:
In the event of any dispute between the parties with respect to any Royalty and
Credit Calculation Report, the calculation of any Reinvestment Credits under
Section 3.1.4, the calculation of any Success Credit Recapture, the calculation of
any WP Termination Credits, the scope or results of any audit under Section
3.1.5[,] or any Annual Invoice, the parties (and, in the case of any dispute
9
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regarding the scope or results of any audit under Section 3.1.5, the auditor) will
meet and discuss in good faith to resolve such dispute.
31

Section 3.3.2 then provides that “[i]f the parties are unable to resolve any dispute pursuant to
Section 3.3.1, the parties agree to exclusively settle such disputes by binding arbitration.”
32

This language covers Microsoft’s allegations in the Amended Complaint: Microsoft’s
first count seeks interest on late-paid royalties under the “2013 Annual Invoice” for Fiscal
Year 2.
33
The second count seeks six separate declarations amounting to a judgment that
Samsung “must pay Microsoft all royalty payments required by the License Agreement,”
34

which under BCA Section 3.2.2 Samsung would have to pay only after Microsoft issues “Annual
Invoices” for Fiscal Years 3 through 7.
35
Both causes of action are therefore arbitrable disputes
with respect to “any Royalty and Credit Calculation Report . . . or any Annual Invoice.”
36

Indeed, the Amended Complaint is awash in allegations about disputed royalty payments
based on Annual Invoices:
• “Samsung breached the License Agreement last fall by refusing to make
its Fiscal Year 2 royalty payment on time and then refusing to pay
interest.”
37

• “Samsung also refused to make the undisputed FY2 royalty payment it
owed to Microsoft on October 11, 2013, the date it was due.”
38

31
Elias Decl., Ex. 2 (BCA) § 3.3.1 (emphasis added).
32
Id. § 3.3.2 (emphasis added). The modifications are spelled out in §§ 3.3.3 and 3.3.4 and go
to the ICC rules concerning the selection of arbitrators.
33
Am. Compl. ¶ 54.
34
Id. ¶ 62(e).
35
See Elias Decl., Ex. 2 (BCA) § 3.2.2 (“within thirty (30) days after receipt of an Annual
Invoice, Samsung will pay the Net Amount to MLGP [Microsoft Licensing GP] . . . by wire
transfer to the account specified by Microsoft in the Annual Invoice”).
36
Id. § 3.3.1; see also Am. Compl. ¶¶ 54, 62(e).
37
Am. Compl. ¶ 2.
38
Id. ¶ 12.
10

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• “On November 29, 2013, Samsung finally paid Microsoft the previously
agreed-to net royalty amount (minus certain funds for taxes), while
preserving all of its legal positions. However, despite Microsoft’s
repeated requests for contractually-mandated interest on the undisputed
FY2 net royalty amount owed to Microsoft, Samsung has refused to make
the interest payment it owes.”
39

• “In fact, allegedly due to the Nokia acquisition, Samsung did not pay the
undisputed FY2 royalty amount due on October 11, 2013 as required.”
40

• “Two days before Samsung made its payment of the FY2 net royalty
amount (without interest), it sent Microsoft a letter, dated November 27,
2013, in which it set forth its positions . . . on the legal issues raised in this
Complaint which are sharply contested by Microsoft.”
41

The Amended Complaint contains at least a half dozen other paragraphs with similar references
to royalty payments under the Annual Invoice.
42

Even if Section 3.3.1 of the BCA were read as what some cases refer to as a “narrow”
arbitration clause, it would still cover Microsoft’s claims. See JLM Indus. v. Stolt-Nielsen SA,
387 F.3d 163, 172 (2d Cir. 2004) (“Recognizing there is some range in the breadth of arbitration
clauses, a court should classify the particular clause as either broad or narrow.”). When
interpreting narrow arbitration clauses, the proper inquiry is whether the court can say with
“positive assurance” that the clause is “not susceptible of an interpretation” that the claims fit
within its scope. Severstal US Holdings, LLC v. RG Steel, LLC, 865 F. Supp. 2d 430, 438
(S.D.N.Y. 2012) (holding that even narrow arbitration clauses must be construed in favor of
arbitration and “arbitration should be compelled ‘unless it may be said with positive assurance
that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute’”
(quoting McAllister Bros. v. A & S Transp. Co., 621 F.2d 519, 522 (2d Cir. 1980), and United
39
Id. ¶ 13.
40
Id. ¶ 47.
41
Id. ¶ 49.
42
See, e.g., id. ¶¶ 14, 15, 16, 36, 46, 54.
11

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Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960))). Here, it
cannot be said with “positive assurance” that the BCA’s arbitration provision “is not susceptible
of an interpretation that covers” Microsoft’s breach-of-contract and declaratory-judgment claims.
Judge Koeltl’s recent decision in Seed Holdings, Inc. v. Jiffy International AS, 2014 U.S.
Dist. LEXIS 38565 (S.D.N.Y. Mar. 24, 2014), illustrates how even a narrow clause can favor
arbitration. There, the court found that an arbitration clause covering “[t]he determination . . . of
the Actual Working Capital” was narrow in scope. Id. at *44. But because the arbitration clause
did not limit types of objections to the calculation, the court found that “[r]easonably interpreted,
[the arbitration clause] therefore reflects the parties’ intent to arbitrate all disputes relating to the
parties’ differences over the determination of actual closing working capital.” Id. at *46. So too
here—even if BCA Section 3.3.1 does not cover all disputes without limitation, it nevertheless
reflects the parties’ intent to arbitrate all disputes relating to the parties’ differences over “Annual
Invoices” and “Royalty and Credit Calculation Reports,” which are precisely the claims at issue
here. Even under a narrow reading of BCA Section 3.3.1, the issues raised in the Amended
Complaint constitute an arbitrable dispute. And to the extent there is any ambiguity about the
parties’ intent or the arbitration provision’s scope, it must be resolved in favor of arbitration. See
Moses H. Cone Mem’l Hosp., 460 U.S. at 24–25 (holding that the FAA “establishes that, as a
matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration”).
ii. Both counts in the Amended Complaint
fall under the BCA, not the PLA.
The BCA’s arbitration provision governs this dispute because Microsoft’s claims arise
from a Royalty and Credit Calculation Report and Annual Invoice that were issued under the
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BCA, not the PLA. While both contracts provide generally for royalty reports,
43
the parties
nonetheless recognized the potential for needless duplication and expressly provided in the BCA
that the “Royalty and Credit Calculation Report . . . will be deemed to constitute, include,
supersede and be in lieu of any ‘Royalty Report’ otherwise due under Section 4.2.3 of
the PLA.”
44

Further, Samsung’s Royalty Reports were issued in the form provided for in the BCA, to
which Microsoft has not objected—a point Microsoft reiterates in the Amended Complaint.
45

Accordingly, if the Court were to consider the arbitrability of Microsoft’s claims, it should do so
by interpreting the arbitration provision in the BCA.
D. The agreements’ forum-selection provisions
do not apply to Microsoft’s claims.
The parties’ selection of a judicial forum in BCA Section 9.5 does not override their clear
intent to arbitrate this dispute under BCA Section 3.3. In fact, Section 9.5 expressly carves out
disputes the parties agreed to arbitrate under Section 3.3 from the forum-selection clause.
46

Moreover, even absent such a carve-out, the Second Circuit gives effect to an arbitration clause
“unless the forum selection clause specifically precludes arbitration”—which Section 9.5 does
not do. Bank Julius Baer & Co. v. Waxfield Ltd., 424 F.3d 278, 284 (2d Cir. 2005) (quoting
Personal Sec. & Safety Sys. v. Motorola Inc., 297 F.3d 388, 396 n.11 (5th Cir. 2002)), abrogated
on other grounds by Goldman, Sachs & Co. v. Golden Empire Schools Fin. Auth., 2014 U.S.
App. LEXIS 16155, at *9 n.3 (2d Cir. Aug. 21, 2014); see also Ecopetrol S.A. v. Offshore
Exploration & Production LLC, 2014 U.S. Dist. LEXIS 126829, at *32–33 (S.D.N.Y. Sept. 10,
43
See Elias Decl., Ex. 1 (PLA) § 4.2.3; Elias Decl., Ex. 2 (BCA) § 3.1.4.
44
Elias Decl., Ex. 2 (BCA) § 3.1.4.
45
See Am. Compl. ¶ 46 (“Microsoft did not, and does not, dispute Samsung’s 2013 Royalty
Report.”).
46
See Elias Decl., Ex. 2 (BCA) § 9.5; see also Am. Compl. ¶ 21.
13

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2014) (holding that because forum-selection clause did not unambiguously require parties to
refer all disputes to court, the clause did “not provide positive assurance that the parties intended
to override the broad arbitration clause”). Indeed, Section 9.5 says nothing about whether the
parties’ disputes must be submitted to litigation—it merely states that “[w]ith respect to all civil
actions” they consent to jurisdiction and venue in the Southern District of New York.
Of course, not all disagreements must be arbitrated under Section 3.3 of the BCA—some
disputes could fall within the forum-selection clauses. For example, if a party breached its
confidentiality obligations (under BCA Section 4 and PLA Section 7.2) or was discovered to
have violated its representations and warranties, the allegedly aggrieved party would properly be
able to seek relief in this Court. Neither of those disputes falls within the items listed in BCA
Section 3.3.1.
II. THIS CASE SHOULD BE STAYED PENDING ARBITRATION.
As long as arbitration is pending, this case should be stayed. Section 3 of the FAA
mandates that result. See 9 U.S.C. § 3 (“If any suit or proceeding be brought . . . upon any issue
referable to arbitration . . . the court in which such suit is pending . . . shall on application of one
of the parties stay the trial of the action until such arbitration has been had . . . .”); see also
Cendant Corp. v. Forbes, 72 F. Supp. 2d 341, 342 (S.D.N.Y. 1999) (Rakoff, J.) (granting a stay
under Section 3 of the FAA and noting “the granting of a stay under this section is mandatory if
an issue in the case is referable to arbitration”). Accordingly, Samsung requests that the Court
stay this action pending the completion of arbitration proceedings under ICC Rules.
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CONCLUSION
For these reasons, Samsung requests that the Court enforce the parties’ contract and
direct this case to arbitration under ICC Rules. Samsung further requests that the Court stay this
action pending the completion of that arbitration.
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Case 1:14-cv-06039-JSR Document 42 Filed 10/10/14 Page 19 of 20

Dated: New York, New York
October 10, 2014

Respectfully submitted,

O’MELVENY & MYERS LLP

By: /s/ George A. Riley

George A. Riley (pro hac vice) (griley@omm.com)
Two Embarcadero Center, 28th Floor
San Francisco, CA 94111
Telephone: (415) 984-8700
Facsimile: (415) 984-8701

Andrew Frackman (afrackman@omm.com)
Gary Svirsky (gsvirsky@omm.com)
Brad M. Elias (belias@omm.com)
Jeffrey A. N. Kopczynski (jkopczynski@omm.com)
7 Times Square
New York, New York 10036
Telephone: (212) 326-2000
Facsimile: (212) 326-2061

Ryan K. Yagura (pro hac vice) (ryagura@omm.com)
400 South Hope Street, 18th Floor
Los Angeles, California 90071
Telephone: (213) 430-6000
Facsimile: (213) 430-6407

Ian Simmons (pro hac vice) (isimmons@omm.com)
1625 Eye Street, NW
Washington, DC 20006
Telephone: (202) 383-5300
Facsimile: (202) 383-5414

John Kappos (pro hac vice) (jkappos@omm.com)
610 Newport Center Drive, 17th Floor
Newport Beach, California 92660
Telephone: (949) 823-6900
Facsimile: (949) 823-6994

Attorneys for Defendant
Samsung Electronics Co., Ltd.

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