Microsoft announced Thursday that it has signed a definitive agreement with Samsung Electronics, to cross-license the patent portfolios of both companies, providing broad coverage for each company’s products. Microsoft will receive royalties from Samsung and both companies will develop and market Windows Phone operating system.

Under the terms of the agreement, Microsoft will receive unspecified royalties for Samsung’s mobile phones and tablets running the Android mobile platform. In addition, the companies agreed to cooperate in the development and marketing of Windows Phone operating system and appropriate handsets.

Earlier this year a rumour suggested that Microsoft demanded $15 for each Google Android-based smartphone from Samsung, which is a massive amount of money, given the current situation on the market of smartphones. Samsung agreed to pay $10 per smartphone "in exchange for a deeper alliance with Microsoft" for the Windows Phone platform. Apparently, the two companies have finally found a solution to their legal dispute.

"Microsoft and Samsung see the opportunity for dramatic growth in Windows Phone and we are investing to make that a reality. Microsoft believes in a model where all our partners can grow and profit based on our platform," said Andy Lees, president of Windows Phone division at Microsoft.

Charging Samsung Electronics, which is currently the largest supplier of Android-based mobile phones, for patents not only gives Microsoft additional money, but will may also make it easier for the software firm to sell its WP7 operating system to Samsung. But making Android more expensive for manufacturers of phones does not automatically make Windows Phone 7 more competitive than Android, which is why it will hardly translate into larger sales of Microsoft-powered handsets. In fact, making Android-based phones less competitive on the market brings direct benefits to Apple's iPhone and iOS platform.

HTC, another large maker of Android-based handsets already pays Microsoft royalties for their technologies used by Android.

“We are pleased to build upon our long history of working together to open a new chapter of collaboration beginning with our Windows Phone 'Mango' launch this fall,” said Dr. Won-Pyo Hong, executive vice president of global product strategy at Samsung’s mobile communication division.

Tags: Samsung, Microsoft, HTC, Android, Google, Windows Phone, iOS