Samsung Could Cut IP Ties With SanDisk

What's more, the royalty rate Samsung pays is believed to be relatively rich - as high as 4%, according to Berenbaum's calculations, vs. the 2% rate that legal experts say is more typical in semiconductor licenses.

That may be because the agreement was drafted seven years ago, before the flash business became the $14 billion market it is today.

Flash memory chips are at the heart of today's consumer electronic gadgets like cell phones, digital cameras and Apple's(AAPL Quote) iPod. The chips' ability to retain data even when electrical power has been shut off make them an ideal means of storing digital music, video and photos in portable, handheld devices.

The question is whether Samsung can produce flash chips without infringing SanDisk's patents.

Back in 1997, the answer was a resounding no. The U.S. International Trade Commission went as far as barring Samsung from selling flash chips in the U.S. that year, a ruling that compelled Samsung to settle with SanDisk and sign a licensing deal.

But according to some analysts, the rapid-pace of semiconductor innovation means the balance of power may have changed even since 2002, the last time the two firm's settled their IP disputes.

One of Samsung's key strengths is its ability to continually improve the process by which it manufactures semiconductors in large volumes, says Bob Witkow, a consultant who has worked with all the major flash memory firms.

"If every once in a while they improve the process and file a patent on it, then later on in [litigation] discovery it's something" that they can use to strengthen their hand, says Witkow.