ZTE has signed a deal with Microsoft whereby the Chinese smartphone manufacturer will pay a royalty for every Android and Chrome device it makes.

ZTE makes patent royalty deal with Microsoft
ZTE is the first Chinese manufacturer to agree to pay royalties to Microsoft. (Credit: Reuters)

The agreement comes a week after Microsoft struck a similar deal with Taiwanese manufacturer Foxconn, which has agreed to pay a flat fee on every Android device it manufactures.

While not as large as Foxconn, which according to Forbes, accounts for roughly 40 percent of all consumer electronics manufactured in the world, ZTE shipped 9.5 million devices in the fourth quarter of 2012 giving it 4.3 percent of the global market share according to the latest figures from research firm IDC.

Microsoft has similar royalty agreements with 19 other smartphone makers, including Samsung, HTC and LG. However, ZTE is the first Chinese manufacturer Microsoft has made a deal with.

Android phone makers are required to pay royalties since the operating system uses interface technology patented by Microsoft. In return, manufacturers are given access to other Microsoft patents used in its phone and tablet devices, including those for operating systems and browsing.

"Experience has taught us that respect for intellectual property rights is a two-way street and we have always been prepared to respect the rights of others just as we seek respect for our rights," said Microsoft general counsel Horacio Gutierrez in a statement published by TechCrunch.

Microsoft is yet to arrange royalty deals with Chinese manufacturer Huawei or Android creator Google. In the past, Google has referred to Microsoft's licensing agreement strategy as "extortion".

"This is the same tactic we've seen time and again from Microsoft," the company said in a statement in 2011. "Failing to succeed in the smartphone market, they are resorting to legal measures to extort profit from others' achievements and hinder the pace of innovation. We remain focused on building new technology and supporting Android partners."