Thu, Dec 25, 2014 - Page 14 News List

Xiaomi faces challenge over patents

Bloomberg

Xiaomi Corp (小米) became the biggest smartphone seller in China without an extensive — or expensive — collection of patents. That low-cost approach is now backfiring as accusations of technology infringement stall its global push.

Ericsson AB sued Xiaomi in India, saying the smartphone maker had not licensed inventions by Ericsson that enable wireless devices to connect to networks. Judges banned some Xiaomi devices in the company’s biggest overseas market, pending another hearing next month.

The lawsuit threatens founder Lei Jun’s (雷軍) drive to boost next year’s shipments to 100 million units, a five-fold gain from last year, with an eye toward overtaking Samsung Electronics Co and Apple Inc globally. It also puts Xiaomi’s strategy of selling devices for near-cost at risk as the Beijing-based company increases spending on research and licensing to avoid the legal battles Samsung and Apple fought around the world.

“The nightmare will keep on going,” said Neil Shah, Mumbai-based research director for devices at Counterpoint Research. “Patent companies in other countries will now go after Xiaomi in other markets and use the India market as the example.”

Low research costs helped Xiaomi go from startup to the world’s No. 3 smartphone vendor within four years of its founding. Virtually all those sales were in China, where weak enforcement of intellectual property rights meant Xiaomi was “much more protected,” Shah said.

Xiaomi says its patent portfolio does not make it any more exposed than other makers using Googe Inc’s Android software.

“Our IP [intellectual property] situation is the exact same as everybody else’s in this space,” Xiaomi vice president for global operations Hugo Barra said in an interview last month.

Technology companies often have their own hoard of intellectual property, which includes patents and trademarks, to protect their innovations and provide a type of currency when it comes to using that of others.

Xiaomi’s challenges in this area are noticed by rivals.

“The IP issue may delay the expansion speed of the Chinese company,” Sony Mobile Communications Inc president and chief executive officer Hiroki Totoki said in response to questions in Tokyo on Friday last week.

Sony’s Xperia devices compete with Xiaomi.

The patent portfolio is small because Xiaomi is young and must build it over time, said Denis Berger, a patent lawyer at Eiger Law in Shanghai.

Entering an overseas market with a limited portfolio can be a “calculated risk,” he said.

Xiaomi focused on software while offering devices “at or near cost,” Barra said.

Xiaomi is working to expand its portfolio globally after filing 600 patent applications last year, company spokeswoman Joy Han said. It will make 1,000 applications this year and double that in each of the next two years, she said.

“We file a ton of patents, particularly in China, but not only in China, around the world,” Barra said. “We license patents, buy patents. It’s the same thing as everybody else has done.”

Ericsson holds essential patents for 2G, 3G and 4G mobile wireless technology, which means any seller of products compliant with those standards must secure licenses, Ericsson spokesman Johannes Persson said.

“Xiaomi refused to respond in any way regarding a fair license to Ericsson’s intellectual property,” Persson said.

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