Qualcomm, the manufacturer behind the super-popular Snapdragon processors inside many of our smartphones and tablets, was recently the subject of a Chinese antitrust probe. That case has now been settled between Qualcomm and the Chinese authorities, leaving the Californian firm $975 Million out of pocket. For Qualcomm, that might very well be the end of it, but for their Chinese customers, this deal looks like the firing pistol of something much worse to come. Here in the West, big tech firms often rely on their war chest of patents to create revenue and control competition. You can put Apple and Microsoft at the top of this list, with the Cupertino-based company using its patents to try and stifle competition from Android manufacturers. Meanwhile, Microsoft seems content to just keep making money off of every Android phone shipped.
One of the main points in the Chinese probe of Qualcomm was its cross-licensing deal with smaller Chinese customers. Essentially, this agreement allowed smaller customers of Qualcomm’s to get free access to patents used by Qualcomm’s larger customers. As such, a small Chinese company out of nowhere could become a customer of Qualcomm’s and gain access to patents from the likes of ZTE and Huawei. That’s no longer the case, as the antitrust threw this deal out of the window, leaving said smaller customers open to attack from larger customers. According to a recent Reuters report, this has driven companies like TE and Huawei, established Chinese brands, to come knocking and ask for royalties on patents used in devices.
Big names like ZTE and Huawei have been amassing patents for some years now, and hold many key patents that other firms will rely on to do business. Now, ZTE and Huawei have the opportunity to ask manufacturers to pay up, and for the first time these companies can start to use their patents strategically; much like Apple and co do in the West. Speaking to Reuters about this Wang Yanhui, secretary general of the Mobile China Alliance he said that “For the first time, the settlement is forcing domestic manufacturers to recognize the value of IP (intellectual property) and consider how to use it strategically, which companies do in the West”. Speaking to a relative newcomer like Xiaomi, their CEO Bin Lin said that they only expect even more patent litigation and lawsuits in the future as their business expands.
In a statement, ZTE said that the deal “is positive for the development and protection of intellectual property rights in China, and will help promote fair competition for technology innovators.” As companies like Xiaomi and Meizu continue to grow and grow, we won’t be surprised to see further litigation and patent suits raised against them.