India injunction highlights risks for Xiaomi as it expands beyond China 15 Dec 14
Ericsson has convinced the Delhi High Court to grant an ex parte injunction against Xiaomi in a dispute over standards-essential patents (SEPs). The temporary court order, issued last week, blocks Xiaomi and its exclusive distributor in India, Flipkart, from importing, manufacturing, advertising or selling devices that infringe the eight Ericsson patents at issue.
An Ericsson representative told TechCrunch that the company has spent more than three years trying to discuss licensing patents related to the GSM, EDGE and UMTS/WCDMA standards on fair, reasonable and non-discriminatory (FRAND) terms with Xiaomi, but has received no response from the Chinese smartphone maker. Meanwhile, a statement provided by Xiaomi to the same website said it was open to working with Ericsson to resolve the matter amicably.
Ericsson has previously brought suits against Indian handset makers including Micromax and Intex over some of the same SEPs. Last year it persuaded an Indian judge to bar the importation of infringing Micromax handsets pending a patent suit between the two. The Indian company came to the negotiating table and agreed to a temporary licensing arrangement with Ericsson, but also made a complaint to India’s Competition Commission alleging unfair practices. As reported by this blog, the Delhi High Court recently ordered Micromax to pay a royalty rate between 0.8% and 1.3% until the dispute is resolved; an antitrust investigation of Ericsson is still ongoing.
The Xiaomi ruling comes just five months after the company started selling phones in India. Hoping to repeat the rapid growth it has experienced at home, it has quickly turned India into its second-biggest market, selling over half a million phones in total. But as reported during this blog’s coverage of IPBC Asia last week, such meteoric growth can leave little time to build a patent portfolio; and as Xiaomi and others seek to expand outside of China, the chances are that they will need to acquire intellectual property from third-party sources to avoid being shut out of new markets by patent-rich incumbents. It would seem that scenario is now beginning to play out.
Xiaomi has focused on moving into developing countries such as India and Russia. The prospect of patent litigation –among many other factors – has always made entering Western markets a difficult proposition, but now it looks as though India will present its own risks. A major adverse decision there could spell out a much tougher path to success outside of China for Xiaomi than its executives would have been hoping for. Moreover, it underlines the need for the company to bulk up its IP portfolio – and fast. IAM has covered some of Xiaomi’s recent efforts to that end, including its investment in patent aggregation fund Ruichuan and its tie-up with chipmaker Leadcore Technologies. After this week’s setback in India, don’t expect Xiaomi’s IP spending spree to slow down anytime soon.
It’s also worth nothing that this is Ericsson’s second anti-trust success in India within the space of just a few weeks. The country has attracted something of an anti-IP reputation following a number of patent setbacks for foreign life sciences companies there, but it’s hard to think of a recent example of another jurisdiction in which the courts have been so accommodating to an owner of SEPs. Foreign businesses that may have thought there was no point in getting involved in India from a patent perspective may want to think again; while India companies looking for coverage and a level of protection in their home market would also do well to reconsider what has been, up to now, a marked reluctance to seek protection.
Register for more free content
- Read more IAM blogs and articles
- Receive the editor's weekly review by email