Chinese tech giants in rare mobile phone patent court battle

Category: WTO Sub-category: Intellectual Property
Document type: news


China's two biggest technology companies Huawei Technologies and ZTE have launched a court battle in Europe over mobile phone patents related to fourth-generation mobile technology. Huawei had filed patent infringement lawsuits related to data cards and improper usage of a Huawei-registered trademark on some of its products against ZTE in France, Germany and Hungary. Whereas ZTE accused Huawei of infringing its 4G patents and asked a French court and Chinese regulators to invalidate a Huawei patent related to rotary USB connector which is used to exchange data between devices. Their dispute comes amid mounting complaints by foreign business groups about Beijing's industrial policy. According to them, China is improperly supporting favored companies by limiting market access and providing low-cost loans and other support.

Fourth generation (4G) mobile technology is a successor to the 3G and 2G families of standards. It will deliver more stable connections, wireless broadband and other advances. A 4G system is expected to provide a comprehensive and secure all-Internet Protocol (IP) based mobile broadband solution to laptop computer wireless modems, smart phones, and other mobile devices. Facilities such as ultra-broadband internet access, IP telephony, gaming services, and streamed multimedia may be provided to users using this technology.

Presently it is in limited use in the US and being tested elsewhere. Hence, control of key patents will decide which equipment suppliers are positioned to reap billions of dollars in sales once it is rolled out in other markets.

Huawei, founded in 1987 by a former Chinese military engineer, currently has 110,000 employees and revenues of $12.33 billion in 2010. ZTE, founded in 1985, currently has 70,000 workers and revenues of $5.66 billion in 2010. Both Huawei and ZTE make network gear- the core of phone systems. According to market-research firm Gartner, in 2010, Huawei ranked 2nd in the global carrier-network-infrastructure market with a market share of 15.7% while ZTE ranked 6th with a market share of 7.2%.

The two companies are competing with Nokia-Siemens Networks, Ericsson and Alcatel-Lucent and have small but growing U.S. and European presence and consider themselves as potential global 4G leaders; this has given the Government of China a hope to transform the nation from a low-cost factory into a creator of profitable technology.  However, the recent patent dispute between them has thrown a challenge for communist leaders who are trying to create global competitors in telecom, energy, and other fields as well as manage Chinese corporate ambitions.