Chinese Smartphone Companies are Building Intellectual Patents Property

Apple Inc. (NASDAQ: AAPL) has recently been sued by a little-known Chinese startup company, Shenzhen Baili, in terms of design-related patents of Apple’s iPhone 6 and iPhone 6 plus, which raised more patents disputes between developing Chinese smartphone makers and world’s leading technology companies such as Apple and Samsung Electronics Co.

Chinese technology giants Huawei Technologies Co., ZTE Corp. and Lenovo Group Ltd. are building up their intellectual property by acquiring patents through licensing deals, acquisitions and hefty spending on research and development.

“Chinese makers have been building their own IP pools over the past years and are able to somehow fight against industry giants,” said James Yan, Beijing-based research director at Counterpoint. “Apple isn’t willing to publicly lose an IP case in China and the best option for them is to offer settlement fees.”

Huawei, the world’s third-largest smartphone maker and the leader in the telecommunications-equipment market, sued Samsung in the U.S. last month, claiming the company violated 11 of its mobile patents. Huawei was the largest filer of international patent applications under the Patent Cooperation Treaty last year, which makes it easier for companies to file patents in multiple countries, according to the Geneva-based World Intellectual Property Organization.

Huawei has an ambitious goal of becoming the world’s top smartphone makers in five years, especially in terms of increasing their patent portfolios. Over the past five years, Huawei has spent nearly $30 billion on R&D. Last year, it’s R&D spending rose 46% to $9.2 billion, beating the $8.1 billion Apple spent in its most recent fiscal year. Huawei now has 16 R&D centers around the world, including in the U.S. and Europe.

Other Chinese smartphone makers such as Xiaomi also agreed to buy 1,500 patents from Microsoft last month in order to strengthen their patents portfolio and sell its devices to developing markets such as India and Brazil.

“We are going to see a lot more Chinese companies filing patents outside China, and more deals and lawsuits involving patents and technologies,” said Benjamin Bai, a partner at Allen & Overy LLP in Shanghai who advises Chinese companies on international intellectual-property strategies.

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