Chinese firms smartphones use patents to challenge Apple and Samsung

Chinese smartphone manufacturers are increasingly using patents as ammunition in their battle against global leaders Apple Inc. and Samsung Electronics Co.

Technology giants China from Huawei Technologies Co. to ZTE Corp. and Lenovo Group Ltd., are acquiring patents through licensing agreements, purchases and large expenditures on research and development (R & D), measures that portend new legal challenges Apple and Samsung, both in China and abroad.

Huawei, which has set the ambitious goal of becoming the leading manufacturer of smartphones in the world in five years, sued Samsung last month in the United States, accusing the South Korean manufacturer of infringing 11 of its mobile patents. Samsung said it will defend itself.

The case marked the first major legal challenge of a Chinese cell manufacturer against a market leader, which upended the notion that Chinese companies are accused in patent disputes.

Last year, Huawei's third smartphone manufacturer in the world and market leader in telecommunications equipment, was the largest applicant for international patents under the Treaty of Patent Cooperation, which enables companies to register patents in various countries, according to the World Intellectual Property Organization, an organization based in Geneva. It was followed by US manufacturer Qualcomm Inc. chips and another Chinese company ZTE.

Patents also play a role in the most rugged terrain mobile Apple and Samsung sailing in China, where regulators insist that foreign companies adhere to the laws of the country. Shenzhen Baili, a new and little-known company, won an injunction against sales of the iPhone 6 and iPhone 6 Plus Apple in Beijing, based on design-related patents which claim ownership in China.

Apple denies the charge, analysts and legal experts say is an indication of the political environment of the country. But at the same time, major Chinese competitors like Huawei are making serious efforts to accumulate patent rights and aim against the two major industry. Three of the five leading manufacturers of smartphones in the world by sales during the first quarter were Chinese, including Huawei, according to research firm Gartner.

"We will see many more Chinese companies applying for patents abroad, and more agreements and disputes related to patents and technologies," predicted Benjamin Bai, a partner at Allen & Overy LLP in Shanghai, a firm that advises Chinese companies on international strategies ownership intellectual.

A smartphone can have thousands of patents. The issues are so complex and thorny that Apple and Samsung have been immersed in patent litigation processes around the world since 2011 in its fight for market dominance.

Huawei has expanded its patent portfolio, mainly due to its generous investment in R & D. Over the past five years, the company has spent about US $ 30,000 million in R & D. Your investment in this area last year increased 46% to reach $ 9,200 million, surpassing the US $ 8,100 invested by Apple in its latest fiscal year. Huawei now has 16 R & D centers in the world.

In a sign that Huawei advances in shaping its portfolio of intellectual property, Apple and Huawei signed a few months ago a license agreement under which the California company pays royalties to the Chinese for their patents, said a source privy .

Richard Yu, head of the consumer division of Huawei, said in January to about 100 engineers at its research center in Beijing that the company will inject money into R & D. He added that bonuses engineers will increase as the business grows.

"We can be as large as Apple," he promised Yu engineers as attending the meeting.

Other Chinese smartphone manufacturers such as Xiaomi Corp., are buying patents Western rivals not to be left behind. Last month, Xiaomi agreed to buy 1,500 patents from Microsoft Corp. in order to get to sell their devices beyond developing markets like India and Brazil.

"We must systematically negotiate international patent licenses and develop a strong intellectual property portfolio for defense purposes, by acquiring and patent applications," said Xiaomi VP Hugo Barra. He added that Xiaomi is looking to western markets like the US and Europe.

Analysts said the intellectual property of Xiaomi is not strong enough to expand into developed markets like the US The company said that last year asked 3,738 patents in China and abroad, compared to 2,045 in 2014.

Success in the smartphone market, in any case, also requires more than investment in patents and R & D, analysts warn.

When Lenovo purchased Motorola Mobility in 2014 for US $ 2,910 million, the PC maker Motorola patents cited as one of the justifications. Even with these patents, the company has had problems in the global smartphone market.

ZTE, which has expanded its patent portfolio, R & D and marketing, has become the fourth largest maker of smartphones in the US, according to Canalys research firm. But a few months ago he ran into trade problems with the US government, which tries to solve.

Huawei is still hopeful it can compete with rivals with considerable expenditure on R & D. At the company headquarters in Beijing, a team of antenna design for smart phones has multiplied by 10 in the last five years to add about 50 engineers. The group, one focused on several antenna design in Huawei- requested five new patents a year, according to an employee.

When Apple launched last year the iPhone 6S and iPhone 6S Plus, the team dismantled phones and their antennas tested in isolation rooms to compare with their own antennas. "We are still behind Apple, but we think the gap is closing," said the employee of Huawei.