30 June 2016
Qualcomm Inc has filed a complaint in a Chinese court against smartphone maker Meizu Technology Co over its alleged violation of intellectual property.
Qualcomm’s litigation against Meizu is a part of the U.S. company’s attempt to protect its licensing business in the world’s largest smartphone market, where it has faced regulatory challenges in recent years including an antitrust investigation by Beijing. In February 2015 Qualcomm announced it had paid $975 million to settle a case brought by China’s National Development and Reform Commission. The agreement also set the terms for licensing fees that many Chinese companies hadn’t been paying. Since its settlement with Chinese authorities last year, the chip maker has signed patent-licensing agreements with a number of Chinese clients, including Huawei Technologies Co. and Xiaomi Corp.
However Meizu Technology Co. is refusing to pay the U.S. company licensing fees and has also avoided negotiating in good faith. Don Rosenberg, executive vice president and general counsel of Qualcomm, said in a statement:
“Meizu is choosing to use [Qualcomm’s] technologies without a license, which is not only unlawful, but is unfair to other licensees that are acting in good faith and respectful of patent rights, and ultimately damaging to the mobile ecosystem and consumers”
Qualcomm said it had negotiated with Meizu to sign a licensing agreement, but the Chinese company was unwilling to do so, prompting the U.S. firm to take legal action.
Qualcomm gets the majority of its profit from technology licensing and China is it's most important market, making up 53 percent of global revenue of $25.28 billion for the fiscal year ended Sept. 27. A large chunk of this profit came from higher-margin royalties earned from the company's licensing arm. As part of its 2015 settlement with the NRDC, Qualcomm agreed to a plan that modified its business practices in China.
The company has since signed more than 100 Chinese handset manufacturers to licensing agreements under the new terms, but is facing problem with Meizu and a few others. Meizu Vice President Li Nan was quoted as saying:
“Meizu has always been staying in close communication with Qualcomm on the patent issue, and has conducted several in-depth discussions with them. We respect Qualcomm’s right to take legal action if they’re not satisfied with the business negotiation. If Qualcomm wanted to resume their discussions, Meizu would welcome it."