ZTE vs. Ericsson: Let the Patent Games Begin

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Gotta love a good, old fashioned multi-jurisdictional, multi-year patent fight between two tech giants, particularly when one is a well established European firm while the other is a relative newcomer from China.

The two companies have been involved in protracted patent licensing negotiations for years. This is pretty normal stuff for the tech sphere. The established company, Ericsson, has patents in a wide range of mobile/wireless technology worldwide. When new companies in the sector expand overseas, they run into that patent wall and have two options: infringe and get smacked down or negotiate a license agreement and pay.

This is assuming that there is indeed patent infringement going on in the first place of course, but industry watchers that I’ve read for a while now seem to take that for granted in this case. Anyway, why would ZTE have even bothered negotiating for this long if they thought that Ericsson had a weak infringement case?

But when the negotiation drags on too long and the numbers remain too far apart, you know what happens next. Right, the lawsuits come out.

Ericsson, the world’s largest mobile network equipment maker, is suing ZTE, a Chinese rival, over alleged infringements of the Swedish group’s technology patents.

Ericsson has accused ZTE of refusing to sign a patent licensing agreement under which the Chinese telecoms equipment maker would pay royalties to the Swedish group.

That’s what I’m talking about. What’s Ericsson’s plan here? Well, most of the time when you have lawsuits filed after negotiations break down, the patent holder is looking to use the suit(s) as a stick with which to beat up the infringer a bit and force him back to the negotiating table.

Seems to be the obvious tactic here as well. So if you’re Ericsson, where do you strike? Where it hurts the most, which in this case means the places in Europe where ZTE, a mobile handset maker, is looking to pump up its export volume.

On Friday, Ericsson said it had filed lawsuits against ZTE in the UK, Italy and Germany.

Those are some pretty nice export markets right there, hmm?

OK, so what are ZTE’s options now? First, they can go back and negotiate again. Second, they can hunker down and fight these patent infringement cases. Third, they can go on the offensive in several ways, including filing their own infringement cases against Ericsson or trying to get Ericsson’s patents invalidated. These options are not exclusive, of course.

Ball’s in your court now, ZTE:

ZTE’s intellectual property director Wang Haibo responded by saying Ericsson infringes certain ZTE patents and the Chinese company will consider suing Ericsson, though he couldn’t immediately name specific ZTE patents being infringed. Wang, speaking to Dow Jones Newswires, said ZTE could file a suit in China, Western Europe or another region.

I don’t know about you, but that’s a pretty weak statement, merely asserting that “they do it too” without being specific. Almost sounds petulant.

And then there’s this:

ZTE, the Chinese telecoms equipment maker, has vowed to retaliate after it was sued by Ericsson of Sweden for alleged patent infringement.

The state-controlled company said it would launch “patent invalidation procedures” against Ericsson in China in response to its rival’s legal action.

Hmm. I’ve seen an article or two that suggests they filed already, which would surprise me. Ericsson filed its cases Friday, so that would mean ZTE slapped together a case within hours and filed it with the State Intellectual Property Office (SIPO) on Saturday. We’re currently on holiday here (Qingming), and most people in China worked on Saturday so that they would get a Sunday, Monday, Tuesday three-day holiday. So could ZTE have filed a new case with SIPO on Saturday? Seems highly unlikely.

Anyway, let’s assume they’ll do so sometime after the holiday is over. What’s going on here? Does a successful China invalidation action against the patents at issue in the European infringement suits help ZTE in Europe? I’m not a patent litigator, so I may be missing something here, but while a China invalidation might be interesting evidence in a European infringement suit, it certainly wouldn’t be given a great deal of weight.

So why did ZTE file an invalidation action in China instead of Europe? Two answers. First, they’re going on offense, and anything’s better than nothing — they could always file in Europe later as well. Second, and this is total speculation now, perhaps they thought that of any jurisdiction, they had the best chance of succeeding on their “home turf.” ZTE is a big player over here, and while I’m not accusing anyone at SIPO of local protectionism (the action hasn’t even been filed yet), the idea that ZTE might think that way wouldn’t surprise me in the least.

If they don’t negotiate a license in the near future, this fight could go on for a long time. Stay tuned, should be fun.