Xiaomi faces legal trouble in India

Indian smartphone patents boom sets alarm bells ringing

The Ministry of Industry and Information Technology of China recently issued a patent pre-warning report for China's smartphone makers that have already tapped into the Indian market.

The report said that patents are more frequently being used as a weapon to attack competitors as market competition is intensifying.

Zhou Jie, an intellectual property expert at China Academy of Telecommunication Research under the MIIT, told the Legal Weekly newspaper that Chinese smartphone companies have been sued in Indian courts for IP disputes and their products seized by local customs in recent years.

Figures from the market consultancy International Data Corporation in August showed that India saw robust growth in the smartphone industry in the second quarter this year, during which more than 18 million phones were sold - an increase of 84 percent over the same period last year.

Xu Hao, senior analyst from Analysys International, said that the market is transforming 2G services into 3G services, which caused many local consumers to replace their old phones with smart ones.

As the industry's second largest market in the world, India has attracted many Chinese smartphone manufacturers to expand their operations, which now take more than half of the market share, said Sun Wenping, head of Shenzhen Mobile Communications Association in Guangdong province.

"Shenzhen alone has nearly 300 mobile phone producers that export products to India, including the industrial leaders Huawei, ZTE and Gionee, according to the local customs," Sun told the newspaper.

In addition, the fast-rising handset maker Xiaomi Corp in Beijing also tapped into the Indian markets in July.

Chinese products are welcomed in Indian markets due to their competitive price, so both industry giants and patent operators, also known as non-practicing entities, have paid special attention to their Chinese competitors, the newspaper reported.

Ren Caibo, head of the legal department in smartphone maker Coolpad Group, said patent disputes involving non-practicing entities are a big challenge for Chinese phone makers in India.

"We can discuss about patent cross-licensing with other phone makers to solve the disputes, but the method is useless when faced with the non-practicing entities, because they do not have real products," he said.

Sun said India's local phone makers are unlikely to file patent lawsuits against Chinese manufacturers because they "currently have insufficient research capabilities and fewer patent reserves".

But he called for more attention to some foreign industry giants who have developed Indian markets for years.

Li Junhui, a researcher at the IP research center of China University of Political Science and Law, said whether Chinese phone makers would encounter patent disputes in Indian markets mainly depends on three facts - whether the markets have strong local competitors, whether their main foreign competitors have already entered into the markets, and the local patent deployment of Chinese companies.

He said risks do not mean real hazards, adding that if the emerging Chinese companies in India do not have enough market influences, they may not have those troubles, because patent infringement cases are costly and time-consuming.

Although no large-scale patent infringement lawsuit against Chinese manufacturers has happened yet in India, Ren said they cannot rule out the possibility that some foreign companies "are waiting for a proper time".

In order to avoid the patent barriers becoming a weak point for Chinese phone makers when "going out", many of them have increased investments on patents and strengthened their research capacities.

Zhou said Chinese manufacturers should make comprehensive studies of the local economic and political situations and the development of the mobile communication industry before they enter into Indian markets.