Source of this article: Times Weekly Author: Guo Meiting

The mobile phone patent war is back in flames.

On July 12, it was reported that Qualcomm was suing Shenzhen Transsion Holdings Co., Ltd. (688036.SH Transsion Holdings) in the India Delhi High Court for infringement of four non-standard essential patents.

Later, Qualcomm confirmed that it was suing Transsion Holdings, and issued a statement saying that "Qualcomm has filed a legal action against Shenzhen Transsion Holdings Co., Ltd. to protect our patent rights and help restore a level playing field for all of our licensees." ”

Source: Screenshot from the official website of TransSound

According to the Times reporter, the patent rate is a major focus of the lawsuit.

Qualcomm believes that Transsion Holdings has been refusing to fully obtain a license from Qualcomm, and that most of Transsion's products have not been licensed by Qualcomm so far, and are still infringing on Qualcomm's highly valuable patent portfolio. However, in response to a reporter from Time Weekly, Transsion Holdings pointed out that the practice of some patentees demanding excessively high license fees does not fully comply with the principles of fairness, reasonableness and non-discrimination.

It is understood that India is one of the relatively important markets in Transsion Holdings' global layout. According to IDC statistics, global smartphone shipments in 2023 will be 1.17 billion units, a year-on-year decrease of 3.2%, while Transsion Holdings will ship 194 million mobile phones, a sharp increase of 24% against the trend. Among them, Transsion Holdings has a market share of 8.2% in India's smart phone market, ranking sixth.

On July 14, Transsion Holdings announced that the company's controlling shareholder proposed that the interim dividend ratio in 2024 should not be less than 50% of the net profit attributable to the parent company in the first half of 2024.

As the "king of African machines", Transsion Holdings has a strong development momentum, but there are also many troubles.

Why was he sued?

It is understood that Qualcomm sued Transsion in India for infringement of its four non-standard essential patents. This is relative to Standard Essential Patents (SEPs).

SEP refers to the patents that must be used for the implementation of technical standards, which are irreplaceable and mandatory. Therefore, the holder of such patents is required to commit to the standardization organization to license these patents on fair, reasonable and non-discriminatory terms, with the aim of preventing the patentee from using his position to monopolize the market.

Non-standard essential patents refer to those patents that are not required by international standards or industry standards, but they fall within the scope of patents owned by the patentee. Other businesses can try to circumvent these patents, but will need to pay a patent fee if they choose to use them.

According to a statement provided by Qualcomm to Time Weekly, Qualcomm believes that Transsion uses Qualcomm's patented technology in its products, including wireless communication standard technology and patented technologies in other fields, which are an integral part of Transsion's mobile terminals. Although Transsion recently signed a license agreement with Qualcomm for some of its products, the vast majority of its products have not been licensed by Qualcomm and are still infringing on Qualcomm's valuable patent portfolio.

According to the relevant person in charge of Transsion Holdings, Transsion and Qualcomm have signed an agreement on the licensing of 5G standard patents and are fulfilling the agreement. TRANSSION Holdings' current sales network covers more than 70 countries in emerging markets such as Africa and South Asia. In these countries, some patentees do not own or only have a small number of patents, but demand excessively high royalties at a globally uniform rate, without taking into account factors such as differences in the level of economic development in different regions, no patents or only a small number of patents in a particular region or market, and the existence of existing precedents that offer different rates in different regions.

"We believe that the practices of some patentees do not fully comply with the principles of fairness, reasonableness and non-discrimination." Transsion Holdings responded.

Xia Hailong, a lawyer at Shanghai Shenlun Law Firm, told the Times that Qualcomm, as a patent holder, has the right to file a lawsuit against the party it believes is infringing, while Transsion, as a defendant, may raise defense grounds, such as non-infringement and patent invalidity. In this type of patent litigation, the court needs to review the evidence provided by both parties, including the validity of the patent right, the existence of infringement, etc., in order to make a final decision.

Previously, Qualcomm had a "patent war" with Apple and Meizu, all of which ended in reconciliation.

In 2016, Qualcomm filed a lawsuit against Meizu in the Beijing Intellectual Property Court because Meizu had not signed a patent license agreement for 3G/4G technology with Meizu and had been inconclusive for seven years. Meizu eventually accepted Qualcomm's patent licensing terms, and the two parties settled to end the lawsuit.

In 2017, Apple sued Qualcomm in the U.S. District Court for the Southern District of California for United States on suspicion of "antitrust" and sued Qualcomm for unfair patent licensing that cost Apple $1 billion. Qualcomm then sued Apple's OEM manufacturer to the court, asking the court to order Apple to perform the patent license contract and compensate for its losses. After that, the "fairy fight" between the two companies spread to a global scale. It was not until 2019 that the parties reached a settlement agreement. Under the settlement, Apple will pay Qualcomm a sum of money, and the two companies have also reached a six-year patent license agreement and a multi-year chipset supply agreement.

Patent licensing fees have always been one of Qualcomm's important sources of income. Qualcomm's 2023 financial report shows that the revenue from patent licensing business (QTL) is as high as $5.3 billion, accounting for 15% of its total revenue. According to the financial report for the second quarter of fiscal year 2024 released in May this year, Qualcomm's QTL business revenue was $1.3 billion, an increase of 2% compared with the same period last year, accounting for about 14% of total revenue. This growth was primarily driven by pro-forma sales growth for 3G/4G/5G multimode products.

Source: Screenshot from Qualcomm's financial report for the second quarter of fiscal year 2024

Negotiations will continue

In recent years, Transsion Holdings has developed rapidly in a number of emerging markets.

According to the global smartphone shipment data released by market research institutions IDC and Canalys in the first quarter of 2024, Transsion Holdings' shipments ranked fifth in the world.

Transsion Holdings' main products are mobile phones under the three major brands of TECNO, itel and Infinix, including feature phones and smartphones. The sales area is mainly concentrated in the global emerging market countries such as Africa, South Asia, Southeast Asia, the Middle East and Latin America.

India is one of the relatively important markets in Transsion Holdings' global layout, and Transsion Holdings has set up factories and logistics warehouses in Ethiopia, India, Bangladesh and other places. According to IDC statistics, in 2023, Transcom will have a market share of 8.2% in India's smartphone market, ranking sixth.

Therefore, Qualcomm chose India as the battlefield of litigation, which may have a great impact on Transsion. "For Transsion, if it is judged to be infringing, it may face risks such as liability for compensation, damage to market reputation, and product ban. This could negatively impact its business and financial performance in the India market. Xia Hailong mentioned.

Previously, due to the loss of the patent lawsuit with Nokia, OPPO and vivo were banned in Germany. It wasn't until a settlement with Nokia that OPPO's brand One Plus began to return to the Germany market. Up to now, the Times reporter went to the official website of OPPO Germany to check, and it was still empty; The official website of vivo Germany shows that "currently vivo products are not available in Germany".

Source: Screenshot from vivo Germany official website

In addition to Qualcomm, Transsion Holdings is facing an intellectual property lawsuit filed by Philips in India. According to the United Kingdom Financial Times, Nokia is also pressuring Transsion Holdings to pay patent fees.

Xia Hailong said that with the increasing protection of intellectual property rights around the world, in order to cope with such problems, enterprises need to strengthen R&D investment, improve independent innovation capabilities, and reduce dependence on external patents; On the other hand, it carries out patent layout in advance and builds its own patent portfolio through application and acquisition, forming a dual strategy of defense and offense. In addition, he advises companies to maintain good communication with international patent organizations and industry associations to keep abreast of industry trends and patent risks, and at the same time seek professional legal assistance in target market countries to ensure that they can respond quickly when facing litigation.

"In the mobile phone industry, intellectual property litigation is frequent. In the course of their business, domestic and foreign mobile phone manufacturers have faced or are facing intellectual property lawsuits. The relevant person in charge of Transsion Holdings also said that it will continue to carry out patent negotiations with third parties and promote the determination of reasonable license fees under the framework of the principles of fairness, reasonableness and non-discrimination.