Ericsson, ZTE in patency legal battle

Ericsson has filed three patent infringement lawsuits against Chinese company ZTE. The Swedish telecoms equipment maker filed the suits in the UK, Italy and Germany after trying to reach an agreement with ZTE about licensing the patents. The development is the latest of an increasingly aggressive set of moves being taken by a number of vendors in the industry, with patent disputes erupting among Apple, Nokia, Motorola and Huawei among others.

In the latest case, Ericsson has accused ZTE of infringing some of its patents relating to GSM and WCDMA technologies. According to Ericsson, ZTE uses the patents in its handsets, its network infrastructure, or both, in the three European countries. Ericsson is planning to ask the courts to stop sales of ZTE products that use technology in which the Swedish group’s patents have allegedly been infringed. But ZTE denied the allegations and accused Ericsson of abandoning the negotiations that had been under way between the companies saying it will initiate “patent invalidation procedures” against Ericsson.

“For several years, Ericsson has made numerous attempts to sign license agreements with ZTE on fair, reasonable and non-discriminatory (FRAND) terms,” the company said. “Such attempts have unfortunately been unfruitful, and we have now, as a last resort, decided to exercise our legal rights to enforce our patents against ZTE's infringing products,” the company said, noting it has signed licensing deals with more than 90 vendors.

ZTE, which said it plans to take its case to the patent re-examination board of China's State Intellectual Property Organization, said it also has been able to reach cross-licensing agreements in most cases and seldom has to resort to third-party negotiations, let alone lawsuits.

Intellectual property rights (IPR) are the lifeblood of infrastructure, chip and device manufacturers, which spend billions developing new technology and can recoup research-and-development expenses through licensing the technology to competitors. However, because the financial stakes are so huge, companies look to the courts system if they feel they are not being paid fairly for their innovations. On the other hand, because patent dispute claims can take years to resolve, companies sometimes won't level patent-infringement charges until the market or company has traction.

Patent lawsuits can take years to reach resolution. Qualcomm Inc. (QCOM) and Nokia Corp. (NOK) battled back and forth for two years before settling IPR claims. In perhaps one of the most infamous patent disputes, Research In Motion Ltd. (RIM) paid $612.5 million to NTP, a tiny Virginia-based company, to settle a five-year battle over patent claims that had been rejected by the U.S. Patent and Trademark Office, leading to calls for patent reform in the United States.

The case highlights growing competition between Ericsson, the world’s biggest network infrastructure maker by sales, and fast-growing Chinese rivals such as ZTE and Huawei. It also underlines the intensifying battle over intellectual property in the telecoms industry.

While smaller than Huawei, ZTE has become one of the world’s top five mobile network equipment makers and is enjoying strong growth in the handset market. The Hong Kong-listed company insisted it was committed to respecting intellectual property rights, pointing out that it filed more international patent applications last year than any other telecoms group.

In addition to seeking damages, Ericsson plans to ask courts in the UK, Italy and Germany to halt sales of ZTE products that use technology in which the Swedish group’s patents have allegedly been infringed. ZTE said it would “fight any action that intends to involve our customers in patent lawsuits”.

In the technology-intensive telecommunications industry, ZTE sees innovation as the core of the company and attaches great importance to patent strategy. The company has consistently invested 10 percent of its income on R&D including the development of an international patent strategy. As of December 31, 2010, ZTE held a total of 33,000 patents, among which, 1863 were international patent applications in 2010 as registered with WIPO (World Intellectual Property Organisation), making ZTE No.1 in the telecommunications industry and No. 2 across all industries worldwide.

When disputes over patents occur, ZTE always follows the rules of mutual respect and mutual benefits to seek reasonable solutions. To date, through negotiation and cross-licensing, ZTE has reached a consensus with most telecommunications systems and components vendors on the majority of products and has been seldom needed to resort to third party adjudication, let alone legal action.