Saturday, 13 December 2014

Complete Story: Xiaomi sales terminated till 5th of Feb due to patent War; Is Ericsson misusing its power ?

China rising star in India Xiaomi has been stopped from selling their smartphone by Delhi High Court recently. Its expansion into the fast growing Indian smartphone market has been halted by a patent dispute. The Delhi High Court has ordered Xiaomi and its retail partner Flipkart to stop sales in India until 5 February, shifting their Happily Indian New Year to Chinese New year (celebrated in Feb in China)

The Delhi high court issued an ex-parte injunction against Chinese smartphone maker, Xiaomi, which prevents it from selling its phones in India. This happened after the Swedish telecom giant, Ericsson, filed a case against Xiaomi for Ericsson has accused Xiaomi of violating eight mobile phone patents relating to the technology standards 3G, EDGE and AMR (a technology that improves voice quality).

WHAT'S AN EX PARTE INJUNCTION?:  An ex parte injunction is an order passed by a court after hearing only one of the parties involved in a case. This is typically done when the implementation of the order is urgent.

Xiaomi is “restrained from manufacturing, assembling, importing, selling or advertising” its smartphones in India according to court documents released to the Economic Times. Indian customs have been ordered to block the import of smartphones or other devices that potentially infringe on Ericsson patents until further notice. In Simple terms Court has seize Xiaomi from all the operations

Xiaomi says it acquired 1,141 patents last year, a number considered unimpressive in the tech industry. Experts said this appeared to be the first patent litigation targeting Xiaomi since it outline plans to launch into up to 10 foreign markets.

“It looks like Xiaomi is experiencing a bit of culture shock in India,” said Wang Yanhui, secretary general of the Mobile Phone China Alliance, an industry lobbying group.

Ericsson, which was one of the leading mobile handset makers in the world at some point, holds over 35,000 standard-essential mobile communication patents, including those that cover 2G, 3G and 4G technologies. Every time someone uses these or any one of the 35,000 technologies that Ericsson's patent portfolio covers, the company gets a licensing royalty. If you want make a mobile handset, chances are high that you'll be paying Ericsson some money to license patents for some crucial features (like data transfer over 3G). Yep, it’s got some serious bullying rights.

Calculation: Xiaomi has sold over 8,00,000 Redmi 1s as per ericsson demanding about 1% of the selling price of Redmi 1s that is about Rs 60 per unit that means till now Ericsson lost about 5crore in absence of this contract (NOTE: the Volumes can be different from original)  

Out of the 35,000 patents credited to Ericsson, 400 are in India. Ericsson is also the single largest holder of patents for wireless technologies such as 2G, 3G, and 4G that are widely used in smartphones and tablets.

According to phonemakers like Micromax, Ericsson has failed to adhere to global standards on providing SEPs at fair prices, and its approach to negotiations has been unreasonable and discriminatory. Micromax, which controls about 18% of the Indian smartphone market, also alleged that Ericsson abused its dominant position by asking for exorbitant royalty rates for its SEPs.

Manu Jain, head of Xiaomi in India, said that the group had not received official notification of the ruling from the court, but that its legal team was “evaluating the situation”.

“India is a very important market for Xiaomi and we will respond promptly as needed and in full compliance with India laws,” he said.

However, terminating the sale of Xiaomi smartphone will give boost in the sale of other as well as Indian brands (don’t laugh Samsung and you too Micromax) Since this injunction was ex parte, Xiaomi now has a chance to file an appeal in the Delhi High Court, which gives it a chance to negotiate with Ericsson but February is too far so its better to sort it out with Ericcson out of court and get the sales chart burning again. Take a look at recent years Ericsson has sued more than a few technology companies in India and beyond:

  • 2010: D-Link (USA) Infringing a set of its 802.11 (b) SEPS 
  • 2012: Samsung (USA) patent infringements in the US
  • 2013: Micromax (India) Licence agreements on SEPS on GSM, EDGE and 3G
  • 2014: Intex (India) Licence agreements on GSM, EDGE, and UMTS/WCDMA
  • 2014: Xiaomi (India) SEPS infringements
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