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Bold Move! Preparing for the Future Means Preparing A Foundation of Patents

August 8, 2017

Introduction

If at first glance the name “Xiaomi” doesn’t ring a bell, don’t be dismayed. While Xiaomi, pronounced like “show me”, would love to become a household name, this privately held Eastern tech giant has avoided the Western market for good reason. While entering the global market can spark mass brand recognition and profits, it is not without many legal pitfalls and perils, most notably patent infringement. While Xiaomi is able to manufacture quality electronics, ranging from smart phones, televisions, and everything in between, at low costs, the available markets to sell these items is severely constricted by a lack of a robust patent portfolio and the possibility of patent infringement suits.

At an evaluation of more than $46 billion in 2014, Xiaomi has unfortunately faced a steady decline in value to around $4 billion in 2017. While in part this is due to their low profit margin, high volume sales business model, their inability to pierce many markets has had considerable detrimental effects on the company’s profits. Falling short of projected sales numbers, which easily could have been reached through the availability of more markets, has casted a shadow of doubt on Xiaomi’s ability to steal coveted space from other technology giants like Samsung Mobile and Apple. With a 36 billion dollar decline, previous patent infringement lawsuits, and fear of upcoming lawsuits; Xiaomi’s history demonstrates the necessity of careful intellectual property planning.

 

Current Infringement Problems

With a population of 1.3 billion, alongside a growing appetite and infrastructure for mobile technology, India is an ideal market for Xiaomi’s electronic expansion. However in 2014, Xiaomi’s move into India was stunted when they were barred from using Mediatek processors within their mobile phones after infringing on patents held by Ericsson. While Xiaomi was still able to sell mobile phones within India, they had to do so with pricier Qualcomm processors, losing out on sales to more competitively priced mobile handsets.

Considerations of expansion into the United States was also met with equally unfavorable grievances, as a few smaller companies immediately filed patent infringement suits against Xiaomi. Many of these lawsuits are generated either due to patent trolls or larger corporations, such as Samsung Mobile and Apple, trying to avoid the loss of market shares to the Eastern tech giant. Xiaomi’s infringement may also extend well beyond patents and into the world of trademarks. While Xiaomi’s software is homemade, many of their mobile designs are unmistakably inspired and copied from Samsung and Apple. While imitation may be the best form of flattery, it is not the best way to avoid legal disputes.

Preparing for the Future

Xiaomi hasn’t sat idle over the past few years when it comes to acquiring patents and the necessary foundation for a more litigation free future. It has begun to file numerous patents of their own as well as patent licensing deals with a multitude of companies in order to transition smoothly into the global marketplace. In 2014, Xiaomi filed an impressive 1,622 patents and an even more staggering 3,136 patents in 2015, a large percentage of which were international. More importantly, Xiaomi has negotiated licensing deals with necessary companies including Qualcomm, Intel, Microsoft, and Leadcore Technologies. Just recently, Xiaomi even signed a licensing deal with Nokia that includes essential cellular standard patents and infrastructure use. While Xiaomi’s expansion may have been stalled by lack of intellectual property, they have now secured the necessary patent portfolio, an indispensable foundation for any business.

Whether a large corporation, or a small startup, the underlying message is the same. Careful intellectual property planning and patents are necessary to protect your assets and inventions as you enter into the marketplace. Correct claim construction and prior art searches can protect you from future litigation and ensure a problem free launch into the marketplace. It all begins with choosing the right attorneys to guide and provide you with essential knowledge and experience. Go Big, go Bold.

Author: Gregory Pandorf, Intern

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