Why Xiaomi Will Fight IP Ban in India

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December 14, 2014 by ...

Xiaomi has been ordered to halt all sales, import and advertising of its cellphones in India. This is brought about by allegations that Xiaomi has used up to eight Ericcson technologies without paying for them. Xiaomi originally said that they had never heard such a claim. They then shifted their posture and said that their kit had indeed been banned and are now fighting back. It would appear that some Indian lawyers will help them.

The Delhi High Court issued a injunction against Xiaomi due to alleged use of up to eight Erricson patents covered by the Standard, Essential Patents (SEPs) and consequently, India’s FRAND (Fair, Reasonable and Non-Discriminatory) measures. Essentially the afore-mentioned can be used to forestall such theft from occuring.

For their part, Erricson says that they have been after Xiaomi for three years, to pay up for use of Ericcson technology. This means that since they began selling phones, Xiaomi has been non-compliant.

Why sue now?
One may wonder why it took Ericcson so long to sue. If Xiaomi has been stealing since its inception, then what took Ericcson so long? The problem is that Xiaomi did not sell handsets outside of China until this year. Being a local hero, it enjoys protection from Beijing. Rather than enforce the laws on its books, Beijing tends to look the other way when local firms run afoul of the ‘laws’.

Ericcson also knows that Beijing can be vindictive and mercenary when it comes to things such as this. Qualcomm, for example, learned the hard way. Not only will they lose hundreds of millions in spurious ‘fines’ in China but were essentially bullied into investing in China-based startups.

Here is a good sound bite about just how ferocious Beijing comrades can be when dealing with foreign firms. ‘An antitrust lawyer working in China told Fortune that the NDRC is widely known for bullying: It encourages companies not to bring lawyers to meetings, often doesn’t inform firms what they are being charged with, and tries to force them to sign written confessions. “We’ve had conversations with some of the antitrust officials in China who have indicated that they view even the request to have a lawyer present as an indication of guilt.’ Here

Beijing’s position
The communist party is aware of China’s innovation deficit and trying to help out all it can. Since joining the WTO, China’s assault on IP is legendary. Each year they steal hundreds of billions of dollars from the USA alone, in high tech know-how. Nothing could make Beijing’s position more clear than the fact that in 2006 they defined ‘indigenous innovation’ as ‘tweaking foreign know-how’, ie reverse engineering foreign ideas.

Xiaomi is a product of this belief system. In terms of allowing IP theft, Beijing is essentially sayin, ‘Why should we pay royalties on things that we make here in China?’ What they fail to respect is that goods are made, but not created here. As I said, Beijing is aware of this innovation deficit and is helping out as much as they can.

My prediction
Look for Xiaomi to push back. It is less costly to fight and lose than to acquiesce and hand over cash. In its three year existence Xiaomi has consistently dodged responsibility for its untoward ways. Rather than man up, they tend to blame the other guy or bully them into submission. To them India’s actions are as much an attack on national pride as matters of law. As witnessed in Hugo Barra’s anemic letter shown below and first posted here

He and his take no blame for their actions. He claims that Xiaomi is trying hard to get its kit to MiFans, but are not being affirded that opportunity. Rather than admit their mistakes and act responsibly, he plays the pity card.

Based on this and Xiaomi’s actions in the past, expect little to change.


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