How Xiaomi Theft Distorts Global Markets

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February 9, 2015 by ...

Xiaomi is a Chinese company with a flair for mimicry. It’s products are about as unoriginal as can be. Their design team spends more time pouring over the pamphlets of competitor offerings rather than dream up their own. This is a simple thing to do in a one-party state with communist rule. China wants to promote growth and local firms, the law be dammed.

At first intellectual property theft (IP) was limited to China. Back in the day, the Chinese could not export their purloined goods as easily and the problem was mitigated. Now all that has changed. Since joining the World Trade Organization (WTO) in 2001, the Chinese have taken theft across the globe.

Take, for instance, the fact that each year China steals as much IP in dollars from the U.S. as America exports to all of Asia. The situation has gotten anything but better.

And then came Xiaomi
Being the ‘Kings of Copying’, Xiaomi has proven what can go wrong when IP is not protected.

For example, it’s been said that almost all Xiaomi sells is a knockoff. This is as true of everything from their handsets to operating system. Simply put, Xiaomi cribs more than it creates.

Once again, this was a China-only problem until 2014. That marked their first foray out of the PRC , and beginning of their legal troubles as well. In India they are being sued by Ericsson and SpicyIP, Xiaomi violated eight patents related to AMR, EDGE and 3G. Xiaomi reportedly breached Standard, Essential Patents (SEPs) which are subject to FRAND (Fair, Reasonable and Non-Discriminatory) terms.

For their part, Ericcson has been dogging Xiaomi for years about unpaid license fees. Lei Jin’s firm failed to respond and sold across the land. Once Xiaomi hit India, however, all that changed. Ericcson went to court and Xiaomi has been put on notice. They cannot sell kit which may be in violation of the law.

Illegal phones still find their way into the market

The problem with this is that companies such as Xiaomishop are disobeying the law and still peddling illegal handsets. Xiaomi says they have nothing to do with the site, but it does not matter. The fact is thy the phones still are being sold. Who the proprietor is is merely a detail. Had Xiaomi obeyed the laws that they must, then the whole issue would be a non-sequitur. No illegal phones-no illegal phones to sell.

The bottom line is that by operating on the fringes of illegality, Xiaomi is getting fat. They exploit the law and then sell by proxy, but have no one but themselves to blame.

In a global market its all-but-impossible to control every part of the resales process . Ensuring conformity with the law has to be done at the manufacturing level. As long as Chinese companies operate such as Xiaomi does, then the world of IP is in a free fall.

Here is Ericcson’s take on it all:
“Ericsson’s commitment to the global support of technology and innovation is undisputed. It is unfair for Xiaomi to benefit from our substantial R&D investment without paying a reasonable licensee fee for our technology.
After more than 3 years of attempts to engage in a licensing conversation in good faith, for products compliant with the GSM, EDGE, and UMTS/WCDMA standards Xiaomi continues to refuse to respond in any way regarding a fair license to Ericsson’s intellectual property on fair, reasonable and non-discriminatory (FRAND) terms. Ericsson, as a last resort, had to take legal action.
To continue investing in research and enabling the development of new ideas, new standards and new platforms to the industry, we must obtain a fair return on our R&D investments. We look forward to working with Xiaomi to reach a mutually fair and reasonable conclusion, just as we do with all of our licensees.
Since this is an ongoing legal process we do not have any more comments on this matter at the moment.”
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