ZTE sues Ericsson in intellectual property row

PUBLISHED : Wednesday, 13 April, 2011, 12:00am
UPDATED : Wednesday, 13 April, 2011, 12:00am

The intellectual-property rights dispute between ZTE and Ericsson has intensified, with the Shenzhen-based company hitting its Swedish rival's mainland operation with a patent-infringement lawsuit.

ZTE, the mainland's second-largest telecommunications-equipment manufacturer, on Monday filed a legal action against Ericsson (China) Communications for contravening domestic patent laws related to a range of ZTE patents in so-called core telecommunications networks, GSM cellular systems and in 4G wireless infrastructure.

A ZTE spokeswoman yesterday said the company 'has asked that Ericsson discontinue any act of infringement and bear legal liability in accordance with the provision of relevant laws'.

Analysts said the mainland lawsuit appeared to be a tit-for-tat action triggered by the patent-infringement lawsuits filed by Ericsson on April 1 against ZTE subsidiaries in Britain, Germany and Italy.

'It is unfortunate that the companies could not resolve their issues directly, but they are hardly alone,' said Matt Walker, a principal analyst at market research firm Ovum. 'Courts are asked to step in and arbitrate intellectual property disputes all the time, very often lately in the telecommunications sector.'

Ericsson's lawsuits alleged that ZTE infringed upon several of the Stockholm-based firm's patents related to GSM and 3G WCDMA cellular technologies found on various ZTE handset models sold in the three European countries where legal action is being pursued.

In a filing with the Hong Kong stock exchange last Thursday, ZTE chairman Hou Weigui said the litigation initiated by Ericsson 'will not have any material or adverse impact on the financial conditions of the group for the current period'.

Hong Kong-listed ZTE said it strongly adhered to the principles of 'cross licensing' and 'basket agreements' to resolve patent disputes in its industry.

Under certain conditions when those disputes could not be resolved in an amicable manner, ZTE said it embarked on legal action to safeguard its legitimate rights. No further details about its action against Ericsson were provided by the company.

'We are aware that ZTE filed a lawsuit against us, but we haven't been served yet so we do not know any details,' an Ericsson spokeswoman in Hong Kong said yesterday.

Analyst Lisa Soh of Macquarie Securities in Hong Kong said these kinds of lawsuits could drag on for years, unless the litigants finally reached a settlement.

Although fierce competitors in many markets worldwide, ZTE and Ericsson managed to form a strategic alliance in 2005 to deliver 3G solutions on the mainland based on the government-endorsed TD-SCDMA standard. Both companies are separately involved in new high-speed 4G network trials on the mainland.

ZTE's share price was down 1.62 per cent to finish yesterday at HK$33.45, its lowest close since February 16, when the stock hit HK$32.65.

As of last December, ZTE held a total of 33,000 patents. That included 1,863 international patent applications registered with the World Intellectual Property Organisation. ZTE became the No.2 company, behind Japan's Panasonic, with the most international patent applications last year.