Chinese technology giants Lenovo, ZTE probed in US for alleged patent infringement

Other smartphone makers also named as respondents

PUBLISHED : Friday, 06 May, 2016, 7:46pm
UPDATED : Saturday, 07 May, 2016, 8:51am

Computer giant Lenovo and ZTE, China’s largest listed telecommunications equipment manufacturer, have been put under investigation by the United States International Trade Commission (USITC) after being accused of patent infringement by Singapore-based Creative Technology.

That probe brought more bad news for Lenovo and ZTE, which have both struggled against intense competition in China’s vast smartphone market.

Lenovo’s share price fell 2.42 per cent to finish at HK$5.64 on Friday, its lowest close since reaching HK$5.38 on July 31, 2012.

Shares of ZTE fell 10.92 per cent to close at HK$10.44. That marked the lowest close for ZTE’s shares since hitting HK$10.24 on September 11, 2012.

The nature of the complaint indicated that it deals with the playback of media from playlists
Paul Haswell, Pinsent Masons

In a statement released on Thursday in the US, the commission also named as respondents in its investigation Samsung Electronics, Lenovo-owned Motorola Mobility, LG Electronics, HTC, BlackBerry, and Sony and its subsidiary Sony Mobile Communications.

Consumer electronics firm Creative and its US arm, Creative Labs, say some of the world’s largest smartphone suppliers violated their patent under section 337 of the US Tariff Act of 1930.

The USITC, a federal agency responsible for adjudicating cases involving US imports that allegedly infringe intellectual property rights, said the products covered by its probe were “portable electronic devices, such as smartphones, with the capability of playing stored media files selected by a user from a hierarchical display”.

The complainants had requested for the issuance of “a limited exclusion order and cease and desist orders” against the respondents, it said.

Samsung is the world’s top supplier of smartphones, with total shipments of 324.8 million units last year, according to data from research firm IDC.

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Lenovo shipped 74 million smartphones last year to rank fourth behind Samsung, Apple and Huawei Technologies.

Paul Haswell, a partner at technology-focused international law firm Pinsent Masons, said each of the respondents’ lawyers “will first need to assess the validity of the complaint, so there is no near-term impact on those companies’ smartphone operations”.

Creative, which is part of British media services company Avesco, used to be a maker of portable music players which competed against Apple’s iPod years ago.

In August 2006, Apple paid a one-time US$100 million licensing fee to Creative to settle a legal dispute over a patented software technology on how users navigate music selections. That fee covered all Apple products.

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With the distraction of a prolonged patent litigation removed, Apple launched the first-generation of its flagship iPhone product on January 2007, integrating the advanced music playback capabilities of the iPod.

“The fact that Apple is not listed as a respondent suggests that the [USITC] case may be similar to Creative’s earlier dispute with that company,” Haswell said. “The nature of the complaint indicated that it deals with the playback of media from playlists. Imagine how many products today use playlists to play back stored content.”

The USITC said one of its chief administrative law judges will be assigned to schedule and hold an evidentiary hearing of the case. “Within 45 days after institution of the investigation, the USITC will set a target date for completing the investigation,” it said.