Author: Yellow Warbler
On March 22, after five years, ZTE finally "unwinded", for the extremely competitive industry of communications, five years is enough to change the life and death of a company.
The communications industry relies on the characteristics of technology betting and forward-looking layout, so that those who are left behind will be eliminated at the slightest miss, like Nortel Networks, Lucent and Alcatel. The only thing these companies can prove to be strong at the time of their death is perhaps patent assets.
If Huawei had not been sanctioned by the United States one after another, perhaps the next thing that fell might be Nokia, which has been "crazy patent realization" in the past two years.
So, ZTE has not fallen behind in recent years, how far can it go? It seems difficult to see on the outside.
Because from the perspective of revenue data, from 2016 to 2017, it was maintained at the level of early 100 billion, then slightly declined to more than 800-900 billion, and then recovered to more than 100 billion, until the whole year of 2021 was 114.5 billion, and the net profit was 6.8 billion, a double high.
Just looking at the financial report seems to be healthy, but to see how far a company can go in the communications industry, patents must be a good indicator.
Before 2018, ZTE first broke into the global TOP 3 position of international PCT patent applications from 2010 to 2017, and remained in the annual TOP 3 list until 2017, of which 2011-2012 and 2016, even won the first position in the global PCT application volume.
However, from 2018, it retreated to the 5th place, and by 2019, it directly fell into the 18th line of small stars, and in 2020 and 2021, it only remained in the 16th and 14th places.
Comparison of ZTE's PCT patent applications with those of major enterprises over the years
At least it shows that in the next 8-10 years of technology competition, ZTE estimates that it is difficult to impact the first camp.
It's not just a matter of not advancing or retreating.
Compared with Huawei, which also suffered sanctions in 2017, ZTE and Huawei can be said to have gone in a wave of diametrically opposed paths.
After Huawei was sanctioned in 2017, not only did its PCT patent applications not decrease, but it also did the opposite, growing significantly, even reaching a "terrifying" 6952 cases in 2021.
From these data, we can basically see who will compete in the first camp in the post-5G era, and even in the future 6G.
Because the right to speak in the communications industry relies heavily on "patent strength" to speak.
This, from the moment Bell invented the telephone a hundred years ago, the patents, monopolies and lawsuits set off determined the century-old history of the communications industry, which is actually a history of patent development. See the new book, "Alexander Bell's Patent War: The Invention of the Telephone and the Reform of U.S. Patent Law."
Therefore, ZTE, which has begun to fall behind in patents, may not be reflected in performance in the short term, but from the perspective of long-term competition, there is still great uncertainty about whether it can stand up again and continue to be an important pole of the communications industry.
More critically, the patent reserve advantage built by ZTE in the last patent investment cycle has not yet been fully monetized.
On the eve of April 26, 2021 World Intellectual Property Day, Zhongliang Liangxing released a report showing that the value of ZTE's patented technology exceeded 45 billion yuan. Subsequently, ZTE began the road of rights protection in China. However, a year later, no announcement of ZTE's large patent licensing transaction has been heard.
The most recent news is that in September 2021, ZTE filed a lawsuit with the Shenzhen Intermediate People's Court, asking the court to determine a global licensing rate that complies with the FRAND principle for its global patent portfolio of 4G LTE standard essential patents. The case was accepted in November 2021 and is currently pending.
That is, ZTE's patent monetization road seems to be smoother only if the court rules on the licensing rate. This is not like other peers, officially announcing 4G/5G license rates to charge, but through court endorsement. This may also reveal some helplessness in China's patent protection and monetization environment.
In fact, in 2010-2017, ZTE maintained its patent reserves when the PCT applied for the world's TOP 3, and its patent reserves were still OK. This has also been compared to Huawei's data in 2014, when the two were on par with patents.
PRIP Research
Only then did the road to patent monetization of the two, like PCT applications, come at a fork in the road.
Huawei has focused its patent licensing mainly on foreign countries, and it should be suspected that it has reached a patent license with Apple, and the annual patent licensing revenue of 400-500 million US dollars can also make up for the cost of some patent applications and maintenance.
However, ZTE has not reported a large licensing transaction, including the amount of the license, and it is known that its model of starting patent fees in China seems to be difficult to make good progress for a while and a half. If patents cannot be monetized quickly, will the previous patent investment and maintenance have been dependent on blood transfusions by enterprises, and will it also become the main factor in the decline of PCT patent applications in the past two years?
Maybe it's also possible.
Therefore, in ZTE, we may be able to see that patent investment needs to be compensated for patent licensing revenue.
Of course, "patent royalties to support the continuous development of research and development" has always been a biggest excuse for patentees to collect patent fees, and it seems that if patent fees cannot be collected, research and development cannot be maintained.
In this regard, Apple has clearly pointed out that this is the excuse for the right holder to charge, taking Apple itself as an example, and has not stopped research and development because it does not charge patent fees, and Apple's research and development has always been recognized as strong in the industry, making Apple the first company in the world with a market value of more than $30,000.
Which is right and wrong may continue to be debated.
However, the impact of ZTE's opening of domestic patent fees may not only be related to the needs of ZTE's own business operations and patent strategies. It is more like a sharp knife, tearing open the "mouth" of China's patent protection system: when in the past, when china was full of patent implementers, suddenly someone stood up and began to charge as a patentee.
If even enterprises such as ZTE and Huawei, which have been storing patents for decades in accordance with international thinking, cannot realize the monetization of patents in China, how many of the patent operation policy incentives that China has been vigorously carrying out for several years can be real monetization cases?
Therefore, ZTE's opening move in the standard essential patent SEP is the most low-key but far-reaching signal this year, even more noteworthy than the OPPO/vivo incident against Nokia's unreasonable charges this year. For this, foreign SEP experts also feel the same way, today I watched David Cohen's interview with Eric Stasik (two SEP industry insiders have a wealth of licensing experience in Nokia and Ericsson, and have become one of the few opinions in the industry), the latter also mentioned the concern about the ZTE case, no less than the attention to the Apple and Ericsson cases.
This actually shows that China is already in a transition from the role of being charged license fees to the role of some people who have begun to collect license fees from the outside. The main reason why it attracts the attention of foreign countries is to see what kind of attitude the Chinese government and courts have towards this diametrically opposed change.
Because it is foreseeable that ZTE is the first to open the way in China, but it will definitely not be the last, Huawei, BOE, and TCL, which have hoarded a large number of patents, the patent operation ideas of these companies are open enough, and they will certainly follow the results of the ZTE case in China.
When this wheel rolls up, the story of patents becoming wealth will really attract more people to attach importance to patents, attach importance to patent quality and value, making the snowball roll bigger and bigger, and China's right to speak and price in the global patent licensing market will become stronger and stronger.
At that time, when China's patent protection changed from unipolar to multipolar, whether Innovation in China was good or bad depended on the wisdom of policymakers.