Preface
With the advent of the 5G era, the patent battle between the global communications giants is intensifying. ZTE, another giant in China's communications industry, recently won a sizable royalty from Samsung for two key 5G patents worth up to $142 million. This is not only in stark contrast to Huawei's large gap in the 5G patent layout, but also reflects ZTE's counterattack in the patent competition.
What is the reason for the high value of ZTE's two 5G patents? Behind this reflects the challenges and opportunities faced by Chinese communications companies in patent competition? Through the analysis of this case, we can not only see the cost and significance of ZTE's "counterattack", but also gain insight into the complexity of the current global communications patent landscape.
Huawei and Qualcomm occupy a dominant position
To fully understand the underlying logic behind ZTE's most expensive 5G patent, we first need to recognize the characteristics of the current global 5G patent landscape.
Overall, Huawei and Qualcomm are still the two major hegemons in the field of 5G patents. According to statistics, as of September 2023, Huawei accounted for 14.59% of the world's effective 5G patents, ranking first. It was followed by Qualcomm, accounting for 10.04%, ranking second. These two companies have an absolute advantage in the control of 5G key technology patents.
The main reasons for the formation of this pattern are as follows:
First of all, Huawei and Qualcomm have taken the lead in the patent layout of previous generations of mobile communication technologies (2G, 3G, and 4G). This patent foundation lays a solid foundation for its patent competition in the 5G era.
Second, both Huawei and Qualcomm have invested a lot of money and manpower in the research and development of 5G technology, which has promoted the accumulation of their core patents. As the leading force in the formulation of global 5G standards, they are also more comprehensive and systematic in the layout of 5G key technology patents.
Thirdly, these two companies are also better in industrial chain integration and patent operation. On the one hand, they have been deeply involved in the communications industry for many years and have accumulated a large number of key suppliers and partner resources. On the other hand, they have also formed a relatively mature business model in patent licensing and licensing, from which they have obtained considerable patent licensing fee income.
Thanks to the above advantages, Huawei and Qualcomm firmly occupy a dominant position in the 5G patent competition and have become recognized as "major patent players" in the industry. In contrast, other companies will undoubtedly have to pay a greater price to achieve breakthroughs and overtake in this field.
The cost behind ZTE's "counterattack".
In such a situation, ZTE was able to win a huge patent licensing fee of $142 million through two 5G patents, which undoubtedly reflects its unique advantages in patent layout. But behind this "counterattack", there is also a lot of cost and uncertainty.
First of all, these two 5G patents, worth up to $71 million, were obtained by ZTE through patent transfer. In other words, ZTE did not independently develop and own these two patents, but only obtained part of the rights and interests through the agreement. To a certain extent, this shows that there is still a certain gap in the accumulation of key 5G patents for ZTE.
Second, even if ZTE won a considerable royalty from these two patents, it would only receive 20% of the benefits agreed in the licensing agreement. In other words, in addition to the $142 million in damages, the remaining $113.6 million remains attributable to the other party, G+Communication. For a giant in the communications industry, such a revenue structure is not ideal, showing that ZTE still has great constraints in the patent competition.
Thirdly, ZTE also faces huge legal and litigation costs to defend and defend the interests of these two patents. The patent lawsuit lasted several years before a favorable verdict was obtained. In this process, ZTE undoubtedly needs to invest a lot of manpower, material and financial resources, which will affect the development of its main business to a certain extent.
Overall, while ZTE has received a significant royalty through these two 5G patents, the costs and risks behind this cannot be ignored. This also reflects that ZTE is still facing huge challenges in the "battlefield" of patent competition.
The Deep Logic of Patent Competition
So, can ZTE continue to make breakthroughs in the future patent competition? To answer this question, we need to understand more deeply the internal logic of the current telecommunications patent competition.
First, patent competition has become a new battlefield of fierce competition among telecommunications enterprises. With the continuous evolution of next-generation communication technologies such as 5G and 6G, patent layout and operation have become the key for communication companies to maintain their technological leadership and maintain their industrial position. Therefore, the major communication giants have increased their investment and layout in this field.
Second, patent competition is closely related to industrial chain control. The value of a patent depends largely on its criticality and influence in the value chain. Enterprises that can control key patents are often able to dominate the development direction of the entire industrial chain. This also means that the victory or defeat of patent competition directly affects the status and voice of enterprises in the industrial chain.
Third, cross-enterprise patent portfolios and cross-licensing have become the norm. Due to the large number of patents and the complexity of the technology, it is difficult for a single company to control all the key patents. As a result, patent portfolio and cross-licensing negotiations began between major companies to balance each other's positions in patent portfolios. This has also intensified the patent game in the communications industry as a whole.
Fourth, legal means have become an important means of patent competition. For those enterprises that are unable to obtain patent advantages through technology and innovation, they often resort to legal means to protect and defend their patent rights and interests through patent litigation. This also means that patent litigation will become a great magic weapon for patent competition between enterprises.
The significance of ZTE's "counterattack".
Although ZTE's cost in this patent lawsuit cannot be ignored, its "counterattack" action is still strategically important.
First of all, this fully demonstrates ZTE's technical strength in key 5G patents. Although these two patents are not independently developed by ZTE, they still have considerable technical content and value. Being able to win such a high patent licensing fee from industry giant Samsung is enough to prove ZTE's patent advantage in certain segments. This also indirectly shows that ZTE has made certain accumulations and breakthroughs in 5G technology research and development and patent layout.
Secondly, the success of this "counterattack" has also strengthened ZTE's voice and status in the industry. As another major enterprise in China's communications industry, ZTE has long been in the shadow of Huawei. However, through this winning case, ZTE was able to demonstrate its strength in the field of patent competition, thereby re-establishing its brand influence. This is undoubtedly a great encouragement for ZTE, which will help it seek a better position in the industry competition in the future.
Thirdly, this case also provides useful inspiration for Chinese telecommunications companies to find new breakthrough paths in patent competition. For a long time, Huawei and Qualcomm's dominance in the field of 5G patents has been almost unchallenged. However, ZTE's "counterattack" shows that even relatively weak enterprises, as long as they are good at using legal means, still have the opportunity to make breakthroughs in patent competition. This is undoubtedly a good reference and demonstration for other Chinese telecommunications companies.
In general, although the cost and price of ZTE's "counterattack" are relatively large, the strategic significance of its production cannot be underestimated. This not only demonstrates ZTE's strength in some key patents, but also provides valuable experience for Chinese communications companies to find new breakthroughs in the global patent competition.
Challenges and trends of future patent competition
But at the same time, we also need to realize that ZTE and other Chinese communications companies will still face many challenges in the future patent competition.
First, industry giants such as Huawei and Qualcomm remain unbreakable in terms of patent accumulation and operational capabilities. They not only have a large patent portfolio and deep technical accumulation, but also are more mature and efficient in business operations such as patent licensing and licensing. This gap is difficult to make up for in a short period of time, which brings great pressure to the patent competition of other enterprises.
Secondly, the geopolitical game under the globalization pattern will further exacerbate the complexity of communication patent competition. In the context of the scientific and technological confrontation between China and the United States, patents have become a new "battlefield", and the competition between multinational companies will become more and more intense. Chinese enterprises will undoubtedly face more uncertainties and risks if they want to seek breakthroughs in such a pattern.
Thirdly, patent litigation, as an effective means of patent competition, also has many limitations. Litigation is often time-consuming and laborious, and the final outcome is highly uncertain. For Chinese companies, how to better protect their interests in litigation is also a major challenge.
Based on the above understanding, we can foresee that the main trends of communication patent competition in the future include:
The first is the strengthening of patent portfolios and cross-enterprise collaboration. The complexity of communications technology makes it difficult for a single company to take full control of key patents. As a result, patent portfolios and cross-licensing will be the main models in the future, and companies will collaborate more closely.
Second, the status of legal means in patent competition has been enhanced. Patent litigation, as a common means of patent protection, will appear more and more frequently in the future. Enterprises need to continuously improve their patent management and legal response capabilities to cope with the increasingly fierce patent disputes.
Third, innovation-driven has become the key. Although legal means play an important role in patent competition, technological innovation is still fundamental. Only by continuously promoting technological progress and accumulating independent research and development patents can enterprises occupy the initiative in patent competition.
In short, patent competition is an important battlefield for the future development of the communications industry, and Chinese enterprises are facing both opportunities and challenges. Only with a more forward-looking vision and strategy can we continue to improve our strength in this global patent game and occupy a favorable position in the industry pattern.
epilogue
Undoubtedly, ZTE successfully won a $142 million licensing fee from Samsung through these two 5G patents, which is undoubtedly an important "counterattack" action. It not only shows ZTE's patent advantages in certain segments, but also enhances ZTE's influence and voice in the industry.
But at the same time, we also see that behind this "counterattack", ZTE has also paid a lot of price. From the way patents are obtained, to the cost of litigation, to the distribution of final licensing fees, ZTE faces various constraints and restrictions. This also reflects that in the current patent competition landscape, other Chinese telecommunications companies are also facing huge challenges.
In the future, patent competition will become an important battlefield for the development of the communications industry. Industry giants such as Huawei and Qualcomm, as well as other companies such as ZTE, need to further strengthen their independent innovation capabilities, improve their patent layout and operational strategies, and improve their legal response capabilities. Only in this way can Chinese communications companies continue to improve their strength in this global patent game and occupy a more favorable position in the industry pattern.
In short, the success of ZTE's "counterattack" has provided some enlightenment for Chinese communications companies to find new breakthroughs in patent competition. But at the same time, it also highlights the complexity and future development trends of the current telecommunications patent competition. Only by deeply understanding these challenges can enterprises better cope with the future patent competition and inject new vitality into the domestic communications industry in the 5G and even 6G era.