Lenovo Takes Aim at ZTE: The High-Stakes Battle for Tech Supremacy

A Chinese company in the UK sued another Chinese company.

On October 21, 2024 local time, Lenovo filed an intellectual property lawsuit against ZTE in the British High Court.

Litigation among communications giants is often accompanied by patent licensing disputes. However, “Gulfstream Economic Review” believes that in the business world, conflicts of interest are inevitable. However, in the context of the current international situation, it is even better for Chinese companies to work together.

01

Litigation that seeks far-reaching benefits

On October 21, local time, Lenovo filed an intellectual property lawsuit against ZTE in the British High Court. Public information shows that the plaintiffs in this lawsuit involve six companies – Lenovo Group Co., Ltd., Lenovo (USA) Co., Ltd., Lenovo Technologies (UK) Co., Ltd., Motorola Mobility Co., Ltd., Motorola Mobility UK Co., Ltd., and Lenovo Innovation Co., Ltd. Company (Hong Kong). The defendants also involved six companies – ZTE Corporation, ZTE (UK) Limited, Nubia Technology Co., Ltd. and three British distributors Gamegeek Co., Ltd., Livewire Telecom Co., Ltd., and EFones.Com Co., Ltd.

As of now, no information including the patents involved in the case and claim details have been released, and Lenovo has not issued a public statement on this incident.

On October 30, ZTE officially responded: “It is difficult for us to understand Lenovo’s decision to go to the UK to litigate, but we respect it. Lenovo’s lawsuit will not change ZTE’s determination to safeguard its legitimate rights and interests.” It is reported that ZTE and Lenovo has been in negotiations over patent licensing for several years.

In fact, not only ZTE, this matter is indeed a bit unreasonable:

First, Lenovo directly bypassed China’s judicial authorities. At present, our country has formed a diversified intellectual property protection system. Just like the patent dispute between Huawei and Xiaomi in the past two years, Huawei did not sue Xiaomi for infringement. Instead, it initiated an administrative ruling on Xiaomi’s major patent infringement dispute with the State Intellectual Property Office. In just half a year, the two parties reached a global patent cross-licensing, which is convenient and fast.

The efficiency is so high, why doesn’t Lenovo use it?

Moreover, various forces including the Chinese government, courts, and industry organizations are actively leading the “global licensing rule governance and jurisdictional competition.” Lenovo directly went to the UK to sue instead of suing in China. Is this a certain degree of distrust?

So, is Lenovo familiar with the British courts to gain more benefits?

Neither. The UK is not familiar with Lenovo and ZTE. Public information shows that in August this year, Lenovo’s revenue in the Chinese market accounted for 22% of total revenue, while the sum of the three markets in Europe, the Middle East, and Africa was only 25%; in 2023, Lenovo mobile phone shipments in the UK It only accounts for 1.5% of total shipments. Similarly, ZTE’s revenue in the Chinese market accounts for 68.9% of total revenue, while Europe, the United States, and Oceania combined only account for 14.2%. The UK is not ZTE’s main market and has accounted for a very small proportion of its revenue in recent years.

Moreover, British referees cannot consider the reality of China at all. The reason is simple. Both are completely Chinese companies, and most of their business is in the country. How can a British court thousands of miles away understand the true situation of China’s communications market and give an objective and fair ruling?

More importantly, there is a very obvious inversion in the standard essential patent reserves of both parties. It stands to reason that the plaintiff has the majority of patents and the defendants have relatively few patents. It’s just the opposite here. Regardless of 4G or 5G technology, Lenovo’s patent reserves are far behind ZTE. For example, in terms of the number of effective standard essential patent families for 4G, Lenovo is less than 1/7 of ZTE.

To sum up, Lenovo’s lawsuit against ZTE in the UK seems to be an internal dispute between Chinese companies, but it is really puzzling to go to the UK instead of the nearest.

02

The first move to attack

But taking a closer look, Lenovo must have carefully considered its decision to file a lawsuit in the UK.

This involves the judgment status of British courts on global FRAND (fair, reasonable and non-discriminatory) rates, as well as the advantages of British law in handling standard essential patent (SEP) disputes.

First, the UK courts have a “unique” preference for FRAND judgments: UK courts are keen on setting global licensing rates. The issuance of an injunction is again subject to compliance with the court decision. Over time, the FRAND judgments of the British High Court of Justice and the London Commercial Court will have an impact on global jurisprudence.

For example, in the case of Lenovo v. IDCC, the England and Wales Court of Appeal (EWCA) issued a second-instance judgment in July this year, requiring Lenovo to pay a royalty of US$0.225 per cellular unit for InterDigital’s 3G/4G/5G patents. The total amount of global patent royalties is closer to the US$80 million offer proposed by Lenovo than the US$337 million proposed by Interdigital. Note that the former is only a fraction of the latter.

In other words, for this little bit, InterDigital has to accept it or not. What’s more serious is that once the rate is decided, it is global, and it is useless for InterDigital to go to the U.S. Supreme Court to defend its rights. In addition, if InterDigital does not accept it, the British court may issue an injunction.

In addition, in the case of Lenovo v. Ericsson in 2024, Lenovo filed a request for a temporary injunction with the British court, requesting the British court to issue a temporary injunction against Ericsson on the grounds that Ericsson allegedly infringed its patents. The point is:

Unless Ericsson agrees not to enforce its ban in other jurisdictions pending a UK global FRAND rate decision, or enters into a provisional licensing agreement pending that ruling.

It is clear that Lenovo’s intention is to use the British courts to force Ericsson to withdraw its preliminary injunctions in Brazil and Colombia.

Secondly, the legal environment in the British courts is favorable to global electronics companies such as Lenovo. On the one hand, British courts rarely adopt litigation injunctions, and their determination of FRAND rates is relatively stable. This is very attractive to companies that make extensive use of others’ standard essential patents.

Based on the above two points, Lenovo has had conflicts with many cellular technology SEP patent holders such as IDCC and Ericsson in the courts of the United Kingdom, the United States, Germany and other countries in recent years, and has used the British courts as its focus for resolving SEP patent disputes. It seems to have “forced “The companies involved in the lawsuit have the taste of accepting the UK court’s global rate ruling.

Business wars are inevitable, especially in the communications field where competition is fierce. But what Gulfstream Economic Review wants to say is:

Win-win cooperation has become a consensus, and only by complementing each other can we achieve mutual success. Facing one of the most developed countries in the world, how to unblock or even find new paths cannot be accomplished by a single company. Instead, Chinese companies need to form a joint force and move forward together.

References:

Shangguan News: Lenovo sues ZTE in the UK! Latest response

Original title: Lenovo UK sues ZTE, behind it is a big game