News hit today that the Indian courts have barred Xiamoi from selling phones in the country due to a complaint registered by Ericsson that Xiaomi is using Ericcson technology in their phones and not paying a royalty. Xiaomi officials claim they are open to discussion with Ericsson to resolve this as India is an important market for this Chinese smartphone company.
One of the things that has concerned me about Xiaomi is their phones are basically knock offs of existing smartphones. They get away with this in China because laws there are not strong when it comes to intellectual property. There has been talk of trying to go after them outside of China but this is the first such legal challenge to their crass use of IP without compensating those who created it.
Xiaomi only has 1.5% of the Indian market so far and has sold about 500,000 phones in India last quarter. But Xiaomi believes they can grow this market and is making a significant investment in India to expand their reach and presence. Looking at the actual complaint from Ericsson it is clear that, even though they have been in talks with Ericsson over a couple of years, Xiaomi has chosen to use this technology any way and to not compensate Ericsson. I have been surprised it took Ericsson so long to challenge this in the courts but it appears they have found a friend in the Indian High Courts and Xiaomi is barred until this can be resolved.
This could be the tip of the iceberg when it comes to Xiaomi’s blatant use of IP without compensating the owners of that IP. It could also send shivers through the Shenzen ecosystem and, in a good way, force them to look closer at any IP that has royalties tied to it when making these phones for OEM’s.
It could also embolden other component makers whose parts are in Xiaomi’s phones to take similar action, at first in India but perhaps in other countries Xiaomi is selling in if their technology is used without proper compensation.
Those interested in the global smart watch market need to watch this case closely. Xiaomi taken to task in India could just be the beginning of more legal challenges for them in the near future.
Also, for those looking for more depth on India IP law and how it has impacted Micromax in this case and Xiaomi we recommend diving into these two articles.