Qualcomm officials early last year finalized a deal with Chinese regulators that included paying a $975 million fine while also laying out the details of licensing fees that the chip maker could charge smartphone makers in the country.
Now Qualcomm officials are putting that agreement to the test by filing a complaint with a Chinese court against Meizu Technology, claiming the smartphone maker has refused to negotiate a licensing agreement for Qualcomm technology that Meizu continues to use in its devices.
Qualcomm, the world's largest vendor of systems-on-a-chip (SoCs) for mobile devices such as smartphones and tablets, said June 24 that it had filed the complaint with the Beijing Intellectual Property Court. Officials are seeking a ruling that not do the licensing terms offered by Qualcomm comply with the country's anti-monopoly laws and the obligations laid out in the chip maker's deal with the government, but also that the terms should form the basis for a patent licensing agreement with Meizu.
The Qualcomm patents at issue include some related to 3G (WCDMA and CDMA2000) and 4G (LTE) wireless communications standards. Meizu has refused to negotiate a licensing agreement in good faith and is continuing to use these technologies in their products, Qualcomm officials said.
"Qualcomm's technologies are at the heart of all mobile devices," Don Rosenberg, executive vice president and general counsel of Qualcomm, said in a statement. "Meizu is choosing to use these technologies without a license, which is not only unlawful, but is unfair to other licensees that are acting in good faith and respectful of patent rights, and ultimately damaging to the mobile ecosystem and consumers."
Qualcomm's technology licensing business is the key driver of profits for the company.
The agreement that the company hammered out in February 2015 with the National Development and Reform Commission (NDRC)—essentially the Chinese government's antitrust arm—settled an antitrust investigation against the chip maker that had taken more than 14 months. Qualcomm agreed to the hefty fine and to change its business practices in the country. They also agreed to parameters for patent licensing deals with Chinese device makers.
Qualcomm officials said that was important because while the investigation was active, the company was having difficulty with some Chinese device suppliers that either refused to pay licensing fees or paid less than they owed. Over the months after the agreement was reached, Qualcomm was able to negotiate deals under the "rectification plan terms" with more than 100 device makers in China, including such companies as Xiaomi, Beijing Tianyu Communications Equipment and Haier.
Qualcomm officials said they have been negotiating "extensively and in good faith" but that Meizu has not.
Meizu officials have not yet made a statement regarding Qualcomm's complaint filing.
According to the company's Website, Meizu was established in 2003 and began making high-end smartphones in 2008. It has more than 1,000 employees and 600 retail stores, with a presence in Hong Kong, Israel, Russia and Ukraine.
China is an increasingly important market for Qualcomm and other chip makers, and is the latest smartphone market in the world. Over the past couple of years, Qualcomm has made several moves to grow its presence in China. In December 2014, the company announced it was investing $40 million in Chinese companies, a decision that came months after the company launched a $150 million fund for the Chinese market. In June 2015, the company said it is partnering with Huawei, Chinese foundry Semiconductor Manufacturing International Corp. and others in creating the SMIC Advanced Technology Research and Development Corp., a joint venture that will push R&D toward next-generation chips for both the Chinese market and abroad.
In January, Qualcomm officials announced the company will build ARM-based server chips in China.