Xiaomi’s Market Entry to SEP Licensing – Episode 9


March 1, 2022

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  • Ran Xu, Xiaomi

Ran Xu is the head of licensing at Xiaomi. He earned his PhD in wireless communications at the University of Bristol and worked as a chip designer at Cambridge Silicon Radio and Samsung. In 2013 Ran came back to China and joined a start-up company called Zhigu. During his years with Zhigu was the time when Ran entered into the IP world and where as an inventor he created more than 100 patentable inventions which turned into more than 100 granted patents today. In early 2016, the team at Zhigu was acquired by Xiaomi and became the IP strategy team within Xiaomi taking care of Xiaomi’s patent licensing and acquisition business. Today a lot of the licensing matters are related to SEPs and have become a major focus of Ran’s daily job at Xiaomi.

Ran says that Xiaomi aims- to become the world number 1 handset manufacturer in 3 years’ time. Ran believes that one key factor behind Xiaomi’s success is the company’s mission which is to build amazing products with honest prices. Xiaomi also sells other smart devices such as tablets, wearables, smart TVs, robot vacuum cleaners or electric bikes. Even more, Xiaomi CEO Lei Jun said that is Xiaomi is expecting to mass produce its own electric vehicles in the first half of 2024.

Xiaomi was considered a new market entrant a few years back and with regards to SEPs had yet a small patent portfolio. There are two ways to build your SEP portfolio, either from your own patent filing or via patent acquisition. So, in the early years, patent acquisition was a more efficient way to build the portfolio. Xiaomi however started to actively participate standardization since 2016 and the IPlytics data also shows that the number of standards contributions e.g. for 5G has been sharply increasing with about 1,500 contribution in 2021 alone. Through all these years of R&D efforts, Xiaomi has built a sizeable 5G portfolio. Ran’ SEP strategy: “Xiaomi will not proactively monetize its SEPs now or even in the future. SEPs are rather means to decreasing Xiaomi’s royalty burden through cross-licensing.”

Well negotiated cross licensing SEP deals will allow Xiaomi’s users to enjoy the products and innovative technologies at a better price, which makes the investment in standardization and SEPs worthy.

Ran believes that there are a lot of factors which make SEP licensing negotiations challenging. One of them is that sometimes the negotiation lacks transparency. For example, when you encounter a licensing proposal from your counterpart, for most of the cases and even if you have made your request, you cannot obtain sufficient information from your counterpart to make your own evaluation. Another challenge are the different perspectives on FRAND terms.

And Ran believes FRAND royalties will be very different for IoT devices as IoT devices in comparison to handsets use connectivity standards technology very differently. A fitness wearable for example transmits much less data compared to a handset. One idea was that the royalty rate for SEPs is based on how much data is transmitted from standard compliant devices. That could be one approach to understand how much value the patented technology brings to the product.

Finally Ran comments on Xiaomi’s strategy to yet not enter the US handset market. While Xiaomi was once on a US ban list a US court decision took Xiaomi off that list and yet none of the Xiaomi products were banned. Even more a look at the Xiaomi patent portfolio shows that just after China, Xiaomi files most patents in the US. Ran believes that if at some point Xiaomi handsets become available in the US, which is one of the most attractive markets in the world, Xiaomi’s best quality at honest price products will be welcomed and loved by the US users.

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