On Thursday, April 6th, multiple news outlets were reporting that Chinese telecom company Huawei Technologies, Ltd. had prevailed in a patent infringement case which it filed against South Korean consumer tech giant Samsung Electronics (KRX:005930). The decision requires Samsung’s Chinese subsidiaries to hand over 80 million yuan ($11.6 million) to Huawei and could mark a major shift in the global smartphone market.
This is the first win in court against Samsung by Huawei, which currently places third in the global smartphone market with 8.9 percent market share as of last September. Huawei asserted a patent covering smartphone technology against the Korean tech company, reportedly seeking compensation for 30 million smartphone units which were sold for a total of $12.7 billion. These infringing smartphone units included the Galaxy S7, according to reports.
This decision is only the first of several which will play out in the current patent squabble between Huawei and Samsung. Huawei has filed patent infringement suits against Samsung in multiple jurisdictions, including the United States. Samsung has filed a countersuit against Huawei in China alleging Huawei’s infringement of Samsung’s patents. A statement from a Samsung spokesperson reported by Reuters left open the question of whether Samsung might appeal the ruling.
It would be easy to frame this as a decision by Chinese courts to prop up a Chinese entity but it’s probably more fair to characterize China’s intellectual property courts as pro-plaintiff, not necessarily pro-Chinese. Reports from last July indicate that foreign plaintiffs in Chinese IP courts had a perfect record in litigation against infringers just two years after China created a court system dedicated to adjudicating IP matters. This, other pro-patent moves in China and the sheer size of China’s consumer market have conspired to create a situation where foreign entities are increasingly choosing Chinese courts as the proper jurisdiction to fight out patent infringement allegations.
About a week before the decision by China’s IP courts, one analyst appearing on the business news channel CNBC said that he expected Huawei to overtake Samsung as the main global competitor to American consumer tech giant Apple Inc. (NASDAQ:AAPL) in the smartphone space. Apple’s space at the top of the smartphone consumer chain has been considered safe thanks to its control over both the hardware and the software of its products, allowing it to differentiate its products in ways that Samsung and other developers cannot.
Huawei does face turbulence in one foreign jurisdiction thanks to an unrelated patent matter. On April 5th, the High Court of England and Wales issued a ruling in a patent infringement case brought by Unwired Planet International against Huawei over the violation of patents which Unwired previously acquired from Swedish telecom firm Ericsson (NASDAQ:ERIC). If Huawei does not pay a royalty awarded by the British court, it could face a sales ban in that country.