Mobile chip maker Qualcomm has signed a 3G and 4G China patent licence agreement with Chinese smartphone maker Xiaomi – but its licensing bounty may come under strict scrutiny.

Qualcomm has granted Xiaomi a royalty-bearing patent licence to develop, manufacture and sell handsets geared for the WCDMA and CDMA2000 3G standards, and for 4G handsets, including trimode, to cater for LTE-TDD, TD-SCDMA and GSM.

Under the terms of the deal royalties payable by Xiaomi must be consistent with commitments made by Qualcomm to China’s National Reform and Development Commission after it was hit with a near billion dollar over improper licensing practices.

In February Telecoms.com reported how the California based chip giant was to pay 6 billion yuan to the Chinese antitrust authority after it was found guilty of abusing its dominance of the chip market to charge excessive royalties.

The Chinese regulator now rules that Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents. It must also provide patent lists during the negotiation process. For licenses of Qualcomm’s 3G and 4G essential Chinese patents for branded devices sold for use in China, Qualcomm can charge royalties of 5% for 3G devices (including multimode 3G/4G devices) and 3.5% for 4G devices (including 3-mode LTE-TDD devices) that do not implement CDMA or WCDMA, in each case using a royalty base of 65% of the net selling price of the device.

The new Xiaomi deal is significant as it was feared that Qualcomm’s future business activities in China would face severe challenges. In November Qualcomm clinched 3G and 4G Chinese patent license agreement with Huizhou TCL Mobile Communication (TCL).