Intellectual Property – Empowering ZTE’s Growth

As telecommunications carriers across the world prepare to roll out next-generation 5G networks in the next couple of years, the proprietary Pre5G technology developed by ZTE Corporation is helping many mobile users in Asia and Europe who want an immediate performance upgrade, without changing their smartphones, right now. The award-winning Pre5G solution is the culmination of years of patented 5G research by ZTE, said the company’s Chief Scientist Dr. Xiang Jiying.

“Pre5G enables carriers to fast-track the application of 5G technologies on existing 4G LTE networks,” Dr. Xiang said. ZTE’s Pre5G products are powered by a self-developed 16 nanometer chipset that integrates the company’s patented research into Massive MIMO, a key technology for 5G, Dr. Xiang said.

ZTE’s Pre5G solutions are deployed in more than 40 networks in 30 countries by carriers including SoftBank, China Mobile and Telefonica. In 2016, ZTE’s Pre5G won the prize of “Best Mobile Technology Breakthrough” and “The CTO’s Choice” from GSMA.

With 20 R&D centers in Asia, North America and Europe, ZTE invests more than 10% of annual revenue on R&D, employing over 30,000 research professionals in the development of next-generation technologies including 5G, IoT, NFV, SDN, Cloud Computing, Big Data and Smart City.

With more than 1,500 5G-related patent applications, ZTE was the world’s first vendor to verify key technologies in the 5G millimeter wave and sub-6GHz frequencies, and has successfully completed 5G single-point technology and prototype verification.

ZTE was ranked No. 1 in the latest annual rankings for international patent applications by the World Intellectual Property Organization published in March 2017. ZTE filed 4,123 applications for patents under the Patent Cooperation Treaty (PCT) in 2016, compared with 3,692 by second-placed Huawei Technologies, and 2,466 by Qualcomm Inc., according to WIPO.

ZTE has filed a cumulative total of more than 68,000 patent applications, with more than 28,000 granted. The company has been ranked inside the Top-3 in WIPO’s annual patents rankings each year since 2010.

Intellectual property management is central to ZTE’s business, and this is reflected in the organizational structure. ZTE’s Intellectual Property Strategy Committee, chaired by the company’s CEO, oversees the company’s IP strategy and reviews all major decisions.

“For ZTE, management of IP is just as critical as our other key company functions including marketing and sales,” said Shen Nan, Chief Intellectual Property Officer at ZTE. Senior decision-makers at ZTE on IP policies are advised by the company’s Intellectual Property Expert Committee, which comprises external members including academics, legal experts and leading industry practitioners, in addition to in-house IP experts and employees.

ZTE’s comprehensive IP management system is structured into sub-departments that administer intellectual property reserves, operations, risk control, and competition, with appraisal and incentive programs. In addition to day-to-day operations of IP management, ZTE’s IP strategy is deeply integrated into core business functions including R&D, sales, marketing, procurement and logistics across all levels at the company.

“Some of my colleagues think my role in IP management simply covers litigations, and I tell them that it is simply one aspect of my work,” Mr. Shen said. “My job is to manage IP to serve the overall strategic business interests of ZTE.”

ZTE’s world-class IP management is underpinned by a stringent patent classification system based on a six-level ranking system. At the beginning of each patent application, ZTE will classify the patent using the ranking system, enabling the company to manage its patent assets for licensing and litigations more effectively. Typically, most other companies operate only a three-level ranking system in their patent management systems.

On the advice of IP experts at ZTE, the company developed internal procedures on working with QR codes to minimize risks of patent infringement. Based on the analysis of ZTE’s IP experts, each QR code may contain patented information of more than 30 rights holders. To minimize risks of infringement, ZTE stopped using non-conforming QR codes and provided employees with guidance and training.

Evolution in ZTE’s IP strategy

As ZTE’s business underwent strong growth in the past decade, its IP strategy has evolved as part of a long-term program, making the company one of the leading players in the global IP market. With increasing resources at its disposal, ZTE is deploying its deepening pool of high-quality IP assets in line with the company’s long-term objectives, through strategic licensing agreements with other leading rights holders and litigation. ZTE is becoming more open to collaborating with other partners to create more value in an industry ecosystem. ZTE’s new IP strategy contrasts with the company’s approach previously, which focused on the use of IP assets as defensive tools in litigations.

An innovative way for ZTE to leverage its IP assets in IoT (Internet of Things) technologies is Avanci. In September 2016, ZTE joined Avanci, the industry’s first platform for licensing patented wireless technology for IoT. Avanci offers IoT companies “one-stop” licensing: a single license to standard-essential patents from the joining patent holders on fair, reasonable, and non-discriminatory (FRAND) terms.

“Using the Avanci platform, our partners in IoT don’t have to sign a licensing agreement with each patent holder individually, reducing their costs and avoiding potential duplication,” Mr. Shen said.

By working with the Avanci platform, IoT developers can license 2G, 3G and 4G cellular technologies for connected cars and smart meters. Apart from ZTE, other members of Avanci include Ericsson, Qualcomm, InterDigital and KPN.

ZTE has been granted more than 400 patents on IoT technologies, the third-highest total among companies globally, according to data compiled by industry consultant LexInnova.

ZTE’s growing IP capabilities put the company in a stronger position to protect itself and the interests of customers and partners. Since 2009, ZTE has been involved in more than 240 IP litigations globally, including over 140 cases in the United States.

Technology companies are often vulnerable targets of IP litigations in US courts under Section 337 of the Tariff Act of 1930. These lawsuits may be protracted and expensive for technology companies, and may result in export exclusion orders and cease and desist orders that will prevent the shipments of affected products to the U.S. market.

With ZTE’s growing pool of high-quality IP assets, the company had successfully defend patent cases under Section 337 of the Tariff Act of 1930 in the US from litigants including TPL, IDCC and Flashpoint, with negligible impact to operations in that market. The strength of ZTE’s IP assets also help preempt many unwanted lawsuits by deterring potential litigants.

ZTE is wielding its increasing power in IP to effect systemic and regulatory changes that are positive to the healthy development of the technology industry. For instance, in the past IP cases typically took 360 days to come to trial, increasing the legal costs for defendants. Together with other technology companies including Google, ZTE initiated the “100 Day Pilot Program” to urge the United States International Trade Commission (ITC) to shorten the period to 100 days, greatly reducing the cost of litigation for defendants.

In March 2016, the “100 Day Pilot Program” helped ZTE and other defendants Sony and Samsung win a Section 337 claim by Creative Technology.

“ZTE’s success is made possible by our intellectual property, which drives the company’s innovations in next-generation technologies,” said Mr. Shen. “As digital transformation gathers pace, we must continue to nurture our intellectual property to sustain our business.”