Xiaomi’s smartphone ban exposes wider patent risk

IP Issues - higher risks in the west spur expansion in india, southeast asia

Sources close to Xiaomi say its leadership has privately acknowledged for years its vulnerability to patent entanglements.

The court order that banned Chinese mobile maker Xiaomi from selling its phones in India has halted its breakneck expansion into the world’s fastest growing major smartphone market and could be just the start of a string of patent challenges.

Xiaomi Technology only started selling in India in July and quickly became the country’s fastest growing smartphone brand; with minimal marketing, it is already outselling even low-cost smartphones running Google’s Android One. Hugo Barra, the former Google executive now leading Xiaomi’s international operations, told Reuters in November said the country had taken to his brand.

All it took was a single Facebook post to draw dozens of superfans to a California Pizza Kitchen in Mumbai to meet him, he said. “It was far more than we expected. The community has really, really embraced us,” he said. And then came Wednesday’s court order to stop selling, after a patent infringement case was filed by telecom equipment maker Ericsson. The ban will last until at least February 5, when the Delhi court hears the case again. But that is unlikely to be the end of the young company’s battle over intellectual property (IP) rights.

Sources close to Xiaomi say its leadership has privately acknowledged for years its vulnerability to patent entanglements. The higher risks of IP litigation in Western markets even played a role in shaping Xiaomi’s strategy of expanding in India and Southeast Asia, the sources said. Xiaomi said in a statement that “it isn’t easy” to build up a patent portfolio as a start-up company, but it aims to have filed 8,000 applications by 2016. Till the ban is lifted in India will be particularly hard on growth prospects. In a country where just one in 10 people use smartphones, the potential is vast. Barra posted a message on the company’s website on Friday apologising to fans. “Rest assured that we’re doing all we can to revert the situation. Stay tuned for more information,” he wrote.