Google and Tencent have announced a patent cross-licence deal that they say will pave the way for future technology collaboration. The pact is said to be “long term” and covering “a wide range of products and technologies”. Beyond that there are no details, including on whether the licence is royalty-bearing.
Here are a few immediate reactions:
If you had asked patent professionals what the next major cross-licence in China would be, I’m guessing not many would have bet on Google and Tencent as the parties. The former has long been marginalised on the mainland, while the latter has not yet done a major IP licence with a foreign company, to my knowledge. Moreover, it’s the mobile device industry that has produced most of the big global hook-ups involving Chinese businesses to date, and Tencent is a player only on the software side. Though they are two of the five largest companies in the world and both have products spanning search and messaging, Google and Tencent are not exactly on an IP collision course that could potentially result in patent litigation. Google, as a rule, doesn’t assert patents. And it doesn’t do much business in the only place where Tencent might have a portfolio advantage. So the idea that the licence could be a precursor to some kind of broader technical collaboration actually makes some sense in this case. It would be very interesting to know who called who to get this rolling.
Tencent arrives on the global patent scene
The deal is a milestone for the Tencent patent team led by Xu Yan. The IP function has been kept busy by legal tussles on both the patent and trademark sides in China, where its WeChat messaging app dominates the market. To round things out, copyright monetisation has been a huge revenue source for the company. But while Tencent has amassed an impressive domestic and international patent portfolio according to recent analyses, is has not made much of a mark on the transactions front. An affiliated entity has acquired around 50 US patents from IBM on two separate occasions, IAM reported late last year. And the company’s many M&A moves have brought a lot more assets into the fold, especially in gaming. As Tencent's business operations continue to spread beyond China, this may be the first of several patent agreements with a global focus.
Google gets a foot in the door
For Alphabet’s Google business, the patent cross-licence is its first in China. In the region, Google did deals with Android partners Samsung and LG back in 2014. Last year it agreed to a licence as part of a $1.1 billion buy-out of the HTC research team working on its Pixel devices. In China, where many of the biggest makers of Android devices are now based, only Coolpad was announced as a member of the Android Networked Cross-License (PAX).
Given its business situation in China, a lack of China deals for Google until now comes as little surprise. Many of its core services have been blocked in China since 2010, when its main search engine stopped censoring results. But very recently there have been tentative signs of a thaw. In December it opened an AI research centre in Beijing, and just two days ago it inaugurated a new office in Shenzhen (also Tencent’s home base), its third in the country. Just how much goodwill this deal might earn Google in China is hard to say, but it could well have played a role in the company’s thinking. Given recent rhetoric from President Trump, it could be that in the coming months US companies with Chinese businesses - or looking to build them - will need all the goodwill they can get.
Internet sector in China is ready for the IP spotlight
In China, the so-called BAT companies (Baidu, Alibaba and Tencent) have each carved out lucrative niches in search, e-commerce and messaging respectively; but they are also competing for the upper hand in developing artificial intelligence-related technologies. An IAM feature from last year detailed how that race is driving cross-industry collaborations that could have a big IP impact. At the end of 2017, for example, Baidu announced a partnership with Huawei to build an open AI ecosystem. So far the BAT firms have not made many major cross-border patent deals, but if cross-licences like this one are seen as opening doors overseas and facilitating collaboration with players like Google, then that could soon begin to change.
Step forward, Mr Lee
There was a major change at Google last summer when Allen Lo stepped down as head of patents to lead the IP operation Facebook. He was replaced in a very low key manner by former Cisco IP strategy chief Michael Lee, who had been running the patent-side of Google's mobile business for a couple of years. As far as we can tell, today's announcement is the first time that Google has publicly acknowledged Lee's position (although given how long these kinds of agreements take to put together it is likely that he was not there at the start of the conversations). This probably tells us a fair bit about where patents currently sit in the company's list of priorities. It could be that the deal also indicates that may be about to change.
Additional reporting by Joff Wild