On Sunday, Ericsson confirmed to China’s Global Times, a state media outlet, that its patent licensing business is the subject of an ongoing antitrust investigation by the country’s regulators. The company affirmed that it conducts business on FRAND terms, but made clear it will not be commenting further while the probe is underway.
The confirmation came after Chinese media reported that the State Administration of Market Regulation (SAMR), the body that enforces China’s Anti-Monopoly Law and also oversees China’s IP office, had conducted a surprise inspection of Ericsson’s large China headquarters facility in Northeast Beijing, conducting ‘forensics’.
Prior to that, other sources had reported that Chinese smartphone makers were complaining to authorities about the company’s licensing practices. In February, IAM published Ericsson’s first public comments on the swirling rumours. A company spokesperson declined to confirm or to deny the existence of an investigation, saying Ericsson had “not received any information about this complaint directly”.
We now know that the investigation is very much going ahead. In all probability, Ericsson has seen the writing on the wall for some time even if it did not receive official communication about the case until last week.
One factor working in Ericsson’s favour is that amid the antitrust speculation, the company was able to announce a SEP license with Chinese smartphone maker Oppo. While it is not clear how much of the market Ericsson has licensed, the Oppo deal is certainly the biggest one that the company has been able to announce publicly.
But other disputes with Chinese firms have lingered on. More than four years after Ericsson sued Xiaomi in India, their disagreement has not been resolved. And Shenzhen Intermediate People’s Court records show that Ericsson is the defendant in a lawsuit of unknown subject matter filed by TCL last August.
The most immediate impact of this weekend’s news might be that the Swedish company finds it difficult to follow up the Oppo agreement with more China deals while the investigation of unknown duration proceeds. There would seem to be little incentive for Chinese implementers to conclude a deal now when regulators might secure them a better one in a year’s time.
Longer-term there are a lot of questions. This case is going to be a big moment not just for Ericsson but for the whole wireless industry. The NDRC, which crafted a settlement with Qualcomm four years ago, is gone. SAMR has taken its place, and this probe of Ericsson will provide some of the first clues to how its top decisionmakers think about IP licensing.
The next couple of major legal/regulatory moments for the wireless licensing market are likely to come in the United States, with verdicts in the FTC v Qualcomm and Apple v Qualcomm cases, and the CAFC’s reconsideration of TCL v Ericsson. These will be closely watched around the world. Then, perhaps a year from now, perhaps longer, China will have the next word on FRAND. But it certainly won’t be the last.
This article first appeared in IAM. For further information please visit https://www.iam-media.com/corporate/subscribe