Xiaomi Forced to Halt Sales in India as Legal Troubles Begin

by Matt Klassen on December 16, 2014

It looks like up-and-coming Chinese mobile handset maker Xiaomi may have had its meteoric rise to the top temporarily halted, as the company has been ordered to cease operations in India following a patent dispute claim from Ericsson.

In the complaint, Ericsson argued that some Xiaomi handsets were employing as many as eight of its patented technologies without licence, particularly those relating to 3G mobile networks. Ericsson explained that it initiated legal action in an attempt to protect its intellectual property and recover unpaid licensing fees.

The dispute is significant for two reasons: First, India is one of the most lucrative mobile markets in the world, one that Xiaomi has already started to dominate in the mere six months it’s been present there. Second, there are hints that Ericsson’s legal challenge may be but the first in a long line of patent disputes for the Chinese firm, as the mobile market attempts to slow the breakneck expansion of the latest rising star.

Arguably the mobile world’s wunderkind, Xiaomi has grown rapidly over the last few years, thanks in large part to its deployment of a Samsung-esque strategy and producing cheap yet well equipped smartphones into burgeoning markets. Able to undercut much of its competition, Xiaomi is now the third largest smartphone manufacturer in the world and has eclipsed Samsung in its home country of China for top spot.

The fact that Xiaomi’s efforts in India have been temporarily waylaid is significant, given that India stands as the world’s third largest mobile market, a veritable cash cow for mobile providers and phone manufacturers alike and that Xiaomi, having only been present in the Indian market since July, is already dominating with its affordable phones.

According to Xiaomi’s head of operations in India, the company has not yet received any formal notice regarding legal action from Ericsson, but noted that the company is certainly willing to find ways to resolve the issue “amicably”.

“Our legal team is currently evaluating the situation based on the information we have,” he told Reuters.

Having only recently deployed 3G technology, India is ripe for an influx of smartphones, with companies like Mozilla, Apple, Google, Samsung, among pretty much all others clamouring to get a piece of the pie. With the nearest resolution for Xiaomi’s legal issues in the country set for February, when the case is first heard, that’s a long time for other companies to start filling in the gaps, making it significantly more difficult for the rising Chinese star to gain any traction.

Further, as a separate report from Reuters explains, this challenge from Ericsson “is unlikely to be the end of the young company’s battle over intellectual property (IP) rights.” According to sources close to Xiaomi leadership, the company has “privately acknowledged for years its vulnerability to patent entanglements,” not surprising given the difficulties faced by any mobile start-up.

While Xiaomi works to resolve this legal challenge quickly and amicably there’s no question that it will hurt the growth prospects for the company, more so if this is only the first of a long line of legal hills to climb.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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