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Behind the lighter: patent may be the biggest risk of Xiaomi IPO?

via:博客园     time:2018/5/7 10:02:02     readed:395

Sun Yongjie

Recently, the IPO prospectus of Xiaomi has attracted widespread attention in the industry. For nearly 500 pages of prospectus, the industry can be described as benevolent and wise. Some are optimistic and others are bad. However, in our view, since Xiaomi CEO Lei Jun chose Xiaomi as an innovation-driven Internet company and had previously emphasized on different occasions that its mobile phone business also relied on innovation to rebound and develop, patents (intellectual property rights) inextricably linked to innovation should It is also the focus of millet and industry attention.

However, in the prospectus, Xiaomi's (mainly potential risks) is only an understatement. The question that comes with it is why did Xiaomi downplay this? Do you think it's not important for your IPO or do you want to cover up? Because the industry knew that Xiaomi had suffered a major loss in patents, and related lawsuits continued.

Mentioned about the lawsuit filed by Xiaomi in terms of patents, the best-known is December 11, 2014, when Ericsson appealed to him for allegedly infringing 8 patents, including ARM, EDGE, 3G and other related technologies owned by Ericsson. Delhi High Court in India, when Ericsson filed a "temporary prohibition" and obtained consent. The ban includes "prohibiting millet from selling, promoting, manufacturing and importing alleged infringements of Ericsson's patented products in the Indian market, and requires Xiaomi and its Indian e-commerce partner, Flipkart, to temporarily suspend sales of patented products that Ericsson sued." In addition, the court also asked Xiaomi and Flipkart to submit the sales volume and total sales of products involved in India. And sent officials to the millet India office to implement the relevant resolutions. At the same time, the court issued a notice to the Indian Consumption Tax and the Central Customs Committee to ban the entry of Xiaomi’s infringing products.

The frustration in the Indian market was undoubtedly cold for Xiaomi, who was in the rising stage. Eventually, Xiaomi compromised. In the precondition that each device was prepaid to the court with Rs. 100 (about 10.12 yuan at the time), Xiaomi was able to temporarily sell the smartphones equipped with Qualcomm chips on the Indian market and carry MediaTek chips. The mobile phone is in the "forbidden" state.

In 2015, Xiaomi fell into the quagmire of patent infringement again. On November 19 of that year, U.S. patent owner BlueSpike sued Xiaomi for a large number of products that infringed its patents. Along with being sued, there was also Haitao Platform & mdash; TOMTOP (Shenzhen Tongtuo Technology) which sells millet products in the US market.

Perhaps this is the frequent patent litigation, so that previously had not paid attention to innovation and patent accumulation Xiaomi had to look at the patent impressively, but given its lack of R & D and innovation of DNA, had to "temporarily cram", rush to take the strategy of mergers and acquisitions Short-term compensation for patent shortcomings.

Therefore, in October 2015, Broadcom’s 31 wireless communication patents were acquired; in February 2016, Xiaomi purchased 332 US patents from US chip giant Intel Corporation, covering “storage management, control logic, serial encoding, and computer packaging. , hand-held terminals, circuit boards & rdquo; and many other fields; in June 2016, Xiaomi once again purchased 1,500 patents from Microsoft. Xiaomi was almost crazy about patent acquisitions and even made him a big buyer in the US patent market in the patent economic market related report written by the Richardson Oliver Law Group LLP.

In spite of this, Xiaomi's pace of buying, buying and buying did not stop there. Since then, in 2017, it has purchased a number of unknown patents from Nokia. Then the question came, Xiaomi this kind of "cuckooing temporarily" "nearly" & "quick" purchase of patent value?

Take the example of 332 US patents that Xiaomi purchased from US chip giant Intel. From the average frequency of patent citations, Intel has cited patents more frequently than Xiaomi’s patents. From the perspective of patent protection, Xiaomi purchased from Intel. Most of the patents are patents that were submitted in 2000 and filed in 2002 and are now authorized. If these patents are all invention patents, the average protection period is only about 5.9 years, and the validity period is not long. As for the Microsoft patents acquired, it is hard to imagine that these patents acquired by Xiaomi from Microsoft can help Xiaomi’s mobile phone business, considering that patents are more concentrated in related areas such as Office and that Microsoft has already withdrawn from the smart phone market in competition. How much value it brings.

Of course, in addition to M&A, Xiaomi has also stepped up efforts to apply for patents on its own, and has also shown rapid growth in terms of quantity. Despite this, it still has risks.

First of all, Xiaomi’s overseas patent layout is still far from enough (including the quantity and quality of patents), which makes it extremely difficult to expand overseas markets in the short term. Once involved in overseas markets, they will face the risk of a large number of patent litigation. Judging from information obtained from other sources, this is also true. Allegedly, Xiaomi launched a "songuo" processor chip, one of the important reasons is to solve the patent problem in the Indian market (somewhat unexpected); in the United States, Xiaomi was repeatedly indicted in the United States patent infringement, For example, 2016 was sued by General Access Solutions, Ltd. and was sued by Sportbrain Holdings LLC in 2017. According to relevant statistics, mainstream mobile phone companies in the United States have been sued more than 20 times in the United States each year. This shows that Xiaomi once faced patent litigation once he entered the US market. The risk is enormous.

Do not underestimate the risk of patent litigation. Once it happens, the consequences can be quite serious. For example, Apple launched a series of patent infringement lawsuits against Samsung in 2012, which disrupted Samsung’s normal planning in the US market and won hundreds of millions of dollars in compensation from Samsung. Apple’s patent lawsuit against HTC will further defend its market share. During the proceedings, it was compressed by about 60%. What's more, it was this patent lawsuit that HTC had been partially recovered by Google until today. The mobile phone business has already existed in name only.

Second, there is still a clear imbalance in the layout of Xiaomi’s patents in the field of technology. A large number of patented technologies still remain on the user interface and user experience. The real core hardware/chips and underlying communication protocols are still lacking in technology. These technologies require a lot of resources and time to accumulate. Obviously, Xiaomi is relying on its own strength to be It is extremely difficult to make up for it in a short time.

According to public statistics, in the past few years, Xiaomi has not less than 30 utility model patents that have been declared invalid by others. Among them, 15 patents have been declared null and void, 7 patents have been partially declared invalid, and only 8 patents have been maintained. effective. It can be seen that the quality of Xiaomi's own patents is not stable, although it has increased the patent application and distribution efforts, but it does not completely eliminate the possibility that millet products may infringe on patents. The most typical case is that once Xiaomi used his official website to promote the application of 46 patents in the marginal touch of the 4C mobile phone of Xiaomi, “dark technology” and other words stated that the parties had not obtained the patent certificate but only the patent application number. It was fined 30000 yuan by Haidian Branch of Beijing Administration for Industry and Commerce.

From 2018, patent litigation against Xiaomi has not been interrupted. Only domestically, the Coolpad Group sued Xiaomi in court for patent infringement involving 6 patents invented by Coolpad. In fact, the final winning or losing here is not important. What we want to say is that even an impending mobile phone company dares to use patents to prosecute the rebound and IPO millet. It shows how vulnerable Xiaomi’s patents or patents are. .

Referring to the value of patents, IBM, which has consistently ranked first in global patent applications and quality, believes that whether or not a patent has value should have five main characteristics. First, it should be the product of forward-looking research and development, followed by strong effectiveness, and again, business. Sexuality/feasibility is strong, and the fourth is strong, and finally it is not easy to be avoided. So how can this standard measure the value of Xiaomi’s patent?

Here we take only the product standards of the forward-looking research and development as examples. The industry knows that the product of forward-looking research and development requires a lot of R&D investment in the early stage. According to the millet prospectus, in 2017, Xiaomi's R&D investment is 3.2 billion yuan, which is only 2.79 of the total revenue. %Compared with rival Huawei, Xiaomi’s R&D investment accounted for only 3.57% of Huawei's, not to mention compared to global technology companies, such as Apple, which has traditionally been regarded as not investing in R&D investment. It is expected that this year's investment in R&D will be It will exceed 10 billion U.S. dollars.

If it is said that Xiaomi used to be a shipwrecked company in terms of patents, the follow-up to “take-over” and “self-requisitioning” is an important issue, but the overall patent strength, especially the limited quality of patents, poses a potential risk before and after its IPO. The patent-related risk is the royalty payable for existing mobile phones.

As we all know, in the mobile phone industry, patent fees account for a considerable part of the product sales price, because almost every part of a mobile phone contains a large amount of royalties. In fact, even on the LCD screens that have been patented on the full surface, there are still a lot of raw material prices, which also include the payment of patent licensing fees.

According to the Xiaomi's prospectus, in 2017, Xiaomi’s mobile phone revenue was 80.6 billion yuan, and the external intellectual property expenses was 3.4 billion yuan, accounting for 4.2% of the revenue. The industry believes that according to this type of company Xiaomi, the patent fee for a single mobile phone The ratio should be between 8% and 10%, which means that there are still a lot of royalties paid by Xiaomi and the risk of intellectual property litigation is very high.

Taking the industry's 4G standard mandatory patent as an example, in addition to Qualcomm, dozens of companies such as Ericsson, Huawei, Nokia, and Samsung have patents, while Xiaomi currently only pays patent fees to Qualcomm, and patent risk (including litigation and purchase patents High expense. Here also do not ignore the follow-up mill to pay other companies to pay and grant royalties to the mill profits, valuation and even market pressure after the listing.

Taking Apple as an example here, the reason why Qualcomm and Qualcomm made a big shot on patent licensing fees, and even hesitates to give up Qualcomm baseband that directly affects the iPhone mobile phone experience and replace it with Intel's baseband, mainly because the patent licensing fee directly affects Apple’s Profit margins have squeezed Apple's profit margins. From the industry's forecast, Apple and Qualcomm’s patent warfare, if Apple wins last year, can save US$2.5 billion in annual patent fees alone from Qualcomm. For Apple, which has the highest profits and profit margins in the global smartphone industry, the patent licensing fee for a mill with a combined profit margin of only 4.7% can be quite a sum of money that will have to be calculated in the future, directly affecting Millet's profit performance.

In summary, we believe that as a self-proclaimed and innovative millet, the industry should pay more attention to the value, strategy, status and position of Xiaomi's patents behind the innovation, especially the future Xiaomi will expand overseas markets. As the main growth driver, patents are the biggest variable in the coexistence of millet opportunities and risks.

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