Legal Action against Unauthorised Importers

Legal Action Against Unauthorized Importers Case Summary China phone manufacturer Xiaomi can’t sell its MediaTek made phones in India since an ongoing patents case from Ericsson in the Delhi High Court. But other unauthorized dealers still import the Xiaomi Redmi Note 3G which runs on a MediaTek processor without Xiaomi’s permission. Ericsson’s lawyers told the Delhi High Court that Xiaomi was selling non-Qualcomm handsets via the website www.xiaomishop.com. Xiaomi had clarified that they only has the only website which is www.mi.com. Legal Issue in the Case From the case, the issue which appeared is infringement of patents which cause by those unauthorized dealer. Head of India operation of Xiaomi, Manu Jain said that authorized sellers in India are only Flipkart and Airtel. All other retail shops or portals such as www.xiaomishop.com which are selling Xiaomi’s products are doing it without their permission. Some of these portals or retail shops are using ‘Xiaomi’ name that infringing on Xiaomi’s trademarks. This is an infringement of trademarks in the issue. Recently Xiaomi is requesting those retail shops and portals to stop selling their devices and close down the unauthorized website and retail shops, or else Xiaomi will be forced to take legal action such as sued them to protect Xiaomi’s interest. Originally, Xiaomi smartphone werecompletely banned in India due to the infringement of patents. However, Xiaomi had successfully convinced that Delhi court that itsQualcomm-powered devices such as Redmi 1S in India. At the same time, Ericsson maintains and insists that Xiaomi must pay a license-fee regardless of the chipset. AlthoughXiaomishop.comis no longer functional, Xiaomi’s headquarter plans to take with legal action against those other four or five websites also breaching the law which is using the name of ‘Xiaomi’ without their permission. Ericsson denounces and sued Xiaomi that they continued selling their (MediaTek-powered) handsets even after January 8, which is clear law violation in this case. After that, the China-based OEM also said that they stopped selling all their MediaTek-powered devices in India after January 8 through Flipkart which is the only authorized dealer of Xiaomi in Asian countries. There are some Xiaomi-branded devices which are currently available in India such as Mi4 and Redmi Note 4G with the Snapdragon-powered models, while the Redmi 1S is prohibited since it is powered by MediaTek’s chip. In a bid to diminish IP accusations and further comply with Indian’s laws, Xiaomi is considering to setup an assembly line in India that produce their product in Indian and sell them. Foxconn from China and Inventec from Taiwan are listed as potential partners, but negotiate and talks are still ongoing. Since Xiaomi wants to expand their business into new markets, it is possible to breaches and meets further legal obstacles of some countries and patent disputes of some competitors. Recently, Hugo Barra, vice president of the International Division of Xiaomi generally acknowledged that IP litigation is an inevitable part of doing business at San Francisco. In order to better defend and protect itself from other infringement of patents, Xiaomi had already amassed about 2,800 patents of its own products in 2014. In a public statement which Ericsson said that they inquires the Dehli court to appoint a local commissioner or assistant director to examine and censor all Xiaomi smartphones that imported to India and the Dehli court was agreed. Xiaomi announced the temporary order was only valid until March 18. When the court will hold another hearing for the controversy, which it is involves Flipkart and Airtel which are Xiaomi's authorized dealer in India. Xiaomi also planned to resort the legal action to protect its own interest from xiaomishop.com. In December, Ericsson said that they tried to talk to Xiaomi about royalties for the past three years but Xiaomi did not give any respond. Outcome Based on the issue above, several concerns will arise mainly for Xiaomi, Ericsson and those aunthorized dealer and unauthorized dealer.

1. Xiaomi’s Concerns

Xiaomi had ran into a roadblock last year where its product which consist MediaTek’s processor areban from importing and selling in India due to a patent dispute from Ericsson. Xiaomi lost its 1.5 percent of shares since they can’t sell their MediaTek’s devices in India. At last Xiaomi managed to get the permission to resume its business but only for those device that run on a Qualcomm’s processors but not MediaTek’s processor. Obviously the reason and root that cause of this patent dispute lies on those devices that run on MediaTek’s processor which allegedly infringed Ericsson’s patents on their AMR, 3G, and EDGE technologies. Xiaomi had try their best and putting lots of efforts in defend themselves and spent a lots of money. Finally Xiaomi has successfully managed to get the exemption for selected devices and models which run on Qualcomm’s processors that have the licensing agreements with Ericsson. This make Xiaomi has to reintroduce theirRedmi 1Sthat consist Dual-SIM 3G and run with a Qualcomm Snapdragon 400 processor. Since the 3GRedmi Noteis prohibited, Xiaomi will try to introduce their latest Redmi Note 4G with single SIM that run on a Qualcomm instead of MediaTek’s processor which been banned in India. The issue happened in India doesn’t affect the business of Xiaomi, it has continue to expand their business all around the world.

2. Ericsson’s Concerns

Although Ericsson is not a market leader within smartphone manufacturing anymore, but the company is become a strong dominant force in wireless technology. Ericsson holds around 32,000 patents and 450 of them are in India. Ericsson had sued many companies such as Samsung and Xiaomi to protect its own interest. Ericsson had successfully protects its interest against Xiaomi. They sued Xiaomi for infringement of patent last year and they won the case. The Delhi court which handles the case had come out with a solution. The agreement between Ericsson and Xiaomi has clearly stated that Xiaomi has to pay royalties to Ericsson due to the infringement of patents.

3. Unauthorized Dealer’s Concern

Xiaomi had warning those unauthorized retail shops and portals to closed down their businesses. Those unauthorized retail shops and portal are selling the Mediatek’s devices in India and cause the infringement of patents. Xiaomi has the right to sue them if they still conducting their business without any acknowledgement from Xiaomi. The portal ‘ xiaomishop’ has closed down because Xiaomi had forced them to do so. There are still 4 to 5 retail shops and portals that still conducting their business and selling Xiaomi’s products.

4. Authorized Dealer’s Concerns

The authorized dealers of Xiaomi in India are Flipkart and Airtel are also affected by the infringement of patents. They also were selling the MediaTek’s devices before the Ericsson has sued Xiaomi. Their businesses are drop since the 3G Redmi Note are banned. Recently they are selling back Xiaomi’s devices that run on a Qualcomm’s processor.

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