Coolpad CEO makes good on patent threats with broadside against Xiaomi

Chinese smartphone maker Coolpad announced late Friday night that it has sued larger rival Xiaomi for infringing three Chinese invention patents. The cases will play out in the city where Coolpad is headquartered, at the Shenzhen Intermediate People’s Court. Notably, it will be one of the first major patent clashes between major players in China’s smartphone sector to play out in domestic courts.

In a voluntary disclosure filed with the Stock Exchange of Hong Kong, Coolpad said that six separate cases have been accepted by the Shenzhen Intermediate People’s Court. The plaintiff is a subsidiary of the group called Yulong Computer Telecommunication Scientific. The patents-in-suit shed some light on the technology at issue:

Chinese invention patent ZL200610034034.8 “Mobile communication terminal synergistic method and interface system thereof”

Chinese invention patent ZL201210250264.3 “Terminal and processing method for new event of application program”

Chinese invention patent ZL201210064396.7 “Terminal and application icons management method”

Coolpad CEO Jiang Chao took over the company’s top job in August of last year after serving as its chief financial officer for three years. In an interview with Chinese media earlier this month about his plans to turn around the loss-making company, he drew particular attention to the company’s patent portfolio, a product of relatively early investment in IP. Saying Coolpad owns more than 10,000 patents in the handset space, Jiang warned: “A lot of companies may have stolen our core technology or patents; our next step will be carrying out patent litigation against some of these companies.”

Coolpad mounts its first major patent offensive at a time when it is struggling in the commercial market for smartphones as well as struggling to emerge from the shadow of LeEco. The latter company became Coolpad’s largest shareholder after a series of investments from 2015 to 2016 – the group’s early outlay in smartphone patents would mesh with LeEco’s outsize ambitions in the mobile space, it was thought. But the Beijing-based company has flamed out spectacularly, and stake in Coolpad became one of the casualties in January.

That hasn’t helped Coolpad, which has also been hurt by the Chinese smartphone market’s consolidation around four major domestic players (Huawei, Oppo, Vivo and Xiaomi) plus Apple and Samsung. Coolpad does purport to have a significant presence in India where it competes at the lower end of the market. The brand said last year that it was producing around 34 million devices annually.

The same dynamics that may have pushed Coolpad to get more aggressive with its patent holdings are only going to intensify in the year ahead. Last week market research firm Canalys announced that tannual smartphone shipments in China declined in 2017 for the first time ever. With the local market now shrinking, there will be more pressure than ever on Chinese firms to grow overseas. And IP teams looking after significant patent assets may be asked what they can contribute to the bottom line.