Xiaomi dips into the patent market to boost global expansion plans

Hugo Barra, vice president of global operations at Chinese consumer tech titan Xiaomi, seems to get asked the same question every time he faces journalists: “When is the company going to launch in the United States?”

His answer has always been the same: soon, but not yet, since the US market’s competitive, regulatory and commercial conditions require a substantially different approach to China. When the question was put to him again in an interview with tech news website CNET last week, he echoed those earlier responses. "The United States is a very different market,” he said. “I think the natural time will come. It's certainly not this year."

However, one area where Barra said something markedly different to previous interviews was in his summary of Xiaomi’s patent position. While Xiaomi executives have previously cited the lack of a substantial patent portfolio – and the threat of litigation that comes with that – as one of the key reasons for delayed entry into the United States, Barra was much more confident on that front. "You have to be prepared to fight those," he told CNET in reference to potential patent lawsuits, “[but] we're very well prepared. There's no mystery involved in this territory. It's very predictable."

Many of us will disagree with Barra on the supposed straightforwardness of patent strategy. But while his assertion that Xiaomi is patent primed and ready would have met with scepticism in months gone by, there is plenty of evidence to suggest that the Chinese firm has drastically improved its IP position of late.

Broadly speaking, Xiaomi has taken a three-pronged approach towards strengthening its IP and technology portfolio. First, it has exponentially increased its in-house patenting activity. Second, it has engaged in a number of M&A and strategic investment deals. And third, Xiaomi has been busy buying up patents from external sources. Back in October it made its first notable purchase when it acquired at least 32 US patent assets from Broadcom. Between February and April this year, it bought 333 US rights from Intel. And in May, Xiaomi hit the headlines when it acquired 1,500 patents from Microsoft alongside a licensing and collaboration deal.

Where appropriate, the purchase of third-party patents comes with some significant competitive advantages. The ability to practise on purchased patents and use the technologies they cover is immediate, while inventing in-house requires a considerable investment of time, money and manpower. Filing a patent application and waiting for it to be granted is an expensive, lengthy and risky process; but buying in patents from elsewhere means that freedom to operate is secured as soon as the assignment is completed.

Xiaomi is just one of many Chinese companies that finds itself in this position – on the cusp of expanding into overseas markets, but lacking the intellectual property to make it possible. In increasingly cutthroat and fast-moving industries such as consumer electronics, speed to market is all important, and there simply isn’t enough time to build a patent portfolio in-house from scratch. Instead, many of China’s high-tech companies will follow Xiaomi’s lead and turn to patent purchases to hasten their expansion. For patent owners looking to sell their assets, this represents a massive opportunity.

Are you a Chinese company looking to buy or license patents, intellectual property or technology to support market expansion plans? Connect with some of the biggest global IP owners on IAM Market to explore the IP they offer for sale.

Other Contents by Author