Qualcomm files complaint in China court against smartphone maker Meizu

Qualcomm Inc has filed a complaint in a Chinese court against smartphone maker Meizu Technology Co after the tech giant said it was unable to reach a licensing accord with one of the top 10 handset suppliers in its biggest market.

People walk past Qualcomm’s stand during the Mobile World Congress in Barcelona, Spain in this February 24, 2016. (Reuters)

Qualcomm Inc has filed a complaint in a Chinese court against smartphone maker Meizu Technology Co after the tech giant said it was unable to reach a licensing accord with one of the top 10 handset suppliers in its biggest market.

The filing by San Diego-based Qualcomm, submitted to the Beijing Intellectual Property Court on Friday, is the first legal action by Qualcomm as it seeks to uphold terms of its landmark 2015 anti-trust settlement with China's economic policy panel, the National Development & Reform Commission (NDRC). Qualcomm agreed to pay a fine of $975 million in the settlement, the largest in China's corporate history.

The complaint against Meizu asks the court to affirm that Qualcomm's terms for a patent license agreement complies with China's anti-monopoly law and the company's fair, reasonable, and non-discriminatory licensing obligations under its 2015 remediation agreement with the NDRC, the company said.

Reuters could not immediately contact officials at Meizu for comment.

Don Rosenberg, Qualcomm's general counsel, said in a telephone interview that the firm has negotiated extensively and in good faith with Meizu to sign a patent license agreement consistent with the terms of the rectification plan submitted by Qualcomm to, and accepted by the NDRC.

"There's no question that Qualcomm's intellectual property has been used and we have not been properly paid," Rosenberg said. He said Qualcomm was not focused on damages, but on leveling the playing field for everyone in China.

Meizu, located in the southern Chinese city of Zhuhai, was China's eighth-biggest smartphone maker in 2015, shipping 24.82 million devices for the year, according to IDC data.

China is Qualcomm's most important market, making up 53 percent of global revenue of $25.28 billion for the fiscal year ended Sept. 27, with a large chunk of profit coming from higher-margin royalties earned from the company's licensing arm.

As part of its 2015 settlement with the NRDC, Qualcomm agreed to a plan that modified its business practices in China.

The company has since signed more than 100 Chinese handset manufacturers to licensing agreements under the new terms, but has said it continues to struggle with a handful of key original equipment manufacturers.

"We remain in active discussions with the few key Chinese OEMs that have not yet signed and believe we are making progress in those discussions," Qualcomm CEO Steve Mollenkopf said on a telephone conference call in April.

Qualcomm has also been seeking to deepen its presence in the Chinese market by transferring technology and investing in next-generation chip manufacturing.