Xiaomi is facing a hurdle ahead of its upcoming Hong Kong IPO.
Following 7 patent lawsuits against it lodged by Coolpad in May, Xiaomi has again been entangled in a patent disputation saw an individual patent holder suing the Beijing-based company for an infringement concerning his patent ZL00800381.5, or “Common Packet Channel.”
The patent concerns Xiaomi 5X, Xiaomi Max 2 and Xiaomi Note 3, all are some of the most popular Xiaomi models.
YUAN demanded Xiaomi to stop patent infringement and asked for $7.52 million (RMB 50 million) in compensation.
Patent problems
Outside of China, Xiaomi’s expansion has been hampered by week patent protection.
In Xiaomi’s largest overseas market India, the smartphone manufacturer is still trapped in a legal battle. Back in 2014, the Delhi High Court restrained Xiaomi from selling its smartphones in India following a patent complaint from Ericsson, the Swedish telecom firm that alleged the Chinese company has infringed on 8 of its patents.
Xiaomi was later allowed to sell its devices which have Qualcomm chipsets in them in the country on the condition that the company deposits 100 rupees per device sold. The two companies haven’t reached a settlement to date.
In the US, the world’s 3rd largest smartphone market, Xiaomi sells a wide range of accessories but no smartphones. Its expansion plans in the country may have been negatively affected by patent issues. In 2015, patent troll Blue Spike filed a patent-infringement suit against Xiaomi, claiming the latter company had breached its “Data Protection Method and Device” patent.
To avoid patent disputes in the long run, Xiaomi has been bolstering its patent portfolio, partnering with patent-rich companies including Microsoft, Intel, Nokia, and Qualcomm.
HK IPO
While moving towards its much-anticipated Hong Kong IPO, Xiaomi identifies the patent problem as a risk factor for the company, claiming in its prospectus that it has been and may continue to be subject to patent claims.
Despite all the hypes, Xiaomi priced its shares at HK$17 per share, the lower end of the HK$17-22 price range. Its valuation has halved to US$54 billion from the rumored US$100 billion, according to South China Morning Post.
Apart from piling patent issues, Xiaomi is also facing only lukewarm responses from retail investors who have doubts about the company’s lofty valuation and its current loss-making position.
Editor: Ben Jiang