ZTE has received legal papers stating that Ericsson has filed lawsuits against ZTE over handset patent infringement in the UK. We sincerely regret that Ericsson has unilaterally broken down the ongoing negotiations between the two parties. In its defence, ZTE will initiate patent invalidation procedures against Ericsson before the patent re-examination board of SIPO (China's State Intellectual Property Organisation).
In the technology-intensive telecommunications industry, ZTE sees innovation as the core of the company and attaches great importance to patent strategy. The company has consistently invested 10 percent of its income on R&D including the development of an international patent strategy. As of December 31, 2010, ZTE held a total of 33,000 patents, among which, 1863 were international patent applications in 2010 as registered with WIPO (World Intellectual Property Organisation), making ZTE No.1 in the telecommunications industry and No. 2 across all industries worldwide.
When disputes over patents occur, ZTE always follows the rules of mutual respect and mutual benefits to seek reasonable solutions. To date, through negotiation and cross-licensing, ZTE has reached a consensus with most telecommunications systems and components vendors on the majority of products and has been seldom needed to resort to third party adjudication, let alone legal action.
But we are also aware that, as competition becomes fierce, patent lawsuits have become an unavoidable challenge for every player in this industry. Patent traps, patent blackmail, overcharging, and involving customers in lawsuits have become commonplace, especially when market structures change and existing business models are challenged. ZTE believes that reasonable negotiation with the purpose of resolving the disputes is the only way for any vendor to survive in this market, and urges Ericsson to withdraw its legal action.
ZTE will adhere to the above rules and will continue to advocate reasonable and pragmatic negotiation. At the same time, we will fight any action that intends to involve our customers in patent lawsuits. We will do everything possible to prevent unnecessarily aggressive competition and reserve the right to take legal action to protect our own and our customers' interest.
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