Bloomberg News

ZTE Signs Smartphone Patent-Licensing Deal With Microsoft

April 23, 2013

ZTE Signs Patent-Licensing Deal With Microsoft Over Smartphones

An employee photographs herself with a ZTE Corp. Grand Memo smartphone at the Mobile World Congress in Barcelona. ZTE had 4.4 percent of the global smartphone market in the fourth quarter of 2012, making it the fourth-biggest manufacturer of smartphones, just behind Huawei. Technologies Inc. Photographer: Simon Dawson/Bloomberg

ZTE Corp. (763), China’s second-biggest maker of mobile-phone equipment, signed a patent-licensing agreement with Microsoft Corp. (MSFT:US) for technology used in smartphones and tablet computers.

Financial terms weren’t disclosed, Microsoft said in a blog posting announcing the deal. The agreement gives Shenzhen, China-based ZTE access to Microsoft technology for use in its phones, tablets, computers and other devices that run on Google Inc. (GOOG:US)’s Android and Chrome OS operating systems.

With ZTE and other licensees, Microsoft gets royalties from 80 percent of the Android smartphones sold in the U.S. and more than half of those sold worldwide, Horacio Gutierrez, deputy general counsel at Redmond, Washington-based Microsoft, said in the blog posting. Google’s Motorola Mobility and ZTE’s crosstown competitor Huawei Technologies Inc. are the two largest holdouts.

“There’s no one that can build a great product these days without using the ideas of other companies,” David Kaefer, general manager of Microsoft’s intellectual property licensing, said in an interview. “ZTE and Huawei look at each other as competitors. Having ZTE licensed only convinces others there is good value there.”

Microsoft has been embroiled in patent litigation (GOOG:US) with Motorola Mobility for more than two years. It won a ruling that limited U.S. imports of Motorola Mobility phones that have a feature for syncing schedules between phones and personal computers, and is awaiting a final decision in a case that targets the Xbox video-gaming system.

Smartphone Market

ZTE and Huawei have their own fight going on, with patent- infringement suits against each other in Europe.

ZTE had 4.4 percent of the global smartphone market in the fourth quarter of 2012, making it the fourth-biggest manufacturer of smartphones, just behind Huawei. The field is dominated by Cupertino, California-based Apple Inc. (AAPL:US) and Samsung Electronics Co. (005930), based in Suwon, South Korea, which together made half the smartphones sold in the world during the last three months of the year, according to Bloomberg Industries data from researcher IDC.

Last week, Microsoft announced it had reached a similar licensing agreement with Hon Hai Precision Industry Co. (2317), the world’s largest contract manufacturer of electronics, and its Foxconn unit. Microsoft also has agreements with LG Electronics Inc. and Samsung.

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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