HONG KONG—China's smartphone makers increasingly are turning to patents as ammunition as they try to reel in global leaders Apple Inc. AAPL -0.24 % and Samsung Electronics Co. SSNHZ 0.00 %
Chinese technology giants from Huawei Technologies Co. to ZTE Corp. ZTCOY 4.55 % and Lenovo Group Ltd. LNVGY 0.20 % are acquiring patents through licensing deals, acquisitions and hefty spending on research and development—moves that could signal more legal challenges for Apple and Samsung not just in China, but overseas as well.
Huawei, which has an ambitious goal of becoming the world's top smartphone maker in five years, sued Samsung in the U.S. last month, claiming the South Korean company violated 11 of its mobile patents. Samsung has said it would defend itself in the lawsuit. The suit marked the first major legal challenge by a Chinese smartphone maker against a market leader, turning on its head the idea of Chinese manufacturers being on the receiving end of patent disputes.
Last year, Huawei, the world's third-largest smartphone maker and the leader in the telecommunications-equipment market, was the largest filer of international patent applications under the Patent Cooperation Treaty, which makes it easier for companies to file patents in multiple countries, accordi ng to the Geneva-based World Intellectual Property Organization. Huawei was followed by U.S. chip maker Qualcomm Inc. QCOM 0.63 % and China's ZTE.
Patents are also playing a role in the harsher mobile landscape Apple and Samsung are navigating in China, where regulators increasingly insist that foreign companies play by Beijing's rules. Shenzhen Baili, a little-known Chinese startup, won a surprise injunction against sales of Apple's iPhone 6 and iPhone 6 Plus in Beijing, based on a design-related patent it claims to own in China.
Apple contests the claims, which analysts and legal experts say are an indication of the country's political climate. But, at the same time, major Chinese competitors such as Huawei are mounting serious efforts to build patent rights and take on the industry's big two. Three of the world's top five smartphone makers by sales were Chinese in the first quarter, including Huawei, according to research firm Gartner.
"We are going to see a lot more Chinese companies filing patents outside China, and more deals and lawsuits involving patents and technologies," said Benjamin Bai, a partner at Allen & Overy LLP in Shanghai who advises Chinese companies on international intellectual-property strategies.
A single smartphone can involve thousands of patents. The issues are so complex and thorny that Apple and Samsung have been locked in patent litigation around the world since 2011 as they battle for market dominance.
Huawei has increased its patent portfolio mainly from its extensive research-and-development investment. Over the past five years, Huawei has spent nearly $30 billion on R&D. Last year, its R&D spending rose 46% to $9.2 billion, beating the $8.1 billion Apple spent in its most recent fiscal year. Huawei now has 16 R&D centers around the world, including in the U.S. and Europe.
In a sign that Huawei is making progress in building its intellectual-property portfolio, earlier this year Apple and Huawei struck a licensing deal whereby the Cupertino, Calif., company is paying royalties for the Chinese company's patents, according to a person familiar with the matter.
Richard Yu, head of Huawei's consumer business, told about 100 engineers at its Beijing research center in a speech in January that the company would pour more money into R&D. He added that engineers' bonuses would increase as the business grows.
"We can be as big as Apple," Mr. Yu told the engineers, according to people who heard his speech.
Other Chinese smartphone makers such as Xiaomi Corp., are buying patents from Western rivals to catch up. Last month, Xiaomi agreed to purchase about 1,500 patents from Microsoft Corp. MSFT -0.12 % as it seeks to one day sell its devices beyond developing markets such as India and Brazil.
"We must systematically negotiate licenses to international patents and build a strong IP portfolio for defensive purposes, by both filing and acquiring patents," Xiaomi Vice President Hugo Barra said. Mr. Barra said Xiaomi is looking toward Western markets such as the U.S. and Europe.
Analysts said Xiaomi's intellectual property isn't strong enough to expand in developed markets such as the U.S. Xiaomi said it filed 3,738 patents in China and overseas last year, up from 2,045 in 2014.
To be sure, success in the smartphone market also requires more than just investing in patents and R&D, analysts say.
When Lenovo bought Motorola Mobility in a $2.91 billion deal in 2014, the Chinese personal-computer maker cited Motorola's patents as a reason for acquiring the company. Even with Motorola's patents, the company has struggled in the global smartphone market.
ZTE, which has expanded its patent portfolio, R&D and marketing, has become the fourth-largest smartphone maker in the U.S., according to research firm Canalys. But it ran into trade issues with the U.S. government earlier this year, which it is trying to resolve.
Still Huawei is hopeful that it can take on rivals with hefty R&D spending. At Huawei, a smartphone antenna-design team in Beijing has expanded 10-fold over the past five years to about 50 engineers. The team—one of several mobile antenna-design teams at Huawei—files four or five new patents every year, according to an employee.
When Apple released the iPhone 6S and iPhone 6S Plus last year, the team disassembled the phones and tested their antennas inside insulated rooms to compare them with Huawei's own antennas.
"We are still behind Apple, but we think the gap is narrowing," the Huawei employee said.
Write to Juro Osawa at juro.osawa@wsj.com
Source: China Smartphone Makers Snap Up Patents in Fight for Market Dominance
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