HONG KONG—When a Canadian patent-licensing firm wanted to sue Japanese electronics company Sony Corp., it chose an unlikely venue: China.
Ottawa-based WiLAN Inc., which earns revenue by licensing its patents, filed a suit against Sony last week in a court in the eastern Chinese city of Nanjing, alleging that the Japanese company's smartphones violated its wireless-communication-technology patent, according to the filing reviewed by The Wall Street Journal.
WiLAN's lawsuit is a rare case of a foreign patent-holding entity suing a non-Chinese company in China. It is an indication of how China is becoming a more attractive place to seek legal action for companies that accumulate patents for litigation and licensing purposes. In China, lawsuits are less time-consuming and less costly than in the U.S. and the country's courts have developed rapidly over the past several years. If an injunction is granted in China, it wouldn't only apply to products sold i n the country using the patent in question, but also to the exports of such goods made in China, giving the plaintiff a possible bargaining tool for a licensing deal.
While China accounts for a small part of Sony's revenue, the Tokyo-based company makes many of its electronic products, including batteries, smartphones and television sets, in the country. A Sony spokeswoman declined to comment on the lawsuit, saying that the company can't discuss a continuing legal dispute.
WiLAN's lawsuit, filed through its subsidiary, alleges that some of Sony's smartphones have infringed on a patent related to the fourth-generation wireless-network-technology standard known as long-term evolution, or LTE.
WiLAN has entered into licensing deals with numerous technology companies around the world. For example, it has recently signed agreements with Mitsubishi Electric Corp. of Japan and ZTE Corp. of China that cover industrial-automation and wireless technology, respec tively, according to WiLAN's website.
The Canadian company's goal is to reach a licensing deal with Sony, said Erick Robinson, a China-based attorney at patent law firm Rouse, which is advising WiLAN in the Sony case.
"Three or four years ago, I wouldn't have advised any foreign company to file a patent lawsuit in China," because the country lacked an effective system for enforcing intellectual-property rights, Mr. Robinson said. In September, WiLAN filed a similar patent lawsuit against Sony in Germany. That lawsuit is pending trial.
Traditionally, the U.S. has been the global hub for such lawsuits, but in recent years, patent-licensing firms are looking for new places to bring lawsuits, lawyers and legal scholars say. While Germany is already becoming a popular venue for patent lawsuits because of its sophisticated and efficient court procedures, some potential litigants are also starting to consider filing their cases in China.
"This is pa rt of a world-wide phenomenon right now," said Joe Siino, president of San Francisco-based Via Licensing Corp., a Dolby Laboratories Inc. unit specializing in patent management and licensing.
The rapid progress in China is driven by Beijing's desire to promote homegrown technologies with the aim to protect the increasing number of patents Chinese companies own. Some of China's biggest technology companies, such as telecommunications-equipment makers Huawei Technologies Co. and ZTE, have already built up extensive patent portfolios. The number of Chinese patents issued in 2015 jumped 54% to 359,000, according to the State Intellectual Property Office.
While granting more patents, the Chinese government has also strengthened its patent laws in recent years and created courts that specialize in IP disputes.
For foreign technology companies that have already faced challenges in China because of stiff competition, this could mean additional legal challenges, lawyers say.
Chinese patent-holders are also taking advantage of the system. In May, Beijing's IP regulator ordered Apple Inc. to stop the sales of the iPhone 6 and iPhone 6 Plus in the city, ruling in favor of Shenzhen Baili Marketing Services Co. A shell company owned by defunct Chinese smartphone maker Digione, it had filed complaints alleging that the U.S. company infringed on its design patents.
The injunction hasn't been implemented because Apple has appealed.
Write to Juro Osawa at juro.osawa@wsj.com
Source: China's Patent-Lawsuit Profile Grows
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