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Microsoft sells 1,500 mobile patents to Xiaomi in licensing deal

Sale of mobile patent portfolio comes alongside software licensing agreement and may herald Xiaomi’s expansion into Europe and the US, say analysts

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Microsoft has sold 1,500 patents to insurgent Chinese device supplier Xiaomi in an agreement that will also see Xiaomi shipping Microsoft Office and Skype software on its Android smartphones and tablets.

The patents are understood to relate to wireless, video, cloud and multimedia technology. The deal builds on a previous agreement to offer Windows 10 on Xiaomi’s Mi Pad tablets, and Xiaomi also currently powers its Mi Cloud service with Azure.

“People want their favourite apps and experiences to work seamlessly on the device of their choice, and that’s exactly what this partnership offers,” said Peggy Johnson, executive vice-president of business development at Microsoft.

“Together with Xiaomi, we’re bringing the very best in mobile productivity to millions more customers in China and around the world.”

Xiaomi senior vice-president Xiang Wang added: “As demonstrated by this agreement with Microsoft, Xiaomi is looking to build sustainable, long-term partnerships with global technology leaders, with the ultimate goal of bringing the best user experience to our Mi fans.”

Xiaomi has struggled to gain traction outside of its domestic market, and has been left standing by Chinese rivals, such as Huawei, which has established a strong business in the West. Xiaomi devices are available in the UK, but generally only through online resellers and unofficial channels such as eBay.

Tristan Sherliker, associate solicitor and intellectual property expert at law firm EIP, said the patent sale showed that breaking into the West was clearly important to Xiaomi.

“This patent pot from Microsoft might just be what Xiaomi needs to break in to the wider global market. Now that it owns patented tech, as well as using it in its smartphones, Xiaomi is in a much better position to compete,” he said.

This is because smartphones have to support a wide range of technology standards, including 2G, 3G and 4G networks, Wi-Fi and Bluetooth and –  all of which are protected by patent. This means a proportion of the price tag will go to the original patent holders, explained Sherliker.

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In the mobile industry, because most manufacturers own patents themselves, everyone ends up paying licensing fees to everyone else, so these costs even out, he said.

However, having only been founded six years ago, Xiaomi has yet to build up patent capital, meaning it pays out, but does not make much money itself.

“Now, Xiaomi can punch from an equal footing, as well as having the backing of a partnership with Microsoft going forward,” said Sherliker.

The licensing deal comes a week after Microsoft backed further away from its own mobile business – and the Windows Mobile operating system – with the loss of more than 1,300 jobs at the former Nokia business.

In a leaked memo, Windows chief Terry Myerson said the smartphone business was being scaled back, but insisted Microsoft was not getting out of mobile altogether.

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