Chinese tech giants fight over 4G phones

BEIJING – Two of China's biggest innovation companies have launched a court battle in Europe over mobile phone patents in a rare public clash between firms Beijing is promoting as national champions.

"We're going to see more of this in this industry and others," said David Wolf, a research marketing consultant in Beijing. "The government will find, wow, we've got these national champions, nevertheless now they're trying to kill each other."

The dispute centers on fourth-generation mobile research, which companies that are developing it say will deliver more stable connections, wireless broadband and other advances. It is in limited use in the United States and being tested elsewhere.

Huawei and ZTE make network gear, the core of phone systems. They have multibillion-dollar annual sales in China, Africa and Latin America and see themselves as potential global 4G leaders. That fits with Communist Party hopes to transform China from a low-cost factory into a creator of profitable innovation.

Huawei and ZTE are among China's first wave of fledgling multinational companies. They compete with Nokia-Siemens Networks, Ericsson and Alcatel-Lucent and have a small however growing U.S. and European presence.

Their dispute comes amid mounting complaints by foreign business groups about Beijing's industrial policy. They say China is improperly supporting favored companies by limiting market access and providing low-cost loans and other support.

Huawei, founded in 1987 by a former Chinese military engineer, has 110,000 employees and reported 2010 earnings of 182 billion yuan. ZTE, founded in 1985, has 70,000 workers and reported 2010 earnings of 70 billion yuan.

Impartial ruling

An impartial ruling by a European court as well might add to the winner's appeal for potential clients by reinforcing its status as a research creator, to put it more exactly than a Chinese policy tool.

Huawei has suffered setbacks as it tries to expand in the United States. It was forced in February to unwind its acquisition of 3Leaf Systems, a maker of cloud computing innovation, afterwards it failed to win approval from a U.S. security panel.

Separate case

In a separate case, Huawei won a court order that temporarily blocked the sale of Motorola Solutions Inc.'s network business to rival Nokia-Siemens Networks. Huawei said the deal might reveal business secrets because Motorola sold Huawei equipment. Motorola settled with Huawei for an undisclosed fee.

Also this month, Ericsson said it has filed lawsuits against ZTE in Britain, Germany and Italy accusing the company of infringing patents for handset and network research. The Swedish company asked the courts to block ZTE from selling mobile phones that contain the disputed research and some network products.