Produced by | Bullet Finance

Art Editor | Qianqian

Reviewed by | Songwen

Do you think the concept of "patent litigation" is distant from your daily life?

Actually, it's much closer than you think. It might be lurking in the smartphones, earphones, and cars you use every day.

From the 3G, 4G, 5G, to the impending 6G era, technology products are becoming increasingly interconnected and heavily reliant on a shared set of technical standards. Utilizing these standards means grappling with a highly specialized term: standard essential patents (SEPs).

As Chinese companies expand globally, many have found themselves entangled in controversies over SEPs. Are they truly "defendants" due to "infringement"? Does involvement in patent disputes necessarily indicate a lack of innovation or strength?

The answer is far more nuanced.

1. What Are Standard Essential Patents? They're Fundamentally Different from Ordinary Patents!

Standard essential patents, or SEPs, refer to patents for industry-standard technologies that are unavoidable and must be used by companies to produce certain products. These are commonly found in fields requiring device interconnection, such as telecommunications, networking, and audio-video coding.

Consider this scenario: Whether you use a Huawei, Apple, or Xiaomi smartphone, you can call each other seamlessly; any brand of earphones can connect to any brand of smartphone for music playback.

This cross-brand interoperability is made possible by a unified set of standards established by the entire telecommunications industry. Think of these standards as a highway that everyone must use to reach the consumer market.

Constructing this highway is a monumental task that no single tech company can accomplish alone. Hence, major manufacturers contribute their core technologies and collaborate to complete the road in sections.

Once the highway is open, there are rules: Any company that contributes technology to build a section of the road can charge a reasonable "toll" from all vehicles passing through. Conversely, when this company uses sections built by others, it must also pay a fee.

In the context of SEPs, this is straightforward: The company that contributes technology and funds to build the road is the "patent holder" of the SEP; manufacturers producing smartphones, cars, smart devices, and using this highway are the "implementers"; the contentious patent fees are essentially these "tolls."

This highlights the fundamental difference between SEPs and ordinary patents: Ordinary patents can often be circumvented, but SEPs cannot. If a company wants to "reach the consumer market" and produce products that comply with international standards, it must use this road.

Due to this characteristic, licensing systems for SEPs have emerged. Patent holders receive reasonable returns through licensing, while implementing companies use standard technologies by paying certain fees, jointly fostering industry interconnection.

So, why do so many companies find themselves embroiled in lawsuits over SEPs? The answer lies in determining the appropriate amount for these "tolls."

If patent holders and implementing companies can agree on a price, everyone is satisfied. If not, they must resort to court, where the court helps determine a reasonable fee. The core of the court dispute is not "whether you used my technology" but "whether this fee is reasonable."

Thus, similar lawsuits have been a constant throughout the history of the telecommunications industry. From the patent wars between Nokia and Motorola in the 2G era to the numerous patent fee disputes in the 3G and 4G eras involving mobile base stations and handset manufacturers, and now extending to automobiles and the Internet of Things (IoT) in the 5G era... it can be said that wherever general standards penetrate, SEP disputes follow.

For terminal implementing companies, becoming involved in SEP disputes is not uncommon. Companies like Samsung, Huawei, Xiaomi, OPPO, and Vivo have all been deeply embroiled in such disputes. This is not "special treatment" for any particular company but an industry norm: The standard essential patents remain constant, while the "defendants" change.

2. Attention! Four Major Misconceptions About Standard Essential Patents

Due to high professional barriers and information asymmetry, numerous misconceptions about SEPs have emerged online. These one-sided views not only misinterpret industry rules but also easily mislead the public's judgment of Chinese companies.

Based on industry realities and actual rules, four major frequent misconceptions exist in the market.

Misconception 1: Chinese companies being sued means they lack technology or stole technology?

This is the most common misinterpretation.

From media reports, it seems that Chinese companies are particularly often "defendants." This is because China is a global hub for product innovation, and consumer electronics products involve a vast number of SEPs. Taking 5G standards as an example, a single smartphone involves over 110,000 patent families and more than 100 patent holders related to 5G SEPs.

In the smartphone sector, IDC data shows that the three major Chinese smartphone brands—Xiaomi, OPPO, and Vivo—accounted for 30% of the global market in Q1 2026.

In the IoT module sector, IoT Analytics data shows that Chinese manufacturers accounted for 68% of global cellular IoT module shipments in 2025.

In the new energy vehicle sector, the International Energy Agency's report shows that nearly 75% of the approximately 22 million electric vehicles produced globally in 2025 were made in China.

In the television sector, TrendForce data shows that just three Chinese brands—TCL, Hisense, and Xiaomi—accounted for 36% of global shipments in Q1 2026.

(Note: Top 5 global TV shipments in Q1 2026)

The more products are sold, the larger the market, and the more standards are covered, the higher the probability of licensing negotiations and lawsuits. Therefore, Chinese companies becoming involved in SEP disputes reflects their market position rather than a lack of innovation. Especially for companies like Huawei and Xiaomi, whose product lines span smartphones, TVs, tablets, routers, IoT, and automobiles... covering a wide range of standards and with a global market presence, they naturally face more SEP disputes.

So, does being a defendant mean there is no technological innovation?

Of course not. The frequent disputes over SEPs arise from disagreements over patent fees. This does not mean the "defendant" stole the "plaintiff's" technology. In most cases, both the "plaintiff" and "defendant" have contributed technology to building this road.

According to the "Global 5G Standard Essential Patents and Standard Proposal Research Report (2026)" released by the China Academy of Information and Communications Technology (CAICT), among the top ten companies globally in terms of valid 5G SEP patent families, Chinese companies occupy four spots: Huawei ranks first globally; ZTE fifth; Xiaomi eighth; and OPPO ninth. These four Chinese companies collectively hold nearly 28% of the global share of valid 5G SEP patent families. These Chinese companies not only "use the road" but also "build the road," contributing key technologies and driving the implementation of more products and applications, propelling the entire industry forward.

(Note: Top ten companies globally in terms of valid 5G SEP patent families)

Additionally, even globally innovative companies like Apple and Samsung frequently face lawsuits; companies like Nokia and Ericsson, which hold substantial SEPs, have also been and are currently being sued in other patent relationships. The number of times a company is sued has no direct correlation with its technological capabilities or innovation.

Misconception 2: Disagreeing with the patent holder's proposed patent fees means disrespecting intellectual property?

The answer is no. SEPs generally adhere to the FRAND principles—Fair, Reasonable, and Non-Discriminatory.

These are industry-recognized licensing principles that ensure patent holders receive reasonable returns while guaranteeing that "tolls" are priced fairly and not excessively high simply because others cannot avoid using your patents. Therefore, implementers also have the right to negotiate for fair and reasonable licensing terms.

If the two parties cannot agree on patent royalty rates, they can determine a reasonable price through commercial negotiations or judicial proceedings, following internationally recognized business rules. It's like buying cabbage at a market: If a vendor asks for 1,000 yuan per kilogram, consumers can argue that the price is inflated and seek assistance from market regulators. This is a legitimate right of consumers as buyers.

An implementer's refusal to accept unreasonable patent fees proposed by the patent holder does not mean they disrespect intellectual property; rather, it reflects their commitment to maintaining a fair and sustainable competitive environment while respecting intellectual property.

Misconception 3: The more patent fees a company pays, the worse its technology?

Let's first examine how patent fees are calculated.

The basic formula is: Total patent fees = Patent royalty rate × Sales volume.

It's clear that the total patent fees paid are not only related to the royalty rate but also directly tied to sales volume. The higher the sales volume, the higher the total patent fees paid.

Meanwhile, there are extensive cross-licensing relationships among companies in the telecommunications industry. Chinese tech companies like OPPO, Xiaomi, and Vivo, despite holding substantial SEPs, often end up as net payers of patent fees due to their enormous sales volumes in cross-licensing arrangements.

Cross-licensing means that if two companies each hold patents the other needs to use, they calculate a net payment: Net patent fees = (Company A's royalty rate × Company B's sales volume) - (Company B's royalty rate × Company A's sales volume). The resulting difference is the amount one party must pay the other.

The core of the decade-long patent litigation saga between Apple and Qualcomm revolves around patent fees. As one of the highest-selling smartphone brands globally, Apple, despite holding numerous patents, remains a net payer in cross-licensing due to its massive sales volume.

Misconception 4: Higher patent fees better protect innovation?

The answer is clearly no. The goal of the SEP system is not only to protect innovative achievements but also to promote the widespread adoption of standard technologies.

Standard technologies are infrastructure, and tolls cannot be exorbitant. If tolls are too high, fewer companies will use the road, contradicting the original purpose of standardization and ultimately rendering the initial investments by all road-building companies worthless.

Moreover, excessively high patent fees have a cascading effect: Higher terminal costs → Reduced consumer purchasing intention → Compressed R&D investment by implementers → Hindered standard adoption → Shrinking industrial ecosystem. If patent fees for a smartphone rise from 50 yuan to 150 yuan, this 100-yuan difference doesn't disappear; either consumers pay more, or smartphone manufacturers cut costs elsewhere. If patent fees become so high that no one wants to implement standard technologies, the standard fails, resulting in losses for all stakeholders in the intellectual property ecosystem.

Therefore, a truly healthy and sustainable SEP ecosystem should balance innovation incentives, industrial prosperity, and consumer interests.

(Note: SEPs should balance the relationships among consumers, patent holders, and implementers)

3. The Future Is Here: SEP Disputes Will Only Increase

With technological advancements, SEPs will no longer be limited to the smartphone industry. More and more sectors, including new energy vehicles, robots, AI terminals, smart homes, and industrial internet, will rely on unified communication standards.

Especially as Chinese tech companies continue to compete globally and their products reach more countries, licensing negotiations and lawsuits over SEPs will inevitably increase, becoming an increasingly common business phenomenon. Therefore, the next time you see news about "a Chinese company being sued," don't jump to conclusions—first understand what the lawsuit is really about.

After all, SEP disputes are not just about commercial interests between companies.

A sustainable patent licensing ecosystem not only ensures innovators receive their due rewards but also enables implementing companies to continue investing in R&D, promoting the widespread adoption of standard technologies and avoiding unreasonable costs being passed on to consumers. When companies argue in court for "reasonable patent fees," ordinary consumers may not be present, but ultimately, it is every smartphone, car, and smart home buyer like you and me who may end up paying for unreasonable pricing.

Only by establishing a healthy and sustainable SEP ecosystem can we truly achieve a win-win situation for innovation, industrial development, and consumer interests.

Of course, only when more and more Chinese tech companies continuously contribute to standard patents and participate in global standard-setting will they gain more voice in this rule-based game and bring more benefits to Chinese consumers. After all, SEP pricing affects every consumer and the future of technology accessibility.

*The featured image and unnamed illustrations in this article are from: Shutterstock, based on the VRF protocol.