Chinese security software developer, Kingsoft, together in the partnership with the mobile phone maker, Xiaomi, Beijing Zhigu Technology Consulting Services (an entity controlled by Xiaomi’s founder Lei Jun) and a few others, has launched a USD 35 Mn fund to support Intellectual Property related investments. Kingsoft announced that the investment vehicle managed by Beijing Zhigu Technology Consulting Services will have a 10-year term, without disclosing other specific details.
It is widely speculated that the fund has been formed as an aftermath of the Qualcomm antitrust investigation by China and its subsequent order to make Qualcomm surrender its “reverse patent license.” Reverse patent license was an interesting conception by Qualcomm, which forbade all smart-phone manufacturers using Qualcomm chips from collecting patent royalties from other Qualcomm clients.
With Qualcomm giving up on its Reverse Patent Licensing, Chinese tech majors like Huawei and ZTE that own several hardware patents, could cut into tech companies like Xiaomi that don’t own as much of their IP. The formation of the new fund suggests that instead of paying licensing fee for previously free patents, Xiaomi and other tech companies are keen on developing new patents of their own.
The fund has been named Beijing Ruichuang Investment Management Center. As a “strategic investment limited partner,” Kingsoft would reserve the permanent rights to license the IP held by the fund; the right of first refusal to buy these patents on exit and the rights to lease the patents held by the fund.
Xiaomi is going to contribute RMB 30 Mn (USD 4.8 Mn) towards the fund, while Kingsoft and Zhigu will each reportedly contribute RMB 10 Mn (USD 1.6 Mn). The remaining money will be raised from the fund’s third-party investors.
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