Dec. 17 (Bloomberg) -- InterDigital Inc. said China threatened to arrest or detain its employees over a bid to collect patent royalties from Huawei Technologies Co., amid tightened Chinese government scrutiny of business practices.
China’s National Development and Reform Commission said it “couldn’t guarantee the safety of people” sent by InterDigital to a meeting set for this week, William Merritt, chief executive officer of the company that licenses its patents on wireless technologies, said in a phone interview. “There’s nothing in that statement that can be positive,” he said.
InterDigital’s accusation marks an escalation in a dispute that saw China start a probe into alleged violations of anti-monopoly laws after the company filed an infringement complaint against handset makers including Shenzhen, China-based Huawei at the U.S. International Trade Commission. China has begun targeting foreign companies including Qualcomm Inc. and Mead Johnson Nutrition Co. under a broader crackdown on business practices it says drive up consumer prices.
“The threat of arrest is unprecedented,” Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong, said in an e-mail. “This is upping the ante in Beijing’s apparent effort to use psychological warfare to tame foreign companies that are deemed to be overcharging or otherwise short-changing Chinese companies or consumers.”
Officials in the press office of the NDRC declined to comment on Merritt’s claims today, and didn’t immediately respond to faxed questions.
The Washington-based ITC is scheduled to issue a final decision on InterDigital’s complaint Dec. 19. InterDigital sent a letter yesterday to the head of the NDRC’s anti-monopoly bureau saying they wouldn’t attend the meeting tomorrow because of the threats. Reuters earlier reported on the letter.
While InterDigital has Chinese patents, it hasn’t filed lawsuits there against Huawei, Merritt said. It has made non-binding offers to Huawei on licensing the patents, he said.
“From everything we heard, they wanted us over before that date” of the final U.S. trade decision, Merritt said. “There was some pressure being put on us in China to get ahead of the ITC case.”
Huawei has filed complaints in Europe and China accusing InterDigital of demanding excessive royalties and of failing to fulfill its pledge to license patents that are used in industry standards on fair and reasonable terms.
A Chinese court sided with Huawei in February and ordered InterDigital to pay 20 million yuan ($3.3 million). InterDigital is appealing.
Huawei “cannot speak to whatever perceptions another company might have about whatever experience they are having with whatever proceedings in which they might be engaged,” said William Plummer, a spokesman for the company, China’s largest maker of phone-network equipment.
“As for the unrelated ITC case, we welcomed last summer’s preliminary ruling” in its favor, Plummer said. “We understand that the final ITC ruling will be issued later this week and we look forward to the appropriate outcome.”
A U.S. trade judge in July found no violation of InterDigital’s patent rights by Huawei, ZTE Corp. or Nokia Oyj. The judge rejected arguments that InterDigital breached its licensing obligations. The commission is reviewing those findings and can order an import ban of any products found to infringe U.S. patents.
China’s NDRC said yesterday it will begin to supervise pricing in certain industries and punish companies that break antitrust rules. In that statement, the NDRC said it’s seeking to strengthen regulation to keep price levels stable, without identifying industries.
The NDRC began a probe on Qualcomm relating to China’s anti-monopoly law, the San Diego-based company said Nov. 25. In August, China fined six dairy companies including Mead Johnson Nutrition Co. and Danone a combined 669 million yuan for price-fixing, a record penalty for violating anti-monopoly laws.
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