ZTE's efforts to collect patent royalties - months ahead of Qualcomm Inc's China antitrust settlement this week, according to people with knowledge of the matter  - shows how that deal has already changed the way China's booming smartphone industry does business.
               
As anticipated by ZTE, a key term in the settlement dissolved Qualcomm's cross-licensing agreements in China that had given smaller Qualcomm customers free access to the patent portfolios of more established Qualcomm customers.
 
The settlement has allowed wireless patent holders like ZTE and Huawei Technologies to seek royalties, while introducing a new risk of litigation to China's younger handset industry at a time when domestic patent law is gaining traction.
               
"For the first time, the settlement is forcing domestic manufacturers to recognize the value of IP (intellectual property) and consider how to use it strategically, which companies do in the West," said Wang Yanhui, secretary general of the Mobile China Alliance, an industry consortium. "That's the real significance of the (Qualcomm) settlement."
               
The competitive dynamics are particularly complex in China, the world's biggest smartphone manufacturer and consumer, as large Chinese telecom equipment makers that hold many essential patents for wireless technology also compete in the phone market against younger, nimbler manufacturers.
               
The settlement could prove tricky for companies like Xiaomi Inc, a 4-year-old Beijing-based smartphone maker whose weak patent position has proved a major vulnerability. In December, a court in India temporarily halted its shipments there after Swedish telecom firm Ericsson complained Xiaomi had not been paying its royalties.