Two of China's biggest technology 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.
The fight between Huawei Technologies Ltd and ZTE Corp highlights the challenge for communist leaders who need to manage Chinese corporate ambitions as they try to create global competitors in telecoms, energy and other fields.
It is the first case of its kind between major Chinese companies, which usually settle disputes in private.
"We're going to see more of this in this industry and others," said David Wolf, a technology marketing consultant in Beijing. "The government will find, wow, we've got these national champions, but now they're trying to kill each other."
The dispute centres on fourth-generation mobile technology, 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.
Control of key patents could help decide which equipment suppliers are positioned to reap billions of dollars in sales once it is rolled out in other markets.
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 technology.
Huawei has filed patent infringement lawsuits against ZTE in France, Germany and Hungary. ZTE rejected the claims and said it has asked a French court and Chinese regulators to invalidate a Huawei patent.
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 but growing US and European presence.
Their dispute comes amid mounting complaints by foreign business groups about Beijing's industrial policy. They say China is improperly supporting favoured companies by limiting market access and providing low-cost loans and other support.
Huawei's lawsuits accuse ZTE of infringing patents for data cards and improperly using a Huawei-registered trademark on some of its products.
"We will do whatever is required to ensure that the use of Huawei's intellectual property by any company is based on internationally accepted protocols and practices," said Huawei's chief legal officer, Song Liuping, in a statement.
ZTE said its lawsuit accused Huawei of infringing its 4G patents. The company said it also has asked a French court and China's State Intellectual Property Office to invalidate Huawei's patents for a rotary USB connector used to exchange data between devices.
"ZTE respects the intellectual property rights of other companies, but it will not stop protecting its own intellectual property rights," said a company statement.
Huawei, founded in 1987 by a former Chinese military engineer, has 110,000 employees and reported 2010 revenues of 182bil yuan.
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