ByteDance, the $75b social media startup from China, is in the market for patents

Jack Ellis
Jan 7 · 6 min read
ByteDance’s headquarters in Beijing. Source: ByteDance

If you’re outside of China, you’ve probably never heard of ByteDance. But the Beijing-based startup’s mobile apps are used by more than 800 million people worldwide every day. It’s said to be seeking fresh investment that would value it at US$75 billion.

And now, it’s getting a taste for patents.

ByteDance’s core products include Jinri Toutiao, a news and info aggregator that tailors content recommendations based on its users’ preferences, and Douyin (or TikTok), a “selfie” app that allows users to film themselves singing along to pop songs. The latter has proven wildly popular across China and Southeast Asia (North American readers may be better acquainted with Musical.ly, another Chinese lip-syncing app favoured by US teenagers, which ByteDance purchased for US$1 billion in November 2017 and subsequently merged into TikTok).

Social media startups and patents don’t always mix, due to various technical, legal, and business-case reasons (that is, until an IPO is on the horizon and IP shopping sprees commence).

Moreover, this is China, which is relatively free of the cultural hang-ups and knowledge gaps that surround patents and patenting in Silicon Valley.

Given that, reports in the Chinese business press last week — indicating that ByteDance is on the cusp of a patent deal with Beijing-based smartphone maker Smartisan — shouldn’t come as too much of a surprise.

A ByteDance spokesperson told TechNode that the unicorn is looking to license several of Smartisan’s patents “for research and development related to electronic educational devices”, though “Smartisan stakeholders are yet to make a final decision on the deal”.

ByteDance began developing an online education platform named Gogokid last year.

ByteDance team members with the startup’s Chinese logo. Source: ByteDance

Whether or not the license deal actually comes to pass, who knows. As with so much in the Chinese tech and business press, it’s anyone’s guess as to how much of what is reported is accurate.

In any case, it’s an interesting development, if only for the fact that this would be another instance of two ‘Made in China’ tech companies trading IP with one another. Just a few years ago, such a deal would only be heard of if it involved legacy behemoths Huawei and ZTE — or otherwise took place in the context of the country’s convoluted mesh of government agencies, research institutions, universities, and state-owned enterprises.

Now, it’s becoming par for the course for China’s newer generation of tech firms to engage in IP-centric transactions — and not just with foreign IP holders.

The two players in this particular story aren’t IP ‘noobs’. Despite being a social media startup, ByteDance has been a proactive patent player, having filed and purchased rights at home and abroad. Meanwhile, Smartisan — which has seen better days — may be able to alleviate its current problems thanks to a diligent approach to IP strategy in the past.

Here’s a potted history of the duo’s IP strategy moves…

ByteDance: Xiaomi and Zhigu links

Patents obtained via its Musical.ly purchase aside, ByteDance has been a fairly active player in the IP transactions market.

In August 2017, it acquired a US patent application for an invention titled ‘Commodity exchange for pre-purchasing commodities and trading future rights to receive commodities’ from a company called Tank Exchange Inc.

Tank Exchange is the Palo Alto-based startup behind Tankwallet, a service that supposedly enables drivers to lock-in petrol prices for the future and avoid price fluctuations by tracking live pump prices. The Tankwallet website currently appears to be inactive; it isn’t clear if the startup is still in operation. In any case, its single filed patent application has been picked up by ByteDance.

According to further USPTO assignments records, ByteDance also acquired a portfolio including 13 US design patents from fellow Beijing-based firm Kingsoft in March last year.

All 13 US assets relate to a ‘Mobile terminal display screen with a graphical user interface’.

Kingsoft chairman and Xiaomi CEO Lei Jun. Source: Fortune / Flickr

Kingsoft operates a number of recognizable tech brands in China, including app developer Cheetah Mobile and computer games producer Seasun, as well as offering cloud and enterprise services.

Notably, its chairman is Xiaomi co-founder and CEO Lei Jun, who joined Kingsoft as an engineer in 1992 and rose through the ranks to become CEO, leading the company to IPO in 2007 and quitting immediately afterwards to become an angel investor. Lei launched Xiaomi three years later.

Kingsoft and Xiaomi (as well as Lei’s VC firm Shunwei Capital) were also shareholders in Zhigu, an IP strategy consultancy that ran a patent acquisition and monetization fund in conjunction with the Beijing municipal government.

Xiaomi later acquired Kingsoft’s shares in the firm, with the Zhigu team effectively moving in-house to become the smartphone maker’s IP strategy department. They went on to handle major patent and technology deals that Xiaomi struck with the likes of Intel, Microsoft, Nokia, and Philips.

Both Xiaomi and ByteDance, at different points in time, have been considered the world’s most valuable startup. Both eschewed anything resembling a systematized IP strategy early on in their lives, and did little in the way of filing patents. Now ByteDance, like Xiaomi before it, is turning to the secondary market to shore up its IP position.

Smartisan: In emergency-selling mode

TechNode reports that Smartisan — which produces peripherals such as earphones and software in addition to smartphones — has filed a total of 64 patents since 2013.

It isn’t clear whether this refers only to its Chinese assets, or to its worldwide portfolio including equivalents. A search of the USPTO assignments database reveals that ‘Smartisan Digital Co., Ltd’ holds 18 US assets, including seven grants, two design patents, and nine published applications. None appear to have been assigned from third parties.

According to TechNode the majority of Smartisan’s patents “relate to electronic devices, including wireless communication equipment, voice-recognition solutions, and a keypad for mobile devices,” as well as fingerprint-scanning technology.

The report also claims that the company “stopped filing patents in September 2017”.

This apparent cessation of patenting makes sense given the troubled waters that Smartisan now finds itself in.

Smartisan’s T1 smartphone. Source: Silentpilot / Pixabay

Rumours of the company’s poor financial health began to swirl last year with talk of office closures, and in November it admitted it was facing a cash crunch following reports that it had failed to pay wages and could cut up to 60% of its personnel. Smartisan was also reportedly sued by Yulong, the company behind competing smartphone maker Coolpad, for failing to pay it for components.

In December, founder and CEO Luo Yonghao was said to have resigned as Smartisan’s “legal representative”, while 10 senior executives were stripped of their directorships at the company.

Nevertheless, Smartisan’s early focus on filing patents may give it some respite. The license deal with ByteDance could lead to substantial bottom-line revenue down the line, depending on how Gogokid pans out. Morevoer, TechNode reports that Xiaomi and security software maker Qihoo 360 may be negotiating patent purchases from the distressed company, pointing to the perceived quality of its filings — though again, rumours in the Chinese business press are ten a penny.

Jack Ellis

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Journalist and editor writing about tech, innovation, and intellectual property in Asia and beyond.