Google and China's Tencent Find Being Friends Has Benefits

By Liza Lin in Shanghai and Alyssa Abkowitz in Beijing 

Alphabet Inc.'s Google and Tencent Holdings Ltd. will license each other's technology patents, a deal that could help the former broaden its toehold in the Chinese market and accelerate the global expansion of the latter.

They entered a long-term patent cross-licensing agreement for a broad range of products and technologies, the two companies said Friday, adding they were open to more cooperation in the future.

"By working together on agreements such as this, tech companies can focus on building better products and services for their users," Mike Lee, Google's head of patents, said in a statement.

Financial terms weren't disclosed, and neither company commented beyond their statements.

Cross-licensing deals allow companies to license each other's technology for use in different markets, said Lester Ross, an attorney at WilmerHale in Beijing. Mr. Ross said that cross-licensing deals can restrain competition, but that they also create market efficiencies--for example, reducing the cost of having to file for patents in multiple countries.

Companies such as Samsung Electronics Co. and Apple Inc. have signed such agreements in the past to prevent infringing each other's technology and regional patents and therefore avoiding expensive lawsuits.

The arrangement is the latest in a string of moves by Google to expand its reach into mainland China, after it pulled out its main search business in 2010 due to concerns about hacking and censorship. Several weeks ago, the Mountain View, Calif.-based company opened an artificial-intelligence lab in Beijing, and this week said it is opening a new Chinese office--in Shenzhen, the city near Hong Kong, where Tencent is based.

Google already operates offices in Beijing and Shanghai, employing about 600 staff. Although Google's search engine is blocked in China, the offices are used mostly for its ad sales staff and engineers working on its global products. Google will use the new base in Shenzhen in part to tap into the region's electronics hardware supply chain, according to an email sent to its Chinese employees.

Tencent is China's largest tech company by market capitalization, and it makes most of its money from videogames. Its WeChat social network app is dominant in China, but has scant reach beyond.

Chris DeAngelis, China general manager for technology consultancy Alliance Development Group, sees the tie-up with Google as a sign of Tencent's global ambitions.

"It represents that China's technology giants have grown up," Mr. DeAngelis said. "Tencent is now a global player."

Write to Liza Lin at [e-mail] and Alyssa Abkowitz at [e-mail]

(END) Dow Jones Newswires

January 19, 2018 04:40 ET (09:40 GMT)

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