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Google and Tencent of China find that being friends has benefits



Alphabet
Inc.

GOOGL -0.27%

Google and

Tencent Holdings
Ltd.

TCEHY -0.87%

will license each other in technology patents, an agreement that could help the former expand their presence in the Chinese market and accelerate the latter's global expansion. [19659007] They signed a long-term patent cross-licensing agreement for a broad range of products and technologies, the two companies said on Friday, adding they were open to further cooperation in the future.

"Working together in agreements like this, technology companies can focus on building better products and services for their users."

Mike Lee,

Google's patent chief said in a statement.

Financial terms were not disclosed, and no company commented beyond their statements.

Cross-licensing agreements allow companies to license each other for use in different markets, said

Lester Ross,

a lawyer at WilmerHale in Beijing. Mr. Ross said that cross-licensing agreements can restrict competition, but that they also create market efficiencies, for example, by reducing the cost of having to apply for patents in several countries.

Companies like

Samsung Electronics
Co.

Y

Apple
Inc.

they have signed agreements of this type in the past to avoid infringing each other's technology and regional patents and, therefore, avoid costly lawsuits.

The deal is the latest in a series of Google moves to expand its reach to mainland China, after it pulled out its main search business in 2010 due to concerns about piracy 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 located. [19659007] Google already operates offices in Beijing and Shanghai, employing approximately 600 employees. Although Google's search engine is blocked in China, offices are mainly used for its advertising sales staff and engineers working on its global products. Google will use the new base in Shenzhen in part to take advantage of the region's electronic hardware supply chain, according to an email sent to its Chinese employees.

Tencent is China's largest technology company by market capitalization and gets most of its video game money. Its WeChat social network application is dominant in China, but it has a scant reach beyond.

Chris DeAngelis,

China's general manager for technology consultancy Alliance Development Group believes that the agreement with Google is a sign of Tencent's global ambitions.

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

Write to Liza Lin at liza.lin@wsj.com and Alyssa Abkowitz at alyssa.abkowitz@wsj.com


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