Huawei May Have Largest 5G Patent Portfolio – Starting to Flex IPR Muscle
Update: This article has been updated after I was contacted by a law firm which has extensive expertise in dealing with wireless technologies patent law. After a meeting with one of their senior lawyers and some subsequent research, this article has been updated to point out that Huawei's 5G patents are in fact SEP DECLARATIONS which are commonly overstated and may not be reflective of the actual number of standard essential patents for 5G which Huawei has.
In an interesting development in the US – China trade war this week, it emerged that Huawei is asking Verizon (NYSE:VZ) for $1 billion for using its patents for core network infrastructure and other technologies. While this would normally just be a corporate discussion and potential for lawsuits, the implications are of course broader than for example the Apple (NASDAQ:AAPL) vs. Qualcomm (NASDAQ:QCOM) battle given the recent actions the US government has taken in putting Huawei on the entity list and the impending block on it being allowed to buy US technology.
A related difficulty here however is that the 5G standards were developed with Huawei being one of the major industry parties in helping form those standards and while its 4G patent portfolio is comparatively pretty small, as far as 5G goes, it’s the number one holder of what are referred to as “Standard Essential Patent Declarations” or SEP declarations, currently holding approximately 1500 patents which they have declared as essential for the standard, leading Nokia with ~1400 (HEL:NOKIA), Samsung (KRX:005930) on ~1300 , LG (KRX:066570) at ~1300, ZTE (SHE:000063) with ~1200, Qualcomm (NASDAQ:QCOM) and Ericsson (STO:ERIC-B) with about 800 apiece.
What this means is that given it is estimated Huawei will lose anything up to about $30 billion in revenue over the next 2 years due to the US ban, the firm has been looking for as many ways to top that up as possible, including the Russia deal I wrote about last week (here). Now it seems as though an additional route to funding will be to exert its patent portfolio which it has been somewhat lax to do in the past. The good news is that patents do have some form of statute of limitations which prevents somebody from just waiting ages in which to file a claim while a possible patent infringer ties themselves into a patented technology deeper and deeper, however the bad news is that 5G is obviously a relatively recent technology which will have many years left to run after its rollout. As such, any company using 5G in its current form is going to be likely to use Huawei patented technologies, even if they aren’t using Huawei provided hardware and as such, some form of payment will probably be due.
US Senate Proposals Could Limit Huawei’s Ability to Sue Over Patents
However there are moves afoot which could see Huawei struggle to assert its patent rights in the US. Senator Marco Rubio has accused the firm of adopting the tactics of patent trolls to attack US companies in retaliation for US sanctions against it, arguing that the US shouldn’t allow Chinese state-backed companies to “improperly” use their own legal system against the US. He has now filed legislation (seen by Reuters) which would limit the ability of companies on US watch lists to seek relief under US law with respect to patents which had been granted by the US Patent and Trademark Office.
#Huawei is using the tactics of patent trolls to attack U.S. companies in retaliation for Trump administration national security actions against them. We should not allow #China government backed companies to improperly use our legal system against us.https://t.co/jhz4cuLDVN
— Marco Rubio (@marcorubio) June 18, 2019
It's probably fair to say that this isn't really an accurate representation. Whatever your personal thoughts on Huawei, patent trolls are generally firms which acquire patents with a view to monetising them as heavily as they can while stifling competition and not actually developing any of its own technologies or making its own products or services using a patent. This really isn't Huawei's way of working, it makes lots of stuff using its patents and wants to sell it! If it can't however, it will likely try to monetise its intellectual property portfolio where it can.
Unsurprisingly, this has concerned the firm with Huawei CEO Ren telling CNBC that if the law were to pass, it would hurt the image of the US as a country ruled by laws. A Verizon spokesman has said that it has no comment to make regarding the specific claim due to its nature as a potential legal matter but did expand on that saying “Given the broader geopolitical context, any issue involving Huawei has implications for our entire industry and also raises national and international concerns”.
The question really arises as to whether this could be seen as an attempt to challenge the rule of law as a bedrock of US principles and although the law may raise eyebrows, fundamentally it probably makes sense. If an organisation is branded as inappropriate in some way, whether that organisation is a terrorist group or a corporate arm of a suspected hostile foreign agency should be irrelevant if the government in question decides to limit its ability to operate. The real question is whether Huawei genuinely is all about spying in foreign countries for the Chinese government as the US asserts, or if indeed it is just attempting to operate a business and being unfairly targeted due to the trade war between the US and China.
Wrapping Up – The Rule of Law Should Be a Two Way Street
The rule of law as a concept holds special significance to many cultures around the world and is generally accepted as to mean that everyone who lives within a given jurisdiction should be subject to the laws of the land equally, regardless of whether they were the person who made or contributed to making the laws or not. The additional concept of an independent judiciary is also seen as key by many in applying a fair legal system and it is this system which has promoted an environment of stability which is seen as critical for allowing business to thrive.
It is important to note here that this section tends to shy away from discussions of a political nature but it is critical to point out that the rule of law should generally be a two way street, but in many ways it isn’t and this is one of the major problems when it comes to dealing with China. US and international businesses as many know, cannot really operate in the country without forming some kind of joint venture with a local company which in general is aimed at some degree of technological transfer.
The rule of law has also been the subject of mass protests in Hong Kong in recent times as there are concerns that following the handing back of Hong Kong by the British to China in 1997, some of the freedoms promised under the “1 country, 2 systems” mantra are starting to be eroded, in particular with the latest proposed extradition law which could allow people being held in Hong Kong to be extradited to the mainland to face justice under the Chinese legal system rather than the Hong Kong one which is obviously a legacy of British rule and built with many of the principles of the rule of law in mind.
Huawei may not be the boogeyman which the US thinks it is, however the US legal system and business climate is generally considered much friendlier to foreign companies than the Chinese one. Certainly Huawei at present is not limited in its ability to pursue patent claims against US companies using the US legal system and the US would obviously be the crown jewel of a market in which it would be able to gain revenues from its 5G patent portfolio but that doesn’t mean there aren’t other markets it could also follow a similar strategy in. This may be the beginning of a more aggressive and litigious stance from the Chinese firm.
Source: IPlytics 5G SEP Declarations