Why is Huawei searching for $1 billion patent cope with Verizon?

WASHINGTON: Huawei is demanding Verizon Communications Inc pay $1 billion to license the rights to patented expertise, signaling a possible shift within the embattled Chinese language firm’s technique for the U.S. market.

A Huawei government made the demand in a February letter, an individual briefed on the matter instructed Reuters. The Wall Road Journal first reported on the letter on Wednesday. The payment would cowl licensing of greater than 230 patents.

Verizon spokesman Wealthy Younger declined to remark “concerning this particular difficulty as a result of it’s a possible authorized matter.”

Nevertheless, Younger mentioned, “These points are bigger than simply Verizon. Given the broader geopolitical context, any difficulty involving Huawei has implications for our whole business and likewise increase nationwide and worldwide considerations.”

Huawei didn’t reply to a request for remark.

The next explains why the patent dispute isn’t uncommon and the way it may very well be resolved.

How frequent is patent licensing?

Patent licensing is quite common, notably in complicated industries like telecommunications. As expertise has superior, it has turn out to be tougher to keep away from violating — or “infringing” — patent rights. There are tens of millions of U.S. patents in drive, and a typical smartphone implicates a whole lot of 1000’s of them.

Firms like Apple Inc, Nokia Inc and Qualcomm Inc personal many 1000’s of patents issued by governments world wide.

It isn’t uncommon for these companies to attempt to earn money from their huge patent portfolios. Nokia, for instance, routinely brings in additional than $1 billion a yr from licensing its patents to others.

Massive corporations like Verizon will attempt to establish patents they is perhaps violating, mentioned Gaston Kroub, a patent lawyer in New York. However that may be a problem as a result of so many patents are granted yearly, Kroub mentioned.

“Subtle corporations like Verizon perceive that they may very well be approached by licensors of any stripe at any time,” Kroub mentioned. The philosophy of wi-fi carriers and smartphone corporations, Kroub mentioned, could be “let’s cope with these claims as they arrive, as a result of we don’t know who will knock on our door subsequent.”

Tom Cotter, a professor of patent legislation on the College of Minnesota, mentioned it was attainable Huawei executives consider Verizon has been infringing their U.S. patents for a while however for enterprise causes waited till now to hunt compensation.

Patent house owners “could not implement their patents for a time period, however they will select do to so each time they wish to,” Cotter mentioned. “It occurs on a regular basis.”

What occurs if Verizon doesn’t pay?

Huawei could find yourself going to a U.S. courtroom and suing Verizon for alleged patent infringement.

Whereas some licensing disputes are resolved with out lawsuits, litigation is pretty frequent. Huawei and Samsung Electronics Co just lately settled a world authorized battle on confidential phrases.

A defendant in a patent case usually argues that it doesn’t truly infringe the asserted patents, or that they have been mistakenly issued and ought to be revoked.

In a lawsuit, a patent proprietor can ask a decide to dam gross sales of infringing merchandise. Whereas such injunctions are hardly ever granted in the US, the specter of one can inspire a defendant to settle with the patent proprietor.

Authorized consultants mentioned Huawei is probably going ready to go to courtroom.

“I don’t know how one can make a requirement of $1 billion and never be ready for the reply to be no, at the very least at first, and for the necessity to litigate,” Kroub mentioned.

Has Huawei been an aggressive enforcer of its patents?

Huawei has lengthy been recognized for defending itself towards U.S. patent infringement claims, fairly than bringing them. However that may very well be altering.

George Koomullil, a patent analyst at Pleasanton, California-based expertise firm Relecura, mentioned that 10 or 15 years in the past Huawei utilized for a comparatively modest variety of patents. However the firm has been extra aggressive about making use of for patents since round 2007, and notably in recent times, Koomullil mentioned.

Huawei could also be extra inclined to monetize its U.S. patents now that the U.S. authorities has restricted its skill to promote merchandise within the nation, Kroub mentioned.

The Nationwide Protection Authorization Act final yr positioned a broad ban on the usage of federal cash to buy merchandise from Huawei, citing nationwide safety considerations.

Final month, the Trump administration banned Huawei from shopping for important U.S. expertise with out particular approval and successfully barring its gear from U.S. telecom networks.

Kroub mentioned Huawei’s licensing demand may mirror a “desperation to give you methods of producing income within the U.S. market, particularly contemplating the standard methods of providing merchandise and promoting issues to enterprise is closed to them.”

Franklin Turner, a authorities contracts lawyer at McCarter & English in Washington, mentioned the patent licensing demand may be a approach for Huawei to “retaliate” towards the US.

Republican Senator Marco Rubio mentioned on Twitter on Thursday that the demand towards Verizon was an “try by (Huawei) to retaliate towards the U.S. by setting the stage for baseless, however pricey, patent claims.”

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