Is Huawei right to demand billions from US carriers for patents?

image: Xinhua

If you didn't know that Verizon owns money to Huawei for patent licensing, you do now. According to the Wall Street Journal, Huawei has sent a letter to America's largest carrier, requesting payment for more than 200 individual patents that it holds. The patents in question stem from base networking gear, through IoT technology, to wired connectivity, and representatives of the two company have reportedly been meeting in New York to discuss further actions on the request.

Additionally, Reuters is filling in the blanks regarging the exact number of patents, and the initial amount that Huawei demands as licensing fees. It turns out that there are more than 230 granted filings that Huawei thinks are currently being infringed by Verizon, regardless of the fact that it doesn't use Huawei gear. Remember, the patents refer to "core" network equipment which may include base stations, signal routing and a bunch of technologies that form the backbone of carrier networks.

Speaking of carriers, Reuters probed AT&T, T-Mobile and Sprint whether they had received the same licensing request from Huawei, but they have declined to respond. T-Mobile is using some Huawei networking equipment, though it argues that it's not in the core of its network. For rural areas, in particular, the affordable and capable Huawei gear is hard to find an alternative to.

As far as the patent licensing fee, it's no chump change. Huawei is reportedly asking for over $1 billion to fork over the rights to use its intellectual property, though it is not clear whether that is just for licensing the existing patents, or also for some kind of a compensation in foregone royalty fees, in case that Verizon and perhaps the other US carriers, have been using Huawei's technology in question for a while.

While Verizon is forbidden to use Huawei networking and other equipment due to the ongoing tech cold war between US and China, it may not able to avoid using Huawei's intellectual property in its network, given that Huawei has a year or so lead in 5G before the competition, to say the least. If it is related to their nascent 5G networks, this could complicate the rollout in the US, which could be another bargaining chip for Huawei and China in the quest to settle the trade dispute with the US.

The head of Huawei's intellectual property licensing department has reportedly sent a letter asking Verizon to resolve the issue, pricing the patents at over $1 billion."We trust that you will see the benefit of taking a license to our patent portfolio," the letter reads which sounds like something from a Better Call Saul episode and smells like a legal dispute may be brewing on the horizon. Indeed, a Verizon spokesman declined to comment on the report with the following:

We have no comment regarding this specific issue because it’s a potential legal matter. However, these issues are larger than just Verizon. Given the broader geopolitical context, any issue involving Huawei has implications for our entire industry and also raise national and international concerns.

The request could potentially put Verizon in a pickle, and may even be designed to do so. The US is accusing Huawei in intellectual property infringements, and the Chinese are trying to turn the table with this patent licensing request. If Verizon refuses to pay citing that the patents are not applicable, or the amount requested is beyond their value, China could use this as argument fodder in any subsequent trade negotiations or court hearings.

This is why we wanted to ask you if you think that Huawei is in its right to demand patent licensing from Verizon and probably other US carriers, too, or could it be using its IP as a negotiation pawn in the larger trade conflict with the US, in a sort of "what goes around comes around" argument.