Intellectual Property

Patent Pariah Or Patent Power? Redux?

Between Verizon and WSOU, Huawei’s 2020 was filled with the amount of patent litigation activity that many other large companies don’t see over the course of a decade.

By Gaston Kroub on March 30, 2021

(Photo by Kevin Frayer/Getty Images)

Back in July 2019, I wrote about the patent opportunities and travails then facing Chinese technology powerhouse Huawei. Banned from sales in the United States market, Huawei at the time was in the news for its “Dr. Evil-esque” $1 billion-plus demand for patent royalties from Verizon, despite a general mood in the market that no reputable company “would cavalierly announce itself as the next great patent troll.” Making matters worse for Huawei, there was a legislative push at the time, led by Sen. Marco Rubio, aimed at defanging any patent threat by Huawei to U.S. companies. As I couched things then, Rubio was in essence “proposing that Huawei’s patents be declared worthless by legislative fiat.” That never happened, but other patent-related difficulties for Huawei have not relented in the interim.

Just take a look at the 2020 Huawei experienced on the patent front. The year kicked off with a public admission that its efforts to license Verizon had failed, with Huawei filing parallel multipatent-infringement cases (in East and West Texas respectively) in early February. In March, Huawei found itself on the defensive, with prolific NPE WSOU Investments filing over 10 separate patent infringement cases in West Texas against the company. That salvo was followed up with another dozen or so WSOU cases against Huawei filed in June, also in West Texas. (Say what you will about WSOU’s strategy of filing cases one patent at a time — for considerations related to IPRs and stays at a minimum — 20-plus cases against a single target would widely be considered a bit extreme. But it is also an indication that Huawei was unwilling to meet WSOU’s demands, with the result that the parties are still at it a year later.)

In addition to WSOU’s spring offensive, summer 2020 saw Huawei facing a barrage of the inevitable Verizon IPRs attacking Huawei’s asserted patents. At this point, a reminder that we should assume that Huawei put its best quality patents to work against Verizon when it filed against them is in order. Because as good as a large portfolio is — recall that Huawei wanted $1 billion-plus for Verizon to license 250 or so patent families — the crucible of litigation is necessary to put the true quality of the assets to the test. Following an August reprieve, back-to-school season was also more-WSOU-cases season for Huawei, with another seven lawsuits filed against it by the persistent folks over at WSOU. November saw Huawei launch a counter strike against WSOU, filing eight IPRs against WSOU patents, with more to come. To recap, between Verizon and WSOU, Huawei’s 2020 was filled with the amount of patent litigation activity that many other large companies don’t see over the course of a decade.

While the WSOU cases are of limited interest to me, since I assume that Huawei has the financial muscle to absorb whatever ultimate damage it sustains settling or litigating to the death against WSOU, the Verizon campaign is more meaningful. As a company, Huawei has used the fact that it is being denied U.S. revenues from sales of products as a reason underlying its need to monetize its hefty patent portfolio. The pressure to get its monetization efforts off to a good start, therefore, is immense. But Verizon thus far has proven a tricky adversary, and my scan of the dockets in both cases Huawei filed against Verizon leaves me little reason to think that Huawei is close to its aimed-for $1 billion-plus payday. That is not to say that its campaign is doomed of course. Rather, we know that patent litigation can be a crude tool when used to try to convince an unwilling customer to pay up. And Verizon is so far very much an unwilling customer of Huawei.

Rebuffed thus far by Verizon — and armed with what has been reported as the largest set of 5G standard-essential patents of any company — it is not a surprise to see the recent announcement that Huawei wants to put its 5G portfolio to work. Maybe it has been watching all the 5G commercials Verizon has been putting out. Either way, Huawei is making its pitch to replicate Qualcomm and Nokia’s historical success licensing earlier wireless communication standards to smartphone makers, as a recent CNBC article announced. Even though Huawei itself is a top worldwide smartphone maker, when it comes to the U.S. market, the duopoly of Apple and Samsung represents the lion’s share of potential 5G royalties. In an effort to lubricate discussions with those targets, Huawei has announced that it will offer its industry-leading (at least sizewise) 5G portfolio at an industry-low (relative to SEP-licensing competitors like Ericsson and Nokia) $2.50 per handset cap. While that might be a good starting point, there is as yet no indication that anyone is lining up to pay 5G SEP royalties to anyone, despite the ubiquitous commercials about the life-changing benefits of the technology for consumers.

Ultimately, Huawei continues to find itself in a challenging circumstance when it comes to the U.S. patent market. On the one hand, NPEs like WSOU continue to see the company as a viable patent defendant. On the other, Huawei can’t point to any material licensing success — at least vis a vis Verizon or even Apple/Samsung on its 5G portfolio — to suggest that its U.S. patent monetization efforts are already bearing fruit. Instead, it looks like Huawei has simply signed up for interminable litigation in Texas — at least at this stage of the game. Back in 2019, I said that Huawei’s decisions would determine whether the company would be seen as a patent pariah or patent power, while also making some suggestions (all ignored unsurprisingly) as to how Huawei could make some favorable headway in the court of public opinions with respect to its patent efforts. It is now Spring 2021 and for Huawei the pariah or power question remains a valid one.

Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.