Intellectual Property

Powering Ahead

It speaks to Huawei’s importance in the global IP landscape that the company’s IP efforts are worthy of a full-day conference.

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Inside Huawei, China’s Tech Giant

(Photo by Kevin Frayer/Getty Images)

Of the many welcome benefits of our new post-pandemic reality, the return to normal in terms of a resumption of professional conferences is a potent symbolic indicator that the COVID-19 tide has been pushed back. While travel may not yet be fully back to normal, especially to certain international destinations, it is nice to at least be able to attend local events with fellow professionals. The return of the conference circuit is perhaps most welcome to the tireless professionals that put together these events. On the IP side, many did yeoman’s work in making the transition to virtual events — and while their efforts may have met with success, I am sure they are most pleased with the ability to execute on in-person conferences once again. Even for the demanding audience that is the IP bar.

But things are not yet completely back to normal. Travel to Asia from the U.S. remains a challenging prospect, particularly when it comes to visiting China, which continues to struggle with omicron outbreaks. Still, at least one major China-based IP power, Huawei, was able to put on an important event in Shenzhen just a few weeks ago. Titled “Broadening the Innovation Landscape 2022,” the event featured presentations from top Huawei legal department members as well as representatives from various IP organizations and governmental agencies, including a former vice president of the EPO and a former commissioner of CSIPO. At the outset, it speaks to Huawei’s importance in the global IP landscape that the company’s IP efforts are worthy of a full-day conference. More importantly, however, I think the event also speaks to the scope and scale of Huawei’s ambitions on the IP side.

For those interested, a replay of the proceedings is available. I myself was most interested in hearing the comments of Huawei’s head of IP, Alan Fan, who is unquestionably one of the most important people in the IP world today. (At my request, Huawei was kind enough to share with me a transcript of the concluding panel, a discussion featuring Fan and others on the topic of “IP and open innovation under shifting global tech dynamics.”) His comments did not disappoint — and to the extent they are reflective of Huawei’s focus, the comments are worthy of our attention, regardless of whether one thinks it is a good or bad thing for a foreign entity to have so many U.S. patent assets under their control. Put another way, there is no doubt that Huawei sees itself as a major IP player, particularly with respect to 5G wireless communication, whose investments in IP have guaranteed it a seat at the table for the ongoing and upcoming rounds of industry negotiation of royalty rates around the 5G standard.

As we consider Fan’s statements at the Huawei event, it is important to remember that Huawei was successful in its first major U.S.-based patent enforcement effort, securing an eve-of-trial settlement with Verizon just over a year ago. (Just compare the tone of Verizon’s initial public response to Huawei’s patent lawsuit to Verizon’s own press release on the settlement to appreciate the inevitability of the result.) Perhaps buoyed by that success, Huawei’s own founder issued a public call earlier this year for the company to use its huge (110,000 plus) patent portfolio to generate licensing revenue. At the center of that global licensing effort is Huawei’s pledge to cap its demands for smartphone-5G patent royalties to $2.50 per device. But no one should make the mistake of thinking that amenability to that cap is an indicator of a lack of resolve to gain 100% smartphone industry compliance with that demand. And it is Fan’s job to spearhead that effort for as long as it takes.

With that background, it is interesting to see Fan open his comments during the panel with a focus on how huge patent portfolios are best used to get to “sharing among the competitors, really and build the world together.” At the heart of that sharing is the development of communication standards, like 5G, that benefit consumers by giving the choice of buying whatever smartphone they desire — secure in the knowledge that the devices they are choosing from will share the “common feature of downloading data and video and playing games, really quick.” Moreover, consumers benefit from standards that allow their phones and other communication devices to work wherever they are in the world. In Fan’s view, it is the collective efforts of those contributing to standards such as 5G that make that possible. And the presence of a huge patent portfolio is one way for a company to demonstrate their contributions to those efforts.

One of the ways Huawei does that, of course, is by becoming a leading customer at patent offices outside of China. That requires tremendous investment, both in filing and maintenance costs, on Huawei’s part. At the same time, Fan was pleased to report that Huawei’s IP department is “happy for not being a pure cost center anymore.” Precisely because of the company’s extensive licensing efforts, which confirm that Huawei’s “patent values are being recognized by the industry.” That is not to say that a company of Huawei’s size and scale has an easy time in its licensing efforts. For one, as an operating company itself (outside of the U.S. primarily, due to U.S. sanctions), Huawei is used to “complicated” licensing discussions with competitors. Second, Fan and Huawei’s IP department are under no illusions when it comes to thinking about which company has the burden of driving licensing negotiations forward. As he stated, “we have to really push forward and religiously license our patents because it’s important for the company.” Put another way, he readily acknowledges that the company seeking the licensing revenue — even one as massive as Huawei — has the burden of overcoming the inertia and delay tactics of the potential licensees.

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Ultimately, it is still early days in terms of assessing whether Huawei will be successful in generating a positive return on its massive investment in IP. That said, there is no doubt that some of the early returns have been positive for the company. And that it has the patent arsenal to compete with anyone, as well as IP personnel with the experience and drive to do whatever it takes to get Huawei the results it needs. For now, Huawei may be the best example of a Chinese company poised to take a leadership role in IP enforcement on a global scale. Back in 2019, I asked on these pages whether Huawei would find itself a patent power or patent pariah. For now, it is powering ahead with impressive resolve.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com 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 gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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