7 January 2014Patents

InterDigital settles with Huawei

US licensing company InterDigital and Chinese phone maker Huawei have agreed to end their global patent dispute.

The companies have agreed to end all patent litigation, including a US International Trade Commission (ITC) investigation, as part of a confidential settlement.

Huawei has also agreed to end its antitrust complaints, according to the joint motion filed on January 2.

If approved, the settlement would end a lawsuit InterDigital filed last January at the ITC seeking cease-and-desist and exclusion orders that could have prevented Huawei from importing certain smartphones and tablets into the US which may have infringed InterDigital's patents. Other defendants, including Nokia, have not reached a settlement agreement with InterDigital.

Delaware-based InterDigital owns of a portfolio of patents in high-speed wireless communications, while Huawei is the largest maker of mobile phone equipment in China.

Huawei had also filed complaints in both Europe and China accusing InterDigital of demanding excessive royalties and failing to fulfil its pledge to license patents on fair and reasonable terms.

The motion says: “Termination of this investigation … will not adversely affect the public interest because such termination will not affect the public health and welfare, competitive conditions in the US economy, the production of like or directly competitive articles in the US, or US consumers.”

William Merritt, InterDigital’s chief executive, said the company had agreed to enter into an arbitration which would determine the result of the settlement.

“The purpose of the arbitration will be to determine the amount owed, after that there won’t be much more to do. Once resolved, the settlement will usually consist of a lump sum or a running royalty payment.”

Merritt added that the arbitration was expected to be resolved within a year.

“InterDigital is open to a variety of options and always look for efficient ways to resolve disputes. Arbitration provides a good opportunity as sometimes you need to have third party for an efficient process and we are happy to do that with any party,” Merritt added.

According to Michael Oblon, partner at Perkins Coie in Washington, DC, it is interesting that InterDigital quickly reached a settlement with Huawei, but not with other respondents also included in the initial lawsuit.

“It is notable that in the motion to terminate, it expressly requests that the confidential settlement agreement be withheld from the other respondents’ counsel,” said Oblon.

“According to InterDigital, such disclosure would ‘significantly prejudice’ its efforts to negotiate with the other respondents.”

Oblon added that there may also be a link between alleged threats from a Chinese government agency to InterDigital’s staff and the seemingly quick settlement.

Last month, WIPR reported that the National Development and Reform Commission (NDRC) had started an investigation of InterDigital.

The NDRC, which is thought to have taken a more assertive stance on enforcing laws against foreign companies, began its investigation when InterDigital filed its initial ITC complaint accusing it of possibly violating Chinese anti-monopoly laws.

The NDRC requested a meeting with Merritt in Beijing, in anticipation of an ITC decision.

However Merritt, who was unable to attend, has said representatives of the company who he offered to send instead had been warned not to attend and faced possible arrest if they did.

In a letter from Merritt to the NDRC, seen by WIPR he said, "in the light of the threat to detain my executives," there would not be anyone sent to the meeting.

“NDRC’s approach to this investigation has been very confusing to my company,” it added.

It is not yet known whether the NDRC investigation will continue following the settlement.

“We are still in a dialogue with the NDRC, we hope this will be a pretty strong step to resolving the investigation,” Merritt added when contected for this story.

A spokesman for Huawei said it welcomed the agreement, which "puts an end to continued and expensive litigation."

"We look forward to continuing to deliver high quality, innovative mobile devices to the market," the spokesman added.

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