huawei
1 February 2014Patents

Huawei: keeping an open mind

In 2012, the number of smartphone users around the world exceeded one billion. In an extremely competitive market, a company’s clout lies in the quality of its patents and licensing strategy. As the long battle between smartphone giants Apple and Samsung has shown, the stakes can be incredibly high—products found to infringe a rival’s patents can be banned from sale, shutting off entire markets.

Essential patents

Huawei is an information and communication technology solution provider with many strings to its bow. As well as working on its own range of smartphones, it develops products and technological solutions for a host of industry operators and enterprises, and boasts customers in 140 countries.

“IP rights are the core capability for a company, and patents are essential for the development of a technical company,” says Song Liuping, chief legal officer at Huawei, which spends tens of millions of dollars on patent applications every year. “We believe that only by strengthening IP rights protection can innovation be promoted in society,” Song says.

By the end of 2013, Huawei had been granted 36,511 patents, many of which were filed under the Patent Cooperation Treaty (PCT). In the same year, it was the fourth most prolific PCT patent filer in the world, behind ZTE Corporation, its crosstown rival, Panasonic and Sharp.

“In infrastructure networks, through many years of accumulation, Huawei is building a leading patent portfolio in key telecommunications-related areas such as fixed network, mobile network, and data communication Internet protocol technology,” says Song.

Huawei also holds many patents in ‘fibre to the home’ broadband technology, optical transport networks and Internet protocol network telecommunications.

"Litigation is a resort only when disputes can't be recognised through long-term negotation. The goal of the legal procedure is to provide timely essential support for reasonable requests."

As part of its IP strategy, Huawei regularly abandons low-value patents, and oversees a total of about 4,000 patent applications annually. It controls about 15 percent of all related standard essential patents for Long Term Evolution, a technological standard in mobile devices that allows for the high-speed wireless communication of data.

Huawei invests 10 percent of its annual sales income in product development and innovation. In 2013 this equated to over $5.4 billion, accounting for more than 14 percent of revenue.“Through our efforts and working with our partners in areas of research and standards, Huawei hopes to build an ecosystem conducive to innovation,” Song says.

The firm employs more than 70,000 people in its R&D team, which account for 45 percent of Huawei’s total workforce, and has established 16 R&D-dedicated research centres in countries including Germany, Sweden, the US and India as well as China, each with its own specific research goals and priorities.

In October 2013, Huawei announced it would build a $200 million research centre in the UK as part of a $2 billion investment plan in the country.

“We take advantage of the international R&D system, and bring together global technology, expertise and experience to develop products so that they’re in keeping with globally advanced technologies once the products come to the market,” Song says.

The firm is currently investing heavily in terminal devices, which end communication signals, and IT, areas that have recently seen growth in the market because of Huawei’s innovative efforts, he adds.

Two tribes

Song says that Huawei works actively to settle IP rights issues by many means, including negotiation and cross-licensing, which helps the company enter different markets: “Strong IP helps the company enter markets and gives it leverage in cross-licensing efforts. When patents are cross-licensed and used between enterprises, the licence costs of the patents are greatly reduced.”

For patents that are beyond the scope of cross-licensing, Huawei pays approximately $300 million in royalties every year to use other companies’ patented technologies.

“Patents play a strategic role for a company. Huawei respects other companies’ IP rights and also does its best to accumulate and protect its own IP rights.”

Huawei secures its own profits by licensing its IP, although maintaining the company’s IP rights has far greater benefits, Song says: “The core effect of IP rights is to protect innovation and improve competition in the market for the products and services of Huawei.”

He says the smartphone patent wars began gathering pace when companies in the ICT field started to integrate. “Many companies encountered each other in the same market where they had not overlapped in the market and technology before,” he said.

“As time goes by, most companies will gradually settle their disputes through negotiation and ongoing litigations so that litigations will be reduced.”

Song considers negotiation to be the best approach to patent infringement disputes. “Potential IP rights disputes need to be solved in a straightforward manner,” he says.

“Litigation is a resort only when disputes can’t be reconciled through long-term negotiation. The goal of the legal procedure is to provide timely essential support for reasonable requests.”

Collaborations

Huawei isn’t standing alone. The company actively takes part in establishing global standards for ICT and is open to sharing its ideas with other companies as the field rapidly evolves.

It has established joint ventures with Nokia-Siemens Networks, Symantec and Global Marine, and has partnered with companies such as Intel, Qualcomm and Microsoft through shared laboratories.

By the end of 2013, Huawei had joined about 170 standards organisations, in which it holds more than 180 active leadership positions including board level positions, at the
Open Mobile Alliance, the Institute of Electrical and Electronics Engineers and the
WiMAX Forum, among others.

The firm also works with European mobile operators such as British Telecom, Vodafone and France Telecom.

“In Huawei, it has been our strong belief that openness, competition and collaboration are the underlying drivers of growth and development. Different companies need to strengthen IP rights collaboration and establish effective communication, protection, and paid use mechanisms, thereby promoting innovation and technological advancement to be commonly used,” he said.

The future is 5G

Huawei is currently investing billions of dollars in the research and development of 4G wireless technology. Song describes Huawei as one of the “main promoting parties” of 4G international standards, and holds many essential patents in the area, though there are plans to invest in the development of 5G technology, which is said to be 100 times faster than the current telecommunications transmission speed.

“With 5G technology, people’s lives and communication will be changed and enriched significantly,” he says.

“Enhancing the protection of IP rights will help Huawei to invest more in the research and development so that new technology and products will be developed continuously.”

With 5G estimated to roll out sometime in the 2020s, Huawei may have some high-profile IP disputes on its hands in the near future. Its partnerships with global companies will to a degree stand it in good stead, although as it shares its hometown with ZTE, it may be a case of keeping its friends close and its enemies closer.

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