Huawei’s patents on 5G means US will pay despite Trump’s ban

Huawei Technologies owns the most patents on next-generation 5G mobile technology, ensuring the Chinese company will get paid despite the Trump administration’s efforts to erase it from the supply chain, according to a new study.

The study by two research firms identified the inventions most closely connected to the 5G standards and found that six companies owned more than 80 per cent – Huawei, Samsung Electronics, LG Electronics, Nokia, Ericsson and Qualcomm, the only US-based company in the group.

That may be awkward for US President Donald Trump, whose administration has launched a global effort to shut out Huawei in 5G network roll-outs, accusing the Chinese telecommunications equipment maker of being a security threat. Washington has launched a number of salvoes, including banning the sale of any silicon made with US know-how that is hurting the company’s aspirations to grow in cutting-edge fields.

“Even if they hire some other company to build the 5G infrastructure, they still have to pay the Chinese company because of the intellectual contribution to develop the technology,” said Deepak Syal, director of GreyB Services, a technology research firm that conducted the study with analytics firm Amplified AI.

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Identifying how many patents a company holds – and how key they are to the industry standards – will help determine who profits most from 5G technology, which promises to revolutionise developments such as autonomous cars, robotic surgery and connected homes.

The Trump administration’s efforts against Huawei have borne fruit. Taiwan Semiconductor Manufacturing Co, the main chip maker to Apple and Huawei, is plans to build a plant in Arizona to allay national security concerns and shift hi-tech manufacturing to America. In Britain, Prime Minister Boris Johnson is taking steps to exclude Huawei from its 5G mobile networks by lining up potential replacements.

Industry standards are critical to ensure devices work together and communicate with each other. Technology companies get together to establish those standards and pledge that any relevant patents will be licensed on “fair, reasonable and non-discriminatory” terms.

There have been global patent wars for years over how to define those fair terms and who is entitled to how much money in royalties. They were at the heart of since-settled fights, including Apple’s scorched-earth battle with Qualcomm and Huawei’s dispute with Samsung. Huawei has also stopped paying Qualcomm what may amount to billions in royalties amid a dispute.

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The GreyB and Amplified study looked at about 6,400 inventions declared “essential” to 5G by their owners that had active patents somewhere in the world as of December 31, 2019. By comparing the wording of the patent to the standard, the team of 25 researchers deemed 1,658 to be patents “core” to 5G.

Courts and negotiators will ultimately have to decide, though, if the patents really are essential to the standard, whether they’re valid or not, and how much they are worth.

Based on the study, all of the companies were found to be padding their patent submissions to ensure they would be able to enforce their rights later, and in an effort to increase the amount they would be able to collect in royalties.

“Companies over-declare pretty equally, so reducing everyone’s share by 75 per cent or so yields the same pecking order,” said Jorge Contreras, a law professor at the University of Utah who has written about determining what is “essential” to a standard.

Huawei has collected more than US$1.4 billion in licensing revenue and has paid some US$6 billion to other companies, it said in a court filing in its patent dispute with Verizon Communications.

“Huawei creates plenty of its own intellectual property; we don’t need to steal anyone else’s,” Ben Howes, a Huawei spokesman, said in an opinion video. The company said it put together the video “in response to the US government’s attempts to prevent Huawei from collaborating with academic institutions and innovating with our R&D and patents”.

The GreyB and Amplified study, considered the first phase as more patents are analysed and the standards continue to evolve, showed the interconnectedness between companies around the world, Syal said. He said the purpose of the study was “to bring more clarity” to where the discussions or decisions are being made.

“Rather than saying who has less contributions or who has less number of patents, let’s work toward increasing the intellectual contribution of our country or our company and then build the 5G infrastructure,” he said. “Otherwise, even by blocking, they are not helping in the end because they’re

paying money in terms of royalties.”

As part of the Trump administration’s efforts against Huawei, Secretary of State Michael Pompeo last week said European countries “need to get it out of their system. They need to use Western technologies”.

While the Trump administration has helped curtail Huawei’s growth outside China, it remains a player because of its global footprint and advanced technology.

“From a pure technology standpoint, nationalism just doesn’t work any more,” said Contreras.