Huawei to start licensing IP
Huawei (pvt) is the largest patent holder in China and according to Statista, is the 9th largest patent holder globally of US granted patents, just behind Apple (AAPL) in 2020, and holds the largest number of patents relating to 5G. While these are important metrics, they become even more important when one compares the number of patent family filings for 5G relative to those for 4G and while no tally has been done yet for 2020, the years between 2017 and 2019 are quite telling with 4G patent families numbering in the hundreds (2006 to 2010 timeframe) while 5G patent families in comparable years number in the multiple thousands, and of the 10,763 (6/2020) granted patent families, 2,893 were deemed to be SEPs (Standard Essential Patents), the most important to the industry.
Why all this focus on 5G patents, particularly Huawei’s 5G patents? Huawei announced that it will begin charging CE companies for the use of its patents, including those for 5G, and is going to begin negotiations for licensing and cross-licensing with companies that produce mobile devices, in the same sense as others have done for years. The company expects to see between $1.2b and $1.3b in fees for the period from 2019 to 2021, some of which will include 5G. Taking it a bit further, the company’s Chief Legal Officer indicated that it will be charging a ‘reasonable fee’ for access to its IP portfolio but will cap the per phone royalty at $2.50. Apple and Qualcomm (QCOM) have been fighting over the $7.50 royalty Qualcomm charges for each iPhone, which Apple cites as unfair and Qualcomm considers it a small price to pay for the technology.
Huawei says it believes the US trade sanctions against it will not limit its ability to license with US companies as the patents are publicly available, although the situation will likely wind up in the courts considering the growth of 5G going forward. Apple and Qualcomm reached a settlement in April of 2019 that extends to 2025 (2 year extension also possible) with Apple expected to maintain using the Qualcomm modems in the iPhone family for the next few years, but some of the Huawei IP could sit aside from Qualcomm IP and could require licensing by Apple and others. Huawei’s well publicized cap at $2.50 was a jab at Qualcomm and a way to point out how reasonable it might be when licensing its IP.
Why all this focus on 5G patents, particularly Huawei’s 5G patents? Huawei announced that it will begin charging CE companies for the use of its patents, including those for 5G, and is going to begin negotiations for licensing and cross-licensing with companies that produce mobile devices, in the same sense as others have done for years. The company expects to see between $1.2b and $1.3b in fees for the period from 2019 to 2021, some of which will include 5G. Taking it a bit further, the company’s Chief Legal Officer indicated that it will be charging a ‘reasonable fee’ for access to its IP portfolio but will cap the per phone royalty at $2.50. Apple and Qualcomm (QCOM) have been fighting over the $7.50 royalty Qualcomm charges for each iPhone, which Apple cites as unfair and Qualcomm considers it a small price to pay for the technology.
Huawei says it believes the US trade sanctions against it will not limit its ability to license with US companies as the patents are publicly available, although the situation will likely wind up in the courts considering the growth of 5G going forward. Apple and Qualcomm reached a settlement in April of 2019 that extends to 2025 (2 year extension also possible) with Apple expected to maintain using the Qualcomm modems in the iPhone family for the next few years, but some of the Huawei IP could sit aside from Qualcomm IP and could require licensing by Apple and others. Huawei’s well publicized cap at $2.50 was a jab at Qualcomm and a way to point out how reasonable it might be when licensing its IP.
Share of Live Granted Core SEP Families - Source: Greyb.com
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