That’ll be $1bn you owe us, Huawei tells Verizon’s Vestberg: agency report  

17 June 2019 | Alan Burkitt-Gray

Cover

Huawei has told US operator Verizon that it owes the Chinese equipment maker “more than $1 billion” in patent licensing fees, according to reports.

The reports say that the patents are used in equipment made by other vendors and then supplied to Verizon for use in its networks.

Verizon, led by group chairman and CEO Hans Vestberg (pictured), did not respond to a request from Capacity for a comment. A Huawei official said: “We are not – at this stage – making any comment on this. When it changes I will be touch.”

The report originally surfaced last week in the Wall Street Journal, which unearthed a communication from an unnamed “Huawei intellectual property licensing executive”.

According to the report, as then covered by the Reuters news agency, “the patents cover network equipment for more than 20 of the company’s vendors including major US tech firms”. Around 230 patents are involved, said the reports.

If correct, they highlight one of the key challenges in the US government’s decision to add Huawei to its so-called entity list, which bans US companies and citizens, and people in the US, from selling to or buying from the company. There is also a wider ban on US government agencies and contractors buying from Huawei or its Chinese rival, ZTE.

But, as Capacity has highlighted, Huawei owns a significant number of patents that are critical not only to new 5G infrastructure and terminals, but also to existing 3G and 4G networks.

Until now rival vendors have avoided major disputes about patents, having agreed to license intellectual property to one another at a fair rate.

But if Huawei is now on the US entity list, it clearly sees that there is a limited opportunity to extract any money at all for its patents from US vendors, US telcos, and any international vendors that supply US telcos.

According to the reports, rival vendors should indemnify Verizon for use of Huawei patents.

Reuters said that representatives of Huawei and Verizon have met “to discuss some of the patents at issue and whether Verizon is using equipment from other companies that could infringe on Huawei patents”.

Prominent among those rival vendors are Ericsson of Sweden and Nokia of Finland. Vestberg is a former CEO of Ericsson.

The agency quoted a Verizon official saying this is “a potential legal matter”, and adding “these issues are larger than just Verizon. Given the broader geopolitical context, any issue involving Huawei has implications for our entire industry and also raise national and international concerns.”

Last week the GSMA said that excluding Huawei from emerging 5G networks in Europe would increase costs by as much as €55 billion.