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IP and 5G: what can we learn from Huawei and Verizon?

(Image credit: Image Credit: Uverse internet)

The question of if – and to what extent – Huawei equipment will be used in building 5G networks remains an issue of ongoing debate. In a recent U-turn, Trump reversed a ban on sales of American-made goods to the Chinese company which had been instated in May this year. This will likely have an impact on other decision-makers who have been hesitant to work with the telecoms company on security grounds.

There’s a second important twist in the trade war story, though. Just days before Trump’s G20 announcement, Huawei demanded fees amounting to $1 billion from US giant Verizon, to license more than 230 of the company’s patents. This represents just a small fraction of Huawei’s 87,805 granted patents, the result of years of R&D and a major factor behind its success. Its equipment is used in networks globally, and it’s now the third-largest smartphone manufacturer in the world. Delve a little deeper and its patent portfolio reveals something interesting: according to statistics from ETSI, Huawei holds 20 per cent of the world’s total 5G standard essential patents (SEPs).

Weaponizing IP and the 5G battlefield

The dual threads of the Huawei story are worth noting. While some in the US will argue that Huawei is effectively weaponizing IP (and Trump is running scared), others in the IP community will be grateful that such an important part of technology innovation (and the development of 5G) is grabbing the headlines.

As with earlier network standards, the arrival of 5G means that every new 5G service, use case, device, and innovation will bring with it new requirements for standardisation. Those companies which have been heavy investors in R&D must have the means to gain fair reward for their work. Others wanting to use 5G SEPs (which will crucial for implementing any standardised 5G applications, from medical devices, to smart processing plants) must ensure that they obtain the correct licenses. At the moment, many companies – Verizon included – are taking a reactive approach to licensing agreements, waiting for licensors like Huawei to demand royalties legitimately owed.  

Verizon is a multinational conglomerate, while Huawei emerged in 1987 and grew out of what is now the major tech hub of Shenzhen, China. Both of these players have the experience, industry knowledge and financial resources to develop, monetise and obtain licenses for patents – key components of a thriving 5G ecosystem in the future. I’m hoping that both will play ball, set a positive example for the industry, and carry out negotiations on FRAND (fair, reasonable and non-discriminatory) terms.

However, not all companies involved in patent licensing will have the clout and specialist knowledge of IP needed to monetise innovation and drive technological development. 5G and the IoT are touching private, public, enterprise and industrial sectors, and allowing business owners (who are not the engineers and experts driving earlier tech transformations) to enter the market. Enterprises must therefore consider the 5G IP opportunity now, address the current culture clash and, unlike Huawei/Verizon, take a proactive approach to patent development and licensing.

What are the challenges in patenting 5G technologies?

Unlike 3G and 4G, 5G is about a whole lot more than smartphones and person-to-person communication. A whole new group of individuals and sectors will be reliant on connectivity and technologies which are wholly – or mostly – new to them. For example, the Industrial IoT (IIoT) will automate processes and deliver operational efficiencies (through machine learning and AI) in areas such as manufacturing, logistics, utilities, mining and construction. Each of sectors will have very specific and very differing requirements relating to factors like latency, throughput, quality of service, prioritisation methods and algorithms, creating an opportunity for the development of new innovations.

However, many of these will be new IoT players: start-ups and growing businesses keen to capitalise on the IoT while maintaining tight control over their organisation’s purse strings. In addition to limited budgets, many businesses will also be at a disadvantage due to a lack of knowledge of and experience in IP.

Enterprises looking to deploy a non-public networks (NPNs)for an IIoT use case for example, will have to navigate the complexities of obtaining patent licenses which are essential to the function and operation of their network.

A similar issue exists in the smart automotive sector, and is compounded by uncertainties around how to license new 5G technologies and SEPs. 3G and 4G licensing programmes were relatively straightforward. Royalty rates could be determined by the retail price of the phone handset, and it fell to the equipment manufacturers to obtain licenses for their use. However, if you apply these same rules to the automotive sector, you end up with car makers having to foot royalty bills based on $100,000 vehicles rather than the $20 components which are putting the ‘smart’ in smart car.

How can we create a fair 5G future?

Patenting ideas breeds innovation. R&D, supported by industry and standards bodies, has allowed engineers and inventors to develop exciting new technologies that have transformed the telecoms sector. As such, we now find ourselves on the precipice of a 5G-powered IoT, but potentially held back by a lack of clarity around licensing practices and a lack of cooperation and collaboration between businesses.

The Huawei/Verizon, China/US rift is just one (albeit pretty major) example of this. Stalling discussions, underhand practices, or (as Senator Marco Rubio has done) blocking parties from fighting patent disputes in regional courts will not pave the way to progress. An alternative, progressive approach should involve taking out licenses at the earliest possible stage, participating in FRAND negotiations and licensing practices, and paying fairly for inventions and innovation. This will be of benefit to the global telecoms and tech industry, levelling the playing field and promoting fair competition. New market entrants with limited IP expertise can engage with specialists to ensure their ideas are protected, monetizable, and future-proof.

In conclusion then, we should not learn by the example set by Huawei and Verizon, but instead learn from them. Sharing ideas and participating in an open, collaborative environment is the only way to achieve a global, fair 5G future.

Pio Suh, Managing Director, IPCom

An attorney and member of the German Bar since 2006, Pio has over a decade of legal experience specialising in intellectual property rights and communication technologies.