After years of accusations that China routinely steals U.S. intellectual property, Huawei sued Verizon yesterday. Nevertheless, Huawei asserted patent infringement against 230 of Huawei’s 11,657 U.S. patents on telecommunication technology. Moreover, Huawei asserts damages exceeding $1 billion. Due, in part, to security concerns, Huawei has a small footprint in the United States.
Ironically, if Huawei has it’s way, Verizon and other U.S. telecoms may have to share their profits with Huawei. Unquestionably, this means sending hundreds of millions of dollars from the U.S. to China. Compared to the 11,657 United States Huawei patents, Verizon appears to only have 120 Chinese patents. Indeed, this asymmetry may give high leverage to Huawei as Verizon would have little to cross-license. For example, here are some numbers gleaned from Google Patents, the USPTO patent database and the Chinese Patent Office English search interface:
The United States may have the most robust and reliable intellectual property framework in the world and Huawei has taken advantage of it. This may lead to a new waive of non-(domestic)-practicing patent assertion entities (aka “patent trolls”). However, in the case of Huawei, it is government regulations and security concerns keeping them out of the U.S. market. Consequently, because they have little to lose in a U.S. litigation counter-claim, they have minimal liability in bringing the action.
Certainly if Huawei had U.S. market share, Verizon and major patent holders such as Google (Motorola portfolio acquired for $12.5 billion) and an Apple-Microsoft consortium (paying $4.5 billion for bankrupt Nortel’s patents) could come after Huawei with counterclaims. However, Huawei would have to make, use, sell, offer to sell or import infringing technology into the United States to invoke the patent statute.
The Eminent Domain Play
Perhaps this is a moon-shot, but Verizon might convince the U.S. government that Huawei’s leverage constitutes a national security matter and the government needs to “take” the Huawei patents which is their right. However, Huawei could go to the United States Court of Claims and seek compensation just as anyone subject to an eminent domain taking by the government.