Sometimes a coincidence is about as timely as coordination would have been. About a week before Huawei's major IP event that took place earlier today, the German Patent and Trademark Office issued a press release on China having overtaken the U.S. in terms of the number of digital communications patent filings, which is perfectly consistent with European Patent Office statistics. Huawei is the #1 company in that field. While I never described patent counts as the perfect metric (what I'm most interested in is litigation results wherever available), they are yet more meaningful than unempirical opinion papers by economists that incredibly claim to have the definitive answer without evaluating a single patent, much less a statistically representative sample of patents.
Huawei's Chief Legal Officer Dr. Song Liuping (note that this is the Chinese order with the family name before the given name) explained in today's opening address that Huawei increased its R&D investment to 142.7 billion yuan (more than US$21B) last year, amounting to 22.4% of the company's total revenues. Both the absolute amount and the relative share represent 10-year highs. Those numbers are perfectly consistent with the EU Industrial R&D Investment Scoreboard, according to which Huawei has the world's second-largest R&D budget. A significant part of that R&D investment (approximately 15%) relates to foundational research.
Dr. Song noted that Huawei filed more than 10,000 patent applications in each of the last two years (another record high for the company). Huawei filed more than 3,500 patent applications (more than any other company, with Samsung a close second) last year with the European Patent Office alone, and is the number 5 patent filer with the United States Patent & Trademark Office.
You can actually see the number of European patent applications, with only the first digit being hidden (but easy to infer from the other parts of the column chart), behind Huawei's IP Chief Alan fan in the picture the company provided along with its press release on today's event:
Just like so many others with an interest in corporate patent strategies, I've been asking myself in recent years what implications the trade war started by former president Donald Trump and continued by the Biden Administration was going to have for Huawei's IP licensing business. IAM interviewed Mr. Fan a few months ago, and even the headline (pretty much all that one can find in front of the paywall) says Huawei's IP department intended to grow licensing revenues but would not lose sight on the goal of supporting the company's business units. At today's event, Mr. Fan again noted that Huawei, notwithstanding its strong patent portfolio, was still making products (large numbers of them, in fact), so its IP strategy has to be coordinated with the business units.
In the Q&A session toward the end, Dr. Song gave a thoughtful answer to the question of what he regarded as the greatest challenge he faced in his 20+ years at Huawei--an answer that has to do with the hostile environment I just mentioned. Dr. Song said the politicization of business, legal, and technical questions was a major challenge, and one that he undoubtedly deems regrettable as it unnecessarily complicates the quest for solutions that serve the economy at large and society.
What I was primarily trying to figure out today was what Huawei's intentions and priorities relating to its formidable patent portfolio are likely going to be. I got the impression that Huawei's positions are centrist. Neither are they going to be another Apple and pursue the devaluation of standard-essential patents (SEPs) nor are they going to start a suefest. I'm pretty sure we're going to see them resolve most situations through licensing negotiations, but they will likely enforce if it can't be avoided. In the latter case I wouldn't want to find myself on the receiving side.
One industry from which Huawei clearly expects increasing patent licensing revenues is automotive. This much they made clear today. Last year, a SEP license agreement between Huawei and a Volkswagen supplier became known. Huawei is the most significant SEP holder not to license its patents to car makers through the Avanci pool (for now, at least). Huawei has entered into component-level agreements. The fact that the automotive sector was specifically mentioned today suggests to me we'll hear about more bilateral license deals between Huawei and either car makers or their suppliers.
Huawei had some interesting guest speakers with WIPO and EPO backgrounds, a former diplomat who urged cooperation between Western and Eastern countries, one of the elder statesmen of Germany's IP law community (Professor Heinz Goddar, a Boehmert & Boehmert partner), and--quite interestingly--Mattia Fogliacco, the President & CEO of Sisvel, a globally active patent licensing firm and patent pool administrator. Huawei's Alan Fan stated the company's intent to participate in patent pools (as IAM--again, sorry for the paywall-noted in its report on today's event). But there has been no announcement of Huawei's participation in a Sisvel pool unless I missed something. Mr. Fogliacco stressed that a patent pool primarily has two tasks to fulfill: to ensure that the patents in the pool represent true innovation, and to strike a balance between licensors' and licensees' interests particularly with respect to royalty rates.
"Balance" was the keyword here. It's easy to think that a company with a strong patent portfolio, substantial licensing revenues, and an occasional need for enforcement is primarily interested in patent monetization. But the reality is often a lot more nuanced. Despite the impact of the trade war, Huawei is still a major product maker. And even companies like Qualcomm, Ericsson, and Nokia get sued by patent holders more often than one might think (either directly or in the form of patent assertions against their customers). Case in point, an IP Watchdog article just criticized a U.S. court ruling in a case where Qualcomm had to defend itself.
Huawei is a licensor as well as a licensee, a SEP holder as well as an implementer of standards, and that was unmistakably reflected by the content, topics, messages, and the speakers at today's hybrid (in-person plus online) event. There wasn't a particular announcement oaf a license deal or partnership. Instead, the part I personally liked best was when three very young inventors--almost fresh out of university--presented the innovations they created at Huawei, such as (now quoting Huawei's press release) "an adder neural network that significantly reduces power consumption and circuit area to a game-changing 'optical iris' that provides a unique identifier for optical fibers." Now I'm waiting for announcements relating to license deals and the participation in patent pools--and enforcement action though they appear to try hard to avoid those in the first place.
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