Jacob Schindler

It was eye-opening, but not necessarily shocking, to read on this blog last Tuesday the suggestion that Huawei’s mobile patents might generate up to 20% of all the patent income earned by Chinese companies. The conjecture appeared in a new research paper which seeks to revise (downward) earlier estimates of the total royalty stack on the typical mobile phone. The study looked at 49 major mobile licensors, of which Huawei was one of only two Asian operating companies (the other being Samsung Electronics).

Credit the Shenzhen-based company for building an IP team that has put it head and shoulders above its domestic competitors in terms of patent portfolio strength. I was reminded, though, of a quote by Huawei head of IP Jason Ding that appears in the issue of IAM out this week:

Increasing numbers of US operating companies dislike patent protection – first because the Internet and open source technology are fundamentally affecting IP licensing and transactions, and second because the production and manufacture of products are increasingly located in Asia and Asian companies have more and more patents. However, since the patent system still exists, the game continues – opportunities are being transferred to the East just like manufacturing was.

It is not the first time I have heard such a sentiment expressed in China. A few others have contrasted the period leading up to China’s WTO accession in 2001 – when US companies lined up to call for greater patent protection in China – with the current moment, in which the pro-patent voices have become a good deal quieter. It’s also been put to me, fair or not, that US companies are less and less willing to pay royalties that Asian companies have coped with for years.

It is not as if Huawei is an arch-maximalist when it comes to licensors’ rights and royalty rates. Elsewhere in the interview, Ding notes that licence offers from certain licensors have gone “far beyond the range of a reasonable return”, and that more and more are coming from NPEs rather than operating companies. But having invested so much money and effort into R&D and standards development, Huawei does appreciate the importance of a strong patent system. It must feel strange to make such a furious effort to catch up to the leading global tech companies in the IP department, only to see attitudes shift against patent protection in the US.

One factor mentioned is the internet, and there is no doubt that companies primarily focused on online platforms have been prominent advocates of patent reform in the US. What will be interesting to see is whether a similar dynamic emerges in China. Last week, we examined China’s powerful big three internet firms – Alibaba, Tencent and Baidu – which have not so far accumulated patents on the same scale as peers in other sectors.

But it is also hard to ignore the role played by the rise of China in driving some of the anti-patent sentiment described in the interview. During the patent reform debate in 2014, proponents including James Bessen and Michael Meurer appealed to nationalism with their dubious warning that “trolls” from China and Taiwan posed a big danger to US companies. Contemporary headlines cried: “China Turns From 'Pirate' Nation To Giant Patent Troll”. After years of criticism over weak IP protections in China, Chinese companies, led by Huawei, now realise the necessity of owning patents in order to compete globally. After all that investment, it must be a bit galling to see large sections of US industry turn around and call for patent rights to be weakened, with a few even using strides made by China to justify their position.

But it is pretty clear that Huawei sees this state of affairs as a major opportunity rather than a setback. The group has assumed a higher profile in the licensing market and launched litigation campaigns for the first time in the last year. It’s no surprise the company expects to reap a financial return from the assets generated by China’s largest in-house IP team. The game continues indeed.