Jack Ellis

When Huawei and InterDigital revealed that they had entered into a broad worldwide licensing agreement recently, it brought to an end a years-long dispute over standard-essential patents that at times had been rather ugly. Now, relations between the two companies couldn’t be more different as they look to partner on future research and development efforts – and, potentially, on monetising patents, too.

InterDigital announced a “multi-year, worldwide, non-exclusive, royalty bearing patent licence agreement” with Huawei in September. This settled all proceedings relating to arbitration initiated in December 2013, so largely ending the two companies’ global web of FRAND-related disputes and antitrust complaints (though litigation and an anti-monopoly investigation in China remain unaffected). In addition to the licence itself, the pair put in place a “framework for discussions regarding joint research and development efforts”. They also agreed on a “process for transfer of patents from Huawei to InterDigital”.

InterDigital reported some particularly impressive financial results for Q3 2016. The publicly traded IP company’s (PIPCO’s) excellent performance could be explained in large part by the realisation of the licence deal signed with Huawei around the start of September, which was the primary reason for its year-on-year revenue for the quarter more than doubling from $100.4 million in 2015 to $208.3 million. Another result of the agreement was that the past patent royalties that InterDigital collected during the quarter totalled $124.0 million – a marked increase of $102.2 million on a year previously.

There was another important titbit in InterDigital press release announcing its Q3 results; in Q2 2017, the PIPCO “expects to recognise additional past patent royalties associated with a patent transfer in connection with the new patent licence agreement” signed with Huawei. This clearly appears to refer to the “transfer of patents” mentioned when the licence agreement was signed in September. A quick search of USPTO assignments data indicates that, in a transaction executed on 15th September and recorded on 19th October, Huawei transferred four granted patents to Vid Scale, Inc, a subsidiary of InterDigital. All four patents seem to relate to online video processing technologies, and were originally assigned to Huawei.     

It isn’t clear at this stage what can be made of InterDigital’s expectation to benefit from past patent royalties associated with this portfolio. It may be the case that Huawei was already receiving royalty payments from licensees to these patents, and that these will now be going to InterDigital. A brief search of SIPO transactions data suggests that no licence agreements relating to the Chinese equivalents of these patents have been recorded – though this doesn’t definitively rule out such a scenario, since licence recordal isn’t mandatory in China.

Another thing that we can only guess about at this stage is whether or not Huawei will be due any share of those expected royalties, or of any future revenues that InterDigital manages to generate from the patents. After all, the Shenzhen-based company does appear to have become more determined to realise value from its patents of late, with assertions against Samsung and T-Mobile and a licence deal with Apple that stimulated much gossip in the tech press. But even if their cooperation on patent monetisation goes no further than this, the fact that the two companies, both major players in 5G technologies, are now exploring an R&D partnership could be seen as pretty extraordinary considering that a few years ago their FRAND dispute had reached such a point that InterDigital executives were reportedly being threatened with arrest if they set foot in China. It just goes to show what the right patents – and the right patent professionals, of course – can achieve on the business front.