Huawei Threatens to Raise Patent Royalties on US Firms

The story of the beleaguered Chinese tech giant Huawei took a turn today as they signal that they may demand more royalties for their patents.

If they go ahead, US companies will face real financial pressure to their bottom line.

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Why is Huawei planning to hike royalties?

According to CNBC, Huawei may ask for more royalties from US firms that use their patents. This, they say, is an attempt to claw back some much-needed cash in their ongoing fight with Washington.

This would be unprecedented from a company that has not historically been litigious in terms of IP. However, they do hold some crucial patents that underpin telecommunications around the world.

Reuters recently reported that Huawei asked Verizon for $1 Billion in royalties for over 230 of their patents. These patents include things like core network equipment necessary for IoT. 

At present, this case has not become a legal case. 

But Verizon is just one of many companies that could face similar demands from Huawei in the future. Huawei's CEO, Ren Zhengfei, said this week:

“Over the past years, we were not aggressive seeking IPR royalties to companies that use our IPR — that’s because we were busy pursuing our business growth. Once we have more time off, we may try to get some money from those companies who use our IPR.”

He added that this action would not be used as a “weapon to hinder the development of human society.”

How many US firms could be affected?

Washington D. C. has effectively banned Huawei from selling telecoms equip to the US government. Despite this, much of its tech is used by many American firms through third-party agreements with Huawei.

Reports CNBC: "Huawei has been granted more than 69,000 patents globally related to everything from data transmission to network traffic management, according to data compiled for CNBC by Relecura, an intellectual property (IP) analytics platform. Another 49,379 patent applications are pending. Of those granted, over 57% are in China, while nearly 18% are in the US, Huawei’s second-largest market for patents."

It is, for example, a world leader in the development of 5G. Many US firms either directly use some of these patents or some of the key companies in their supply-chain do. 

Why are they doing this?

Huawei's threats about increased royalties come as part of the current pressure being put on them by the US government. They have, for example, recently been added to a blacklist that restricts American firms selling to them.

Huawei, while holding many patents of their own, are also reliant on some US tech for their devices. 

These kinds of actions seriously threaten the company, especially its smartphone business. So much so that the recent battle has forced them to slash their revenue forecast for the next couple of years. 

According to their CEO, the current battle could cost them $30 billion in sales if the US continues to pressure them. 

Only time will tell if this materializes or not. But in the meantime, it seems Huawei is 'testing the water' with their threats to see how America reacts.