India: Patent Pariah Or Patent Power

Last Updated: 22 August 2019
Article by Madhur Tulsiani

1. BACKGROUND

1.1 Why was Huawei in the news?

Recently, Huawee's demand for 1 billion USD as license fee from Verizon Inc[1] captured interest of almost every patent enthusiast around the globe. The issues got even more complicated when the US took to politicization of patent rights which drew criticisms from all fronts.

1.2 Senator's Comment and world response

Republican senator Marco Rubio, supported by Democrat senator Charles Schummer, stated that the current ban on Huawei is justified following the US Government's move of placing Huawei on "Sanctions list" on the grounds of threat to national security due to connections between Huawei and the Chinese intelligence services as well as the people's liberation army. Further, the move has been seen as necessary for better trade rules between US and China[2].

However, what Senator Marco Rubio has proposed is to effectuate this ban by means of legislation. This happened when U.S. Senator Marco Rubio actually filed legislation for an amendment to the National Defense Authorization Act, or NDAA, on 17th June 2019 which would prevent Huawei Technologies Co Ltd and other companies on the U.S.A's watchlist for Security[3] from seeking damages in U.S. patent courts, after the Chinese firm demanded that Verizon Communications Inc pay $1 billion to license the rights to patented technology[4].

In response, China has warned that threats and tariffs will not resolve trade tensions between the two biggest economies and blasted Republican Senator Marco Rubio for his criticism of technology giant Huawei over patents. The Chinese called this attempt "bizzare".  Huawei denied that it would share user data with the Chinese government if ordered to do so. Huawei also stated that there are no backdoors in its equipment and that it is willing to enter into a "no backdoor" agreement with any nation that wants one. The Chinese view the move as complete politicization of patent rights. Huawei brought a lawsuit in the U.S. this March challenging the constitutionality of the national security law which prevents the U.S. government and its contractors from using Huawei equipment[5].

1.3 US-China trade War

In 2018, the US – China trade deficit stood at around 419 billion USD.  This trade deficit is increasing, right from 2012 where it stood at 315 billion USD. In order to reduce the trade deficit, tariffs were imposed on Chinese goods. For instance, on March 1, 2018 Donald Trump, POTUS, announced that he would impose tariffs of around 10% on steel imports and around 25% on aluminium. On 6th July, the tariffs cost the Chinese around 34 billion USD. As a result, they cancelled soybeans. This series of measures and counter – measures have taken the form of what is known as the longest standoff between the US and China in the economic history of the world. One such victim of this trade war was Huawei[6].

2. PROPOSED COUNTERMEASURES BY HUAWEI

Huawei at this position has to take a stand. It has to decide whether it wants to fight a lengthy litigation battle and protect its right. Again, the outcome may not be very much favorable. Or Huawei may plan to prepare its exit.

2.1 Divesting patents

If Huawei takes the call to leave US, it can do so by divesting itself of patents covering certain technology areas so that it can realize value for the technology without having to devote resources to its further exploitation or development. Typically, this can be done by outright assignment of patents, know-how and other assets, or by license. This will not only bring revenue to Huawei, but will also aid them a smooth exit from the country's patent regime. Huawei may also dedicate some of the patents to the public domain. This will not only help Huawei to offload its portfolio, but also enable the company to improve its public image in the patent domain.

2.2 Improving public relations on patent front

However, if Huawei opts to stay, it may be an opportune time to invest in improving its public perception. Huawei has successfully defended itself from patent infringement suits till date by notifying Verizon immediately and proactively enforcing its patent rights. Huawei can go on aggressive advertisements showcasing itself as a responsible owner of intellectual property and respecting intellectual property rights.

2.3 Personalizing the Company

Another alternative for Huawei is to give due credit to inventors in company advertisements. Spotlighting company inventors in advertisements and allowing them to become the face of the company's innovation will only help to improve public perception of Huawei. Along with it, Huawei may even be able to vent off its frustration on the challenges faced in the current patent regime of United States.

3. CONCLUSION

3.1 Story till now

Over the years, Huawei has invested a lot of resources and has built up a portfolio of more than 10,000 patents. The recent attitude of US is an indication for Huawei to start taking countermeasures in order to safeguard its interests in the US. Although approaching the Courts against the Amendment of National Defence Authorisation Act as unconstitutional, Huawei must take proactive measures that not only employ its patents to good use but also work towards improving its image in the market.

3.2 Way forward

As the US China trade war drags on, and as tariffs keep on piling on either sides, Huawei and other Chinese corporations must work towards protecting their interests. Leaders from both the ends should come together and international conventions should not be bypassed by taking aid of legislature. Instead, being the two economic superpowers of the West and the East respectively, they must act in a responsible manner and act as a check and balance to each other. International commitments must be respected at all costs.

Footnotes

[1] https://news.cgtn.com/news/2019-06-19/Huawei-Verizon-patent-dispute-How-common-is-patent-licensing–HEsyAlMnwk/index.html

[2] https://wccftech.com/marco-rubio-we-want-huawei-restrictions-to-stay/

[3] http://www.thestandard.com.hk/breaking-news.php?id=130079&sid=6

[4] https://ca.reuters.com/article/businessNews/idCAKCN1TI2T3-OCABS

[5] http://www.thestandard.com.hk/breaking-news.php?id=130079&sid=6

[6] https://www.thebalance.com/u-s-china-trade-deficit-causes-effects-and-solutions-3306277

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