Chinese telecommunications giant Huawei Technologies has inked a new deal with Swedish counterpart Ericsson that gives the duo rights to use each other’s cellular technologies in network gear and consumer devices, in the latest effort by the Shenzhen-based firm to turn its patents into money.
Huawei announced on Friday that its new patent cross-licensing agreement with Ericsson will cover patents essential to various standards for 3G, 4G and 5G technologies globally. Huawei said that it would be a long-term deal, without elaborating on the specific period.
“As major contributors of standard essential patents (SEPs) for mobile communication, the companies recognise the value of each other’s intellectual property,and this agreement creates a stronger patent environment,” Alan Fan, head of Huawei’s intellectual property department, said in a statement.
“This agreement is the result of intensive discussions that ensured the interests of both patent holders and implementers are served fairly.”
Ericsson said in a separate statement on Friday that the renewed multi-year deal recognised the value of each other’s intellectual property (IP).
“This agreement demonstrates the commitment of both parties that intellectual property should be respected and rewarded, and that leading technological innovations should be shared across the industry,” said Christina Petersson, chief intellectual property officer at Ericsson.
Ericsson expects its 2023 revenue from IP licensing to reach around 11 billion krona (US$998 million).
The renewed deal extends previous agreements between the two telecommunications giants on licensing patents to each other. Under an agreement signed in 2016, Huawei would make “ongoing royalty payments” based on actual sales of smartphones and other products using Ericsson’s patents.
Huawei was the biggest Chinese smartphone brand at that time and mostly held on to that position until its handset sales nosedived when it was placed on the US Entity List in 2019, which cut it off from advanced 5G semiconductors among other technologies originating in the US. The company is also facing increasing uncertainties in Europe as the European Union has called for more member states to block Huawei from their 5G networks.
The decline in Huawei’s handset sales led to a reduction in its payments for using others companies’ patents. Huawei’s annual income from royalties exceeded its IP expenses for the first time in 2021, and it said it collected about US$560 million from patent royalties in 2022.
In July Huawei announced for the first time the rates it charges for some of its most important communications technologies, including 4G and Wi-fi 6.
The enhancement of the company’s patent portfolio results in higher licensing incomes that can offset Huawei’s payments for using the patents of other parties, said Emil Zhang, head of the European IPR department at Huawei.
“Huawei is not only a patent holder but also a patent implementer, so we are not afraid to pay reasonable royalties on the one hand, and also receive reasonable payments for Huawei’s patents on the other hand,” Zhang said. “Royalty income is not the goal that we are aiming for, only the results of our innovation being recognised.”
After it was founded in 1987, Huawei grew into a giant in the telecoms hardware space in the 2000s largely by undercutting the international competition on price.
With Chinese technology now facing greater scrutiny overseas, particularly in the US and Europe, Huawei’s intellectual property holdings could help it weather declining sales in other areas and fund its hefty research and development.
Zhang said the agreement with Ericsson to share technology showed that innovations should not be affected by deglobalisation.
“The long-term deal will provide more business certainty for the companies and eventually for the downstream customers including carriers and end users,” Zhang said.