Huawei agrees long-term patent deal with Ericsson despite western curbs

Huawei has sealed a multiyear patent cross-licensing deal with Ericsson for 5G and other technologies as the Chinese group searches for ways to generate revenue after being banned from telecom networks or subjected to curbs in several countries.

The rival equipment makers will be able to access each other’s patents essential for the “3G, 4G and 5G cellular technologies” used in network infrastructure and consumer devices, Huawei announced on Friday.

Huawei and the Swedish company already had a patent licence in place but this is the first long-term agreement between the pair, Huawei said without disclosing further details.

Developing and monetising patents is a route for Huawei to make up for lost sales and seek growth after being squeezed by western sanctions.

The US in 2019 banned companies exporting to Huawei without a licence to cut the Chinese company off from the critical semiconductors it needed for its smartphones, triggering a significant decline in its market share for its consumer electronics business. Washington believes that Huawei is helping the Chinese government conduct cyber espionage and technology theft and has increased curbs since then. Huawei denies such allegations.

In Europe the UK, Denmark, Sweden, Estonia, Latvia and Lithuania have all banned Huawei from their 5G network build. The EU is also considering a mandatory ban on member states using Huawei in their 5G networks.

Boosting its licensing fee business is “a lifeline for Huawei in light of maximising any possible opportunities, and long-term certainty”, said Paolo Pescatore, analyst at PP Foresight. “Huawei is in a precarious position, given the negative sentiment towards the company predominantly driven by geopolitical concern.”

Huawei is the world’s largest 5G patent owner with 20 per cent of global patents.

In 2021 the company began charging smartphone makers a royalty to use its patented 5G and other technologies. Last month, the company disclosed that the royalty rate caps for 5G handsets is $2.5 per unit, which legal experts say is significantly lower than the industry average.

Huawei’s licensing revenue was $560mn last year, meaning it brought in more patent income than it paid out in fees to other companies to use their patents for a second year in a row.

Emil Zhang, Huawei’s head of intellectual property rights in Europe, said: “A patent holder needs to get a reasonable compensation from the industry who implement the patent . . . but implementers shall also be entitled to obtain and to be shared with the technologies by paying reasonable royalties.”

Recent aggressiveness in monetising its patents shows “a major shift in strategy for Huawei, as it used to be a big implementer [of patents of others] for a long time”, said Benjamin Grzimek, a partner in Fieldfisher specialising in patents.

However, he noted that it is a regular business practice for large players of developing standard patents to enter into cross-licensing arrangements to “make peace between themselves”.

Huawei is one of the players, alongside Ericsson, Finland’s Nokia and US chipmaker Qualcomm, creating global standards for 5G and other networks given their collective dominance in holding so-called standard essential patents.