Patents, Pressure, and Perseverance: Huawei's resilience beyond ban in a shifting tech landscape

Huawei, a leading force in the tech industry, has experienced notable fluctuations in patent filings related to audio-visual (AV) technologies. Initially, there was a remarkable surge, with filings increasing by approximately 229% from 2017 to 2019. However, this surge was followed by a significant decrease of around 85.89% in patent filings specifically concerning video tech. The emphasis on AVC-related filings, from a Telecomm giant, implies a strategic adjustment within the company, prompting a closer examination of various key factors.

Contrary to public perception of Huawei only being restricted to Telecomm space, it consistently allocates significant resources to exploring cutting-edge technologies across diverse domains. This proactive strategy, and understanding of the complex essentiality of AVC standards, underscores Huawei's determination to lead the way in shaping the future of telecom. Innovation has long been the cornerstone of Huawei's approach to leadership in its industry. Surpassing rivals like Nokia and Ericsson, Huawei's commitment to innovation has been unwavering, even in the face of challenges. Let us delve into what could be the potential reasons behind what appears to be a concerted effort of Huawei to a carve a niche in the burgeoning market.

In early 2017, MPEG LA made an announcement regarding legal actions taken against Huawei Deutschland GmbH ("Huawei") and ZTE Deutschland GmbH ("ZTE") in German District court ("Landgericht Dusseldorf") cases. The essence of the complaints revolved around Huawei’s purported use of patent-protected AVC methods in its mobile phone products marketed in Germany, without obtaining proper licenses from the individual patent holders or acquiring a comprehensive portfolio license provided by MPEG LA. The enforcement actions were deemed necessary due to the failure of Huawei and ZTE to obtain proper licensing for the AVC patents.

Consequently, Huawei and ZTE were required to discontinue offering AVC/H.264 compliant devices, such as smartphones and tablets, in Germany that utilized the enforced patents. Furthermore, they were obligated to recall and destroy all such products in their possession or the possession of third parties. However, MPEG LA emphasized that acquiring a license would resolve the issue, extending an invitation for both companies to do so.

Huawei and MPEG LA resolved their legal dispute in the Düsseldorf Patent Court, effectively lifting the sales ban on Huawei mobile phones in Germany. This agreement, signed after a protracted legal battle, concluded a contentious chapter in the company's history. Although rumors of an impending resolution circulated, it wasn't until January 13, 2019, that an agreement was reached. Subsequently, all disputes before the Düsseldorf courts were settled, and Huawei secured a license from MPEG LA.

In the United States, a case was brought against Huawei in 2018 by PanOptis Wireless Technology, Optis Cellular Technology, and PanOptis Patent Management, known together as PanOptis. The jury found Huawei guilty of infringing several of PanOptis' patents related to wireless technology. As a result, the court ordered Huawei to pay PanOptis compensatory damages of $10,553,565, along with enhanced damages of $2,638,391.25, and ongoing royalties. Additionally, Huawei was required to cover pre-judgment and post-judgment interest on the damages awarded, and PanOptis was awarded costs as the prevailing party. Huawei was instructed to provide PanOptis with a detailed account of its sales related to the infringing products, with ongoing royalty payments due quarterly. The court also declined to issue a judgment on a specific aspect of PanOptis' complaint. Finally, the case was officially closed on March 18, 2019.

Huawei being a titan in the telecommunications industry, was poised to claim the title of the world's largest smartphone manufacturer by the close of 2019, challenging Samsung's reign. However, controversies, including allegations of espionage and unethical practices, clouded its success. In May 2019, the company faced a significant setback when it landed on the "Entity List" prohibiting it from doing business with U.S. entities like Google, NVidia, Microsoft, Intel, Qualcomm, etc. This ban disrupted Huawei’s smartphone operations, prompting strategic adjustments. Despite occasional regulatory wins, the ban persists, forcing Huawei to adapt to ongoing challenges.

Innovation as its driving force, fueled by the pressure of lawsuits lead to a surge in patent filings by Huawei. The aggressive patent filings seen never before, lead to 229% growth in the patent filings from the year 2017 to 2019. Following Huawei's acquisition of a license from MPEG LA, its rapid ascent was mirrored by a significant decline in patent filings from 2019 to the present. According to Fan Zhiyong, head of Huawei's intellectual property rights department, the industry has widely recognized the value of Huawei's patents, particularly in mainstream standards like cellular technology, Wi-Fi, and audio/video capabilities.

In recent years, Huawei has faced significant external pressure, yet it has not succumbed. Instead, the company has emerged even stronger, serving as an inspiration for numerous Chinese enterprises to embrace innovation. This underscores Huawei's robust global competitiveness in the realm of intellectual property.