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Chinese company seeks patent fees from U.S. carrier, which calls action 'sneak attack'

By Dan Strumpf 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 7, 2020).

HONG KONG -- Huawei Technologies Co. is suing U.S. carrier Verizon Communications Inc. to demand it pay fees for the use of a dozen patents in its networks, escalating a long-simmering dispute between the two telecom giants.

Huawei's lawsuits, filed in two federal district courts in Texas, argue that Verizon should pay the Chinese company for its use of a variety of telecommunications technologies patented by the Shenzhen-based company, which is the world's largest maker of telecommunications equipment and the No. 2 seller of cellular phones.

The Wall Street Journal reported last year that Huawei was demanding payments from Verizon for allegedly using its patents without a license. The two sides met numerous times in the U.S., as recently as last month, to discuss the dispute without a resolution, according to the lawsuits.

Song Liuping, Huawei's chief legal officer, said Verizon has "benefited from patented technology that Huawei developed over many years of research and development." The lawsuits don't specify a monetary value for the patents at issue, and says compensation for Huawei should be determined at trial.

A Verizon spokesman called the suits "a PR stunt" and "a sneak attack on our company and the entire tech ecosystem. Huawei's real target is not Verizon; it is any country or company that defies it. The action lacks merit, and we look forward to vigorously defending ourselves."

Huawei's move is likely to further inflame tensions between the Chinese company and Washington, which for years has blocked Huawei from selling its products in the U.S. and has been lobbying allies against using its equipment in their 5G network rollouts. U.S. officials believe the Chinese company's gear could be used to spy for Beijing or disrupt communications, which Huawei denies. The Journal has reported that the company has a history of being accused by rivals of technology theft.

The Trump administration's anti-Huawei campaign faced a setback last week when the U.K. decided to allow Huawei to supply 5G technology to its carriers, with restrictions on its use in sensitive parts of the network and a cap on the company's 5G market share. The European Union last week also stopped short of recommending a ban to its members.

The U.S. administration has also been pushing to tighten rules enacted last year restraining American technology companies from selling parts and software to Huawei, but the effort was paused following pushback within the administration.

Some U.S. allies have blocked Huawei in their 5G networks, including Australia, New Zealand and Japan. On Wednesday, Nicholas Jonathan Read, the CEO of Vodafone Group PLC, said the European carrier would remove all Huawei gear from sensitive "core" areas of its EU networks over five years at a cost of about 200 million euros ($220 million) after a pause on new purchases for those parts of its networks last year.

According to the lawsuits, Verizon is using Huawei's technology without a license in several applications, including in its routers and switches and in enterprise services. Verizon isn't a customer of Huawei. One lawsuit references technologies allegedly used by Verizon and branded by other vendors such as Cisco Systems Inc., which competes with Huawei in telecom equipment.

The patents at issue involve longstanding telecom technologies such as those for optical transmission and digital communications.

It is the third recent high-profile lawsuit Huawei has filed in the U.S. Last year, the Chinese company sued the Trump administration, seeking to block a law prohibiting U.S. agencies and contractors from buying its products. It is also suing the Federal Communications Commission over a rule prohibiting U.S. rural carriers from accessing a federal subsidy to buy Huawei equipment.

Write to Dan Strumpf at daniel.strumpf@wsj.com

(END) Dow Jones Newswires

February 07, 2020 02:47 ET (07:47 GMT)

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