Huawei targets Verizon for $1B in patent fees

Huawei is going on the offensive by demanding more than $1 billion in patent licensing fees from Verizon even though Verizon isn't a customer.

Verizon should pay to “solve the patent licensing issue," a Huawei intellectual property licensing executive wrote in a letter to Verizon, according to The Wall Street Journal. Huawei's letter accused Verizon of violating 238 patents that cover core, wireline and IoT technologies being used in Verizon's network.

While Verizon isn't a Huawei customer, the Chinese company claimed that Verizon should pay the hardware and software licensing fees because Verizon does rely on more than 20 vendors that use technology owned by Huawei, according to a story by The New York Times (NYT). Generally, patent licensing fees are paid on a per-subscriber basis as a percentage of the gross or net profit made on each sale of a product. 

"We have no comment regarding this specific issue because it’s a potential legal matter. However, these issues are larger than just Verizon," Verizon spokesman Rich Young said. "Given the broader geopolitical context, any issue involving Huawei has implications for our entire industry and also raise national and international concerns." 

The NYT, citing "two people briefed on the matter," reported that Huawei and Verizon have exchanged emails and phone calls, and met in person last week in New York to discuss Huawei's claims.

In a letter dated March 29, Huawei wrote to Verizon that “we trust you will see the benefits to taking a license to our patent portfolio,” according to The New York Times.

While Verizon is the first target for Huawei, other U.S. telcos, including T-Mobile, Sprint, CenturyLink and AT&T, could be in the cross hairs as well.

Last month, the U.S. Department of Commerce put Huawei on a trade blacklist that was designed to make it difficult for the world's largest telecom vendor to do business in the U.S. The blacklisting, set to take effect after a 90-day reprieve, would require U.S. companies to ask the government's permission to do business with Huawei.

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The battle with Huawei and the U.S. has been brewing for some time, but it started to heat up last year as the Trump administration's trade negotiations with China soured. Huawei has maintained that it's a pawn in the trade negotiations, and that it doesn't provide technology secrets to the Chinese government via backdoors in its products and applications.

Over the past few months, Huawei has aggressively pushed back as the U.S. has sought other countries, such as the U.K., to take similar measures. Huawei faces a threat to its supply chain as several companies, including Intel, Arm and Google, have said they would no longer do business with Huawei if the issues with the U.S. government weren't resolved.

Google has suspended business with Huawei in some areas, and said it would no longer allow access to software updates for its Android operating system and apps that are used in Huawei's smartphones and tablets.

Reuters reported that Huawei has applied to trademark its “Hongmeng” operating system in at least nine countries and Europe, and that it expects to have it in use by next year.