We'll show you our patents if you show us yours, say Huawei and Ericsson

Analysts reckon extension of 2016 deal will be good for industry – as long there are no gotchas

Huawei and Ericsson have signed a long-term cross-licensing agreement that includes patents relating to a broad range of technology areas, including those covering 3G, 4G, and 5G cellular networks.

This agreement, finalized earlier this month, covers the respective sales of network infrastructure and endpoint devices by the two companies, and includes patents covering a broad range of standards including the 3GPP, ITU, IEEE, and IETF standards for 3G, 4G, and 5G networks.

According to Huawei, the deal provides greater certainty, not just for itself and Ericsson, but for their customers and other companies around the world, that there will not be disruptive patent disputes between the two over products implementing widely used network standards.

In a statement, Alan Fan, head of Huawei's Intellectual Property Department, said: "As major contributors of standard essential patents (SEPs) for mobile communication, the companies recognize the value of each other's intellectual property, and this agreement creates a stronger patent environment.

"It demonstrates the commitment both parties have forged that intellectual property should be properly respected and protected."

Christina Petersson, Chief Intellectual Property Officer at Ericsson, said of the deal: "We are pleased to announce our renewal of our global cross-licensing agreement with Huawei.

"Both companies are major contributors to mobile communication standards and recognize the value of each other's intellectual property."

Ericsson said today it estimates that with its current portfolio of IPR licensing contracts, its full-year 2023 IPR licensing revenues will hit approximately SEK 11 billion ($1 billion).

The two companies have signed cross-licensing agreements before. Back in 2016, there was a similar deal on wireless standard essential patents, including the GSM, UMTS, and LTE cellular standards. That agreement was in itself an extension of previous patent licensing deals, now extended further with this latest arrangement.

However, the financial details of the agreement are not being disclosed. Huawei would only say that because the two companies use each other's technology, there will end up being a net payment from one to the other.

Back in 2016, it seems that this was from Huawei to Ericsson, with the company stating: "Huawei will make ongoing royalty payment based upon actual sales to Ericsson from 2016 and onwards."

But since that time, Huawei has poured huge amounts of investment into research for newer telecoms standards, in particular 5G networks. By the end of 2021, the company had amassed 6,566, declared patents relating to 5G, more than any other technology company.

What this means is that the situation may well have reversed, and Ericsson is now the one making net royalty payments to Huawei, making this a potential extra revenue stream for the company. This is speculation, however, as the company declined to give details.

IDC associate vice president Alejandro Cadenas told us that the agreement should be seen as a good move for the industry, as long as there were no hidden clauses to it.

"If there is no 'unexpected' aspect of this deal, and it is a continuation of the one they signed in 2016, my view is that this is good news for the industry in a time when the adoption of such technologies needs to be supported by device availability and compatibility of infrastructure," Cadenas said.

"An extension of an agreement between such telecom provider giants goes in the right direction to make innovation available to customers in the shortest time, while protecting the ownership of such innovation via reasonable compensation."

PP Foresight telecoms analyst Paolo Pescatore agreed, saying: "This deal provides long-term certainty, especially for Huawei and will now strengthen Ericsson's network position in 5G. Let's not forget Huawei had gained a superior early network position in 5G, prior to the sanctions."

The latter highlights that the previous agreement was before the US government decided that Huawei was a security risk and banned it from networks in the country then embarked on a campaign to force its partner nations to follow suit.

On a media briefing for the new agreement, Emil Zhang, head of Huawei's European IP business, tried to allay any concerns, saying: "This deal is not Huawei using Ericsson as a vehicle into Europe, nor is it vice versa ... The deal just demonstrates both companies' recognition of each other's IP value as well as their respective contributions to the telecommunications world and society as a whole."

But Pescatore sounded a note of caution, saying: "The notion of security concerns will not go away. For this reason it's unclear if this agreement will raise further scrutiny as to whether the current sanctions will extend towards patents in the future." ®

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