Titanium Media reported on March 16 that Huawei stated that in order to promote openness and transparency and 5G technology applications, and balance innovation protection and industry development, Huawei will charge royalties for 5G patents from 2021 and will provide prices applicable to 5G mobile phones. Reasonable percentage rate, and the upper limit of a single license fee is 2.5 US dollars.
Both Huawei and Qualcomm are holders of a large number of core communications patents, and they cannot be bypassed with 5G. I remember that Huawei and Qualcomm had a patent cross-licensing agreement before, and then Huawei paid a certain amount of patent fees to Qualcomm every year to sell Huawei mobile phones. Because of the existence of cross-licensing, Huawei pays much lower patent fees than other mobile phone manufacturers. Samsung, Xiaomi, ov and other manufacturers directly purchase Qualcomm chips and pay patent fees in accordance with Qualcomm’s patent fee model. At the same time, they are protected by Qualcomm’s patent pool and enjoy the right to use patents obtained by Qualcomm’s cross-licensing. Qualcomm’s patent fee rate is very high, and it is calculated in accordance with the price of the whole machine, and has been heavily fined by regulatory agencies in various countries many times. After Qualcomm was fined 6.088 billion yuan in China in 2015, it lowered its fee rate and reached a new authorization fee agreement with the National Development and Reform Commission. Apple also filed several lawsuits because of the unreasonable charging model of Qualcomm, but finally succumbed to the pressure of 5G and settled with Qualcomm for $4.5 billion. The iPhone 12 series can use the Qualcomm X55 baseband. The crux of the problem now is that, subject to US sanctions, the supply of Kirin chips for Huawei mobile phones has been cut off, sales are shrinking day by day, and the pressure on revenue decline has increased. Huawei’s mobile phone sales are declining, and the need to pay patent fees will naturally decrease, so the original patent authorization model will naturally no longer apply. Therefore, Huawei proposes to charge Samsung and Apple patent fees, which is a very reasonable request. After all, their respective patents are obtained from their own hard research and development. What needs to be observed is: How will Huawei and Qualcomm negotiate? Does the original cross-licensing agreement apply? After all, all households now use Qualcomm’s 5G chips. Qualcomm will bear the increased cost due to patent fees? Increase chip prices? Or will it be passed to downstream terminal manufacturers such as Samsung and Apple, and Huawei will directly charge them? How does Huawei charge domestic terminal manufacturers Xiaomi, OPPO, and vivo? How will this matter affect Qualcomm’s patent charging model and rates in the future? In short, Huawei’s patent fee requirements are reasonable, and again it shows that only by mastering the core technology can we have the initiative. I hope that the localization of chip manufacturing will be faster. Note: For non-professional legal and communications practitioners, this is only for personal understanding. Any errors are welcome to point out.