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Huawei says it's talking with Verizon and other US firms about royalties for using its patented tech

Key Points
  • Huawei's legal chief, Song Liuping, tells CNBC the company is in discussions with Verizon and other U.S. firms over paying royalties for the use of the Chinese firm's patented technology.
  • Song says discussions with Verizon are in the "early phase" and no final amount has been set.
  • Song claims Sen. Marco Rubio's plan to effectively block Huawei from pursuing patent cases in U.S. courts will be a "catastrophe for global innovation."
A Huawei logo on display at MWC Shanghai in June 2019.
Arjun Kharpal | CNBC

Huawei is in discussions with Verizon and other U.S. firms over royalty payments for the use of the Chinese giant's patented technology, the company's legal chief told CNBC on Thursday.

The company announced on Thursday that, by the end of 2018, it had been granted 87,805 patents globally. Of those, 11,152 are registered in the U.S. Thousands of elements of that intellectual property (IP) will be "standard essential patents," which are technologies critical for mobile networks including 3G, 4G and now 5G. Other companies, including some of Huawei's rivals, will need to use the patented technology.

Even though Verizon doesn't buy products directly from Huawei, its other vendors are using Huawei-patented technology.

Reuters reported earlier this month that Huawei is asking Verizon to pay $1 billion in royalties for using over 230 patents.

Huawei Chief Legal Officer Song Liuping confirmed to CNBC that discussions are ongoing and are in an "early phase."

"We provided several hundred patents to Verizon, these are patents in various domains in network operations. These patents cover almost the end-to-end network operations of Verizon," Song said. "As for this specific amount of royalties, it is now just a preliminary stage of the discussion. We have not yet arrived at the discussion of the specific amount of royalties."

Royalty payments will often be negotiated for a several-year term. It could be to cover previous years or the next few years. Song said those terms with Verizon had not been decided yet. Huawei is also in discussions with other U.S. companies and firms from "elsewhere" too cover royalties, the exec added, but declined to name them because the negotiations are confidential.

Huawei said it has received $1.4 billion in licensing revenue since 2015. The Verizon deal reportedly could be $1 billion alone. Experts told CNBC that Huawei could get more aggressive in pursuing companies over patents, but Song said the company would not use intellectual property as a weapon.

"On IP, Huawei is not a very aggressive company, we don't support the approach of weaponizing patents, our goal around IPR (intellectual property rights) is to ensure that our global business is protected, so it's a defensive approach, we like to defend our business that's our goal around IPR activities," Song told CNBC.

Huawei said it has paid more than $6 billion in royalties to other companies.

US patent proposal a 'catastrophe'

Seemingly aware of the potential for Huawei to use patents against U.S. companies, Sen. Marco Rubio proposed legislation that would block Huawei from fighting patent disputes in American courts, according to Reuters. The proposal is far from becoming law.

Rubio accused Huawei of being a "patent troll."

In a news conference on Thursday, Song called the proposal "dangerous" and said the company "will take legal action to defend ourselves" if it did become law.

"It would be a catastrophe for global innovation, it would have terrible consequences," Song said.

IP theft accusations

Huawei has been accused on many occasions of stealing intellectual property and has been involved in a number of lawsuits on the subject. In 2014, TMobile accused Huawei of espionage to steal trade secrets in relation to a robot the American firm was developing called "Tappy." Huawei was ordered to pay $4.8 million for a breach of contract but the jury decided the company's actions were not "willful and malicious."

On Wednesday, a U.S. jury found Huawei had misappropriated trade secrets from an American semiconductor firm called CNEX. Huawei had initially sued CNEX. The Chinese firm alleged a former Huawei employee who went on to found CNEX stole technology and poached employees. CNEX filed a counter suit claiming Huawei looked to steal trade secrets. The jury found that Huawei had misappropriated CNEX's technology, but awarded no damages.

Song defended his company's record in intellectual property cases saying at the news conference that "no court has ever concluded that Huawei is engaged in malicious thefts of IPR and have not been required by court to pay damages for this."

In the interview with CNBC, Song said the company respects intellectual property rights.

"Huawei as a tech company regards innovation as the soul of our business and respecting IPR is the basic principle of our company," Song said. "Because, if we don't respect the IP of other companies, how can we expect others to respect ours?"

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- Clarification: Due to a Huawei translation error, this story has been updated to clarify the company's statement about courts and intellectual property.