InterDigital pens SEP license agreement with Huawei as Lenovo Dispute escalates

Yesterday, InterDigital announced that it signed “a multi-year, worldwide, non-exclusive, royalty bearing patent license agreement” with Huawei, bringing an end to the companies’ SEP litigation in China and the U.K. over FRAND terms for InterDigital patents essential to 3G, 4G, and 5G wireless telecommunication standards. InterDigital’s press release states the new agreement “covers certain of Huawei’s products and certain of InterDigital’s essential patents” and that the companies have agreed to dismiss all pending litigation between them.  

In addition to resolving a significant overhang that the dispute posed to InterDigital’s licensing business, we anticipate the Huawei agreement could feature prominently in InterDigital’s defense against Lenovo’s newly filed antitrust claims, particularly those predicated on an alleged failure to license its patents on FRAND terms (see our April 28, 2020 post). Quoting InterDigital President and CEO William Merritt, the press release may preview the tone of InterDigital’s response in the Lenovo case by noting that the Huawei agreement “underscores the fairness and flexibility of our licensing approach, including our rate and portfolio transparency, which set an industry standard.”  

Background 

Yesterday’s announcement will sound familiar to those that have followed InterDigital’s licensing arrangements with Huawei. InterDigital last executed a multi-year patent license agreements for 3G and 4G terminal units in September 2016, setting forth cash payments to InterDigital, establishing a process for transferring patents from Huawei to InterDigital, and resolving proceedings related to arbitration initiated in December 2013 and lawsuits across U.S District Court, the International Trade Commission, and China. InterDigital’s annual reports attribute 23% ($153.2 million) of its FY 2016 revenues and 14% ($74.6 million) of 2017 revenues to Huawei. 

Several years later, on January 2, 2019, Huawei filed a complaint against InterDigital in the Shenzhen Intermediate People’s Court, alleging InterDigital violated an obligation to license its 3G, 4G and 5G SEPs on fair, reasonable and non-discriminatory (“FRAND”) terms and asking the court for a determination of licensing terms for all of InterDigital’s Chinese patents essential to 3G, 4G and 5G standards covering Huawei’s wireless terminal products sold or made in China from 2019 to 2023. InterDigital responded by filing jurisdictional challenges that were pending appeal when the 2020 license agreement was announced yesterday.  

InterDigital also lodged claims against Huawei in the High Court of Justice, Business and Property Courts of England and Wales, Intellectual Property List (Chancery Division), Patents Court, asserting infringement of five European InterDigital patents relating to 3G, 4G/LTE and 5G standards, seeking a declaration that the terms offered Huawei were consistent with InterDigital’s FRAND commitments, and seeking a “FRAND injunction” similar to that previously awarded by the High Court in Unwired Planet v. Huawei. We note these are the same five patents being asserted in InterDigital’s U.K. case against Lenovo: European Patent (U.K.) Nos. 2,363,008; 2,421,318; 2,485,558; 2,557,714; and 3,355,537. Huawei was in the midst of challenging the High Court’s jurisdiction over the matter when the 2020 license agreement was announced, with Huawei’s U.K. challenge listed to be heard between July 1 and July 3, 2020.