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The patent war between technology giants is intensifying, and it seems difficult to guess who will be the next to stand in the "defendant's seat".

On the morning of July 19, MediaTek issued an announcement to clarify media reports. In response to the news that "Huawei filed a lawsuit against MediaTek that may involve mobile communication technology patents", MediaTek stated that this lawsuit has no significant impact on the company, the case has entered the judicial process, and the company will not comment.

Related information released by MediaTek

A person close to MediaTek told the First Financial reporter that the company and Huawei began to have disagreements over relevant patent fees two or three years ago, until the two sides "broke down talks" over the price issue some time ago.

"The other party made corresponding requirements to MediaTek based on the price of the terminal, but MediaTek believed that the price was too high." The above person told reporters.

It is reported that the patents Huawei is suing MediaTek for are likely to involve cellular mobile communication technologies such as 5G (or 4G, 3G, etc.). In other words, Huawei is exploring the possibility of charging patent licensing fees from smart terminal manufacturers and further exploring the possibility of charging licensing fees from chip manufacturers.

However, as of press time, neither Huawei nor MediaTek has given a public response to the patent details involved in the lawsuit.

Charge upstream chip components?

In the past few years, with the rapid deployment of 5G commercialization around the world, communication giants have no longer been secretive about patent fees, and the patent war between technology giants has intensified.

For example, less than three years after the patent litigation war between Qualcomm and Apple subsided, Ericsson and Nokia have started a 5G patent litigation war against mobile phone manufacturers around the world. Previously, Ericsson filed patent infringement lawsuits against Apple in at least six jurisdictions, and the two parties reached a settlement agreement at the end of 2022. Nokia has sent "complaints" to many Chinese manufacturers in the UK, Germany, Spain, France, India, Indonesia and other regions since 2021, and then settled with OPPO this year.

Huawei sues MediaTek. Photo is a file photo.

But judging from the lawsuit between Huawei and MediaTek, unlike in the past, Huawei, the patent owner in the lawsuit, is targeting chip manufacturers rather than mobile phone terminal manufacturers.

Industry media "Enterprise Patent Watch" believes that charging is done at the mobile phone end, which has a larger value chain. However, if the charging model can be transferred to the "component level" in the future, the most intuitive experience for ordinary consumers is that the pressure on patent licensing fees for mobile phone OEM manufacturers such as Apple, Samsung, Huawei, Xiaomi, OPPO, and vivo will be greatly reduced in the future, and the main patent fee issues will be handled by a few chip manufacturers in the supply chain, such as MediaTek, Qualcomm, Huawei HiSilicon, etc. In this model, consumers' cost expenditure on mobile phones may be expected to be further reduced.

However, Huawei did not respond to the details of the lawsuit.

The reporter checked the information published on Huawei's official website and found that the current patent licenses mainly include three parts, including mobile phone licenses, wifi licenses and cellular Internet of Things licenses, and the specific rates were also announced simultaneously.

Specifically, Huawei implements a standard of no more than US$2.5 per 5G mobile phone, while 4G mobile phones are no more than US$1.5 per unit. In addition to mobile phone products, the licensing rate for Wi-Fi6 consumer products is US$0.5 per unit, while for devices with IoT technology as the core, such as asset trackers, the rate is 1% of the product price, and a cap of US$0.75 per unit is set. For devices with enhanced connectivity through the IoT, the licensing rate is US$0.3-1 per unit.

The reporter noticed that Huawei has been expanding its patent revenue globally since three years ago. At an intellectual property conference last year, Shen Hongfei, vice president of Huawei's legal department and director of the major project department, said that Huawei's patent revenue includes major ICT standard technologies such as 5G, Wi-Fi6, and 4G.

"Huawei's patent licensing revenue in 2022 was approximately US$560 million. This is the second year that Huawei's patent licensing revenue exceeded licensing expenditure. The historical cumulative licensing fee expenditure is three times the cumulative revenue. At present, we have applied for and own 20% of 5G and WIFI6 patents, 10% of 4G patents, 15% of NB-IoT and LTE-M patents worldwide. The main patent licensing revenue comes from the above-mentioned patent packages." Shen Hongfei said that Huawei advocates that patents should be charged reasonably, neither too low nor too high.

Challenging patent fees and model pricing?

From the patent disputes that keep "burning up", we can see that the global intellectual property layout is facing risks and pressures from technology iteration, fierce competition, patent licensing, etc. The industry is paying close attention to the lawsuit between Huawei and MediaTek, one of the important reasons is that it may change the existing patent licensing model in the current global smartphone industry.

The patent war between Apple and Qualcomm has attracted attention from the industry. The picture is a data picture

Previously, the patent war between Apple and Qualcomm attracted attention in the industry because Apple tried to challenge the patent charging model in the smartphone industry dominated by Qualcomm.

Apple mentioned in past lawsuits that Qualcomm's business is built on older traditional standards, but it strengthens its position through exclusive tactics and excessive patent royalties. In Apple's lawsuit, it directly pointed the finger at Qualcomm's chip licensing model, saying that Qualcomm forced customers to sign patent licensing agreements before purchasing chips, "Without licensing agreements, there are no chips." Such chip licensing agreements allow Qualcomm to extract a certain percentage of iPhone revenue in exchange for a continuous supply of chips. Apple hopes to be able to purchase chips without signing patent licensing agreements, which allows the company to avoid having to pay Qualcomm a share of every iPhone sold.

This also means that in addition to paying for chips, a mobile phone also has to pay licensing fees for a large number of components unrelated to mobile communications, such as panels and memory. If other hardware costs unrelated to Qualcomm chip IP increase, Qualcomm's patent fees will also increase. However, Mark Snyder, senior vice president of Qualcomm, also refuted this statement in an exclusive interview with a reporter from China Business Network.

He said that Qualcomm had discussed with Apple around 2005 and 2006. Later, Apple decided not to obtain a license directly from Qualcomm, but to obtain a license through Apple's foundry that had reached a licensing agreement with Qualcomm. Mark Snyder believes that Apple's attack on Qualcomm and its business model is intended to weaken the Android ecosystem that Qualcomm has always strongly supported.

Subsequently, after several lawsuits, Qualcomm and Apple reached a settlement, but Qualcomm's patent charging model did not change.

The above-mentioned industry media believe that the most critical point that enables Qualcomm to maintain this business model is that it does not open licenses to chip manufacturers. That is, Qualcomm does not close licenses to Qualcomm's competitors such as Intel and MediaTek, but only opens licenses to terminals. This satisfies the "exhaustion of rights" requirement of the patent system.

However, whether the lawsuit between Huawei and MediaTek involves the patent model itself still needs further advancement and disclosure of the case.

From Huawei's previous attitude towards the patent charging model, we can see that Huawei believes that there are two main ways to license global patents. One is to solve the licensing issues between two companies through bilateral licensing, and the other is to carry out "one-stop" licensing through patent pools. Participants can provide licenses to other members as right holders, and can also obtain licenses from other members as users. In terms of rates, two main methods have also been proposed, one is the single unit rate, and the other is the percentage rate.

"The information available at the moment is that MediaTek has a disagreement with Huawei over a certain patent charging standard, but the direction of the situation will depend on Huawei's attitude and whether it chooses to reconcile," said the above-mentioned person familiar with the matter.