Huawei, Verizon Settle Suits on Patent Royalties Mid-Trial

Huawei Technologies Co. and Verizon Communications Inc. agreed in the midst of a federal jury trial in Texas to end two patent-infringement lawsuits over royalties on telecommunications technology.

Representatives of both companies said they were pleased with the settlement, the details of which they said were confidential.

U.S. District Judge Rodney Gilstrap on Monday approved the joint motion to dismiss the cases, filed Sunday by the companies.

Verizon shares rose 19 cents to $56.26 at 12:11 p.m. New York time.

A trial began last week in Marshall, Texas, in Huawei’s case against Verizon over claims it is using Huawei’s patented networking technology without a license. It was the first of two trials scheduled this year over lawsuits Huawei filed last year against Verizon, the biggest U.S. mobile carrier.

The pact resolves a long-running battle over Huawei’s royalty demands that Verizon, the biggest U.S. mobile carrier, pay a license for patents on telecommunications technology. Analysts saw the litigation as a sign of China’s largest technology company flexing its muscles toward U.S. companies in the wake of crippling sanctions from Washington.

“We may never know who is the winner and who is the loser” given the paucity of public information released about the settlement, said Paul Berghoff, a patent lawyer with McDonnell Boehnen Hulbert & Berghoff not involved in the case.

“You can speculate the settlement is a cross-license” with each company allowing the other to use some patents, Berghoff said in an interview. Such a settlement may include monetary terms, but “there’s just no way to know,” he said.

Each side in the litigation faced “tremendous uncertainty,” said Kenneth Weatherwax, a patent lawyer at Lowenstein & Weatherwax LLP, who was not involved in the litigation.

“This settlement removes uncertainty and they both continue business as usual,” Weatherwax said in an interview.

The trial focused on the two companies’ inventions related to optical transport network systems, a key technology that enables the rapid transmission of large amounts of data. Each side had accused the other of using patented inventions without licensing the technology.

Huawei had argued that Verizon was infringing three patents, a small fraction of the portfolio it says Verizon needs to license. Verizon denied infringing the patents and said they are invalid.

Huawei said its three patents in the case are critical components of the International Telecommunication Union’s G.709 industry standard for the networks, which Verizon uses. Because the patents are declared essential to the standard, Huawei is required to license them on “reasonable and non-discriminatory terms.”

Verizon claimed Huawei breached that contractual obligation by demanding an unfairly high royalty rate, and accused the Chinese company of unfair competition by defrauding the standard-setting board.

Verizon’s two patents are for a way to measure how long it takes for data to transfer in a network. They also are used in the optical networks, though not considered essential to the industry standard.

It was to be the first of two trials in lawsuits Huawei filed last year against Verizon. The second trial, over Huawei patents for network infrastructure, including routers, and Verizon’s Smart Family and One Talk applications, had been scheduled for October in Waco, Texas.

The settlement earlier was reported by Reuters.

The cases are Huawei Technologies Co. v Verizon Communications Inc., 20-30, U.S. District Court for the Eastern District of Texas (Marshall), and Huawei v. Verizon, 20-90, U.S. District Court for the Western District of Texas (Waco).

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.