Reports emerged today that Huawei has demanded over $1 billion in patent license payments from Verizon for its cellular network patents.
As I wrote in April, Huawei has the potential to abuse its strong position in cellular network patents. As required by international agreements, the U.S. patent system doesn’t discriminate between domestic and foreign patent holders, meaning that anything a U.S. patent holder can do, a foreign holder—like Huawei—is equally permitted to do.
Rules that make it easy to obtain and assert overbroad patents also enable their assertion by foreign companies. This is why it’s important to make sure that U.S. patent laws are balanced, producing the kind of well-defined, clear patents that protect innovation without enabling abusive litigation.
Witnesses at the recent § 101 hearings discussed concerns about research and development fleeing to China, but that concern is overblown. A Chinese company is already equally capable of and incentivized to obtain U.S. patents and access the U.S. market, and there’s no current advantage generated by the U.S. patent system for research conducted in the U.S. This point is well-evidenced by the fact that patents assigned to foreign applicants have been a significant portion of all U.S. patents for quite some time [1][2][3].
In fact, a patent system that makes it easy to obtain over-broad and abusive patents disincentivizes conducting R&D in the U.S., as you would potentially be liable for worldwide sales for infringing during development, rather than only for your U.S. sales.
And a patent system that makes it easy to assert vague patents or to use patents to maintain an anti-competitive position in the market can be used for that purpose by a foreign entity just as well as an American one.
As the Senate continues to discuss reforms to § 101, it’s worth keeping in mind that a flawed U.S. patent system can be abused by anyone, regardless of where in the world their corporation is registered.
