Chinese telecom gear giant wants U.S. wireless giant to license its patent portfolio, further escalating tensions

By Sarah Krouse
Updated June 12, 2019 12:06 p.m. ET

Huawei Technologies Co. has told Verizon Communications Inc. that the carrier should pay licensing fees for more than 200 of its patents, according to people familiar with the matter, further escalating tensions between the Chinese company and the U.S.

A Huawei intellectual property licensing executive wrote to the U.S. wireless carrier in February, telling Verizon it should pay to “solve the patent licensing issue,” according to the people. Verizon isn’t a Huawei customer.

“We trust that you will see the benefit of taking a license to our patent portfolio,” the letter said, according to the people. The patents at issue span core network equipment, wireline infrastructure and internet-of-things technology, one of the people said, and the matter could impact several of Verizon’s vendors.

Huawei’s letter came amid extensive efforts by American policy makers and the Trump administration to limit the company’s global reach.

Representatives for Huawei and Verizon met last week in New York to discuss some of the patents at issue, one of the people said.

“We have no comment regarding this specific issue because it’s a potential legal matter. However, these issues are larger than just Verizon,” a Verizon spokesman said. “Given the broader geopolitical context, any issue involving Huawei has implications for our entire industry and also raise national and international concerns.”

A Huawei spokesman had no immediate comment.

The U.S. has said Huawei’s growing clout poses a national security threat that could disrupt communications or facilitate spying. The telecommunications equipment-maker has vehemently denied it would ever do so.

Verizon and other large U.S. carriers have for years been barred from using Huawei products in their domestic wireless networks and, more recently, U.S. officials encouraged allies to eschew the company’s gear.

U.S. national security officials have told senior executives at wireless carriers they are concerned the continued strengthening of the world’s biggest telecom gear maker could weaken smaller rivals such as Nokia Corp. and Ericsson AB. That, in turn, could limit choices for large carriers buying radio-access-network gear such as base stations and antennas.

Those parts are critical to the development of next-generation 5G networks.

Carriers around the world are rushing to roll out those faster wireless networks. Governments have sought ways to give their countries an advantage in that infrastructure race.

Huawei’s rival gear makers have long alleged that it has benefited from copying and stealing intellectual property. The Wall Street Journal has reported that the company’s culture has blurred the boundary between competitive achievement and ethically questionable methods of gaining ground.

Huawei has said it is committed to complying with laws around the world and has a track record of innovation.

There are signs the U.S. campaign is beginning to weigh on Huawei, which sells core network components as well as consumer technology like phones and laptops.

It scrapped the launch of a new laptop and paused production at its personal-computer business because of restrictions on buying U.S. components, the Journal reported Wednesday.

Last month, President Trump signed an executive order allowing the U.S. to ban telecommunications network gear and services from “foreign adversaries,” without naming Huawei. The Commerce Department banned American companies from selling components to Huawei, but granted suppliers 90-day temporary exemptions.