BACKGROUND ARTICLE
Although many consumers and industries are looking forward to the introduction of the 5G network, it does appear to be up in the air again for the time being. This has everything to do with the patents on 5G technologies held by Chinese company Huawei. Although the telecoms manufacturer invested heavily in the development of 5G, it may not be able to sell its products because of international trade tensions. As a result, it may look for other ways to recoup its investments. It might decide to do so through its patents, which competitors are not allowed to infringe, for instance. I feel that this is going to have a major impact on the telecoms market.
FRAND
Companies in the telecoms sector have been working together on the development of telecoms standards such as 2G, 3G and 4G ever since the first mobile networks. It is in their joint interest to have a common standard, as this makes it possible for products from different manufacturers to all work within the same network.
Every company makes inventions on which it applies for patents and then grants licences to its competitors. This has been a workable situation for many years thanks to umbrella organisations such as ETSI, the European Telecommunications Standards Institute, and similar organisations in other regions. They all work together as part of the 3GPP, the 3rd Generation Partnership Project. Companies participating in this project have to offer each other licences based on the FRAND principle: fair, reasonable, and non-discriminatory. Three fine principles, which in the case of 5G will come under pressure as a result of various developments.
Investments and Trade War
First of all, Huawei, which is a member of the 3GPP, has specifically focused on the development 5G technologies in recent years. It hopes to obtain a lot of patents on these technologies in order to improve its competitive position. It sees 5G as a way of becoming a leading player in the market.
However, a trade war has now broken out between China and the US. President Trump wants to keep Huawei out of the American market and is putting pressure on the UK to do the same. Although it is undoubtedly a thorn in his side that 5G technologies are now largely in the hands of Chinese and European companies, he mainly relies on reports that Huawei's technologies are not watertight. They allegedly give the manufacturer, and possibly even the Chinese authorities, access to user information. Needless to say, this potential data breach is a cause for concern, but in my opinion the political game surrounding it also raises doubts about the future of 5G.
Upsetting the balance
It is still unclear which patent applications filed by Huawei are going to be granted and to what extent these patents are crucial for the development of 5G. However, it is to be expected that some of these are in fact essential for the network to operate. This will give Huawei patent rights that it can use if it is actually excluded from large Western markets. This could upset the balance between the parties that are working together on the 5G standard.
These parties normally grant licences because they need each other. For example, a Samsung phone uses a technology patented by Ericsson, and vice versa. This is a workable situation for all parties concerned.
If Western countries exclude Huawei, the Chinese will have to withdraw from the Western market for 5G products. However, they will still own the intellectual property rights that their competitors need to commercialise the 5G network and 5G services. These competitors are therefore dependent on Huawei's licences, but Huawei will become less dependent on its competitors' licences. The situation will then no longer be workable for all concerned. But what will this mean for 5G?
A complicated power game
The definitive introduction of 5G depends on how the international power game develops. One option would be for Huawei to actually stop making products for the Western market and only license its technologies instead. In that case it would probably make those licences considerably more expensive than usual in order to recoup the investments made. This would make 5G products much more expensive than planned and desired.
Competitors may then decide to start innovating around Huawei's patents in order to roll out a new 5G network. In this way, they are not infringing. The White House is already taking steps in that direction. It wants American companies to develop an alternative that runs entirely on software developed in the US. If a scenario like this goes ahead, it will greatly delay the introduction of 5G. Development, manufacture, standardisation and patent processes can take years.
It is quite conceivable that lawsuits will follow about the patent situation between companies in the telecoms market. There is so much money and power involved that all major players would want to stand up for themselves. Such lawsuits will primarily be focused on the validity of patents and infringements: does a competitor, who decides to enter the market after all, infringe Huawei's patents or not? The competitor will challenge Huawei on the basis of the FRAND principle: is Huawei really fair, reasonable and non-discriminatory? This promises to become a complicated power game.
The power of intellectual property
It is already possible to conclude that the introduction of 5G on a large, international scale is a lot less obvious than it seems to a lot of people. There is a complex field of tension. On the one hand there are companies in bodies such as ETSI, and on the other there are various political world powers. This field of tension is not likely to disappear in the short term.
It is already a well-known fact that there are problems in the field of security and trade policies. However, this patent issue could end up playing an even greater role in the future of 5G. Just how hard this game will be played, will depend on the patents that are actually granted. ETSI makes a distinction between essential and non-essential patents. The more crucial a patent is to the functioning of 5G, the more valuable it is going to be in this battle. The real value of Huawei's patent portfolio will become apparent in the coming years when it becomes clear which pending applications are going to be granted.
It is not unrealistic to assume that a fierce battle will follow, in which the world's largest telecoms manufacturers and governments will be intertwined in a bizarre concoction of interests. Time will tell how fair, reasonable and non-discriminatory that is going to be. I find it fascinating to see how far the power of tactically used intellectual property rights can reach.
