Huawei, Microsoft Negotiating Patent Deal

Huawei, Microsoft Negotiating Patent Deal

Huawei discussing a licensing deal with Microsoft over the use of Android software, and may end up paying the software maker millions in patent royalty fees as it expands worldwide.

Huawei Chief Marketing Officer Victor Xu confirmed discussions are in progress, though he insists his company can defend itself in a patent lawsuit, if discussions should come to that.

“We always respect the intellectual property of key companies,” Xu said. “At the moment we have more than 65,000 patents and we have enough instruments to protect our interests.”

Despite having its own stockpile of patents, Huawei may not have enough power to fight back against Microsoft, which has been targeting Android phone makers worldwide as the Android OS includes more phones.

Microsoft contends the Android OS infringes on patents it owns, and moves to bring lawsuits against companies unless they agree to property license settlements.

Those settlements have cost companies millions. HTC pays Microsoft $5 per Android device. Samsung was able to bargain Microsoft down from its demands for $15 per phone to $10 a phone, under the condition that it comes out with a Windows Phone.

A licensing deal with Huawei may be lucrative for Microsoft. The Chinese company is not yet well known in the U.S., but it is the world’s second-biggest network and telecom equipment supplier. Its products are used in 140 countries, according to the BBC, and many analysts believe it may soon take over Ericsson, particularly since the Swedish company recently parted ways with Sony.

Huawei is also planning aggressive growth over the next three years. It is expected to expand into the U.S., Japan and India next year, and then worldwide in 2013.

The Chinese company has picked the U.K. as its international launch point and is forecasting rapid growth, which may mean billions for Microsoft if a licensing agreement is made.

“Over the next three years we are aiming to be in the top five smartphone makers, and in the top three in the next five years,” said Xu. “We have established very aggressive targets in the market.”

Huawei is building three design centers to expand its operations. The first will be in London, concentrating on the European market.

The initial lineup includes the Huawei Blaze and Vision smartphones and a seven-inch MediaPad tablet. These Android-powered devices are targeted toward the lower-end market, but the company is betting they’ll reap big profits from them. Any profits may have to be shared with Microsoft, because of their past success on claiming patent infringement against other companies that use the Android OS in their devices.

While Microsoft has been known to threaten Android phone makers with bans if they don’t work out agreements, a product ban would not benefit Microsoft nearly as much as a lucrative licensing agreement, so that threat does not normally go into effect.

Even though Huawei says it can defend itself, facing a lawsuit just as it plans to expand worldwide may hamper its momentum, so Microsoft likely will have yet another licensing partner as use of open-source Android continues to grow.

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