As the earliest witness in FTC v. Gaotong court, Huawei and Lenovos testimony attracted great attention. According to two testimonies from the two companies obtained by the First Financial Journalist, Yu Nanfen, Huaweis 12-year legal director, gave a very strong testimony.
In his testimony, Yu Nanfen confirmed that Qualcomm did refuse or threaten to refuse to supply chips to Huawei. She mentioned that HUAWEI had wanted the TDSCDMA chip of Qualcomm three module, but Qualcomm refused to provide it to China unless the two sides signed a patent agreement.
Either terminate or extend the agreement
In his testimony, Yu Nanfen said Huawei extended its subscription patent agreement for CDMA components in 2013 to avoid being interrupted by Qualcomm. She confirmed that Qualcomms threat to Huawei was expressed by Tony Blevins, vice president of purchasing at Apple, who repeatedly referred to him as Eric Reifschneider, then vice president of Qualcomms technology licensing business, in a court hearing on Friday.
I remember saying that if we dont extend the licensing agreement for CDMA, they will stop supplying chips to us, but this will disrupt Huaweis business. Yu Nanfen said.
In the court hearing, the FTC showed Huawei witnesses a number of intra-enterprise mails as evidence. In response to the FTCs question about Huaweis intention to expire the patent licensing agreement, Yu Nanfen said: It is the industry practice to discuss an alternative agreement when an agreement expires, not just for Qualcomm. But Qualcomm never gives us the time to think about it. That is to say, if we need to think about renegotiating the agreement, they will stop supplying us, so they only give us two choices, either terminating the agreement or extending it.
Asked why Huawei did not communicate with Mr. Reifschneider of Qualcomm to find out other alternatives to avoid stopping the supply of chips, Yu Nanfen said that according to the long-term communication between Huawei and Qualcomm and the views expressed orally by Qualcomm, Huawei believed that it was a threat to Qualcomm, so it did not seek other solutions, but agreed to sign any form of patents. Authorization agreement.
FTC questioned the signing of another agreement between Huawei and Qualcomm on WCDMA and LTE patent licensing. The two sides signed the agreement in mid-December 2014, but in fact, the agreement has been implemented since July 1, 2014. The FTC questioned Nanfen about why Huawei fulfilled the agreement in advance.
Yu Nanfen said Huawei had no choice. First of all, we have a dependence on and demand for Qualcomm chips. Secondly, we already have a legally valid agreement for the previous WCDMA, and the agreement has no deadline, which means that we will pay the patent fee permanently, she said. She added that any agreement with Qualcomm would include LTE-related products.
In addition, Yu Nanfen pointed out that in another 2003 Qualcomm and Huawei patent agreement on ordering CDMA components, the main clauses stipulate Huaweis purchase commitment to pay for the patents required to purchase Qualcomm chips. That is to say, under this agreement, Huawei must purchase all Qualcomms CDMA chips. If one chip comes from another supplier, then it must purchase all Qualcomms CDMA chips. Higher patent rates will be paid to Qualcomm. This clause still applies today.
Qualcomm refuses to grant right exhaustion patents to any manufacturer
Finally, in another agreement on the definition of rights and obligations of both parties to patent protection, Huawei pointed out that Qualcomm intends to exclude a specific chip from the agreement and does not include Qualcomm patent licensing. Huawei must sign a patent licensing agreement with Qualcomm through another independent agreement. Huawei believes that it is a deliberate measure taken by Qualcomm to avoid the suspicion of exhaustion.
In response, Mueller told First Financial Journalist: Qualcomm is afraid of exhaustion of power. One is that if Qualcomm sells a chip, it means that all patents on the chip will no longer be charged a patent fee. But Qualcomm forces customers to obtain these patents, which is the main reason why Apple challenges it. Secondly, if Qualcomm grants patents to other chip manufacturers, then Qualcomm cannot impose patent licensing fees on their customers. Exhaustion of rights means that you have been rewarded by sales or patent licensing and cant profit from it again.
In Nanfens testimony, she mentioned that Huawei wanted Qualcomm to authorize a patent that had been exhausted, but it was rejected by Qualcomm. The reason is that Qualcomm does not want Haise to be able to supply chips, thus affecting the patent licensing fees charged by Qualcomm to Huawei Haise smartphone equipment customers.
Mueller told First Financial Journalist that not only Huawei, but also Samsung, MediaCorp and Intel all want Qualcomms authorization to exhaust its rights. But no matter who asks for it, Qualcomm wont give it. Mueller said.
In the transcript of Ira Blumberg, Lenovos vice president of intellectual property, he also made clear that Qualcomms patent fees were overpriced. Blumberg says Nokia, Ericsson and InterDigital are priced much lower. He also mentioned that passing high would threaten to stop supplying to customers who questioned their charging standards.
Blumberg also pointed his finger at Reifschneider, a former senior executive of Qualcomm. Lenovo expressed to Qualcomms team its wish to consider whether to terminate the patent licensing agreement. Mr. Reifschneider was very calm and told us that we could do whatever we wanted. If we decided, we would not be able to buy chips from Qualcomm anymore.
Blumberg was shocked by Reifschneiders contempt. I asked a few more questions to make sure he meant it, but thats what he meant. Im sure its Qualcomms policy that you dont get their chips unless you sign a patent licensing agreement, Blumberg said.
Blumberg also mentioned in his testimony that Qualcomm and Unicom had signed a patent licensing agreement and stipulated a clause that Unicom could only sell Qualcomm chips to its customers, which meant that if Lenovo terminated its patent licensing agreement with Qualcomm, it might also be subject to Qualcomm and could not get chips from Unicom, which would cover all high and low end products.
Source: Zhao Yaping_NN9005, Responsible Editor of the First Finance and Economics Network