In U.S. court filing that sheds light on UPC and German cases, Huawei claims to have been “repeatedly ghosted by Netgear”

Context: On Wednesday, Huawei won a Unified Patent Court (UPC) injunction against router maker Netgear over a WiFi 6 standard-essential patent (SEP) (December 18, 2024 ip fray article). The court’s reasoning indicates that there would have been multiple ways of arriving at the conclusion that Huawei discharged its FRAND (fair, reasonable and non-discriminatory) licensing obligation while Netgear did not (December 18, 2024 ip fray article). Another injunction looms large on January 9, 2024, and to the extent that the UPC injunction comes with a carve-out for patent exhaustion, Netgear presumably will not benefit from it (December 19, 2024 ip fray article).

What’s new: On Friday (December 20), Huawei’s U.S. lawyers filed their opposition brief to Netgear’s motion to bifurcate the proceedings the router maker had started in the Central District of California. Apparently Netgear was greatly unresponsive, dragging the process out over the course of a couple of years.

Direct impact: What the new court filing says about the negotiations between Huawei and Netgear makes it hard to imagine that the case in German national court will result in anything but another injunction.

Wider ramifications: In the debate over SEP policy, one side argues with the risk of hold-up and the other with that of hold-out. Publicly accessible court documents (judgments, orders or pleadings) can also serve to inform policy makers of real-world issues.

First, here is Huawei’s opposition brief:

24-12-20 Huawei opp bifurcation Download

The following timeline chart shows that Huawei first reached out to Netgear in July 2020, and waited until March 2022 before filing its first patent infringement lawsuit in the Dusseldorf Regional Court:

Interestingly, the filing with the UPC was made more than a year later (as the UPC went into operation and accepted filings only as of June 1, 2023), yet resulted in the first Huawei v. Netgear injunction.

The reason why the history of negotiations comes up is because Netgear’s proposed bifurcation would separate the FRAND rate-setting part from an assessment of the parties’ conduct. Huawei argues that Netgear’s alleged hold-out tactics should be fully considered. Also, there would be an additional burden resulting from the need to present some of the same evidence twice.

Huawei alleges that “Netgear’s negotiation conduct—including ignoring Huawei’s seven [emphasis in original] letters over nearly two years asking Netgear to accept a license to Huawei’s Wi-Fi SEPs and responding to Huawei only [in April 2022] after Huawei finally filed suit—is a textbook example of patent holdout”. And “for nearly two years [emphasis i original] before Huawei filed suit, Netgear stonewalled Huawei’s repeated attempts to engage Netgear in licensing negotiations”.

Elsewhere, the filing says:

Having been repeatedly ghosted by Netgear, Huawei sued Netgear on March 2, 2022, in Düsseldorf, Germany for infringing two Wi-Fi 6 patents.

In light of Rule 11, it is inconceivable that Huawei made those allegations up. This is how the filing describes the communications Netgear chose to ignore:

On July 9, 2020, Huawei first notified Netgear of Netgear’s infringement.
Huawei explained that its letter served “as a formal notice letter of infringement of Huawei’s standard essential patents to 802.11 series standards (‘Wi-Fi Standards’) by Netgear’s products.” […] Huawei attached a 91-page list of “Exemplary Patents of Huawei” identifying by number roughly 1,800 Huawei patents from its Wi-Fi portfolio. […] Netgear did not respond.

On August 14, 2020, Huawei followed up with a second letter “kindly remind[ing]” Netgear that a license was required for “any NETGEAR products compliant with Wi-Fi Standards.” […] As Huawei noted, “In compliance with our commitment to IEEE, we are willing to license our Wi-Fi patent portfolio on fair, reasonable and non-discriminatory terms.” […] Netgear did not respond.

On September 8, 2020, Huawei sent a third letter urging Netgear to “please contact us and begin licensing discussions as soon as possible” if it was “willing to take a license under Huawei’s Wi-Fi patent portfolio.” […] Netgear did not respond.

On October 28, 2020, Huawei wrote a fourth letter stating it had “sufficiently demonstrated” its willingness “to offer NETGEAR a license on fair and reasonable terms and conditions.” […] Netgear’s
“total silence,” Huawei said, “could only be considered” a “rejection of our invitation and offer.” […] Netgear did not respond.

On December 30, 2020, Huawei made a fifth attempt to engage Netgear, writing: “We have exhausted the commercially reasonable ways of notifying NETGEAR of its infringement of Huawei’s Wi-Fi patent portfolio. Apparently, NETGEAR refuses to enter into licensing discussions with Huawei.” […] Netgear again did not respond.

After nearly a year’s pause, Huawei contacted Netgear a sixth time on November 22, 2021, stating matter-of-factly: “We sent five letters in 2020 inviting Netgear to engage with Huawei discussing license matters with regard to Huawei’s Wi-Fi patent portfolio. We have not received any response so far.” […] Netgear did not respond.

Huawei tried a seventh and final time on January 11, 2022: “Please let us know before January 31, 2022 if Netgear is interested in obtaining a license under Huawei’s Wi-Fi . . . patent portfolio.” […] But January 31 came and went, and again Netgear did not respond.

There was no meaningful progress even after Huawei brought litigation, and between last year and earlier this year there were several occasions on which Huawei proposed mediation so as to reach an amicable resolution:

[…] Huawei suggested on September 1, 2023 that the parties resolve their disputes with a third-party mediator. […] But Huawei’s mediation overtures also went ignored, despite follow-ups on September 21, September 29, and October 17, 2023. […] On January 28, 2024, Huawei wrote Netgear again, noting that Netgear had left Huawei’s October 17, 2023 correspondence “entirely unanswered” and asking again whether Netgear was “committing to enter into mediation.” […] Netgear again did not respond. Instead, it filed this suit [the one in the Central District of California] the next day on January 29, 2024—three-and-a-half years after Huawei first contacted Netgear to discuss licensing of Huawei’s Wi-Fi SEPs.

Netgear points to Microsoft v. Motorola as the key precedent in the Ninth Circuit, but Microsoft filed its (F)RAND complaint in the Western District of Washington in 2010, within one day of receiving an outrageous royalty demand (2.25% of end-product price even if Microsoft provided the Windows operating system but did not make the device), and almost a year before Motorola Mobility brought the German SEP enforcement lawsuits (2011) that were enjoined by the U.S. court the following year (2012).

If you are interested in further information on what Huawei’s lawyers tell the U.S. court about the UPC and German proceedings, and/or if you find a machine translation to English of the redacted version of the UPC decision useful, here is a sworn declaration by Clifford Chance’s Dr. Tobias Hessel that was attached to Huawei’s opposition brief:

24-12-20 Ex. 2 Hessel diso Huawei opp bifurcation Download

By the way, there is a reference to an ip fray article in Huawei’s filing:

Huawei is indeed a rare case of a company that makes huge numbers of units of standard-implementing products, yet has an active outbound licensing program as well. But there are also other SEP holders with significant product and licensing businesses, such as network infrastructure makers Nokia and Ericsson or consumer electronics makers like Philips and LG. It is, of course, a question of degree: some companies may be much more interested in patent licensing revenues than in the potential effect of their positions in SEP litigation on the terms on which they have to license SEPs for their own products.