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Can Sentaor Rubio really block Huawei from pursuing patent infringement against Verizon?

Zachary Silbersher

It’s rare that patents make the mainstream news, and even more rare that one company’s allegation of patent infringement touches—even remotely—on issues of national security.  Yet, that appears to be happening with U.S. Senator Marco Rubio’s proposed legislation to block Huawei from seeking relief for infringement of its granted U.S. patents.  There isn’t really much precedent for legislating that a certain set of patents are unenforceable.  Can this really happen?

 The background is already known to most readers.  Huawei is technology powerhouse in China, but has been placed on an effective trade blacklist in the US.  That has pushed unrelated companies to cut ties with Huawei, which will likely hurt Huawei’s bottom line.  The blacklisting of Huawei in the U.S. could cost the company upwards of $30 billion

One way that Huawei has responded is by issuing a demand for $1 billion against Verizon for a license to 230 patents owned by Huawei.  As Gaston Kroub pointed out, you don’t make a billion dollar demand for patent infringement without expecting the answer will be, “No.”  Huawei is almost certainly prepared to make good on its threat to pursue major litigation in an effort to hobble its U.S. competitor, and correspondingly, strike back at the blacklist imposed upon it by the current U.S. administration.

Huawei’s patent threat against Verizon, thus, appears on its face to suggest it is unwilling to go quietly.  Threatening patent infringement against one of its U.S. competitor appears to be an effort to gain leverage.  Turn the screws on a major U.S. telecommunications company, and that will presumably put pressure back onto the administration.

And, likewise, Senator Rubio’s proposed legislation smacks of rhetorical posturing within the broader context of economic muscle-flexing.  Rubio appears to be saying, If you threaten our telecommunications network with patents, we’ll just neuter your patents. 

But what are the implications of Senator Rubio’s legislation to unilaterally deprive a patent-holder from enforcing its own patents?  The first question is whether Senator Rubio’s proposal constitutional.  The President and Congress typically have tremendous powers when it comes to acting in the name of national security.  We are all aware of orders issued by the current administration in the name of national security, some of which were upheld by the Supreme Court despite tremendous controversy.

Here, the case for national security is a little bit lopsided.  If the concern is that Huawei’s equipment sold into the U.S. may be furtively spying on America, that may be one thing. But Huawei’s allegations of patent infringement would presumably have more to do with Verizon’s equipment rather than Huawei’s.

But what about an injunction?  Huawei’s threat of patent infringement against Verizon’s telecommunications equipment could theoretically pose a significant economic threat to Verizon.  If Huawei proves infringement at trial, it will most certainly seek an injunction.  Shutting down Verizon’s network could theoretically be irreparable for Verizon. 

Yet, an injunction against Verizon’s network could also pose security threats to the United States.  Although Verizon may not necessarily be a utility, given the limited number of networks, the damage and risk to the country if Verizon were to shut down is not hard to see.

On the other hand, the likelihood of an injunction of that magnitude against Verizon is very low.  For one thing, Huawei is unlikely to be practicing its patents sufficiently in America to warrant an injunction under eBay.   

But more importantly, if the damage to the country—not just to Verizon—were really that significant based on an injunction against Verizon, then it is unlikely that any injunction will granted.  Judges have wide latitude when granting or not granting injunctions.  The public interest in the consequences of an injunction is one of the principal factors considered by courts.  In short, the greater Huawei’s patent infringement allegations implicate Verizon’s network, the less likely a court will shut down Verizon’s network.

For those in the patent community, there looms a bigger concern over the consequences of Senator Rubio’s proposed legislation for the future of patents as a valuable asset.  IAM-Media recently published an interview with Kevin Rivette that suggested that patents may be poised to once again take up the mantle of a valuable asset. 

China is going to play a significant role in patents being recognized once again as a valuable asset.  Numerous U.S. companies already attempt to evade patent-infringement liability by off-shoring sales and manufacturing, which indirectly mitigates the value of U.S. patents.  Moreover, sales to the Chinese market are increasingly hitting the bottom line of companies in a way that makes enforcement of IP in Asia necessary. 

 For patents to stand up again, foreigners will need to expect that Chinese foreign counterpart patents can be enforced in that jurisdiction, and foreign patent-holders will get a fair shake.  Senator Rubio’s proposed legislation smacks of what all patent-holders are afraid of, namely, being discriminated against in a Chinese patent court for being an American patent-holder.  Many will argue that Huawei is an exception, and it is unlikely Senator Rubio is too concerned about shifting winds within the patent climate.