Protecting out-licensed IP from a competitor takeover – Huawei and Motorola

Just how far can you protect your IP once you’ve licensed it out? Here’s a shining example. What are your thoughts?

On January 24th, 2011, Huawei Technologies, Co., Ltd. (“Huawei”), a leader in providing next generation telecommunications network solutions for operators around the world, asked a U.S. District Court to prevent Motorola from illegally transferring Huawei’s intellectual property (IP) to Nokia Siemens Networks (“NSN”). Huawei took this action as NSN seeks to complete its US$1.2 billion acquisition of Motorola’s wireless network business.

In the complaint, Huawei stated that it had signed a series of agreements with Motorola from 2000 to 2007 and that under such agreements Huawei supplied Motorola with a variety of products and systems for resale to Motorola’s customers including GSM-standard and CDMA-standard mobile telephony switching equipment, Network Controller products, Universal Mobile Telecommunications Systems products, and further second-, third-, and fourth-generation technologies as well as mobile telephony products. The portfolio of products and services Huawei developed and provided for Motorola reached almost $38 million in 2006. Huawei claimed that the acquisition would lead to massive disclosure of the company’s confidential information to its competitor, NSN, resulting in irreparable harm. Huawei’s claims included trade secret misappropriation, copyright infringement and breach of contract. The court issued a temporary restraining order against the disclosure only days after receiving the complaint.

Some Chinese media sources have commented that Huawei took wise and quick action to protect its IP. Had Huawei applied for arbitration as its first line of action it would not have achieved such a prompt halt to the transfer of IP to NSN. The matter also indicates that Chinese companies are increasingly looking well beyond their own shores as part of their ongoing IP strategy.

Image credit: pamelaadam

2 Comments on “Protecting out-licensed IP from a competitor takeover – Huawei and Motorola

  1. This just shows the need to further tighten IP contracts to avoid surprises. This, however, may reduce the financial gain through IP deals. But you need to balance out with other incentives at the time of contract negotiations.

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    • Hi Naim, thanks for your comments. I agree with you. I think a well-designed strategy for licensing, licensee selection, confidential terms and limit of transfer to third parties will help the licensor and avoid him to see big surprise after the IP is licensed.

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