Former partners resolve IP dispute over sale to Nokia

China's leading telecom equipment company Huawei Technologies announced on April 13 that it has reached a settlement with its former partner Motorola Solutions in a far-reaching dispute over intellectual property.

Industry analysts estimate Huawei will now receive about $200 million in compensation for its designs as part of the sale of Motorola Solutions to Finland-headquartered Nokia Siemens Networks (NSN) announced last July.

Confidential data

The settlement follows a court ruling in February that banned Motorola Solutions from transferring Huawei's confidential technical information to NSN.

The Motorola-Huawei partnership began in 2000 making wireless network equipment sold under the Motorola brand, but turned sour in recent years with both sides filing lawsuits over intellectual property rights and trade secrets.

Huawei said that while the partnership was underway it provided products and confidential technologies developed by its team of more than 10,000 engineers, for which Motorola paid $880 million to Huawei in licensing fees.

"Throughout our decade-long relationship with Motorola Solutions, Huawei contributed cutting-edge technology for use around the globe," said Guo Ping, vice-chairman of Huawei.

Motorola sued Huawei last July, alleging it stole trade secrets, and the Chinese firm followed with a suit in Motorola Solutions' home state of Illinois.

The court upheld Huawei's claim that its intellectual property was part of the sale to NSN.

"Huawei provided Motorola's experts and counsel with source code and millions of documents," Guo said.

"Huawei acted properly and aboveboard at all times, developing its products independently and without the use of any Motorola trade secrets."

Huawei would "suffer irreparable commercial damage if its proprietary commercial property and information is transferred to a third party", the company stated on its website.

"We regret that these disputes have occurred between our two companies," said Greg Brown, president and CEO of Motorola Solutions.

"After reviewing the facts, we decided to resolve these matters and return to our traditional relationship of confidence and trust. I am pleased that we can again focus on having a cooperative and productive relationship," Brown said.

Reshuffle for No 2

The sale of Motorola Solutions to NSN will enable the Finnish firm to surpass Huawei as the world's second-largest telecommunication equipment manufacturer following Swedish company Ericsson.

To comply with antimonopoly regulations, Motorola Solutions must gain approval from the governments of nine countries and regions where it has assets, including the United States, the European Union, China, Brazil and Japan.

Still under review

Eight have approved the deal, but the application is still under review by China's Ministry of Commerce.

Few foreign applications for mergers and acquisitions have failed approval in China, and with a settlement now reached, the ministry is likely to announce a positive result within two months, an insider said.

"With the case settled and the misunderstandings put to rest, Huawei is pleased to move forward with its efforts to provide innovative solutions to its customers," Guo said.

Huawei's defense sets a good example for other ambitious Chinese companies that are ready to enter the global market, experts said.

"The purchase of Motorola Solutions will help NSN be better positioned to compete with growing Chinese rivals like Huawei and ZTE," said Yang Qun, analyst with Shenzhen Warring Strategy Public Relations Consultants.

"That shows Chinese telecommunications equipment manufacturers with world-level technology and marketing prowess poise a challenge to global giants.

"Only by mastering the core technologies can a company have an advantageous position in the market," he added.

Motorola Solutions lowered the price NSN will pay for its unit from $1.2 billion to $975 million. Analysts think the $225 million difference will possibly be used as patent fee to Huawei.

The deal will close on April 29 if it gains approval from the Ministry of Commerce.

China Daily

(China Daily 04/20/2011 page17)