On October 8, 2012, the New York Times reported that the US House Intelligence Committee has accused Huawei Technologies and ZTE Inc. “of being arms of the [Chinese] government that had stolen intellectual property from American companies.
Envision IP reviewed Huawei and ZTE’s US patent portfolios, and compared them to the patent holdings of their US competitors Apple, Motorola Mobility, and Qualcomm. We focused on two indicators, among several, used to measure patent innovation – forward citation counts and patent issuance rates.
A forward citation is when a later-issued patent references a particular patent. The more times a particular patent is cited in the future by peer, competitor, and contemporary patents, this indicates the level of innovation of that patent. A higher average number of forward citations for a patent portfolio can also often indicate (though not conclusive) that the patent portfolio as a whole is fundamental to its industry.
The patent issuance rate is the percentage of filed patent applications which eventually issue into a patent for a company. A higher issuance rate indicates that a company more selectively files patent applications on technologies it strongly feels are innovative, novel, and unique. On the other hand, a low issuance rate can indicate that while a company files a large number of patent applications, many of their technologies are not truly novel.
Huawei Technologies, and its US subsidiary, Futurewei Technologies, Inc., own 1,532 US patents. Since 2001, Huawei has filed 5,053 US patent applications, giving it an issuance rate of about 30%. On average, its US patents have 1.2 forward citations per patent.
ZTE owns 186 US patents. Since 2001, ZTE has filed 1,511 US patent applications, giving it an issuance rate of about 12%. On average, its US patents also have about 1.2 forward citations per patent.
In comparison, Apple and Motorola Mobility’s patent portfolios on average have 16.5 forward citations per patent, and Qualcomm has 12.5 forward citations per patent. This indicates that these US companies may have much more innovative patent portfolios than Huawei and ZTE.
Additionally, Apple and Motorola Mobility have issuance rates of over 60%, and Qualcomm has an issuance rate of almost 45%. Compared with the much lower issuance rates of Huawei and ZTE, this indicates that these US companies place a higher emphasis on filing patent applications on technologies they believe are novel and innovative, rather than filing patent applications on incremental improvements of existing technology.
Both Huawei and ZTE were founded in the mid-to late 1980’s, however, these companies did not begin to aggressively file US patent applications until 2006. Up until 2005, Huawei owned 51 US patents, and ZTE only owned 3 US patents. Their US counterparts, however, had actively been filing US patent applications since their inceptions, with surges in filings starting in the late 1990’s and early 2000’s, consistent with the infancy of mobile and wireless communications.
The extremely low forward citation counts of Huawei and ZTE’s US patent portfolios as compared to Apple, Motorola Mobility, and Qualcomm’s US patents, and their relatively recent US patenting activity starting in 2006 indicates that Huawei and ZTE are attempting to improve on existing technologies already in the marketplace. Also, Huawei and ZTE have much lower issuance rates than these US counterparts, further indicating the lack of novelty of its applied-for patents.
Whether these Chinese competitors “had stolen intellectual property from American companies” remains to be seen. However our analysis does show that Huawei and ZTE appear to be expanding on existing technology owned by US competitors rather than developing innovative technologies via their own R&D efforts.