Netgear accuses of Huawei of extortion and racketeering in patent dispute

The maker of Wi-Fi routers says the Chinese tech giant reneged on its commitments to license standard essential patents on reasonable and non-discriminatory terms to its competitors.

LOS ANGELES (CN) — Netgear, a California maker of Wi-Fi routers, is accusing Huawei of extortion and racketeering for refusing to license patents that are essential to Wi-Fi communications on reasonable and non-discriminatory terms, as it is required to do.

Netgear on Tuesday filed a complaint in Los Angeles federal court saying that the Chinese technology juggernaut has reneged on its commitments to the Institute of Electrical and Electronics Engineers, which develops global standards for electronic communications. The standards are crucial for equipment from different companies to communicate with each other.

Under these commitments, when a company's patented technology is incorporated into a worldwide standard adopted by the industry at large, the company is required to license these so-called standard essential patents to competitors at reasonable and non-discriminatory, otherwise known as RAND, terms.

According to Netgear, however, Huawei has refused to do so since it started in 2020 to accuse the California company of infringing its Wi-Fi patents and demanded that it stop making and selling Wi-Fi-enabled products that infringe the patents.

Huawei, Netgear says, has been seeking "grossly excessive or supracompetitive licensing rates on a 'take it or leave it' and 'all or nothing' approach [...] under the coercive threat of litigation and injunctions."

As part of this strategy, the Chinese company has filed legal actions against Netgear in Europe, China and the U.S. Patent Office to enforce its patents, according to the complaint.

Huawei's refusal to engage in good faith negotiations for a license of its standard essential technology on RAND terms, Netgear claims, is part of the company's strategy to monetize its extensive patent portfolio to make up for lost revenue after many countries, including the U.S., banned its telecommunications equipment because of national security concerns.

"By misappropriating intellectual property rights, including by fraudulent means of enjoining or excluding others from practicing the Wi-Fi or other standards or demanding exorbitant and unreasonable licensing terms to drive up costs for competitors, Huawei can extort money and value from competitors and control and dominate the market for Wi-Fi and other technology worldwide," Netgear said in the complaint.

Representatives of Huawei did not immediately respond to a request for comment Tuesday night.

Former President Donald Trump, claiming the company's telecom equipment could by used by China for espionage, barred Huawei from the U.S. market, pressured allies to shun its networking gear and imposed a succession of escalating sanctions including cutting off access to vital components.

Sales of Huawei's smartphones plunged in 2020 as a result of the U.S. sanctions on its suppliers, 

Huawei repeatedly denied the allegations, saying the U.S. government had never produced evidence of the charge and suggesting the moves were motivated more by national economic competition in the tech field.

Federal prosecutors in Brooklyn, New York, in 2020 accused Huawei of a decades-long effort to misappropriate intellectual property, including from U.S. companies, to grow and operate its business.

The Netgear lawsuit accuses Huawei of antitrust monopolization, antitrust attempted monopolization, civil RICO violations, breach of contract and fraud, among other claims. It seeks actual and treble damages as well as punitive damages.

The company is represented by Alan Block, Blair Jacobs, Christina Ondrick, John Holley, Elizabeth Bernard, Arvind Jairam and Stuart McCommas of McKool Smith.