ICTs & Innovation: The view from a top PCT filer

By Ken Hu, Rotating CEO and Deputy Chairman of Huawei

At the beginning of the last century, Austrian economist Joseph Alois Schumpeter pointed out that, "the function of the entrepreneur is innovation", a view that is still widely held by many today. At Huawei, we firmly believe that we have the responsibility and capability to contribute to economic growth and social progress through continued innovation.

At present, openness and cooperation are two crucial characteristics that drive innovation. Enterprises need to obtain intellectual capacity globally, achieving success through cooperation with global value chain players. Open innovation is dependent upon an institutional environment that nurtures, protects, and spurs innovation continuously. The elements of such an environment include:

First, markets that encourage open and fair trade practices and promote competition. These are the true engines of innovation that will drive industrial and social development.

Two fundamental factors have contributed to the rapid economic development witnessed in the past 200 years: First is the advancement of technologies that significantly boosted productivity; second is the establishment of free trade that facilitated global resource reallocation and industry restructuring, maximizing the utilization of scientific and technological innovations. China's exponential economic growth in the past three decades is also attributable to these two factors. Huawei, in particular, is acutely aware of the importance of openness (open market and free trade practices continuing to be the main drivers of global economic growth) as we operate in the information and communications technology (ICT) industry. When looking at the history of communications technology, an open system always attracts more industry support and achieves greater success than a closed one. Consider, for example, the success of the Global System for Mobile Communications (GSM) of the past and today's Long-Term Evolution (LTE) networks. A closed approach tends to lead to limited success and often eventual withdrawal from the market.

Second, an effective system to protect intellectual property rights (IPRs) must be in place before true innovation can surface.

To protect IPRs is to safeguard innovation. Scientific and technological innovation requires significant investment in terms of time, funds, and intellectual capacity. Successful innovators should own the IPRs of the results of their innovative work and benefit from the associated rewards. Companies and individuals can be motivated to pursue innovative activity and invest more in this field if their results are protected appropriately. More than three hundred years have passed since the world's first IPR protection system was created. Though a latecomer, China has made remarkable progress in developing its IPR protection systems over the past three decades. This is a major reason why more and more innovative companies are emerging in China.

Third, innovations rely on long-term investments in infrastructure.

Investment in education provides the intellectual resources for innovative research. Construction of infrastructure, particularly ICT infrastructure, offers hardware that supports platforms for innovation.

Huawei’s commitment to innovation

Huawei's growth can be attributed to our willingness to compete in global markets, and more importantly, to our customer-centric innovation strategies. Meeting customer needs is the starting point of our innovative efforts and reflects the value of our innovations. We place innovation at the core of our operating strategy. By capitalizing on optimal innovation mechanisms, Huawei continuously develops future-oriented technological advantages and capacity to better meet customer needs at faster speeds and lower costs. Our approach focuses on 5 main areas:

Huawei’s headquarters in Shenzen, Guandong Province, China. Huawei’s significant
investment in R&D – it invests 10 percent of annual revenue in R&D every year – has
translated into a rich patent portfolio. The company currently holds some
30,000 patents around the world and is one of the top users of WIPO’s
Patent Cooperation Treaty (PCT).

• Investment in research and development (R&D) on an ongoing basis: Since Huawei was founded in 1997 we have invested 10% of annual revenue in R&D every year. Of our 150,000 employees, more than 70,000 are directly engaged in R&D. In 2012, our R&D investment totaled US$4.8 billion, and the figure for the past decade amounts to US$19 billion. Our investment in R&D is a long-term commitment that will remain.
• Emphasis on fundamental technology innovations: Huawei categorizes innovations into three types: application innovations, product innovations, and fundamental technology innovations. What is important for us is to not only focus on application and product innovations that can be seen and experienced by customers, but also to emphasize fundamental technology innovations, which we believe are crucial to the success of the other two types of innovations even though they are often unseen.
• Integration of intellectual resources on a global scale: Our world is information-heavy, and economic and technological globalization is continually advancing. Against this backdrop, we have to focus our huge R&D investments on integrating resources globally with the highest possible efficiency. Huawei has set up 16 independent R&D centers around the globe, spanning North America, Europe, and the Asia Pacific. This enables Huawei to integrate the best intellectual resources from around the world and to develop innovation capabilities globally.
• Remaining open to cooperate with global partners: In the globalized era, the significance of openness and cooperation to innovation is clear. In terms of R&D, Huawei engages in cooperation initiatives at multiple levels. We cooperate with industry partners, organizations such as IBM, Intel as well as local government and customers in different countries.
• Our R&D strategy puts customers first as it is their needs that direct our future technology innovations. Joint innovation with customers is also an important part of Huawei’s commitment to openness and cooperation. So far, Huawei has set up over 20 joint innovation centers with customers around the world, which have already created substantial value.
• Respecting and protecting innovative results: Huawei plays an active role in protecting IPRs in the industry. We respect the IPRs of industry partners and use those of our industry partners through cross-licensing and fee payments to accelerate the development of new innovations. We also adopt every legal measure to protect our own IPRs. So far, Huawei has filed over 40,000 patent applications in China and approximately 30,000 international and national patents in other countries. We use the Patent Cooperation Treaty (PCT) administered by WIPO which offers us great flexibility, enables us to save time and money and helps us to make the right decisions in relation to our patenting strategy. Huawei has been granted over 30,000 patents around the globe. In addition, Huawei pays around US$300 million in licensing fees to industry partners every year.

Looking ahead

Today, innovation has become an integral part of our daily lives. Looking ahead, the further integration of the digital and physical worlds will usher in new waves of digital development. Huawei is committed to providing wider and smarter information pipelines in an increasingly digital society, enabling ubiquitous broadband connections. We will continue to be open and innovative, to contribute to the Global Innovation Index (GII) and cooperate with WIPO and other stakeholders to help establish a favorable innovation environment and jointly promote scientific and technological innovation for the benefit of society.