By Daniel Thomas
Of DOW JONES NEWSWIRES
Finnish telecommunications equipment maker Nokia Corp. (NOK) Thursday said it will pay $20 million to chipset maker Qualcomm Inc. (QCOM) to cover patent licenses in the second-quarter of 2007, a move which could give it the upper hand in forthcoming lawsuits.
The two companies have for some time been embroiled in a series of lawsuits against each other, concerning intellectual property rights and patent infringements, but Nokia says Thursday's payment is unrelated to those disputes. It says it's willing to pay fees for this new license, which relates to the European Telecommunication Standardization Institute.
"As we continue to negotiate the new cross-license agreement, Nokia views this payment as fair and reasonable compensation for the use of relevant Qualcomm essential patents in Nokia UMTS handsets during the second quarter of 2007," said Nokia Chief Financial Officer Rick Simonson.
However, Nokia signaled that it would be aggressively contesting the old patent license agreements with Qualcomm that are set to expire next week, on April 9.
At 1330 GMT, shares in Nokia were up EUR0.13, or 0.8%, at EUR17.55.
Nokia and Qualcomm have been embroiled in a number of intellectual property and licensing disputes over the last year and the two companies are currently at loggerheads on how much Nokia should pay Qualcomm for using its code division multiple access, or CDMA, intellectual property in North America.
Richard Windsor, an analyst at Japanese investment bank Nomura, said Nokia has pulled of a "strategic master stroke" by doing this.
Windsor said the deal signals how much Nokia is willing to pay Qualcomm for royalties and by doing so, Nokia significantly reduces the risk of being found guilty of "wilful infringement" in any patent lawsuits that follow with the San Diego-based chipset maker.
Wilful infringement is something Nokia cannot afford as punitive damages could cost it as much as three times the existing royalty rate in damages, he says.
"By reducing this risk Nokia will be able to fight harder and hold out longer against the legal blanket bombing that we think is being prepared by Qualcomm," said Windsor.
Windsor added that the move lengthens considerably the wait Qualcomm might have to endure before it gets paid the royalties thta are due to it.
Nokia argues that Qualcomm's patent portfolio applies predominantly to the U.S. and says it believes the U.S. chipmaker has very few patents in other countries where Nokia operates.
"When Qualcomm's early patents become paid-up and royalty-free on April 9, Qualcomm's share of all patents relevant to Nokia UMTS handsets will significantly decrease," said Simonson in a statement Thursday.
"Qualcomm's entire chipset business becomes exposed to Nokia's extensive GSM, WCDMA and CDMA patent portfolios and Nokia will use all rights from those portfolios when defending itself against any new Qualcomm litigation", said Simonson.
On Tuesday, Qualcomm filed two more patent-infringement lawsuits against Nokia Corp., which follow a preemptive strike by Nokia two weeks earlier, when it filed lawsuits in Germany and the Netherlands.
The crux of the dispute is Nokia's contention that it's not fair for Qualcomm to keep charging Nokia the same royalty rate for WCDMA handsets, the most popular variety for third-generation cellphones, as Qualcomm did in the existing agreement.
Qualcomm declined to comment.
Company Web site: nokia.com
Company Web site: qualcomm.com |
