From: peterk 10/30/2006 9:38:01 PM
of 56461
UPDATE 2-EU set to intensify Qualcomm probe -sources
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Reuters U.S. Company News
1:25 p.m. 10/30/2006
(Adds share price, 7th paragraph)
By David Lawsky
BRUSSELS, Oct 30 (Reuters) - The European Commission is likely to intensify its investigation of Qualcomm's (QCOM) patent licensing rates for a new generation of mobile telephones, people familiar with the situation said on Monday.
The Commission will probably shift gears in its investigation in a decision that will involve Competition Commissioner Neelie Kroes, according to three people with knowledge of the situation.
"The Commission looks likely to move ahead in the coming weeks on this investigation," one of the people said.
Major manufacturers of mobile phones filed a complaint that Qualcomm was charging too much to license patents for high-speed, third generation equipment.
Matsushita Electric Industrial, Nokia <NOK1V.HE>, Broadcom (BRCM), NEC, Texas Instruments (TXN) and Ericsson have said Qualcomm's fees were far higher than the agreed-upon standard of "fair, reasonable and non-discriminatory (FRAND)".
They said Qualcomm charges the same for using its patents for the new technology as it did for an older system, although its patents account for a far smaller percentage of the new system.
By 1800 GMT QualComm shares were down 1.67 percent at $36.52.
Qualcomm's patents are used not only in its own CDMA mobile standard but also in W-CDMA, which is the high-speed 3G update to the worldwide GSM standard.
Qualcomm has said its patents cover the foundation of the new system. It has also said that it was entitled to charge what the market would bear and that, in any case, the definition of FRAND was to be negotiated by the parties.
NEXT STEP
Qualcomm's general counsel, Lou Lupin, said in a statement the complaining companies wanted to preserve market share although competition "has driven tangible decline in 3G handset prices and (helped the) introduction of powerful new features".
The European Commission case team has been preparing a complaint to go to Competition Commissioner Kroes, which would allow her to decide whether to take the next step, the sources said.
She is expected to move the investigation further, rather than abandon it, one of the sources said.
The source added that were the probe to be closed at this point, that decision could be open to a legal challenge by the complainants.
Qualcomm's practices have also stirred controversy in the United States, where a number of private lawsuits have been filed, leading to a confusing series of rulings.
Earlier on Monday, Qualcomm said a U.S. District court in San Diego had barred Broadcom from the use of certain Qualcomm trade secrets.
On Oct. 10, an administrative law judge said Qualcomm had infringed a Broadcom patent but stopped short of banning U.S. sales of mobile phones with QualComm chips.
On Oct. 20, a U.S. appeals court in Washington, D.C., ordered that a lower court reconsider its ruling in favour of Qualcomm and against Nokia, which had asked the court to temporarily halt a patent infringement suit against it by Qualcomm.
Qualcomm is the originator of the CDMA mobile phone system, a rival standard to GSM that is used as one of the U.S. mobile systems and in some other countries. Qualcomm both licenses its technology and manufactures chips.
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