Judge says no to Qualcomm on patents
signonsandiego.com
Must stop selling Broadcom chips
By Jonathan Sidener
UNION-TRIBUNE STAFF WRITER
January 1, 2008
In a New Year's Eve ruling, a Santa Ana federal judge said wireless giant Qualcomm must stop selling some of the high-speed data chips that infringe on rival Broadcom's patents.
The chips that use WCDMA technology make up a small, but rapidly growing, portion of the U.S. phone market and are used primarily in AT&T and T-Mobile phones in this country.
U.S. District Judge James Selna said San Diego-based Qualcomm can continue to sell other infringing chips in the United States until the end of January 2009 but must pay royalties on those chips. The chips, which use a different high-speed technology called EVDO, can be sold to existing customers for existing phones.
The chips are used on Verizon and Sprint networks in this country.
The ruling also allows Qualcomm to continue to use a Broadcom walkie-talkie technology until January 2009.
Irvine-based Broadcom said yesterday it would be inaccurate to call the judge's ruling a split decision. “The ruling is very close to what we asked for,” said David Rosmann, Broadcom's vice president for intellectual-property litigation.
Online: To read the judge's
ruling, go to: uniontrib.com/more/injunc
While the decision directly affects Qualcomm sales in the United States, its broad wording will limit Qualcomm's ability to develop and market its WCDMA chips in other countries, Rosmann said.
Qualcomm is prohibited from advertising or marketing, providing customer support, writing software or modifying the infringing chips in its U.S. operations, according to the order.
A Qualcomm spokeswoman said yesterday that the company was reviewing the complex ruling and declined further comment.
Qualcomm shares fell 22 cents, or 0.56 percent, to $39.35 in Nasdaq trading. Shares fell 5 cents after hours.
Shares of Broadcom fell 7 cents, or 0.27 percent, to close at $26.14 on the Nasdaq. They rose 28 cents after hours.
The court set royalty fees of 6 percent and 4.5 percent for two infringing technologies used on the EVDO chips but did not set a fee for the walkie-talkie technology. The fees are taken from sales revenue that Qualcomm makes when it sells a chip with the Broadcom technology.
Qualcomm would have to pay more than 10.5 percent of revenues for some chips because they violate all three patents, Rosmann said. Others violate one or two.
Yesterday's ruling is the latest – but not necessarily the final – word in the dispute, which comes as a result of a May federal jury decision that Qualcomm violated three Broadcom patents.
“The fat lady has not sung yet,” said analyst Will Strauss of the Tempe, Ariz., marketing research firm Forward Concepts. “The litigation is sure to continue because this is such an important area.”
Strauss said WCDMA sales are important to Qualcomm because the technology that allows fast Internet access is taking off as the company's traditional CDMA chip business slows for cell phones.
Qualcomm has a near-monopoly in CDMA chip sales but faces stiff competition in WCDMA from other chip makers.
The analyst expects sales of WCDMA phones in North America this year to more than double to 11.5 million from 2007.
Strauss said that Qualcomm is undoubtedly re-engineering its WCDMA chips to replace infringing technology but that work will take time.
“It will take at least three months to redesign (and manufacture) new chips,” Strauss said. “Then it will take another six or nine months to design a phone around those chips.”
Judge Selna previously ordered Qualcomm to pay $19.6 million to Broadcom for violating the patents. He had set the amount at $39.3 million, calling it a willful infringement, but reduced that because of changes in case law on determining willfulness.
This case is one of more than a dozen in which Qualcomm faces legal action from competitors and handset manufacturers who say the company's technology licensing fees are unfair. Analysts say the patent disputes are one way for these companies to challenge the fees, which are estimated to be between 4.5 percent to 6 percent of the retail price of a handset.
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Jonathan Sidener: (619) 293-1239; jonathan.sidener@uniontrib.com
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