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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: rvgent who wrote (59143)	1/26/2007 11:31:25 AM
From: matherandlowell	Read Replies (1) \| Respond to of 197348

Q: IS THERE A DIFFERENCE BETWEEN APRIL 9, 2007 AND THE END OF 2008? Excellent discussion guys. I'm tuning in a little late. Let me see if I have the conclusion straight. QCOM agrees to a contract with Nokia in 2001 which values the WCDMA royalty rate at the same FRAND rate as CDMA (approximately 5%). Nokia believes in 2001 that they will develop a workaround for the essential patents in question and be able to sell handsets in 2007 without a license from QCOM, but they want to be able to get the same contract deal if they are wrong. Therefore, Nokia insists on an option to extend the 2001 contract which would be good for about 20 months. This would give them a window in which they could begin a legal process to prove that QCOM's WCDMA royalty rate is not FRAND. The extension period does not grant Nokia the use of the Q's IP without payment. Nokia will attempt to use the IP without paying the Q. The Q says fine: don't pay us the royalty; face injunctions and possible treble damages for willful infringement. So the price Nokia will pay for willful infringement will be facing worldwide injunctions against their handsets, possible loss of market share if the handsets are taken off the shelves, and still having to pay royalties to the Q in the form of damages (in the United States, triple damages for willful infringement). They would take this route if they thought that they could reasonably expect to prevail on the legal points and thus not have to pay WCDMA royalties to QCOM. If they crack in November, 2008, Nokia could abandon the legal challenges and high costs of litigation and sign an extension to the 2001 contract. They would still owe QCOM damages from the period of infringement. In the U.S., 3x damages. They will also need to hire lawyers in each country to answer why they think they should be able to use Q's IP without a license. Altman's point that the option says much about FRAND also has to be the considered the key argument here. Presumably, the option to renew (now disclosed) would be evidence at any trial of what constitutes a FRAND rate. Nokia has already agreed to pay the WCDMA rate for 5 years and the option is further proof of their willingness to accept this rate as FRAND. Beyond 2008, Nokia would face ongoing legal challenges and appeals but without the security blanket of being able to renew the 2001 contract. If they let the option expire without clear legal resolution of QCOM's claims and appeals, they would be taking tremendous risk-- a risk which could essentially send them back to making the shoes Maurice so fondly remembers. High stakes poker. But I still like our cards. j.