The legal tussle over Qualcomm Inc.’s licensing practices turned into a full-scale war last week as Qualcomm took aim at longtime rival Nokia Corp. with a patent-infringement lawsuit. The charges come just a few short weeks after Nokia joined five other wireless heavyweights in accusing Qualcomm of anti-competitive behavior.
The level of high-powered rhetoric surrounding this particular issue-as well as the size of the players involved-makes it stand out from the regular commotion within the industry. The case also brings up age-old animosity between CDMA and GSM proponents.
The fight actually started in July, when chipmaker Broadcom Corp. filed a complaint against Qualcomm in New Jersey U.S. District Court, alleging Qualcomm’s business strategies violate U.S. antitrust laws. The charges failed to cause much of a stir until Nokia, L.M. Ericsson, NEC Corp., Texas Instruments Inc. and Panasonic Mobile Communications joined Broadcom by filing anti-competition complaints with the European Commission. In their complaint, filed in October, the companies claim Qualcomm had promised to license its W-CDMA patents fairly-which was why industry initially embraced the standard-but has reneged on those assurances.
Qualcomm, not one to sit quiet, vehemently denied the allegations, pointing out that Nokia, Ericsson, NEC, TI and Panasonic all have signed licenses for its W-CDMA patents. Qualcomm even took the opportunity to bedevil its critics, pointing out that “efforts to design around Qualcomm’s fundamental innovations in formulating the UMTS/W-CDMA standard were unsuccessful.”
The fight escalated last week when Qualcomm fired back at Nokia with a patent-infringement lawsuit, alleging Nokia’s GSM products infringe on 12 of its patents. Qualcomm essentially said Nokia’s GSM products use innovations it originally developed for CDMA, including technologies to “achieve higher data rates, increase spectral efficiency, enhance capacity, improve resistance to interference, permit access to packet switched networks and facilitate multimedia distribution.”
“We have been discussing a number of issues with Nokia for some time, including the fact that we have essential GSM patents for which Nokia is not licensed, and we are disappointed that this has resulted in litigation,” said Louis Lupin, Qualcomm’s senior vice president and general counsel. “Until recently, we had been led to believe that these issues might be resolved cooperatively and amicably. However, it now appears that a cooperative resolution of these issues is quite unlikely and we must move forward with the litigation in order to protect our rights and to get these issues resolved.”
Interestingly, Qualcomm filed a similar patent-infringement suit against Broadcom earlier this year, shortly after Broadcom accused Qualcomm of antitrust practices. Qualcomm’s lawsuit against Broadcom covers six of the 12 patents it now alleges Nokia infringes.
Qualcomm executives have said that Qualcomm’s patent-infringement lawsuit against Nokia is not a retaliation against Nokia for its complaints with the European Commission. Qualcomm said the charges stem from a breakdown in licensing negotiations with Nokia.
Nokia took issue with Qualcomm’s assertion.
“The timing of this lawsuit and the comments of Qualcomm’s general counsel that a cooperative resolution of these issues is unlikely, when the patents have not been verified and licensing terms have not yet been offered or discussed, is completely inconsistent with the basic licensing principles to which Qualcomm is obligated,” Nokia said in a statement.
Indeed, Nokia said Qualcomm’s lawsuit is further evidence that Qualcomm “continues to disregard its obligations to offer to license its alleged essential patents on fair, reasonable and nondiscriminatory terms.”
The case likely will take years to resolve. However, it’s unclear how the issue will affect the worldwide wireless industry in the interim. Already the W-CDMA licensing situation is cloudy at best; dozens of companies claim they own essential W-CDMA patents, and each wants to get its share of the market’s licensing revenues. Qualcomm, Nokia and Ericsson have perhaps the strongest W-CDMA patent positions-although even that isn’t clear because there is no independent authority to validate W-CDMA patents. Thus, startups must negotiate licensing arrangements with each patent holder on their own and decide if those patents are essential.
Although no company will reveal Qualcomm’s licensing rates, industry observers guess that it stands at around 5 percent for W-CDMA and CDMA technology. Thus, industry watchers estimate W-CDMA licensing rates could be as much as 30 percent if all W-CDMA patent holders levied their charges. Two years ago, Nokia proposed an industrywide 5-percent cap on W-CDMA royalty rates. The proposal fell flat, and Nokia said it is no longer pursuing the scheme.
The ultimate resolution of the case could mean millions for the players involved. If Qualcomm is at fault, the company likely would be forced to lower its licensing rates, an outcome that could cut deeply into its revenues. However, if Qualcomm comes out ahead, the company probably would gain a more solid licensing position-thus cutting into the revenues from its accusers.
