Qualcomm Inc. declared victory after a U.S. district court dismissed an antitrust lawsuit filed by fellow chipmaker Broadcom Corp.
Broadcom’s complaint, which was filed in July 2005, accused Qualcomm of violating antitrust laws by charging too much to license its UMTS chipset technology and unfairly offered discounts to licensees that also purchase the chipsets. But the U.S. District Court in New Jersey rejected the claim, finding that “the facts and claims alleged by Broadcom do not state claims for unlawful tying or exclusive dealing.”
“Qualcomm’s dual status as a patent-holder for W-CDMA technology and manufacturer of UMTS chipsets provide it with a business advantage,” Judge Mary Cooper wrote. “Broadcom invites the court to extend claims for unlawful tying and exclusive dealing to include coercion in the form of rebates, discounts and other incentives. The court declines this invitation.”
Qualcomm rushed to praise the decision, claiming in a prepared statement that the company “has scrupulously abided by its commitments to standards development organizations to offer licenses for its essential patents on fair and reasonable terms.”
The ruling granted Broadcom the right to amend the complaint and continue to pursue the complaint, however, and Broadcom said it is “evaluating its next legal steps.”
“Qualcomm should take little comfort in the court’s decision,” Broadcom counsel David A. Dull said in a prepared statement. “The decision does not find that Qualcomm’s alleged misconduct was lawful or that Qualcomm honored its promises to standards setting bodies. Rather, Judge Mary Cooper simply held that Qualcomm’s alleged abuse does not give rise to federal antitrust liability.”
UBS Securities L.L.C. analyst Maynard Um noted the while Broadcom may appeal the verdict, the decision was positive for Qualcomm’s financial outlook moving forward.
“We continue to believe fundamentals remain strong and that (estimated) revisions remain biased on the upside,” Um wrote in a research report. “In addition to our recent findings that a Motorola Inc. 3G handset using a Qualcomm chipset is currently being designed, we believe number portability in Japan in October should be favorable for Qualcomm as it appears KDDI Corp. is well positioned to benefit.”
Um reiterated UBS’ $50 price target for Qualcomm’s stock.
Shares of the two companies moved in opposite directions following the ruling, with Broadcom’s stock falling 89 cents, or just over 3 percent, to $28.50 per share. Qualcomm shares were up 86 cents, or more than 2 percent, to $38.53.
