Broadcom: Counter-offer is old news

Covering the Hatfields’ and the McCoys’ blood feud might be easier than sifting through the conflicting claims between Broadcom Corp. and Qualcomm Inc. over patent rights and competitive issues.
The two chip vendors’ public rhetoric continued to heat up last week, even as the companies attempted to negotiate resolutions in several matters ranging from licensing each other’s intellectual property to anti-competitive complaints.
The most prominent and recent issue relates to a power-management patent belonging to Broadcom. The U.S. International Trade Commission ruled in May that Qualcomm is infringing that patent and on June 7 ordered a ban on the importation of new models of 3G handsets containing Qualcomm chips that infringe on that patent.
That ban is expected to impact major handset vendors such as Motorola Inc., Samsung Electronics Co. Ltd. and LG Electronics Co. Ltd., as well as leading network operators such as AT&T Mobility, Verizon Wireless and Sprint Nextel Corp. The degree of impact to any single party or to the industry is debatable.
In late June, Broadcom offered to license the patent in question to Qualcomm for $6 per handset which, according to Broadcom, represents a 2% to 2.5% royalty rate on the price of offending handsets.
Qualcomm responded that the Broadcom offer was “ridiculous” and said it made a counter-offer of $100 million in cash and a cross-licensing agreement with the potential to end many of the two companies’ ongoing disputes.
Broadcom, in turn, said that Qualcomm’s “counter-offer” was nothing but an old offer made months ago-prior to the ITC decision and a recent federal court ruling in favor of Broadcom that Qualcomm willfully infringed on three other patents-in the context of global cross-licensing talks. Qualcomm’s cross-licensing offer also wasn’t “exhaustive” and would allow Qualcomm to charge royalties to Broadcom’s customers, which runs counter to the traditional licensing model in the semiconductor industry, according to Broadcom.
In conversations with the two companies last week, the rhetoric used on both sides suggested that settlements small and large may remain elusive, even as the passage of time increases the pressure on both parties.
“For a long time we’ve said that their goal is to destroy our business,” said Bill Davidson, a Qualcomm VP for global marketing and investor relations. “The offer they made (recently) showed this. It was absolutely ridiculous. (The offer) made clear that there’s little chance for a settlement.”
“Qualcomm has not offered one penny for the right to use the ‘983’ patent (cited in the ITC case) in their cellphones,” said David Rosmann, a Broadcom VP for IP litigation. “And they have been found to infringe on that patent. The $100 million you’ve read about was not a counter-offer. That was made in the context of earlier negotiations for a global cross-licensing agreement-before they lost in federal court on infringing three of our patents and before they lost at the ITC.”
Rosmann said that Qualcomm’s claim that the $100 million pertained to its power-management patent cited in the ITC case was designed to confuse the issues.
“It’s clear we have an offer on the table for their use of the ITC-cited patent and that we’re willing to negotiate,” Rosmann said. “Qualcomm hasn’t really made a counter-offer.”
Qualcomm’s assertion that it is pursuing a settlement-in addition to a presidential veto of the ITC decision and an effort in the federal circuit court of appeals to overturn the ITC decision-appeared to be a new element in its public stance. Prior to the recent public spat over a settlement in the ITC case, Qualcomm had steadfastly declared that it sought only an official reversal of the ITC decision.
Davidson disputed that characterization and said that Qualcomm has always pursued the settlement option. “We’d like to settle this for the industry,” Davidson said. “Our pride is not an issue. We just want to move past this and whatever that takes-as long as it’s reasonable and doesn’t completely destroy our business model-we’re willing to be flexible on.”
The passage of time and the pressure of other issues, however, eventually could lead the parties to a resolution or, conceivably, back to court.
The window for a presidential veto of the ITC decision, sought by Qualcomm, ends Aug. 6, according to Davidson. Qualcomm expects a ruling “any day” from the federal circuit court of appeals on the company’s request that the ITC ban on new 3G handset models containing its chips be stayed, pending review of the case’s merits. The fourth quarter, when many analysts believe the ITC ban will have a significant impact on Qualcomm and its handset vendor and network operator customers, is less than 90 days away. For its part, Broadcom said that a presidential veto of the ITC decision would represent a blow to the country’s traditional policy of defending IP rights.