Qualcomm Inc (QCOM)

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Broadcom Fails to Win Ban on Qualcomm-Based Phones (Update2)

By Susan Decker and Peter J. Brennan

Oct. 10 (Bloomberg) -- Broadcom Corp., a maker of chips for consumer devices, failed to persuade a judge to recommend a ban on U.S. imports of mobile phones that use Qualcomm Inc.'s newest chips.

International Trade Commission Judge Charles Bullock said in a decision released today that Qualcomm chips and the phones that use them infringe a Broadcom patent. Still, the judge said he ``does not recommend' that any order banning Qualcomm chips in the U.S. cover cell phones made by other companies.

The ruling may indicate whether San Diego-based Qualcomm will be able to continue collecting royalties on handsets that use newer chips for fast Internet connections. Sales of such 3G, or third-generation, handsets exceeded $1.3 billion last year, a Verizon Wireless lawyer estimated in July.

Broadcom, an Irvine, California-based maker of chips for TV set-top boxes, is trying to enter the cell-phone market and accuses Qualcomm of blocking the way. Broadcom had said it had an edge before the ITC because commission attorneys backed its patent-infringement claims in May and administrative law judges such as Bullock often follow their advice.

Shares of Qualcomm rose $1.19, or 3.3 percent, to $37.43 in Nasdaq Stock Market trading at 11:06 a.m. New York time. Broadcom fell 34 cents, or 1.2 percent, to $29.25.

Broadcom spokesman Bill Blanning and Qualcomm spokeswoman Christine Trimble didn't immediately respond to messages seeking comment.

Decision Review

Bullock said two other Broadcom patents weren't infringed. His decision will be reviewed by February by a six-member commission made up of three Republicans and three Democrats. The ruling then may be challenged in a federal appeals court in Washington.

The commission, which is charged with protecting U.S. markets from unfair trade practices and patent infringement, in the past has blocked imports of knockoff pens and disposable cameras. In 2001, the ITC persuaded U.S. President George W. Bush to impose tariffs of as much as 40 percent to protect the U.S. steel industry.

Broadcom and Qualcomm, the world's second-largest maker of cell-phone chips after Texas Instruments Inc., are battling in courtrooms and before regulators in California, New Jersey, Washington, Europe and South Korea. The dispute began two years ago when Broadcom said it would start competing with Qualcomm after the companies had worked together on a project.

New Jersey Suit

U.S. District Judge Mary Cooper in New Jersey threw out Broadcom's antitrust suit against Qualcomm in August, concluding the evidence was insufficient. Broadcom appealed, saying the ruling was based ``on an incorrect reading of antitrust law.'

On Oct. 2, U.S. District Judge Rudi Brewster in San Diego denied Qualcomm's request for a preliminary injunction to block Broadcom's shipments of processors that Qualcomm claims use stolen trade secrets.

The judge ordered the two sides to work together on a preliminary injunction involving trade secrets that Broadcom acknowledges possessing but says it hasn't used. The companies' billionaire chairmen, Irwin Jacobs of Qualcomm and Henry Samueli of Broadcom, failed to reach an agreement when they met for more than five hours Oct. 4 in court-ordered mediation in San Diego.

To contact the reporters on this story: Susan Decker in Washington at [e-mail] ; Peter J. Brennan in Los Angeles at [e-mail] .

Last Updated: October 10, 2006 11:16 EDT