Qualcomm Inc (QCOM)

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Broadcom, Qualcomm Promise Further Legal Action
By Wayne Rash
May 31, 2007


http://www.eweek.com/article2/0,1895,2139484,00.asp


Broadcom will ask a federal court in Santa Ana, Calif., to permanently enjoin Qualcomm from infringing on patents it holds.

A federal jury found on May 29 that Qualcomm had willfully infringed on three Broadcom patents involving wireless technology. A spokesperson for Qualcomm, however, said that the jury found that the company had not infringed on a Broadcom claim involving cell network handoffs that was also part of the lawsuit.

The three patents that the jury upheld involve the use of two networks on a single transceiver, video processing and push-to-talk features. While the jury has decided in favor of Broadcom on three patent claims, the legal action is by no means over. Alex Rogers, senior vice president and legal counsel at Qualcomm, told eWEEK that he intends to file post-trial motions asking the court to overturn the verdict, and if that fails, Qualcomm will appeal the verdict to the U.S. Circuit Court.

"We're very disappointed in this verdict," Rogers said, "We feel very strongly in our position with this patent. We plan to file our post-trial motion with the judge and following that we'll take the case to appeal in the federal circuit."



Rogers said that he believes Qualcomm has a strong case, especially in light of the recent decision by the U.S. Supreme Court that makes it harder for businesses to get a patent for an idea that is clearly obvious. A Broadcom spokesperson did not respond to eWEEK's request for comment, but the company did issue a statement detailing its ongoing legal feud with Qualcomm. The two companies have sued each other repeatedly, and the May 29 action was simply the latest in a long series of legal maneuvering by both companies.

Click here to read more about the companies' claims of trade secret misappropriation and patent infringement.

"Sometimes you win, sometimes you lose," said analyst Craig Mathias, principal of the Farpoint Group. "I don't really think it's that significant," he said. Mathias pointed out that most actions such as the suits filed by Broadcom and Qualcomm against each other have less to do with the law than with business tactics. "High-tech companies sue one another for competitive reasons," Mathias explained. "They have to license each other's technology. It'll be covered by cross-licensing."

"These companies don't like each other, but they won't compromise their long-term business outlook just because they want to be nasty," Mathias said. "The lawyers will drag this out for quite some time," he said. "There will be a lot of discussions. It would be more significant if Qualcomm lost access to some of its own patents." But Mathias noted that so far, Qualcomm hasn't even been enjoined from using the patents that Broadcom won the case on.

"This won't have any effect on 3G deployment," Mathias said. "Broadcom could seek an injunction, but I think they'd rather get a royalty return. Not doing business is in no one's interest. They will work out a deal that will be satisfactory to all parties," he said. Mathias pointed out that such legal tactics are simply a popular business practice in fields such as this. "There's competition in all kinds of domains," he said. "This is just competition in the legal domain. It's par for the course." He added that there's little to be gained for Broadcom by shutting Qualcomm down. "They just want their money," he said.



Gartner analyst Stan Bruederle said that the legal action is really more about setting up the terms of the eventual license negotiations than it is about winning or losing court cases. "Broadcom's point is that they need to have value established in negotiations," Bruederle explained. He said that one reason that Broadcom and other competitors are engaging in these legal tactics is ultimately to save money on licensing fees they currently pay to Qualcomm.

"Everyone wants these things to be resolved," Bruederle said. "Qualcomm wants to protect their licensing revenue flow. Sometime in the next year, I expect there will be resolution. I don't believe that a court will decide to keep Qualcomm from shipping their phones into the country," he said, referring to a separate suit by Broadcom that has asked the federal government to prevent Qualcomm from shipping phones into the United States. "I don't think they want to put anyone out of business, they just want to protect their position in future negotiations."



No effect on sales or customers.

Bruederle said that he thinks Broadcom's suits are unlikely to affect phone sales or customers. "I don't think over the next few years there will be much effect at all. There are multiple chips that go into these phones. Customers don't have a single source." Bruederle said that he doesn't think the suits will have any effect at all on end users, and that the suits should not have any effect on 3G deployment.

ADVERTISEMENT "On the other side of that, with all their experience and all of the years Qualcomm has been designing CDMA [Code Division Multiple Access]-based technologies you have to take them as a pretty competent chip supplier in this arena," Bruederle said. He pointed out that this ultimately means that companies will have to license patents from each other in order to make the products their customers want. "I think there will be some amount of cross-licensing, so that recognizes the intellectual properties of the companies negotiating," he said.

Both Bruederle and Mathias pointed out that the monetary award in this case, under $20 million, is insignificant. "Pocket change," said Bruederle.

"It's really nothing," agreed Mathias.

Analyst Jack Gold, founder of J. Gold Associates, said that lawsuits such as the Broadcom-Qualcomm dispute are to be expected. "What goes around comes around," Gold said. Gold said that it's usually hard to predict how juries will decide these cases. "All of these suits are really tough because you have to prove this esoteric stuff to people who don't understand," he said.

"What it does prove is that all of these tech giants are trying to play the legal system to their advantage," Gold pointed out. "That works for a while, but ultimately what you really have to do is make products," Gold said. "Products change so quickly in this space, that if you're wasting time suing people, it's wasted resources."

Ultimately, Gold said, he doesn't see how this latest verdict will affect Qualcomm in any way. "It's not a big deal. Business will go on, and nobody in the user community will notice," Gold said.

But Gold did question the motivation for the suits by Broadcom, Qualcomm and others. "Are these patents so critical that it will negatively impact their business, or is it just trying to keep other companies from competing with them?" he asked.

"Those folks that have a stable of patents will have to decide whether they're going to defend all those patents, or be good engineers and move the market forward," Gold said.

Post-trial motions are set to begin in the case on June 18.