QCOM's P. Jacobs says it will adjust its tactics following court losses
By Jeffry Bartash
While Qualcomm Inc. (QCOM) plans to stick to its overall legal strategy in a growing patent war with rivals, Chief Executive Paul Jacobs says the wireless company will adjust its tactics following a string of court losses.
Jacobs told reporters Wednesday at a breakfast in Washington that he believes the San Diego company still holds a winning hand in its effort to defend its substantial portfolio of patented technology.
But he warned that investors should not expect a quick resolution of the issues that are currently being litigated with rivals such as Broadcom Corp. (BRCM) and Nokia Corp. (NOK).
"Some of this technology is complicated and the distinctions are subtle," Jacobs said about the patent disputes. "The process does work, but it gets stretched out a fairly long time."
Qualcomm's stock has seesawed repeatedly over the past year with the ebb and flow of court and regulatory rulings.
Qualcomm, a maker of chipsets and other technology used in wireless phones, has suffered several legal defeats this year at the hands of rival Broadcom.
In its most recent loss, the vendor was slapped with an injunction by the International Trade Commission after the agency found that Qualcomm infringed on patents held by Broadcom.
The company lobbied the Bush administration to veto the ITC ruling, but the White House declined to get involved.
"We knew it was a long shot," Jacobs said. "It's not a thing that most administrations would have done."
Qualcomm did receive some good news earlier this month when the U.S. Court of Appeals in Washington, D.C., granted a stay on the ITC injunction, which banned the import of wireless handsets containing Qualcomm's chipsets.
The company's technology is used by millions of wireless customers who subscribe to the services of such providers as Verizon Wireless, Sprint Nextel Corp. (S) and Alltel Corp. (AT).
In the meantime, Jacobs said the company is getting closer to hiring a new general counsel to oversee litigation of the company's numerous patent disputes. Longtime legal advisor Lou Lupin resigned in August and was replaced on an interim basis by former U.S. Attorney Carol Lam.
Despite the shakeup in Qualcomm's legal team, Jacobs said the company would continue to appeal the Broadcom decision and fight its other rivals in court.
"From a strategic standpoint, we're not fundamentally changing our strategy," Jacobs said. "We are changing our tactics."
Another thing unlikely to change soon is the dispute between Qualcomm and Finnish mobile-phone giant Nokia over patent claims and cross-licensing fees. A prior cross-licensing agreement expired April 9 and has not been renewed.
Nokia and other competitors such as Ericsson LM (ERICY) and Texas Instruments Inc. (TXN) have demanded lower cross-licensing fees - the money paid to use proprietary Qualcomm technology. As part of the dispute, they've also challenged the legal basis of Qualcomm's patents.
Jacobs said that neither side has ceded much ground and that it probably would take outside intervention to resolve the dispute. That could involve a clear-cut legal victory or pressure by suppliers and mobile-phone carriers on both companies to compromise.
"We've been talking a very long time and there's been very little progress," he said.
Jacobs also expressed skepticism about current efforts in Congress to reform patent-protection laws. He said the bill under consideration would too heavily favor large, established companies at the expense of innovative startups.
Had such rules been in place years ago, he said, "we never would have been able to build a company."
A tiny startup when it was founded in 1985, Qualcomm has transformed itself into a $67 billion company whose once-doubted but innovative technology has shaken up the wireless world.
"We still look at ourselves as a David," mused Jacobs, "but when we walk into court, people look at us like we're Goliath."
-Jeffry Bartash; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 19, 2007 13:28 ET (17:28 GMT)
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