Broadcom Inc (fka BRCM)

[Time To Roll]

Qualcomm Inc. said it agreed to pay $891 million to Broadcom Corp. over four years as part of a settlement of a series of bitter legal disputes between the rival chip makers.

Under a deal announced late Sunday, Qualcomm and Broadcom agreed to end their litigation and exchange rights to each others' patents. Besides ending patent suits in the U.S., Broadcom agreed to drop antitrust complaints it has filed against Qualcomm in Europe and South Korea.

The deal is expected to help Broadcom become a more significant supplier of chips for cellphones, a market in which Qualcomm plays a pivotal role because of its control of key patents.

"At a time when the wireless industry should be focused on moving forward, the agreement removes uncertainty for Qualcomm and its customers," said Paul Jacobs, Qualcomm's chief executive, in prepared remarks.

Don Rosenberg, Qualcomm's general counsel, added in an interview that the deal preserves a key element of his company's business model: Qualcomm will be able to seek patent royalties from cellphone makers that use Broadcom chips. Royalties from handset makers are a key contributor to Qualcomm's profits.

Qualcomm disclosed Wednesday that it was in advanced talks about a "global settlement" of the disputes with Broadcom. The surprise development caused Qualcomm to postpone the release of its second-quarter results, which had been scheduled that day and are now expected to be announced Monday morning.

The two Southern California chip makers have waged a series of court battles. Broadcom, of Irvine, Calif., is a major supplier of communications chips but is a newcomer to the cellular arena.

One obstacle to Broadcom's plans in that market was the need to negotiate a patent license from Qualcomm. That company, based in San Diego, invented some widely used cellular technologies. Qualcomm receives patent royalties from chip makers and cellphone makers that use what the industry calls third-generation, or 3G, networks.

To put pressure on Qualcomm to grant favorable licensing terms, Broadcom filed multiple patent suits and other litigation against Qualcomm. Though Qualcomm filed suits of its own against Broadcom, the latter had chalked up more court victories so far.

Under the settlement, Broadcom will not have to pay Qualcomm patent royalties on the chips it sells. "Other than the payment we are making, neither of us is making ongoing payments," Mr. Rosenberg said.

Broadcom had argued in court that Qualcomm did not have the legal right to charge royalties both for cellphones and the chips inside them, under a principle known as "patent exhaustion."

Qualcomm's payments to Broadcom include $200 million that will be paid in the current quarter, ending June 30, the companies said.

"We have set aside our differences while addressing the needs of our customers, our shareholders and the industry," said Scott McGregor, Broadcom's chief executive, in a statement.

Write to Don Clark at [e-mail]
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