Qualcomm files patent infringement suit against Nokia

Qualcomm Inc. on Monday said that it had filed a lawsuit against Nokia Corp. on Friday, charging Nokia with patent infringement. While this is the latest in a series of lawsuits dating back many years involving Qualcomm’s patenting activities, the more recent lawsuits are significant because they point to the competing agendas of Qualcomm on one hand with other vendors including Nokia, Telefonaktiebolaget LM Ericsson and Motorola Inc. on the other.

Qualcomm is charging Nokia in federal court in San Diego for allegedly infringing on eleven Qualcomm patents related to GSM (Global System for Mobile Communications), GPRS (General Packet Radio Service) and EDGE (Enhanced Data Rates for GSM Evolution).

The suit might come as a surprise to many involved in the wireless industry because Qualcomm is known for the development of CDMA (Code Division Multiple Access), a different type of wireless technology that emerged after the creation of GSM.

In a statement, however, Qualcomm said that demand and competition from CDMA has led GSM developers to evolve to support better data performance, increase spectral efficiency, enhance capacity and improve resistance to interference, among other functions, and in doing so they infringe on Qualcomm patents.

Nokia declined to comment on the lawsuit. In a statement, however, the company said it hadn’t received a copy of the complaint but that Qualcomm has a duty to license the relevant patents on fair reasonable and nondiscriminatory terms. Nokia also said that Qualcomm had not provided Nokia with proposed terms for licensing the patents.

At press time, Qualcomm had not yet been able to provide a spokesperson to comment on the case.

The suit points to the different ways that Qualcomm and other vendors earn revenues. Even though this suit involves GSM, GPRS and EDGE, at its heart it’s about WCDMA (Wideband CDMA), said John Jackson, a wireless analyst with Yankee Group Research Inc. WCDMA is the technology used by GSM network operators in Europe as they evolve to 3G (third-generation) networks. GPRS and EDGE are interim technologies deployed prior to WCDMA that deliver slower data rates.

The licensing situation with WCDMA is very different than for CDMA and GSM, he said. “The licensing regimes around both CDMA and GSM are pretty unambiguous,” said Jackson. “In both cases, the key or essential patent holders have entered into an agreement the principle of which is that they are not going to make a living off of selling licences.”

The vendors decided to mitigate the licensing penalty for buyers, deciding that would help the market to grow while they earned revenues on equipment sales instead.

Qualcomm intellectual property dominates the CDMA standard so the company earned significant revenue from the setup. With WCDMA, however, 15 or more vendors contributed intellectual property to the standard, far more than in GSM or CDMA, Jackson said. Qualcomm’s share of intellectual property is smaller in the WCDMA standard than for CDMA.

Because Qualcomm doesn’t sell handsets or equipment, it doesn’t benefit from the strategy the other vendors take to mitigate license fees and earn revenues on equipment sales.

“For Qualcomm this has the potential to be a bit of an identity crisis,” Jackson said. The other vendors are pressuring Qualcomm to decrease the royalty payments that it demands in an effort to lower handset prices and thus grow the market. However, Qualcomm earns a significant portion of its revenues from patent royalties so it is reluctant to reduce prices, he said. “Qualcomm is doing what every company should do: looking for ways to maximize shareholder value,” he said.

Even though the suit against Nokia involves GSM, GPRS and EDGE, it points to Qualcomm’s efforts to ensure continued revenue from future GSM networks, including WCDMA. “This seems to me like a series of prepared legal maneuvers intended to forestall any mandatory action or legal judgment on either side of the Atlantic,” Jackson said. He’s referring to a number of other lawsuits that have been filed recently relating to Qualcomm.

On Oct. 28, a handful of companies including Nokia, Ericsson, Broadcom Corp., Texas Instruments Inc. and NEC Corp. filed complaints with the European Commission charging Qualcomm with anticompetitive behaviour.

They said that Qualcomm is unfairly offering discounted royalty fees to companies that buy chips from Qualcomm and also charging royalties higher than its share of contributed intellectual property. In response, Qualcomm characterized the complaints as attempts by the companies to renegotiate their licensing agreements through government intervention.

In July, Qualcomm filed a suit against Broadcom complaining that Broadcom infringes on six of the same patents that Qualcomm now says Nokia infringes. Another suit from Qualcomm against Broadcom followed in October. Both allegations follow an earlier suit from Broadcom, filed in May, charging Qualcomm with infringing on 10 of Broadcom’s patents.

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