Qualcomm Loses in 3G Chip Dispute

A ruling handed down by a federal judge decrees that Qualcomm, the wireless chip manufacturer, stop sales of 3G WCDMA cellular chips infringing on patent rights of Broadcom Corp., a rival chip manufacturing giant.

The ruling, handed down by James Selna, U.S. District Judge, allowed Qualcomm to sell, through 2009 January, certain chips that were also in violation of three patents owned by Broadcom. According to the ruling, Qualcomm can sell those chips that it had released to the market as of 29 May 2007.

That was the date when a jury in Santa Ana, California, came out with the verdict that Qualcomm had indeed infringed on patent rights owned by rival chip manufacturer Broadcom. The ruling also said it could not sell these chips to new customers or customers it had acquired after the given date.

The ruling also required Qualcomm to pay royalties to Broadcom for any chip sales during the ‘sunset period’ that ends on 31 January 2009. It will have to pay 6 percent as royalty for a patent that includes video compression for mobile phones. For a patent that includes simultaneous communication between different networks, the royalty has been set at 4.5 percent.

In his ruling, Judge Selna also asked the two companies in question, Broadcom and Qualcomm, to arrive at a negotiated royalty for the third patent, which covers technology akin to that used in walkie-talkies. Alternately, they could inform the court about a suitable royalty at the next hearing, set for February 29, 2008.

Judge Selna’s ruling also said Qualcomm would not be able to infringe on Broadcom patents at all post January 31, 2009, the date when the ‘sunset period’ ended.

Broadcom had, in fact, asked that the judge set a mandatory license fees for 18 months for the two patents Qualcomm had infringed on, for a specific set of Qualcomm offerings.

The walkie-talkie like technology, which is the subject of the third patent infringement by Qualcomm, is what Sprint Nextel wants to use in the first quarter of 2008, using the Qualcomm chips and calling the product QChat. Broadcom had also asked the judge to ban Qualcomm from selling those chips that were used to develop the QChat feature.

In return, Qualcomm had offered to pay an amount that was three times what it thought constituted a reasonable royalty, for continued use of the Broadcom-patented technology without an injunction.

The reactions from the two rival companies, Qualcomm and Broadcom, were markedly different. While David Dull, the general counsel for Broadcom said his company was happy with the ruling, a spokeswoman at Qualcomm said it had no comment to offer yet as its attorneys were still studying the ruling.

In a statement, Dull said, “Broadcom should not have to compete against companies that use Broadcom's own patented technology against us, and this injunction puts a stop to Qualcomm doing just that.”