San Diego Union Tribune

May 25, 2007

Qualcomm awaits sanctions in infringement case

COPLEY NEWS SERVICE

WASHINGTON – A ruling a federal agency is expected to deliver today could strike a serious economic blow to Qualcomm and the wireless industry if it bans the import of certain advanced cell phones into the United States.


 

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The U.S. International Trade Commission has a deadline of today to announce its remedy in a patent-infringement dispute between Southern California chip makers Qualcomm of San Diego and Broadcom of Irvine.

The commission, an independent federal agency, ruled last year that Qualcomm infringed on a patent held by rival Broadcom for a chip that conserves battery power in high-bandwidth cell phones that can surf the Internet, play music and download video.

Broadcom has asked the commission to ban the import of all cell phones containing the infringing chips, an action it says is necessary to protect its intellectual-property rights.

Qualcomm and more than half a dozen companies in the wireless industry, including Verizon and Sprint Nextel, oppose a full ban.

During a two-day hearing before the commission in March, opponents said stopping those cell phone imports would cost the industry billions of dollars, raise cell phone prices and undermine public safety.

Broadcom officials say the dire predictions of harm to the industry are overblown.

“We certainly don't think it's going to have a great impact,” said David Rosmann, a Broadcom attorney.

The ITC considers the public interest in making its decision on a remedy for patent infringement.

Many observers, including former ITC attorney Lyle Vander Schaaf, doubt the commission will opt for a ban on cell phone imports because of the effect it would have on the industry.

It would be “extraordinary” if the commission did so, he said. Such a move would “impact these cell phone manufacturers. It (would) affect the market value of their stock and everything else because it's going to have an impact on their sales.”

Not everyone agrees.

Smith R. Brittingham IV, another former attorney for the commission, said he expects the commission to ban cell phone imports, based on its actions in previous similar cases.

Other commission options include restricting the import of some cell phones but not others or simply banning the import of stand-alone chips. Both sides agree that banning stand-alone chips would have little effect since most chips come into the country as part of assembled phones.

In a filing with the ITC, AT&T and Deutsche Telekom's T-Mobile urged the trade commission to avoid a “compromise” decision that would ban phones using wideband CDMA technology and Qualcomm's infringing chips. That alternative would hurt those companies because they use the wideband CDMA while their rivals are using competing CDMA technology.

Whichever remedy the commission chooses, it could be overturned by President Bush, who has 60 days to review the decision. Bush also could ask the commission to modify its ruling.

Banning the import of phones would hurt Qualcomm sales.

Qualcomm attorney Louis Lupin said the company does not have an estimate of the sales that would be lost, but that “it would certainly be significant.”

About 40 million Qualcomm-based phones, representing $10 billion in sales, will be sold this year in the United States, estimates Jerry Hausman, an economics professor from the Massachusetts Institute of Technology.

Even if the commission goes along with Broadcom's request for a ban on imported cell phones, Americans would still be able to buy wireless devices with similar capabilities including devices with typewriter-like keyboards manufactured by BlackBerry and “smart phones.”

Bloomberg News contributed to this report.