San Diego Union Tribune
June 8, 2007
Qualcomm punished with phone import ban
By Kathryn Balint
all new models of cell phones containing Qualcomm chips will be
banned from import into the United States under a trade agency
order issued yesterday that could mean far fewer new handset
models for the December holidays.
by the U.S. International Trade Commission – intended to punish
San Diego-based Qualcomm for infringing on a patent by rival
Broadcom – reverberates throughout the nation's wireless
industry. It affects new models of cell phones with Qualcomm
chips that can surf the Internet, download music and play 3-D
the order are models under development by LG Mobile Phones,
Kyocera Wireless, Samsung, Motorola and other manufacturers –
potentially millions of handsets.
chief executive Paul Jacobs said in a conference call with
investors that the $7.5 billion-a-year company will not be hurt
in the short term, but that the ITC order immediately affects
cell-phone makers and wireless carriers that use Qualcomm
broad, disproportionate remedy plainly is not in the public
interest,” Jacobs said.
the commission's 4-2 decision bans new models using the chips,
it allows models already on the market to continue being
was less draconian than one option: banning the import of nearly
all phone models – even current ones – with infringing Qualcomm
commission rejected that option because it “would impose great
burdens” on the wireless industry, according to the ITC order.
King, a San Diego-based wireless analyst with Gartner market
research firm, said Qualcomm supplies 98 percent of the chips in
phones used by Verizon Wireless and Sprint Nextel customers. In
addition, one-third of the chips in phones used by AT&T wireless
customers come from Qualcomm.
He said it
would be all but impossible for other chip suppliers to meet the
is the world's second-largest maker of cell phone chips, next to
Texas Instruments. In 2006, 83 million cell phones using
Qualcomm's chips were sold in the United States, according to
In-Stat, a market research firm in Scottsda0le, Ariz.
as early as today, Qualcomm planned to appeal the ITC decision
to President Bush and ask a federal appeals court for an
emergency stay. The president has 60 days to modify or veto the
also planned to seek a stay of the ban and press Bush to
“This is a
bad order for the industry, and it's a bad order for wireless
consumers,” said Verizon spokeswoman Nancy Stark. “It would
Irvine-based chipmaker Broadcom saw the ITC order as another in
a string of recent victories against Qualcomm.
this is up to Qualcomm to resolve,” said David Rosmann, vice
president of intellectual property litigation for Broadcom. “To
the extent that we're unable to do that, the responsibility lies
squarely on Qualcomm's shoulders.”
it's unlikely that Qualcomm will allow the ban to affect its
customers for long. “They're either going to have to settle with
Broadcom or win the case,” he said.
engineers are trying to come up with technology to work around
the Broadcom patent. Sanjay Jha, Qualcomm's chief operating
officer, said it could take time to develop the work-around and
get the approval of cell-phone makers and wireless carriers.
Jha said he expects that Broadcom would challenge Qualcomm's new
technology at the trade commission. He said a Bush veto or a
victory on appeal are the only ways “to move forward with any
rarely overturn an ITC order. Lyle Vander Schaaf, a former
attorney with the International Trade Commission, said the fact
that two commissioners to voted against the ban makes it
possible that Bush would ask for modifications.
The ban is
the second penalty meted out to Qualcomm in the past nine days
for infringing on a Broadcom patent. Last week, a jury awarded
Broadcom $19 million for Qualcomm's infringement of three
filed its patent complaint to the ITC in May 2005 after the two
companies failed to reach a cross-licensing agreement to use
each other's technology. Broadcom accused Qualcomm of
overcharging for its technology; Qualcomm said it wouldn't
jeopardize its business model by lowering its price.
then, the two companies have been battling in federal court, at
the European Commission and at the International Trade
an administrative law judge and, later, the ITC agreed that a
combination of Qualcomm's chips and its software infringed on a
patent that Broadcom purchased from another company for a
technology initially developed for bar code readers. In cell
phones, the patented technology allows handsets to conserve
power when out of range of a cellular antenna.
expires in about three years, at which time the ITC order would
had asked the commission to ban all phones with Qualcomm chips,
except those with miniature keyboards, from entering the United
States. The commission had also considered banning just some of
the phones with Qualcomm chips from entering the country but
that solution would have affected some wireless carriers and not
commission's decision to ban new models of cell phones appears
to be a compromise. The two dissenting members, Chairman Daniel
Pearson and Dean Pinkert, had argued for a more limited form of
relief for Broadcom.
Nextel was relieved that the order allows current models to
continue to be sold. The company expects to sell 5 million cell
phones with the infringing Qualcomm chip in 2007.
work with our suppliers such as Qualcomm to ensure that our road
map is not disrupted,” said Sprint Nextel spokesman Matt
cell phone maker Kyocera Wireless said it believes there is
“solid evidence to merit a presidential veto of the decision
based on the resultant harm to the wireless industry, the U.S.
economy and the safety of U.S. citizens.”
decision was announced after the stock markets closed. Qualcomm
shares fell $1.21, or 2.87 percent, to close at $41.02 on the
Nasdaq. They rose 69 cents in after-hours trading. Shares of
Broadcom fell 69 cents, or 2.24 percent, to close at $30.11 on
the Nasdaq. In after-hours trading, they rose 34 cents.
Krawzak of Copley News Service contributed to this report.