WASHINGTON – Qualcomm
won a round yesterday in what had seemed a lost cause when
a federal appeals court temporarily lifted a ban on
importing cell phones that use a certain type of its chips
until the outcome of its patent-case appeal.
The ruling is an early holiday present for San
Diego-based Qualcomm and the handset manufacturers who use
the chips it produces that have been found to infringe
upon a patent owned by Irvine-based Broadcom.
The appeals court process could take nine to 18 months,
according to Qualcomm. That would allow Kyocera Wireless,
Motorola, Samsung Electronics and other cell phone
manufacturers to import new models with the chips for the
holiday sales season, when new and innovative features are
important for competition.
“That's great news for Qualcomm,” said Michael Cohen,
director of research for San Diego-based Pacific American
“I think it's very good news for Qualcomm's customers
that they won't be impeded from importing new models in
time for Christmas,” he said.
In addition, Qualcomm will have longer to develop a
technological work-around that does not infringe upon
others' patents – should the company not prevail in its
appeal to the U.S. Court of Appeals for the Federal
News of the appeals court ruling came after the markets
closed yesterday. Qualcomm shares rose 83 cents in
after-hours trading after ending the day down 14 cents to
$37.87 on the Nasdaq. The shares' 52-week range is $34.10
Shares of Broadcom fell 9 cents yesterday to $35.37,
also on the Nasdaq, and were unchanged after hours. The
stock's 52-week range is $26.80 to $37.50.
Qualcomm had appeared to suffer a grievous economic
blow last month when the Office of the United States Trade
Representative affirmed a U.S. International Trade
Commission order banning the import of new cell phone
models with the offending chips, which help phone
batteries conserve power. Last year, 83 million cell
phones using Qualcomm chips were sold in the United
States, according to In-Stat of Scottsdale, Ariz.
That trade decision marked a victory for Broadcom,
because it meant that Qualcomm or its customers would have
to reach a deal with Broadcom or give up potentially
millions of dollars in sales as a result of not being able
to stock their shelves with new models.
Smith R. Brittingham IV, a former ITC attorney, called
the stay a “significant development in Qualcomm's favor.”
“They can wait for the decision (from the court) and
they won't suffer in the meantime,” Brittingham said.
The companies that sought the stay included Kyocera
Wireless, Motorola, Samsung Electronics, Sanyo Fisher and
LG Electronics – all cell phone manufacturers – and AT&T
and T-Mobile, which operate wireless networks.
Broadcom and the ITC opposed the request.
The five-page order signed by Appeals Court Judge
Haldane Robert Mayer said the companies raised substantial
questions about the ITC's authority to ban their products
when they were not found in violation of rules and were
not named in the ITC case brought by Broadcom.
It said a stay, or postponement, of the ITC order on
their imports was warranted while Qualcomm's request for a
stay on its imports and redesigned chips and products was
Qualcomm said yesterday that it does not import the
chips, which arrive already installed in phones rather
“It's quite rare for the federal circuit to stay ITC
orders pending appeal,” said Lyle Vander Schaaf, a former
ITC attorney. “This is sort of a first-of-a-kind thing.”
Alex Rogers, a Qualcomm lawyer overseeing the case,
described the court order as a huge break for Qualcomm,
which has been battered in recent months in wide-ranging
legal battles with Broadcom.
“We're gratified,” Rogers said late yesterday.
Broadcom officials expressed satisfaction that the
court denied several Qualcomm requests.
“We look forward to an expedited process in the appeal
and believe that the stay will eventually be lifted for
all parties,” said David A. Dull, Broadcom's senior vice
president and general counsel.
Beyond any economic benefit to Qualcomm, analyst Cohen
said the stay would relieve pressure on Qualcomm to reach
a settlement with Broadcom during the appeal.
The action cast into some doubt the wisdom of a
decision by Verizon to cut a $200 million deal with
Broadcom to continue to use the infringing chips, because
it appears that its rivals will now be able to use them
without an agreement, analysts said.
Verizon spokesman Jim Gerace defended the company's
move, saying the deal gives Verizon the right to “many”
chips that were in dispute, including three others that
Qualcomm has been found to be infringing upon in a
“We wanted to remove the entire overhang, and that's
what we did,” Gerace said.
“It isn't accurate to say that we didn't get much out
of our $200 million, because that remains to be seen,” he
Qualcomm and Broadcom have been dueling in legal venues
nationwide over patent rights and business practices as
Broadcom attempts to crack the wireless-chip business
dominated by Texas Instruments and Qualcomm.
“What (Broadcom) was seeking to do in this ITC case was
essentially attack our customers and impose an exclusion
order against them – and then use that as leverage to
negotiate a settlement with Qualcomm on terms favorable to
them,” said Qualcomm attorney Rogers.