June 13, 2006

Qualcomm Inc. last week upped the ante in its long-running patent dispute with Nokia Corp. by filing a third lawsuit against the Finnish handset vendor.

This time the lawsuit was filed with the United States International Trade Commission, seeking to bar imports and sales of Nokia’s GSM phones into the United States.

Nokia said it would evaluate and respond to the complaint, but initially said it appeared that the technologies listed in Qualcomm’s complaint—GSM patents held by Qualcomm—were already covered by a cross-licensing agreement that is currently in effect and being renegotiated.

Qualcomm’s latest action appears to be a hit-them-where-it-hurts tactic while, presumably, negotiations between the two parties are ongoing to renew their cross-licensing agreement due to expire in April 2007.

Nokia’s market presence in the United States—crucial to its global battle with rival Motorola Inc.—is almost solely based on the company’s GSM phone sales. Shutting off the U.S. market to Nokia would stymie one of the handset vendor’s key strategic plans.

Timing also may be a significant factor in the Qualcomm filing.

A complaint now before the European Commission joined by Nokia, Broadcom Corp., Texas Instruments Inc., L.M. Ericsson, NEC Corp. and Panasonic Corp. that alleges unfair and unreasonable licensing practices by Qualcomm—which supplies either IPR licensing or chips to the complainants—over the W-CDMA technology that is GSM’s 3G upgrade path, may be entering the investigation phase by the EC.

Observers have remarked that the resolution of an unrelated appeal by Microsoft Corp. to the EC now frees up the commission to proceed with the investigation phase of the complaint against Qualcomm.

Also, Nokia’s new chief executive officer, Olli-Pekka Kallasvuo, took office on June 1. Paul Jacobs, CEO at Qualcomm, has said in recent interviews that his own ascendancy to the CEO position last July might have prompted at least the timing of the EC complaint.

The importance of legal issues and their outcome is critical to a company such as Qualcomm, which derives a significant portion of its revenue from IPR licensing.

Source: RCR