Tuesday, November 08, 2005


IS QUALCOMM HAVING A "REARDEN STEEL" MOMENT? It seems that every time you turn these days, Qualcomm gets drawn into a new dispute over its CDMA/WCDMA patent portfolio. It has gotten to the point that 6 major companies (Ericsson, Nokia, Broadcom, NEC, Panasonic and Texas Instruments) have recently turned to the European Commission (EC) to claim that Qualcomm is "stifling" the phone chip trade by engaging in "anti-competitive conduct" by not licensing their technology in a "fair, reasonable and non-discriminatory" way, pursuant to the WCDMA standards, established previously by wireless companies.

The tension surrounding Qualcomm's patents has been building since earlier this year, with a growing number of wireless equipment makers becoming increasingly peeved at the market power and royalties that come with Qualcomm's near-monopoly grip on CDMA. Qualcomm collects a fee for almost every CDMA-based phone sold and a growing number of GSM-based handsets. Qualcomm is now claiming that next-generation versions of GSM have borrowed patented aspects of its CDMA portfolio to boost connection speeds, increase network efficiency and capacity, and facilitate multimedia services.

In May, wireless chipmaker Broadcom sued Qualcomm for infringement of patents for audio, video and data services and filed a complaint with the International Trade Commission alleging unfair trade practices. Two months later, Qualcomm returned the favor by suing Broadcom for infringement of patents relating to cell phone semiconductors.

Now that wireless equipment companies have decided to turn up the heat on Qualcomm by filing their complaint to the EC, Qualcomm has responded by filing a complaint for patent infringement against Nokia, who also happens to be one of Qualcomm's largest customers. A pretty bold move, if you ask me. The patents asserted against Nokia are the same ones that Qualcomm asserted against Broadcom in the earlier litigation. And judging from their previous behavior, there is a fair chance that more litigation is in the pipeline.

This will definitely be one of the more significant patent disputes in the wireless industry (this one could potentially dwarf the RIM/NTP dispute). In the end, odds are that everyone will eventually settle and move on, but for the time being, this dispute will provide plenty of drama for months to come.

And maybe it's me, but the situation in the EC reminded me of Rearden Steel's dispute with the government and other steel and manufacturing companies in Atlas Shrugged ( i.e., the "Anti-dog-eat-dog Rule" and the "Equalization of Opportunity Bill"). Is Qualcomm a modern day equivalent of Hank Rearden? Beats me, but in the meantime, the parallelisms are hard to ignore . . .

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