Qualcomm-Nokia Patent Fight Heats Up

Wireless communications company Qualcomm fired back at Nokia Thursday afternoon, calling the phone maker's $20 million payment "nominal" and filing an arbitration demand requesting that Nokia be forced extend a royalty agreement set to expire on April 9.

In announcing its payment, which involves WCDMA/UMTS patents granted to Qualcomm, Nokia said it believed the sum was fair and had no intention of extending the previous agreement, which would cost the firm much more than $20 million. Nokia added that it would make future payments, but offered no further details.

Qualcomm apparently isn't happy with that figure, and says that because Nokia is continuing to use the company's patents and agreeing to pay for them, that should constitute an election by Nokia to extend its license under the existing agreement. It is asking the American Arbitration Association to confirm that viewpoint.

The agreement in question, which covers CDMA technology utilized in Nokia handsets and PDAs, was signed in July 2001 and expires next week. It includes a provision that enables Nokia to extend it for another year to 2008. But it is Qualcomm that wants Nokia to exercise the extension.

The possibility that Nokia would not be willing to accept Qualcomm's terms arose as early as April of last year, when during a quarterly conference call to analysts, Qualcomm executives acknowledged disputes with Nokia existed, though the company at the time refused to explain them in detail.

Keeping Nokia tied to the previous royalty agreement has two big advantages for Qualcomm. The first involves money: Nokia would be obligated to pay for more than just the WCDMA patents referenced in Thursday payment, including a number of early patents that are due to expire.

Qualcomm claims the "nominal amount" of $20 million makes clear that Nokia has no plans to comply with the agreement, or pay a fair price for its technology. It equated Nokia's payment to a shoplifter.

"Nokia has no more right to unilaterally set a price than the average consumer has a right to walk into a store, take a product off the shelf, and walk out with it after leaving only a fraction of the established price on the counter," Qualcomm said in a statement. "Leaving some money on the counter does not make the act any less unlawful."

In Thursday's response, Qualcomm characterized Nokia's claim that it has been paying no more than %3 royalty fees on WCDMA handsets as a lie, saying the company is paying more than 3% to Qualcomm alone. The company even put together a document detailing Nokia's royalty payments to other patent holders, which came to light in a patent infringement case against Vitelcom, a Spanish wireless handset manufacturer.

The second advantage for Qualcomm relates to litigation. Under the current agreement, Nokia cannot assert patent claims against Qualcomm's CDMA products; after April 9, that is no longer the case. The company has reason to be worried, as Nokia has not been shy about its intention to protect itself against Qualcomm litigation by using its GSM, WCDMA and CDMA patent portfolios.

Both companies are already embroiled in litigation. Qualcomm added five additional claims to its patent infringement suit against Nokia earlier this week. Prior to that, Nokia filed suit in the Netherlands and Germany in March arguing that Qualcomm was attempting to get paid twice for use of its technologies.

"Nokia's current comments regarding Qualcomm's rates are simply statements of convenience," Qualcomm said.

In its arbitration filing, Qualcomm also said that it should have the right to immediately revoke all of Nokia's rights and licenses under the agreement if Nokia files suit after April 9. It's not yet clear what effect, if any, this would have on Nokia handset sales in the United States and abroad. Many of Qualcomm's patents are not viable in Europe.

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