ITC ban detrimental to Qualcomm, wireless industry
Qualcomm has always had a reputation as a fierce defender of intellectual property rights--and for a good reason. A large source of the San Diego-based company's revenue is through its technology licensing.
But now the firm is in a precarious position thanks to yesterday's International Trade Commission ruling, which banned the import of new cell phones made with Qualcomm 1xEV-DO and WCDMA chipsets. The ITC says those chipsets infringe upon patents held by Broadcom. Those patents cover power management features in certain 3G wireless phones.
Exactly what handset models are affected by this order is still unclear. Qualcomm executives say that they believe the order applies to 1xEV-DO and WCDMA phones but not 1xRTT phones. Companies can still import phones that contain the questionable chips, as long as the models are already on the market. But no new phones that contain the chips can be brought into the U.S. This will likely have a huge impact on the fourth-quarter holiday handset buying season, unless Qualcomm can find a solution quickly.
Qualcomm's strategy for overcoming this situation is two-fold. In a conference call with analysts and media late yesterday, Qualcomm executives said they will vigorously fight the order. First, the firm will file for an emergency stay with the Federal Circuit Court and second, it will ask for a presidential veto.
But neither solution seems like a given. Getting a presidential veto for an ITC decision is admittedly a long-shot. The Bush Administration has 60 days to decide whether or not to veto the order. If it doesn't take action in that time frame, the opportunity to veto expires. According to Lou Lupin, Qualcomm executive vice president and general counsel, the White House rarely grants vetoes over ITC decisions.
Of course, the long-term ramifications of this ruling reach far beyond Qualcomm. Perhaps the additional support of handset makers like LG and Samsung as well as CDMA carriers such as Sprint, Verizon and Alltel will help spur a favorable ruling by the Circuit Court or a veto from the White House.
There also is the possibility of a workaround solution. Sanjay Jha, COO and president of Qualcomm CDMA Technologies Group says that the firm is looking for opportunities to design and implement new software but any solution is subject to operator acceptance.
Of course, the firm could start licensing Broadcom's patent but that appears unlikely since it believes that resolution would be detrimental to the firm's overall business model.
Qualcomm is in a precarious position and I suspect that few feel much sympathy for the firm. The company, which I consider one of the smartest and savviest in the industry, is also one of the least popular. Its customers and allies all have a love/hate relationship with the technology firm. Yesterday's ITC ruling has little to do with Qualcomm's popularity but I'm guessing many are celebrating its defeat today. -Sue
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