ITC may ban all EVDO handset importation into the U.S.

The Qualcomm-Broadcom patent infringement case has reached a fever pitch, as a government panel mulls whether to ban all EVDO handsets into the U.S., which would effectively prevent new mobile content subscribers at Verizon Wireless and Sprint Nextel from using regular EVDO handsets during the next three years. In a rare public hearing at the International Trade Commission (ITC), Broadcom CEO Scott McGregor asked the ITC to ban all EVDO and WCDMA handsets imported into the U.S. that include Qualcomm basebands. The request is a proposed remedy to an ITC judge’s ruling last year that Qualcomm infringed on one of Broadcom’s patents. The patent covers technology that governs power usage within handsets, which is technology that Qualcomm has embedded in virtually all EVDO handsets, according to Broadcom. The ruling from last year included a suggested remedy that banned Qualcomm from importing any of the infringing (standalone) chips into the U.S. Broadcom, however, wants to extend that suggested ban to all EVDO handsets as well. Since the ITC’s directive is to counter-balance its decision with the interests of the public good, Broadcom’s proposed remedy will allow for the importation of EVDO-enabled PDAs and smartphones (defined as QWERTY keyboard-equipped handsets). Here’s the full scoop from ITC headquarters in Washington, D.C.: Broadcom: EVDO will be fine Broadcom’s lead counsel Robert Van Nest said that the injunction “will not harm consumers since consumers will still have a lot of choices, in particular and including EVDO on laptops, BlackBerrys and the new generation of smart phones made by LG, Motorola and Samsung.” (Notice no Nokia.) Broadcom witness and former chief economist for the FCC Simon Wilkie said that it “is critical to remember that the majority of users won’t be affected since most people only use their phones to talk or text other people—only 10 percent use phones for other services.” Wilkie goes on to argue that the majority of mobile users who do use EVDO services do so through data cards for laptops or on PDAs and smartphones. For those rare few that do have handsets and use mobile content services, Wilkie suggests that they switch to AT&T, which is moving toward an HSPDA network—much better than EVDO, Wilkie says. Broadcom CEO McGregor summed it up when he said that “there will be a number of presentations from Qualcomm and its supporters that claim ‘Judgement Day’ is upon the mobile industry if EVDO is affected, but EVDO is just another standard in a long line that includes WiMAX, HSDPA and others being finalized as we speak.” He added, “No EVDO networks would have to be turned off, no EVDO phones in use currently would stop working, only those phones set for importation to the U.S. would be affected.” Qualcomm: The ban would crush economies of scale Qualcomm’s chairman Irwin Mark Jacobs argued that “Broadcom’s view that the exclusion of EVDO phones from the U.S. market would not be extensive or disruptive is simply not true: EVDO handsets are the largest growing category of handsets.” Jacobs also noted that most do not have QWERTY keyboards. “The largest market for EVDO phones is the U.S., so the exclusion of non-QWERTY handsets could possibly destroy the market worldwide, because they will lose those economies of scale worldwide.” Jacobs added that Broadcom’s contention that data users are increasingly trending toward QWERTY keyboard enabled phones is flat-out false: “Just look at the iPhone. It doesn’t have any keys,” Jacobs quipped. What Broadcom really wants McGregor admitted that Broadcom would be thrilled if the ITC decided to ban the importation of all EVDO chips, whether standalone or in handsets, PDAs, data cards and smartphones. “To be candid, we would like to exclude all of them, all these products. We worked really hard with the ITC staff to find a reasonable remedy that is a compromise, it’s not full in Broadcom’s interest to do so, but we agreed to allow some of the infringing devices to continue to enter the U.S. and ask for some of the downstream revenue from those that do,” McGregor said. While some might argue the revenue from the allowed PDAs, smartphones and data cards would be worth the compromise alone, it’s also important to note that Broadcom must not appear to harm the “public good,” which is the deciding factor for imposing an injunction on products that make use of infringed patents. No difference between smartphones and others? Broadcom’s proposed remedy defines “smartphones” and “PDAs” as those handsets with full Qwerty keyboards, which leads to the exclusion of BlackBerry’s Pearl and other prosumer handsets that are beginning to gain traction in the U.S. Despite making this distinction, Broadcom argues that carriers market QWERTY phones in the same way that they market others. Broadcom exhibited a Verizon Wireless print advertisement that showed QWERTY phones LG enV and the Samsung u740 side-by-side regular handset LG Chocolate each for $99.99 and with identical service offerings. Indeed, the lines between these types of phones are blurring and form factors are becoming comparable, however, some data subscribers simply won’t want to stare down a QWERTY keyboard. Will an injunction threaten public safety? Broadcom, Qualcomm and their respective supporters have spent a great deal of time arguing to what extent an injunction on EVDO phones into the U.S. will negatively affect the public good, since according to ITC precedent, an injunction hinges on this factor following the positive infringement ruling. Qualcomm and five public safety agencies are set to testify today that first responders and other emergency workers will be prevented from communicating with each other. Broadcom’s witness, Frances Edwards a professor at San Jose State University who previously headed up that city’s emergency services, stated that Qualcomm’s public safety witnesses must not understand the injunction. Edwards argues that first responders rely exclusively on radios, not cell phones, because radio allows the information to be widespread, while cell phones are person to person. Secondly, agencies use cell phones but only for non-critical situations since they cannot rely on the commercial systems to be available—it’s well known that they become overloaded during times of crisis. Edwards also argued that Qualcomm has not presented a single case of any public service agency in the U.S. that uses EVDO networks via handsets. Edwards explained, “No agency is using a cell phone to look up warrants, photos or building plans, because a cell phone screen is simply too small.” Qualcomm’s chairman Jacobs completely disagreed with Broadcom and its supporters: Public safety agencies do use EVDO, he said. Jacobs admitted that EVDO is mostly used for mobile entertainment on the consumer side, which is not really necessary for the public good. However, “we need carriers to be successful commercially for these services to be there to enable public services too,” Jacobs said. Is denial of mobile entertainment a threat to the public good? Broadcom and its supporters argued that the only services that will be affected by their requested injunction on EVDO handsets will be Verizon Wireless and Sprint Nextel’s mobile music and mobile video offerings. Rep. Adam Shiff from California urged the ITC to consider the impact of the injunction on the recording industry, which has lost “tons of money” from illegal file sharing online, and the rise of EVDO networks ushers in a new era of streaming and downloading music that holds the promise of moving more consumers from illegal file sharing to legal services on the mobile phone. Other witnesses were not so bullish on the need to preserve the great public good of mobile content: Broadcom lead counsel Robert Van Nest argued that the injunction only effects mobile music and video, which “doesn’t rise to the level of any of the public interest cases the commission has ruled on before. You have to ask yourself: Does the streaming of music and television to the cell phone have enough public import” to trump these intellectual property violations? Where WCDMA fits in While Qualcomm has the market cornered on CDMA 1xrtt EVDO chipsets, GSM-based WCDMA has a broad swath of chipset vendors, including Broadcom, Texas Instruments, Ericsson and others. Broadcom lead counsel Nest pointed out that “Broadcom makes WCDMA chips, not EVDO ones, but if an injunction goes through, then you would assume more consumers will be selecting WCDMA phones, because there will be more choices there… And, yes, some of those will contain Broadcom’s technology.” Of course, that financial benefit is dependent on consumers choosing a GSM-based service service, and leaving their CDMA network provider. It is also noteworthy to say that if Qualcomm took a license or does in the future, then it will receive dividends from each EVDO handset sold, as well. Is Rev. A Qualcomm’s workaround? ITC’s investigative attorney Karen Norton noted that Broadcom’s patent is only good for another three years and during that time an EVDO Rev. A (single mode) chipset could come into fruition and attain mass adoption. Such a chip would not be subject to the proposed remedy since it only specifies multimode chipset technology from Qualcomm. Rev. A, carries both voice and data similar to 1xrtt, and as such, phones equipped with a Rev. A chipset could be imported into the U.S. Of course, right now the only Rev. A chipsets in use are Qualcomm’s and would be excluded from importation to the U.S. under this proposed remedy. Broadcom’s parting shot Broadcom CEO McGregor made a particularly poignant remark when he said, “I recognize that Qualcomm [is a] large corporation, but I do not think the patent infringement should stop at large corporations whose own statements imply that the infringement is so widespread a remedy is not an option—It can’t be that: If they infringe a little: I get a remedy; But if they infringe a lot: I don’t.” Expected resolution The ITC has set May 8, 2007 as the deadline for making a decision. At that time the White House will have 60 days to approve or disapprove any decision.