Qualcomm loses powerful ally in ITC dispute



Qualcomm loses powerful ally in ITC dispute

In a surprising move, Verizon Wireless yesterday announced that it had entered into a licensing deal with Broadcom Corp. so it can continue to import and sell devices that are the subject of a patent dispute between Broadcom and Qualcomm.

As we've reported, the International Trade Commission earlier this summer ruled in favor of Broadcom and issued a ban on the import of new cell phones made with Qualcomm 1xEV-DO and WCDMA chipsets. The ITC said those chipsets infringe upon patents held by Broadcom.

Verizon has agreed to pay Broadcom to use the disputed chip technology in its phones. The carrier says it will pay Broadcom a rate of $6 per 1xEV-DO handset, PDA or data card sold after the effective date, subject to a maximum payment of $40 million per calendar quarter and a lifetime maximum payment of $200 million.

I talked to Nancy Stark, spokeswoman at Verizon Wireless, about the news late yesterday and she said that the carrier decided to go this route so that it could take its customers out of the middle of this patent dispute. "We made sure our supply chain wouldn't be interrupted," Stark says.

I'm sure other carriers are concerned about their supply chain. Although Qualcomm is downplaying the impact of this licensing deal, calling it a "positive development," this news has some huge implications for the San Diego firm. I would suspect that other wireless carriers will follow Verizon's lead and announce similar deals with Broadcom. After all, the fourth-quarter holiday buying season is approaching and U.S. carriers need to be able to secure 3G-enabled handsets for their holiday portfolios. Added to this mix is the tremendous popularity of Apple's iPhone. I'm sure that AT&T's competitors are anxious to add the latest consumer-friendly, tech-savvy 3G devices to their lineups so that they can compete with the iPhone frenzy. Keeping their customers from fleeing to other operators will likely provide enough incentive for operators to pony up some cash in exchange for handsets with the disputed chip technology.

If more operators go the Verizon route and ink deals with Broadcom, it will certainly negatively impact Qualcomm's ability to get a presidential veto on the ITC ban. Qualcomm, of course, argues that Verizon's deal with Broadcom doesn't solve the problem and that there are still millions of consumers that will be impacted by the ban. The San Diego firm is also playing the critical public safety card, saying that public safety will be negatively impacted by the ban. I think this latest move by Verizon makes Qualcomm's long-shot chance at a presidential veto of the ITC ban even more unlikely. -Sue