Qualcomm-Nokia Feud Raises Standards, Patent Questions, Industry Players Say

Qualcomm filed a complaint about Nokia with the U.S. International Trade Commission (ITC) it announced late last week, the latest salvo in a battle between the companies over use of Qualcomm CDMA wireless technology. The complaint stems from alleged unfair trade practices by Nokia, which the chipmaker said imported and sold mobile handsets and other wireless devices and components infringing parts of 6 Qualcomm patents. Qualcomm asked the ITC to bar Nokia import of those handsets, and also sought an ITC cease and desist order to ban sale of devices and components already imported.

The ITC request is Qualcomm’s 3rd legal action against Nokia in under a year, including one filing in the EU. Nokia claimed in a release Mon. that “most of the patents… are believed by Nokia to be covered by Qualcomm’s prior agreements to license on fair and reasonable terms and are thus not properly subject to a request by Qualcomm to the ITC.” Nokia also said the repeated legal actions indicate Qualcomm’s recognition that the patent and intellectual property world has changed fundamentally since the early 1990s, when it landed many of its CDMA patents, and that the U.S. chipmaker no longer holds the upper hand.

Qualcomm probably does have the upper hand, said Tim Scannell, Shoreline Research wireless analyst. There’s “not really any basis” to Nokia’s resistance to Qualcomm’s intellectual property demands, he said: “It could be a nuisance-type deal” where Nokia looks to test its limits within the chipset and component space. Remembering that Qualcomm once made handsets and changed its model to its great advantage, Scannell said Nokia may be testing the waters as to which of its own technologies are viable in case the handset market takes another downturn as it did in 2004. That said, Nokia doesn’t have much of a chance and must know it, he said, but its unwillingness to settle with Qualcomm could be “more positioning than anything else,” to show investors it’s being aggressive.

“Nokia is testing the depth of the investment Qualcomm is willing to make to defend its patents,” said Susan Eustis, chief analyst for Wintergreen Research. Each side is acting in a way it deems rational, she said -- Nokia fighting what it sees as patent hegemony and Qualcomm defending its patents on principle. Ultimately, she said, Qualcomm will win because it regularly has been afforded “broad patent protection… worldwide.”

The case is as much about CDMA’s efficient use of spectrum as anything, said patent attorney Bruce Sunstein. Most GSM technology is de facto moving to CDMA due to this, he said, and Qualcomm is essentially responsible for CDMA licensing. Sunstein said the bar is high for patent owners participating in standards-making, with 2 overarching rules: (1) The company must license all commerce, and (2) it must be licensed at a “reasonable” rate. Nokia can say Qualcomm overcharges “with a straight face,” but Qualcomm’s counter- argument, likely involving the cost of research and development and innovation, will be more persuasive, he said.

The companies’ real fight won’t be over infringement, but damages, Sunstein said, because there’s very little history of precedent for standards-based communications technology. It’s in both parties’ interests to settle, he said, but managerial ego could drag the case out even longer. In such situations, damage claims suddenly expand, he said, citing the RIM-NTP case. Qualcomm often is accused of charging too much, but the bottom line is they hold the patent, and will likely make good money in this fight, Sunstein said.