Saturday, June 30, 2007

Qualcomm rejects Broadcom settlement offer

Bloomberg reports: Broadcom is seeking $6 for every handset sold with a Qualcomm chip that was found to infringe a patent for a battery- saving feature, Broadcom spokesman Bill Blanning said June 28. Qualcomm rejected the offer, made earlier this week, and instead offered to pay $100 million and agree that the companies would give each other royalty-free access to patents.

"Broadcom is asking for a royalty rate for one patent greater than the rate we ask for our entire portfolio," Qualcomm spokesman Bill Davidson said in an interview. "We rejected it because it's an extraordinary request."

Bloomberg also noted: Broadcom's remedy is "grossly out of proportion to the value of this particular patent," Blecker wrote in his reply. Bloomberg News obtained copies of both documents.

Qualcomm's offer of royalty-free access to its patents is similar to one the chipmaker has with larger competitor Texas Instruments Inc. of Dallas. Qualcomm generates the bulk of its royalties by charging handset makers less than 5 percent of the wholesale cost of a handset.

Royalties generated $636 million of Qualcomm's earnings before taxes, or about 67 percent of its profit for the quarter that ended in March.

The ITC ban is opposed by the largest U.S. wireless carriers and emergency-response agencies. The decision is being reviewed by U.S. Trade Representative Susan Schwab and possibly by President George W. Bush, with a final decision on whether to approve the ITC ruling due before Aug 7.

Bloomberg did report:

"The per-handset royalty we're asking for is less than the royalty Qualcomm demanded from Broadcom" during a lawsuit earlier this year over video-compression patents, he said. Qualcomm lost a trial on that issue, Blanning said.

The WallStreetJournal online wrote:

But Qualcomm executives said the $6 per cellphone would translate into a royalty rate of 30% on its chips, a percentage far above the industry norm. Broadcom's real motivation is to "destroy Qualcomm's business model," argued Louis Lupin, Qualcomm's general counsel.

Within the WallStreet article one has:

Though Qualcomm is known for wielding patent power in cellphones -- charging royalties of close to 5% of the price of many handsets -- the ITC ruling and another jury verdict have given Broadcom negotiating leverage in entering the market for handset chips.

Those who remember Jaffe and Lerner's Innovation and Its Discontents may recall their favorable treatment of Qualcomm. Of course, the H.264 business probably would not have been mentioned. Jaffe and Lerner's characterization of "patent history" was cartoonish and two-dimensional, and we are seeing the real world of patent litigation as the saga of Qualcomm and Broadcom unfolds.

There was of course no justification for Jaffe and Lerner to get the history of both Edison and the Wright Brothers wrong. See Is the Jaffe/Lerner Analysis of Patent Law Correct?


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