Nokia and Qualcomm Continue to Duke It Out in Court

Posted by: Jennifer L. Schenker on March 04

Nokia celebrated two court victories over Qualcomm in the last seven days but the larger battle between the two companies over intellectual property and royalties is far from resolved, keeping the future shape of the mobile industry hanging in the balance for some time to come.

On Mar. 3, a High Court in Britain ruled that all of Qualcomm’s asserted GSM patent claims against Nokia are invalid. And on Feb. 27, the U.S. International Trade Commission decided against Qualcomm’s appeal of an earlier ruling that Nokia does not infringe Qualcomm GSM patents.

Not surprisingly Nokia painted its victories as “further evidence of Qualcomm overstating its position as an industry innovator and demanding compensation for patents that are not relevant or valid.” Similar patents, asserted against Nokia GSM products, are at issue in separate cases filed by Qualcomm against Nokia in China, Europe, and the U.S.

The two sides have agreed to temporarily stay these patent infringement lawsuits pending an upcoming ruling by a Delaware court. The two sides have been deadlocked in royalty negotiations ever since a previous contract between them expired on Apr. 9. The Finnish phonemaker claims Qualcomm is demanding too high a price for a new contract covering W-CDMA, the technology underlying third generation technology, and the companies have been forced to resort to arbitration.

A Delaware court is expected to make a ruling in September but the dispute won’t end there, says Rick Simonson, Nokia’s chief financial officer. The ultimate outcome, which could add or subtract hundreds of millions of dollars in profits for either company, has to hashed out between them regardless of how the Delaware court rules.

The Delaware judge “will not set a future rate for W-CDMA,” says Simonson. If the two companies can not agree on a rate, “we will still continue in court, country by country, arguing what that rate is,” he says. Clarification from the Delaware judge on certain points “will at least make our continuing litigation more efficient,” Simonson adds. Lawyers for both sides are probably already planning to buy bigger boats with their fees.

But the outcome isn’t just about making lawyers richer and Nokia or Qualcomm poorer. At the heart of the Delaware case and a European Commission investigation is whether Qualcomm's licensing terms are "fair, reasonable, and non-discriminatory." This legal principle, often applied in intellectual-property cases, says that owners of essential patents should not be able to hold an industry hostage by charging exorbitant prices for access to the technology.

This is especially important when companies have had their patents incorporated into an industry standard, as was the case with Qualcomm and W-CDMA. The Delaware judge will make a ruling on the licensing terms. Depending on what the court decides, Qualcomm could have much more to lose than what it charges Nokia.