Qualcomm IP battle hots up

Nokia, for its part, claims Qualcomm has never even requested a royalty for the technologies it now cites, clearly perceiving the new suits merely as a response to the EU complaints. Qualcomm’s other accusers before the EU, along with Nokia and Broadcom, are Ericsson, Texas Instruments, NEC and Panasonic, and some further action against them may be anticipated.

The arguments from the counsels for both companies will drone on, and no clear decisions from courts or the EU can be expected for a couple of years or more, but several broader issues are clear, which are significant for Qualcomm’s future success and for the whole shape of the wireless equipment business.

Qualcomm needs to rethink its patent policy in the light of new market conditions, but is making it clear it will not do this readily. Instead it is gathering IP in all key wireless technologies and seeking to broaden its patent base to the extent that it is almost impossible for major handset and equipment makers to avoid it.

Spreading itself more thinly may also be an insurance policy in case it is forced – or deems it commercially necessary – to reduce its royalty levels, perhaps to the five per cent level advocated by Nokia and Ericsson in 3G. A wider portfolio would compensate in revenue terms for reduced charges. Of course, the critical question for Wi- MAX is whether Qualcomm has any patents up its sleeve – or will be able to acquire some – that would enable it to charge licensing fees on 802.16 products.

A rethink of royalties

Some carriers may complain about Qualcomm’s grip on its market but it is also important to remember that the chipmaker has an understanding of operator needs that is unique in the silicon industry, and it is applying this to broader markets too. Advanced technology and a canny insight into carrier priorities mean that, whatever the hostility to Qualcomm’s patents policies, its expanding range of platforms will continue to appeal and generate the major source of its revenues, chip sales. The FLO multimedia OFDM technology and the mobile broadcasting system based upon it, MediaFLO, are good examples of highly advanced engineering targeting an important new operator opportunity. And the adoption of the uiOne user interface products by O2 is a sign that it can attract the attention of non-CDMA service providers too. In the end, generating sales of its key platforms in previously closed GSM markets is more important to growth than extending royalty payments.

Some compromise on royalties policy is almost inevitable because Qualcomm badly needs to generate sales for its new WCDMA chips, in a market where it does not have the incumbent position and must challenge Texas Instruments and others. Bringing charges into line with the giants of the GSM community, but holding patents in more areas, would be one approach. This rethink will become more critical to the cellular equipment industry because of two factors – the challenge from broadband wireless alternatives like Wi-Fi and WiMAX, which so far are not heavily burdened with patent charges and may succeed in keeping patent payments under control; and the need to develop very low cost GSM and CDMA handsets for emerging economies, which will be impossible if royalties remain at current levels.