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Our patents are bigger than yours, Nokia tells Qualcomm

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Analysis This week Nokia puts $20m of patent royalties into the pot for Qualcomm for the coming quarter, in the hope of mitigating any damages that might be awarded against it in a patent dispute with Qualcomm over UMTS patents.

It triggered this payment to Qualcomm just hours after the US wireless intellectual property giant filed yet more patent abuse cases against Nokia in the US.

In all Qualcomm filed two new cases, one in the Eastern District of Texas, Marshall Division over two patents and another in the Western District of Wisconsin for infringement of three patents.

The first case relates to the downloading of applications and other digital content over a GPRS/EDGE wireless data network and the other to speech encoders used in certain models of GSM cellphones. Qualcomm is trying to get Nokia phones off the shelves immediately by applying for an injunction. There are already similar cases pending in the UK, France, Germany, Italy and China.

The problem is just how much Qualcomm charges for its patents, and its charging practices were thrown into sharp relief in its legal actions against Broadcom. In fact it might be said that the company settled with Broadcom so that the harsh light of day would not be shone onto its habit of charging more for its patents that other essential patent holders feel they can sensibly charge for theirs.

The Nokia payment is an amount that Nokia thinks is fair, not the old royalty amount that it pays under the agreement with Qualcomm that ends this week, and until a trial says otherwise, it's pretty unlikely that any judge will punish Nokia with an injunction, when it is prepared to pay money to Qualcomm to continue its use of patents.

Nokia said that the payment announced this week does not extend, and is not related to, the old agreement, rather, it is based on the licenses that Qualcomm has agreed and provided through the European Telecommunication Standardization Institute (ETSI).

"As we continue to negotiate the new cross-license agreement, Nokia views this payment as fair and reasonable compensation for the use of relevant Qualcomm essential patents in Nokia UMTS handsets during the second quarter of 2007. Nokia believes that Qualcomm's patent portfolio is concentrated in the United States, and that it has few or no alleged UMTS patents in many of the countries in which Nokia has substantial UMTS handset sales.

When Qualcomm's early patents become paid-up and royalty-free on April 9, 2007 Qualcomm's share of all patents relevant to Nokia UMTS handsets will significantly decrease", said Rick Simonson, chief financial officer, Nokia.

Nokia intends to make similar payments in the future and will announce such payments when they are made.

The whole point from the Nokia point of view is that its patents are at least as essential for running a UMTS cellular network as Qualcomm’s and it doesn’t see why it should pay anything at all, and that the payments should be offset. As a result it wants a legal battle and it wants it to be as public as possible. If Qualcomm fails to settle before that happens it is likely that any settlement in Nokia’s favor, even if it is just some of what Nokia wants, will almost automatically extend to Qualcomm’s other 140 licensees.

Qualcomm has hinted that it may separate out its intellectual property into a separate company, and focus on chip design and chip sales, something that it appears to have no peers at in CDMA wireless technology. The Nokia statement also had a veiled threat from the big Finnish handset maker, saying that it retains the right to ask Qualcomm, and its customers, to respect Nokia's patents rights, which have significant value.

"It is important to note that as of April 9, 2007, Qualcomm's entire chipset business becomes exposed to Nokia's extensive GSM, WCDMA and CDMA patent portfolios and Nokia will use all rights from those portfolios when defending itself against any new Qualcomm litigation", a Nokia statement said. ®

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