Patent fracas blurs Nokia, Qualcomm management focus

Ongoing legal disputes over mobile phone patents between Nokia Corp. and Qualcomm Inc. are consuming much executive management time, generating substantial lawyer fees and, if they escalate, could affect handset development and prices, experts warn.

Defending intellectual-property (IP) rights through litigation "is the nature of the business," said Chris Jones, senior analyst with Canalys.com Ltd. in Reading, England. "But in the case of Nokia and Qualcomm, unfortunately, it's been taking up too much management time."

On Monday, Nokia responded to a patent lawsuit filed by Qualcomm in U.S. District Court for the Eastern District of Texas by filing a counterclaim against the U.S. company.

Over the past two years, Qualcomm has filed 11 lawsuits against Nokia, according to a Nokia spokeswoman.

The initial Qualcomm lawsuit filed in Texas deals with three patents related to the downloading of applications and other digital content over GPRS (General Packet Radio Service) or EDGE (Enhanced Data Rates for GSM Evolution) networks, two technologies for speeding the transmission of packet data in GSM (Global System for Mobil Communications) networks.

Nokia contends that Qualcomm's patents are invalid and, in addition, has asked the Texas court to stop Qualcomm from using six Nokia implementation patents used in Qualcomm's MediaFlow and Brew technologies.

Standards bodies divide patents touching the technologies they define into two categories: those essential to a standards-compliant product, and those that only cover a particular implementation of the standard.

This is the second counterclaim filed by the Finnish manufacturer.

On April 2, Nokia filed a counterclaim in the U.S. Western District of Wisconsin, accusing Qualcomm of infringing six of its patents relating primarily to multiband and multimode technologies that reduce handset and chipset size, cost and power consumption. The counterclaim came in response to Qualcomm's initial lawsuit filed in the same court over two patents covering speech encoders used in certain GSM phones to digitize audio signals for transmission.

So far, the patent infringement lawsuits against Nokia "haven't taken the vendor's eye off the ball when it comes to developing and bringing handsets to market," Jones said but warned of "too much management time being focused on these litigation cases."

Nokia is in "close discussions" with its partners and customers to keep them informed of how the company is dealing with litigation, the spokeswoman said. "Our view is that they respect our right to protect our patents and our business, and to take the action we need to take," she said.

Andrew Gilbert, president of Qualcomm Europe, argues that the company's licensing model has created greater competition in the market by allowing vendors without GSM patents to enter the market and compete more easily. The model, known as "pass through rights," lets manufacturers obtain the rights to use numerous GSM patents already licensed by Qualcomm -- in addition to the company's own CDMA (Code Division Multiple Access) patents -- instead of having to strike separate royalty deals with each GSM patent holder.

"We think our model drives down prices of royalties and thus the price of handsets," he said.

But Gilbert conceded that the current litigation is a cost factor. "Clearly, we'd rather be spending the couple of hundred million dollars on innovation," he said.

That sum could easily rise as the chronology of the legal battles between Qualcomm and Nokia suggests:

On Oct. 28, 2005, Nokia and five other companies, including Broadcom Corp. and Telefonaktiebolaget LM Ericsson, filed a complaint to the European Commission over Qualcomm's high royalty rates, among other issues. The Commission has yet to make a decision.

On Nov. 4, 2005, Qualcomm filed a lawsuit against Nokia in the federal court of San Diego, California, over GSM patents. The court put the case on hold, pending further information.

On May 24, 2006, Qualcomm filed a patent infringement lawsuit against Nokia in the U.K. over two GSM patents. The trial is expected later this year.

On June 9, 2006, Qualcomm filed a complaint against Nokia with the U.S. International Trade Commission (ITC) over six GSM patents. The company later withdrew three, and the ITC has meanwhile put the case on hold.

On Aug. 9, 2006, Qualcomm filed a GSM patent infringement lawsuit against Nokia in Germany. The trial is set for September.

On the same day, Nokia filed a case in Delaware, claiming that Qualcomm breached its written contractual obligations to license essential GSM and 3G (third-generation) patents on fair, reasonable and non-discriminatory (FRAND) terms.

On Oct. 4, 2006, Qualcomm filed a patent infringement lawsuits against Nokia in France and on Oct. 16 in Italy over GSM technologies.

On Feb. 2, 2007, Qualcomm filed three complaints in China over GSM patents.

On March 19, Nokia filed complaints against Qualcomm patents in Germany and the Netherlands.

On April 2, Qualcomm filed the two cases against Nokia in Wisconsin an Texas.

And on May 24, Nokia filed a counter-claim against Qualcomm in response to the lawsuit filed in Wisconsin.

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