Nokia-Qualcomm Settlement Boosts Sharing, Ends Costly Patent War

By Tatum Anderson for Intellectual Property Watch
Nokia and Qualcomm, the two mobile phone equipment manufacturers engaged in a costly patent war that spanned three years and three continents settled their differences last week. However, questions still remain over the principles they fought about in courts around the world.

The companies agreed a new intellectual property contract and to cease all lawsuits, including an important case at the Chancery Court of Delaware due to start last week. Nokia also has agreed to withdraw a complaint about Qualcomm to the European Commission made in 2005.

The new deal enables the companies to share many more technology patents than before. Qualcomm’s technology will be licensed to Nokia, while Qualcomm will be allowed to incorporate Nokia’s technology within its mobile phone components and companies that buy those components will pay royalty fees rather than Qualcomm.

Disagreements had flared up after the companies could not agree on the terms for a new deal replacing a 15-year-old-agreement which enabled them to licence each other’s technology.

By April last year, Nokia stated that the old deal had expired and many of the old handset patents were now fully paid-up and not eligible for royalty payments. It said it would pay much less in royalty payments for the newer patents to reflect, in its opinion, Qualcomm’s relative contribution to the development of technology used in mobile devices, especially 3G.

Qualcomm had argued that its intellectual property portfolio fully justified the payment it had asked for.

Now, however, Nokia is believed to have won its battle for cheaper royalty fees and Qualcomm has got its hands on lots of crucial technology that will be used in future mobile devices. Who actually won is still unclear.

“Who won entirely depends on the amount of money, which the parties are keeping to themselves,” said Ilya Kazi, a partner at patent firm Mathys and Squire. “My guess is it was a draw, a reasonable commercial settlement which both can live with and if so, this means common sense and commercial pragmatism won, a good result.”

However, sources close to Nokia admit that many of the principles on which the company fought its battles are unresolved.

Before it received favourable commercial terms, Nokia had argued that certain principles should be adhered to within standards bodies, and therefore by the mobile industry.

In its European Commission complaint, for instance, it argued that Qualcomm had failed to meet its commitments to international standard bodies around the world and that it should licence its technology on fair, reasonable and non-discriminatory (FRAND) terms.

Along with other manufacturers, it also accused Qualcomm of anti-competitive conduct in the licensing of essential patents for mobile technology called 3G and allegedly excluding competing manufacturers of chipsets for mobile phones from the market and preventing others from entering.

Indeed, the company continually raised the idea of FRAND and the need for a more precise definition of FRAND within the European Telecommunications Standards Institute (ETSI), the European Commission, the World Intellectual Property Organization, and finally at Delaware, in a court specialising in contractual cases.

As Tim Frain, director of IPR, Regulatory Affairs, at Nokia put it in 2006: “Each essential patent owner can develop its own idea of how FRAND should be applied in practice. This fragmented approach means that when there are many essential patents and many essential patent owners, the overall licence cost, or “cumulative royalties”, are more uncertain.”

In addition, Nokia raised other legal issues. It asked the Delaware court to issue an order that prevents companies from imposing injunctions against others when those patents have been declared essential to a standard. Nokia argued that companies lose the right to impose injunctions when they enter standard bodies.

That came about in response to Qualcomm’s decision to file several lawsuits alleging patent infringement at the International Trade Commission (ITC) which has the potential to impose injunctions on companies it finds guilty of patent infringement. (Actually Nokia countersued and filed its own complaint with the ITC).

Other Complaints Outstanding

But although Nokia has withdrawn from such proceedings, it looks as if other members of the industry have not.

The European Commission investigation into Qualcomm looks set to continue. Nokia was only one of the six companies – Broadcom, Ericsson, NEC, Panasonic Mobile Communications and Texas Instruments – to file separate complaints on Qualcomm to the Commission.

Several say they have not withdrawn their complaints. “We will continue to co-operate with the Commission in its investigation,” said a spokesperson at Texas Instruments. “We intend to push forward with our complaint in the EU,” a spokesperson for Broadcom told Intellectual Property Watch.

Tatum Anderson may be reached at info@ip-watch.ch.