Saturday, April 14, 2007

Qualcomm’s #1 cheerleader

Because of its large patent portfolio and its aggressive assertion of its patent portfolio, Qualcomm has long been a controversial firm in the telecom industry. To some, it’s no better than Rambus. To others, it’s another successful example of an open innovation business model.

Given this controversy, who is Qualcomm’s #1 cheerleader? That is to say, who is the most biased, one-sided, unrealistic in covering Qualcomm — a mouthpiece for Qualcomm’s positions? I write this both as someone who had limited training in journalistic ethics (during my brief stint as a wanna-be and then small-town reporter), as someone who tries to teach business students to do a complete and balanced analysis, and of course as someone who’s been studying Qualcomm for more than a decade.

Let me rule out some possibilities. First, I want to disqualify the CDMA Development Group on a technicality. Just as the Association for Competitive Technology has been decried as a Microsoft front group, the Open Group was an auxiliary to Sun Microsystems, and the USB Implementors Forum is effectively a subsidiary of Intel, so we expect CDG to usually do the bidding of the main firm in the CDMA ecosystem. No surprise or deception there.

Second, I don’t think the Union-Tribune fits either. Bruce Bigelow, Jennifer Davies, then (since early 2004) Kathryn Balint seem to have consistently sought to get both sides of the major Qualcomm stories. Certainly they show less bias than the hometown papers of some of Qualcomm’s enemies in its IPR fights, such as the OC Register (when it covers Broadcom) or some of the European press (covering Nokia, Ericsson or in particular the EU antitrust case). There’s a difference between having easy access to one side and convincing readers that there is only one side to a controversy. (Still, none of these compare to the drumbeat of biased and often inaccurate reports on Qualcomm royalties from the Korea Times.)

Here the nominees are:
Of course, readers of the blog will know who I vote as the least biased. The balloting is rigged, because I declare a unilateral right (on my own blog) to pick my own favorite.
Still, based on my unbiased assessment of bias, the winner (by a landslide) is George Gilder. Not for his seven-month old Forbes column “Qualcomm Still Rules Wireless Roost,” but for his column Friday in the Wall Street Journal.

In his column (registration required), Gilder writes:
The 10-year war mounted by EU bureaucrats and Europe's communications giants against America's leading wireless technology innovator, Qualcomm, is now reaching a climax. …

A decade ago, with its single, unifying cellphone standard known as GSM, Europe led the world in mobile communications. But threatened by Qualcomm's CDMA breakthrough, the Europeans launched a ferocious political and PR offensive, hoping to scare off potential customers of the young American firm. The technology was all hype, they said; it "violated the laws of physics."

When Qualcomm proved them wrong and its mobile technology deployed across the U.S. and Korea, Europe went to plan B. They excluded the Americans from the standards process for third-generation, or 3G, technology, battled in the courts, and mandated their "new" system for all of Europe. But in fact, the new European and Japanese standard, called Wideband CDMA, was essentially a copy of the American CDMA system.
And it goes on from there.

Gilder’s hyperbolic EU-bashing has an element of truth. Certainly, there are elements of European industrial policy that resemble (as always) French industrial policy, the kind that brought us Compagnie des Machines Bull, Alcatel and Sanofi-Aventis. But there are aspects of Qualcomm’s IPR business model that resemble Microsoft or Rambus (as well as less controversial examples like Dolby).

Nokia is offering Qualcomm 20¢ on the dollar because it claims Qualcomm is “unfair,” as do many other companies writing Qualcomm large royalty checks (whether in Europe, Korea, Texas or Irvine). Even if one dismisses Nokia’s claims outright and assumes Qualcomm is blameless on all charges (which seems unrealistic), there would still be an important policy question to be answered: if Rambus is illegal conduct, and Qualcomm is legal, what’s the line in between? IP law here butts up against “unfair competition” of antitrust law.

This is hardly unique to Qualcomm, as (the Mickey Mouse copyright extension act notwithstanding) case law is how the American system typically answers such policy dilemmas. If copying is legal in Sony v. Universal Studios, but illegal and MGM v. Grokster, that leaves a lot of specifics to be resolved in reconciling the protection rights of copyright holders and the fair use rights of buyers.

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