Qualcomm’s Hail Mary

I know Paul Jacobs didn’t go to Boston College, he’s taller than Doug Flutie, and it’s the wrong religious metaphor. Still, Qualcomm’s strategy for dealing with the ITC decision seems like a “Hail Mary” play.

Thursday’s press release responding to the decisions was posted after business hours. It begins:

Although all of the Commissioners agreed that a disruption in the supply of EV-DO and WCDMA handsets would negatively impact the public interest and public safety, the remedy fashioned by the majority does not protect the public interest or public safety. QUALCOMM will ask the Federal Circuit Court of Appeals to stay enforcement of the ITC's order and ask the President to veto the ITC's decision. QUALCOMM maintains that Broadcom's patent is invalid and not infringed.

Hmmm... If the patent is invalid and not infringed, shouldn’t there be an action in a court of law to win a determination to that effect?

The press release continued:

Having chosen not to develop an EV-DO solution and having failed in the marketplace to generate interest in its WCDMA products, Broadcom brought this litigation against QUALCOMM but has used it as a vehicle to attack the U.S. cellular industry, even though Broadcom has never accused any wireless manufacturers or operators of infringement or any other wrongdoing. The public injury that would result from the remedy imposed by the Commission is grossly disproportionate to any benefit flowing to Broadcom from such broad enforcement of a recently-purchased patent. Broadcom does not make or sell EV-DO chips, and Broadcom's claims that it can supply WCDMA products for the United States have been rebuffed by WCDMA operators in submissions the operators made to the ITC.

Qualcomm lost by a 4-2 vote — 2 commissioners did not favor a ban. Last October, when the ITC administrative law judge ruled against Qualcomm, it praised the judge for not recommending a “downstream” remedy; I can’t verify this, because the judge’s report does not appear to be on the ITC website. Still, the ITC enforces its orders via an import ban, unlike a Federal court that imposes fines or other remedies.

Its press release continues:

QUALCOMM and the U.S. wireless industry will seek an emergency stay from the Federal Circuit and a Presidential veto of the ITC's ruling on several grounds, including that Broadcom's ITC action will harm U.S. consumers, impact public safety and national security and harm the U.S. economy by stunting mobile broadband deployment. By punishing completely innocent cellphone manufacturers and wireless operators that were given no opportunity to contest Broadcom's infringement claims, the ruling also raises serious issues of due process and fairness.

The Verizon and Sprint websites are silent, although CTIA (representing all the carriers) says:

CTIA-The Wireless Association® believes today’s decision by the International Trade Commission will cause enormous undue harm to tens of millions of American wireless consumers, and urges President Bush to veto the ITC importation ban. The ITC decision unnecessarily decreases competition, and denies millions of consumer’s access to innovative wireless broadband products. This decision flies in the face of public policy that encourages the availability of broadband services and products, and could have the unintended effect of impairing the wireless industry’s efforts to improve communications in areas such as public safety. Consumers should not have to pay the price for a legal debate that could be settled by other means.

Whilte the UT reports Sprint Nextel as being focuced on a work-around, it quotes Kyocera Wireless (Qualcomm’s former handset division) as supporting the veto, as does Verizon:

“This is a bad order for the industry, and it's a bad order for wireless consumers,” said Verizon spokeswoman Nancy Stark. “It would freeze innovation.”

Still, this seems like a longshot effort; as one lawyer’s site says, “a presidential veto is extremely rare.”

The UT and others note that Qualcomm is working on a work-around, but it will take time. Since they lost before the judge almost eight months ago, I don’t know why they didn’t start a crash project back then. The UT also says the patent expires in three years, suggesting Qualcomm would like to stall until then.

Meanwhile, Broadcom is just waiting for Qualcomm to settle — presumably one that would give it access to Qualcomm’s portfolio:

We simply want to be adequately compensated for the use of our intellectual property. To that end, we have made it clear to Qualcomm that we are open to discussions regarding the potential for licensing of our patent. The ball is in Qualcomm's court.

Technorati Tags: Broadcom, patent infringement, Qualcomm