Tuesday, August 14, 2007

Throw Lou under the bus

How is Qualcomm going to deal with investor dissatisfaction over its recent legal troubles? Monday its general counsel, Lou Lupin, resigned for unspecified personal reasons.

A graduate of Stanford law, Lupin had been with the company since 1995 and general counsel since October 2000. But after last week’s terrible legal news — not only the final ITC decision but a stringing rebuke over misleading a Federal court — it was clear something had to happen. As the LA Times reported:
“It’s not a big stretch to guess that Lou took the hit,” said Mark McKechnie, a telecommunications equipment analyst with American Technology Research. “Qualcomm was a bit embarrassed the court held against them essentially for misconduct.”
Whether he fell on his sword or was pushed, Lupin’s action gives Qualcomm’s CEO some badly-needed breathing room.

As an added bonus, Qualcomm named a famous interim counsel from its bench: Carol Lam, the famous (and somewhat controversial) former U.S. Attorney for the Southern District of California. Fortunately for Qualcomm, Lam today is best known for being fired by the Bush administration (thus winning sympathy with Bush-hating judges) and not for anything she did or did not do as U.S. Attorney. Every U.S. news story seemed to mention this, as in the UT account:
Carl Tobias, a professor of law at the University of Richmond, said Lam, 48, will be a benefit to Qualcomm because she is well-respected in the legal community. He said many see Lam's ouster as U.S. attorney – part of the Bush administration's controversial firing of eight U.S. attorneys – as a “raw deal.”

“Mostly she enjoys a really good reputation,” he said. “That fact could help improve the confidence of the judges.”
Judicial sentiment notwithstanding, the change of counsel is not going to change Qualcomm’s dependence on enforcement of patents and patent royalties as the cornerstone of its IP-based business model, nor the determination of its various major rivals — Broadcom, Ericsson, Nokia or TI — to reduce or eliminate paying such royalties.

In particular, nothing in the change of counsel (whether with Lam is the interim or permanent replacement) will make Nokia any more willing to negotiate an end to the current standoff, in which it has been shipping CDMA phones without paying Qualcomm royalties for the past 4 months.

While a change in counsel is not a change in management or a change in Qualcomm’s business model, it could change three things: Qualcomm’s legal strategy, how well that strategy is executed, and the advice that the top executives are getting. While Lam isn’t a patent attorney, perhaps she will end the rash of miscalculations (or poorly executed courtroom strategies) that brought the company to this point.

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