InterDigital loses key patent case

On Friday, InterDigital lost an effort to enforce four key 3G patents on Nokia’s cellphones.

Of course, IDCC will appeal. Company supporters hope IDCC can win a favorable settlement — as it did with Samsung.

I don’t see a settlement in the cards. As the world’s largest cellphone maker — and thus the largest royalty target — Nokia has been playing hardball all the way. Of course, in 2008 Nokia settled its war with Qualcomm, on very favorable terms.

My sense is that Nokia places a much greater value on the Qualcomm patent portfolio — or at least considers it impossible to work around all their IP without getting some sort of license.

In the face of a precedent that (if sustained) could begin to destroy its business model, IDCC shares lost 23% of their value on Monday and were essentially flat Tuesday. This seems a little optimistic.

Barron’s reports:

Hilliard Lyons analyst Tom Carpenter maintains his bullish stance on InterDigital despite the setback at the ITC. Carpenter notes that Nokia could still lose on appeal, which could trigger a licensing deal between the two companies. He thinks Nokia could still end up paying IDCC 35 cents per handset, or as much as $300 million over five years.

Even if the company fails to win on appeal, Carpenter contends IDCC’s patent portfolio could make it a potential acquisition target for Research in Motion (RIMM), Cisco (CSCO) or even Nokia. The potential appeal: IDCC holds a large number of patents on LTE, the 4G transmission technology that has been adopted by most wireless carriers.

While I understand the large pool of IDCC bulls, I don’t get this, either. I guess it all depends whether you consider this court case a fluke, or representative of the quality of the rest of its patent portfolio.

Qualcomm's other shoe

After 10 years in which Symbian never supported CDMA or any Qualcomm chipsets, why did Qualcomm join the Symbian Foundation last week? As the EE Times reports, the other shoe dropped this morning:

BARCELONA — Both ST-Ericsson and Qualcomm Inc. have revealed partnership programmes with Nokia based round reference platforms that will use the Symbian Foundation's software.

Qualcomm's deal focuses on developing UMTS mobile devices, initially for North America, that will be based on the S60 software on Symbian OS, running on the San Diego, California- based chip maker's latest MSM7xxx-series and MSM8xxx-series chipsets targeting wireless broadband.
…
The companies, for long arch rivals due to long standing patent infringement law suits that were finally settled last year, say the first mobile devices based on the collaboration would be expected to launch in mid-2010 and be compatible with the forthcoming Symbian Foundation platform.

Nokia currently has a very limited relationship with US carriers. “UMTS … for North America” means selling S60 smartphones either to AT&T or T-Mobile, competing for shelf space with the iPhone or gPhone respectively. Certainly, outside the US the Nokia smartphones are sold side-by-side with the iPhone by the same carriers.

EE Times plausibly argues that this cooperation is because Nokia last summer finally resolved its patent fight with Qualcomm. In November, analysts told EE Times they thought it unlikely that Nokia would go so far as to buy chips from Qualcomm.

It seems particularly odd that Nokia would start its partnership with Qualcomm with W-CDMA phones — given its sells hundreds of millions worldwide — but perhaps it is just trying to prime the pump. Presumably the next step is to use QCOM chips to sell more CDMA phones in the US, although so far Nokia is outsourcing that work to ODMs.

On a somewhat related note, Qualcomm CEO Paul Jacobs was quoted in Barcelona by CNBC as saying demand for smartphones remains strong. However, unlike his predecessor (Jacobs père), Jacobs fils is a perpetual optimist.

TI and InterDigital ally against Qualcomm

In connection with GSM Mobile World Congress, TI and InterDigital have made announcements reflecting an alliance between them. The new development is helping InterDigital make its transition from being an IP licensing company (that a few rivals have called a patent troll) to a firm that makes 3G chips to subsume its IP.

Not surprisingly, InterDigital is more enthusiastic about the alliance than TI is. (It’s fun to read these tea leaves — as someone who ran a little company that did joint press releases with big companies — the message is pretty clear). InterDigital issued a press release trumpeting its W-CDMA (i.e. HSPA) modem option and how it works with the the TI OMAP 3 and OMAP 4 processors:

"We are pleased to be the wireless modem supplier for TI's advanced OMAP 3 platform. Our high performance HSPA modem offers instant mobile broadband connectivity, accelerating the development of compelling new applications," stated Mark Lemmo, Executive Vice President, Business Development for InterDigital. "Available as a 3G modem option, InterDigital's SlimChip MID Module has been pre-integrated with the Zoom OMAP34x-II MDP, allowing mobile application developers and OEMs to fully exploit the rich capabilities of this platform."

The press release goes on to quote Bill Crean, Strategic Marketing Manager, as praising “ The flexible architecture of the OMAP 3 platform allows it to easily connect to InterDigital's SlimChip MID Module.”

Meanwhile, the TI press release allows InterDigital space with other vendors who praise themselves and the OMAP 3. The only mention of InterDigital comes from InterDigital itself:

"We are pleased to be a wireless modem supplier for TI's advanced Zoom II mobile development platform. Our high performance HSPA modem offers instant mobile broadband connectivity, accelerating the development of compelling new applications," stated Mark Lemmo, Executive Vice President, Business Development for InterDigital. "Available as a 3G modem option, InterDigital's SlimChip MID Module has been pre-integrated with the OMAP34x-II MDP, allowing mobile application developers to fully exploit the rich capabilities of this platform."

Eleven months ago, blogger Vijay Nagarajan predicted on his own blog (and later on Seeking Alpha) that an alliance with InterDigital would help TI:

TI is the market leader for 3G application processors with its OMAP product-line. But it does not currently have a standard 3G baseband solution. The company’s OMAP roadmap merely has placeholders for future merchant ICs with 3G baseband. Its mammoth market share comes from custom chips it develops for Nokia and Motorola among others. This position is, however, challenged by the multiple sourcing trend that the handset vendors are now adopting. Left behind in the 3G baseband race, not only by Qualcomm but also by Broadcom, Infineon, InterDigital etc, TI is finding itself losing mobile share. The aggressive strategy and the niche product positioning by the competition is not helping its cause either.

So although Qualcomm has a unique combination of technologies, its rivals are able to ally to produce a competing combination. (We call this “open innovation.”) I don’t know how this will impact Qualcomm’s profitability in the long term, but it seems as though the increased competition isn’t going to help.

Korea 3G finally shifts to W-CDMA

For 2G, Korea was exclusively cdmaOne, the only country in the world where this was true. Operators quickly got into 3G by offering cdma2000 on their existing frequencies, but the government licenses specified W-CDMA for new 3G frequencies that (IIRC) were compatible with the Japanese selections. As with anything else in Korea, each round of choices was designed to protect (or at least help) the export efforts of Korean companies.

The website Cellular News reported Thursday that in Q4 2008, the total W-CDMA subscribers in Korea finally passed those for cmda2000: 16.5 million vs. 14.9 million. For me, this marks the end of an era for Qualcomm’s original success story in Korea, marred only by the periodic royalty complaints.

British standards for essential 3G patents

As decided last December, the ruling by the High Court of Justice for England and Wales on Nokia v Interdigital Technology Corp (2007) will have a major impact on how patents are licensed (and enforced) in mobile phone standards. Although the ruling is technically only binding in the UK, I believe the findings will impact the various patent lawsuits involving InterDigital (IDCC), Qualcomm (QCOM), Nokia (NOK), Broadcom (BCOM) and others holding (or seeking to avoid paying royalties on) mobile phone patents.

InterDigital declared to ETSI that various patents were essential for implementing the W-CDMA standard, but (as with all ETSI declarations) this self-determined essentiality was not independently verified. My interest here is not the SD telecom book, but a series of papers I’m doing with Rudi Bekkers on W-CDMA (aka UMTS) patents.

In this case, Nokia sued to have 29 InterDigital patents declared not-essential to W-CDMA. Nokia had previously won in English courts in an earlier case involving InterDigital’s GSM patents. This is all part of a larger strategy by Nokia to get out of paying any royalties to InterDigital.

Of the 29 “essential” patents, Nokia dropped its challenge to one patent, InterDigital conceded that 21 were not essential, did not defend three more, leaving four patents contested at trial. The judge, Sir Nicholas Pumfrey, ultimately ruled that only one patent was partially essential.

When the ruling by Sir Nicholas Pumfrey was released Dec. 21, 2007, InterDigital spun the ruling as a victory, but clearly InterDigital ended up telling the world (including current and potential licensees) that 27 of 28 patents patents declared essential to W-CDMA actually aren’t.

The findings are all covered in the ruling by Lord Justice Pumfrey, but I learned what it really meant from a forthcoming law review article:

Myles Jelf and Michael Stevenson, “Nokia v IDC: an essentially English judgment,” Journal of Intellectual Property Law & Practice, 2008, Vol. 3, No. 7, pp. 457-460. doi: 10.1093/jiplp/jpn084

The authors are not a party to the case, but attorneys at Bristows in London; they do a commendable job of explaining the findings in a style accessible to an IP-knowledgeable engineer or businessperson. A preprint copy of their article was posted May 21 to the journal website.

The article notes the contribution of the decision in deciding essentiality, providing a process for its evaluation, and even procedural precedents about to run such litigation. To quote the authors:

The overall approach adopted by the Courts appears to be as follows:

• Start out with the patent in one hand and the relevant standards in the other.
• Consider the correct construction of the patent, entirely independently of the standards, through the eyes of the skilled person.
• ...
• Consider to what extent the claim construction put forward corresponds with what is specified in the standards ...
• ...[D]ecide whether what is properly required by the standards falls within the language of the claim, as understood by the skilled person.

But (the authors argue) the contribution of the ruling goes beyond the process of determining essentiality to setting a standard for essentiality and providing procedural precedents about to run such litigation. I defer to the article for a more complete discussion of the ruling’s interpretation and implications.

Before he was promoted to become Lord Justice of Appeal last November, Pumfrey gained a reputation for handling complex patent cases. He drew from degrees in both physics and law that he earned before becoming a barrister in 1975, as well as three years as junior counsel in the UK patent office. But he was known more broadly for his expertise in IP law, ruling (for example) last year on a trademark case involving a transvestite beauty pageant.

Tragically, Pumfrey died three days after the ruling was published of a massive stroke he suffered on Christmas Eve. The judge, aged 56, apparently had a weight problem. Pumfrey was well-regarded for his specialized expertise and will be missed by his peers.

Photo credit: Sir Nicholas Pumfrey, from the Times of London January 3, 2008 obituary.

Qualcomm's W-CDMA/cdma2000 chipset

Once upon a time, the Europeans and Japanese that strategically allied to make a common W-CDMA standard in hopes of pre-empting the Americans and dominating the world, but that didn’t happen.

The whole global roaming argument seemed like a nonstarter, as a few people said at the time. Sure, Europeans wander around within the EU and perhaps to Mediterranean beaches, but how many go to the US or Asia? How many Americans travel enough outside North America to care about GSM (W-CDMA) coverage? I can’t imagine it’s more than 5%.

But without a single standard, there was an interest in having dual-mode phones — more from the CDMA subscriber sides than the GSM side, since there are lots of W-CDMA only countries and only a few that are exclusively or dominated by cdma2000. Thus for years, Qualcomm has been planning and now offering MSM chips that support both the W-CDMA and cdma2000 variants of 3G technology.

Reading the Financial Times last month, I saw a brief (and glowing) review of the Blackberry 8830 “World Edition”, which uses the Qualcomm chips to provide a dual mode capability. It also got a generally positive review by InfoWorld. and from CNET. Someone said that there have been other dual mode phones (presumably by LG, Samsung or Sanyo), but if there have, they have not been visibly marketed in the US.

The original US reviews were with Verizon, but now Sprint is advertising that this phone is “coming soon.” So both companies have an attractive alternative to the claims of AT&T (née Cingular) promoting world phones.

Technorati Tags: 3G, CDMA, Qualcomm, W-CDMA