Qualcomm The First Company To Endure Wrath Of Patent Reform

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adotas_small_011.jpgYesterday, semiconductor company Qualcomm was the first in what could be a long line of companys subjected to new obstacles based on pending patent reforms.

The International Trade Commission ruled that millions of new mobile phones containing certain Qualcomm semiconductors may be barred from being imported to the U.S. This was the decision issued s designed for Sprint, AT&T and Verizon wireless networks will never make it to American soil.

The ruling was based on the infringment Qualcomm made on a key patent belonging to competing chip company Broadcom. This technology is used in Broadcom’s design of chips for advanced 3G, or third-generation, smart cellphones.

Qualcomm is looking to immediately appeal not only to the federal court, but to President Bush as well. Bush trade representative Susan C. Schwab has 60 days to veto the ruling.

Nancy Stark, a Verizon Wireless spokeswoman claims that without a void on the ruling “irreparable damage” may be done to the economy.”It’s going to freeze innovation.” she said.

Lehman Brothers telecommunications industry analyst Tim Luke does not believe the ruling will disrupt handset supplies. Investors “will be looking for a settlement between Qualcomm and Broadcom,” he said. He also stated that perhaps Qualcomm may find a way to fix their technology as to not infringe upon the Broadcom patent. Qualcomm’s “fundamental business is really strong and they’ll have to think of a way to work around this,” Luke said.

Broadcom has filed complaint that Qualcomm is not paying licensing royalties for the power management technology. This issue was brought up on a Qualcomm conference call to investors in which they stated that they have been debating with Broadcom to establish royalty rates, however the rates in current negotiations are so “prohibitive” that if paid would “undermine Qualcomm’s business model”.

However, the I.T.C.’s ruling will not affect all of Qualcomm models. Anything on the market by June 7 will be permitted whether or not they are using technology that is patented. This ruling will only affect the newest of Qualcomm models.

This case is the first example of what is sure to be an ongoing debate over patent vs. potentcy. Should there be leniancy based on a company’s reach or should new legislation demand that company’s cut their loses and work together.

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