RealTime IT News

Nokia Accuses Qualcomm of Double Dipping

Handset vendor Nokia announced today that it has asked courts in Germany and the Netherlands to rule that telecommunications technology vendor Qualcomm isn't entitled to royalties on intellectual property for which it has already collected royalties from a third party.

Specifically, Nokia is asking the European courts to rule that Nokia doesn't owe Qualcomm royalties on sales of phones containing chipsets manufactured by Texas Instruments , because Qualcomm has already collected royalties on those chipsets. Nokia's claim is based on a legal principle of patent exhaustion.

"What we're challenging is whether or not this practice of double royalty is legal," Nokia spokesman Bill Plummer told internetnews.com.

Qualcomm said Nokia's position with regards to exhausted patents is "demonstrably false." In a statement, Qualcomm also noted that Nokia has implicitly admitted as much since, in the past, it has paid royalties to Qualcomm on handsets that incorporate chipsets supplied by Texas Instruments.

Moreover, Qualcomm has brought suits of its own against Nokia for patent infringement in the United States, Germany, France, Italy and China and has brought a complaint before the U.S. International Trade Commission. Qualcomm said Nokia's actions today "are merely the latest in a series of attempts by Nokia to avoid or delay a determination on the merits that Nokia's GSM/GPRS and EDGE subscriber products infringe Qualcomm's patents."

One reason Nokia may have brought its action in Europe is that the exhaustion principle was dealt a blow by federal courts in a 1992 decision explained in this amicus brief brought by the Electronic Freedom Foundation in an unrelated case.

But Plummer denied Nokia is venue shopping. "The exhaustion principle is a fundamental principle in European law, and the courts we have gone to have a strong understanding of the definition and application of the principle, and that's why we've chosen to go there," he said.

Current Analysis analyst Avi Greengart told internetnews.com that the suit "goes to the heart of how you allocate intellectual property in core technologies that serve markets where multiple parties have invested in and own parts of the technologies."

Hanging over these suits and countersuits like an appointment with the dentist is the fact that a large part of the cross-licensing agreements between the two companies will expire on April 9, 2007. Qualcomm's intellectual property is largely in CDMA technology, while most of Nokia's is in GSM.

While Nokia has said it will no longer manufacture handsets based on CDMA technology, its new-generation phones based on WCDMA still contain some CDMA technology. The companies are currently negotiating an extension of the agreements so that both sets of technologies can be incorporated into new handsets.

The new cross-licensing agreements, if they are reached, will determine how much royalty Nokia would have to pay Qualcomm for its portion of intellectual property contained in those next-generation phones.

Plummer confirmed that negotiations on this issue are ongoing but said it would be inappropriate to characterize how they are proceeding.

"We remain committed to negotiating in good faith toward a mutually acceptable arrangement that takes into account the relevant intellectual property rights of both parties and the value of those rights in terms of the total," he said.

He accused Qualcomm of failing to live up to its commitment to license its technology "on fair, reasonable and non-discriminatory terms."

Both parties have a lot to lose if the negotiations fail: Nokia, which could lose significant margins on revenues, and Qualcomm, which has a business model based on licensing technology. "Everyone still needs to remain in business; it's just a matter of what the terms are," said Greengart.