US ITC Bars Some Qualcomm Imports

The U.S. International Trade Commission barred the import of future models of phones using Qualcomm third generation chips, marking a blow to the vendor in its ongoing intellectual property battle with Broadcom.

New models of phones and personal digital assistants that hit the market after Thursday and that include certain Qualcomm chips can't be imported to the U.S., according to the order. The Commission decided to limit the ban to forthcoming phones because banning all phones with Qualcomm chips would have been against public interest and could hurt the economy and U.S. consumers, it said in a statement.

The decision to only focus on future devices was a compromise. Banning all phones would be a "great burden" to companies that may not have enough other products to choose from, the ITC said. However, banning only the chips and not actual phones wouldn't offer much relief to Broadcom since not many chips are imported. The compromise was designed to be acceptable to companies that buy the phones while still offering relief to Broadcom, the ITC said.

The ITC ruling follows a Commission finding late last year that Qualcomm had infringed on a Broadcom patent that relates to power management. The patented technology helps save battery life when a mobile phone can't find a wireless signal. Broadcom has said that essentially all third generation EV-DO (Evolution-Data Optimized) and WCDMA (Wideband Code Division Multiple Access) phones use it.

The ban follows a hearing before the ITC that happened on May 21. During the hearing, Broadcom and Qualcomm were allowed to argue the merits of a ban. Broadcom asked the commission to ban all handsets with Qualcomm's WCDMA and EV-DO chips, excluding smartphones, PDAs and laptop cards. Qualcomm asked the commission to consider the affect such a ban would have on consumers and emergency response agencies.

The ban is effective immediately and becomes final in 60 days.

Qualcomm said it plans to initially focus on trying to convince U.S. President George W. Bush to overturn the decision. Bush has 60 days to look at the ITC opinion and can decide to strike it.

That has happened only a handful of times and is unlikely, said Smith Brittingham, a lawyer with Finnegan, Henderson, Farabow, Garrett & Dunner, and a former investigative attorney with the ITC.

"It would be difficult for the president to criticize what the Commission has done in terms of the attempt to balance public interest factors," he said. "The amount of time the Commission has put on this particular remedy is unprecedented." The Commission held special hearings and investigated the matter thoroughly in an attempt to come to a balanced decision, he said.

The ruling is unprecedented for other reasons as well. Brittingham is unaware of an ITC case that grandfathers in existing products, allowing infringing products to continue to be imported, for economic reasons. In a few cases, the ITC has allowed infringing products to continue to be imported if a ban would threaten people's lives.

It sets a dangerous precedent, he said. "It raises the specter that in the future if you infringe a little bit on an unimportant or unsuccessful product, we'll keep you from doing that, but if you infringe a lot on a wildly successful product you can keep doing it," he said. "That seems to be a perverse incentive."

If the President doesn't strike the ruling, Qualcomm will have the option of appealing the decision in the Federal Circuit court. The company has a lot of faith in the Federal Circuit courts to rule on complicated patent issues, said Lou Lupin, general counsel for Qualcomm, speaking during a conference call to discuss the ITC ruling.

After the 60 days, Qualcomm can launch its appeal in the Federal Circuit and it can then ask for a stay of the ban pending the appeal. Brittingham can only remember one time that an ITC order has been stayed pending an appeal. "It's an uphill battle for Qualcomm," he said.

In a statement, Broadcom said it was pleased with the ITC ruling.

The ITC case is just one of many between the two companies in their ongoing argument over patent violations. Last week, a jury found that Qualcomm had infringed on three other Broadcom patents, awarding Broadcom US$19.6 million in damages. Qualcomm plans to challenge the ruling.

The companies have also recently dismissed other patent infringement cases against each other.

Qualcomm faces legal challenges from other camps as well, in an indication of how much these companies believe is at stake in the wireless industry. Qualcomm is separately embroiled in a series of legal maneuvers with Nokia, which claims that the chip maker charges too much in licensing fees. A licensing agreement between the two expired in February and they have yet to hammer out a new one.

Copyright © 2007 IDG Communications, Inc.

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