Federal judge finds Qualcomm violated aspects of injunction


Like squabbling politicians, Broadcom Corp. and Qualcomm Inc. issued dueling press releases yesterday on a federal judge’s ruling that Qualcomm had violated certain conditions of an injunction issued last year related to W-CDMA patents owned by Broadcom.
Qualcomm said it would appeal the ruling.
Two analysts said today they did not see a material impact on Qualcomm’s business.
U.S. District Court Judge James Selna rejected some claims made by Broadcom, but is still considering whether to hold Qualcomm in contempt of the December injunction over the allegation that it continued to offer infringing chips for sale after the injunction was issued. The case applies only to the United States market.
Judge Selna’s ruling remained temporarily sealed, but according to both companies he cited Qualcomm for contempt of the injunction on several points. Selna ruled in May 2007 that Qualcomm had violated three Broadcom patents relating to W-CDMA and last December issued an injunction against Qualcomm’s unauthorized use of those patents.
According to Broadcom, Judge Selna ruled yesterday that:
–Qualcomm continued to use and support infringing W-CDMA chips and must cease;
–Qualcomm failed to pay Broadcom royalties on infringing QChat products and must pay Broadcom gross profits from those products (Broadcom must return incorrectly calculated royalties);
–Qualcomm must pay its rival’s attorney’s fees in the case.
Qualcomm’s acknowledgement of the contempt ruling mentioned “contempt” only once, when it noted that the judge had rejected “most grounds for contempt.”
“While the Court found that Qualcomm had not violated the order on most of the issues raised by Broadcom, and while the Court declined to enjoin Qualcomm from continuing to make and sell W-CDMA chips that implement a design around, the Court did find certain violations,” according to Qualcomm’s press release.
“We would buy Qualcomm on any pullback (in stock price) related to the Broadcom ruling,” wrote analyst Mark McKechnie at American Technology Research. “While embarrassing, this ruling does not have a material one-time or ongoing impact to Qualcomm’s business. We estimate up to $50 million in penalties to Qualcomm but limited impact to Qualcomm customers.”
“From a big-picture perspective, we believe nothing has really changed from the initial ruling,” wrote analyst Maynard Um at UBS. “Although Qualcomm will appeal, the violation appears to be an interpretation of parts of the judge’s initial order. Qualcomm believed it had to pay royalties to Broadcom and thus could provide service and support (but) the judge did not agree and royalties paid to Broadcom will be returned. Qualcomm also believed (that its) QChat design-around was not subject to royalties (but) the judge did not agree and Qualcomm must pay Broadcom.”

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