Nokia and Qualcomm agree to ceasefire, consolidate cases

Don’t get too excited.
That’s the basic message from Nokia Corp. and Qualcomm Inc. – yes, one thing they can agree on – which have famously been jousting to defend the honor of their business models, patent portfolios and the damsel in distress, the cellular industry.
The two antagonists essentially said Friday they were taking steps to approach issues that might lead to substantive discussions to resolve their major disputes. In a nutshell, those are the qualifiers-within-qualifiers that produced a media blip last week and had two financial analysts seeing different shades of gray on the stand-off.
The two companies said last week they had agreed to not initiate any new patent-related litigation, to put some current cases on hold and to consolidate their ongoing arbitration proceedings with a patent-licensing case in U.S. District Court in Delaware due to begin July 21.
Potentially at stake – and at the heart of the two companies’ disputes – is hundreds of millions of dollars in licensing fees that Qualcomm claims Nokia owes; Nokia’s own cost structure for licensing patents; a settled business relationship between the largest handset vendor and one of the largest handset chip makers; and, conceivably, predictable growth in the global 3G market.
Ongoing battle
The two sides have been skirmishing in courts worldwide for the past year over patent licensing and other matters after a 2001 cross-licensing agreement expired in April 2007. Nokia filed a complaint against Qualcomm in the Delaware case in August 2006 charging that the latter was not licensing GSM and UMTS patents on fair and reasonable terms and that the chip maker was not entitled to injunctive relief relative to “essential” patents in technology standards.
The new agreement does not extend to all ongoing cases, however, including cases at the U.S. International Trade Commission and the European Commission. And executives at both companies have cautioned that their basic stances have not changed.
Headlines last week prematurely forecast a step toward resolution of the two companies’ crucial cross-licensing dispute.
“The Delaware case is one step which could help the companies reach common ground on certain issues that are in dispute,” Nokia spokeswoman Anne Eckert told Reuters over the weekend. “However, it is unlikely the case will resolve the overall licensing negotiations between the companies.”
Differing views
Analyst Ittai Kidron at Oppenheimer said the agreement raised more questions than it answered.
“While the consolidation appears to streamline the process, we don’t believe the two parties are any closer to resolving the disputes,” Kidron wrote in a note to investors today. “Furthermore, the contractual discussion in the Delaware court would only be a first step of many that would be required to resolve the patent dispute.”
In contrast, analyst Mark McKechnie at American Technology Research said the developments were “positive news.”
“The Delaware consolidation marks a ‘base hit’ in Qualcomm’s struggle to get Nokia to pay royalties in W-CDMA, but the timing and terms of an outcome are uncertain,” McKechnie wrote today.
“Consolidated but not simplified,” Kidron concluded today.