Nokia, Qualcomm ‘stand down’ for upcoming case: Rivals seek court’s expertise in contract law over expired agreement

NOKIA CORP. AND QUALCOMM INC. HAVE ENDED THEIR ARBITRATION PROCESS over the renewal of an expired cross-licensing contract and agreed to consolidate the major issues with a FRAND case in Delaware Chancery Court, to avail themselves of that court’s reputation for speed and expertise in corporate contract law.
FRAND stands for fair, reasonable and non-discriminatory terms, required by standards-setting bodies for the licensing of patents declared “essential” to a standard. The original Delaware court case was filed by Nokia in August 2006, when it complained that Qualcomm was not licensing certain GSM and UMTS patents on FRAND terms. Qualcomm rejected the claim, but both sides have agreed to air the consolidated cases in Delaware.
Vice Chancellor Leo Strine – essentially a judge in Delaware Chancery Court – convinced both parties to consolidate their arbitration proceedings into the FRAND case as a way to move forward, according to Don Rosenberg, Qualcomm’s general counsel.
Meanwhile, the two parties – at odds over the provisions of a patent cross-licensing agreement that expired last April and the details of a new agreement – have agreed to not pursue new litigation and put other cases on hold pending the outcome of the Delaware proceedings, set to begin July 21.
That news prompted widespread speculation that a resolution could be at hand for the two companies often simultaneously compete and cooperate with each other. Under their expired agreement, Nokia had paid Qualcomm an undisclosed sum each year that analysts speculate might be as much as $500 million annually.
The Finnish company has argued that the expired agreement did not properly value its own patent contributions and that Qualcomm’s royalty rates are too high. Qualcomm has argued that its rates are reasonable and that Nokia has “by its conduct” elected to extend the expired agreement.
Last week, Nokia spokeswoman Laurie Armstrong said that “the Delaware case is one step which could help us reach common ground on certain issues in dispute. However, it is unlikely the case will resolve the overall licensing negotiations.”
In contrast, Rosenberg said last week that his company sought a final resolution in Delaware Chancery Court and was optimistic that would be the case.
Rosenberg said that Qualcomm will argue that Nokia “has elected extension by its conduct” – that is, by continuing to ship products that rely on Qualcomm patents, the Finnish handset maker has invoked a clause in the expired agreement that effectively renews it. Nokia argues that, based on the expired agreement’s provisions, it has until this year to make up its mind, according to Armstrong.
The Delaware case, however, is complex and many aspects of it will remain out of view because the arbitration process included confidential information. One public document, however, is a “stipulation and order” – essentially a court-approved agreement on certain ground rules. It reflects that the sides have agreed to “stand down” on new and pending cases (with some exceptions) and, among other things, excludes from the Delaware case discussions of patent infringement or validity. It also qualified how the Delaware case may affect litigation in other countries.