Qualcomm Inc. threatened to forbid Nokia Corp. from using its patents forever, the strongest blow yet in the ongoing battle between the mobile technology companies.
At the heart of this threat is a new assertion by Qualcomm that turns the current negotiations between the companies on its head.
"We don't believe we actually use their patents," said Lou Lupin, general counsel at Qualcomm. "It hasn't been an issue up until now but there's a serious question about whether in fact we use any of their patents. It's likely an issue that will be hard fought over the next months."
Nokia and Qualcomm have been locked in a bitter renegotiation process over a patent licensing contract that expires Monday. Nokia asserts that Qualcomm's contributions to current mobile standards has decreased such that Nokia ought to pay less to license Qualcomm patents. As part of the negotiations, Nokia has relied on its own patent portfolio, arguing that Qualcomm has as much to lose as Nokia, if not more, if a new contract isn't signed, because Qualcomm would lose the rights to use Nokia's intellectual property.
"Nokia retains the right to ask Qualcomm, and its customers, to respect Nokia's patents rights," the company said in a statement Thursday. "The retained rights have significant value, and Nokia believes it is well positioned to offset any claims Qualcomm may make against Nokia products to claim more money in license fees."
Qualcomm appears to be pursuing a new strategy in stating that in fact it may not need any of Nokia's intellectual property.
Actions by both companies on Thursday indicate that they also have very different opinions about what they think should happen if Monday passes without renewing the contract. Qualcomm requested that the American Arbitration Association rule that if Nokia continues to sell phones using WCDMA (Wideband Code Division Multiple Access) technology past the contract expiration, it constitutes a decision by Nokia to extend the existing contract. Qualcomm also asked the arbitration court to rule that such an extension prohibits Nokia from suing Qualcomm.
Qualcomm also asked for a ruling that would entitle it to cut off Nokia's right to license Qualcomm patents, if Nokia does sue Qualcomm for patent infringement after Monday. "If they continue to use our patents ... we believe there are obligations that come along with that. If they don't meet those, then they're in breach of our agreement and we're entitled to damages and we could terminate their rights to our patents forever," Lupin said.
Nokia has a different expectation for the Monday deadline. "The bottom line is, it's our expectation that as this is a normal course of business, we will go forward," said Bill Plummer, vice president of external affairs for Nokia, in an interview. Nokia on Thursday paid Qualcomm US$20 million in royalties for patents covering the second quarter of 2007. Plummer called it a "good faith" payment that demonstrates that Nokia is "trying to contribute to the ability for both parties to go forward."
Qualcomm sees Thursday's payment from Nokia in a different light. "That $20 million, from our perspective, they picked that number out of the air," Lupin said. "It has no legal significance. They don't have the right to do this. They can't name their own price and decide to pay us."
The figure is an estimation Nokia made based on Qualcomm's agreement with international standards bodies to license its intellectual property on a fair and reasonable basis, Nokia's Plummer said. It doesn't take into account the amount that Qualcomm owes Nokia for using Nokia's patents, he said.
Qualcomm made the filing with the arbitration court because the companies specified in their contract that disputes relating to the agreement have to be arbitrated by this particular association, Lupin said. Such an arbitration process could take around a year, he said.