Bush administration upholds phone ban in Qualcomm patent dispute

Published 7 August 2007

Bush administration upholds import ban on phones which contain Qualcomm chips; DHS review finds no justification to oppose the ban on public safety grounds

The Bush administration upheld an import ban Monday on phones which contain Qualcomm chips, further threatening the introduction of new handsets. U.S. trade representative Susan Schwab said she was adhering to a long practice of declining to overrule the U.S. International Trade Commission (ITC) unless conditions were “extraordinary.” The executive branch has overruled the ITC only five times, most recently in 1987. In June the ITC banned imports of new, high-end phones which run on Qualcomm chips, raising doubts about the introduction of some models from carriers and manufacturers such LG Electronics and Samsung Electronics. The ITC ruling came in patent dispute between Qualcomm and rival chipmaker Broadcom. The commission found that Qualcomm infringed on a patent that protected Broadcom’s technology to conserve battery power. Qualcomm said it would ask a federal appeals court to overturn the ban. CEO Paul Jacobs said in a statement that he was disappointed but added that Qualcomm will pursue “all legal and technical options available” to limit the impact on consumers.

AP reports that the ban applies to the high-speed EV-DO and WCDMA network technologies, which allow users to more quickly surf the Internet and download music and video. Schwab acknowledged worries that the ban may slow the introduction of 3G mobile phones but said Broadcom’s licensing deals with “two major wireless carriers” would soften the impact. Verizon Wireless, whose phones run on Qualcomm chips, struck a deal with Broadcom last month to pay for each phone it sells that carry one of Qualcomm’s patent-infringing chips, ducking the ban and depriving Qualcomm of a powerful ally in its legal fight. Neither the U.S. trade representative nor Broadcom would identify the second carrier to strike such a deal. “We cannot comment on the other carrier at this time, but what is clear is that the market has responded with relevant companies finding ways to accommodate the ruling through agreements with Broadcom,” said Broadcom attorney David Rosmann. A spokesman for Sprint Nextel, whose phones also run on Qualcomm chips, did not immediately respond to a phone message.

The Qualcomm story has a homeland security aspect not unlike the Blackberry story of last year: You may recall that a McLean, Virgnia-based patent-trolling company called NTP sued Waterloo, Ontario-based Research in Motion (RIM), the maker of Blackberry, for patent infringement. DHS filed a statement with the court saying that issuing an injuction against RIM would undermine the national security of the United States becasue most of the officers of companies running U.S. critical infrastructure use Blackberry for communication. There were fears that imposing a ban on Qualcomm chips would adversly affect public safety agencies, but a DHS review found that there no justification for overturning the ban. The decision, announced after markets closed, was widely anticipated by investors and analysts.

San Diego-based Qualcomm is the world’s second-largest chip supplier for mobile phones after Texas Instruments but earns much of its money — by some estimates, more than a third — from licensing fees on its patented technology. Broadcom, based in Irvine, California, is a newcomer to the cell phone business but has scored several legal victories against Qualcomm this year.