In an arbitration demand filed with the American Arbitration Association, QUALCOMM Incorporated (Nasdaq: QCOM) requests a ruling that Nokia’s continued use of QUALCOMM’s patents in Nokia’s CDMA cellular handsets (including WCDMA ) after April 9, 2007 constitutes an election by Nokia to extend its license under the parties’ existing agreement. Such an extension would obligate Nokia to pay QUALCOMM the same royalty specified in the current agreement and prohibit Nokia from asserting patent claims against QUALCOMM’s CDMA products. QUALCOMM also seeks a ruling that it is entitled to terminate all of Nokia’s rights and licenses under the agreement if Nokia sues QUALCOMM for patent infringement after April 9, 2007.
QUALCOMM and Nokia signed their current license agreement for CDMA products in July 2001. The agreement expires in part on April 9, 2007, with Nokia having a right to extend the agreement exercisable through the end of 2008. If the agreement is not extended beyond April 9, 2007, Nokia’s rights to sell certain subscriber products (such as cellular phones and wireless personal digital assistant devices) under most of QUALCOMM’s patents will expire.
Nokia’s announcement that it intends to pay an arbitrary sum for the use of QUALCOMM’s patents in Nokia’s WCDMA products after April 9 is an acknowledgment of its obligation to compensate QUALCOMM for the use of those patents. However, the announcement that Nokia will only pay a nominal amount makes clear that Nokia does not intend to comply with the agreed-upon terms of the parties’ existing agreement or to pay the fair and established price for access to QUALCOMM’s extensive patent portfolio. Nokia has no more right to unilaterally set a price than the average consumer has a right to walk into a store, take a product off the shelf, and walk out with it after leaving only a fraction of the established price on the counter. Leaving some money on the counter does not make the act any less unlawful.
Nokia’s claim that it has been paying cumulative royalties of no more than 3% on WCDMA products sold through 2007 is intentionally deceptive and misleading. Nokia has been paying a royalty on WCDMA handsets in excess of 3% to QUALCOMM alone.
Finally, Nokia’s claims as to what are fair and reasonable rates for QUALCOMM’s patents are directly contradicted by its demands for royalties for its own patents. When it comes to Nokia’s own patents, Nokia has taken the position that a fair and reasonable royalty rate for a single essential patent is 2.5%, for two essential patents, 3.5%, for three patents, 4%, and for ten or more, 5% or higher. Non-essential patents, which are included in QUALCOMM’s portfolio and are not subject to FRAND commitments, may be subject to higher royalty rates, according to Nokia’s own prior positions. Nokia’s current comments regarding QUALCOMM’s rates are simply statements of convenience. For more information on the positions that Nokia has taken when seeking to enforce its patents, go online.
QUALCOMM’s licensing program for WCDMA products is well established and confirms that QUALCOMM’s licensing terms and conditions, including royalty rates, are fair and reasonable. The fair market value of QUALCOMM’s patents for WCDMA has been established by the more than 70 royalty-bearing license agreements that QUALCOMM has negotiated at arm’s length with the world’s largest cellular equipment suppliers over the past decade.
QUALCOMM Incorporated is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 2006 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
QUALCOMM is a registered trademark of QUALCOMM Incorporated.