Qualcomm, Nokia Prepare For Patent Court Battle

Cell phone makers Qualcomm and Nokia are scheduled to take their seemingly eternal patents battle to a showdown in Delaware Chancery Court in July, but don't look for a resolution to the litigation to come from that venue.

Earlier this week, a Nokia spokeswoman said the consolidation of some legal issues in the ongoing litigation may help the companies sort out some issues, but "it is unlikely the case will resolve the overall licensing negotiations between the companies."

The legal maneuvering has been so voluminous that the real issue -- how much should Nokia pay for Qualcomm's intellectual property? -- sometimes gets lost in the fog of litigation.

While there are no public figures, Nokia is thought to be paying Qualcomm $500 million a year for IP rights, and various analysts translate that figure to a 5% royalty payment shelled out by Nokia.

One close observer of the Qualcomm-Nokia wars -- Art Samberg, chairman and CEO of Pequot Capital -- recently told a Barron's audience that he expects the two companies to settle.

"They will negotiate something," he said. "Qualcomm's core patents are valid. This is just about Nokia getting the old royalty rate, when CDMA was more of a niche market. Royalties of 3% aren't uncommon."

Qualcomm has more dominance over the CDMA2000 EV-DO market, but it lagged in getting that technology into the hands of service providers, while Nokia and others brought the European-developed GSM standard to market to the point that GSM accounts for more than 80% of the worldwide market today. Qualcomm still has important intellectual property in the GSM W-CDMA standard, and that's where much of the battling between the two companies takes place.

Qualcomm and Nokia entered into a cross-licensing agreement in 2001 and that deal ran out last April. The two companies are also battling each other over IP issues in several countries around the world.