Verizon Wireless Reverses Field, Signs Broadcom Licensing Deal

The deal calls for Verizon Wireless to pay licensing fees of $6 for each handset it sells, or up to $40 million per calendar quarter and up to a lifetime maximum of $200 million.
Like a motorist steering around a freeway pileup, Verizon Wireless has decided to avoid entanglement in the patent battle between Broadcom and Qualcomm by agreeing to pay licensing fees to Broadcom.

Announced late Thursday, the deal calls for Verizon to pay licensing fees of $6 to Broadcom for each handset it sells with chips from Qualcomm carrying the disputed technology, or up to $40 million per calendar quarter and up to a lifetime maximum of $200 million. It represents an about-face for Verizon, which had previously supported Qualcomm in its patent dispute against Broadcom.

The U.S. International Trade Commission last month banned the import or sale of phones with certain Qualcomm chips that were found to infringe a Broadcom patent. The ban included new phone models that weren't already being imported by June 7.

A joint venture of Verizon Communications and Vodafone Group, Verizon Wireless had previously supported Qualcomm in seeking a reversal of the ban, arguing it would prevent the latest handsets from getting to U.S. consumers. Qualcomm is pursuing a a court stay of the import ban or, barring that, a veto from President Bush.

Bush is less likely to strike down the ban now that a licensing deal with a major U.S. carrier is in place, according to Stifel Nicolaus analyst Blair Levin. "The existence of even a single license agreement will allow opponents of the veto to argue that there is no longer any need," Levin wrote in a note to clients after the Verizon-Broadcom deal was announced.

The companies also said they have entered into a strategic alliance to develop and market new mobile device chipsets as well as Bluetooth and wireless LAN systems, optical network products, GPS location technology, and DSL and fiber network components such as set-top boxes.

The ITC last year found that Qualcomm's cellular baseband chips infringe a Broadcom patent relating to power conservation in cellular phones. Last month, the commission ordered that Qualcomm chips containing the technology, as well as cellular phones that incorporate those chips, be banned from U.S. shores. President Bush designated U.S. Trade Representative Susan C. Schwab to review the ITC action and decide whether to the ITC decision will stand. The 60-day presidential review period ends Aug. 6, and Verizon Wireless -- which markets thousands of mobile devices containing Qualcomm chips annually -- apparently saw the chances of a reversal dwindling.

The deal also could put pressure on Sprint Nextel, the No. 3 U.S. wireless carrier, to reach an agreement with Broadcom.

Reuters contributed to this report.

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