Finnish telecommunications equipment maker Nokia Corp. Thursday said it will pay $20 million to chipset maker Qualcomm Inc. to cover patent licenses in the second-quarter of 2007.The companies have been embroiled in a series of lawsuits against each other concerning intellectual property rights and patent infringements, but Nokia says Thursday's payment is unrelated to those disputes. It says it's willing to pay fees for this new license, which relates to the European Telecommunication Standardization Institute.
"As we continue to negotiate the new cross-license agreement, Nokia views this payment as fair and reasonable compensation for the use of relevant Qualcomm essential patents in Nokia UMTS handsets during the second quarter of 2007," said Nokia Chief Financial Officer Rick Simonson.
Qualcomm said it filed an arbitration claim Thursday that would require Nokia to continue paying the same royalty rates as a 2001 licensing agreement if the two sides fail to renew the pact before it expires next week, April 9.
Lou Lupin, Qualcomm's general counsel, declined to say how much money it gets from Nokia but said $20 million is "a fraction."
"The amount, as far as we can tell, was picked out of the air," Lupin told The Associated Press.
Qualcomm's claim before the American Arbitration Association also seeks that Nokia be prevented from filing patent claims against its rival over a mobile phone standard known as CDMA, or code division multiple access.
Nokia signaled that it would be aggressively contesting the old patent license agreements with Qualcomm that are set to expire next week.
Nokia and Qualcomm have been embroiled in a number of intellectual property and licensing disputes over the last year and the companies are currently at loggerheads on how much Nokia should pay Qualcomm for using its code division multiple access, or CDMA, intellectual property in North America.
Richard Windsor, an analyst at Japanese investment bank Nomura, said Nokia has pulled of a "strategic master stroke" by doing this.
Windsor said the deal signals how much Nokia is willing to pay Qualcomm for royalties and by doing so, Nokia significantly reduces the risk of being found guilty of "willful infringement" in any patent lawsuits that follow with the San Diego-based chipset maker.
Willful infringement is something Nokia cannot afford as punitive damages could cost it as much as three times the existing royalty rate in damages, he says.
"By reducing this risk Nokia will be able to fight harder and hold out longer against the legal blanket bombing that we think is being prepared by Qualcomm," said Windsor.
Windsor added that the move lengthens considerably the wait Qualcomm might have to endure before it gets paid the royalties that are due to it.
Nokia argues that Qualcomm's patent portfolio applies predominantly to the United States and says it believes the U.S. chipmaker has very few patents in other countries where Nokia operates.
"When Qualcomm's early patents become paid-up and royalty-free on April 9, Qualcomm's share of all patents relevant to Nokia UMTS handsets will significantly decrease," said Nokia's Simonson Thursday.
On Tuesday, Qualcomm filed two more patent-infringement lawsuits against Espoo, Finland-based Nokia, which follow a pre-emptive strike by Nokia two weeks earlier, when it filed lawsuits in Germany and the Netherlands.
The crux of the dispute is Nokia's contention that it's not fair for Qualcomm to keep charging Nokia the same royalty rate for WCDMA handsets, the most popular variety for third-generation cell phones, as Qualcomm did in the existing agreement.
© 2007 The Associated Press
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