Qualcomm Inc., the world's second- largest maker of chips for mobile phones, is pressing the Bush administration to overturn yesterday's unfavorable ruling by a trade agency that will ban its newest chips from the U.S.
A presidential decision is "the only way we're going to eliminate the uncertainty around the continuing ability of manufacturers and carriers to supply wireless broadband to the American public and to public safety organizations,'' Qualcomm General Counsel Lou Lupin said today.
The U.S. International Trade Commission yesterday ruled mobile phones with Qualcomm's newest chips won't be allowed into the country if they violate a patent held by smaller rival Broadcom Corp. The ruling, by a 4-2 vote, permits handset models already on the market as of June 7 with Qualcomm's chips to continue entering the U.S.
President George W. Bush and U.S. Trade Representative Susan Schwab have
60 days to make a decision. They can review the trade commission ruling only on public policy grounds. USTR spokeswoman Gretchen Hamel said the office will be "engaging in our normal internal and interagency procedures governing policy review.''
Qualcomm has open support from members of Congress and within the
administration. Officials of the Federal Communications Commission and the
Federal Emergency Management Agency testified on Qualcomm's behalf before
the ITC in March, saying the newest mobile-phones are necessary for disaster planning and consumer choice.
Two Congressmen from California, Republican Darrell Issa and Democrat Adam Schiff, testified at the hearing and others, including Republican Senator Orrin Hatch of Utah, Democratic Congresswoman Loretta Sanchez of California and Republican Congressman James McCrery of Louisiana, sent letters urging the agency to not issue any ban.
"The FCC's mandate last week to improve wireless E9-1-1 accuracy will be undermined by this ill-conceived ITC order,'' said David Aylward, director of Comcare Emergency Response Alliance, a Washington trade group that represents emergency agencies.
San Diego-based Qualcomm, as well as phone-service providers, also have
been lobbying the administration to overturn any ban.
"We've certainly been laying the groundwork to ensure that the White House is well informed on this issue,'' Lupin said. "We, including the carriers and manufacturers, have done as good a job as we possibly can.''
Broadcom, based in Irvine, California, said it's trying to protect its rights as a patent owner, and is open to talks about licensing its technology. Analyst Mark McKechnie of American Technology Research said Broadcom has "gained negotiating power'' because of this ruling and a jury verdict in California that Qualcomm infringed three other patents.
Lupin said the two sides have been in talks for two years and have "irreconcilable differences.''
Lawyers who handle patent cases before the ITC said presidents have overturned only five decisions issued by the agency since 1974, and the last time was in the mid 1980s, by President Ronald Reagan.
"Just looking at the odds, it's unlikely'' Bush will disapprove of the ban, said lawyer Jim Adduci of Adduci, Mastriani & Schaumberg in Washington. "But given the attention this case has received, I'm certain that the USTR will give this considerable attention.''
The chances of Bush overturning the decision are "more likely than in the typical case, but still an uphill battle,'' said lawyer Smith Brittingham of Finnegan Henderson in Washington.
"The big question is: Is this case extreme or unusual or just a typical case that happens to involve a large volume of commerce?'' Brittingham said.
Qualcomm says the new phones, with features like faster Internet access and better graphics, are necessary to public safety agencies. The Broadcom patent is for a battery-saving feature.
"To deny that access to the public safety community is very problematic, as well as denying to consumers the latest advances in wireless,'' Lupin said.
Qualcomm, and companies like Verizon Wireless, also are asking the U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in patent law, to defer imposition of the decision until an appeal can be heard on the underlying patent case.
Verizon Wireless also is asking the ITC to delay enforcement of any ban until the appeals court can review the case. The request was made May 31, before the ITC made public its decision.
Analyst Michael Burton of ThinkEquity Partners said Qualcomm is likely to prevail, either with the president or the court.
"We do not expect this decision to make it beyond Qualcomm's appeal and
potential presidential veto,'' Burton said in a note to clients.
Shares of Qualcomm rose $1.02 to $42.04 at 1:29 p.m. in Nasdaq Stock Market composite trading. Broadcom shares climbed 43 cents to $30.54.
The case is In the Matter of Certain Baseband Processor Chips and Chipsets, 337-543, U.S. International Trade Commission.
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