Gulp.
Lawyers in more than 150 countries are set to benefit from one of the biggest licensing tussles in history when Qualcomm Inc attempts to stop market-leader Nokia Corp from selling in countries around the world when their licensing agreement expires on April 9.
With the two companies not even close to a resolution of the dispute, Qualcomm said it plans to seek injunctions against Nokia’s sales as well as damages for its unlicensed sales.
Nokia CFO Richard Simonson said he thought it unlikely an injunction would be granted over licences covered by fair, reasonable and non-discriminatory terms.
As Qualcomm has disclosed that an end to Nokia’s royalties would cost it $0.04 to $0.06 in quarterly earnings per share, it is possible to calculate that a total figure of up to $500m is at stake. San Diego, California-based has up its legal costs by $100m this year.
Simonson would not be drawn on how much legal fees are costing Nokia, except to say it does not approach the figures attributed to Qualcomm.
When it released its first-quarter figures on Tuesday, Qualcomm said selling, general, and administrative expenses increased 54% to $369m, largely attributable to increases in legal fees and employee related expenses.
Qualcomm said its license agreement with Nokia expires in part on April 9, with Nokia having an option exercisable through the end of 2008 to extend the agreement.
Under GAAP rules, Qualcomm said it will be unable to record royalty revenue attributable to Nokia’s sales until a court awards damages or agreement with Nokia is reached.
But Qualcomm is prepared to throw its lawyers into the battle. Legal action by NTP in seeking to stop Research in Motion Ltd selling its BlackBerry devices in the US was clearly a factor in forcing RIM to reach a settlement. Qualcomm hopes that the threat to its sales in world markets will force Nokia to reach a deal.
Qualcomm said that while it continues to work with Nokia to see if it can reach an agreement, there is no guarantee that it will be able to successfully resolve the matter before April 9.
"If we are unable to reach agreement, and Nokia continues to use our unlicensed intellectual property, we will aggressively pursue all our legal and business options and assume that Nokia will do likewise," it said.
When a company’s patent are incorporated into a world standard, it has an obligation to license it to other players on FRAND terms and not hold them to ransom. The agreement with Nokia is complicated because the Espoo, Finland-based company believes that R&D it has conducted in recent years puts it into a more favorable bargaining position with Qualcomm.
Source: Computer Business Review Online