News and New Products

ITC mulls ban on Qualcomm chips, handset imports

By Tam Harbert, Contributing Writer -- Electronic Business, 3/27/2007

In a rare two-day hearing that drew cadres of lawyers from wireless chip, handset and network vendors, the U.S. International Trade Commission (ITC) heard testimony last week on the effects of a possible ban on importing Qualcomm chips and handsets.

An administrative law judge ruled last fall that Qualcomm’s multimode baseband processor had violated a Broadcom patent on power use, and recommended that the chip be banned from importation into the United States. Broadcom is seeking, and the ITC’s Office of Unfair Import Investigations has recommended, to extend the ban to mobile handsets containing the Qualcomm chips as well. Such a ban could include Qualcomm-based W-CDMA and EV-DO handsets.

The ITC held the hearing in order to hear testimony on the possible implications of such a ban. The last time the ITC held a similar remedy hearing was 1993, according to ITC Chairman Daniel Pearson.

An ITC decision on the matter is expected by May 8.

In his testimony, Broadcom CEO Scott McGregor argued that the ban was the best remedy for the infringement and cautioned the commission against presuming such a ban would harm the public interest or the wireless market. In the case of W-CDMA chips, mobile handset vendors could turn to any one of several other suppliers, including Broadcom, Texas Instruments, Ericsson and Freescale Semiconductor, he said. And in the case of EV-DO, McGregor noted that Broadcom was asking for a ban on only handsets, but not data cards, PDAs or smartphones that incorporate Qualcomm’s EV-DO chip. Broadcom’s position is that these exceptions would allow most current EV-DO users to continue to use the network. Simon Wilkie, a former chief economist of the Federal Communications Commission who testified on behalf of Broadcom, said that only a small percentage of customers use mobile phones for services other than voice or texting. Of those who do use EV-DO data services, most access them through data cards in laptops, through PDAs or through smartphones, he said.

But representatives from Qualcomm as well as Verizon Wireless and Sprint-Nextel – both EV-DO service providers -- argued that the ban would shut down deployment of EV-DO networks and would significantly stunt the growth and innovation of 3G networks in the United States.

“Broadcom’s view that the exclusion of EV-DO phones from the U.S. market would not be extensive or disruptive is simply not true,” said Irwin M. Jacobs, Qualcomm’s chairman. The service providers also predicted that lack of innovation and deployment of advanced networks could have dire consequences for public safety and communications during emergencies. The next generation of EV-DO, for example, will support higher speeds and capacities that would enable video and voice-over-IP.

Qualcomm representatives also contended that Broadcom’s definition of a smart phone for purposes of the ban – any phone with a full QWERTY keyboard – was arbitrary and would be difficult for customs officials to enforce. If smart phones are handsets with full QWERTY keyboards, then new devices such as the Apple iPhone -- which has no keyboard, and the latest generation of the Blackberry – which uses only a partial QWERTY keyboard --would not be considered smart phones and would be excluded under the ban, they pointed out.

Broadcom’s contention that other chip companies could supply U.S. handset vendors with W-CDMA chips was inaccurate, said Cecilia Gonzalez, a lawyer for Qualcomm. Qualcomm has some 80 percent of the W-CDMA market in the United States, she said. “We are not the only source, but we are the major, viable supplier for W-CDMA chips now.” Broadcom’s W-CDMA chips are available mostly in other countries, not the United States, she said.

McGregor said he didn’t agree with Qualcomm’s contention that the ban would have a broad impact on consumers and the industry, but that even it that were true, “the fact that infringement is widespread should not preclude Broadcom from getting an effective remedy. . . . An effective remedy is not one that allows all or nearly all of the ongoing infringement to continue unabated.”

The ITC case is only one aspect of ongoing legal wrangling between the two companies. Although they settled some patent litigation cases in late February, there are still several other lawsuits working their way through the courts.

The ITC said it expects to render a decision on the remedy by May 8. For information and background on the case, go to http://www.usitc.gov/trade_remedy/int_prop/investigations/337/337-TA-543_intro.htm.