Qualcomm agrees to pay $891 million over 4 years to settle patent litigation with Broadcom

Monday, April 27, 2009

Qualcomm to pay $891M to settle suit with Broadcom

SAN DIEGO — Chip maker Qualcomm Inc. said late Sunday it will pay Broadcom Corp. $891 million over four years to settle a longstanding dispute over patents and royalties.

The company said it will pay $200 million of the settlement in the quarter ending June 30. The agreement dismisses with prejudice all litigation between the companies, including overseas, with Broadcom agreeing withdraw its complaints to the European Commission and the Korea Fair Trade Commission.

Qualcomm said the terms of the agreement won’t change its 3G and 4G licensing revenue model. The company’s chips are used in many of the world’s cell phones, and it also licenses technology to wireless communications companies.

Under the agreement, the companies have granted certain patent rights to each other, however, neither company’s customers receive rights to patents related to chip products incorporated into non-cell phone products and equipment.

“The settlement will allow us to direct our full attention and resources to continuing to innovate, improving our competitive position in this economic downturn, and growing demand for wireless products and services,” said Paul E. Jacobs, chairman and CEO of Qualcomm, in a statement.

“We have set aside our differences while addressing the needs of our customers, our shareholders and the industry,” said Scott A. McGregor, president and CEO of Broadcom.

San Diego-based Qualcomm had delayed its quarterly earnings report last week in order to complete settlement talks with Broadcom. The company will post the quarter’s results Monday.

The settlement ends years of litigation between the companies, in which Broadcom had sued Qualcomm alleging its rival was misusing its patents to suppress industry competition. The company had argued that it only needed to identify the types of products at issue — chips used in wireless communications and handsets — to get a court order declaring the patents unenforceable.

Irvine, Calif.-based Broadcom also had claimed the threat of patent litigation made customers reluctant to buy its chips. In May 2007 the company won $19.6 million in damages, after a jury found Qualcomm had violated three of its chip patents.

But Qualcomm had also scored some legal victories, having three consumer class-action suits against the company alleging antitrust violations thrown. The chip maker had been accused of failing to license its technology on fair terms.

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