WASHINGTON (Reuters) - Nokia (NOK1V.HE), the worlds largest cell-phone maker, and wireless chip supplier Qualcomm (QCOM.O) go to court on Wednesday in hopes of resolving a licensing fight that involves hundreds of millions of dollars and has spawned lawsuits on three continents.
The case is based on a 1992 licensing agreement that allowed Nokia to use Qualcomms patents in its phones. That license expired on April 9, 2007, after Nokia paid Qualcomm 1 billion in fees and considered it to be paid up.
But Qualcomm disagreed, and is asking the Delaware Court of Chancery, which hears business disputes, to rule that Nokia extended that agreement by continuing to buy its patented products on the same terms.
Nokia says that under the deal between the two companies the cross-licensing agreement can only be extended in writing.
Nokia also maintains that Qualcomm failed to live up to obligations incurred when a standard setting body chose as the standard Qualcomms patents for CDMA -- a digital radio system that allows a cell-phone user to send voice, data and information such as a dialed telephone number between mobile telephones and cell sites.
"Essentially, we are seeking to prevent Qualcomm from imposing on Nokia the licensing terms of an old agreement contrary to the terms of that agreement and based on a vague allegation of use of patents that have never been identified," said Nokia spokeswoman Laurie Armstrong.
She also argued that Nokia should have access to the patents.
"Further, we are asking the courts clarification on acceptable corporate behavior in a standard-setting environment," she said. "We believe this means you should not be entitled to seek court injunctions for essential patents."
Nokia has also argued that Qualcomms patents have declined in value as technology has advanced.
"If it was such a bad deal, why did they negotiate so hard to extend that deal?" Qualcomm Vice President Bill Davidson asked Reuters. "If it was a good deal when it was 50 patents, its an awfully good deal now that we have 7,000 patents (to license)."
One analyst said Nokia faced an uphill battle in Delaware because other cell-phone makers had agreed to pay 5 percent of the cost of their cell phones to Qualcomm to use the technology.
"The difficulty Nokia has got is that 90 other members of the industry agreed to this. They have agreed to pay the 5 percent," said Francis Morrison, a lawyer for Axinn Veltrop and Harkrider LLP.
"Were talking about hundreds of millions of dollars."
The winner of the legal battles will have the upper hand when the companies do reach an agreement on licensing the technology, analysts have said.
Nokia and Qualcomms expensive legal battles in the United States, Europe and Asia have worried investors.
Qualcomm is also embroiled in legal issues with rival Broadcom Corp (BRCM.O), and said in April it would need a "business defense" budget for fiscal 2008 of 300 million.
Five other lawsuits between Nokia and Qualcomm have been stayed pending the result of the Delaware suit. Four others were recently concluded; Qualcomm won two and Nokia won two.
Furthermore, the European Commission opened an investigation last October into charges that Qualcomm has overcharged customers.
The trial begins on July 23, and has two eight-day phases. The start date of the second phase has not yet been set. Appeals from the court of Chancery go to the Delaware Supreme Court, and from there to the U.S. Supreme Court.
(Editing by Maureen Bavdek)
The case is based on a 1992 licensing agreement that allowed Nokia to use Qualcomms patents in its phones. That license expired on April 9, 2007, after Nokia paid Qualcomm 1 billion in fees and considered it to be paid up.
But Qualcomm disagreed, and is asking the Delaware Court of Chancery, which hears business disputes, to rule that Nokia extended that agreement by continuing to buy its patented products on the same terms.
Nokia says that under the deal between the two companies the cross-licensing agreement can only be extended in writing.
Nokia also maintains that Qualcomm failed to live up to obligations incurred when a standard setting body chose as the standard Qualcomms patents for CDMA -- a digital radio system that allows a cell-phone user to send voice, data and information such as a dialed telephone number between mobile telephones and cell sites.
"Essentially, we are seeking to prevent Qualcomm from imposing on Nokia the licensing terms of an old agreement contrary to the terms of that agreement and based on a vague allegation of use of patents that have never been identified," said Nokia spokeswoman Laurie Armstrong.
She also argued that Nokia should have access to the patents.
"Further, we are asking the courts clarification on acceptable corporate behavior in a standard-setting environment," she said. "We believe this means you should not be entitled to seek court injunctions for essential patents."
Nokia has also argued that Qualcomms patents have declined in value as technology has advanced.
"If it was such a bad deal, why did they negotiate so hard to extend that deal?" Qualcomm Vice President Bill Davidson asked Reuters. "If it was a good deal when it was 50 patents, its an awfully good deal now that we have 7,000 patents (to license)."
One analyst said Nokia faced an uphill battle in Delaware because other cell-phone makers had agreed to pay 5 percent of the cost of their cell phones to Qualcomm to use the technology.
"The difficulty Nokia has got is that 90 other members of the industry agreed to this. They have agreed to pay the 5 percent," said Francis Morrison, a lawyer for Axinn Veltrop and Harkrider LLP.
"Were talking about hundreds of millions of dollars."
The winner of the legal battles will have the upper hand when the companies do reach an agreement on licensing the technology, analysts have said.
Nokia and Qualcomms expensive legal battles in the United States, Europe and Asia have worried investors.
Qualcomm is also embroiled in legal issues with rival Broadcom Corp (BRCM.O), and said in April it would need a "business defense" budget for fiscal 2008 of 300 million.
Five other lawsuits between Nokia and Qualcomm have been stayed pending the result of the Delaware suit. Four others were recently concluded; Qualcomm won two and Nokia won two.
Furthermore, the European Commission opened an investigation last October into charges that Qualcomm has overcharged customers.
The trial begins on July 23, and has two eight-day phases. The start date of the second phase has not yet been set. Appeals from the court of Chancery go to the Delaware Supreme Court, and from there to the U.S. Supreme Court.
(Editing by Maureen Bavdek)
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