Qualcomm Has a Bad Thanksgiving (QCOM, BRCM)

Broadcom Corp. (Nasdaq: BRCM) announced early this morning that a federal judge has let stand a jury verdict that found that Qualcomm Inc. (Nasdaq: QCOM) infringes three Broadcom patents. Broadcom plans to inform the judge that it will not seek a new trial.  Instead Broadcom will accept the original $19.6 million in compensatory damages as originally awarded by the jury AND will immediately pursue an injunction against Qualcomm’s infringing products.  In the injunction, Broadcom will seek to enjoin Qualcomm from making, using, selling and developing third generation (3G) WCDMA and EV-DO cellular chips that infringe any of the patents.

As far as history is concerned, a unanimous federal jury previously found that Qualcomm infringed three Broadcom cellular phone baseband patents, and that the infringement had been willful, allowing the judge to double the damage award to Broadcom for past infringement from $19.6 million to $39.3 million.  In that ruling Judge James V. Selna awarded Broadcom double damages and its attorneys’ fees in the case, based upon the jury’s finding of willful infringement. Later Judge Selna decided to reconsider his decision on double damages and attorneys’ fees as a result of a subsequent change in the federal law regarding willfulness announced in an unrelated appellate case involving Seagate Technologies. In the wake of the Seagate decision, Qualcomm asked for a new trial on whether its products infringe Broadcom’s patents.

On November 21, Judge Selna issued his final ruling in the matter, overturning his earlier award of double damages and attorneys’ fees in light of Seagate, but allowing the jury’s underlying infringement verdict against Qualcomm to stand. He gave Broadcom the option either to accept his final decision on enhanced damages and thereby avoid a new trial, or to seek a new trial in which the issue of willfulness would be tried again, along with Broadcom’s infringement claims.

It is unclear how this will ultimately turn out and with Broadcom seeking further injunctions, it is hard to know when this will end or how bad it will get for Qualcomm.  24/7 Wall St. had previously written about how this could cost it over $1 Billion or more per year, and its chief legal counsel had left the company. Nokia’s attempts to get Qualcomm’s chips barred from the U.S. was dropped by the ITC Wednesday, but the Broadcom case is believed to have more bite to it. 

Sometimes management makes the wrong dice throws.  Time might be short for Jacobs the younger…..

Jon C. Ogg
November 23, 2007