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Qualcomm, Ericsson Reportedly Considering Truce

Some white flags are starting to be raised in the great Wireless War that has been raging in courtrooms over the last three years.

Reports surfaced over the weekend that Qualcomm is in talks with its top rival, Sweden-based Ericsson, to settle a long-running patent dispute that has sucked up millions of dollars in legal bills and court costs between the two firms. The dispute stems from the code-division multiple access (CDMA) technology, the popular digital-wireless standard developed for commercial use by Qualcomm that is poised to become the reigning standard in future generations of wireless networks.

The dispute is part of a lawsuit filed by Ericsson in a Texas federal court in 1996 in which the company accused San Diego-based Qualcomm of infringing on its own CDMA patents with its wireless technology. Qualcomm filed a counter-suit in federal court in San Diego, accusing Ericsson of the same and demanding an injunction and damages. The two cases eventually were consolidated in 1997 when a San Diego judge ruled that it would be counterproductive to pursue the same case out of two separate courtrooms.

Although the two companies have been snipping at each other for years, it is clear that neither one feels a trial would be in their best interests. Officers for both firms told the Investors Business Daily and the Wall Street Journal over the weekend that the companies would like to settle the matter before its scheduled April trial date. A pretrial hearing on the case was scheduled for Monday.

But what would such a settlement involve? According to the Wall Street Journal, citing "sources familiar with the matter," a likely settlement essentially would allow the two companies to enter into each other's business. To date, Ericsson has made its fortunes solely on selling phones and equipment based on the European global system for mobile communications (GSM) standard. Qualcomm, by contrast, has stuck exclusively with CDMA.

As a result, Qualcomm has been virtually locked out of the European markets, while Ericsson has limited market opportunities in markets in the U.S. and Asia, where CDMA is more popular. Making matters worse for the Swedish firm is the fact that CDMA, which offers carriers greater capacity over their networks, is likely to become the standard for so-called third-generation systems being built for the next century.

Under a possible settlement, Ericsson would be allowed to manufacture phones using CDMA, while Qualcomm would get similar access to Ericsson's GSM patents. Qualcomm CEO Irwin Jacobs told the Journal the company has been speaking to several players, including Ericsson, about deals to acquire GSM licenses to make equipment.

So far, both companies are officially mum on the potential terms of an agreement. But such disputes carry financial and business risks for both players. For once, the two may find it easier -- not to mention cheaper -- to work out their problems on their own.

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