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Qualcomm files patent infringement suit against Nokia

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SAN DIEGO -- Qualcomm Inc. (Nasdaq: QCOM) is suing Nokia Corp. (NYSE: NOK) for alleged patent infringement, firing back quickly in a widening dispute over next-generation wireless technologies one week after Nokia and five other companies filed an antitrust complaint against Qualcomm in Europe.

The suit, filed Friday by Qualcomm in a federal court in San Diego, charges that Nokia cell phones sold in the United States infringe on 11 patents for improving wireless Internet access and data transmission on the dominant cellular standard -- GSM, or Global System for Mobile.

Qualcomm, which developed a rival standard known as CDMA, short for code-division multiple access, said next-generation versions of GSM have adopted its innovations to boost connection speeds, increase network efficiency and capacity, and facilitate multimedia services.

The legal acrimony surrounding Qualcomm has been building since earlier this year, with a growing number of wireless equipment makers chafing at the market power and royalties that come with Qualcomm's near-monopoly grip over CDMA. Qualcomm collects a fee for almost every CDMA-based phone sold and a growing number of GSM-based handsets.

In May, wireless chipmaker Broadcom Corp. (Nasdaq: BRCM) sued Qualcomm for infringement of patents for audio, video and data services and filed a complaint with the International Trade Commission alleging unfair trade practices. Two months later, Qualcomm sued Broadcom for infringement of patents relating to semiconductors for cell phones.

The dispute widened dramatically in late October when Nokia, LM Ericsson (Nasdaq: ERICY), Broadcom, NEC Corp. (Nasdaq: NIPNY), Texas Instruments Inc. (NYSE: TXN) and the Panasonic unit of Matsushita Electric Industrial Co. Ltd. (NYSE: MC) asked the European Commission to investigate and halt Qualcomm's alleged abuse of EU competition rules.

The six companies alleged that Qualcomm was making it harder for rival producers of computer chips for cell phones to compete because it was refusing to license essential CDMA patents on reasonable terms and offered lower royalty rates to handset makers that only buy Qualcomm semiconductors.

Qualcomm appeared to point to that complaint on Monday in announcing the suit against Nokia.

"We have been discussing a number of issues with Nokia for some time, including the fact that we have essential GSM patents for which Nokia is not licensed, and we are disappointed that this has resulted in litigation," Louis M. Lupin, Qualcomm's general counsel, said in a statement. "Until recently, we had been led to believe that these issues might be resolved cooperatively and amicably. However, it now appears that a cooperative resolution of these issues is quite unlikely."

Finland-based Nokia, the world's biggest producer of cell phones, said in a statement it had not yet seen a copy of the suit, but contradicted Qualcomm's and Lupin's assertions.

"Nokia is disappointed Qualcomm has taken this step given they have yet to engage in any licensing negotiations concerning these matters," the statement said. "Qualcomm has a duty to license those patents on fair, reasonable and non-discriminatory terms. Qualcomm has not provided Nokia with any proposed terms for a license in compliance with its obligations."

More than two thirds of the world's roughly 2 billion cell phones are based on GSM, which dominates Europe and most other regions other than the United States and Korea, where CDMA has prospered.

In terms of voice-capabilities for cellular calls, there was little similarity between the two wireless standards, and little need for the type of efficiency and capacity boots enabled by CDMA.

But with cellular providers vying to generate new revenues from mobile data services -- ranging from e-mail and Web browsing to music, games and TV -- the growing traffic can strain each operator's wireless network and limited slice of the airwaves in any market.

"As Qualcomm seeks to respond to the complaints brought before the European Commission, we would not be surprised to see similar actions brought against the other complainants in that matter -- Texas Instruments, Ericsson, NEC, and Panasonic," Inder M. Singh, an industry analyst for Prudential Equity Group said in a note to investors.

Shares of Qualcomm fell 16 cents to close at $44.64. Nokia's U.S. shares fell 12 cents to finish at $17.04.

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