Qualcomm Incorporated (Nasdaq: QCOM) yesterday notified Nokia that it has rejected Nokia's $20 million payment and the accompanying multiple pages of terms upon which Nokia conditioned its payment. Nokia tendered the money ostensibly as an advance payment of royalties to Qualcomm for the quarter ending June 30. Both the amount of the payment and the terms that Nokia sought to unilaterally impose in connection with it are at odds with the parties' 2001 license agreement.
Nokia's attempted payment is a fraction of the royalty to which Nokia agreed in the arm's length negotiations leading to the parties' existing contract and for which Nokia bargained in obtaining the extension option. The attempted payment also represents only a small fraction of the well established value of Qualcomm's patent portfolio - a value which has been repeatedly validated by the more than 70 royalty-bearing WCDMA license agreements Qualcomm has signed with the world's largest vendors of wireless products. Ironically, the royalty rate implied by Nokia's attempted payment is a mere fraction of the rates that Nokia itself seeks to impose when it attempts to enforce its patents (www.qualcomm.com/press/legalnewsroom/pdf/NokiaLicensingPositions.pdf).
Last week, Qualcomm asked an arbitrator to rule that Nokia has elected to extend the terms of the 2001 license agreement, including Nokia's obligation to pay the agreed royalty rate, by its admitted use of Qualcomm's patents in Nokia's WCDMA and CDMA products after April 9 (www.qualcomm.com/press/releases/2007/070405_files_arbitration_demand.html). Qualcomm's agreement with Nokia requires that disputes relating to the agreement must be resolved through binding arbitration in Los Angeles.
Qualcomm is concerned that Nokia continues to attempt to mislead the industry and the investment community. Nokia's statement today that “it has paid less than 3 per cent aggregate license fees on WCDMA handset sales under all its patent license agreements” and that such “WCDMA handset related royalty payments made by Nokia include all WCDMA handset royalty payments made to Qualcomm”, if true, would mean that Nokia has seriously underpaid royalties owed to Qualcomm under the parties' 2001 license agreement and is in material breach of the agreement. Qualcomm will address this potential breach through legal and contractual channels.
Qualcomm Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., Qualcomm is included in the S&P 500 Index and is a 2006 FORTUNE 500® company traded on The Nasdaq Stock Market® under the ticker symbol QCOM.