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July 24, 2008 2:15 PM

Nokia-Qualcomm Agree to Play Nice

Posted by Zach Lowe

Qualcomm, the world's leading maker of cell phone chips, settled a three-year patent dispute with Finnish cell phone giant Nokia Wednesday, avoiding prolonged litigation that could have threatened Qualcomm's lucrative licensing deals with Nokia and other cell phone companies.

Under the terms of the deal, the two companies have agreed to drop all litigation in the U.S. and before the European Commission and to share technology for the next 15 years.

Cravath, Swaine & Moore's Evan Chesler and Cooley Godward Kronish's Steven Strauss have represented Qualcomm in the dispute over the past three years.

Qualcomm drafted Cooley into the mess in 2006, when Nokia signaled that it might want to continue using Qualcomm chips -- possibly for free -- when their licensing agreement expired in 2007, Strauss says. The firm filed a petition for arbitration with the American Arbitration Association; the petition was eventually combined with the rest of the litigation, Strauss says.

Nokia sued Qualcomm in several U.S. courts and at the European Commission in 2005, accusing the chip maker of licensing its chip patents on unfair terms. (Five other companies--including Broadcom and Ericsson--were part of that action.) Qualcomm earns about two-thirds of its profits from licensing fees.

The cell phone maker relied on a team from Quinn Emanuel Urquhart Oliver & Hedges led by partners Charles Verhoeven and A. William Urquhart. Urquhart's and Chesler's work on the matter was the subject of a feature story in the December 2007 issue of The American Lawyer. Quinn Emanuel has represented Nokia on other intellectual property cases, according to that story.

Settlement talks began in earnest on Monday between Steven Altman, Qualcomm’s president, and Tero Ojanperä, executive vice president of Nokia, after a pretrial hearing July 18 in which Qualcomm won all its motions, according to Cooley's Steven Strauss. "That seemed to change the settlement dynamic," he says.

Strauss says he was in the Delaware courtroom Wednesday morning, ready to start the trial, when the negotiators called to ask for a short delay. On learning that the case had been settled, Strauss said he was disappointed--because he had prepared to try the case for so long--but ultimately satisfied that his client's best interests had been served. He declined to discuss the financial details of the settlement, except to say that it is a "multibillion-dollar award that includes a large cash payment and an ongoing royalty."

Under the terms of the settlement, Qualcomm will give Nokia access to its chip technology as Nokia develops the next generation of its cell phones. Nokia in return has agreed not to use any of its patents directly against Qualcomm.

Nokia also will make an up-front payment to Qualcomm and will continue to pay royalties as part of the deal. Financial terms of the settlement were not disclosed.

Qualcomm's stock soared 18 percent as investors expressed relief that Qualcomm's licensing money won't run out anytime soon. The company still faces similar litigation brought by Broadcom Corp.

--Additional reporting by Ben Hallman.

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