November 14, 2005
Another Fine Kettle of Fish - Qualcomm vs Broadcom
Please note that contributed articles, blog entries, and comments posted on EDACafe.com are the views and opinion of the author and do not necessarily represent the views and opinions of the management and staff of Internet Business Systems and its subsidiary web-sites.
| by Jack Horgan - Contributing Editor
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These editorial pages have given extensive coverage to legal issues such as patent infringement, theft of trade secrets, employment contracts and relationship with standard making organizations that beset the EDA and electronic industries.
The coverage has been both of a general nature and of specific instances, e.g. Synopsys versus Magma and Rambus versus multiple. This time the focus is Qualcomm, a major player in the technology underpinning cell phones and a consumer of EDA products and services. There are parallels to the Rambus case.
When a firm has a portfolio of patents it may adopt a number of strategies. It may cross license patents with other patent holding firms, it may licenses its patented technology to others including to competitors, it may reserve the technology for competitive advantage, it may donate technology to a standards making organization or consortium or it may adopt a combination of strategies. Presumably the decision will be based on the greatest benefit to the firm. Licensing technology to a competitor may be more advantageous in the long run than forcing that competitor to develop or seek alternatives elsewhere. Some firms buy failing firms for their intellectual property with absolutely no
intention of producing and selling any product. They use the patent portfolio and the treat of a lawsuit to exact licensing fees. SCO may be considered an example of this practice. In 1995 through an asset purchase agreement SCO acquired UNIX “IP”, the UNIX business and source code from Novell who had acquired it from AT&T. SCO has gone after Linux on the grounds that some of its UNIX source code had found its way into the Linux kernel.
IBM has so many patents in the computer arena, it is difficult to believe that any new computer design would not infringe on many of its patents. It would be difficult to determine if a new design accidentally infringed on any patent ever granted to anyone. Some patents are so broad, mistakenly broad in the opinion of many people, that the mere act of breathing is probably an infringement of some patent. I know a firm, MAGI, that had a patent of transmitting an image to a workstation. If one is applying for a patent, it is comparably easy although not foolproof to determine what prior art exists. In that case the search is narrow. As has been pointed out in previous editorials, the
Patent Office does not determine whether prior art exists. They rely on the filer to uncover and disclose prior art and later on those impacted by a patent to make the case that a patent should be rendered invalid.
Qualcomm was founded in 1985. In 1989 they introduced Code Division Multiple Access (CDMA) technology for wireless and data products. Today, QUALCOMM's patent portfolio includes more than 3,900 United States patents and patent applications for CDMA and related technologies. CDMA is the foundation for the two most widely adopted 3G standards - CDMA2000 and WCDMA (UMTS). QUALCOMM has patent license agreements with more than 125 manufacturers for the cdmaOne and CDMA2000 standards and with more than 50 manufacturers covering the WCDMA and TD-SCDMA standards.
Qualcomm has shipped two billion chips since 1996 when it delivered the first commercial CDMA solutions to wireless handset and infrastructure customers. It has shipped one billion chips since 2003. QUALCOMM solutions power a significant number of the more than 740 commercial CDMA2000 and WCDMA (UMTS) wireless devices available today. There are more than 150 CDMA2000 1X, CDMA2000 1xEV-DO and WCDMA operators in 71 countries who currently support more than 210 million 3G subscribers around the world.
In fiscal 2005, the period ending September 25, 2005 Qualcomm had revenues of $1.56 billion and net earnings of $538 million. Qualcomm is divided into multiple business segments. The QCT (Qualcomm CDMA Technologies) segment develops and supplies ICs and system software for wireless voice and data communications, multimedia functions and global positioning products. The QTL (Qualcomm Technology Licensing) segment receives revenue from licensing fees as well as ongoing royalties based upon worldwide sales by licenses of products incorporating or using the firms IP. The QWI (Qualcomm Wireless & Internet) segment provides technology to support and accelerate the growth of the wireless data
market. In fiscal 2005 QCT, QTL and QWI accounted for approximately 57%, 32% and 11% of total revenue respectively.
In May 2005 Broadcom filed suit against Qualcomm alleging that Qualcomm's products infringed on 10 patents. Broadcom also filed a complaint with the US International Trade Commission (ITC) claiming that Qualcomm is importing microprocessors that infringe its patents and thereby violating section 377 of the Tariff Act of 1930. According to the Hawley-Smooth act imported products that allegedly violate US intellectual property rights can be barred from entry into the country. Broadcom's complaint requested a cease and desist order to bar further sales of infringing products that have already been imported into the United States by Qualcomm. The ITC is likely to hand down its final
determination in the second half of 2006.
Broadcom founded in 1991 is one of the world's largest fabless semiconductor companies. Over the last four quarters Broadcom had revenue of $2.4 billion and net earnings of $287 million. The firm provides manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices with a broad portfolio of SoC and software solutions.
In early July Broadcom filed a complaint in US District Court asserting that Qualcomm had violated US antitrust laws. The alleged violations relate to Qualcomm's abuse of the wireless technology standards-setting process, its failure to meet its commitments to license technology for cellular wireless standards on fair, reasonable and non-discriminatory terms, and various anticompetitive practices of Qualcomm in the markets for cell phone technology and chipsets.
Louis M. Lupin, senior vice president and general counsel of QUALCOMM. "This case, like the earlier patent cases filed by Broadcom against QUALCOMM, appears to be a desperate attempt by Broadcom to gain bargaining leverage through meritless litigation. Because Broadcom does not hold essential patents for the important cellular standards, Broadcom must feel compelled to resort to these kinds of measures rather than continuing to negotiate for licenses in good faith. Broadcom's unfortunate preference for the litigation forum rather than the negotiating table will require QUALCOMM to proceed with litigation of its own."
Mr. Lupin pointed out Broadcom has a history of initiating litigation and ITC proceedings that do not turn out well for the company. Broadcom's patent litigation and ITC proceedings against Intel resulted in Broadcom's paying Intel a $60 million settlement in 2003. Similarly, Broadcom filed patent claims against Microtune, Inc. in court and in the ITC with the outcome a $22.5 million settlement payment from Broadcom to Microtune in 2004. Broadcom's patent infringement claims against Agere Inc. suffered a similar fate with Broadcom reporting a $27.5 million charge to settle that litigation late last year.
On July 11 Qualcomm filed suit against Broadcom for infringement of seven QUALCOMM patents. QUALCOMM's lawsuit asserts infringement of patents that are “essential” to the manufacture or use of equipment that complies with the GSM, GPRS and EDGE cellular standards (the “GSM Standards”) and to certain interoperability standards for wireless local area networks popularly known as Wi-Fi. Patents that are “essential” to a standard are those that must necessarily be infringed to comply with the requirements of the standard. QUALCOMM's complaint states that Broadcom is infringing six of the patents by the manufacture and sale of integrated circuits for use in
GSM Standards handsets and is infringing the remaining patent by the manufacture and sale of semiconductors for Wi-Fi devices. QUALCOMM seeks an injunction against Broadcom's continued manufacture and sale of these products as well as monetary damages.
In mid-October Qualcomm filed a second suit against Broadcom charging Broadcom with infringing two of Qualcomm's patents. One of the patents describes an image-compression technology and the other video encoding and decoding.
On Oct 28, 2005 Broadcom Ericsson, NEC, Nokia, Panasonic Mobile Communications and Texas Instruments each filed complaints to the European Commission requesting that it investigate and stop Qualcomm's anti-competitive conduct in the licensing of essential patents for 3G mobile technology.
The companies stated that Qualcomm is violating EU competition law and failing to meet the commitments Qualcomm made to international standard bodies around the world that it would license its technology on fair, reasonable and non-discriminatory terms. Absent these commitments, the WCDMA 3G standard would not have been adopted. The companies said that Qualcomm is infringing these rules by:
1. trying to exclude competing manufacturers of chipsets for mobile phones from the market and preventing others from entering. To this end, Qualcomm has committed a number of abuses, ranging from the refusal to license essential patents to potential chipset competitors on fair, reasonable and non-discriminatory terms to offering lower royalty rates to handset customers who buy chipsets exclusively from Qualcomm.
2. charging royalties for its WCDMA essential patents that are excessive and disproportionate; in particular by imposing the same royalty rate on WCDMA 3G handsets as it does for CDMA2000 3G handsets despite the fact that Qualcomm has contributed far less technology to the WCDMA 3G standard than it has to the CDMA2000 standard.
Qualcomm responded that the allegations are factually inaccurate and legally meritless. They point to the large number of licenses that Qualcomm has granted to a broad range of companies including 5 of the 6 claimants as evidence for their position.
On November 7 Qualcomm filed suit against Nokia for infringement of eleven Qualcomm patents and one patent owned by a subsidiary.
There are parallels with the Rambus case. In particular there are allegations that the standards making process may have been manipulated. In June 2002 the FTC charged Rambus with violating federal antitrust laws in particular by deceiving industry-wide standard-setting organization, namely the JEDEC Solid State Technology Association. According to the FTC's complaint, Rambus participated in JEDEC's SDRAM-related work for more than four years without ever making it known to JEDEC or its members that Rambus was actively working to develop, and did in fact possess, a patent and several pending patent applications that involved specific technologies proposed for, and ultimately adopted
in, the relevant standards. In February 2004 an FTC judge ruled that Complaint Counsel failed to prove the facts they alleged in the complaint and that the legal theories advanced by Compliant Counsel failed to demonstrate that a violation of the FTC Act had occurred.
As Qualcomm states in its latest 10K “Standards Development Organizations (SDO) do not have the enforcement authority or ability to protect intellectual property rights. Today, these organizations generally ask participating companies to declare whether they believe they hold patents essential for compliance with a particular standard or proposed standard and if so, whether they are willing to license such patents on terms and conditions that are fair, reasonable and free from unfair discrimination”. Such licenses are referred to as FRAND (fair, reasonable and non-discriminatory.
It is not clear what assurances or commitments, if any, Qualcomm may have given to various standards organizations. It is not clear if such assurances were made, that they were broken in any way by Qualcomm. It is not clear what recourse if any these SDOs or claimants may have, if indeed the commitments were broken. It is not clear what the potential fallout for the industry will be during and after the lengthy litigation process. Even the cloud of uncertainty may have considerable impact. Qualcomm's stock has risen 36% since the first of July. Broadcom's stock has risen 28% over the same time period. By comparison the NASDAQ stock index has risen a modest 7%.
Another parallelism with the Rambus case is that the companies making charges and allegations are licensees of the target company.
It should be pointed out that the Rambus case is largely well documented history while the Qualcomm case is still in its preliminary stages. No one knows how this will play out over time.
This is a high stakes game. According to EMC World Cellular Information Service, a researcher and publisher of wireless industry intelligence, there will be 2.2 billion mobile phone users or subscribers by the end of 2005 and there will be nearly 3.2 billion mobile subscribers by 2010.
Some Background on Cell Phone Technology
A cell phone exchanges signals with a tower or base station that is connected back to a central station. These base stations have a range of up to 6 miles. The phone carriers such as Sprint, Verizon, Cingular and T-Mobile have erected networks of these towers. In order to place a call, the cell phone must first connect to one of these towers. If a cell phone moves outside the range of a tower during a call, the connection must be handed off to another tower. If your carrier has no tower in a particular area then you can not make or receive a call or have your conversation handed off, unless your vendor has an arrangement with another carrier. You are said to be roaming and depending
on your service plan there may be additional, often steep, charges.
Governments have assigned certain frequencies for cellular transmission. European phones use the 900 and 1800 MHz bands for some of their older networks and the 2100 MHz bands for their new 3G networks. The Americas operate in the 850 and 1900 MHz bands. In the US the FCC licenses a band of spectrum to a carrier on a regional basis, sometimes leading to a mixture of frequencies for a particular carrier across the nation. Because of this situation cell phones are available that work on multiple banks, so called dual-mode and tri-mode phones.
Cell phones are designed and manufactured by a number of well know companies including Nokia, Motorola, Samsung, LG and Sony. However each phone has software and protocols that are specific to a carrier so that a “Sprint” phone can not become a “Verizon” phone. However, because of federal legislation, one can port the phone number across carriers.
When cells phones were first introduced, they basically provided mobility by untethering the phone from the wall jack. They supported basic voice communication. Over time capabilities have been added for text messaging, built in cameras and camcorders, video casting, satellite radio, web surfing, nationwide push-to-talk or walkie-talkie capability, GPS, E911 (Emergency 911), personalized ringtones and so forth. The technology inside the cell phone and in the supporting cellular networks can be said to have progress through multiple generations: 1G, 2G, 2.5G and currently 3G. First generation cell phones were analog. They lacked capacity and data transfer capability, consumed
considerable power and had inconsistent levels of service. The second generation was digital with new functionality for paging, e-mail, facsimile, and connection to computer networks at a lower price but still data services were limited to low transmission rates. The main 2G cellular technologies were CDMA, TDMA, PDC and GSM (see glossary below). The third generation, 3G, is targeted at ability to simultaneously carry both high speed data and voice traffic. Possible applications include ability to:
Download games, ring tones and other robust applications
View video files (streaming and download-and-playback)
Use push-to-chat and voice over Internet protocol (VoIP) services
Experience video conferencing and instant multimedia
Browse the web and check email
In May 2000 the ITU, International Telecommunications Union, adopted the 3G standard known as IMT-2000, which encompasses five terrestrial operating radio interfaces, three of them based on Qualcomm's CDMA intellectual property. There are two current commercial versions of CDMA2000, namely CDAM2000 1X and 1xEV-DO. Some carriers are deploying 2.5G mobile packet data technologies, such as GPRS and EDGE, as a bridging technology while they wait for 3G WCDMA devices to become more readily available and affordable.
The functionality evolution and convergence of devices has significant ramifications for cell phone developers and EDA vendors. One obvious problem is the length of time a cell phone can operate away from a charger in both active (typically 3 hours) and standby mode. A replacement cell phone battery costs about $70. Storage capacity requirements not only for software but also for content like photos and videos are increasing exponentially. Of course cost is always an issue in this consumer market and price competition is stiff. A cell phone retails for a few hundred dollars. Carriers typically offer around $150 dollars off the retail price in exchange for a two year service
commitment. In some cases this is sufficient to make a phone upgrade “free”. The same technologies have applicability for PDA and laptop computers, digital cameras and media players.
Glossary of Cellular Terms
CDMA or Code Division Multiple Access; also known as spread spectrum, CDMA cellular systems utilize a single frequency band for all traffic, differentiating the individual transmissions by assigning them unique codes before transmission.
GPRS or General Packet Radio Service is part of GSM Phase 2+. GPRS represents the first implementation of packet switching within GSM, which is a circuit switched technology. GPRS offers theoretical data speeds of up to 115kbit/s using multislot techniques. GPRS is an essential precursor for 3G as it introduces the packet switched core required for UMTS.
GSM or Global System for Mobile communications is the international digital radio standard created by the European Telecommunications Standards Institute. GSM is currently the dominant 2G digital mobile phone standard for most of the world.
HSPDA/HSUPA are evolutions of the WCDMA standard. HSDPA or high-speed downlink packet access refers to the speed at which individuals can receive large data files, the “downlink.” HSUPA or high-speed uplink packet access refers to the speed at which individuals can send large data files, the “uplink.”
EDGE or Enhanced Data rates for GSM Evolution; effectively the final stage in the evolution of the GSM standard, EDGE uses a new modulation schema to enable theoretical data speeds of up to 384kbit/s within the existing GSM spectrum.
EV-DO or “EVolution, Data-Only” is a 3G CDMA standard providing data rates over 10 times faster than 1xRTT1xEV-DO is based on a technology initially known as "HDR" (High Data Rate) or "HRPD" (High Rate Packet Data), developed by Qualcomm.
OFDM and OFDMA wireless solutions will enable delivery of high-quality streaming video and audio programming.
TDMA or Time-Division Multiple Access is a technique for multiplexing multiple users onto a single channel on a single carrier by splitting the carrier into time slots and allocating these on a as-needed basis.
UMTS or Universal Mobile Telecommunications System is a wireless standard approved by the International Telecommunications Union and is intended for advanced wireless communications. UMTS uses WCDMA technology, and the two terms are often used interchangeably with each other.
WCDMA or Wideband Code Division Multiple Access is an approved 3G wireless standard which utilizes one 5 MHz channel for both voice and data, offering data speeds of 144 Kbps to 2 Mbps.
In last week's editorial the name Apache was inadvertently misspelled in the title line. My apologies to Apache Design Solutions.
The top articles over the last two weeks as determined by the number of readers were:
FPGA Technology Mapping: A Study of Optimality - Technical Paper from DAC 2005 The paper describes an algorithm, based on Boolean satis ability (SAT), that is able to map a small subcircuit into the smallest possible number of lookup tables (LUTs) needed to realize its functionality. For some circuits the total area improvement can be up to 67%.
The Forum will be held on November 9, 2005 in Santa Clara, CA, and will feature a wide array of industry-wide EDA initiatives and standards. The event will provide sessions on: "Innovations in Open-Source Liberty Library Modeling," "Moving to Open EDA Databases," "Developing the SystemVerilog Ecosystem," and "V-SDC Open-Source Format for Equivalency Checking.
Synopsys Integrates Solution-Soft's Advanced GDSII and MEBES Compression Solutions With CATS
Synopsys and Solution-Soft announced the general release of Solution-Soft's GDSII and MEBES format data compression technologies as part of Synopsys' CATS mask data preparation software.
Synopsys Leads Industry With New Nanometer Modeling Technology
Using Synopsys' Composite Current Source (CCS) modeling technology, designers are able to perform comprehensive timing, noise and power analysis using a single, open library model. Anchored by golden sign-off tool PrimeTime, CCS modeling technology extends sign-off to include noise and power effects that are required for today's nanometer designs.
IEEE Approves SystemVerilog(R) and Verilog(R) Standards for Electronic Design
THE IEEE has approved SystemVerilog, IEEE Std 1800(TM)-2005, as a new standard and has approved Verilog, IEEE Std 1364(TM)-2005, as a revision to the popular Verilog HDL. SystemVerilog, IEEE Std 1800-2005, raises productivity for hardware design, specification, simulation and validation, especially for large-gate-count, IP-based, bus-intensive chips. It is based on the SystemVerilog 3.1a HDVL from the Accellera standards organization, which includes such features as advanced design modeling capabilities, testbench constructs, and verification methods using assertion and testbench language, and a richer coupling with other languages such as C/C++.
Sequence announced significant enhancements of PowerTheater, a complete toolkit for SoC power analysis and optimization; CoolPower, providing physical power optimization for leakage power, and dynamic power; and CoolTime, for static and dynamic power grid analysis and optimization.
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-- Jack Horgan, EDACafe.com Contributing Editor.