Tuesday, August 14, 2007

Qualcomm vs. Broadcom

A vicious legal war is raging between Qualcomm, the inventor of the CDMA wireless technology that serves as the foundation for all third generation (3G) wireless systems, and two other firms. One of those firms is Broadcom, a competing supplier of wireless semiconductor products, and Nokia, the world's largest handset maker.

I'm going to address four issues: (1) who invented the CDMA technology that underlies all third generation (3G) wireless networks and products?, (2) how important are standards and the committees that set them?, (3) is patent reform needed?, and (4) what are the key facts in the legal war being waged against Qualcomm?

I've seen comments on some discussion boards suggesting that Qualcomm is a company that has made no important contributions to wireless technology and exists merely to extort other manufacturers. It's hard to say whether these comments are more remarkable for their ignorance or mean-spiritedness.

When Qualcomm proposed CDMA in 1989 a number of voices complained the concept was fatally flawed and probably just an investment scam. Fast forward to 2007, and we have people posting on discussion boards claiming that Qualcomm didn't invent CDMA. One poster asserts it was Hedy Lamar's Austrian husband. This would be an amazing revelation to the nearly 200 companies that have licensed CDMA from Qualcomm and even Hedy Lamar were she still alive.

Hedy Lamar and George Antheil, a composer of music for automated instruments, obtained a patent for a spread spectrum frequency hopping scheme for radio-controlled torpedoes and intended to evade enemy jamming. While this was a primitive example of wideband communications, it was not CDMA, which is a multiple access scheme that can be used with frequency hopping or other wideband schemes such as (and more commonly) direct sequence spread spectrum.

There is absolutely no doubt that Qualcomm invented CDMA. Irwin Jacobs, in particular, is credited with solving the dynamic power control problem that was an obstacle to its successful implementation.

On to standards. Standards are important to telecommunications. Just as trains and railroad tracks must match to work properly, telecom standards ensure that diverse users can communicate with each other. In the early days, a "standard" was generally a proprietary technology that became so successful everyone started using it. In some cases, governments chose technical standards to avoid drawn-out market battles. Today, standards-setting is highly political and largely a charade. Companies use standards to boost their own prospects and/or derail competitors. Standards committees pretend to serve consumers, but in reality they almost ways serve the big, incumbent vendors who can afford to send people traipsing around the world representing their interests. Most standards never gain traction, and many of the most successful standards are simply repackaged versions of a proprietary technology that most vendors are already sold on.

Regarding patent reform, the key issue to remember is that patents were intended to protect inventors. For example, if an inventor brings an innovative new product to market, a larger company should not be able to just copy that product and sell it for less. It's that simple. Unfortunately, our legal system has strayed far from the original intent, and we have companies patenting sunshine and buying patents mainly to use them in court. There have also been many difficult patent cases that made a fetish of priority. Patents should not be used mainly to reward the first person to think of an idea--we may never know who that was--but to reward the first person to think of, develop, and promote an idea. In other words, priority should not go to someone who suddenly shows up with a scrap of paper on which they claim they wrote down the idea first; additional consideration should go to those who made the invention succeed as long as they can show they conceived and developed it independently. (Admittedly, there may be exceptions in which the first person to conceive an idea was blocked from proceeding for reasons beyond their control--particularly if their work influenced others.)

So what are the facts in Qualcomm vs. Broadcom and Qualcomm vs. Nokia? I don't claim to know all of the details but I think at this point what's needed is a high-level view. It's generally believed that Qualcomm licenses CDMA for royalties of about 5%. That is a perfectly reasonable royalty rate--particularly for a company that has been slandered and attacked in court so many times over the past two decades.

Make no mistake about it, the legal war is nothing more than an attempt by Broadcom and Nokia to exempt themselves from that 5% rate. As best I can tell, Broadcom believes Qualcomm should cross-license with them so that Broadcom will be the only other chip maker that doesn't pay royalties for CDMA. In Nokia's case, the firm admits it needs a license from Qualcomm, but claims 5% is exorbitant because other firms including Nokia contributed IP to WCDMA, the leading 3G standard.

Qualcomm and its lawyers have made some serious mistakes, failing to fully disclose documents in a timely manner and misreading others' perceptions regarding standards committees. They are also tough business people (perhaps partly because they have taken so many arrows over the years), and that rubs some the wrong way.

But mainly, Broadcom and Nokia are exploiting longstanding prejudice and enmity towards Qualcomm. In the ITC case, Broadcom purchased wireless LAN patents and is using them to make claims regarding cellular implementations. In another case, Judge Rudi Brewster handed down a stinging rebuke to Qualcomm for failing to follow a standard committee's policy that "encourages" participants to make early disclosure of essential patents, though Brewster fails to show that Qualcomm intended to spring its patents on the entire industry at the last minute.

Nokia claims it should not have to renew its license with Qualcomm at the same rate it already agreed to, and along with companies including Broadcom is attempting to revive the European protectionist policies that prohibited Europe's mobile operators from implementing Qualcomm's original CDMA technology.

I welcome anyone who can show through facts and sound reasoning that any of the above is inaccurate.


Welcome to I Dare to Speak. I am using this blog to air controversial ideas about politics, religion, health care, education, and more. The idea is simple: instead of posting essays to diverse discussion forums, I am posting short comments in those forums with links to this blog.