Verizon-Broadcom Deal Allows Continued Imports

Broadcom Corp. and Verizon Wireless Inc. have reached a deal that will allow Verizon to continue importing and selling mobile handsets that are at the center of an ongoing legal battle between Broadcom and Qualcomm Inc.

On June 7, the U.S. International Trade Commission (ITC) banned the importation of new models of phones and PDAs that hit the market after that day and include certain Qualcomm chips. Broadcom had sued the rival mobile chip vendor over alleged patent infringement.

Under a licensing agreement, Verizon will pay Broadcom US$6 for every handset, PDA (personal digital assistant) or data card that uses EV-DO (Evolution-Data Optimized) mobile broadband technology. The carrier will make the payments up to a ceiling of $40 million per calendar quarter and a lifetime maximum of $200 million. As part of the deal, Verizon also will drop an effort to overturn the ruling. Other terms are confidential, according to a statement released by the two companies.

The move is a blow to Qualcomm, which pioneered the CDMA (Code-Division Multiple Access) technology on which EV-DO is based. Verizon is the largest carrier in the U.S. using EV-DO. It will pay Broadcom to license technology that Qualcomm has argued does not belong to Broadcom in the first place. Qualcomm was not immediately available for comment.

In addition to the licensing deal, Broadcom has entered a strategic alliance with Verizon Communications Inc., the parent company of Verizon Wireless. That deal covers new mobile device chipsets as well as Bluetooth, wireless LAN, optical network, GPS (Global Positioning System), DSL (digital subscriber line), fiber, set-top box and home network equipment components. Broadcom, in Irvine, California, makes chips for a wide range of wired and wireless network products. Qualcomm, in nearby San Diego, is focused on wireless technology.

Qualcomm said last month it would try to convince President George Bush to overturn the June 7 ruling, which was effective immediately. Bush has 60 days to decide whether to take action. If he doesn't, Qualcomm could appeal the ruling in federal court.

The June 7 ruling came after the ITC ruled last year that Qualcomm had infringed on a Broadcom patent for power management technology. Broadcom had said the system is used in essentially all EV-DO and Wideband CDMA phones.