Legal News

All Quiet on the Western Front: Broadcom, Qualcomm Reach $891M Deal

By Ashby Jones

It may have been a quiet weekend on the M&A front, but that doesn’t mean there wasn’t a good bit of dealmaking going on. We’re talking about the global settlement reached over the weekend by rival southern California-based chip makers, Broadcom and Qualcomm.

Under the deal, Qualcomm agreed to pay $891 million to Broadcom over four years. The companies will end their litigation and have agreed to exchange rights to each others’ patents. In addition to ending patent suits in the U.S., Broadcom agreed to drop antitrust complaints it has filed against Qualcomm in Europe and South Korea. Click here for the WSJ story; here for the NYT’s; here for an earlier LB post on the case.

Throughout the last several years, the two chip makers have waged a series of court battles.

Broadcom is a major supplier of communications chips but is a newcomer to the cellular arena. One obstacle to Broadcom’s plans in the cellular market was the need to negotiate a patent license from Qualcomm, which invented some widely used cellular technologies.

To put pressure on Qualcomm to grant favorable licensing terms, Broadcom filed multiple patent suits and other litigation against Qualcomm. Though Qualcomm filed suits of its own against Broadcom, the latter had chalked up more court victories so far.

In June 2007, Broadcom prevailed in a jury trial in California federal court after it claimed that Qualcomm had violated three patents that include methods for transmitting high-speed data over cellphones. A week later, the United States International Trade Commission ruled that Qualcomm had violated a separate Broadcom patent that governed power management in cellphone chips. Broadcom asserted that Qualcomm was using the technology without paying licensing fees.

Under the settlement, Broadcom will not have to pay Qualcomm patent royalties on the chips it sells. “Other than the payment we are making, neither of us is making ongoing payments,” Mr. Rosenberg said.

Qualcomm’s payments to Broadcom include $200 million that will be paid in the current quarter, ending June 30, the companies said.

Ed Snyder, a telecommunications industry analyst with Charter Equity Research, told the NYT that the agreement was good for both companies but said "clearly, Broadcom is coming out ahead."

Full post as published by Law Blog - WSJ.com on April 27, 2009 (boomark / email).