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Issued: April 1992 Prosecuted by: Russell Miller (in-house) Litigated by: Cooley Godward and Akin Gump Strauss Hauer & Feld If you buy a cell phone this year, odds are that you’ll be putting money into Qualcomm Inc.’s pockets. The company has fought hard to control and leverage its hundreds of patents on the wireless transmission format Code Division Multiple Access (CDMA). This “spread spectrum” technology creates clearer signals and uses the broadcast spectrum more efficiently than previous technologies. Qualcomm receives about 4 percent of the wholesale price of all CDMA phones sold, as well as royalty revenue from the sale of CDMA network equipment�the towers you see along the road and the switches that connect all the calls. The company licenses its CDMA technology to Telefonaktiebolaget LM Ericsson, as well as, Nokia Corporation; Matsushita Communication Industrial Co. Ltd.; ZTE Corporation; Compaq Computer Corporation; Teleion Wireless, Inc.; and Mitsubishi Electric Corporation. Qualcomm recently entered into a design-transfer agreement with Motorola Inc. for modem-card equipment that will enable high-speed Internet access. In 2000 the company reported royalties and licensing fees totaling $705.5 million, a quarter of its $2.8 billion annual revenue. Some industry analysts have projected annual royalty revenue of $3 billion by 2005. No wonder the company has a market capitalization of nearly $50 billion. Qualcomm has not had an easy time turning its technology into killer patents. It has fought court battles with virtually every major telecommunications equipment maker, including Ericsson, Nokia, Motorola, Siemens AG, and Alcatel SA. Through deft courtroom work, Qualcomm has successfully fended off all challengers so far, and even turned Ericsson into an ally. That alliance took some effort to forge. The companies fought for more than two years over the right to the technology. But in March 1999, prompted by cellular service providers that were demanding an end to the uncertainty, the companies reached a settlement just before trial. Financial terms were not disclosed. The settlement calls for the two companies to develop a single CDMA standard for future generations of handheld devices. Ericsson bought Qualcomm’s weak infrastructure business and is using it to expand the size of the CDMA market. In addition to licensing its core technologies, Qualcomm also develops new applications, which it then off-loads to other companies for manufacture or implementation. In the meantime, the royalties keep rolling in.

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