Qualcomm Says Sprint May Lose $2 Billion Due to Injunction

Sprint Nextel stands to lose a $2 billion investment in a new phone feature if a court bars Qualcomm from making the necessary chips, Qualcomm executives told the court on Thursday.

Qualcomm rival Broadcom has asked U.S. District Judge James Selna in California to permanently bar its rival from making chips covered by three Broadcom technology patents after an 18-month phase-out period.

A jury found in May that Qualcomm infringed the patents, including one related to walkie-talkie technology Sprint plans to put in phones in the first quarter of 2008, known as QChat.

Sprint has said QChat is key to a plan for moving customers from an older service acquired in its 2005 Nextel takeover. The No. 3 U.S. wireless service has lost customers in recent quarters, citing issues including Nextel network problems.

Qualcomm executives said at the penalty phase hearing, which began on Tuesday in Santa Ana, California, that an injunction would "significantly" harm the company and customers including Sprint. Qualcomm asked the judge to force Broadcom to offer it a license for the disputed patents while it appeals.

In a separate interview with Reuters, Sprint's CEO did not rule out the possibility of an agreement with Broadcom.

Eric Rosen, Qualcomm's senior director of engineering, testified on Thursday that Qualcomm and Sprint worked on QChat for years, but they had not tried to design around the disputed patent after Broadcom filed its suit in May 2005 or a complaint with the U.S. International Trade Commission in 2006.

"I did not believe we were infringing," Rosen said, adding that Sprint does not have a "fallback" if an injunction is granted, and that the two companies would "have to go back to the drawing board."

Rosen said an injunction could affect 20 million Sprint customers who have signed up for push-to-talk service.

In an interview at a Sprint technology conference that featured QChat and other technologies, Sprint Chief Executive Gary Forsee would not say if the company was working with Qualcomm on a technology to avoid a ban on QChat.

"We have lots of options to work with both companies on the Santa Ana litigation. We'll use all the options we need to use," to avoid an impact on its business, Forsee told Reuters at the conference at Tysons Corner, Virginia.

Verizon Wireless, a venture of Verizon Communications and
Vodafone Group , agreed to pay Broadcom up to $200 million to license its technology to avoid a U.S. government ban related to another patent infringement case between San Diego-based Qualcomm and Irvine-based Broadcom.

Asked if he would consider a deal with Broadcom to avoid an injunction on QChat, Forsee said there were "lots of options."

Since May, Qualcomm has found a "technical solution" to one disputed patent and is working on "two or three paths" on the other two, but cannot forecast when the chips will be commercially available, Chief Technology Officer Roberto Padovani testified on Thursday.

The hearing ended on Thursday. Lawyers on both sides expected Selna to issue a ruling next month.

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