Qualcomm turns down Nokia payment

Qualcomm today rejected the $20 million payment Nokia offered to keep its W-CDMA licensing deal temporarily intact for the second quarter. Qualcomm said that the payment was not only a fraction of what Qualcomm would be owed for three months of royalties, but Nokia also attached numerous conditions to the payment that Qualcomm found unacceptable.

While not naming a specific amount it would deem acceptable, Qualcomm said the $20 million was not only far less than the royalties Nokia would owe under the 2001 cross-licensing agreement that expired on Monday, but it was also lower than the royalty rates Nokia is seeking to impose on Qualcomm for its own GSM and W-CDMA patents.

The statement issued this afternoon was the first public statement either company has made since Monday when their agreement expired, except to assure customers and investors that they both would continue to make their chipsets and handsets respectively. Last week Qualcomm asked for arbitration in the dispute, seeking a judgment that would allow it to revoke all licensing deals with Nokia, effectively shutting down the vendor’s handset operations. Though nothing has come of the threat yet, neither company has indicated that talks have progressed any further.

Nokia claims that it pays out a total of 3% of the cost of its UMTS handsets in royalties and about 1% of that goes to Qualcomm for W-CDMA royalties. Meanwhile Qualcomm maintains its patent royalties from other cross licensing agreements approach 5% of total handset costs. Today Qualcomm fired back at Nokia, saying if it is true Nokia pays less than 3% per unit in royalties then it has “seriously underpaid” royalties Nokia agreed upon in their 2001 deal, meaning Nokia owes it a big check.

Nokia is arguing that the royalty rate the companies negotiated in their previous deal is no longer applicable--that the value of the actual radio technology in current UMTS handsets is much less than it was in 2001. Nokia officials said that the $20 million payment was determined entirely by guidelines for “fair and reasonable” licensing laid by the European Telecommunications Standard Institute.