Were Qualcomm's GSM Lawsuits Calculated?

While I do think that the legal reversals don't change Qualcomm's (QCOM) future outlook as much, there is one thing that nags me about this GSM thing: Did Qualcomm think through the market consequences?

There are only two explanations to the GSM lawsuits. Either Qualcomm's legal team was confident (read overconfident) about the chances of the patents in question or it was a well-calculated move by the Qualcomm executives.

Qualcomm is CDMA-centric, or at least its early IP was. When all the world was developing GSM and TDMA devices, the company set forth demonstrating the capacity benefits of a revolutionary technology. This in turn, meant that the company's engineering talent was intensely focussed on broadening its CDMA intellectual property, thereby ignoring the other prevelant standards. So the only GSM patent claims, if any, could come from a few common methods, system or apparatus. Even this is likely to be pre-dated by the work or 'prior-art' of other engineering teams focussed on GSM. So, if I were to take an educated guess on the company's chances of defending its GSM IP, I would say 'Slim'.

And what are the chances that Qualcomm, of all companies, is not aware of this? Super slim. Then the next question that should be asked is: Why then did Qualcomm file a slew of lawsuits related to its GSM IP if it knew it was going to lose? The legal team, that has done so well for the last 15 years (until the Broadcom (BRCM) debacles), may have been overconfident that they can outsmart their opponents in a couple of these battles. By filing multiple lawsuits, the company also sought to increase the probability of a win.

So far, it has been a sad tale though with the disputed patents being fully or partially invalidated. The company has sunk in substantial legal fees in a seemingly lossy venture. What is more hurting is the loss of face and the negative public perception that comes with it.

Does this then reflect poor judgment from the Irwin Jacobs clan? Or are Paul Jacobs and his team so confident of the company's foundations? In the latter situation, the upsides of a win make these lawsuits a risk worth taking. I would like to believe that this is the case. Paul, much like others who cherish the company's engineering leadership, would hate to dilute this position by a series of miscalculated maneavors.

Disclosure: The author was long QCOM at the time of writing.

Comments

[squawk]

Don't readily agree with your broad assumption that QCOM's claims to protect its patents on the GSM platform stand next to no chance of succeeding. They may prevail on some claims, while lose on others. The actions were filed on all claims to protect whatever rights they may wish to assert going forward. I still think its too early to cast judgment upon QCOM's overall legal strategy.

[VijayNagarajan]

I do not fault QCOM's legal strategy, not yet. My point was that if the company is confident of absorbing the downsides of these losses, this is not a bad strategy. But defending these patents in the light of earlier work from other companies is going to be an uphill battle.

Incidentally, my understanding is that earlier agreements with Nokia covering CDMA were contingent on QCOM dropping any claims on GSM. Read sramanamitra.com/2007/.../
for more color on this.