A U.S. appeals court on Friday said Qualcomm Inc. was premature in appealing an order by a federal trade agency that banned imports of some cellular telephones containing Qualcomm chips.
The U.S. Court of Appeals for the Federal Circuit said it lacked jurisdiction over an order by the U.S. International Trade Commission (ITC) because Qualcomm has asked the Bush administration to invalidate the decision.
An ITC determination does not become final for purposes of judicial review until the president has either approved of the determination or failed to disapprove within 60 days, the court said.
The Bush administration has until August 6 to review the ITC's June 7 order, which banned imports of future advanced cell phone models using Qualcomm chips but exempted phone models that were already being imported on June 7.
The ITC, which determines whether imports injure U.S. companies, found that Qualcomm's chips infringe on a patent owned by California-based Broadcom Corp..
Qualcomm spokeswoman Emily Gin Kilpatrick said the ruling was based on a procedural issue, not the merits of the case. Qualcomm plans to go back to court and renew its stay request if the Bush administration does not veto the ban, she said.
Former ITC attorney Lyle Vander Schaaf agreed: This is just something they'll get to fight out on another day.
The No. 2 U.S. mobile service provider, Verizon Wireless, which uses Qualcomm's chips in its phones, had supported Qualcomm in its patent dispute against Broadcom. But on Thursday, Verizon Wireless agreed to pay up to $200 million in licensing fees to Broadcom to avoid the ITC ban on imports.
Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc, has also withdrawn its support for Qualcomm's request for a stay or a veto of the ban.
Stifel Nicolaus analyst Blair Levin said in a note to clients that the Verizon defection reduces Qualcomm's chances of a presidential veto to 10 percent to 20 percent from his previous view that there was a 60 percent to 70 percent chance of a veto.
The ban on new phone models with Qualcomm chips would also hurt Sprint Nextel Corp., the No. 3 U.S. mobile service provider, and mobile phone makers such as Samsung Electronics and LG Electronics Inc.
These companies had joined Qualcomm in seeking a stay of the ban. A Sprint spokesman was not immediately able to comment on whether or not it would forge a similar pact with Broadcom.
If Broadcom strikes another carrier deal before August 6, particularly if it is with Sprint Nextel, we would view the likelihood (of a veto) as close to zero, Levin said.
The Broadcom patent at issue covers technology that extends
battery life in phones when they are outside network range.
Qualcomm stock closed down 35 cents, or less than one percent, at $43, while Broadcom finished 45 cents higher, or up 1.3 percent, at $34.44.
(Additional reporting by Sinead Carew in New York)