Qualcomm
The U.S. International Trade Commission yesterday said Qualcomm, Motorola Inc. and four other companies infringed Tessera patents for the packaging on their chips. It issued an order, which is subject to presidential review, to halt imports of certain chips by the companies that arent covered by licenses and forces Qualcomm, Motorola, Freescale Semiconductor Inc. and Spansion Inc. to stop selling unlicensed chips they have on the U.S. market.
The Tessera patents cover a way of making packaging to surround the chips so they are protected from damage and yet can be made smaller and faster. Tessera Chief Executive Officer Hank Nothhaft has said the ITC complaints are “strategic,” to push chipmakers to license its technology. Royalties accounted for $220.3 million, or 89 percent, of Tesseras $248.3 million in revenue last year.
This “gives them a very strong incentive to settle this with us, quickly, in a timely manner,” Nothhaft said yesterday in an interview. In a conference call, he said the ruling “has improved the outlook for our company quite a bit, but were not prepared to quantify it today.”
Tessera jumped as much as 23 percent on the news after the close of regular trading yesterday.
Contingency Plans
The exclusion order doesnt go as far as Tessera had asked. The companies have been working to ensure that, should they lose the case, their customers wouldnt be affected. The order is directed at Qualcomm, Motorola, closely held Freescale, Geneva- based STMicroelectronics NV, Spansion and Advanced Micro Devices Inc.s ATI Technologies.
Qualcomm, the worlds biggest maker of mobile-phone chips, changed its packaging contractor for many chips to Amkor Technology Inc., which already had a license to Tessera patents. Qualcomm said it will be able to “continue to supply the U.S. market without interruption.”
“We were hopeful we would get a good outcome, but weve been preparing for this for quite some time,” said Alex Rogers, a lawyer for San Diego-based Qualcomm.
Schaumburg, Illinois-based Motorola, the biggest U.S. mobile-phone maker, paid Tessera to ensure that, if it lost the case, it could license Tessera patents with a set royalty rate. Motorola will consider whether to “exercise the license option in the coming days,” said Paula Thornton-Greear, a Motorola spokeswoman.
Best Interests
“As we have said previously, this is a dispute between Tessera and certain semiconductor chips suppliers,” she said. “As a major customer of these suppliers, we have made it clear that we expect them to act in the best interests of their customers and the industry and resolve this matter as quickly as possible.”
Michael Silverman, an AMD spokesman, said the company has received only a summary of the trade commissions decision and wont be able to comment until it reviews the entire ruling.
Courtney Brigham, a Spansion spokeswoman, had no immediate comment.
“Were disappointed in the decision, but our policy is not to comment on ongoing litigation,” said Mike Markowitz, a U.S.- based spokesman for STMicroelectronics.
Stock Gain
Tessera gained $1, or 6.4 percent, to $16.61 in Nasdaq Stock Market trading yesterday. The stock rose as high as $20.54 after the market closed, when the ITC decision was announced.
So-called chip packaging coats the silicon and metal that makes up semiconductors with material that protects them from electrical interference and physical damage. As devices such as mobile phones and music players become smaller, that increases the importance of inventions to shrink the protective layer.
Tessera collects royalties on only 30 percent to 35 percent of the mobile products using its technology, estimated Kevin Vassily, an analyst with Pacific Crest Securities Inc. in Portland, Oregon. The company could add $50 million a year in royalties if it wins the case, he said.