Broadcom (BRCM) Works To Shut Qualcomm (QCOM) Down

Broadcom (BRCM) is arguing in federal court that Qualcomm (QCOM) should be prohibited from selling a number of its chips because they infringe on BRCM patents. According to Reuters:  “Broadcom was seeking an injunction in federal court on Tuesday to bar Qualcomm from supplying its customers with chips that a Santa Ana jury found in May had infringed three technology patents owned by Broadcom.”

If Broadcom wins the case, it will have the affect of taking a number of Qualcomm products off the market, doing what could be nearly irreparable damage to the company. Qualcomm has asked the court to license Broadcom tech while the case continues.

One of Qualcomm’s arguments for the arrangement is flawed. The company claims that large wireless service operators like Sprint (S) would be prevented from marketing certain handsets with the QCOM tech. Verizon Wireless, which has set up a direct licensing agreement with Broadcom would, therefore, have an unfair advantage. The theory lacks substance because nothing prevents Spint or AT&T (T) from setting up their own license agreements with Broadcom.

As one attorney told the Associated Press regarding a potential ban on Qualcomm offering infringing products: “It essentially makes it extremely difficult for Qualcomm to work with customers to make new (chip) designs.”

Broadcom is doing nothing short of trying to get the courts to lock Qualcomm out of certain of its largest markets.

Qualcomm traded at $52 in May 2005. It is not down to $37.75. If things get worse, the shares could see $30.

Douglas A. McIntyre