In a growing trend, No. 1 cell-phone supplier Nokia (NYSE: NOK) recently appealed to the U.S. International Trade Commission (ITC) to ban the import of Qualcomm (Nasdaq: QCOM) chips that supposedly infringe on five of its patents. If you're thinking you've heard this story before, you have. In June, the ITC banned certain Qualcomm chips that it ruled infringe on one of Broadcom's (NYSE: BRCM) patents.
The latest salvo in a long legal battle between Nokia and Qualcomm, the ITC request comes mere days after a similar request from InterDigital (Nasdaq: IDCC) against Nokia itself. In that complaint, InterDigital wants the ITC panel to ban the importation of the new N75 handset and any other next-generation Nokia product that supposedly infringes on two of its patents.
Following the precedent set by Broadcom, the ITC bully has now become everyone's best friend on the telecom playground. While lawsuits sit pending in courtrooms around the world, the ITC motions can more effectively force the hand of one party in a dispute by constraining imports and threatening product rollouts from customers such as Sprint Nextel (NYSE: S), AT&T (NYSE: T), and Verizon Wireless, a joint venture between Verizon Communications (NYSE: VZ) and Vodafone.
Nokia is clearly taking advantage of the ITC's recent strong stance, moving to attack Qualcomm while it's down. Since Qualcomm has logged its own ITC complaint against Nokia (set for a hearing in September), it will be interesting to see how deeply the body becomes embroiled in intellectual-property disputes.
This new trend is somewhat silly, because all of these companies hold thousands of patents, vastly increasing the odds that each violates at least a few claims on a patented technology owned by the others. But the ITC's willingness to actively involve itself in debating infringement of even single-patent claims has touched off a race to see who can conclude an investigation and ban offending products first. The fastest legal team gets a leg up in license negotiations, while the other party gets handicapped with a product ban from the ITC.
While those bans are within the scope of the ITC's authority, enacting one based only upon a small piece of a much larger picture sets a dangerous precedent -- one that's skewing leverage in free-market license negotiations and eliciting a growing wave of new IP litigation tactics.
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Fool contributor Dave Mock should not have been banned from the goofy golf course -- he found the clown face in that condition when he got there. He owns shares of Qualcomm and is the author of
The Qualcomm Equation. InterDigital is a Stock Advisor recommendation. Vodafone is an Inside Value selection. The Motley Fool's disclosure policy would never make anyone eat dirt.
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