QCOM Update: Worry about BRCM

Implications: There was little reaction to the news last week that the Federal Circuit would not stay the pending BRCM injunction against QCOM.  But make no mistake: the BRCM fight is going poorly for QCOM, and there will be enormous pressure on QCOM to cut a deal later this year.

Analysis: QCOM's litigation with BRCM has been a fact of life for years now, and for the most part it has rightly taken second seat to the more important cases underway between QCOM and NOK.  That said, toward the end of this year, BRCM looks poised to have substantial leverage over QCOM, as two unrelated fights both are moving quickly toward a rough ending.

The first fight underway is the patent case that was litigated in Santa Ana.  BRCM won a small cash victory there (roughly $20M) but then was awarded an injunction that came into partial force immediately and completely goes into effect this coming January.  QCOM tried to get that injunction stayed, but the Federal Circuit last week refused, choosing to instead set up a fast merits hearing in July. 

Is that good enough for QCOM?  On the one hand, yes.  Having a hearing in July makes the stay unimportant; QCOM will now know the final ruling before the injunction comes into force.  On the other hand, however, QCOM would have been better off with a stay and then a hearing next year.  That would have given QCOM more time to work on non-infringing alternatives to the BRCM patents and also to negotiate a deal both sides can live with.  Now, instead, the pressure is on, and January is a sharp deadline.

QCOM could earn a reprieve if enough of the appeal goes favorably to QCOM, of course.  But that seems a low-odds outcome.  BRCM won so decisively below, and on three separate patents, that QCOM can't reasonably expect to reverse enough of those issues on appeal so as to defang the January injunction. 

The second fight underway, meanwhile, is the old ITC case about energy conservation.  The exclusion order there is stayed, but that stay probably has only another 9-14 months on it.  QCOM has reassured its partners in the meantime by saying that it already has a workaround that makes the exclusion order unimportant.  But BRCM is now arguing that the workaround, too, infringes; and, so far, BRCM seems to be doing well in that fight too.

Adding all that up, QCOM has a number of plausible problems looming in the BRCM litigation.  If the Santa Ana injunction goes into force, or the ITC exclusion order looks to matter again, QCOM will likely feel enormous pressure to cut a deal.  There simply aren't that many more appeals or fall-back positions left.