Adam Bender

Vonage will pay $39 million to settle with AT&T, the price it agreed in principle to pay last month (CD Nov 9 p6), a Vonage spokesman confirmed. A Securities and Exchange Commission filing is coming, he said.

One claim of a European InterDigital patent is essential to the 3G WCDMA standard by the European Telecommunications Standards Institute, but the patent’s second claim and three other patents are not, the English High Court ruled last week after reviewing a Nokia lawsuit against InterDigital. Both parties declared victory. The decision means Nokia will have to pay royalties on the InterDigital patent ruled essential, InterDigital said. And “this is the first ruling by a court of law finding any patent to be essential to the 3G standard,” said Chief Legal Officer Lawrence Shay. Nokia also said it was pleased. “The outcome of the case, pending a possible appeal, will be a declaration that the vast majority of the patents InterDigital had declared so far to ETSI as essential… are not essential,” a spokeswoman said. “It was found that one claim of one patent was essential, however, in order to do so, the judge had to interpret the claim very broadly so that it covered the standard,” she added. “This interpretation calls into question the validity of the patents, which was not an issue at the hearing… Nokia now has the option to take future legal actions to resolve these patent validity questions.” In its original July 2005 complaint Nokia asked the court to declare 31 InterDigital patents not essential to the standard. During litigation, however, the case’s scope was reduced to four.

Qualcomm faces another investigation by the International Trade Commission, which in the summer issued a limited exclusion order banning import of Qualcomm cell phone chips said to infringe Broadcom patents. Broadcom seeks “fines and additional orders against Qualcomm to finally put a stop to their infringement,” a Broadcom spokesman said. Broadcom filed a complaint last month alleging that Qualcomm had violated the ITC ban by continued marketing, testing and programming of infringing chips. Qualcomm filed an opposition this month. After reviewing the filings, the ITC found that Broadcom’s complaint complied with commission rules “for institution of a formal enforcement proceeding,” the commission said. The ITC “is not taking a position on Broadcom’s complaint and has referred it to an administrative law judge for handling,” a Qualcomm spokeswoman said. “Any time frame for handling will be set by the ALJ. In the meantime, the stay on the downstream exclusion order remains in place.” Qualcomm has a stay on the “bulk” of the ITC injunction while it appeals in the Federal Circuit U.S. Appeals Court, said Stifel Nicolaus analyst Rebecca Arbogast. However, “there was no stay in effect” that would have let Qualcomm bring in standalone chips not contained in handsets “for engineering and research purposes,” she said. “The larger lesson to be drawn… is how aggressive the legal challenges will be to any workaround that Qualcomm says it has.”

Sprint Nextel’s hiring Dan Hesse as CEO is a “positive step,” but what the ex-Embarq CEO means for Sprint strategy is unclear, Bank of America said Tuesday. “Hesse brings new blood to the Sprint organization, and a recent positive track record of brand-building at Embarq, but there is no track record to draw upon with respect to how his vision for a new Sprint Nextel will come together,” the bank said. Hesse must act fast. “As a relative outsider, the first test for Hesse will be to quickly assimilate the state of Sprint and what steps are necessary to reinvigorate the business,” it said. “The longer Sprint’s current course deviates from its ultimate course, the more time-consuming and expensive the fixes become.” Bank of America expects Hesse to hold an investor meeting in mid-March to discuss Sprint’s 2008 and 2009 game plan, it said. Hesse is no stranger to Sprint or wireless. “For those investors seeking external, outside- the-industry candidates, Hesse is as close to an insider as they come,” said Current Analysis’ William Ho. In 2005, ex- Sprint CEO Gary Forsee hired Hesse to run Sprint’s wireline business, later spun off and renamed Embarq. From 1997 to 2000, Hesse had led the old AT&T Wireless as president and CEO. His industry experience is valuable, Ho said. “Sprint is bleeding and needs someone who knows the business now without any learning curve.” Hesse probably won’t “make the dynamic changes” needed at Sprint, Pali Capital said. “While Hesse might communicate a plan that portends to improve the operational results and culture at the company, we fear that it will be the typical corporate 10-point plan that lacks the radical change and immediate action necessary to set a new course for Sprint.”

Covad will challenge an arbitration order requiring it to pay STS Telecom $7.3 million in damages and legal fees, said Thad Stevens, Covad’s government and external affairs vice president. The American Arbitration Association signed the order Dec. 5 after determining that Covad “fraudulently induced” STS to sign a broadband Internet access agreement in 2005. Covad misrepresented and concealed material facts when officials told STS that Covad’s network was optimized for VoIP and being used for it, and that STS could “successfully provide VoIP services over the same network,” Judge Chris Cottle wrote in the AAA order. “These representations were false and the evidence demonstrates Covad’s sales and engineering personnel knew they were false.” The AAA’s decision was “not supported by facts or applicable law,” and a challenge will come in the “near future,” Covad’s Stevens said. Covad is looking at district courts and other avenues of appeal, he said: “STS is engaging in a defamatory campaign to force a settlement and gain an unfair competitive advantage.” Covad shouldn’t “disparage” the AAA decision, since the parties agreed on the judge, and the court based its decision on California law, said Keith Kramer, STS legal & regulatory affairs senior vice president. STS isn’t trying to defame Covad, and it doesn’t want to settle, Kramer said. STS won the award, Kramer said: “Why would I want a settlement?” STS “did everything by the book,” and it was the U.S. District Court for the Southern District of Florida that ordered the companies to the AAA proceeding, he said. The Florida court must still confirm and enforce the AAA ruling, he said, saying STS made filings to that end last Wednesday.

Collaboration -- not IPTV -- is central to Qwest’s strategy, CEO Ed Mueller said in a Monday call updating investors on his strategic company review. Mueller’s review found no major fault with the previous management. “I see a solid foundation and vision,” he said. But he will “focus day to day on operations and seek opportunities to improve customer choice and drive revenue.”

Nortel countersued Vonage in Delaware, alleging willful infringement of 12 VoIP patents and seeking an injunction, damages and legal costs. Nortel also asked the U.S. District Court for Delaware to deny a Vonage request to invalidate three Nortel patents. A hearing on claim construction will take place Nov. 14, 2008; a 10-day jury trial will start May 4, 2009. “This litigation is ongoing and both parties have filed and will continue to file papers in support of the case going forward,” a Vonage spokesman said. Vonage resolved conflicts with several parties, most recently dismissing charges against Sprint Nextel after settling with the carrier in a separate dispute (CD Nov 20 p9).

Leap Wireless would consider joining forces with another company, CEO Doug Hutcheson said as the carrier released Q3 results last week. Leap “has strong independent growth prospects, but we have also taken significant steps to explore appropriate collaborative alternatives to further building the business,” Hutcheson said. MetroPCS has been the favorite to buy Leap since last September, when it proposed to the carrier (CD Sept 5 p2). A post-700 MHz auction MetroPCS deal still seems likeliest, but cable and satellite companies looking to enter wireless could be interested, Stanford Group analyst Michael Nelson said. Buying or joint venturing with Leap could cost less than buying spectrum, he said. AT&T also could make a move on Leap, Egan-Jones said in a note. “It is probably cheaper for AT&T to purchase Leap than to expand its own systems,” the analyst firm said. Nelson disagreed, citing high integration costs. An AT&T deal would make “no sense at all” because GSM carrier AT&T would need to convert Leap CDMA-based network, he said. Leap also updated investors on 700 MHz auction plans and its earnings results restatement on the period from 2004 through Q2 2007. Leap “filed to participate in Auction 73,” Hutcheson said. “The company has been a disciplined bidder in past auctions resulting in one of the lowest average price per MHz POP paid, and the company expects to be thoughtful in managing its spectrum opportunities and liquidity.” Earnings revisions shrank service revenue $8 million and operating income $23 million over the restated periods, he said. Leap expects related regulatory filings to be done by Dec. 31, he said. The restatement slowed release of Leap Q3 results; other U.S. carriers reported earnings in late October and early November. In Q3, Leap net losses grew significantly, rising $42.5 million year-over year to $43.3 million. Leap blamed higher interest and taxes from accounting method revisions. Gross customer adds, up 11 percent year-over-year, were “less than we anticipated,” said Hutcheson, citing “changes in customer buying patterns during the third quarter.” In Q4 Leap should hit expected customer adds, driven by “attractive post-Thanksgiving results,” he said.

Towerstream can win 700 MHz spectrum despite its size, CEO Jeff Thompson said Thursday during a panel at the Thomas Weisel Partners conference in San Francisco. The wireless broadband firm said Wednesday it filed an auction application (CD Dec 13 p9). Thompson and officials from FiberTower and Airspan Networks also discussed WiMAX’s advantages over Long Term Evolution (LTE), a rival technology embraced by AT&T and Verizon Wireless.

Nokia GSM phones don’t infringe Qualcomm patents, a International Trade Commission judge said in an initial determination. The ruling isn’t a final decision. That will come in late April. But the commission historically doesn’t “disturb” it, former ITC lawyer Lyle Vander Schaaf said in an interview.