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Qualcomm may change tactics

Its top lawyer resigns. A former U.S. attorney takes over and may take a friendlier tack.

August 14, 2007|Michelle Quinn | Times Staff Writer

After one of the worst weeks in Qualcomm Inc.'s history, the embattled cellphone chip maker may be ready to put down its swords.

General Counsel Lou Lupin, a 12-year veteran who led Qualcomm's courtroom attacks on competitors, resigned Monday in the aftermath of three bruising legal defeats.

Carol Lam was named acting general counsel. The former U.S. attorney for San Diego was one of eight federal prosecutors whose firings by the White House last year prompted congressional hearings and calls for the removal of Atty. Gen. Alberto R. Gonzales.

"It's a way of making a statement with other players that Qualcomm is trying to do the right thing -- be a good partner and a good, above-board competitor," said Charles Golvin, principal analyst with Forrester Research.

San Diego-based Qualcomm did not give a reason for Lupin's departure, other than to say the decision was his and "a personal one."

The company said his exit would "not affect Qualcomm's legal strategy."

But the company's shares rose nearly 3% to $38.92 after the announcement, suggesting that investors believed otherwise and were looking for a change in the aggressive legal tactics that led to two stinging rebukes by federal judges last week.

"It's not a big stretch to guess that Lou took the hit," said Mark McKechnie, a telecommunications equipment analyst with American Technology Research. "Qualcomm was a bit embarrassed the court held against them essentially for misconduct."

The company, whose technology is used in the networks of Verizon Wireless, Sprint Nextel Corp. and other carriers, has taken a legal beating in recent months.

On Aug. 6, the Bush administration upheld a ban on imports of high-end cellphones that contain Qualcomm chips. The U.S. International Trade Commission had imposed the sanctions in June after finding that Qualcomm had violated patents held by its chief competitor, Irvine-based Broadcom Corp.

The same day, a San Diego judge criticized the company's legal tactics as "suggesting extremely sophisticated foul play." U.S. District Judge Rudi M. Brewster ruled that Qualcomm had waived its right to defend and enforce two patents because it deliberately hid the patents from an industry standards organization, which the judge said showed Qualcomm was "holding hostage the entire industry."

In a separate patent infringement case, a judge in Santa Ana on Monday ordered Qualcomm to pay Broadcom damages of $39.3 million and attorney fees for past infringement of three Broadcom patents.

U.S. District Judge James V. Selna, who had issued a tentative damages award Friday, doubled the $19.6-million jury award because Qualcomm's patent infringement was "willful." Selna is scheduled to begin hearing arguments today on whether to order an injunction stopping Qualcomm from infringing on Broadcom's patents.

In promoting Lam, who joined the company in February, Qualcomm President Steven Altman called her "a top prosecutor who has litigated complex cases with national impact."

Analysts said Lam's more visible role meant Qualcomm might rely more on politics than litigation as it moves into new markets against bigger competitors.

Analysts called Lupin's resignation a good first step but said the onus remained on Qualcomm to show that it planned to change its corporate culture.

Qualcomm is going through "a maturation process," said Michael King, research director at Gartner Inc. "There are going to be times when they have to play nice with the competition. They haven't had to do that."

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