Qualcomm has agreed to pay Broadcom US$891 million over the next four years in a settlement aimed at ending the long-running litigation between the two rival chip-makers. In a joint statement, Qualcomm and Broadcom said that the deal would result in the dismissal of all litigation between the two companies, including all patent infringement claims in the International Trade Commission and US District Court in Santa Ana, as well as the withdrawal by Broadcom of its complaints to the European Commission and the Korea Fair Trade Commission. Under the agreement, the two chip-makers have granted certain rights to each other under their respective patent portfolios. For example, Broadcom has agreed not to assert its patents against Qualcomm’s customers using Qualcomm’s chips in their mobile products, while Broadcom’s customers will be similarly protected from Qualcomm patent claims against Broadcom chips used in non-mobile products and equipment. Qualcomm – which last week delayed its fiscal second-quarter earnings call in anticipation of reaching a settlement – said that it will pay US$200 million to Broadcom during the current quarter. Qualcomm noted that the agreement will not result in any change to its current licensing revenue model in either its 3G (CDMA2000, WCDMA and TD-SCDMA) or 4G (LTE, WiMAX) product portfolios.

Qualcomm and Broadcom have been locked in a bitter legal dispute over alleged patent infringements and anti-competitive behaviour for several years. However, analysts had long expected an out-of-court settlement to eventually be reached, especially as many of the court decisions to date had gone in Broadcom’s favour. In an interview with Bloomberg today, Mark McKechnie, a San Francisco-based analyst at Broadpoint Amtech, said that the deal could save Qualcomm about US$100 million in annual legal costs, and about US$50 million for Broadcom. “The important thing, at least for Qualcomm, is that their business model isn’t broken,” he said. “For Broadcom, that’s a nice chunk of change.” However, the deal does not automatically end action against Qualcomm in Europe, where it is being investigated by the European Commission over a complaint made jointly by Broadcom, Texas Instruments and Ericsson. “Once the commission receives full details [of the Qualcomm/Broadcom settlement] it will assess the implications of the agreement for its ongoing antitrust case,” the EU’s antitrust authority said in an e-mailed statement to Bloomberg. The Broadcom settlement mirrors a similar settlement between Qualcomm and Nokia last year, which saw Nokia agree to pay Qualcomm EUR1.7 billion and the two companies enter a 15-year cross-licensing agreement for mobile phone patents. Reporting its delayed earnings today (quarter ending 29 March), Qualcomm posted a net loss of US$289 million compared with a profit of US$766 million in the year earlier quarter, while revenues fell to US$2.46 billion from US$2.61 billion. However, the firm raised its revenue target for its current fiscal year to a range of US$9.85 billion to US$10.25 billion from an earlier estimate of US$9.3 billion to US$9.8 billion.