Bush administration upholds phone ban By ELLIOT SPAGAT, AP Business Writer

Bush administration upholds phone ban By ELLIOT SPAGAT, AP Business Writer
Mon Aug 6, 6:38 PM ET



SAN DIEGO - The Bush administration upheld an import ban Monday on phones that contain Qualcomm Inc. chips, further threatening the introduction of new handsets.

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U.S. Trade Representative Susan Schwab said she was sticking to a long practice of declining to overrule the U.S. International Trade Commission unless conditions were "extraordinary." The executive branch has overruled the ITC only five times, most recently in 1987.

In June, the ITC banned imports of new, high-end phones that run on Qualcomm chips, raising doubts about the introduction of some models from carriers and manufacturers like LG Electronics Inc. and Samsung Electronics Co.

The ITC ruling came in patent dispute between Qualcomm and rival chipmaker Broadcom Corp. The commission found that Qualcomm infringed on a patent that protected Broadcom's technology to conserve battery power.

Qualcomm said it will ask a federal appeals court to overturn the ban. Chief Executive Officer Paul Jacobs said in a statement that he was disappointed but added that Qualcomm will pursue "all legal and technical options available" to limit the impact on consumers.

The ban applies to the high-speed EV-DO and WCDMA network technologies, which allow users to more quickly surf the Internet and download music and video.

Schwab acknowledged worries that the ban may slow the introduction of so-called third-generation, or 3G, mobile phones but said Broadcom's licensing deals with "two major wireless carriers" would soften the impact.

Verizon Wireless, whose phones run on Qualcomm chips, struck a deal with Broadcom last month to pay for each phone it sells that carry one of Qualcomm's patent-infringing chips, ducking the ban and depriving Qualcomm of a powerful ally in its legal fight. Neither the U.S. Trade Representative nor Broadcom would identify the second carrier to strike such a deal.

"We cannot comment on the other carrier at this time, but what is clear is that the market has responded with relevant companies finding ways to accommodate the ruling through agreements with Broadcom," said Broadcom attorney David Rosmann.

A spokesman for Sprint Nextel Corp., whose phones also run on Qualcomm chips, did not immediately respond to a phone message.

Schwab noted some industry players are working on alternative chip designs to avoid the ban. She said a Department of Homeland Security review found insufficient justification for overturning the ban despite concerns it would create problems for public safety agencies.

The decision, announced after markets closed, was widely anticipated by investors and analysts. Qualcomm shares rose $1.01, or 2.5 percent, to $41.78 in regular trading, then surrendered 35 cents after hours. Broadcom's shares climbed 48 cents, or 1.5 percent, to close at $33.44, then added 31 cents after hours.

Qualcomm, based in San Diego, is the world's second-largest chip supplier for mobile phones after Texas Instruments Inc. but earns much of its money from licensing fees on its patented technology. Broadcom, based in Irvine, is a newcomer to the cell phone business but has scored several legal victories against Qualcomm this year.