Qualcomm 2011 Annual Report Download - page 21

eliminate their need to pay royalties to us for the use of our intellectual property in order to negatively affect our business model and that of our
other licensees. These strategies have included (i) litigation, often alleging infringement of patents held by such companies, patent misuse, patent
exhaustion and patent and license unenforceability, or some form of unfair competition, (ii) taking positions contrary to our understanding of
their contracts with us, (iii) appeals to governmental authorities, (iv) collective action, including working with wireless operators, standards
bodies, other like-minded companies and other organizations, on both formal and informal bases, to adopt intellectual property policies and
practices that could have the effect of limiting returns on intellectual property innovations, and (v) lobbying with governmental regulators and
elected officials for the purpose of seeking the imposition of some form of compulsory licensing and/or to weaken a patent holder’s ability to
enforce its rights or obtain a fair return for such rights.
Some companies or entities have proposed significant changes to existing intellectual property policies for implementation by SDOs and
other industry organizations, some of which would require a maximum aggregate intellectual property royalty rate for the use of all essential
patents owned by all of the member companies to be applied to the selling price of any product implementing the relevant standard. They have
further proposed that such maximum aggregate royalty rate be apportioned to each member company with essential patents based upon the
number of essential patents held by such company. A number of these strategies are purportedly based on interpretations of the policies of
certain SDOs concerning the licensing of patents that are or may be essential to industry standards and our alleged failure to abide by these
policies. Others have made proposals that could severely limit damage awards and other remedies by courts for patent infringement. There is a
risk that relevant courts or governmental agencies will interpret some or all of those proposals in a manner adverse to our interests. If such
proposals and strategies continue and are successful in the future, our business model would be harmed, either by artificially limiting our return
on investment with respect to new technologies or forcing us to work outside of the SDOs or such other industry groups to promote our new
technologies, and our results of operations could be negatively impacted. As well, the legal and other costs associated with defending our
position have been and continue to be significant. We assume that such challenges regardless of their merits will continue into the foreseeable
future and may require the investment of substantial management time and financial resources to explain and defend our position.
Other companies or entities have commenced, and may again commence, actions seeking to establish the invalidity of one or more of our
patents. In the event that one or more of our patents are challenged, a court may invalidate the patent(s) or determine that the patent(s) is not
enforceable, which could harm our competitive position. If our key patents are invalidated, or if the scope of the claims in any of these patents is
limited by court decision, we could be prevented from licensing the invalidated or limited portion of such patents. Such adverse decisions,
depending upon their extent, could negatively impact our revenues. Even if such a patent challenge is not successful, it could be expensive and
time consuming to address, divert management attention from our business and harm our reputation.
The enforcement and protection of our intellectual property rights may be expensive, could fail to prevent misappropriation or unauthorized
use of our proprietary intellectual property rights or could result in the loss of our ability to enforce one or more patents.
We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality agreements and other
methods, to protect our proprietary information, technologies and processes, including our patent portfolio. Policing unauthorized use of our
products, technologies and proprietary information is difficult and time consuming. We cannot be certain that the steps we have taken, or may
take in the future, will prevent the misappropriation or unauthorized use of our proprietary information and technologies, particularly in foreign
countries where the laws may not protect our proprietary intellectual property rights as fully or as readily as United States laws. We cannot be
certain that the laws and policies of any country, including the United States, or the practices of any of the standards bodies, foreign or domestic,
with respect to intellectual property enforcement or licensing or the adoption of standards, will not be changed in a way detrimental to our
licensing program or to the sale or use of our products or technology. We may have difficulty in protecting or enforcing our intellectual property
rights and/or contracts in a particular foreign jurisdiction, including: challenges to our licensing practices under such jurisdictions’ competition
laws; adoption of mandatory licensing provisions by foreign jurisdictions (either with controlled/regulated royalties or royalty free); failure of
foreign courts to recognize and enforce judgments of contract breach and damages issued by U.S. courts; and challenges pending before foreign
competition agencies to the pricing and integration of additional features and functionality into our wireless chipset products.
A substantial portion of our patents and patent applications relate to our wireless communications technology and much of the remainder of
our patents and patent applications relate to our other technologies and products. We may need to litigate in the United States or elsewhere in the
world to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. As a
result of any such litigation, we could lose our ability to enforce one or more patents or incur substantial unexpected operating costs. Any action
we take to enforce our intellectual property rights could be costly and could absorb significant management time and attention, which, in turn,
could negatively impact our operating results.
Claims by other companies that we infringe their intellectual property could adversely affect our business.
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