Court Upholds Patent Ruling Against Qualcomm

Updated from 1:20 p.m. EDT

A federal appeals court upheld a previous ruling that Qualcomm (QCOM Quote - Cramer on QCOM - Stock Picks) infringed on two patents held by Broadcom (BRCM Quote - Cramer on BRCM - Stock Picks), sending shares of the two companies in opposite directions.

The U.S. Court of Appeals for the Federal Circuit ruled alongside a lower court in a patent dispute case brought forth by Broadcom against Qualcomm. "[T]he district court did not abuse its discretion in issuing a permanent injunction," the Court of Appeals said in a release.

Broadcom claimed that baseband chips produced by Qualcomm that enable cell phones to run on high-speed 3G networks, using CDMA2000 and WCDMA technologies, infringed on patents it held. Qualcomm argued that because Broadcom makes WCDMA chips, not CDMA2000 products like Qualcomm, it could not have established "irreparable injury" from Qualcomm's sale of CDMA2000 chips.

The court found that Broadcom provided evidence of irreparable harm, despite the fact that it doesn't currently practice the claimed inventions. However, the court ruled a third patent involving video compression on cell phones was invalid and thus not infringed upon by Qualcomm.

"It was a mixed result and we're pleased with the court's decision to invalidate the one patent. We are disappointed that they found in favor of Broadcom on the other two patents," said Alex Rogers, senior vice president and legal counsel of Qualcomm. "We'll have to review our options in the appellate process. This decision is hot off the press, so we'll take our time in doing that."

Shares of Broadcom were lately up 5.9% at $19.47, while Qualcomm was down 1% at $45.49.

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