Updated from noon EDT Qualcomm ( QCOM) rivals took a familiar legal challenge to an unpredictable venue Friday. Shares of the wireless standard bearer fell 5% in heavy trading Friday as Wall Street reacted to a complaint brought by industry heavies Nokia ( NOK), Ericsson ( ERICY) and Texas Instruments ( TXN). The wireless trio has joined a legal skirmish started by Broadcom ( BRCM), which accuses Qualcomm of anticompetitive licensing practices. The challengers argue that Qualcomm uses its dominant position in code division multiple access, or CDMA, technology to overcharge competitors for use of its key licenses. The opponents are urging the European Union to investigate Qualcomm's practices, which rivals claim drives up the cost of cell phones. Qualcomm rejected the claims, saying in a midafternoon press release that though it "has not seen the actual complaint, the reported allegations made to the European Commission are factually inaccurate and legally meritless." It vowed to defend itself vigorously. Still, the legal challenges go right to the heart of Qualcomm's core business of licensing intellectual property. The San Diego wireless titan rose to power by aggressively defending its CDMA patents against other more widely used technologies. Today, Qualcomm's CDMA patents are used in nearly every wireless network. And while the company has prevailed in past battles, the European Union is a new arena. "The question is what legal steps will the E.U. take," says Harris Nesbitt analyst John Bucher, who has a buy rating on the stock. "But it does seem that Qualcomm has the moral high ground." Bucher owns Qualcomm through a trust. The escalation of the patent-pricing battle underscores the massive growth of the wireless industry and Qualcomm's success as a pivotal player in the tech race. Now that cell phones outsell PCs -- and occasionally even fetch higher prices -- wireless players large and small are out to test the established players' lock on an increasingly lucrative market. Observers note that the latest challenges come from a group of tech giants that banded together to crack the CDMA market, but to date have yet to make much significant headway.
"Its interesting that for ever and a day Qualcomm was the underdog," says Ovum analyst Roger Entner. "Now the world has moved to CDMA and the others are all taking aim at Qualcomm." Qualcomm fans say the company established a valuable technology and was able to negotiate royalties and licensing fees because customers were willing to pay for it. In other words, the market has determined Qualcomm's position. "I don't think legal avenues were designed to make up for engineering," says Entner.