Another major legal defeat has sent Qualcomm ( QCOM) reeling. The U.S. District Court in Santa Ana, Calif., handed Qualcomm a
second injunction involving phone chips that infringe on Broadcom ( BRCM) patents. The San Diego wireless tech shop told analysts on a conference call Wednesday that it plans to seek an appeal and a stay of the ruling. Executives on the call also said the company has developed alternatives so customers could substitute new chips for the infringing chips. But the carrier certification process and the change in production will take time. The legal blow is a significant setback for Qualcomm's new lawyer Don Rosenberg, who previously helped Apple ( AAPL) sail through its stock option backdating review largely unscathed. The darkening legal cloud also revived discussions about Qualcomm's potential split-up. Executives on the call said they are still exploring the separation of the company's chip unit and its licensing and royalty collection business. As part of the ruling issued Monday, U.S. District Judge James Selna said that Qualcomm can continue to sell EVDO chips that were already on the market as of May 29, 2007, so long as it pays royalties to Broadcom. The remaining dispute is over patents in WCDMA, or new generation network technology, chips. Some analysts were surprised by the immediate injunction on these 3G chips, but see the potential for quick legal relief.
JPMorgan analyst Ehud Gelblum wrote in a research note Wednesday that he believed a WCDMA injunction "would be quickly stayed pending appeal," because it could harm Qualcomm customer AT&T ( T). Qualcomm's first injunction came earlier this year when the U.S. International Trade Commission determined that Qualcomm had infringed on Broadcom patents. The ITC prohibited imports of phones with these chips. But in September, a U.S. Court of Appeals for the Federal Circuit lifted the ban on Qualcomm chips that infringe on Broadcom patents. The ruling said the ban unfairly punished phone makers like Motorola ( MOT), Samsung and LG, as well as telcos like Sprint ( S) and Verizon ( VZ). In the wake of the ITC's ban, Verizon and Broadcom agreed to a licensing agreement to assure chip supplies would continue. Qualcomm executives declined to offer any financial forecasts reflecting the legal defeat, but the company says it will provide an updated earnings outlook on Jan. 23. Qualcomm shares were down 62 cents, or 1.6%, to $38.73 Wednesday.