1. Page 1 October 15, 2004 Intellectual Property Rights, Technology Standards & Incentives to Innovation Sean Murphy QUALCOMM Incorporated China-U.S. Informatization Policy Roundtable Washington, D.C. -- October 15, 2004

2. Page 2 October 15, 2004 Observations on Chinese IT market & policies  China is a major supplier and consumer of ICT goods & services, and will become am important source of innovation and IPR  These impressive achievements are attributed largely to Chinese-US private sector collaboration  China wants to attract foreign high-tech investment and IPR, yet some policies may risk causing the opposite outcomes: Emerging preference for unique national or “home-grown” standards Restrictions on customary business-to-business IPR licensing & royalty terms Access to Chinese market is often conditioned on commercial concessions  Policies seem to be motivated by assumption that Chinese companies need government intervention to help them succeed: Global standards development bodies are not accessible to Chinese firms Perception that foreign IPR owners abuse their rights / exploit licensees

3. Page 3 October 15, 2004 Benefits of Global Standards Voluntary, industry-driven ICT standardization: Accelerates commercial availability of new technologies / services Promotes interoperability Increases quality of services / reliability of products Promotes economies of scale / lower costs Minimizes customer frustration / maximize social benefits Promotes cooperation / collaboration among business partners and stakeholders

4. Page 4 October 15, 2004 Global Standards Trends Industry is moving from national to global standards Decisions about standards adoption are best left to the market place: Companies know best which technologies enhance competitiveness and best meet the needs of their customers Government policies cannot keep pace with technology innovation, evolution, and convergence Most global ICT standards have been created with little or no government involvement Governments are refraining from compulsory standards and technology mandates; focusing instead on technology-neutral performance requirements

5. Page 5 October 15, 2004 Appropriation Role of Government This is not to say governments have no role in standards For example, US government is involved in standards as a: Participant in standards development (generally, as an observer) Regulator Consumer (government procurement) Governments can facilitate development and deployment of private sector-led standards that are: Voluntary Driven by technical and commercial merits Least trade-restrictive Consistent with domestic and international rules protecting IPR

6. Page 6 October 15, 2004 Government Adoption of Standards Ideally, goal is direct adoption of international standards If not feasible because of compelling circumstance, then resort to adaptation of international standards; however, WTO Members are obligated to: Justify the deviation Ensure that modified standard is least-trade restrictive alternative Protect and enforce IPR implicated by the modified standard Only in rare cases, consider development of unique national standards This is the exception not the rule Above WTO obligations apply

7. Page 7 October 15, 2004 Principles of Standards Development Most global standards development organizations (SDOs) agree on the following common principles: Openness to all interested parties Transparency in procedures Consensus-based decision-making Industry-led activities, not government-mandated Procedures for review & appeal Fair treatment of IPR at outset of standardization process Licensing of essential IPR on reasonable and non-discriminatory (“RAND”) terms once standard is completed

8. Page 8 October 15, 2004 Example 1: Chinese Leadership in 3G WCDMA CCSAChina Communications Standards Association (China) ARIBAssociation of Radio Industries and Businesses (Japan) TTCTelecommunication Technology Committee (Japan) TTATelecommunications Technology Association (Korea) ATISAlliance for Telecommunications Industry Solutions (USA) ETSIEuropean Telecommunications Standards Institute (Europe - CEPT)

9. Page 9 October 15, 2004 Example 2: Chinese Leadership in 3G CDMA2000 CCSAChina Communications Standards Association (China) ARIBAssociation of Radio Industries and Businesses (Japan) TTCTelecommunication Technology Committee (Japan) TTATelecommunications Technology Association (Korea) TIATelecom Industry Association (USA, Canada, Mexico)

10. Page 10 October 15, 2004 Why Participate in International SDOs? Example: QUALCOMM IPR is essential to multiple standards cdmaOne (2nd generation or “2G”) CDMA2000 (3rd generation or “3G”)  CDMA2000 1x (voice & high-speed data)  CDMA2000 1xEV-DO (very high-speed data)  CDMA2000 1xEV-DV (voice and very high-speed data) Wideband CDMA (also known as “WCDMA” or “UMTS”) Chinese variants (TD-SCDMA and SCDMA)

11. Page 11 October 15, 2004 QUALCOMM’s Unique Patent Position: The Result of Significant R&D Investments Over Time Cumulative U.S. Patents (Issued Patents & Filed Applications) (Excludes non-U.S. filed applications and granted patents)

12. Page 12 October 15, 2004 IPR licensing disseminates technology and opportunity Technology Platform Vendors Infrastructure & Equipment Vendors Application Platform Vendors Application Developers Content Providers Content Aggregators Mobile Portal Providers Mobile Network Operators Handset Vendors Operator Takes Leadership Motorola Lucent Nortel Ericsson Samsung ZTE Samsung LG ZTE Motorola Toshiba Sanyo Kyocera Soutec HiSense Capital Haier Bird Konka TCL Eastcom Xoceco MobileOperator“M-PORTAL” ISP ICP ASP QUALCOMM participates in every link of the chain Illustration: CDMA value chain in China

13. Page 13 October 15, 2004 18 Subscriber Equipment Licensees9 Infrastructure Equipment Licensees Amoi Mobile Co. Ltd. Beijing Telecommunications Equipment Factory CEC Telecom Co., Ltd. Dalian Daxian Group Co. Ltd. Dalian Huanyu Mobile Technological Co. Ltd. Datang Telecom Technology Co., Ltd. Eastern Communication Company Ltd. Guangzhou Southern Hi-Tech Co., Ltd.Great Dragon Information Technology Corp. Ltd. Haier Group CompanyGuangzhou Jinpeng Group Co., Ltd. Hisense Group Co., Ltd. Huawei Technologies Co., Ltd. Konka Group Co. Ltd. Langchao Electronic Info Industry Group Corp. Legend Mobile Communication Technology Ltd. Ningbo Bird Co. Ltd. TCL Holdings Co. Ltd. UTStarcom, Inc. ZTE Corporation Example: More jobs, world class manufacturers and technology transfer resulting from QUALCOMM licensing to Chinese vendors China Benefits from IPR Licensing

14. Page 14 October 15, 2004 IPR Licensing Promotes Competition And Consumer Choice in China, as illustrated: There are over 160 different CDMA handsets in China, including the 30 new models shown above introduced in 2004

15. Page 15 October 15, 2004 Conclusions Global standards benefit everyone; IPR protection and licensing are critical components The market should decide what standards are voluntarily developed and deployed Governments should protect & enforce IPR and refrain from interference with IPR/technology transfer This approach leads to robust standards, creation of a value chain, better products & services, competitive manufacturers, domestic employment and technology transfer, and enhanced consumer choices IPR owners need incentives to engage in R&D and ability to earn return on investment or there will be no value chain or down-stream benefits

16. Page 16 October 15, 2004 Thank You Sean Murphy Tel: +1 (202) 263-0026 smurphy@qualcomm.com >