June 7 (Bloomberg) -- Qualcomm Inc. chips will be banned from new mobile-phone models sold in the U.S., a trade agency ruled, after finding that the products infringe a patent owned by smaller rival Broadcom Corp.

Semiconductors made by Qualcomm, the world's second-biggest manufacturer of chips for mobile-phones, can still be sold in handset models already on the market, the U.S. International Trade Commission said today. The decision must be reviewed by President George W. Bush and U.S. Trade Representative Susan Schwab. Qualcomm and Verizon Wireless said they will seek to overturn the ban.

Qualcomm is also seeking an emergency stay of the ruling from the Federal Circuit, as well as a presidential veto, the company said tonight in a statement.

The trade commission, in a 4-2 vote, said it will order U.S. customs officials to block imports of some handsets using Qualcomm chips that enable phones with features such as high- speed Internet access. The company also will be banned from bringing the semiconductors into the U.S. for testing, the agency said in a statement.

While excluding all phones would have hurt the U.S. economy, the commission concluded that ``the exemption for previously imported models sufficiently ameliorates this impact.''

The majority of the commission's members ``didn't get it right,'' Qualcomm General Counsel Lou Lupin said. The decision ``doesn't avert the worst part of the impact to public interest and public safety,'' he said. ``The remedy will not have any short term disruptive impact on Qualcomm, but we can't speak for others.''

Tens of millions of handsets could be affected, Qualcomm Chief Executive Officer Paul Jacobs said during a conference call. Chief Operating Officer Sanjay Jha said the ban may mean the carriers can't offer new phones for the Christmas shopping season.

`A Bad Order'

The four biggest phone-service providers -- AT&T Inc., Verizon Wireless, Sprint Nextel Corp. and Deutsche Telekom AG's T-Mobile -- and handset manufacturers told the trade commission in March that a total ban on the importation of phones with Qualcomm chips would have a harmful impact on billions of dollars of investments and future profits.

``It's a bad order that essentially attempts to freeze innovation in cell phones, and it won't stand in the process,'' Verizon Wireless spokesman Jim Gerace said. ``We think this is going to negatively affect the entire wireless industry, not just Verizon Wireless. There's a new phone introduced by somebody every day. That would slow to a trickle under this order.''

Matt Sullivan, a spokesman for Sprint Nextel, said the company will work with Qualcomm and its suppliers to make sure there is no disruption.

Shares Rise

Qualcomm and Broadcom stock both rose in after-hours trading. Shares of San Diego-based Qualcomm, which had dropped $1.21 to $41.02 as of 4 p.m., New York time, in Nasdaq Stock Market composite trading, rose 68 cents in after-hours trading to $41.70 after the decision was announced. Broadcom shares rose 31 cents to $30.42 after the ruling.

``It appears minor to Qualcomm rather than anything that would really hurt it in the market,'' said Michael Cohen, an analyst at San Diego-based Pacific American Securities, who owns shares of Qualcomm. ``This doesn't affect phones already in the marketplace.''

Two members of the commission, Chairman Daniel Pearson and Commissioner Dean Pinkert, said any order banning handsets would ``adversely affect the public interest.''

The U.S. International Trade Commission in Washington is responsible for protecting U.S. markets from unfair trade practices, including patent-infringement. The commission in December upheld an administrative law judge's finding that Qualcomm infringed a Broadcom patent for a battery-saving feature. Today's decision was on the remedy.

Broader Feud

Almost all of Qualcomm's chips are made in Ireland, Taiwan and elsewhere in Asia, and are brought into the U.S. in handsets made by overseas manufacturers. Broadcom argued that the only way to stop the patent-infringement was to block imports of the phones containing the Qualcomm chips.

The trade complaint is part of a broader feud begun in 2004 when Broadcom, known for chips used in television set-top boxes, announced it would enter the bigger mobile-phone market.

``We simply want to be adequately compensated for the use of our intellectual property,'' Broadcom spokesman Bill Blanning said in an e-mailed statement. ``To that end, we have made it clear to Qualcomm that we are open to discussions regarding the potential for licensing of our patent. The ball is in Qualcomm's court.''

Outcry

The prospect of a ban on mobile phones with Qualcomm chips prompted an outcry from phone-service providers and handset makers LG Electronics Inc., Motorola Inc., Samsung Electronics Co. and Kyocera Corp.

Samsung spokesman John Lucas said the company had no comment. Motorola spokesman Jennifer Erickson said the company was preparing a statement. Officials with LG and Kyocera didn't immediately return phone calls.

Emergency services workers, including members of the police department in Qualcomm's hometown of San Diego and the head of emergency planning for Washington, said a complete phone ban would derail their efforts to improve law-enforcement and disaster services.

Qualcomm argued that Broadcom, based in Irvine, California, didn't really have a market to protect. The patent was one of about 150 patents and applications Broadcom bought from Unova Inc., now Intermec Inc., for $24 million in 2002. Qualcomm doesn't make chips for Apple Inc.'s new iPhone, which goes on sale in the U.S. June 29.

The case is In the Matter of Certain Baseband Processor Chips and Chipsets, 337-543, U.S. International Trade Commission.

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net.

Last Updated: June 7, 2007 23:40 EDT