With the expiration of its cross-licensing agreement with Qualcomm soon expiring, Nokia today offered up a $20 million payment to the chipset maker, saying it was “fair and reasonable compensation” for the use of Qualcomm’s W-CDMA patents for the 2^nd quarter while the two companies continue to negotiate a new cross-licensing agreement.

The agreement in question was signed in 1992 for handset radio technology and extended to include W-CDMA radio infrastructure in 2001. Nokia said it has forked over all royalty payments for the previous 15-year agreement without protest. The question, however, remains about the terms of a new agreement the two have failed to strike despite more than a year of negotiations. The payment will keep its phone factories operational for next three months, Nokia said, but it also pointed out that Qualcomm needs to offer up similar compensation to avoid being in violation of Nokia’s own patents after the licensing agreement expires Monday.

“It is important to note that as of April 9, 2007, Qualcomm’s entire chipset business becomes exposed to Nokia’s extensive GSM, W-CDMA and CDMA patent portfolios and Nokia will use all rights from those portfolios when defending itself against any new Qualcomm litigation,” Simonson said.

Qualcomm earlier this week filed two new lawsuits against Nokia, claiming the Finnish vendor infringed on patents related to GPRS/EDGE vocoder and downloading technologies. The suits were in part response to cases Nokia filed in Europe, claiming Qualcomm was violating European patent pass-through laws, i.e. that Qualcomm was making Nokia pay royalties twice by requiring both itself and its chipset provider Texas Instrument license its W-CDMA technology.

Qualcomm on Thursday made no indication that it would pay up any money for Nokia’s patents to keep its chip shipments going in the second quarter while negotiations are ongoing. But it certainly gave clear indication that Nokia’s $20 million stopgap payment was unacceptable. Nokia said it came to the $20 million figure based on the essential patents laid out by the European Telecommunication Standardization Institutes guidelines for UMTS licensing, but the figure is probably far lower than Qualcomm is angling for. In response to Nokia’s offer it filed an arbitration demand with American Arbitration Association, asking it to rule that if Nokia continued to make W-CDMA handsets after April 9, it would automatically extend their current cross-licensing agreement until the end of the year. In addition, Qualcomm also threatened to terminate all license and patent agreements with Nokia if it decides to bring Qualcomm to court—as Nokia has threatened--for infringing on Nokia’s GSM/W-CDMA patents after their licensing agreement expires.

Qualcomm owns as significant portion of W-CDMA intellectual property by virtue of its development of the original CDMA technology. Previous licensing agreements have reflected that IP clout—Nokia said it pays 3% cumulative license fees it pays on its handsets and a full 1% goes to Qualcomm. But Nokia now maintains that Qualcomm’s share of the overall W-CDMA patent portfolio has decreased in the last 15 years and the proportional value of the radio technology in the handset itself has gone down. While in older phones the radio chipset made up a large proportion of the phone’s total cost, phones today contain cameras, music players, memory and applications processors that account for a greater percentage of billable materials and don’t fall under Qualcomm’s intellectual property portfolio.