Taiwan's largest chipmaker MediaTek Inc on Friday reached a broad patent agreement on third-generation (3G) chips with US rival Qualcomm without paying royalties, the firm said in a statement on its website.

The patent agreement with Qualcomm raised Media Tek's stock by 1.73 percent as it eased investor concern that huge royalty payments might affect MediaTek's profits as fierce competition has pressed the firm to lower chip prices.

The arrangement includes CDMA and WCDMA essential patents, with respect to all integrated circuit products, including CDMA and WCDMA products.

Customers of each company do not receive rights to patents held by the other company and will have to obtain a separate license to receive any rights. The remainder of the terms of the arrangement are confidential.

MediaTek will be able to sustain gross margin, as the companies will not claim any royalties based on the cross-licensing agreement, Taipei Times reported, citing Kenneth Lee, a semiconductor analyst with Fubon Securities Investment Services Co as saying.

We believe MediaTek's leading position in TD-SCDMA chips may give it the upper hand in the patent negotiations with Qualcomm, Lee added.

Intellectual property law Patent Qualcomm