NEW YORK -(Dow Jones)- IPCS Inc. (NASDAQ-NMS:IPCS) (IPCS) filed a lawsuit against Sprint Nextel Corp. (NYSE:S) (S) claiming its joint venture with Clearwire Corp. (NASDAQ-NMS:CLWR) (CLWR) violates an agreement that gives IPCS exclusive rights to provide wireless service in its territory.

The suit rehashes the argument that IPCS's Sprint affiliate status preserves its exclusivity despite any mergers or deals - one in which IPCS has successfully argued. The affiliate program was one of many problems Sprint created when it acquired Nextel in 2005.

In March, an Appeals Court in Illinois ruled upheld a decision that went in favor of IPCS and its exclusivity. Sprint has filed another appeal seeking a review by the state's supreme court. But IPCS said on Monday that the same argument applies to the Clearwire joint venture, which will offer high-speed wireless service called WiMax.

Last week, Sprint went to a Delaware Court to ensure the joint venture - in which Sprint is the largest shareholder - would be cleared of legal entanglements. It's unclear when a decision would come out, said spokesman Matt Sullivan.

"Because of our ongoing disputes with IPCS, we felt compelled to seek declaratory judgment that Sprint's affiliate agreement with IPCS in no way prevents the operation of the new Clearwire in IPCS territory," he said. "This latest action by IPCS is simply a response to our request of the court."

IPCS, however, claims the move is designed to bypass the Illinois court decision. The affiliate is seeking a permanent injunction restricting the completion of the WiMax deal until it is changed to meet the existing terms.

Such a move would throw a wrench in the Clearwire deal, which also includes investments from giants in the cable, semiconductor and Internet industries. The deal was lauded as a victory for Sprint in getting the massive capital investment required to deploy the network off of its books.

IPCS stands as the last major independent affiliate of Sprint and the most contentious of the bunch. Sprint has already acquired six affiliates, as well as Nextel Partners, and has struck agreements with smaller players Shenandoah Telecommunications Co. (NASDAQ-NMS:SHEN) (SHEN) and privately held Swiftel Communications.

Sullivan declined to comment on whether Sprint would pursue the acquisition of IPCS.

Sprint shares fell 3 cents to $9.36. IPCS rose 6.7% to $28.95.

- By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

    (END) Dow Jones Newswires   05-12-08 1204   Copyright (c) 2008 Dow Jones & Company, Inc.