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June 8, 2007

ITC Hangs Up Qualcomm

Conflicted in administering harsh medicine, the U.S. International Trade Commission (ITC) hesitated for weeks, then, in a 4-2 decision yesterday, banned the import of new models of cell phones and PDAs using Qualcomm chips that infringed Broadcom patents.

The injunction does not apply to products imported before June 7, the day the order was issued.

From the ITC press release:

The Commission reached its decision after careful consideration of the appropriateness of an order excluding from importation the "downstream products" that is, handheld wireless communications devices incorporating the infringing chips. The Commission found that an order excluding all downstream products would impose great burdens on third parties, given the limited availability of alternative downstream products not containing the infringing chips. However, as the infringing chips are not imported in significant quantities outside of downstream products, the Commission also found that an exclusion order covering only the chips and chipsets, and not downstream products, would afford little or no relief to the patent holder, Broadcom. The Commission determined that barring importation of downstream products, with an exemption for certain previously imported models, will substantially reduce the burdens imposed on third parties while affording meaningful relief to the patent holder.

If the Commission finds infringement, then it must order that the infringing articles be excluded from importation, unless, after considering the effect of the exclusion order on statutory public interest factors, it finds that the articles should not be excluded.

Dissenting commissioners sought more limited relief that would only bar Qualcomm's chips from import, and issue a cease and desist order against devices with the chips.

The ITC's decision was a unique compromise, and the first instance of including a grandfathering clause. Former administrative ITC law judge D.R. "Chip" Terrill, Jr.: "In some respects, they are trying to split the baby here by not making the decision so dislocative to the consuming public and to the networks that have been put in place with the 'infringing' technology."

Customs agents have been handed a puzzling order to enforce. Terrill chirped, "The decision is going to hand over to customs a real difficult enforcement action and is going to highlight the extreme need for intellectual property customs patrol agents. They're struggling as is now and this is going to make it more difficult."

Intervenors in hearings against an injunction included Verizon Wireless, Spring Nextel, Samsung Electronics, Motorola, Kyocera Wireless, and LG Electronics MobileComm.

Verizon has already filed a contingent motion with the Court of Appeals for the Federal Circuit for a stay.

Smith Brittingham IV at Finnegan, Henderson, Farabow, Garrett & Dunner thinks the order will withstand any appeal, and is unlikely to be disapproved by the President. The White House has 60 days to veto the ruling. Scooter Libby may have a better chance of being let off the hook.

Five patents were at issue, three of which Broadcom purchased: 6,374,311; 6,714,983; 6583,675; 5,682,379; and 6,359,872.

Left standing, the decision could could slow the introduction of new models, including Motorola's Razr 2 phone, which the company has hopes to put it back on track after losing market share for sitting on its laurels.

Qualcomm will be under heavy pressure to settle with Broadcom. In a fight that Qualcomm started back in 2005, Broadcom has gotten the better of. Qualcomm has been negotiating with Broadcom to set royalty rates, but has balked so far at the tab. In a conference call with investors, Qualcomm intimated that the two were still far apart.

Posted by Patent Hawk at June 8, 2007 1:31 AM | Injunction

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