Qualcomm v. Broadcom (CAFC 2007-1545, 2008-1162)

Qualcomm asserted 5,452,104 & 5,576,767. Trial did not end well.

Throughout discovery, motions practice, trial, and even post-trial, Qualcomm adamantly maintained that it did not participate in the JVT during development of the H.264 standard. Despite numerous requests for production and interrogatories requesting documents relating to Qualcomm's JVT participation prior to adoption of the H.264 standard, Qualcomm repeatedly represented to the court that it had no such documents or emails. On January 24, 2007, however, one of the last days of trial, a Qualcomm witness testified that she had emails that Qualcomm previously claimed did not exist. Later that day, Qualcomm produced twenty-one emails belonging to that witness. As the district court later discovered, these emails were just the "tip of the iceberg," as over two hundred thousand more pages of emails and electronic documents were produced post-trial. Remedy Order at 1245. The district court later determined that these documents and emails "indisputably demonstrate that Qualcomm participated in the JVT from as early as January 2002, that Qualcomm witnesses . . . and other engineers were all aware of and a part of this participation, and that Qualcomm knowingly attempted in trial to continue the concealment of evidence."

The jury found the patents unenforceable due to inequitable conduct.

Rambus had a similar situation: participating in a standards-setting organization (SSO) while patenting. In both the Rambus and Qualcomm instances, the SSO's were so stupid as to not have explicit requirements for patent disclosure. Rambus got off the hook because its claimed technology was found not to fall directly within the standard, hence no disclosure duty. Qualcomm was not so lucky.

In order to determine whether Qualcomm breached its disclosure duty, the district court considered whether the '104 and '767 Patents "reasonably might be necessary" to practice the H.264 standard. Finally, having concluded that the asserted patents fell within the "reasonably might be necessary" standard, the district court determined that the proper remedy for said breach was to order the patents unenforceable against the world.

The issue is termed patent "hold-up," like a guy with a gun and a ski mask at a 7-11, only without the ski mask.

By failing to disclose relevant intellectual property rights ("IPR") to an SSO prior to the adoption of a standard, a "patent holder is in a position to 'hold up' industry participants from implementing the standard. Industry participants who have invested significant resources developing products and technologies that conform to the standard will find it prohibitively expensive to abandon their investment and switch to another standard." Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 310 (3d Cir. 2007). In order to avoid "patent hold-up," many SSOs require participants to disclose and/or give up IPR covering a standard. See Mark A. Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90 Cal. L. Rev. 1889, 1902 (2002) ("Because many SSOs want the public to be free to use their standard, they will often require members to give up any IP protection that covers the standard.").

Even though SSO rules failed to ward off potential "hold-up," the courts treated non-disclosure as a violation if SSO members considered the policy "as imposing a disclosure duty." Group ethical belief systems as a matter of law. Welcome to America, where ideological jurisprudence reigns supreme.

In sum, we agree with the district court that, "[a] duty to speak can arise from a group relationship in which the working policy of disclosure of related intellectual property rights ('IPR') is treated by the group as a whole as imposing an obligation to disclose information in order to support and advance the purposes of the group." Waiver Order at *19-20. Not only did the district court find that Qualcomm was silent in the face of a disclosure duty in the SSO context, it also found clear and convincing evidence that Qualcomm had knowledge, prior to the adoption of the H.264 standard in May 2003, that the JVT participants understood the policies as imposing a disclosure duty, that the asserted patents "reasonably might be necessary" to practice the H.264 standard, and that Qualcomm intentionally organized a plan to shield said patents from consideration by the JVT, planning to demand license fees from those seeking to produce H.264-compliant products. Then, after participating in the JVT and shielding the asserted patents from consideration during development of the H.264 standard, Qualcomm filed a patent infringement lawsuit against Broadcom, alleging infringement primarily, if not solely, based on Broadcom's H.264 compliance. In these circumstances, we conclude that it was within the district court's authority, sitting as a court of equity, to determine that Qualcomm's misconduct falls within the doctrine of waiver.

The remedy must be commensurate to the misconduct.

We conclude that a district court may in appropriate circumstances order patents unenforceable as a result of silence in the face of an SSO disclosure duty, as long as the scope of the district court's unenforceability remedy is properly limited in relation to the underlying breach.

While we agree with the district court that there is an "obvious connection between the '104 and '767 patents and H.264 compliant products," we do not discern such a connection between the asserted patents and products that are not H.264-compliant, and neither party points us to any such connection. Waiver Order at *62.

Accordingly, based on the district court's findings, the broadest permissible unenforceability remedy in the circumstances of the present case would be to render the '104 and '767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against all H.264-compliant products (including the accused products in this case, as well as any other current or future H.264-compliant products). Accordingly, we vacate the unenforceability remedy and remand with instructions to enter an unenforceability remedy limited in scope to any H.264-compliant products.

The award of attorneys fees upon this case being exceptional was upheld.

In our view, the litigation misconduct findings were sufficient standing alone to support the exceptional case determination here...

Affirmed-in-part, vacated-in-part, and remanded.