Center for Advanced Study & Research on Intellectual Property

 

CASRIP Newsletter - Fall/Winter 2009, Volume 16, Issue 1

Industry Standard and Equitable Doctrine Qualcomm Inc. v. Broadcom Corp.,

By Michael Pirog 1

I. OVERVIEW

In Qualcomm Inc. v. Broadcom Corp., the Federal Circuit considered the appropriate remedies for silence by a party in light of a duty to disclose patents to an industrywide standards setting organization (“SSO”).2 At issue was whether Qualcomm Inc., owner of US Patent Nos. 5,452,104 (“the 104 Patent”) and 5,676,767 (“the 767 Patent”) and a member of an SSO, the Joint Video Team (“JVT”), owed a duty to disclose both patents, and if the proper penalty for failing to do so was the unenforceability of both patents against the world.3

The Federal Circuit held that either the language of an SSO’s intellectual property rights policies or the understanding of the SSO members’ interpretation of the policies can create a duty to disclose all patents or applications that “reasonably might be necessary” to the development of a standard, and Qualcomm breached such a duty by failing to disclose the “104” and “767” patents to the JVT.4 However, the Federal Circuit reversed the holding of the district court with respect to the waiver of enforceability, remanding the case with instructions to render the patents unenforceable only with respect to products based on the SSO’s proposed standard.5 Additionally, the Federal Circuit upheld district court’s granting of an exceptional case motion on the grounds of attorney misconduct and application of sanctions against Qualcomm and their representation.6

II. PROCEDURAL BACKGROUND

Qualcomm, Inc. (“Qualcomm”) originally filed suit against Broadcom Corp. (“Broadcom”) for patent infringement, claiming Broadcom’s development of products featuring H.264 compliant video compression technology violated the ‘104’ and ‘767’ Patents.7 The H.264 standard was developed by the Joint Video Team (“JVT”) SSO, and members of the organization were required to disclose all patents, applications, and other materials as required by the group’s rules for intellectual property rights (‘IPR’).8 Throughout the trial, Qualcomm maintained it was not a member of the JVT and not subject to any disclosure duties.9

While the jury found the patents valid, they recommended as a matter of equity that the court render both patents unenforceable due to Qualcomm’s membership in the JVT and failure to disclose the patents, which constituted a waiver of patent rights.10 The court entered an order denying Broadcom’s counterclaim of inequitable conduct, but found in favor of their affirmative defense of waiver.11 Later, the court ordered the ‘104’ and ‘767’ patents unenforceable.12 Additionally, due to litigation misconduct and evidence of bad faith participation in the JVT by Qualcomm, the court granted Broadcom’s motion for an exceptional case, awarded attorney fees, and referred six Qualcomm attorneys to the California State bar.13

On appeal, the Federal Circuit affirmed the ruling of the lower court in part, holding that Qualcomm owed a duty to disclose the “104” and “767” patents to the JVT, and that its actions constituted a breach of that duty.14 While the Federal Circuit agreed with the district court that Qualcomm’s behavior constituted a waiver of its enforcement rights, they held that the proper remedy was not unenforceability.15 Accordingly, the judgement was vacated in part and remanded to the district court with instructions to narrow the remedy to instead apply only to products compliant with the H.264 standard developed by the JVT.16

III. ANALYSIS

A. Duty to Disclose IP to an SSO

While the district court recognized the importance of patent disclosure as “critical to the development of an effective industry standard” and that failure to disclose could in effect hold the standard hostage, they did not find that the JVT’s written IPR policies created an express disclosure requirement with respect to Qualcomm.17 Instead, the district court found that the JVT members’ actions and understanding of obligations created by the document created an implied disclosure requirement.18 The Federal Circuit disagreed, holding that the written JVT IPR policy’s inclusion of a “best efforts” standard for disclosure created an obligation to disclose relevant IPR information.19 It viewed the lower court’s interpretation of the facts concerning Qualcomm’s JVT membership as correct, and rejected Qualcomm’s argument that it was not a member of the JVT at the time the H.264 standard was finalized and therefore not subject to any disclosure duty.20

Importantly, the Federal Circuit agreed with the district court’s finding that the JVT participants’ understanding of the group’s IPR policies created disclosure requirements, regardless of the written language of the policies themselves.21 Here, the Federal Circuit found Rambus Inc. v. Infineon Technologies AG directly on point.22 The Rambus court held that when members of an SSO treat IPR policies as “imposing a disclosure duty, the court likewise treats this language as imposing a disclosure duty.”23 The proper scope of such a duty consisted of disclosure of any patents that “reasonably might be necessary” to practice the standard created by the SSO.24 While in Rambus the duty was not actually breached,25 here there was clear and convincing evidence that the JVT members treated the IPR policies as if a duty existed.26 Though Qualcomm attempted to argue the standard created in Rambus amounted to disclosure of what must “actually be necessary” to practice the industry standard, the Federal Circuit rejected this reasoning.27 A proper reading of the plain language standard of Rambus implies an objective standard of reasonableness, what essentially amounts to a duty to disclose IPR info “which applies when a reasonable competitor would not expect to practice the H.264 standard without a license under the undisclosed claims.”28

Finally, Qualcomm argued that since Broadcom’s products did not infringe the “104” and “767” patents, non-disclosure of said patents did not amount to a breach of any duty owed.29 Again, the Federal Circuit rejected Qualcomm’s reasoning, deferring to the district court’s findings of fact on the issue, and noting that by bringing suit for infringement, Qualcomm acknowledged that they believed both patents “reasonably might be necessary” to practice the H.264 standard developed by the JVT.30

B. Equitable Remedies

In addition, Qualcomm contended that that application of waiver was an abuse of discretion by the district court. By bringing suit for infringement, they were in fact seeking to protect their rights, not waive them.31 Here the Federal Circuit agreed with Qualcomm, but because Qualcomm brought suit for infringement only after hiding obviously relevant patents from the JVT SSO, they were willing to apply the doctrine of implied waiver.32 The court demonstrated an unwillingness to let Qualcomm escape the application of the doctrine of waiver through its own misconduct, and brushed aside Qualcomm’s arguments concerning lack of demonstrable harm and lack of detrimental reliance.33 The court also found that the doctrine of equitable estoppel was applicable as a remedy for the breach of a disclosure duty.34 However, because of its holding on the applicability of implied waiver, it did not find it necessary to remand the case with instructions to address the estoppel issue. 35

The Federal Circuit also outlined the limits of an equitable remedy to the breach of a duty to disclose a patent to an SSO. It drew an analogy to post-issuance patent misuse, and the remedy of unenforceability only until misuse is purged in such cases.36 The court determined the appropriate remedy in the case of non-disclosure to an SSO should be similarly restrained, and that it was improper for the district court to grant a remedy unlimited in scope.37 Courts should instead remedy silence by a member owing a duty to disclose relevant patent information to an SSO by rendering the patents unenforceable against products related to the standards under development by the SSO, in this case all H.264 compliant products.38

IV. CONCLUSIONS

While the conclusions of the district court may be famous for the exceptional case determination and subsequent awarding of attorney’s fees affirmed here by the Federal Circuit,39 the result at the circuit level provides critical guidance regarding the duties owed by members to SSOs, and appropriate equitable remedies for failure to disclose relevant IPR information. By permitting the use of waiver and equitable estoppel, as well as outlining the proper scope of any remedy as limited to the SSO standard, the Federal Circuit made it clear that it recognizes the tactic of “patent hold-up,” and is unwilling to acquiesce to attempts by companies to hold industry standards hostage.

End Notes

  1. Michael Pirog is a J.D. candidate at the University of Washington School of Law.
  2. Qualcomm Inc. v Broadcom Corp, 548 F.3d 1004 (Fed. Cir. 2008).
  3. Id. at 1004.
  4. Id. at 1018.
  5. Id. at 1026.
  6. Id. at 1027.
  7. Qualcomm Inc. v Broadcom Corp. 539 F.Supp.2d 1214 (S.D.Cal. 2007).
  8. LEXIS 28211 at *34 (discussing JVT ToR subsections 3.1 and 3.2).
  9. Qualcomm, 548 F.3d at 1009.
  10. Broadcom, 539 F.Supp.2d 1214.
  11. Id.
  12. Id.
  13. Id.
  14. Qualcomm, 548 F.3d at 1027.
  15. Id.
  16. Id.
  17. Broadcom, 539 F.Supp.2d 1214.
  18. Id.
  19. Qualcomm, 548 F.3d at 1014.
  20. Id.
  21. Id. at 1015.
  22. Rambus Inc. v. Infineon Technologies AG 318 F.3d 1081 (Fed. Cir. 2003).
  23. Id. at 1098.
  24. Id.
  25. Id.
  26. Qualcomm 548 F.3d at 1016.
  27. Id. at 1017.
  28. Id. at 1018.
  29. Id. at 1019.
  30. Id.
  31. Id.
  32. Id. at 1020.
  33. Id. at 1021.
  34. Id. at 1024.
  35. Id.
  36. Id. at 1025. (citing B.Bruan Inc. v Abbott Laboratories, 124 F.3d 1419, 1427 (Fed.Cir 1997).
  37. Qualcomm 548 F.3d at 1016.
  38. Id.
  39. Id. at 1027.

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Last updated 4/27/2012