[A2k] Law.com: Patent Ambush Costs Qualcomm

[Thiru Balasubramaniam]

http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202426407589

Patent Ambush Costs Qualcomm
Zusha Elinson
12-02-2008

Monkeying around in a technology standards-setting organization can
cost you in the end.

The U.S. Court of Appeals for the Federal Circuit agreed Monday that
Qualcomm should be punished for what has in other cases been called a
"patent ambush" -- not disclosing patents to a standards-setting body
and then suing adopters of the standard. In this case, Qualcomm's
target was Broadcom.

Upholding most of a 2007 Southern District of California court
opinion, the three-judge panel limited Qualcomm's ability to enforce
the two video compression patents it hid from a standards-setting
group (pdf) called the Joint Video Team. It also must pay the
attorneys fees awarded to Broadcom, totaling more than $8.5 million.

The opinion helps clarify what is legal behavior in the murky area of
standards-setting organizations, which are widely used in the
technology industry to ensure, for instance, that all lamp plugs can
fit into the same electrical outlet, said Joseph Miller, a Lewis &
Clark Law School professor.

"What's most significant to me is that we now have more information
about what the penalties are for failing to disclose what you need to
disclose," said Miller, who follows the issue closely. "I think it's
very important because there are many SSO's that use the sorts of
disclosure language that's talked about in the case."

So it's better to err on the side of disclosure, said Miller as well
as other lawyers.

"The courts are showing a willingness to find a duty to disclose where
there's none set forth," said Tyler Baker, a partner at Fenwick & West
in Mountain View. "It says that you should err on the side of assuming
that you have to disclose, or you may suffer the consequences of
having your patent made unenforceable if you don't."

The Federal Circuit agreed with the trial court that Qualcomm should
have disclosed its patents to the Joint Video Team, which released the
H.264 standard for video technology in 2003. Instead, Qualcomm turned
around and sued Broadcom, another member of the Joint Video Team, in
2005.

"The district court found clear and convincing evidence that Qualcomm
intentionally organized a plan of action to shield the '104 and '767
Patents from consideration by the JVT with the anticipation that it
would then have the opportunity to become an indispensable licensor to
anyone in the world seeking to produce H.264-compliant products,"
Judge Sharon Prost wrote for the majority.

Irvine, Calif.-based Broadcom, which was represented by Wilmer Cutler
Pickering Hale and Dorr, cheered the opinion in a press release.

"Qualcomm's standards abuse in this case is just the tip of the
iceberg," said David Rosmann, Broadcom's vice president, intellectual
property litigation. "We believe Qualcomm has violated the rules of
the cellular standards bodies as well, a fact we are determined to
bring to light in our other pending cases."

San Diego's Qualcomm, which was represented by Sidley Austin; Bingham
McCutchen; DLA Piper; and Cravath, Swaine & Moore, was able to
persuade the Federal Circuit to trim Judge Rudi Brewster's order that
the patents shouldn't be enforceable at all.

"The Federal Circuit Court of Appeals affirmed Judge Brewster's Aug.
6, 2007, ruling. The court also found, however, that the scope of
Judge Brewster's remedy was too broad, and limited the
unenforceability of the two patents at issue to H.264-compliant
products," a Qualcomm spokeswoman said in an e-mailed statement.

Patent and antitrust law observers said that the opinion is one of
only a few in the area of standards-setting organizations.

The Federal Circuit tackled similar issues in Rambus Inc. v. Infineon
Technologies AG, ruling in 2003 that the patents withheld by Los
Altos, Calif.-based Rambus from a standards-setting organization
weren't close enough to the standard to matter. However, that court
established that even if there is no explicit rule stating that
members have to disclose, if everyone acts like there's an unwritten
rule, then there is a duty to disclose.

The court reiterated that stance in the Qualcomm case, although it
found that Qualcomm's patents were more closely related to the standard.

"It really follows in the path of the opinion in the Rambus case,"
said James Hopenfeld, an IP lawyer at Ropes & Gray in Washington, D.C.
"It definitely takes the ball from that and keeps running."

The underlying case, Qualcomm v. Broadcom, is, of course, the one that
produced one of the largest discovery fiascoes in recent history.
Qualcomm was sanctioned for failing to turn over key e-mails showing
that it was part of the Joint Video Team.

Although the Federal Circuit was dealing more with Qualcomm's behavior
as a member of the standards-setting body, the court noted that "the
district court's litigation misconduct findings -- which were based on
the repeated false claims during discovery, trial and post-trial, by
Qualcomm's attorneys and witnesses that Qualcomm did not participate
in the JVT in the development of the H.264 standard -- represented the
culmination of this plan."

Ropes & Gray's Hopenfeld said that even though the discovery debacle
wasn't central to the ruling, it probably played an important role.

"Had their credibility not been shot, it's possible this could've come
out differently, I don't know," he said.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997