Qualcomm Inc. v. Broadcom Corp.: Federal Circuit Affirms Judgment Against Qualcomm, Limits Remedy of Patent Unenforceability

Qualcomm Inc. v. Broadcom Corp., Federal Circuit, December 1, 2008, No. 2007-1545 & 2008-1162
Slip opinion

On December 1, 2008, the Federal Circuit affirmed in part the District Court for the Southern District of California, no. 05-CV-1958, holding that Qualcomm breached its duty to disclose relevant video-compression technology patents during its participation in a standards-setting organization (“SSO”). However the Federal Circuit limited the scope of the remedy; rather than make the patent unenforceable against the world, the court held the patent unenforceable only against products compliant with the standard created by the SSO.

The judgment arises from a patent infringement suit brought against Broadcom in which Qualcomm asserted two patents concerning video compression technology. After a concealment effort that resulted in sanctions for litigation misconduct, it came to light that Qualcomm had participated in an SSO called the Joint Video Team (“JVT”) that was responsible for creating a video compression standard known as H.264. The H.264 standard was intended to be achievable at a baseline by anyone without requiring them to pay royalties. The court found that Qualcomm was required to disclose to the members of JVT any patents it held covering technology that “reasonably might be necessary” to practice the standard. Qualcomm was held to have waived its rights to the two patents by not disclosing those patents to JVT.

The case provides some clarity in a previously murky area: The Wall Street Journal Law Blog notes that this case clarifies the court’s willingness to find a duty to disclose in the SSO context, while Zusha Ellinson of The Recorder observes that it also clarifies the penalties for failing to disclose. The case is also being held up as a demonstration of the disastrous results of withholding evidence.

In determining that Qualcomm had a duty to disclose, the court relied heavily on Rambus Inc. v. Infineon Technologies AG, 318 F.3d 1081 (Fed. Cir. 2003), which finds a duty to disclose either if the intellectual property policy of the SSO creates such a duty or if the participants of the SSO treat the policy as requiring disclosure. The Rambus standard limits the duty of disclosure in an SSO context to patents that reasonably might be necessary to practice the standard being created by the SSO.

Writing for the court, Judge Prost indicated that Qualcomm had at least a “best efforts” duty to disclose based on JVT’s written intellectual property policy, and had a clear duty based on the policy of the parent organization of JVT. The court also looked to the treatment of JVT’s policy by its participants, finding a duty to disclose based on that treatment. Relying in part on Qualcomm’s own attempt to assert its patents after the SSO had completed, the court found that the patents meet the “reasonably might be necessary” standard and therefore should have been disclosed.

The Federal Circuit vacated the lower court’s remedy that had made the patent unenforceable against the world. Instead the court examined the equitable remedy of waiver and the doctrine of patent misuse and remanded the case with an order to enter a judgment making the patents only unenforceable against products complaint with the H.264 standard created by JVT. In doing so, the court said that the equitably remedy should reflect Qualcomm’s misconduct in its participation with JVT.

Lastly, the court affirmed the determination that the case was exceptional under the meaning of 35 U.S.C. § 285 and that Broadcom was therefore entitled to recover more than $8.5 million in attorney’s fees. Although the court refused to consider Qualcomm’s misconduct with JVT as a basis, Qualcomm’s serious misconduct during litigation was found to be entirely sufficient. Qualcomm had made false representations to the effect that it had not been a participant in JVT, and had improperly withheld documents during discovery.