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.