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The 3d U.S. Circuit Court of Appeals has ruled that a patent holder can be sued under antitrust laws for deceptive conduct toward an organization that sets uniform telecommunications standards. Broadcom Corp. v. Qualcomm Inc., No. 06-492. The litigation involves computer chipsets, the core electronics that allow cellphones to transmit and receive data. They are made in accordance with one of two sets of standards to ensure that phones can communicate with each other. One of the standard-setting groups, European Telecommunications Standards Institute, based its standards on a technology for which Qualcomm held the patent. Because the decision to use a proprietary technology can confer monopoly power on whoever controls it, standard-setting groups require patent holders to agree they will license their technology on fair, reasonable and nondiscriminatory (FRAND) terms. Qualcomm had allegedly agreed to do so but then demanded higher royalties from Broadcom and other competitors and from companies using chipsets not made by Qualcomm. The complaint accused Qualcomm of intentional deception and of monopolizing certain markets for cellphone technology in violation of sections 1 and 2 of the Sherman Act and sections 3 and 7 of the Clayton Act. In 2006, Judge Mary Cooper of the U.S. District Court for the District of New Jersey dismissed the complaint for failure to state a claim, reasoning that Qualcomm has a legally sanctioned monopoly in its patented technology, including the right to exclude competitors and to set terms for distribution. Cooper also concluded that, even if Qualcomm was deceptive, it did not matter under antitrust law because the standard-setting process would inevitably result in the absence of competition. The 3d Circuit reversed, ruling that Cooper had failed to consider that the FRAND commitments “were intended as a bulwark against unlawful monopoly,” and that the standards groups could otherwise have chosen an unpatented technology. “We hold that . . . in a consensus-oriented private standard-setting environment . . . a patent holder’s intentionally false promise to license essential proprietary technology on FRAND terms . . . coupled with [a standard setting group's] reliance on that promise when including the technology in a standard, and . . . the patent holder’s subsequent breach of that promise, is actionable anticompetitive conduct,” wrote Judge Maryanne Trump Barry on behalf of the panel. Though the 3d Circuit acknowledged that no court or agency had decided the issue, it did point to several Federal Trade Commission proceedings that lent support to its position, especially In the Matter of Rambus, No. 9302, decided on Aug. 2, 2006. There, the FTC found that Rambus, a developer of computer memory technologies, misled a standards group about the nature of its patent interests, leading the group to adopt a standard using proprietary Rambus technology. The FTC found that Rambus had engaged in anti-competitive conduct and violated antitrust law. Other cited cases, involving Dell Computer Corp. and Unocal Corp., demonstrate the types of products subject to comparable industry standard-setting. The FTC had accused Dell of concealing its patent for what wound up as an important design feature of a standard for a computer switch. Dell even allegedly certified to the standards group that its proposed standard did not infringe any Dell patent, but once the standard proved successful, Dell tried to assert its patent rights. The case, In the Matter of Dell Computer Corp., 121 F.T.C. 616, ended in 1996 with a consent order requiring Dell to cease and desist from asserting that use of the standard violated its intellectual property rights.

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