Qualcomm Inc. v. Broadcom Corp. (Fed. Cir. 2008)

For patents relating to a standardized technology, participation in a standards organization’s development efforts in any capacity may impose a duty upon the patentee to disclose its standards related patents to the standards setting organization (“SSO”).

While Qualcomm Inc. v. Broadcom Corp. is a case concerning inequitable conduct on the part of Qualcomm with respect to its duty to disclose known intellectual property rights, the case is informative for all who participate in SSOs and develop patents related to developing standards.

For Qualcomm’s case on appeal, the Federal Circuit reviewed the questions of (1) the existence of a disclosure duty to an SSO; (2) the scope of the SSO disclosure duty; (3) whether such a duty was breached; and (4) whether the District Court had equitable authority to impose a patent unenforceability remedy in the case. A brief synopsis of the Federal Circuit’s analysis and discussion of the District Court’s holdings serves as a tutorial of the issues involved for an SSO participant who is also a patentee.

Most SSOs impose requirements on their participants to disclose, and possibly give up, intellectual property rights (IPR) related to standards developed by the SSO. This is because, in many instances, SSOs expect the public to utilize and promulgate technology related to the standard and therefore expect the public to have access without limitations and cost due to the IPR of others. Toward this purpose, most SSOs have a written IPR policy that sets forth the expectations for disclosure of IPR by its participants.

The rub for SSO participants is that a reading and interpretation of an SSO’s written IPR policy is not suffi cient in itself to determine whether a participant has a duty of disclosure. Although a court will look to whether a written IPR policy imposes any disclosure obligations on participants, it will also look at how the other participants understood the policy and whether the policy was viewed by other participants as imposing an obligation.

Even if an IPR written policy has no explicit requirements for disclosure, a duty may still be found by a court based on the understanding of the participants. For example, in Qualcomm, the Federal Circuit discussed its previous holdings in Rambus Inc. v. Infi neon Technologies AG, 318 F.3d 1096 (Fed. Cir. 2003). In Rambus, the Federal Circuit reviewed an SSO written IPR policy and found no express duty imposed on members of the SSO. However, because the SSO members treated the language of the policy as imposing a disclosure duty, the court likewise treated the language as imposing a disclosure duty.

This is akin to stating that the “majority rules” with respect to perceiving the existence of an IPR disclosure duty, even if the IPR policy is silent as to a duty or is otherwise ambiguous. The “treatment” of an IPR policy’s language as imposing a duty based on SSO participant behavior may create a disturbing legal reality for participants who believed they were in compliance with an SSO IPR policy based on their reading and interpretation of the written policy’s language. If such a disclosure duty is neglected, an implied waiver of patent rights may occur.

The Federal Circuit, in analyzing the Qualcomm case on appeal, repeated the wording of the District Court and stated that, “a duty to speak can arise from a group relationship in which the working policy of disclosure of related intellectual property rights (‘IPR’) is treated by the group as a whole as imposing an obligation to disclose information in order to support and advance the purposes of the group.”

Qualcomm’s problems began when they fi led suit against Broadcom for infringement of two patents that Qualcomm argued were necessary for any product implementing the H.264/MPEG-4 AVC (Advanced Video Coding) video compression standard. The Qualcomm case went to the jury and a verdict of noninfringement was returned for both of Qualcomm’s patents. However the jury also returned a unanimous advisory verdict and found by clear and convincing evidence that one of the two patents was

unenforceable due to inequitable conduct, and that both patents were unenforceable due to waiver. In Qualcomm Inc. v. Broadcom Corp., Qualcomm appealed the decision of the U.S. District Court for the Southern District of California, holding that, due to Qualcomm’s breach of duty to the SSO and inequitable conduct during the trial of withholding evidence that Qualcomm was a participant in the relevant SSO, the two Qualcomm patents that were related to the resultant standard, were unenforceable against the world. The Federal Circuit vacated the patent unenforceability ruling with respect to its breadth, limiting unenforceability only to H.264-compliant products. However, even this narrower ruling likely defeated the intended purpose of obtaining the H.264 related patents and also destroyed the two patents’ value.

The value of a patented technology that is required in order to implement a standard is readily apparent. Infringement of such a patent can be determined merely by the fact that an accused product complies with the standard. Compliance therefore automatically equals infringement. Such patents are sometimes referred to as essential to the standard, or necessary for the standard in the District Court’s language. Waiver was raised by Broadcom as an affi rmative defense to the allegation of patent infringement. The waiver theory was that, since Qualcomm had a duty to disclose its IPR during the development of the standard, and breached its duty by remaining silent, it waived its right to later assert the non-disclosed patents against those complying with the standard. Qualcomm argued that once the non-infringement determination was reached, the court lacked legal basis to further consider waiver and apply it in a judgment of patent unenforceability. However, the Federal Circuit concluded that the District Court “may in appropriate circumstances order patents unenforceable as a result of silence in the face of an SSO disclosure duty, as long as the scope of the district court’s unenforceability remedy is properly limited in relation to the underlying breach.”

Qualcomm was an active dues paying member, and participant in the relevant SSO. However, they argued during trial that they did not participate in the SSO during development of the H.264 standard. E-mails were later produced that showed that Qualcomm did in fact participate in the SSO and attempted to conceal evidence of participation during the trial.

Regarding the written IPR policy, and the question of existence of a duty of disclosure, the policy was somewhat different from the policy discussed in Rambus in that there was no duty to disclose patents unless a member submitted a technical proposal. The written IPR policy also stated that, “members/experts are encouraged to disclose as soon as possible IPR information (of their own or anyone else’s) associated with any standardization proposal (of their own or anyone else’s).” This information was to be provided “on a best effort basis.” The District Court also concluded that the SSO members treated the IPR policy “as imposing a duty of disclosure on participants apart from the submission of technical proposals.”

Qualcomm argued it had no duty since it did not submit any technical proposals and that the written policy only “encouraged” disclosure. However, the Federal Circuit disagreed and held that the “best efforts” requirement required disclosure even apart from submission of technical proposals. The Federal Circuit also found a duty imposed by language in a broader IPR policy that covered various subsections of an overall SSO.

The question remained as to which patents needed to be disclosed in order to satisfy the disclosure duty. The District Court articulated the “reasonably might be necessary” standard, which the Federal Circuit elaborated upon stating that, “the disclosure duty operates when a reasonable competitor would not expect to practice the standard without a license under the undisclosed claims.” Although the Court stated that “[t]his formulation does not require that the patents ultimately must “actually be necessary” [as argued by Qualcomm] to practice the H.264 standard,” it is diffi cult to decipher how a competitor would not expect to practice the standard without licensing the not “actually necessary” patent claims. In other words, one would think that, if the competitor expected that a license would be needed in order to practice the standard, then the patent claims must have been “actually necessary.”

In contrast to this thinking, the Court’s approach here seems to indicate that, during the development of a standard, it is not yet certain whether any specifi c patent will “actually be necessary.” However, one may be able to discern that a patent “reasonably might be necessary” based on knowledge of the direction the standard is taking based on participation.

Qualcomm’s argument was that the Court in Rambus stated that “it must be reasonably clear at the time that the patent or application would actually be necessary to practice the standard.” Thus, Qualcomm argued that “the court really meant that the patent or application must “actually be necessary” to practice the standard.” The Federal Circuit disagreed, as discussed above.

Qualcomm’s actions according to the evidence showed that the disclosure duty was breached, and the Federal Circuit affi rmed the District Court’s decision with respect to its equitable authority to impose the unenforceability remedy upon the two asserted patents. In summary, SSO participants need to be aware of the understandings and consensus of the participant group with respect to treatment of IPR. Any written IPR policies are relevant to the extent that such policies expressly provide disclosure duties and obligations. But the determinative factor as to whether a duty exists, and the scope of the duty, lies with the participant group consensus. Participants may also expect to disclose IPR consistently over time, as their various segments of IPR “reasonably might be necessary” to implement the standard as the standard content changes during the development cycle.

Practice Tip:

A reading of the written language of an SSO IPR policy alone is not suffi cient for determining a participant’s duty of disclosure with respect to the SSO.