Implications of the Federal Circuit’s Qualcomm Decision
Last week, the US Court of Appeals for the Federal Circuit, the court that most often addresses patent appeals, confirmed that companies risk their patents becoming unenforceable if they do not disclose relevant intellectual property when participating in standard-setting organizations (SSO). The case, Qualcomm Inc. v. Broadcom Corp., 2008 WL 5047675, Nos. 2007-1545, 2008-1162 (Fed. Cir. Dec. 1, 2008), dealt a blow to Qualcomm’s assertion of its patent rights and sent a message to SSOs and their members: maintain clear disclosure policies and follow them with care.
I. Case Summary
Qualcomm and Broadcom are manufacturers of various technology products. In 2005, Qualcomm filed a patent infringement suit against Broadcom in the US District Court for the Southern District of California. The suit alleged that Broadcom infringed two of Qualcomm’s patents for video compression technology. In its defense, Broadcom argued that Qualcomm had waived the patents’ enforceability when Qualcomm failed to disclose the patents to the Joint Video Team (JVT) SSO.
Broadcom’s defense was premised largely upon the case of Rambus Inc. v. Infineon Technologies AG, in which the Federal Circuit held that Rambus had a duty to disclose patent information to an SSO in which it had participated. 1The court reached this conclusion based not on the organization’s written policies, but the members’ treatment of those policies. The written policy did not require that the members disclose relevant patent information. The SSO’s members, however, “treated the language of [the policy] as imposing a disclosure duty.” The court therefore required Rambus to disclose all patent information “that reasonably might be necessary to practice the standard.” The court reasoned that this type of disclosure ensures that a participant could not use nondisclosure of patents central to a newly adopted standard to inhibit or unfairly profit from that standard. Rambus did not address what language in a written policy would create a disclosure obligation. Qualcomm does.
The JVT was established in 2001 to adopt an interoperable industry standard for video compression technology. In 2003, the JVT’s proposed standard was adopted by its parent organizations—the Telecommunication Union Telecommunication Standardization Sector, the International Organization for Standardization and the International Electrotechnical Commission. The JVT’s policies “encouraged” members to disclose on a “best effort basis” patent information “associated with any standardization proposal.” Qualcomm argued that the JVT’s written policies were vague and could not be read to create a disclosure duty. Although the court acknowledged the ambiguity of this policy, it nevertheless held that the policy required disclosure, focusing principally on the fact the association required its members to use their “best efforts” to disclose relevant patent information. The court also looked to the JVT’s parent organizations. Those organizations required disclosure of patent information from all participants prior to standard adoption. As in Rambus, the court therefore held that the JVT’s policy required participants to disclose patent information that, as in Rambus, “reasonably might be necessary” to implement the standard. The court added that, even if the express language were ambiguous, the JVT’s participants treated the policies as imposing a duty to disclose upon all participants and Rambus thus also applied.
The court then addressed whether Qualcomm’s behavior rendered their patents unenforceable. The court found that Qualcomm had (i) “intentionally organized a plan to shield its patents from consideration by JVT,” (ii) represented to the court that it had not participated in the JVT, and, (iii) maintained throughout trial that this was the case. But the court later learned that Qualcomm had in fact hidden over 400,000 documents demonstrating its involvement in the JVT. Based on these findings, the court held that Qualcomm had in fact waived enforcement of its patents. It “was silent in the face of a disclosure duty . . . , had knowledge . . . that the asserted patents ‘reasonably might be necessary’ . . . , [and] intentionally organized a plan to shield said patents from consideration by the JVT, planning to demand license fees from those seeking to produce [compliant] products.” Consequently, the court ruled that Qualcomm’s patents were “unenforceable against all [standard-compliant] products” and, compounded by what the court termed “litigation misconduct,” ordered Qualcomm to pay Broadcom’s attorney fees.
The Qualcomm decision confirms that SSO participants must heed their obligations to disclose relevant patent information during the standard-setting process. The Federal Circuit has made clear with Rambus and Qualcomm that SSO disclosure policies will be liberally construed. Courts will look not only at the written language but also at how participants actually behave under the policies. This leaves little doubt that profit-driven nondisclosure, together with arguably ambiguous policies, risks serious penalties. Indeed, one might even argue Rambus and Qualcomm effectively create a de facto duty to disclose relevant patent information when participating in an SSO. In light of Rambus and Qualcomm, any SSO that wishes to relieve their members of a duty to disclose should therefore do so explicitly in their policy and as part of their ongoing operations. Any organization engaged in standard setting should review their disclosure policies and ongoing protocols to make sure they clearly state the association’s desires. These organizations also should make sure that members clearly know what the policies are intended to mean.
1 318 F.3d 1081 (Fed. Cir. 2003).