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Failure to disclose patents to SSO results in unenforceabilty against products using standard

March 23, 2009
Post by Blog Staff

In a recent decision, the Federal Circuit affirmed-in-part a district court decision that a patentee had breached a duty to disclose relevant video-compression technology patents while participating in a joint video team standards-setting organization (SSO). The Federal Circuit, however, reversed in part the district court decision finding the patents unenforceable against the world, instead holding the patents should only be held unenforceable against products embodying the applicable video standard.The court affirmed the district court's finding that the case was exceptional and awarding attorney fees to the defendant. The plaintiff had concealed the existence of tens of thousands of relevant documents throughout discovery, with their existence not revealed until near the end of trial (we previously blogged about the district court's decision awarding fees here). The Federal Circuit held this litigation misconduct was sufficient to support the exceptional case finding even absent the failure to disclose the patents to the SSO.More on Qualcomm Inc. v. Broadcom Corp. after the jump.The plaintiff, Qualcomm, brought suit against Broadcom asserting infringement of two patents concerning video compression technology – U.S. Patent Nos. 5,452,104 and 5,576,767. The patents relate to the H.264 video compression standard, used in a multitude of consumer products such as satellite television receivers, video iPods, and Blu-ray disc players.In late 2001, a Joint Video Team (JVT) was established as a joint project between two standards-setting organizations (SSOs), the Video Coding Experts Group (VCEG) and the Moving Picture Experts Group (MPEG), with the purpose of developing a single "technically aligned, fully interoperable" industry standard for video compression technology. This standard was named the H.264 standard. Qualcomm was a participant in these proceedings but did not disclose either of the two asserted patents to the JVT prior to the release of the H.264 standard in May 2003.On October 14, 2005, Qualcomm filed the present lawsuit against Broadcom claiming that Broadcom infringed the patents by making products compliant with the H.264 video compression standard. A jury returned unanimous verdicts as to non-infringement of the two asserted patents and an advisory verdict that the patents were unenforceable due to inequitable conduct and waiver. The district court entered an order finding in favor of Broadcom and against Qualcomm on Broadcom's affirmative defense of waiver as to the patents, and scheduled a hearing to determine the appropriate remedy for the waiver. After a hearing, the district court concluded Qualcomm had waived its rights to assert the two patents as against the world, and accordingly held them to be unenforceable. The court based its decision on Qualcomm's concealment, throughout the litigation, of evidence showing its participation in the JVT during the development of the H.264 standard. Most importantly, on one of the last days of the trial, a Qualcomm witness testified that she had emails that Qualcomm previously claimed did not exist. According to the court, the emails "indisputably demonstrate that Qualcomm participated in the JVT . . . and that Qualcomm knowingly attempted in trial to continue the concealment of evidence." In light of Qualcomm's bad faith participation in the JVT and its litigation misconduct the court further concluded that the case was exceptional and Broadcom was entitled to attorney's fees. Qualcomm appealed.The Federal Circuit first considered the waiver issue. This essentially required consideration of four items:

(1) Existence of Disclosure Duty: Did Qualcomm, as a participant in the JVT, have a duty to disclose patents to the JVT prior to the release of the H.264 standard in May 2003; (2) Scope of Disclosure Duty: If so, what was the scope of its disclosure duty; (3) Breach: Did Qualcomm breach its disclosure duty by failing to disclose the . . . Patents; and (4) Remedy: If so, was it within the district court's equitable authority to enter an unenforceability remedy based on the equitable defense of waiver in the SSO context?
Duty to discloseThe court relied Rambus Inc. v. Infineon Technologies AG, and observed a duty to disclose exists when the IP policy of the SSO establishes such a duty and/or when the participants regard the policy of the SSO as requiring disclosure. Here, both the policy and the participants' conduct indicated disclosure was required. The written policy stated:
According to the ITU-T and ISO/IEC IPR policy, 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). Such information should be provided on a best effort basis.
Qualcomm argued this only "encouraged" members to disclose relevant IP. The court disagreed, noting that encouragement related to the timing of the disclosure (encouraged to disclose as soon as possible), not the requirement of disclosure, which required "best effort" to disclose.Furthermore, the court also examined the treatment of the JVT policy by other participants. This analysis revealed that participants treated the policy as having a duty to disclose. For instance, Broadcom offered testimony of the JVT chair as well as a participant that they understood the patent disclosure duty to be mandatory. Based on this evidence, the court agreed with the district court that a duty to disclose existed.Scope of duty to discloseHere, the court again examined the relevant intellectual property rights policies of the JVT. The policies required disclosure of information "associated with" or "affecting the use" of JVT work. According to the court, this required participants to disclose IP that "reasonably might be necessary" to practice the applicable standard, again referencing Rambus. This is an objective standard that "does not depend on a member's subjective belief that its patents do or do not read on the proposed standard."Breach of dutyQualcomm admitted it did not provide any effort to disclose, let alone best efforts, so it therefore breached its duty to disclose if the patents "reasonably might be necessary" to practice the H.264 standard. Here, the court had little trouble finding a breach, given Qualcomm's suit against Broadcom was based at least in large part, if not entirely, on its use of the H.264 standard in devices. Accordingly, Qualcomm could not now argue that it might not reasonably be necessary to practice the standard given that it sued under the patents based on the use of the standard (internal citation omitted):
Broadcom argues that if Qualcomm truly believes that the asserted patents do not meet the "reasonably might be necessary" standard, then it necessarily lacked a Rule 11 basis to bring this litigation in the first place.We are not persuaded by Qualcomm's arguments on this point, and are unable to reconcile its ex post argument that the asserted patents do not meet the "reasonably might be necessary" standard with its ex ante arguments regarding infringement.

Accordingly, the court had little trouble affirming that Qualcomm had breached its duty to disclose.

Scope of remedyWith regards to the equitable remedy of unenforceability of the patents, the Federal Circuit held the district court's remedy was too broad. The court noted the equitable remedy needed to be limited in relation to the underlying breach of the duty to the SSO. Thus, the court held the proper remedy was that the patents should only be unenforceable against products compliant with the H.264 standard. This outcome would more closely and equitably reflect Qualcomm's misconduct in its participation with the JVT.Finally, the court affirmed the determination that the case was exceptional under 35 U.S.C. § 285. The district c


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