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One More Round: Court of Appeals Affirms All but Scope of Remedy, Remands with Specific Instructions to Narrow Scope

Posted in NEWS & UPDATES

Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004 (Fed. Cir. 2008)

On December 1, 2008, the Court of Appeals for the Federal Circuit issued its opinion affirming the lower court’s findings that Qualcomm breached its duty to disclose the patents at issue in the underlying case and thus waived the enforceability of those patents.  The Court of Appeals also upheld the lower court’s finding that this constituted an “exceptional case,” and the resulting award of attorney’s fees to Broadcom.  The Court of Appeals took exception, however, to the scope of the waiver remedy articulated by the lower court, vacated that portion of the order and remanded the case with instructions to narrow the scope.

Background

In this case, Qualcomm brought suit against Broadcom alleging that Broadcom infringed two patents, ‘104 and ‘767, by making products compliant with the new H.264 video compression standard.  It was later revealed that Qualcomm belonged to the standards-setting organization that adopted the H.264 standard and that the organization required the disclosure of relevant intellectual property rights, prior to the adoption of a standard, to prevent one member’s ability to hold up the process of implementing the standard upon adoption.  Pursuant to that duty, Qualcomm should have revealed its ownership of the ‘104 and ‘767 patents, but did not.  This breach of duty was revealed by evidence produced only days before the trial ended, after the existence of documentation establishing Qualcomm’s membership in the standards-setting organization was made known for the first time.  The jury’s subsequent advisory verdict included a finding that the patents at issue were unenforceable due to inequitable conduct and due to waiver.

The district court agreed and entered an order finding in favor of Broadcom on its affirmative defense of waiver, and setting a hearing on an Order to Show Cause regarding the appropriate remedy for Qualcomm’s waiver, among other things.  Following that hearing, the court entered its Order on Remedy for Finding of Waiver which ordered the ‘104 and ‘767 patents unenforceable against the world.  Qualcomm appealed.

Appeal

The Court of Appeals upheld the findings of the district court, save one exception:  the scope of the unenforceability remedy.  The appellate court stated:  “[W]e conclude that a district court may in appropriate circumstances order patents unenforceable 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.”  The appellate court went on to state:

While the scope of an unenforceability remedy in the patent misuse context is limited to rendering the patent unenforceable until the misuse is purged, the scope of the district court’s unenforceability remedy in the present case was not limited in relation to Qualcomm’s misconduct in the SSO context.  The basis for Broadcom’s waiver defense was Qualcomm’s conduct before the JVT during development of the H.264 standard, including intentional nondisclosure of patents that it knew "reasonably might be necessary" to practice the standard.  The district court correctly recognized that the remedy for waiver in the SSO context should not be automatic, but should be fashioned to give a fair, just, and equitable response reflective of the offending conduct.  In determining the appropriate equitable remedy in this case, the district court properly considered the extent of the materiality of the withheld information and the circumstances of the nondisclosure relating to the JVT proceedings.  While we agree with the district court that there is an "obvious connection between the ’104 and ’767 patents and H.264 compliant products," we do not discern such a connection between the asserted patents and products that are not H.264- compliant, and neither party points us to any such connection.

Accordingly, based on the district court’s findings, the broadest permissible unenforceability remedy in the circumstances of the present case would be to render the ’104 and ’767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against all H.264-compliant products (including the accused products in this case, as well as any other current or future H.264-compliant products).  Accordingly, we vacate the unenforceability remedy and remand with instructions to enter an unenforceability remedy limited in scope to any H.264- compliant products.