Qualcomm Incorporated v. Broadcom Corp.

• Decision Date: 01 December 2008
• Docket Number: No. 2007-1545.,No. 2008-1162.,2007-1545.,2008-1162.
• Citation: 548 F.3d 1004
• Parties: QUALCOMM INCORPORATED, Plaintiff-Appellant, v. BROADCOM CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

548 F.3d 1004

QUALCOMM INCORPORATED, Plaintiff-Appellant, v. BROADCOM CORPORATION, Defendant-Appellee.

No. 2007-1545.

No. 2008-1162.

United States Court of Appeals, Federal Circuit.

December 1, 2008.

Carter G. Phillips, Sidley Austin LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Stephen B. Kinnaird, Eric A. Shumsky, Peter S. Choi, and Ryan C. Morris. Of counsel on the brief were David B. Salmons, Bingham McCutchen LLP, of Washington, DC, and Richard S. Taffet, of New York, NY; William S. Boggs, Brian A. Foster, Timothy

S. Blackford, and Stanley J. Panikowski, DLA Piper U.S. LLP, of San Diego, CA; and Evan R. Chesler and Peter T. Barbur, Cravath, Swaine & Moore LLP, of New York, NY.

William F. Lee, Wilmer Cutler Pickering Hale and Dorr LLP, of Boston, MA, argued for defendant-appellee. With him on the brief were John J. Regan, Vinita Ferrera, Kate Saxton, and Carrie H. Seares. Of counsel were Donald R. Steinberg and James L. Quarles, III, of Washington, DC.

Before MAYER, LOURIE, and PROST, Circuit Judges.

PROST, Circuit Judge.

This patent infringement case involves the consequence of silence in the face of a duty to disclose patents in a standards-setting organization ("SSO"). The district court concluded that Qualcomm breached its duty to disclose U.S. Patent Nos. 5,452,104 ("'104 Patent") and 5,576,767 ("'767 Patent") to the Joint Video Team ("JVT") SSO. As a remedy, the district court ordered the '104 and '767 Patents (and related patents) unenforceable against the world. Additionally, based on both Qualcomm's JVT misconduct and its litigation misconduct, the court determined that this was an exceptional case and awarded Broadcom its attorney fees. For the reasons set forth below, we affirm the district court's determinations that Qualcomm had a duty to disclose the asserted patents to the JVT, that it breached this duty, and that the JVT misconduct and litigation misconduct were proper bases for the court's exceptional case determination. Because the scope of the remedy of unenforceability as applying to the world was too broad, however, we vacate the unenforceability judgment and remand with instructions to enter an unenforceability remedy limited in scope to H.264-compliant products. Accordingly, we affirm-in-part (duty to disclose, breach of duty, exceptional case determination), vacate-in-part (unenforceability scope), and remand.

I. BACKGROUND

This case presents the question of whether Qualcomm waived its right to assert its patents by failing to disclose them to the JVT SSO. The asserted patents relate to video compression technology. The '104 Patent issued in 1995 and is entitled, "Adaptive Block Size Image Compression Method and System." The '767 Patent issued in 1996 and is entitled, "Interframe Video Encoding and Decoding System." Chong U. Lee, who was the Vice President of Technology at Qualcomm at the time of this litigation, is the named inventor of the '104 Patent, and he and Donald Pian are the named inventors of the '767 Patent. Qualcomm is the assignee of the '104 and '767 Patents.

In late 2001, the JVT was established as a joint project by two parent SSOs: (1) the Video Coding Experts Group ("VCEG") of the International Telecommunication Union Telecommunication Standardization Sector ("ITU-T"); and (2) the Moving Picture Experts Group ("MPEG") of the International Organization for Standardization ("ISO") and the International Electrotechnical Commission ("IEC"). The JVT was created to develop a single "technically aligned, fully interoperable" industry standard for video compression technology. Qualcomm Inc. v. Broadcom Corp., 539 F.Supp.2d 1214, 1218 (S.D.Cal.2007) ("Remedy Order") (quoting JVT Terms of Reference ("ToR")). The standard developed by the JVT was later named the H.264 standard. In May 2003, the ITU-T and ISO/IEC adopted and published the official H.264 standard.

Plaintiff Qualcomm is a member of the American National Standards Institute ("ANSI"), which is the United States representative member body in the ISO/IEC, and was an active dues-paying member for many years prior to 2001. It is also a member of the ITU-T and a participant in the JVT. Qualcomm did not disclose the '104 and '767 Patents to the JVT prior to release of the H.264 standard in May 2003.

On October 14, 2005, Qualcomm filed the present lawsuit against Broadcom in the United States District Court for the Southern District of California, claiming that Broadcom infringed the '104 and '767 Patents by making products compliant with the H.264 video compression standard. A jury trial was held from January 9, 2007, to January 26, 2007. The jury returned a unanimous verdict as to non-infringement and validity, finding that (1) Broadcom does not infringe the '104 and '767 Patents; and (2) the '104 and '767 Patents were not shown to be invalid. The jury also returned a unanimous advisory verdict as to the equitable issues, finding by clear and convincing evidence that (1) the '104 Patent is unenforceable due to inequitable conduct; and (2) the '104 and '767 Patents are unenforceable due to waiver.

On March 21, 2007, the district court entered an order (1) finding in favor of Qualcomm and against Broadcom on Broadcom's counterclaim of inequitable conduct as to the '104 Patent; (2) finding in favor of Broadcom and against Qualcomm on Broadcom's affirmative defense of waiver as to the '104 and '767 Patents; and (3) setting a hearing on an Order to Show Cause as to the appropriate remedy for Qualcomm's waiver. The district court's conclusion that Qualcomm waived its rights to assert the '104 and '767 Patents was based on Qualcomm's conduct before the JVT.

Throughout discovery, motions practice, trial, and even post-trial, Qualcomm adamantly maintained that it did not participate in the JVT during development of the H.264 standard. Despite numerous requests for production and interrogatories requesting documents relating to Qualcomm's JVT participation prior to adoption of the H.264 standard, Qualcomm repeatedly represented to the court that it had no such documents or emails. On January 24, 2007, however, one of the last days of trial, a Qualcomm witness testified that she had emails that Qualcomm previously claimed did not exist. Later that day, Qualcomm produced twenty-one emails belonging to that witness. As the district court later discovered, these emails were just the "tip of the iceberg," as over two hundred thousand more pages of emails and electronic documents were produced post-trial. Remedy Order at 1245. The district court later determined that these documents and emails "indisputably demonstrate that Qualcomm participated in the JVT from as early as January 2002, that Qualcomm witnesses ... and other engineers were all aware of and a part of this participation, and that Qualcomm knowingly attempted in trial to continue the concealment of evidence." Id.

On August 6, 2007, after a hearing on the Order to Show Cause, the district court entered an Order on Remedy for Finding of Waiver, ordering the '104 and '767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against the world. The district court concluded:

In light of all of the ... evidence finally revealed, the eventual collapse of Qualcomm's concealment efforts exposes the carefully orchestrated plan and the deadly determination of Qualcomm to achieve its goal of holding hostage the entire industry desiring to practice the H.264 standard by insulating its IPR from the JVT so that the JVT would lose the opportunity to mitigate, if not to avoid, Qualcomm's IPR in the development of the H.264 standard. Broadcom, ignorant of the existence of the '104 and '767 patents, designed and is in the process of manufacturing numerous H.264-compliant products.

Remedy Order at 1248.

On August 6, 2007, the district court also granted Broadcom's exceptional case motion, finding that this is "an exceptional case by clear and convincing evidence based on (1) Qualcomm's bad faith participation in the H.264-standard-setting body, the Joint Video Team (`JVT'); and (2) the litigation misconduct of Qualcomm through its employees, hired outside witnesses, and trial counsel during discovery, motions practice, trial, and post-trial proceedings." Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958, 2007 WL 2261799, at *2, 2007 U.S. Dist. LEXIS 57122, at *7 (S.D.Cal. Aug. 6, 2007) ("Exceptional Case Order"). In conjunction with the exceptional case order, the district court granted Broadcom its attorney fees.

On October 12, 2007, the magistrate judge held a hearing to investigate Qualcomm's litigation misconduct. As a sanction, the magistrate judge ordered Qualcomm to pay Broadcom's attorney fees, offset by any amount Qualcomm pays associated with the exceptional case order. The magistrate judge also referred six Qualcomm attorneys to the California State Bar for investigation and possible sanctions. The magistrate judge further ordered Qualcomm and the sanctioned attorneys to participate in a comprehensive Case Review and Enforcement of Discovery Obligations ("CREDO") program. Qualcomm subsequently paid the sanction and participated in the CREDO program.

This appeal followed. We have jurisdiction under 28 U.S.C. § 1295(a).¹

II. DISCUSSION

By failing to disclose relevant intellectual property rights ("IPR") to an SSO prior to the adoption of a standard, a "patent holder is in a position to `hold up' industry participants from implementing the standard. Industry participants who have invested significant resources developing products and technologies that conform to the standard will find it prohibitively expensive to abandon their investment and switch to another standard." Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 310 (3d Cir.2007). In order to avoid "patent hold-up," many SSOs require participants to disclose and/or give up IPR covering a...