Legal Journals

Standards Setting Decision of Federal Circuit Will Guide NDCal Antitrust Cases.

Technology standardization is viral to expanding tech markets. Offering standardized components or end-use products can enable multiple entrants to gain access to emerging markets. Countervailing concerns, arising from patent rights bundled into standards, were adjudged and affirmed in the Federal Circuit’s ruling in Qualcomm v. Broadcom (Dec. 1, 2008). While the rulings in that case were somewhat overwhelmed with serious nondisclosures by Qualcomm about its participation in a standards setting organization (SSO), the appeal ruling is precedential and will guide antitrust cases in the NDCal alleging anticompetitive combinations of patents and standards. Examples in the NDCal currently are Zoran v. DTS, 5:08CV4655 involving audio compression standards for Blu-Ray DVDs, and Analogix v. Silicon Image, 5:08CV2917 arising from HDMI interface standards.

After a battering in district court, Qualcomm went to the Federal Circuit with an A-team, that included Carter Phillips and Evan Chesler. Still, the ruling was affirmance, but with a modified unenforceability mandate. The quirk is that Qualcomm sued for infringement of patents that allegedly embodied the “H.264″ standard, but the jury ruled there was no infringement. Instead of Qualcomm’s patents being “unenforceable against the world,” the Federal Circuit “narrow[ed] the scope of unenforceability to H.264-compliant products.” The non-infringement verdict provoked questions of whether Qualcomm’s sin of covering up its role in the SSO deserved a penance greater than just losing its infringement case. Instead of a non-infringement verdict ending the case or controversy, the issue turned to whether patents of participants in the SSO “reasonably might be necessary” to practice the standard. Possibly, should Qualcomm ever sue on these same patents, will the defense be measured against the claim limitations, or compliance with the H.264 standard?

This Qualcomm decision follows the emerging caselaw from Rambus v. Infineon (Fed. Cir. 2003) on the unenforceablity that can result from breach of a duty to disclose and/or to fairly license patents that might be necessary to practice a technology standard. Even the Federal Circuit struggled with whether the remedy flows from waiver, equitable estoppel, inequitable conduct, or patent misuse. Each of these doctrinal bases have been roundly criticized for adding to the uncertainty and expense of patent litigation. A factual inquiry subsumed in the reported cases are any equitable distinctions between standards that flow from a duly-constituted SSO, or a voluntary working group, or a profit-driven alliance between a few manufacturers. It is doubtful that the rules and risks do not differ depending on any differences in the form of group that promulgates a standard.

Full post as published by Tech Law Forum on December 02, 2008 (boomark / email).