United States: The Federal Circuit Reaffirms Its Judicial Support Of Standard Setting Organizations In Qualcomm

The Qualcomm Inc. v. Broadcom Corp. litigation is probably best known by practitioners for the hefty discovery sanctions imposed by the trial court in the Southern District of California against Qualcomm and its attorneys for failure to produce key documents.  The case will soon be known for something else.  The Federal Circuit's December 1, 2008 opinion on appeal, in addition to affirming the lower court's sanctions order, focused on the important and more substantive issue of when participants in standard-setting organizations ("SSOs") have a duty to disclose potentially relevant patents.  Qualcomm Inc. v. Broadcom Corp., Nos. 2007-1545, 2008-1162, slip op. (Fed. Cir. Dec. 1, 2008).  In its decision, the Federal Circuit continued a trend toward holding participants in SSOs to stringent duties to disclose potentially relevant patents, even absent a written SSO policy compelling disclosure.  Especially in light of the increased prevalence and importance of SSOs in a wide variety of technology industries, companies that become involved in SSOs need to understand the obligations their participation creates, obligations which may not be apparent from the written SSO policy. 

The Qualcomm Opinion

In Qualcomm, The Federal Circuit ruled that Qualcomm had a duty to disclose two patents to Joint Video Team ("JVT"), an SSO of which it was a member, despite the fact that JVT's written policy did not explicitly impose a disclosure duty.  In so deciding, the Court confirmed its willingness to read between the lines to require SSO participants' disclosure of relevant patents.  The decision echoed the Court's 2003 opinion in Rambus Inc. v. Infineon Technologies AG 318 F.3d 1081 (Fed. Cir. 2003) ("Rambus"), where the Court likewise held that members of the Joint Electron Device Engineering Council ("JEDEC") SSO had a duty to disclose in the absence of a written policy clearly imposing such a duty.

To determine whether a disclosure duty existed, the Federal Circuit in Qualcomm followed the same contract interpretation approach it took in Rambus, looking first to the four corners of JVT's written intellectual property rights ("IPR") policy, which did not impose any disclosure duty on participants who did not submit technical proposals.  As in Rambus, however, despite the absence of a written disclosure duty, the Court went on to find an implied duty to disclose based largely on the fact that participants understood the policies as imposing such obligations and took actions consistent with the existence of a duty.  In both Rambus and Qualcomm, the Federal Circuit held that the duty to disclose extends "only to claims in patents or applicationsthat reasonably might be necessary to practice the standard," defined as "when a reasonable competitor would not expect to practice the standard without a license under the undisclosed claims."

The Tension Between IP Rights And SSOs

Lower courts are likely to look carefully at Qualcomm, not only for its explicit holding, but also for continued guidance about the proper level of judicial deference to be given to SSOs and their goals.  Presented with a scenario where intellectual property rights were in tension with the goals of an SSO, the Federal Circuit has now twice determined that intellectual property rights should yield to the goals furthered by the SSO, even in the absence of a written policy requiring disclosure.  The Federal Circuit's identification of a duty to disclose in the Qualcomm and Rambus cases - when it could have stopped its inquiry in either case upon finding that the relevant SSO lacked a written disclosure policy - suggests a strong level of judicial support for SSOs.  Both cases reflect an implicit determination that avoiding the threat of standard blocking by a patent hold-up was worth the reduction in value of patent rights resulting from the finding of a disclosure duty. 

Extending The Reach Of Qualcomm And Rambus

Rambus and Qualcomm dealt with SSOs in the semiconductor and telecommunications fields, respectively.  It remains to be seen whether this degree of Federal Circuit support for SSOs will extend beyond markets such as these - often referred to as "network markets" - where compatibility is critical and where SSOs may offer a substantial benefit to consumers.  It also remains to be seen what level of evidence courts will require to demonstrate an implied duty to disclose, in cases where discovery misconduct is not at issue.

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