Broadcom Wins ITC Order Barring Certain Qualcomm Baseband Chips and Cellular Phones from Importation into the U.S.

(Business News & Technology News, 8 Jun 2007)

Broadcom Corp. has announced that the United States International Trade Commission (ITC) has ordered that certain Qualcomm Inc. chips, and future downstream products such as cellular phones that incorporate those chips, that infringe a Broadcom patent be barred from importation into the U.S. The ITC also entered a Cease and Desist Order prohibiting Qualcomm from engaging in certain activities related to the infringing chips.

Last year, an ITC administrative law judge and later the Commission itself found that Qualcomm's cellular baseband chips infringe five claims of U.S. Patent No. 6,714,983, which relates generally to power conservation in cellular phones. Qualcomm confirmed the importance of this technology when it testified under oath at the ITC in March that a noninfringing work around to the patent may be possible, but could take as long as 18 months.

Today, the six-member Commission issued its Final Determination on remedy for Qualcomm's infringement.

"We are very pleased with the ITC's ruling, and gratified that the Commissioners followed the letter and spirit of their charter, which is the protection of American products from unfair trade practices," said David A. Dull, Broadcom's Senior Vice President and General Counsel. "In this case, Qualcomm and its customers have been importing products that use Broadcom's valuable intellectual property without permission. As Broadcom continues to develop cutting edge wired and wireless communications and multimedia products that enable the convergence and communications trends that are touching consumers in their daily lives, we are gratified to know that the results of our investments and hard work will be protected from infringers like Qualcomm."

Broadcom, which originally filed its ITC complaint in May 2005, has also pursued patent infringement claims against Qualcomm in U.S. District Court in Santa Ana, Calif., where on May 29 a federal jury found Qualcomm liable for willfully infringing nine claims of three different Broadcom patents. The jury awarded Broadcom $19.64 million in damages, which may be trebled by the judge due to the finding of willful infringement. Broadcom also plans to seek an injunction to bar future infringement by Qualcomm.

The ITC determination brings the total number of Broadcom patents found to be infringed by Qualcomm to four. Broadcom plans to return to the Santa Ana court to seek damages and an injunction for Qualcomm's infringement of the '983 patent; action on those claims has been stayed pending resolution of the ITC proceeding.

The ITC order issued today will bar Qualcomm from bringing infringing chips into the U.S., or engaging in certain activities related to the infringing chips, affecting its ability to provide support to its customers for such essential services as designing next-generation mobile handsets, or supporting the testing and debugging of handsets. The infringing products include baseband processor chips that comprise Qualcomm's core suite of enhanced multimedia and convergence handset platforms.

Additionally, the order will bar handset makers from bringing their products into the U.S. if they contain Qualcomm's infringing chips. Existing phone models and PC data cards, however, will not be barred.

Dull continued: "As noted previously, we have been forced to seek redress in the ITC and the courts because Qualcomm has repeatedly refused to recognize the value of Broadcom's patented technology. Qualcomm's willful and widespread patent infringement is particularly egregious and ironic in light of its historic practice of seeking unfair compensation for its own patent portfolio¡ªviolating multiple promises it made to international standards-setting organizations to charge fair, reasonable and non-discriminatory royalty rates for Qualcomm technology incorporated into the standards¡ªas well as its abuse of the rules and procedures of various standards bodies."

Dull concluded: "We simply want to be adequately compensated for the use of our intellectual property. To that end, we have made it clear to Qualcomm that we are open to discussions regarding the potential for licensing of our patent. The ball is in Qualcomm's court."

Today's ITC order is subject to Presidential review for a period of sixty days.

Additional Actions
In January 2007, a unanimous jury in San Diego federal court determined that Broadcom does not infringe two Qualcomm patents related to video compression. The judge in that case then decided that Qualcomm had waived its right to enforce the patents by failing to comply with its obligations to the applicable industry standards body. A hearing on the appropriate remedy for Qualcomm's conduct in the video compression case is set for June 25.

Separately, Broadcom recently filed a complaint against Qualcomm asserting unfair competition, fraud and breach of contract claims related to Qualcomm's abuse of the intellectual property rules of various industry standards setting bodies. The complaint alleges that Qualcomm has engaged in a pattern of misconduct across multiple technologies and multiple standards bodies, including those responsible for setting cellular, video, and mobile broadband standards, and that Qualcomm's misconduct includes improperly concealing its patents, reneging on licensing obligations, and exerting dominance through hidden affiliations. Additionally, last week Broadcom filed motions in San Diego federal court seeking sanctions against Qualcomm for failing to turn over thousands of documents in the January trial, a serious breach of Qualcomm's obligations in the litigation discovery process.

Broadcom has also joined five other leading mobile wireless technology companies in filing complaints with the European Commission alleging that Qualcomm has engaged in anticompetitive conduct in the licensing of its patents and the sale of its chipsets for mobile wireless devices and systems. The six companies assert that Qualcomm is violating EU competition law and failing to meet the commitments it made to international standards bodies to license its technology on fair, reasonable and non-discriminatory terms. Broadcom and other wireless technology companies have filed similar complaints before the Korean Fair Trade Commission. Broadcom is also appealing last year's dismissal of its federal antitrust lawsuit against Qualcomm. The dismissal, by a U.S. District Judge in New Jersey, was appealed to the U.S. Court of Appeals for the Third Circuit. The appeal is scheduled to be heard June 28.

While Broadcom continues to pursue its claims against Qualcomm regarding patent infringement, anti-competitive behavior and fraud issues, Qualcomm has either lost or withdrawn all of its claims against Broadcom.

The proceedings instituted by Broadcom against Qualcomm come at a time when the cellular phone industry is transitioning from providing voice-only services to offering customers an array of multimedia services, including a wide variety of audio, video, data and communications capabilities. Among the multimedia features now offered to consumers are TV, MP3 capabilities, personal video recording (PVR), VoIP, and the push-to-talk feature, which enables users to use their cellular phones like walkie-talkies. Consumer demand for these enhanced features is driving the next upgrade cycle in networks and cellular phones.

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