San Diego Federal Court Finds That Qualcomm Engaged in Aggravated Litigation Misconduct and Intentional Abuse of Industry Standards

(Top News, 10 Aug 2007)

A San Diego federal court has ruled that Qualcomm Inc. engaged in aggravated litigation misconduct and standards abuse with respect to two Qualcomm patents that relate to digital video technology. The court ruled that Qualcomm has thereby waived its rights to enforce all claims of the two patents and any continuations, continuations-in-part, divisions, reissues, or any other derivatives of those patents. The court also ordered Qualcomm to pay all of Broadcom Corp.'s reasonable attorneys' fees, court costs, expert witness fees, travel expenses and any other litigation costs reasonably incurred by Broadcom in defending the patent infringement case that led to the rulings.

Citing the misconduct of Qualcomm's employees, witnesses, and counsel before, during and after trial, the court found that "Broadcom proved this to be 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." According to the court, "Qualcomm closely monitored and participated in the development of the H.264 standard, all the while concealing the existence of at least two patents it believed were likely to be essential to the practice of the standard, until after the development was completed and the standard was published internationally. Then, without any prior letter, email, telephone call, or even a smoke signal, let alone attempt to license Broadcom, Qualcomm filed the instant lawsuit against Broadcom for infringement of the '104 and '767 patents."

"The court's findings indicate that this is one of the most serious and egregious cases of standards abuse and litigation misconduct that our industry has ever witnessed," said David J. Rosmann, Broadcom's Vice President of Intellectual Property Litigation. "While we are gratified with the court's ruling, we are also disappointed that Qualcomm chose to stoop to such tactics."

"Aggravated Litigation Abuse"
In a 54-page opinion, the court exhaustively chronicles Qualcomm's systematic misconduct from its early participation in the H.264 standards body in 2002 through the trial with Broadcom in early 2007. In commenting on Qualcomm's abuse, the ruling states, "Merely the reiteration of the chronology of events above and below tells the story of the gravity of the misconduct. The facts speak for themselves." The court went on to say:

"The track of this conduct following the adoption of the H.264 standard exposes aggravated litigation abuse. This abuse commenced with Qualcomm's abrupt commencement of suit, then continued (1) in discovery through Qualcomm's constant stonewalling, concealment, and repeated misrepresentations concerning corporate documentary evidence that would have revealed the fullness of the corporate plan; and (2) in trial through Qualcomm's presentation of numerous witnesses who steadfastly testified falsely denying even the awareness, let alone the participation in the JVT project and through the actions of Qualcomm's lead and co-counsel up to the time Qualcomm substituted new lead counsel, who adamantly denied the obvious and then, when the truth was discovered and exposed by document production, sequentially contended denial of relevance, justification, mistake, and finally non-awareness."

"Misconduct of Qualcomm, Its Employees, and Its Witnesses"
The court determined "by clear and convincing evidence that Qualcomm, its employees, and its witnesses actively organized and/or participated in a plan to profit heavily by (1) wrongfully concealing the patents-in-suit while participating in the JVT and then (2) actively hiding this concealment from the Court, the jury and opposing counsel during the present litigation."

The court also found that "Qualcomm's standard-setting misconduct with the JVT was indeed serious and suggests extremely sophisticated foul play on the part of Qualcomm and its employees."

"Misconduct of Qualcomm Counsel"
Additionally, the court determined "by clear and convincing evidence that Qualcomm counsel participated in an organized program of litigation misconduct and concealment throughout discovery, trial and post-trial before new counsel took over the lead role in the case on April 27, 2007" and further that Qualcomm and its witnesses knowingly attempted in trial to conceal evidence.

"The Carefully Orchestrated Plan and the Deadly Determination of Qualcomm"
The court concluded, "In light of all the above 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."

"The gross misconduct that came to light in this case just scratches the surface of Qualcomm's pervasive and systematic schemes to distort industry standards-setting processes and highlights the extreme lengths to which they will go to conceal their illegal behavior from regulatory and legal authorities," continued Rosmann. "Qualcomm's ongoing misconduct threatens competition and innovation in the cellular industry, and consequently we intend to aggressively pursue these other instances of Qualcomm's standards abuse."

Qualcomm filed the case in San Diego federal court in October 2005, alleging that Broadcom products complying with the H.264 digital video compression standard infringed two Qualcomm patents. In January 2007, a unanimous jury found that Broadcom did not infringe the patents, and further recommended that the court find that Qualcomm misled an industry standards-setting body known as the JVT by failing to disclose the patents related to the H.264 standard.

The court adopted the jury's finding regarding standards abuse in a March 2007 decision and held a hearing in June to determine the appropriate remedy for that abuse.

Broadcom has also filed a motion for sanctions for Qualcomm's litigation misconduct in the patent case. A hearing on that motion was conducted July 26, and the parties await a ruling.

Other Litigation
In April 2007 Broadcom filed a complaint in California state court 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.

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. A hearing was held in June, and the parties await a ruling in the appeal.

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.

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