It's been a rough week for Qualcomm. On Monday, the Bush administration let stand the ITC ruling barring import of mobile phones using certain Qualcomm chips unless a license fee is paid to Broadcom, a competing company who holds patents covering the power management technology used in the chips.
Also Monday, a federal judge in California found that Qualcomm had committed serious litigation misconduct in a second patent case against Broadcom, and ordered Qualcomm to pay all of Broadcom's attorney fees, costs, and expenses incurred in defending the suit, which could amount to roughly $10 million.
Details about the judge's findings and Qualcomm's apparent actions after the jump.
The patents at issue related to the H.264 video compression standard, used in a multitude of consumer products, including sattelite television receivers, video iPods, and HD-DVD and Blu-ray disc players. Earlier, a jury found Qualcomm's patents to be unenforceable and not infringed. After trial, however, was when the real fireworks began.
One of Broadcom's defenses was that Qualcomm had participated in the group, JVT, that ultimately determined that H.264 would be the standard adopted. If Qualcomm participated in that group, it would have had an obligation to disclose any patents or pending applications that would arguably cover the standard being developed, and the terms on which it would license such patents or applications. Qualcomm never disclosed any patents to the standards body, and during discovery steadfastly denied ever having participated in the group.
At least one Qualcomm employee's email address was listed on an email distribution list that was used by the standards body. During trial, counsel for Broadcom asked this employee whether she had received any emails from the standards group, and she stated that during preparation for her testimony, some such emails were pulled from her email archive that she was unsure whether they had been produced to Broadcom. This exchange took place during trial on January 24, and the emails were apparently discovered by Qualcomm's counsel on January 14.
The ensuing problems for Qualcomm are best described in the court's own words:
[A]t side bar on January 18, 2007, Qualcomm counsel, in an attempt to keep out of evidence a list of email addresses for a JVT ad hoc group that included the email address of Qualcomm employee Raveendran, represented to the Court, "Actually, there are no emails -- there are no emails." (Trial Tr., 91, Jan. 18, 2007.) He further stated, "there’s no evidence that any e-mail was actually sent to this list. This is just a list of e-mail . . . addresses. There’s no evidence of anything being sent." (Trial Tr., 92, Jan. 18, 2007.) These statements were made four days after Qualcomm counsel, while preparing Ms. Raveendran for her testimony, had stripped over fifty pages of emails regarding the JVT from her email archives.
Six days later on the morning of January 24, 2007, one of the last days of trial, Qualcomm counsel filed Qualcomm’s Motion for Judgment as a Matter of Law ("JMOL") Pursuant to Rule 52(c), in which they argued: Broadcom failed to show (1) that Ms. Raveendran ever received a single email related to this list, (2) that anyone on this list ever communicated regarding the H.264 standard, and (3) that the email list in question was even a JVT list at all.
. . .
After trial, on February 1, 2007, Qualcomm counsel finally admitted by telephone to Broadcom that "on January 14, 2007, attorneys for Qualcomm learned of an archive of emails [sent to this email list for the JVT ad hoc group] belonging to Viji Raveendran." (Doc. No. 543-2, Ex. E at 2.) Therefore, on January 14, four days before Qualcomm counsel argued to the Court that "there are no emails" and eight days before Qualcomm counsel argued that Broadcom had failed to prove "[Ms.] Raveendran had ever received a single email related to this list" in Qualcomm's JMOL, Qualcomm attorneys already knew that there were in fact emails and had pulled them from Ms. Raveendran's email archive. It is clear to the Court now, despite the attempts made by Qualcomm to minimize the significance of these twenty-one emails, that they were just the "tip of the iceberg," that over two hundred thousand more pages of emails and electronic documents were produced post-trial that indisputably demonstrate that Qualcomm participated in the JVT from as early as January 2002, that Qualcomm witnesses Irvine, Raveendran, Determan, 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. None of these emails or electronic documents were produced in discovery as requested by Broadcom in multiple requests for production and interrogatories.
The revelation that over 200,000 pages of additional documents existed was devastating, as many of those documents, accoriding to the court, evidenced that Qualcomm had indeed participated in the standards group. Because Qualcomm was under an obligation to disclose its patents that arguably covered the technology being considered, the court found that Qualcomm had waived its right to pursue its infringement claims.
The court also took Qualcomm to task for its behavior in connection with the standards body. Specifically, the court found that Qualcomm intentionally kept its two patents secret in an attempt to force those who eventually adopted the H.264 standard to take a license to its patents. This misconduct caused Qualcomm to lose its right to enforce not only the two patents at issue, but all related patents. As summarized by the court (internal citations omitted):
In light of all of 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 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.
The Federal Circuit has held that unenforceability of a patent due to inequitable conduct before the PTO extends to continuations and reissues of the original patent. While divisions of the original patent may not be unenforceable "where the claims are subsequently separated from those tainted by inequitable conduct . . . and where the issued claims have no relation to the omitted prior art," by analogizing misconduct before a standards setting body resulting in waiver to misconduct before the PTO resulting in inequitable conduct, this Court finds all claims of the '104 and '767 patents tainted by Qualcomm’s waiver and that any divisional, continuation, continuation-in-part, or reissue application of either patent would be similarly tainted.
Therefore, under the totality of evidence produced both before and after the jury verdict, by reason of Qualcomm's intentional and persistent insulation of their directly related IPR from the activities and the analyses of the JVT when they were obligated to reveal it, this Court FINDS, pursuant to Rambus, that Qualcomm has waived its rights to enforce the '104 and '767 patents and their continuations, continuations-in-part, divisions, reissues, or any other derivatives of either patent.
More instances of misconduct are detailed in the judge's order (available here), including apparently outright lies by Qualcomm 30(b)(6) deposition witnesses and abusive discovery tactics.
Not only are its patents unenforceable, but the judge also found the case "exceptional" pursuant to 35 U.S.C. § 285, and ordered Qualcomm to pay Broadcom's attorney fees and costs, which are estimated to be about $10 million. This case is a reminder for parties and lawyers to always be forthright and diligent in litigation: even if you don't believe you'll get caught, the truth will almost always surface, and the consequences for concealing the truth can be dire.
Update (8/15): The WSJ law blog is reporting that the magistrate judge has now ordered Qualcomm's litigation counsel to show cause why they should not be sanctioned for the discovery shenanigans described in the district judge's order. Also, Qualcomm's general counsel has resigned.