Third Circuit: Patentee’s intentional falsehood to standards body can support antitrust claimSeptember 5, 2007

Maybe it's time for Qualcomm to rethink how it approaches standard-setting organizations. In a decision today, the Third Circuit reversed in part a district court's dismissal of rival Broadcom's antitrust claims, finding that Broadcom had adequately pleaded actions by Qualcomm that, if true, would constitute an antitrust violation.

The facts of the case are similar to those in a recent case in California federal court (blogged about here), in that they deal with Qualcomm's interactions with standard-setting groups. In this case, Qualcomm allegedly made intentional misrepresentations to a standard-setting group that led to a standard being adopted that arguably infringed Qualcomm patents. Once the standard was adopted, Qualcomm changed its stance regarding the terms on which it would license the patented technology. As stated by the court (after describing other cases of similar conduct where antitrust violations were found):

We hold that (1) in a consensus-oriented private standardsetting environment, (2) a patent holder’s intentionally false promise to license essential proprietary technology on FRAND [Fair, Reasonable, And Non-Discriminatory] terms, (3) coupled with an SDO’s [Standards Determining Organization's] reliance on that promise when including the technology in a standard, and (4) the patent holder’s subsequent breach of that promise, is actionable anticompetitive conduct. This holding follows directly from established principles of antitrust law and represents the emerging view of enforcement authorities and commentators, alike. Deception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer monopoly power on the patent holder.

As a result, if the allegations are true, Qualcomm could be subject to antitrust liability for these actions under § 2 of the Sherman Act for unlawful monopolization. The court also held that Broadcom stated a claim for attempted monopolization, but the dismissal of other claims was affirmed. All in all, it's been a bad month for Qualcomm in its legal wrangling with Broadcom.

To read the full decision in Broadcom Corp. v. Qualcomm Inc., click here.

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