Appeals court reverses ITC in Broadcom-Qualcomm spat: ‘Induced infringement’ issue goes back to ITC

Qualcomm Inc. last week won an appeal of an International Trade Commission ruling issued last year that banned the importation of 3G handsets containing a Qualcomm chip that the ITC found infringed on a battery-saving patent owned by Broadcom Corp.
The decision is the latest development in legal skirmishing between the two companies, which are competing to provide 3G baseband chips and license intellectual property to handset vendors.
The U.S. Court of Appeals for the Federal Circuit last week said it had vacated a finding by the ITC that Qualcomm had “induced” infringement by its customers of a Broadcom patent.
The Appeals Court, while upholding the validity of a Broadcom battery-saving patent in the case, said that the ITC used the wrong legal standard for determining whether Qualcomm had induced handset vendors as well as carriers to infringe the patent.
The appeals court said Broadcom had not named vendors and carriers – the downstream users in the case – in its complaint against Qualcomm and thus the ITC’s ban on importation of handsets by those parties was not appropriate. The ban was declared prior to last year’s holiday season, infusing efforts at resolution with urgency, but was stayed pending Qualcomm’s now-successful appeal.
The ITC has 45 days to file for a re-hearing before the Federal Circuit of Appeals. Or it can revisit the issue of “induced infringement,” according to Alex Rogers, senior VP for legal counsel at Qualcomm.
For its part, Broadcom said that its claim of “induced infringement” would ultimately be confirmed by the ITC.
One analyst firm said that the larger impact of the appeals court’s decision was that parties claiming downstream infringement would have to name those parties in future complaints. But naming customers or potential customers in a far-reaching patent-infringement case might be counter-productive to a plaintiff’s business, and thus in the future such actions would likely be self-limiting, according to attorney Blair Levin at Stifel Nicolaus.
The “downstream” parties included Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc. AT&T Mobility probably is included on that list but never publicly confirmed whether it had forged its own agreement with Broadcom to avoid the ITC ban.
Last year, Verizon Wireless agreed to pay Broadcom $6 per handset, PDA or data card sold after the ban’s effective date, up to $40 million per quarter, with a lifetime maximum payment of $200 million. The agreement covered patents beyond those involved in the ITC dispute and was characterized by Broadcom and Verizon Wireless’ parent company Verizon Communications Inc. as part of a “broad-based strategic alliance” between the two companies that included doing business in Bluetooth, WLAN solutions, optical network solutions, multimedia over coaxial cable devices, GPS technology, DSL and fiber network components.
The agreement, which appeared to reflect Broadcom’s goal of garnering new business, is largely confidential. But according to Nancy Stark, executive director of corporate communications at Verizon Wireless, last week’s appeals court decision would not affect the agreement or its royalty payments.
Sprint Nextel employed a “design-around” solution from Qualcomm meant to circumvent the infringement finding, which has been challenged by Broadcom. If Qualcomm had lost its appeal and the ban took effect, T-Mobile USA would not be able to import 3G handsets just as it ramps up its 3G network.
Article updated Oct. 17, 2008, adding comments from Verizon Wireless.