Another confusing split decision in Broadcom / Qualcomm spat

Perhaps one of the sternest reprimands of a US corporation in history, handed down last year, may be chopped in two and watered down as a result of a federal appeals court decision yesterday.

A decision rendered by the Federal Circuit Court of Appeals late yesterday in the perpetual intellectual property dispute between Broadcom and Qualcomm, around which much of the health and well-being of the entire semiconductor industry now directly depends, once again has both sides claiming victory this morning.

However, technically, the news cannot be good for Qualcomm, which now has been completely stripped of its rights to enforce two key patents in the US. Complete text of the Appeals Court's decision had not been released by press time, though according to accounts from both Reuters and Bloomberg's Susan Decker, the judges upheld the part of Federal Judge Rudi Brewster's stinging decision from August 2007. In one of the most vociferous rebukes of a US corporation ever seen, Judge Brewster had determined that Qualcomm forfeited its right to claim ownership of, and seek royalties for, two patents for international standards for H.264 video encoding, when it failed to disclose its work on those standards to the Joint Video Task Force (JVT) of which it is a member.

Broadcom's contention has been that Qualcomm intentionally masked its ongoing work on the so-called '104 and '767 patents from JVT so that it could suddenly send royalties bills to Broadcom and others who would later adopt those standards, thinking they were open by virtue of having been offered up as international standards. Judge Brewster clearly agreed with that contention.

But that part was not the part that the Appeals Court upheld yesterday. Instead, it would appear, by virtue of Judge Brewster having been so vocal in his rebuke of Qualcomm, that he apparently misinterpreted the meaning of a previous Federal Circuit decision in another case -- one that Brewster had cited as precedent.

Specifically, the judge had ruled that Qualcomm's judicial misconduct -- quite literally, in his stated opinion, lying directly to the court -- effectively voided its right to claim the enforceability of those H.264 patents. "The Federal Circuit has upheld the unenforceability of a patent to the world due to inequitable conduct before the [US Patent and Trademark Office] even when pled as an affirmative defense by the defendant."

Apparently, according to reports, it's the "to the world" part of that statement which the Appeals Court believes is in error. Yesterday, the Federal Circuit voided that part of Brewster's decision, remanding it back to that lower court where it could be rephrased.

But that key phrase "to the world" was central to Broadcom's argument, in that the JVT is an international standards body, and that Qualcomm, it claims, misused that organization as a way to shield itself from visibility to the world before revealing itself to the world, and seeking royalties or even liability damages throughout the world. If that phrase gets thrown out, some of Broadcom's argument could get tossed along with it...which is why some analysts are concluding yesterday's decision really was a victory for Qualcomm.