Patent Strategy Cross- licensing

Marc S. Adler2009 Advanced Licensing Institute at

Pierce LawJanuary 2009

A patent and the right to exclude

United States Constitution Article 1 Section 8The Congress shall have Power… to promote the progress

of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.

========A patent grants the owner the right to exclude others from

practicing the invention without authorization, but it doesn’t grant the patent owner the right to make, use or sell the invention.

Your inventor can obtain a patent but not have the right to practice that invention!

Remedies for Patent InfringementThe Patent Statute 35 USC§281. Remedy for infringement of patent

A patentee shall have remedy by civil action for infringement of his patent 35 U.S.C. §283 Injunction.

The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

§284. DamagesUpon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed.

No automatic right to an injunctionEBAY INC. ET AL. v. MERC EXCHANGE, L. L. C. 547 U.S. 388 (2006)CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

The traditional four-factor test applied by courts of equity when considering whether to award permanent injunctive relief to a prevailing plaintiff applies to disputes arising under the Patent Act.

That test requires a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury;(3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity

is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

The decision to grant or deny such relief is an act of equitable discretion by the district court, reviewable on appeal for abuse of discretion. These principles apply with equal force to Patent Act disputes. “[A] major departure from the long tradition of equity practice should not be lightly implied.” Weinberger v. Romero-Barcelo, 456 U. S. 305, 320. Nothing in the Act indicates such a departure.

Patent strategy• A patentee may seek to enforce its patent against those who make, use, sell or import

the claimed invention without authorization by instituting suit and seeking damages and possibly an injunction… but is litigation the only, or best way, maximize the value of a patentable invention?

• When might a patentee choose not litigate?Litigation is expensive & multi-party litigation is very expensiveLitigation risks the patent-potential infringers may already be deterredIf patentee can not meet 4 part injunctive relief test e.g. are damages

adequate to compensate for infringement ?If infringer has other business relationships with patentee

e.g. customer/potential customer, supplierIf patentee’s business model favors expanding use of invention beyond

patentees commercial product or process ( new use) or in a geography where the patentee doesn’t supply patented product and infringer does.If infringer owns other patents that block desired activities of patentee.If infringer is doing research of interest to patentee Potential problems with jurisdiction and venue

Cross license Defined • In patent law, a cross-licensing agreement is an agreement in which two (or more) parties grant a

license to each other for the exploitation of the subject matter claimed in one or more of the patents each owns.

Each cross license is between two parties.• Cross license is often royalty free and unlimited in terms of ability to make, use and sell. • Cross license can be for one or more patents• Cross license may be royalty bearing and/or limited to field of use and/or geography• Cross license may contain “grant-back” provision to future patented improvement inventions of

either or both parties• Cross license can include unpatented know how, trademarks and copyrights

• What is a patent pool?• A Patent pool is a (cross) license among several (>2) patent owners in which each party licenses

identified patents into pool for use by all pool members : patent pools have antitrust considerations.

• Standards setting organizations utilize patent pool cross license agreements.

Patent strategyCross licensing Considerations

Some reasons for entering into a Cross license

Maintain or create new business alliancesMinimize litigation expensesReduce existing royalty payments Proactively eliminate patent barriers to practiceAccelerate R&D through joint research and developmentSettle existing litigationParticipate in new technology standards and patent pools

Preparations for cross licensingStrategic issues and actions for patent counsel before licensing Develop patent portfolio : Can’t cross license if don’t have patents others need

Define Technology roadmap : Can’t get where you want if don’t know where you are

Create a defensive Patent strategy : For your new products and processes, and possible technical/ commercial alternatives

Create an offensive patent strategy : Know the competitive patent landscapeWhere are they and where are they going?Obtain patents in path of third party patents.

Understand all potential application of potential license partner’s other patents to your other businesses: no surprises

Understand all existing contracts (licenses) with competitors/suppliers: license negotiation may open door to non- patent business arrangements

Preparations for Cross licensing

Preparations: current patent portfolio What is your current patent position : it’s not just how many patents but what each claims What patents do you have- what do they cover, what patents do others have, and what’s next

Your existing patents , applications, new research disclosures, plans

Analyzing the patent map : yours and competition Patent scope and validity : :key terms defined; are your patents valid?

Include published pending applications and prosecution status ww Foreign filing coverage- gaps

Current licenses in- scope and term

Third party patents , publications, applicationCompetitors/universities/ suppliers/ customers by date and trendIdentify complementary and potential blocking patents and applications:

opportunities to oppose/be opposed/interferences

Assess design around possibilities & offensive improvement patent filings

Brainstorming in the “White space” : potentially open patent areas: inclusive teamsChallenge Basic assumptions/conventional wisdom and identify disruptive technologies

The Future StateFuture Technology road map

What new technology is needed: Is there a defined performance target and time window?

Define the enabling next generation technology desired patent claims : make, use and /or sell

Do you plan to manufacture and supply: product/processCommercialization introduction sequence :product and geographyAnalyze your supply chain/ distribution/ direct sales vs. agents/customersWhen will next technology be commercialized : miss by a day- wait years for next opportunityPlanned obsolescence: plan and execute for multi- generation product improvementsWorst case scenarios : assumptions/ disruptive technologies, etc.

Exclusive business model• Business desires worldwide exclusivity

– Objective No competition and no license in or out anywhere– Patent strategy build complete walls around basic invention

• Patent commercial path and all alternatives• Know-how and trade secret protections :

contracts & internal procedures– Remove all potentially blocking third party patent applications :

by re-exam / opposition/ nullity/opinions– License in only as needed to remove blocking patents – License out : only as last resort e.g. to settle litigation

• Field of use or geography limited• No grant backs to improvements

Collaboration modelAccelerate entry into new market or Access new technology

Identify potential partner based on:technology strength : specific patents

customer/supply chain relationships geographyOther factors to consider:

Overall Business to business relationshipExisting licenses with potential partnerOther contracts with potential partnerWho will do what : make/use/sell and where

Acquisition or Exit strategy model Cross licensing as strategic element to establish relationship with another

as part of :Acquisition plan

Divestiture plan

Getting to know others strengths and weaknessesHow they do things : management and technical resourcesHow they value IP: corporate cultureHow they manage risk

Due diligence can start years before contract negotiation

Examples

Cross license to reduce royalties• Example A takes a non exclusive, 5% royalty bearing license under

B’s patents to enter market with new product• 5 years later, A’s success leads to 10million/yr royalty payments to B• A wants to reduce royalty payments to B• A studies B’s patents- identifies trend and possible improvements• A files new patents in B’s technical trajectory• A contacts B to determine interest in A’s new patents

– B less likely to file a declaratory judgment action vs. A– B interested in discussing a license under A’s patents or applications

• A agrees with B to license B under A’s new improvement patents/applications and to covert initial B to A license into a cross license at same or lower royalty rate

• E.g. A continues to pay B 10 million/yr - offset by B’s payment to A of 2 million/yr – much less than cost for A’s new patents

Example

Cross license in joint R&D• A makes a product : B is intended customer• B has patents and know- how on use of A’s product in end use application• A’s current product not 100% suitable for B for reasons known to B but not A• B not completely familiar with how to make A’s product• B would like to buy A’s product if made suitable for end use but doesn’t want to

do R&D on A’s product• A and B enter into 18 month joint development agreement (JDA) for optimization

of A’s product for B’s application• A to own all patents resulting from JDA relating to product composition and

manufacture; B to own all patents relating to end use.• A and B agree to deal exclusively with each other for product in end use in US for 2

years : A to make product only for B ; B to sell into end use• A licenses B to make, use and sell A’s product outside US now and in Japan in year

3 for x% royalty• B licenses A to make, use and sell modified A under B’s end use patents in Europe

and Latin America now and China in year 3 for x % royalty• Both parties agree to non exclusive royalty free x license ww after year 3

Cross license to settle disputes

• A and B have a dispute regarding B’s patent(s)• B believes A is infringing • A believes B’s claim construction is incorrect and

A doesn’t infringe e.g.B’s patent obvious• B institutes suit vs. A• A has patents that it believes B might be

infringing• A and B settle dispute by agreeing to cross license

each other

Cross licensing in Standards setting• To speed the adoption of an industry standard where

no one party has complete patent protection for all elements of new standard

• Parties submit their relevant patents to a pool and agree that members of pool have right to use these patents in developing their products/processes in conformity with the standard

• Standard setting body determines which patents are essential for the pool

• Essentially patent pool operates as a crosslicense • Patent pools involving competitors subject to

antritrust scrutiny

Cross licensing in Standards setting situation

• What is meant by standardization and standards?• Standardization is the process of establishing a technical standard, e.g.

specification, test method , definition procedure or process, etc.• Objective :Standards created through standards organizations lead to improved

product quality, ensured interoperability of competitors’ products, and provide a technological baseline for future research and product development

• Formal standard setting through standards organizations has numerous benefits for consumers including increased innovation, multiple market participants, reduced production costs, and the efficiency effects of product interchangeability.

• The existence of a published standard does not necessarily imply that it is useful or correct. Just because an item is stamped with a standard number does not, by itself, indicate that the item is fit for any particular use. The people who use the item or service (engineers, trade unions, etc) or specify it (building codes, government, industry, etc) have the responsibility to consider the available standards, specify the correct one, enforce compliance, and use the item correctly. Validation of suitability is necessary.

Standards

• May be de facto or de jureDe facto standards means they are followed by informal convention or dominant usage.De jure standards which are part of legally binding contracts, laws or regulations.

• National Standards Body (NSBs) may be either public or private sector organizations, or combinations of the two.

Types of standards

• There are at least four levels of standardization: compatibility, interchangeability, commonality and

reference. Standardization processes create compatibility,

similarity, measurement and symbol standards.

Standards Development• Standards Developing Organization (SDO) generally refers to an

industry or sector based standards organization which develops and publishes industry specific standards.

• When an organization develops standards which may be used openly, it is common to have formal rules published regarding the process. These may include:

Who is allowed to vote and have input on new or revised standards What is the formal step-by-step process How are bias and commercial interests handled How are negative votes or ballots handled What type of consensus is required, etc.

Example: International Telecommunications Union (ITU)

Since 1865, the telecommunications industry has depended on the ITU( a specialized agency of the United Nations) to establish the telecommunications standards that have been adopted worldwide.

The ITU has created numerous telecommunications standards including telegraph specifications, allocation of telephone numbers, interference protection, and protocols for a variety of communications technologies.

Standards Setting Organizations (SSO)or consortia

• Ever-quickening pace of technology evolution has affected the way new standards are proposed, developed and implemented.

• A new class of standards setters are the industry consortia or Standards Setting Organization (SSO).

• One example is the World Wide Web Consortium (W3C) whose standards for HTML, CSS, and XML are used universally throughout the world.

• There are also community-driven associations such as the Internet Engineering Task Force (IETF), a world-wide network of volunteers who collaborate to set standards for lower level software solutions.

“Open” Standards• An open standard is a standard that is publicly available and has various rights to use associated with it.

The term "open" is usually restricted to royalty-free technologies while the term "standard" is sometimes restricted to technologies approved by formalized committees that are open to participation by all interested parties and operate on a consensus basis.

• The definitions of the term "open standard" used by academics, the European Union and some of its member governments or parliaments preclude open standards requiring fees for use.

• On the standard organization side, the W3C ensures that its specifications can be implemented on a Royalty-Free (RF) basis.

• Many definitions of the term "standard” and open standards may permit patent holders to impose "reasonable and non-discriminatory" royalty fees and other licensing terms on implementers and/or users of the standard.

• The term "open standard" is sometimes coupled with "open source" with the idea that a standard is not truly open if it does not have a complete free/open source reference implementation available.

• Open standards which specify formats are sometimes referred to as open formats.

• Many specifications that are sometimes referred to as standards are proprietary and only available under restrictive contract terms (if they can be obtained at all) from the organization that owns the copyright on the specification. As such these specifications are not fully Open.

Open Standards: ITU definition• "Open Standards" are standards made available to the general public and are developed (or

approved) and maintained via a collaborative and consensus driven process.

• Elements of "Open Standards" include, but are not limited to:• Collaborative process – voluntary and market driven development (or approval) following a

transparent consensus driven process that is reasonably open to all interested parties.• Reasonably balanced – ensures that the process is not dominated by any one interest group.• Due process - includes consideration of and response to comments by interested parties.• Intellectual property rights (IPRs) – IPRs essential to implement the standard to be licensed to all

applicants on a worldwide, non-discriminatory basis, either (1) for free and under other reasonable terms and conditions or (2) on reasonable terms and conditions (which may include monetary compensation). Negotiations are left to the parties concerned and are performed outside the SDO.

• Quality and level of detail – sufficient to permit the development of a variety of competing implementations of interoperable products or services. Standardized interfaces are not hidden, or controlled other than by the SDO promulgating the standard.

• Publicly available – easily available for implementation and use, at a reasonable price. Publication of the text of a standard by others is permitted only with the prior approval of the SDO.

Other Open Standards Definitions• Bruce Perens: open standards expert lists a set of principles that he believes must

be met by an open standard:– Availability: Open Standards are available for all to read and implement.– Maximize End-User Choice: Open Standards create a fair, competitive market for

implementations of the standard. They do not lock the customer in to a particular vendor or group.

– No Royalty: Open Standards are free for all to implement, with no royalty or fee. Certification of compliance by the standards organization may involve a fee.

– No Discrimination: Open Standards and the organizations that administer them do not favor one implementor over another for any reason other than the technical standards compliance of a vendor’s implementation. Certification organizations must provide a path for low and zero-cost implementations to be validated, but may also provide enhanced certification services.

– Extension or Subset: Implementations of Open Standards may be extended, or offered in subset form. However, certification organizations may decline to certify subset implementations, and may place requirements upon extensions ..

– Predatory Practices: Open Standards may employ license terms that protect against subversion of the standard by embrace-and-extend tactics. The licenses attached to the standard may require the publication of reference information for extensions, and a license for all others to create, distribute, and sell software that is compatible with the extensions. An Open Standard may not otherwise prohibit extensions.

Microsoft’s definition

• Vijay Kapoor,Microsoft’s national technology officer, defines what open standards are as follows:

• "Let's look at what an open standard means: 'open' refers to it being royalty-free, while 'standard' means a technology approved by formalised committees that are open to participation by all interested parties and operate on a consensus basis. An open standard is publicly available, and developed, approved and maintained via a collaborative and consensus driven process.”

Open Source Initiative’s Definition• Open Source Initiative's definition• An "open standard" must not prohibit conforming implementations in open source software.• To comply with the Open Standards Requirement, an "open standard" must satisfy the following

criteria. If an "open standard" does not meet these criteria, it will be discriminating against open source developers.

• No Intentional Secrets: The standard MUST NOT withhold any detail necessary for interoperable implementation. As flaws are inevitable, the standard MUST define a process for fixing flaws identified during implementation and interoperability testing and to incorporate said changes into a revised version or superseding version of the standard to be released under terms that do not violate the OSR.

• Availability: The standard MUST be freely and publicly available (e.g., from a stable web site) under royalty-free terms at reasonable and non-discriminatory cost.

• Patents: All patents essential to implementation of the standard MUST:– be licensed under royalty-free terms for unrestricted use, or– be covered by a promise of non-assertion when practiced by open source software

• No Agreements: There MUST NOT be any requirement for execution of a license agreement, NDA, grant, click-through, or any other form of paperwork to deploy conforming implementations of the standard.

• No OSR-Incompatible Dependencies: Implementation of the standard MUST NOT require any other technology that fails to meet the criteria of this Requirement.

World Wide Web definition

• World Wide Web Consortium (W3C) defines the following set of requirements that the provider of a technical specification must follow for that specification to qualify as an Open Standard.

• transparency (due process is public, and all technical discussions, meeting minutes, are archived and referenced in decision making)

• relevance (new standardization is started upon due analysis of the market needs, including requirements phase, e.g. accessibility, multi-linguism)

• openness (anybody can participate, and everybody does: industry, individual, public, government bodies, academia, on a worldwide scale)

• impartiality and consensus (guaranteed fairness by the process and the neutral hosting of the W3C organization, with equal weight for each participant)

• availability (free access to the standard text, both during development and at final stage, translations, and clear IPR rules for implementation, allowing open source development in the case of Web technologies)

• maintenance (ongoing process for testing, errata, revision, permanent access)

Digital Standards Organization definition

• Digital Standards Organization (DIGISTAN) states that "an open standard must be aimed at creating unrestricted competition between vendors and unrestricted choice for users”

• Definition "open standard" (or "free and open standard") is "a published specification that is immune to vendor capture at all stages in its life-cycle”.:

• "The standard is adopted and will be maintained by a not-for-profit organization, and its ongoing development occurs on the basis of an open decision-making procedure available to all interested parties.

• The standard has been published and the standard specification document is available freely. It must be permissible to all to copy, distribute, and use it freely.

• The patents possibly present on (parts of) the standard are made irrevocably available on a royalty-free basis.• There are no constraints on the re-use of the standard.• A key defining property is that an open standard is immune to vendor capture at all stages in its life-cycle.

Immunity from vendor capture makes it possible to improve upon, trust, and extend an open standard over time.

• “Vendor capture". "Many groups and individuals have provided definitions for 'open standard' that reflect their economic interests in the standards process. We see that the fundamental conflict is between vendors who seek to capture markets and raise costs, and the market at large, which seeks freedom and lower costs... Vendors work hard to turn open standards into franchise standards. They work to change the statutory language so they can cloak franchise standards in the sheep's clothing of 'open standard'. A robust definition of "free and open standard" must thus take into account the direct economic conflict between vendors and the market at large.”

Patents and StandardsReasonable and non discriminatory

royalties • A controversy arose about using reasonable and non-discriminatory (RAND) licensing for the use of patented

technology in web standards .

• Some experts and associations have argued that the use of patents restricts who can implement a standard to those able or willing to pay for the use of the patented technology. The requirement to pay some small amount per user, is often an insurmountable problem for free/open source software implementations which can be redistributed by anyone. Royalty free (RF) licensing is generally the only possible license for free/open source software implementations.

• Version 3 of the GNU General Public License includes a section that enjoins anyone who distributes a program released under the GPL from enforcing patents on subsequent users of the software or derivative works.

• One result of this controversy was that many governments (including the Danish, French and Spanish governments singly and the EU collectively) specifically affirmed that "open standards" required royalty-free licenses. Some standards organizations, such as the W3C, modified their processes to essentially only permit royalty-free licensing. Others allow committees to operate either on a RAND basis or a royalty-free basis, but OASIS does say to grant "open standards" when they are not royalty-free.

• Patents for software are currently enforceable in the US but not in the EU. The European Patent Convention Article 52 paragraph (2)(c) expressly prohibits algorithms, business methods and software from being covered by patents.

Patents and standards• A standards body and its associated processes cannot force a patent holder to give

up its right to charge license fees, especially if the company concerned is not a member of the standards body and unconstrained by any rules that were set during the standards development process.

• This may discourage some standards bodies from adopting an "open" approach, fearing that they will lose out if their members are more constrained than non-members.

• Few bodies will carry out (or require their members to carry out) a full patent search.

• The only sanctions a standards body can apply on a non-member when patent licensing is demanded is to cancel the standard, try to rework around it, or work to invalidate the patent.

• Some standards bodies require as a condition to joining the body or working group that the use of required patents be granted under a royalty-free, and this is generally considered an enforceable provision.

Rambus and Standards• Rambus (RMBS) is a company that derives the majority of

its revenue by licensing patents for chip interfaces to its customers.

• With no chip production facilities of its own, Rambus conducts business by filing patents and then licensing technologies. For example, Nintendo licensed Rambus memory for the Nintendo 64, as did Sony for use in the PlayStation 2. However, the most famous agreement was with Intel Corporation in 1996, under which Intel became obligated to use RDRAM as the primary memory technology for all Intel platforms until 2002.

• AMD, Elpida, Infineon, Intel, Matsushita, NECEL, Renesas, Sony, and Toshiba have taken licenses to Rambus patents for use in their own products.

RAMBUS : case history of a company that got in trouble because of its

behavior in standard setting• In the early 1990s, Rambus was invited to join the JEDEC the leading standards setting organization

for semiconductors.• Rambus had been trying to interest memory manufacturers in licensing their proprietary memory

interface, and numerous companies had signed non-disclosure agreements to view Rambus' technical data. A memo that Infineon, a member of JDEC, wrote after a meeting with representatives of other manufacturers surfaced during litigation , it included the following: “[O]ne day all computers will be built this way, but hopefully without the royalties going to Rambus”

Infinion continued with a strategy discussion for reducing or eliminating royalties to be paid to Rambus.

As Rambus continued its participation in JEDEC, it became apparent that Rambus was not prepared to agree to JEDEC’s patent policy requiring owners of patents included in a standard to agree to license that technology under terms that are ‘reasonable and non-discriminatory’ and Rambus withdrew from the organization in 1995.

Memos from Rambus at that time showed Rambus was tailoring new patent applications to cover features of SDRAM being discussed, which were public knowledge (JEDEC meetings were not considered secret)

Rambus litigation orHow not to participate in Standards

setting organizations• In 2000, Rambus began filing lawsuits against the largest memory

manufacturers, claiming that Rambus owned SDRAM and DDR technology.

• Seven manufacturers, including Samsung, quickly settled with Rambus and agreed to pay royalties on SDRAM and DDR memory.

• When Rambus sued Infineon Technologies, however, Micron and Hynix joined forces with Infineon to fight the lawsuit, countersuing with claims of fraud. .

• In May 2001, Rambus was found guilty of fraud., and all infringement claims against memory manufacturers were dismissed.

• In January 2003, the Federal Court of Appeals overturned the fraud verdict of the jury trial, issued a new claims construction, and remanded the case back to Virginia for re-trial on infringement. .

Rambus continued• In January 2005, Rambus filed four more lawsuits against memory

chip makers claiming that other chips contain Rambus technology. • In March 2005, Rambus had its claim for patent infringements

against Infineon dismissed. Rambus was accused of shredding key documents prior to court hearings, the judge agreed and dismissed Rambus' case against Infineon. This sent Rambus to the settlement table with Infineon. Infineon agreed to pay Rambus quarterly license fees and in return, both companies ceased all litigation against each other

• Currently, cases involving Micron and Hynix remain in court. • In June 2005, Rambus also sued one of its strongest proponents,

Samsung, the world's largest memory manufacturer, and terminated Samsung's license. Samsung had promoted Rambus's RDRAM and currently remains a licensee of Rambus's XDR memory.

Rambus and the FTC• In May 2002, the United Stated Federal Trade Commission (FTC) filed

charges against Rambus for antitrust violations. • Specifically, the FTC complaint asserted that through the use of patent

continuations and divisionals, Rambus pursued a strategy of expanding the scope of its patent claims to encompass the emerging SDRAM standard.

• The FTC's antitrust allegations against Rambus went to trial in the summer of 2003 after the organization formally accused Rambus of anti-competitive behavior the previous June, itself the result of an investigation launched in May 2002 at the behest of the memory manufacturers.

• The FTC's chief administrative-law judge, McGuire, dismissed the antitrust claims against Rambus in 2004, saying that the memory industry had no reasonable alternatives to Rambus technology and was aware of the potential scope of Rambus patent rights, according to the company. Soon after, FTC investigators filed a brief to appeal against that ruling.

Rambus and the FTC• In 2004, Infineon, Hynix and Samsung plead guilty to

price-fixing in an attempt to manipulate the market spot-price of all major DRAM types. Each paid >100 million in fines. A fourth company, Elpida also pled guilty and paid a fine of 85 million dollars. It is widely believed that the evidence collected during the FTC's investigation of Rambus led directly to the guilty pleas.

• On August 2, 2006, the Federal Trade Commission overturned McGuire's ruling, stating that Rambus illegally monopolized the memory industry under section 2 of the Sherman Antitrust Act, and also practiced deception that violated section 5 of the Federal Trade Commission Act.

Rambus and the FTC• February 5, 2007, U.S. Federal Trade Commission issued a ruling

that limits maximum royalties that Rambus may demand from manufacturers of dynamic random access memory (DRAM), which was set to 0.5% for DDR SDRAM for 3 years from the date the Commission’s Order is issued and then going to 0; while SDRAM's maximum royalty was set to 0.25%. The Commission claimed that halving the DDR SDRAM rate for SDRAM would reflect the fact that while DDR SDRAM utilizes four of the relevant Rambus technologies, SDRAM uses only two. In addition to collecting fees for DRAM chips, Rambus will also be able to receive 0.5% and 1.0% royalties for SDRAM and DDR SDRAM memory controllers or other non-memory chip components respectively. However, the ruling did not prohibit Rambus from collecting royalties on products based on (G)DDR2 SDRAM and other JEDEC post-DDR memory standards. Rambus has appealed the FTC Opinion/Remedy and awaits a court date for the appeal.

Rambus• On March 26, 2008, the jury of the U.S. District Court in San Jose

determined that Rambus acted properly while a member of the standard-setting organization JEDEC during its participating in the early 1990s, finding that the memory manufacturers did not meet their burden of proving antitrust and fraud claims.

• On April 22, 2008, the DC Court of Appeals overturned the FTC reversal of McGuire's 2004 ruling, saying that the FTC had not established that Rambus had harmed the competition.

• On April 29, 2008, the Court of Appeals for the Federal Circuit issued a ruling vacating the order of the United States District Court for the Eastern District of Virginia, saying the case with Samsung should be dismissed, saying Judge Robert E. Payne's findings critical of Rambus, were on a case that had already been settled, and thus had no legal standing.

Rambus Lesson• Participants in any patent pool or standards setting

organization may benefit from participating and cross licensing relevant patents, but they need to be very careful of the terms and conditions of the standards setting organization, their representatives must know what technologies patents and applications their company is seeking and how they could be used in the standards setting process. They must be very careful not to attempt to take any advantage of their knowledge of where the standard is going as by filing on new inventions without prompt and full disclosure to the standards setting organization or withholding relevant patents from the standards setting organization they participate in.

, .

QUALCOMM INCORPORATED, Plaintiff-Appellant v.BROADCOM CORPORATION

2008 WL 5047675 (Fed. Cir. Dec. 1, 2008).

• Background: Patent owner filed action against competitor alleging infringement of patents relating to video compression technology. The United States District Court for the Southern District of California granted judgment for competitor. Owner appealed.

• • Holdings: The Court of Appeals Prost, Circuit Judge, held that:• (1) owner had been required to disclose its patents to joint video team (JVT) standard setting

organization (SSO) even if it did not submit technical proposal;• (2) JVT intellectual property right (IPR) policies, that referred to IPR information “associated

with” any standardization proposal or “affecting the use” of JVT work, required JVT participants to disclose patents that “reasonably might be necessary” to practice JVT standard;

• (3) clear and convincing evidence existed that patents in suit relating to video compression technology “reasonably might be necessary” to practice standard for video compression;

• (4) implied waiver could be applied to owner's intentional organization of plan to shield its patents from consideration by JVT in face of duty to speak;

• (5) competitor could assert equitable estoppel defense on appeal even if its pleadings may have been deficient in certain respects;

• (6) scope of remedy of unenforceability had to be limited to products that were complaint to video compression standard; and

• (7) litigation misconduct was sufficient standing alone to support exceptional case determination.

Qualcomm case• In the present case, the district court considered whether Qualcomm had a duty to disclose the '104 and ’767

Patents to the JVT prior to the release of the H.264 standard. The district court first analyzed the written JVT IPR policies, and concluded that,

• “[s]imilar to Rambus, the JVT IPR Policy and Guidelines provide no express requirement to disclose patents unless a member submits a technical proposal.”Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958, 2007 U.S. Dist. LEXIS 28211, at *34 (S.D.Cal. Mar. 21, 2007) (“Waiver Order ”). The court continued, “[i]nstead, ‘members/experts are encouraged to disclose as soon as possible IPR information (of their own or anyone else's) associated with any standardization proposal (of their own or anyone else's). Such information should be provided on a best effort basis.’“ Id. (quoting JVT ToR subsection 3.2). The district court next considered the JVT participants' treatment of the JVT IPR policies. The district court stated that, “[s]imilar to Rambus, despite the language of the IPR Policy merely encouraging participants to disclose patents to the JVT, the issue before the Court is whether JVT participants treated the IPR policy as imposing a duty of disclosure.”Id. at .The district court concluded, like Rambus, that JVT members treated the JVT IPR policies as imposing a duty of disclosure on participants apart from the submission of technical proposals. In order to determine whether Qualcomm breached its disclosure duty, the district court considered whether the '104 and '767 Patents “reasonably might be necessary” to practice the H.264 standard. Finally, having concluded that the asserted patents fell within the “reasonably might be necessary” standard, the district court determined that the proper remedy for said breach was to order the patents unenforceable against the world.

• • *5 This appeal requires that we address the following questions relating to the district court's judgment: (1)

Existence of Disclosure Duty: Did Qualcomm, as a participant in the JVT, have a duty to disclose patents to the JVT prior to the release of the H.264 standard in May 2003; (2) Scope of Disclosure Duty: If so, what was the scope of its disclosure duty; (3) Breach: Did Qualcomm breach its disclosure duty by failing to disclose the '104 and '767 Patents; and (4) Remedy: If so, was it within the district court's equitable authority to enter an unenforceability remedy based on the equitable defense of waiverin the SSO context?

•

• it is clear from a review of the JVT IPR policies that identification of IPR by JVT participants is critical to the development of an effective industry standard. While more advanced profiles of the JVT standard may include patents on a reasonable terms and conditions basis, the goal of the JVT was to develop a royalty free “baseline” profile. See J.A. 8176 (“The JVT codec should have a simple royalty free ‘baseline’ profile.”). The district court recognized that “[t]he non-disclosure of a participant's core patents in such a program could put the participant in a position in which it could literally block the use of the published H.264 standard by any company unless the company obtained a separate license from the participant.”Waiver Order at *60. As previously mentioned, however, the district court determined that the written JVT IPR policies “provide no express requirement to disclose patents unless a member submits a technical proposal.

• The rules of the JVT parent organizations provide that an ITU-T and ISO/IEC “Patent Statement and Licensing Declaration” should be submitted separately to the ITU-T and ISO/IEC prior to final approval of a standard created by the JVT. Remedy Order at 1219. The ITU-T and ISO/IEC patent policy provides that “any party participating in the work of the ITU, ISO or IEC should” identify patents “embodied fully or partly” in a standard under consideration. Id. As the district court noted, this language applies to Qualcomm as a “party participating in the work of the ITU, ISO or IEC.”FN3Id. In light of the foregoing, we agree with the district court that JVT participants also had to disclose patents prior to final approval of a standard under the rules of the JVT parent organizations.FN4

• • In sum, we conclude that Qualcomm, as a participant in the JVT prior to the release of the H.264 standard

did have IPR disclosure obligations, as discussed above, under the written policies of both the JVT and its parent organizations.

• Having concluded that the proper scope of the disclosure duty requires JVT participants to disclose patents that “reasonably might be necessary” to practice the H.264 standard, we next address the question of whether Qualcomm breached this disclosure duty. It is undisputed that Qualcomm did not disclose the '104 and '767 Patents to the JVT prior to the release of the H.264 standard. Thus, Qualcomm breached its disclosure duty if, as the district court found by clear and convincing evidence, the '104 and '767 Patents “reasonably might be necessary” to practice the H.264 standard.