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Qualcomm Inc. v. Broadcom Corp.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA


November 20, 2006

QUALCOMM INCORPORATED, PLAINTIFF,
v.
BROADCOM CORPORATION, DEFENDANTS.

The opinion of the court was delivered by: Hon. Rudi M. Brewster United States Senior District Court Judge

ORDER GRANTING BROADCOM CORPORATION'S REQUEST FOR RECONSIDERATION BY DISTRICT COURT OF MAGISTRATE JUDGE'S RULING CONCERNING PRODUCTS IN DEVELOPMENT

I. INTRODUCTION

Before the Court is Defendant Broadcom Corporation's ("Broadcom") Request for Reconsideration of Magistrate Judge's Ruling Concerning Products in Development filed on October 27, 2006. Doc. No. 146. On November 3, 2006, the Court held a hearing on Broadcom's Request. Having reviewed the papers and oral arguments in favor and opposition thereto, the Court hereby GRANTS Broadcom's Request for Reconsideration.

On October 24, 2006, the Magistrate Judge granted Plaintiff Qualcomm Incorporated's ("Qualcomm") motion to compel discovery of Broadcom's fabricated and Field-Programmable Gate Array ("FPGA") prototype H.264 products ("October 24 Order"). Doc. No. 144. The main issue before this Court is whether Broadcom's development of the products at issue constitute "making" under 35 U.S.C. § 271(a)*fn1 and therefore is discoverable in this lawsuit. Parasitic to this main issue are the specific discovery and sanction rulings made by the Magistrate Judge in the October 24 Order. The Court finds that Broadcom's development of the products at issue here did not constitute "making" under 35 U.S.C. § 271(a) and is therefore not discoverable.

The Court accordingly REVERSES the Magistrate Judge's October 24 Order granting Qualcomm's motion to compel discovery of Broadcom's fabricated and FPGA prototype H.264 products and ordering Broadcom to pay all associated costs including Qualcomm's reasonable attorneys' fees. The Court REMANDS any outstanding or future discovery issues to be resolved by the Magistrate Judge in accordance with this Order.

II. BACKGROUND

Qualcomm filed the present suit against Broadcom for patent infringement on October 14, 2005. Doc. No. 1. On October 24, 2006, the Magistrate Judge granted Qualcomm's motion to compel discovery of Broadcom's fabricated and FPGA prototype H.264 products. October 24 Order. In this order, the Magistrate Judge granted Qualcomm's request to take the deposition of a Broadcom witness competent to provide testimony regarding Broadcom's fabricated and prototyped H.264 products. See id. at 16. The Magistrate Judge required that the deposition occur on or before November 6, 2006, and ordered Broadcom to pay all costs associated with the deposition, including Qualcomm's reasonable attorneys' fees. See id. at 17. The Magistrate Judge further granted Qualcomm's request that Broadcom supplement its responses to certain Qualcomm Requests for Production and Interrogatories within seven (7) days of the October 24 Order. See id.

On October 27, 2006, Broadcom filed an ex parte application for stay of the October 24 Order pending reconsideration by the District Court. Doc. No. 147. Broadcom simultaneously filed the present Request for Reconsideration by District Court of Magistrate Judge's Ruling Concerning Products in Development. Doc. No. 146. On November 2, 2006, this Court granted Broadcom's ex parte application for stay of the October 24 Order pending resolution of Broadcom's present request for reconsideration. Doc. No. 150.

As set forth in the October 24 Order, Qualcomm is seeking to compel oral and written discovery regarding Broadcom's fabricated and prototyped H.264 products, or products in development. See October 24 Order, p. 4. As defined by Qualcomm, fabricated products are those products that have been fabricated, but for which a final version has yet to be distributed, i.e., sampled, to customers and potential customers. See id. at 4 n. 2. Qualcomm defines prototyped products as products that have yet to be produced in marketable form, but of which prototypes of video encoding components have been created using an FPGA emulation device. See id.

Broadcom has already conceded to providing discovery for products that have been or will be fully designed and sent to the factory for physical fabrication (i.e., "taped out") by the time the trial is set to begin on January 9, 2007. See id. at 4 - 5. Broadcom opposes Qualcomm's motion to compel, arguing that the products at issue have not been nor will they be taped out until at least February or March 2007. See id. at 5. Therefore, Broadcom argues that these products have not been "made" for purposes of 35 U.S.C. § 271(a) and are not subject to discovery. See id.

III. DISCUSSION

From the facts set out in the record of the present action, the Court finds that Broadcom's development of fabricated and FPGA prototyped H.264 products does not constitute "making" under 35 U.S.C. § 271(a). As described to the Court by both parties during the November 3, 2006, hearing regarding the present Request for Reconsideration, before a chipset is taped out, a prototype is designed in the laboratory and subjected to testing in an FPGA, a programmable device in which all logic gates and other points of adjustment appropriate for the chipset can be set on a temporary basis for testing purposes. After testing is complete and the prototype functions as the designer intended it to, the prototype is taped out, creating a blueprint from which the manufacturer can produce the final chip. Taping out is the final step before chipset production.

Accordingly, the Court finds that taping out is the last event that occurs outside the scope of patent infringement liability under the term "making" in 35 U.S.C. § 271(a). The moment this tape out is transferred to a manufacturer for the purpose of chipset production is the first step of "making." Broadcom's H.264 products at issue here apparently have not been taped out yet and will not be before the trial for the present action is set to begin on January 9, 2007. Broadcom estimates that they will be taped out at the earliest in February or March 2007. See October 24 Order, p. 5. No evidence of a transfer date for the tape out was provided. Therefore, they have not been "made" under § 271(a) and do not infringe the Qualcomm patents at issue here. As such, the Court finds that they are beyond the scope of discovery in this case.

Qualcomm argues that Broadcom's H.264 products at issue do not fall under the "experimental use" exception to patent infringement liability as laid out by the Federal Circuit. In Madey v. Duke Univ., 307 F.3d 1351, 1352 (9th Cir. 2002), former Duke University ("Duke") professor Madey had sole ownership of two patents practiced by some of the equipment in his laboratory at Duke. Duke removed him as director of that laboratory, but continued to operate some of the equipment there, so Madey sued the University for patent infringement. See id. at 1352 - 53. The Federal Circuit held that Duke's use of the equipment did not fall under the experimental use exception, since "regardless of whether a particular institution or entity is engaged in an endeavor for commercial gain, so long as the act is in furtherance of the alleged infringer's legitimate business and is not solely for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry, the act does not qualify for the very narrow and strictly limited experimental use defense." Id. at 1362.

However, this Court does not grant Broadcom's request for reconsideration under the "experimental use" exception to patent infringement, but rather on the grounds that development of the H.264 products in question does not constitute "making" under 35 U.S.C. § 271(a) and therefore does not constitute patent infringement. Furthermore, in this case, Broadcom designed prototypes to emulate chip behavior in the testing phase of product development, as any responsible company would do to 1) investigate efficacy and 2) ensure that it is not infringing on existing patents. Unlike Duke in Madey, which used Madey's equipment for its intended laboratory purposes, Broadcom was not using the FPGA prototypes for any actual commercial applications protected by Qualcomm patents. Instead, it was acting as a reasonable company by testing prototypes in order to design a successful next generation chipset that did not infringe on existing patents. Therefore, the Federal Circuit's reasoning in Madey would not apply here.

Qualcomm further argues that a prototype of a device that has not been taped out can constitute "making" under 35 U.S.C. § 271(a) and infringe a patent if it meets the limitations of the asserted patent claims, but does not refer to any persuasive binding precedent in support of its claim. Ironically, Qualcomm took the opposite stance in the related International Trade Commission ("ITC") proceeding, Inv. No. 337-TA-543, between Qualcomm and Broadcom. On November 28, 2005, Broadcom moved to compel production of documents related to Qualcomm's products in said ITC proceeding.

Qualcomm opposed this motion, arguing that the chipsets in question (which, incidentally, had already been taped out) were "not commercially available or even available for sample." Doc. No. 155, Ex. 6, p. 5. As support, Qualcomm cited to Certain Optical Disk Controller Chips, Inv. No. 337-TA-523, Order 46 (May 2005), in which the Administrative Law Judge ("ALJ") held that products in the "earlier stage of development" may not properly fall within the scope of discovery.*fn2 Id. at *11. Qualcomm there contended that "[w]here, as here, the product has not been shown to customers, it is not appropriate to include the product within the bounds of discoverable material." Doc. No. 155, Ex. 6, p. 5.

In the ITC Proceeding, the ALJ held that "the relevant question is not whether [the Qualcomm chipsets in question] are going to be imported into the United States before the completion of this investigation, but whether the chipsets are in a sufficiently finalized state of development such that information regarding them would lead to the discovery of admissible information." Doc. No. 155, Ex. 9, p. 5. In the December 20, 2005, Order, the ALJ noted that "engineering samples of [the Qualcomm chipsets in question] will not be available until March 2006 and December 2006, respectively, and that the commercial availability of [the Qualcomm chipsets in question] are estimated to be available in December 2006 and December 2007, respectively." Doc. No. 155, Ex. 11, p. 1. The ALJ therefore held that the Qualcomm chipsets were "not in a sufficiently finalized state of development such that information regarding them would lead to the discovery of admissible information in this investigation" and denied Broadcom's motion to compel. Id. at 1 - 2. Broadcom seeks, and the Court finds, development to cease and "making" to start before chipsets are available for sample, if that, as the Court understands, is an event that occurs after tape out.

The Magistrate Judge did not have access to the unredacted copies of the parties' briefs and the ALJ's Orders in said ITC proceeding. Qualcomm was therefore able to convince the Magistrate Judge that the basis for the ITC's denial of Broadcom's motion to compel was the products' "importability" rather than their developmental status. See October 24 Order, p. 12. However, as cited above, the ALJ's analysis of the developmental status of the Qualcomm products in question had a building block significance to any following analysis of "importability." Doc. No. 155, Exs. 9, 11. This Court finds persuasive the reasoning used by the ALJ in the ITC matter in denying Qualcomm's present motion to compel discovery related to products in development, a position directly advocated by Qualcomm itself in the ITC proceeding, and the facts of this case are a fortiori to Qualcomm's position before the ITC.

IV. CONCLUSION

Accordingly, the Court finds that taping out a chipset is the last event that occurs outside the scope of "making" under 35 U.S.C. § 271(a). The moment this tape out is transferred to a manufacturer for the purpose of chipset production is the first step of "making" under § 271(a) and the first exposure to patent infringement liability under this term. Discovery regarding products under the term "making" shall not be allowed until this tape out transfer occurs.

The Court therefore GRANTS Broadcom's present Request for Reconsideration of Magistrate Judge's Ruling Concerning Products in Development. The Court REVERSES the Magistrate Judge's October 24 Order granting Qualcomm's motion to compel discovery of Broadcom's pre-tape-out fabricated and FPGA prototype H.264 products and ordering Broadcom to pay all associated costs including Qualcomm's reasonable attorneys' fees. The Court further REMANDS any outstanding or future discovery issues to be resolved by the Magistrate Judge if necessitated by this Order.

IT IS SO ORDERED


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