Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Broadcom Corp. v. Qualcomm Inc.

March 11, 2009

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



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matters before the Court are the (1) Motion to Dismiss Claims Four through Eight of Plaintiff's Second Amended Complaint (Doc. # 238) filed by Defendant Qualcomm Incorporated, (2) Motion to Deem Qualcomm's Responsive Pleading to be its Answer, Strike Qualcomm's Affirmative Defenses and Related Allegations, and Dismiss Qualcomm's Counterclaims (Doc. # 239) filed by Plaintiff Broadcom Corporation, and (3) Motion for Leave to File a Sur Reply Memorandum of Points in Opposition to Qualcomm Incorporated's Partial Motion to Dismiss (Doc. # 265) filed by Plaintiff Broadcom Corporation.

BACKGROUND

This action arises out of allegations that Defendant Qualcomm Incorporated ("Qualcomm") systematically undermined competition in the markets for technology and integrated circuit chips used in mobile wireless devices, and willfully manipulated various standard-setting processes. On July 1, 2005, Plaintiff Broadcom Corporation ("Broadcom") initiated this action by filing a complaint (Doc. # 1) in the United States District Court for the District of New Jersey. On November 2, 2007, Broadcom filed the Second Amended Complaint ("SAC"), which is the operative pleading in this case (Doc. # 2). On September 3, 2008, the case was transferred to the Southern District of California from the District of New Jersey (Doc. # 194).

I. Factual Allegations in the SAC

A. The Parties

Broadcom is a supplier of semiconductors for wired and wireless broadband communications. SAC, ¶ 2. Qualcomm operates several business units around the world. Relevant to this action, Qualcomm licenses its intellectual property rights ("IPR") through a business unit called the Technology Licensing Segment, and sells chipsets through a business unit called the CDMA Technologies Segment. Id. ¶3.

B. The Structure of the Mobile Wireless Industry

Mobile wireless carriers ("carriers") provide cell phone service to consumers. Id. ¶15. Cell phone manufacturers "manufacture mobile wireless handsets (also known as cell phones), and the manufacturers typically sell those phones to the carriers, which in turn arrange for sale of the cell phones to consumers." Id. Among other components, cell phones contain "one or more computer chipsets that deliver the cell phones' core ability to communicate with the wireless system." Id. ¶ 17. Once a carrier has made an initial decision to install a particular wireless system, "the sunk investment in that system, and the costs that would be incurred to establish a different system, make it virtually impossible to switch to a different technology." Id. ¶ 50. Only phones with the appropriate technology will work on a particular mobile wireless network, and the chipsets that operate cell phones must conform to the technology of the system for which the phone is being manufactured. Id. ¶ 52.

Standards that facilitate the adoption and advancement of technology and facilitate the development of products that can interoperate "are especially critical to and prevalent in the mobile wireless industry," and "are required to ensure that a carrier's wireless system can seamlessly interface and function properly with cell phones made by various manufacturers." Id. ¶ 24. Standard-development organizations ("SDOs") establish standards for high- technology industries, such as the wireless industry, to ensure compatibility and interoperability. When SDO participants select a technology to perform a function needed to practice a standard, "all alternative technological solutions for that function are excluded from use in connection with that standard." Id. ¶ 43. Thus, once a standard has been adopted, companies can become "locked in" to a particular technology. Id. ¶ 44.

If not constrained, the adoption of a patent holder's technology into a standard can then enable the patent holder to extract monopoly rents from parties that want to produce products that implement the standard, and to "capture for itself downstream markets or [] shut down use of the standard entirely." Id. ¶¶ 20, 21. "To prevent such abuse of the standard-setting process by participants, SDOs frequently adopt rules, policies, and/or procedures relating to participants' intellectual property rights" ("IPR policies"). Id. ¶ 22. For example, SDOs often require patent holders to disclose their essential intellectual property ("IP") and commit to license such IP on fair, reasonable and non-discriminatory ("FRAND") terms. Telecommunications SDOs include the European Telecommunications Standards Institute ("ETSI"), which produces global telecommunications standards. Id. ¶¶ 26-30. The ETSI "led and continues to lead the standardization process for a family of standards referred to as Global System for Mobility ("GSM"), GSM Packet Radio Service ("GPRS"), Enhanced Data Rates for GSM Evolution ("EDGE"), and Universal Mobile Telecommunications System ("UMTS")." Id. ¶ 30.

"Cell phones have developed through several 'generations' in response to demand for mobile wireless systems that carry data at faster rates and voice traffic at higher capacity." Id. ¶ 34. The earliest wireless systems are typically referred to as first generation ("1G"). Id. ¶ 34. The leading second generation ("2G") technologies are based on the GSM family of standards, and the Code Division Multiple Access ("CDMA") family of standards, which are incompatible: "a GSM phone will not work on a CDMA network and vice versa." Id. ¶ 36. "As demand for wireless systems that carry both data at faster speeds and voice at higher capacity has increased significantly, third generation or '3G' wireless standards have been proposed and adopted by international SDOs." Id. ¶ 38. The UMTS standard was designed to permit economical transition from 2G GSM-based systems to a 3G standard, which incorporates the GSM family of standards as well as a set of 3G protocols based on Wideband Code Division Multiple Access ("WCDMA"). Id. ¶ 39. "Despite the similarity in name, cell phones designed for WCDMA operation under the UMTS standard are not compatible with any of the CDMA standards, regardless of generation, and the 3G standard for CDMA networks is entirely separate from either UMTS or WCDMA." Id. As cell phone technology continues to develop, development of technologies may be implemented in beyond-third-generation ("B3G") and fourth-generation ("4G") mobile wireless systems.

C. Qualcomm's Anticompetitive Conduct

i. Monopolization of the CDMA Chipset Markets

The CDMA standard cannot be practiced without using Qualcomm's patented technology because Qualcomm holds more than 1400 patents relating to CDMA technology, including the majority of patents declared as "essential" for the various generations of CDMA, and has more than a 90% share of each of the CDMA chipset markets. Id. ¶¶ 57, 60. "Qualcomm has charged extremely high prices for CDMA chipsets - on the order of double the price of GSM chipsets - that are not justified by production costs, by product functionality, or by quality," and has "repeatedly demonstrated that it possesses the power to control the output of CDMA chipsets." Id. ¶ 61. Qualcomm's control of essential patents create high barriers for entry into the CDMA chipset market. Id. ¶ 62. "Qualcomm's durable monopoly position in the CDMA markets has resulted from a continuing course of exclusionary and anticompetitive conduct," including using its power over the CDMA chipset supply to discipline customers and exclude competitors, and reducing royalty rates when a licensee agrees to purchase Qualcomm chipsets exclusively. Id. ¶¶ 64-69. ii. Qualcomm's Monopolization of the WCDMA Chipset Markets "Successful in its efforts to obtain and maintain its CDMA chipset monopolies, Qualcomm now has its eyes set on the UMTS chipset market." Id. ¶ 70. Qualcomm is a member of the ETSI, and expressly agreed to license patents that it claims are essential to practicing ETSI standards on terms and conditions that comply with the ETSI's IPR Policy.

Id. ¶¶ 72, 85. Qualcomm deliberately and intentionally failed to timely disclose any patents as being purportedly essential to the UMTS standard, as required by virtue of its participation in the ETSI. Id. ¶¶ 93-98. Qualcomm falsely represented that it would license any of its essential patents on FRAND terms. Id. ¶¶ 89-90. "In reliance on Qualcomm's FRAND assurances, SDOs around the world, including the ETSI, included Qualcomm's technology in the UMTS standard." Id. ¶ 90. In contradiction of its FRAND commitments, Qualcomm has engaged in anticompetitive conduct through making unreasonable royalty demands, and licensing its IPR on unreasonable terms. Id. ¶¶ 110, 112, 113.

iii. Abuse of the Standard-Setting Process for GSM/GPRS/EDGE, H.264, IEEE 802.20, and CDMA 200 EVDV

Qualcomm is the assignee of at least 104 patents or patent applications that it claims are essential to practice GSM, GPRS and/or EDGE. Id. ¶ 144. Qualcomm deliberately and intentionally failed to timely disclose the patent numbers of patents it considered essential to practice GSM, GPRS and/or EDGE in violation of the ETSI IPR Policy. Id. ¶¶ 143-149. Qualcomm selectively asserts its patents through patent infringement actions with respect to patents purportedly essential to GSM, GPRS, and EDGE "in an effort to shield its anticompetitive conduct from challenge, and in furtherance of its monopolization of the WCDMA technology markets and the UMTS chipset market." Id. ¶ 159. Qualcomm refuses to honor its commitments to the ETSI to license its purportedly essential IPR on FRAND terms and conditions and in accordance with the other terms of the ETSI IPR Policy. Qualcomm's failure to timely disclose its patent rights to the ETSI and unwillingness to license its purportedly essential IPR on FRAND terms has allowed Qualcomm to demand and obtain monopoly rents and terms from parties practicing the GSM, GPRS, and EDGE standards. Id. ¶¶ 162-168. Furthermore, "[b]ecause UMTS chipsets must have backward compatibility with GSM, GPRS, and EDGE as previous GSM-path standards, Qualcomm's conduct in GSM/GPRS/EDGE had the additional effect of reinforcing the effects of Qualcomm's conduct relating to UMTS chipsets." Id. ¶ 169. H.264 is a standard for video compression, developed by the Joint Video Team ("JVT"), a SDO involved in setting standards for digital video compression. Id. ¶¶ 170-175. Qualcomm claims to own at least two patents that are purportedly essential to practice H.264. Id. ¶ 191. Qualcomm participated in the JVT's development of the H.264 standard, and as a result is bound by JVT's Terms of Reference for Joint Video Team Activities ("JVT Terms of Reference"), which requires participants in the standard-setting process to disclose patents believed to be essential to the H.264 standard. Id. ¶¶ 181-186. Qualcomm deliberately and intentionally failed to timely disclose its patents purportedly essential to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.