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Broadcom versus Qualcomm: Patents and the International Trade Commission
Expert Analysis: The ITC can prohibit the importation and sale of products that infringe a US patent. Most electronic devices are manufactured outside the United States, so the potential power of the ITC is very real and worth understanding.
By Jay Sandvos, Bromberg & Sunstein LLP -- Electronic Business, 7/18/2007
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Last year, in a classic David-versus-Goliath patent war, a handful of invalid patents owned by a small patent-holding company nearly destroyed the huge Blackberry market. More recently the patent stakes have increased from just Blackberries to include the whole cell-phone market. The US International Trade Commission (ITC) recently ruled that 3G cell phones containing Qualcomm chips infringe a patent asserted by its competitor, Broadcom, so the ITC has barred the importation of new-model phones with Qualcomm chips. But don't worry; this is Goliath versus Goliath, and whoever "wins," both giants will continue to hurtle along, raking in their respective riches.
It seems like every time patents are in the news, some strange new wrinkle comes to light. In this case, it is the ITC process that is the "I Can't Believe It's Not Butter!" of patent litigation. It looks and feels just like real patent litigation in federal court, but it's not. The ITC can prohibit the importation and sale of products that infringe a US patent. Most electronic devices are manufactured outside the United States, so the potential power of the ITC is very real and worth understanding.
The ITC process is not an exclusive alternative to the usual colossal patent litigation in court. Rather, for high-stakes patent cases (when the typical eye-popping legal fees are simply not astronomical enough), an ITC action can also be filed (creating more excruciatingly higher legal expenses that really last and satisfy). But the ITC route is not for everyone. First, no trolls are allowed—only a competitor actually practicing the patent in the United States can file with the ITC. In addition, more-detailed complaints are required that can entail much more prefiling legal work. Worst of all, no money damages are available—just a potential injunction prohibiting importation and sale.
The ITC procedure is also much faster than litigation in the courts, typically six months from beginning to end. Although this puts considerable pressure on the patent owner's attorneys to deliver the case, it correspondingly increases the stakes and the pressure on the accused infringer to pull together a credible defense in a lot less time than for a court case. And the discovery process is similarly accelerated—just 10 days to respond—which tends to prevent many of the protracted and costly disputes over document production and witness depositions that typically arise in court cases. For both sides, the ITC can serve as a sparring ring to test out potential positions for the main battle in court.
But the action in the ITC is not just a two-way battle between the parties. The Commission staff of the ITC itself are also parties to every ITC action, representing the rights and interests of the general public in the issues and various activities of the case. Usually, the two adversarial parties work hard to persuade the Commission staff to adopt their respective positions, which—when it happens—may well tip the decision.
After the quick discovery period, the issues play out at an administrative trial before the ITC administrative judges without extensive legal motions or even formal construction of the patent claims. Decisions are returned by the ITC judges themselves rather than by a jury. Because the judges are considered to be more experienced and (dare I say it?) more intelligent than a jury, the feeling is that they are somewhat less confused by the technical complexities of the case and may produce more rational outcomes.
Of course, even a somewhat rational outcome may still be surprising. In the dispute between Broadcom and Qualcomm, each side seems to have won a little and lost a little. The ITC found that Qualcomm's chips infringed the Broadcom patent, but it did not take the next logical step of banning the importation of all phones with those chips. Rather interestingly, it barred only the importation of any new models but allowed phones that are already on the market to continue to be imported and sold. Although this is no doubt unpleasant and inconvenient for Qualcomm, it can hardly be the strong complete injunction that Broadcom must have wanted.
And as I suggested earlier, the ITC battle between Broadcom and Qualcomm is just one of many different disputes between them. They still have multiple court cases involving patents, trade secrets, unfair competition, and other complaints. Just based on the sheer number of these time-consuming legal fights, it would be surprising if either party ever achieved complete victory or suffered total defeat, but all these battles are highly expensive and not very sensible if any other solution can be found.
In the end, don't be surprised if the companies reach a settlement, putting aside their differences and joining together as strategic partners in bold new initiatives. Cynically translated: We've orally agreed (nothing in writing—wink, wink, antitrust guys) to crush everyone else and split the loot.
Jay Sandvos is a partner with Bromberg & Sunstein LLP, a Boston law firm focusing on intellectual property and business litigation.
