Partial Qualcomm Chip Ban Stay ‘Victory’ for Qualcomm Customers Who Filed Appeal

The appeals court stayed the ITC Qualcomm chip ban for Qualcomm customers, reasoning that Broadcoms initially didn’t name the downstream carriers and device makers as infringers. The decision lets third parties AT&T, T-Mobile, LG, Kyocera, Motorola, Samsung and Sanyo import 3G devices containing the chips pending the court’s final decision, not expected this year.

The court didn’t stay the ban for Qualcomm, saying the company “provides no reasoning why the cease and desist order should be stayed,” and therefore “has not made the requisite showing to obtain a stay… with respect to its own imports,” the court said. The court also denied a motion to stay the ban for workaround chips and products containing them, calling the redesigned products “outside the scope of this appeal,” since they weren’t involved in the ITC proceedings. The court also noted that the commission ban lets companies wanting to import workarounds to certify that the products aren’t covered by the order.

T-Mobile should be ecstatic, Stifel Nicolaus’ Rebecca Arbogast said. T-Mobile, set back by problems clearing its Advanced Wireless Services spectrum band, is only starting to roll out its 3G network and as yet hasn’t imported any devices, she said. Failure to stay the ITC ban would have further delayed T-Mobile’s 3G rollout, she said. The stay should give the carrier time to roll out in some areas, she said. Even if the ITC ban is upheld, the stay will give T- Mobile time to create workarounds, she added. The carrier is expected to start offering 3G as early as fourth quarter.

Sprint Nextel isn’t covered by the order, since it didn’t join the federal circuit appeal, choosing instead to do workarounds. The court’s refusal to stay the ban for redesigned chips means Sprint must get Broadcom’s approval to use them, Arbogast said. Sprint could file its own appeal to try to “piggyback” on the order, she said. But “that’s a difficult argument to make,” lawyer Lyle Vander Schaff said. The court may say that Sprint and other companies hoping to file “me too” appeals lack standing to do so, since they didn’t take part in the ITC proceeding, he said. Or Sprint might claim indirect coverage under the order since it gets 3G handsets from makers involved in the appeal, Arbogast said. Sprint doesn’t expect any disruption to its business, said a spokesman. “We'll continue to import into the country the latest handset technology for our customers,” he said.

It’s “possible” the order means Verizon can renegotiate licensing terms with Broadcom, Arbogast said. Verizon agreed with Broadcom in July to remove itself from the ITC ban (CD July 20 p11), but terms may allow renegotiation in the case of favorable court decision, she said. The same may go for AT&T, rumored to have signed a similar-but-confidential agreement with Broadcom, despite leaving its name on the federal circuit appeal, Arbogast said.

A Verizon spokeswoman attacked the speculation. “This doesn’t change anything regarding our licensing agreement with Broadcom,” she said. Asked about AT&T’s Broadcom interaction, an AT&T spokesman offered a vaguer response. “All I can tell you is that we have spoken to both Broadcom and Qualcomm about ways to mitigate possible effects of the ITC’s action,” she said.

The stay decision sets a precedent that is “not good for patent owners or the ITC,” Vander Schaff said in an interview. Vander Schaff worked six years in the ITC General Counsel’s Office. The order marks the first time a court has stayed an ITC exclusion order without a bonding requirement, he said. About five years ago, a court stayed an ITC ban in a case involving disposable cameras, imposed only because the defendant agreed to a court-imposed, 100 percent bond, he said.

Wednesday’s decision cuts some of the ITC’s allure as a forum for patent litigation, Vander Schaff said. The ITC is often seen as a better setting than courts for intellectual property cases because the commission has six members and a legal staff of IP experts to make decisions, he said. A district court, on the other hand, usually leaves the decision to a judge and a clerk, he said. Commission IP expertise has been a main reason its decisions are so stayed so rarely, he said. The stay in the Qualcomm case challenges commission authority on such matters, he said.

The stay could affect other ITC telecom patent cases, especially Nokia’s claim against Qualcomm, Arbogast said. Nokia filed against Qualcomm in the commission in late August (CD Aug 20 p3). Since the federal circuit stayed the ban for Qualcomm customers on the grounds that Broadcom did not name them in its ITC complaint, Nokia too may fail to get a long- term injunction without naming downstream carriers, she said. Nokia may not want to add those names, she said, because doing so would mean suing “the very customers it hopes to woo by excluding Qualcomm patents.”

If Qualcomm wins its appeal in the Federal Circuit, Broadcom could appeal to the Supreme Court, Vander Schaff said. But a Supreme Court decision would be moot by the time the court took the case, he said. The ITC might seek Supreme Court appeal if its limited exclusion order is reversed, but the commission typically doesn’t do that, he said. ITC likes to use its own lawyers, but would have to go to the Justice Department’s Solicitor General office for representation in the Supreme Court, he said. That would make the ITC “uncomfortable,” since the Solicitor General represents the president and may not agree with the ITC, he said.

Qualcomm and Broadcom disagreed about who won. Qualcomm legal counsel Alex Rogers said the company is pleased the court “recognized the undeserved harm to parties who were not named in the lawsuit.” Broadcom General Counsel David Dull said he was glad Qualcomm “will not be permitted to continue its infringement of our patent.”