Opinion ID: 209477
Heading Depth: 3
Heading Rank: 4

Heading: Unenforceability Remedy

Text: In its March 21, 2007 order, after finding that Qualcomm waived its rights to enforce the asserted patents against H.264 products by silence in the face of a disclosure duty, the district court discussed the proper remedy to apply in this case. The district court was unable to find guidance for an equitable remedy of waiver by a patentee, but it noted that [i]nequitable conduct by an inventor and his/her agents before the PTO may result in a decree of unenforceability of the patent, but the remedy depends on equitable considerations arising from the circumstances involved. Waiver Order at . The court reasoned that an equitable remedy to a finding of waiver should not be automatic; rather, it should be fashioned to give a fair, just and equitable response reflective of the offending conduct. Id. at . In light of this, the district court considered the extent of the materiality of the withheld information and the circumstances of the nondisclosure relating to the JVT proceedings. Id. The district court noted that the theoretical remedies that appear vary from total unenforceability of the patents to no sanction of any kind. Id. The court stated: The Court sees the obvious connection between the '104 and '767 patents and H.264 compliant products. Therefore, the Court is inclined to consider a remedy consisting of (1) independent unenforceability of the '104 and '767 patents against any H.264 compliant products, and (2) inclusion of the '104 and '767 patents in the MPEG LA patent pool, which receives royalties from H.264 compliant producers that are divided between all owners of patents related to the H.264 standard who are members of the pool. Id. at -63. The court did not decide which remedy to apply in its March 21, 2007 order. Instead, it scheduled an Order to Qualcomm to Show Cause why it should not order the aforementioned remedy. Id. at . On August 6, 2007, after a hearing on the Order to Show Cause, the district court entered an Order on Remedy for Finding of Waiver, ordering the '104 and '767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against the world. In reaching this conclusion, the district court rejected Qualcomm's argument that Broadcom may not have any remedies beyond itself, because it raised waiver as an affirmative defense rather than as a counterclaim or crossclaim. The district court noted that this court has upheld the unenforceability of a patent to the world due to inequitable conduct even when pled as an affirmative defense. Remedy Order at 1217 (citing McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 908, 926 (Fed.Cir. 2007); Semiconductor Energy Lab. Co. v. Samsung Elecs. Co., 204 F.3d 1368, 1372, 1378 (Fed.Cir.2000); Refac Int'l, Ltd. v. Lotus Dev. Corp., 81 F.3d 1576, 1578, 1585 (Fed.Cir.1996)). Qualcomm argues that the remedy of unenforceability entered on Broadcom's defense of waiver is contrary to law. It submits that once the jury returned a non-infringement verdict the district court lacked any legal basis to consider the affirmative defense of waiver. It appears to base this argument largely on the fact that Broadcom pled waiver only as an affirmative defense, as opposed to a counterclaim. Thus, Qualcomm argues that, because waiver was pled as an affirmative defense, it cannot result in a judgment of unenforceability. We disagree. It was entirely appropriate for the district court to address the defense of waiver after the jury returned a non-infringement verdict. As the district court noted, this court has upheld judgments of unenforceability based on inequitable conduct even where pled as an affirmative defense. We see no reason why an affirmative defense of waiver cannot similarly result in a judgment of unenforceability. Broadcom also submits that [t]he district court, sitting in equity, had the authority to grant relief as a result of Qualcomm's conduct. Appellee's Br. 57. By analogy, it claims that successful assertion of the defenses of inequitable conduct, equitable estoppel, and patent misuse has resulted in unenforceability judgments. In response to Broadcom's analogy to inequitable conduct, Qualcomm argues the rationale for a remedy of unenforceability for inequitable conduct before the PTO that such conduct taints the property right ab initio is simply not present for waiver based on post-PTO conduct before a private SSO. Appellant's Reply Br. 27. In response to the patent misuse analogy, Qualcomm states that [w]hen patent misuse is proven, a court may temporarily suspend the owner's ability to enforce the patent while the improper practice and its effects remain ongoing. Id. In addition to the analogy to inequitable conduct, we find the remedy of unenforceability based on post-issuance patent misuse instructive in this case. As Qualcomm notes, the successful assertion of patent misuse may render a patent unenforceable until the misconduct can be purged; it does not render the patent unenforceable for all time. Appellant's Reply Br. 27. In B. Braun Medical, Inc. v. Abbott Laboratories, this court stated: [T]he patent misuse doctrine is an extension of the equitable doctrine of unclean hands, whereby a court of equity will not lend its support to enforcement of a patent that has been misused. Patent misuse arose, as an equitable defense available to the accused infringer, from the desire to restrain practices that did not in themselves violate any law, but that drew anticompetitive strength from the patent right, and thus were deemed to be contrary to public policy. When used successfully, this defense results in rendering the patent unenforceable until the misuse is purged. 124 F.3d 1419, 1427 (Fed.Cir.1997) (citations and quotations omitted); see also C.R. Bard. Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1372 (Fed.Cir.1998) (Patent misuse arises in equity, and a holding of misuse renders the patent unenforceable until the misuse is purged; it does not, of itself, invalidate the patent.). In light of the foregoing, we agree with Qualcomm that patent misuse does not render a patent unenforceable for all time. Contrary to Qualcomm's arguments, however, the limited scope of unenforceability in the patent misuse context does not necessarily lead to the conclusion that an unenforceability remedy is unavailable in the waiver context in the present case. Instead, we conclude that a district court may in appropriate circumstances order patents unenforceable as a result of silence in the face of an SSO disclosure duty, as long as the scope of the district court's unenforceability remedy is properly limited in relation to the underlying breach. While the scope of an unenforceability remedy in the patent misuse context is limited to rendering the patent unenforceable until the misuse is purged, the scope of the district court's unenforceability remedy in the present case was not limited in relation to Qualcomm's misconduct in the SSO context. The basis for Broadcom's waiver defense was Qualcomm's conduct before the JVT during development of the H.264 standard, including intentional nondisclosure of patents that it knew reasonably might be necessary to practice the standard. The district court correctly recognized that the remedy for waiver in the SSO context should not be automatic, but should be fashioned to give a fair, just, and equitable response reflective of the offending conduct. In determining the appropriate equitable remedy in this case, the district court properly considered the extent of the materiality of the withheld information and the circumstances of the nondisclosure relating to the JVT proceedings. While we agree with the district court that there is an obvious connection between the '104 and '767 patents and H.264 compliant products, we do not discern such a connection between the asserted patents and products that are not H.264-compliant, and neither party points us to any such connection. Waiver Order at . Accordingly, based on the district court's findings, the broadest permissible unenforceability remedy in the circumstances of the present case would be to render the '104 and '767 Patents (and their continuations, continuations-in-part, divisions, reissues, and any other derivatives thereof) unenforceable against all H.264-compliant products (including the accused products in this case, as well as any other current or future H.264-compliant products). Accordingly, we vacate the unenforceability remedy and remand with instructions to enter an unenforceability remedy limited in scope to any H.264-compliant products.