Deceptive Commitment to License on RAND Terms May Be Antitcompetitive Conduct Just Like Deceptive Nondisclosure of IP to Standard Setting Organization

Case: Broadcom Corp. v. Qualcomm Inc., Case No. 06-4292 (3rd Cir. 9/4/07)

The One Sentence Summary: In a consensus-oriented private standard setting environment, a patent holder's intentionally false promise to license essential proprietary technology on fair, reasonable and non-discriminatory terms, coupled with a standard setting organization's reliance on that promise when including the technology in a standard, and the patent holder's subsequent breach of that promise, is actionable anticompetitive conduct in violation of Section 2 of the Sherman Act.


What They Were Fighting About: Broadcom alleged that the European Telecommunications Standards Institute (ETSI) and its U.S. counterparts included Qualcomm's proprietary technology in the Universal Mobile Telecommunications System (UMTS) standard in reliance on Qualcomm's commitment to license that technology on fair, reasonable and non-discriminatory (FRAND) terms. Subsequently, Qualcomm sought licenses with non-FRAND terms.

Third Circuit Holdings:

• Reverses dismissal of Broadcom's claims of monopolization and attempted monopolization.
• In recent actions brought before the FTC, patent holders have faced antitrust liability for misrepresenting to standard setting organizations that they did not hold intellectual property rights in essential technologies, and then, after a standard has been adopted, seeking to enforce those rights.
• Deception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer monopoly power on the patent holder.
• Deceptive FRAND commitments, no less than deceptive nondisclosure of intellectual property rights, may result in such harm.
• For its monopolization claim, Broadcom adequately defined the relevant market as the market for Qualcomm's proprietary WCDMA technology, a technology essential to the implementation of the UMTS standard. The incorporation of a patent into a standard makes the scope of the relevant market congruent with that of the patent.
• For its attempted monopolization claim, Broadcom adequately alleged that Qualcomm engaged in anticompetitive practices with the specific intent to obtain a monopoly over the global UMTS chipset market. Broadcom's Complaint also alleged sufficient facts as to the dangerous probability of Qualcomm obtaining monopoly power in the UMTS chipset market.
• Broadcom lacked standing with regard to claims based on harm to markets in which Broadcom neither competes nor seeks to compete. Allegations that Qualcomm, by maintaining its monopolies in certain markets intended to cause harm to Broadcom in other markets, were speculative and alleged only remote injury.