Struggle over Standards Capture
Given the fact that SSOs depend on the full cooperation of, and disclosure by, each participant, it is not hard to see why several industries have struggled with standards capture—as documented in patent infringement and unfair competition litigations. For example, in the computer memory chip industry, Rambus, a participant of the SSO, allegedly modified its pending patent applications to cover the computer memory chip standard being developed by the SSO without disclosing the pending patent application to the SSO. It later withdrew from the SSO and sought to enforce the patents against manufacturers who adopted the standard.
A jury verdict found the manufacturers not liable for patent infringement on the theory that a patentee’s participation in an SSO creates an implied contractual relationship that grants manufacturers permission to practice the patents covered by the standard. However, the Court of Appeals for the Federal Circuit, the second highest court on patent matters reversed, finding that because the SSO policy statement concerning patent disclosure and licensing was unclear, and the SSO members did not explicitly consent to any contractual relationship between the SSO and its participants, no such relationship existed to immunize manufacturers from patent infringement.
In a December 2008 decision by the Court of Appeals for the Federal Circuit Qualcomm Inc. v. Broadcom Corp., Qualcomm sued Broadcom for patent infringement after Broadcom manufactured a product that adopted a video signal encoding standard developed by the SSO of which Qualcomm was a member. The court determined that, although the SSO policy did not explicitly impose a duty to disclose any intellectual property rights that “reasonably might be necessary” to practice the standard, it was sufficient to impose such a duty where the other SSO participants understood that the SSO policy did, in fact, impose such a duty.
Although Qualcomm contended that its participation had occurred after the standard had been set, evidence at trial revealed that Qualcomm had actively participated in the SSO during the standard-setting period, but had not disclosed the relevant patents to the SSO. The court held that because Qualcomm had concealed its patents during the standard-setting process and had concealed its participation in the SSO during trial, it was in breach of this duty of disclosure and had waived its right to enforce the patents against any standard-compliant products.