Competition for 'Design-Wins' and Speculative Damages Support Non-Practicing Entity's Preliminary Injuction

In Broadcom Corp. v. Qualcom Inc. (September 24, 2008), the Federal Circuit affirmed the district court did not abuse its discretion in issuing a permanent injunction where Broadcom provided evidence of irreparable harm and lack of adequate remedy at law, despite the fact that it does not practice the claimed inventions.

According to the opinion by Circuit Judge Linn,

The district court found that this factor [of irreparable harm] weighed in favor of an injunction with respect to both the ’317 and ’010 patents. Injunction Opinion at 10, 15. It remains an open question "whether there remains a rebuttable presumption of irreparable harm following eBay," Amado v. Microsoft Corp., 517 F.3d 1353, 1359 n.1 (Fed. Cir. 2008), but the district court did not abuse its discretion in finding irreparable injury here even if Broadcom benefits from no such presumption. The district court explained that the evidence at trial demonstrated that

[t]he market for baseband chips is unlike the typical market for consumer goods where competitors compete for each consumer sale, and the competition is instantaneous and on-going. . . . Competition for sales is
not on a unit-by-unit basis, but rather competition is characterized by
competing for "design wins" for the development and production of cell
phones which will embody the proposed chip. . . . In this kind of a market,
the exclusion has a competitive effect on a firm even if it does not have an
immediately available product.

Injunction Opinion at 5-6. And as identified by Broadcom, Qualcomm has
previously conceded this indirect competition. E.g., J.A. at 7785 n.7 ("Any cell
phone customer who has chosen between, e.g., Cingular (GSM) and Verizon (CDMA)
service knows that handsets and thus chipsets do compete and thus ‘substitute’
across standards.").

Thus, Broadcom provided evidence of irreparable harm, despite the fact that it does not currently practice the claimed inventions. . . . [T]he district court did not abuse its discretion in finding that allowing Qualcomm to sell CMDA2000 chips implementing Broadcom’s patented features would harm Broadcom’s efforts to market WCDMA solutions.

. . . We [also] agree with Broadcom that the district court did not abuse its discretion here [with regard to lack of adequate remedy at law], particularly in light of its findings that "the structural nature of a ‘design win’ market favors a finding that monetary damages are inadequate." Id. at 16. We also agree that the Verizon license has little bearing on the effect of a compulsory license to a direct competitor, particularly in light of these market realities. Additionally, while Broadcom’s damages expert testified that any comparison of Qualcomm’s lost profits based on an injunction to Broadcom’s potential gain would be "almost pure speculation at this point," J.A. at 3217, this difficulty in estimating monetary damages reinforces the inadequacy of a remedy at law. Cf. Jacobsen v. Katzer, 2008 WL 3395772, at *6 (Fed. Cir. Aug 13, 2008) (noting, in the copyright license context, that "because a calculation of damages is inherently speculative, these types of license restrictions might well be rendered meaningless absent the ability to enforce through injunctive relief").