The EC's Director General for Competition, Philip Lowe, has said that international bodies have to co-operate to stop companies from hiding their patent position from industry standards-setting bodies in order to claim royalties on them after the standard has been set.
Moreover they must, Lowe told a recent Reuter's conference, get companies to reveal the amounts they intend to charge for licensing patents which may be adopted in standards.
The EC Competition Directorate is currently investigating both Rambus and Qualcomm in connection with such practices. Rambus for allegedly hiding DRAM patents during the standards setting process, and Qualcomm for allegedly over-charging on IP after it had agreed to charge reasonable fees prior to it being incorporated in an industry standard.
In Qualcomm's case the issue arose when, in return for acceptance of Qualcomm's CDMA and WCDMA standard for 3G, Qualcomm committed to license its technology on 'fair, reasonable and non-discriminatory terms'.
Since then, Panasonic, Nokia, NEC, Ericsson and Broadcom, have complained that Qualcomm has ignored this condition by, among other things, demanding IP charges of up to $5 per hand-set, and giving companies cheap IP deals if they buy Qualcomm's chips.
Qualcomm spent over $200 million last year, and expects to spend $200 million this year, on lawyers' bills fighting these legal battles.
What is peculiar, in Qualcomm's case, is the unreasonableness with which the company has conducted its legal cases, leading to the resignation of Qualcomm's top lawyer, and the possible legal punishment of another six Qualcomm lawyers.
US Judge Barbara Major has asked the California Bar Association to investigate the conduct of six Qualcomm lawyers after behaviour she described as 'exceptional misconduct'.
"Producing 1.2 million pages of marginally relevant documents, while hiding 46,000 critically important ones, does not constitute good faith," said. Judge Major.
The case involved was Qualcomm vs. Broadcom. The case turned on the timing of Qualcomm's attendance at meetings of a standards-setting committee called Joint Video Team (JVT) that led to the adoption of a video coding standard in 2003.
JVT participants were required to disclose relevant patents and license them to anyone who followed the 2003 standard. If Qualcomm had attended the JVT before adoption of the standard, then Qualcomm's action against Broadcom for breach of Qualcomm patents was waived. Qualcomm asserted, however, that it was not a participant prior to 2003.
Then, a Qualcomm lawyer found an August 2002 e-mail welcoming a Qualcomm employee to the AVC, a sub-committee of the JVT. Qualcomm's lawyers decided not to produce the email to the court, even though they were obliged under US law to do so.
Judge Major said that Qualcomm had been 'aggressive' in its assertion that it had not participated in the JVT in 2002. At the court hearing, cross-questioning of the Qualcomm employee revealed her 2002 email exchanges. The court found for Broadcom.
Subsequently it transpired that 46,000 documents, containing 300,000 pages of relevant unproduced documents, had been withheld by Qualcomm from the court.
Judge Major's findings on Qualcomm are very like the allegations made against Rambus: that Qualcomm went to standards-setting meetings, did not disclose its patent position at those meetings, used knowledge gained at those meetings to apply for patents on technologies likely to be adopted as standards, and then, when the technologies became standardised, sought to claim unusually high levels of royalties on those patents.
The Nokia-Qualcomm lawsuits started in 2005 with Qualcomm suing for infringement of GSM patents.
This was followed in 2006 by four similar suits about GSM patents brought by Qualcomm, and one brought by Nokia alleging a breach of the fair, reasonable and non-discriminatory terms for licensing.
Last year the two companies stepped up the pace initiating no fewer than eight lawsuits plus an arbitration request. These Qualcomm-Nokia lawsuits were initiated after the July 2005 change of CEO at Qualcomm, when Qualcomm co-founder Irwin Jacobs handed over the CEO role to his son Paul Jacobs.
Nokia-Qualcomm lawsuits have now been initiated in California, Wisconsin, Texas, the UK, Germany, the Netherlands, France, Italy and China.
Now, however, there are signs that the litigants are ready to talk, and it is anticipated that the Nokia-Qualcomm dispute could be resolved in a Delaware court in July.
Meanwhile Qualcomm has to pick up the pieces. The biggest downside effect of the litigation for Qualcomm, is that the telecommunications industry is refusing to touch Qualcomm's proposed standard for 4G telephony called Ultra-Mobile Broadband (UMB).
Two big US wireless carriers, Verizon and AT&T have decided to go for the alternative, European standard, LTE (Long Term Evolution) and Japan's biggest carrier, NTT DoCoMo has also gone for LTE while Japan's second largest carrier, KDI, has gone for Wimax.
The industry has shunned Qualcomm's UMB 4G standard. "It was a three horse race, LTE, Wimax and Qualcomm, now it's a two horse race: LTE and Wimax", says Rupert Baines, vice president for marketing at PicoChip.
"You only get one chance at it", says Malcolm Penn, CEO of analysts Future Horizons, "you only get one chance to screw the industry. The more unreasonable you are, the more you people dig in to stop you doing it again. It's much smarter if you don't quite screw people into the ground and, instead, try and get as much as you can without upsetting people. But if you absolutely go for broke, and try and take as much as you can, you never get another chance."
The whole point is that the world doesn't need UMB. "There are alternatives," points out Penn, "people don't like being held to ransom, and they'll do anything to avoid it happening to them again."
Rambus has spent the last decade in litigation with DRAM companies, its potential customers. According to US stock analysts if Rambus succeeds in the litigation its shares could be $100 compared to their current level of $20 as Rambus claims $10bn in back royalties from the DRAM companies..
Recent decisions in the most recent case in the US District Court of the Northern District of California, under Judge Ronald M. Whyte have been favourable to Rambus. The case is Hynix Semiconductor vs Rambus Inc. But there is a long way to go before the US court systems' hierarchy of appeals is exhausted.
The case turns on whether Rambus failed to disclose its patents to a JEDEC committee engaged in setting standards for the DRAM industry. The patents relate to SDRAM and DDR DRAM, but not to subsequent products like DDR2 and DDR3.
Hynix argues that Rambus violated antitrust and fraud laws by failing to disclose its technology at meetings from 1992 to 1996, then changed patent applications to cover JEDEC specifications.
In 2006, the US Federal Trade Commission (FTC) ruled that Rambus wrongfully obtained patents, then used them to impose undeserved license fees.
The EC has said that Rambus deceptively failed to disclose patents during the standards-setting process without which Rambus could not have charged high royalties in a "patent ambush".
Rambus says that patent abuse can be claimed only under exceptional circumstances and that JEDEC, which set the DRAM standards, lacked defining detail in its patent policy.
Maybe the sheer legal grind and expense of the Qualcomm and Rambus legal cases will persuade US companies never again to go down the litigious route of trying to establish IP hegemony over an industry sector. Because that is what Rambus and Qualcomm are suspected of trying to do.
If American CEOs, in future, respond to the urgings of activist shareholders by saying: 'Look, I don't want years of litigation like Qualcomm and Rambus went through', then the long legal misery endured by Qualcomm and Rambus will do the high-tech world a big favour.