Qcom's Complaint against MOT--in detail I have just obtained a copy of the Complaint for Declaratory Relief, which was filed July 20th in Case No. 99-CV-1488-1EG CGA. Most of the following is a recitation of what's in the pleading.
On Sept. 26, 1990, the two companies entered into a DS-CDMA Technology Agreement and related Patent License Agreement (“PLA”). MOT licensed Qcom with respect to the following MOT patents:
4,385,295
4,412,217
4,523,155
4,701,759
4,851,829
5,075,684
5,157,391
5,193,223
5,200,655
5,258,751
5,459,774
Qualcomm alleges that both companies cross-licensed any patents (in addition to their own) that either has the right to license which are technically or commercially necessary to make and sell certain CDMA and Dual-Mode wireless products. In Nov. 1995, MOT acquired from Telular, Inc. the right to sublicense certain Telular patents that MOT and Telular claim are technically or commercially necessary and essential to make and sell WLL products employing CDMA technology. [As an aside, Valueman says MOT owns 15% of Telular.]
The pleading goes on to allege that Qualcomm repeatedly asked for a formal sublicense of the Telular patents. Instead, in early 1997, MOT filed suit against Qcom asserting infringement of MOT patents. The cause number of lead case: 97-CV-0372-J, consolidated with 97-CV-0489-J, -0615-J and –1514-J before Judge Napoleon A. Jones, Jr. Q asserts--as defensive matter to MOT's claims--that all of the MOT Patents as to which MOT alleges infringement are licensed to Qcom by the PLA. Qcom alleges that MOT is “contractually estopped” from asserting the infringement claims. [I said a week ago that MOT would be estopped from claiming infringement if Q's is right that the licenses cover it; I just didn't use the technical term that it is estoppel by contract.]
Under Section 3.01 of the PLA, Qcom alleges it is entitled to terminate the licenses and rights granted by Qcom while retaining the licenses and right granted by MOT if: (1) MOT breaches the PLA; (2) Qcom notifies MOT of such breach; and, (3) MOT fails to cure the breach or breaches.
Qualcomm alleges two breaches of the PLA by MOT: (1) asserting and continuing to prosecute the infringement claims against Qcom; and, (2) refusing to grant Qcom a sublicense to the Telular patents. Qcom says it has repeatedly notified MOT that its is breaching the PLA for two years, but MOT has failed to cure the breaches by dismissing the infringement claims and granting the Telular sublicense.
Accordingly, on July 19, 1999, Qcom sent a letter informing MOT of Qcom's intent to terminate all licenses and rights granted by Qcom to MOT under the PLA. Specifically, the following Qcom patents are mentioned:
5,103,459
5,309,474
5,414,796
5,504,773
5,544,196
5,600,754
5,659,569
5,841,806
Qcom further alleges that after termination, MOT would be unable to continue to manufacture, use import, offer for sale or sell all of its CDMA-based wireless products, including subscriber units (such as the StarTac ST7760 and MicroTAC SC-725), components such as ASIC's, infrastructure equipment (such as cellular base stations) or test equipment previously licensed under the PLA.
The pleading requests a declaration of Qcom's rights under the PLA and its rights and duties after termination of the license to MOT, declaration of the right to terminate MOT's rights (while retaining all licenses and rights granted by MOT to Qcom), declaration that after termination MOT is no longer licensed to use the above numbered patents; declaration that after termination, certain actions by MOT would constitute patent infringement, for attorney fees and costs. Please note that a jury has been demanded.
My comments:
The Telular allegation is very interesting; and it is something which has not been mentioned in the media. As with just about every suit based on a contract, the language in the contract is crucial. The Complaint does not quote the particular language, but the issue will be whether the sublicense language covered after-acquired patents, that is, patent rights which were not in existence at the time of the PLA in 1990 but were acquired or created afterwards.
Second, the specific language of Section 3.01 is also crucial. Does it specifically allow for retention by one party and termination of the other? The fact that one cannot terminate immediately but only upon adequately complaining about a breach and giving some time to cure that breach, may well support the idea that there could be a termination of the breaching party with the non-breaching party retaining rights. My guess is that the contract does not specifically address the matter, since the company is asking for the Court to determine its rights. I can certainly see damages for breach of the contract but terminating only one part of a contract still troubles me. Nevertheless, what is a reasonable result when a party licenses a patent that and then sues for breach of the same patents? I would imagine, under the right circumstances, a court could terminate the benefits to the breaching party. I don't, however, see a pleading based on equitable grounds, purely contractual.
What I would like the thread to address is the nature of the patents received from MOT and whether those patents cover MOT's infringement allegations? The problem is I do not recall the MOT pleading being posted anywhere to compare.
Does anyone know the particular Telular patent involved? I wonder if it only deals with WLL then whether the refusal to license—even if mandatory under the PLA—would cause the right to terminate the entire licensing agreement. The problem we have is that without the contract and all the relevant pleadings, there is not much way to figure out how good the claims are either way. Given the fact that the market has failed to respond in any meaningful way one way or another and brokerage firms have lawyers that look at this stuff, it appears that the street does not think there will be a major negative impact on either of the litigants. |
