Sprawling allegations by Realtek Semiconductor of a “concocted” scheme between Broadcom Corp. and Avago Technologies to obfuscate their corporate structure “for tax and regulatory purposes” were never put to the test following an abrupt settlement last month in Delaware chancery court. Now, a standard essential patent owner is sounding a similar alarm in Texas. Nonpracticing entity Polaris Innovations says the "opaque" corporate structure at Qualcomm makes a group pleading appropriate — but should the court disagree, discovery is warranted. If history is any guide, the Irish entity will get its wish.
A recent settlement at the Delaware Court of Chancery left unanswered the question of whether Broadcom Corp. engaged in a “Singaporean scheme of arrangement” when joining forces with Avago Technologies, as alleged by Realtek Semiconductor.At issue, there, was a 2015 cross-license between Realtek and Avago Technologies and Realtek’s claim of standard essential patent, or SEP, holdup by Broadcom after it was acquired by Avago (see here). The role a $0 corporate reorganization at Broadcom played — thereby creating what Realtek called a “a gap in mutual ownership” — was never decided when Realtek agreed to dismiss the lawsuit last month, just weeks after it was filed.
In Texas, uncertainty over the role Qualcomm Inc. or QCI, plays in the manufacture and sale of its products has emerged.
Polaris Innovations is fending off a motion to dismiss by QCI who, along with Qualcomm Technologies Inc., or QTI, are accused of infringing patents declared essential to the JEDEC memory standard with their “Snapdragon” and “X Series” system-on-chip processors.
The November 2024 complaint by Polaris asserts QCI and its wholly owned subsidiary QTI “operate as a singular, unitary business enterprise and are, thus, jointly, severally, and communally liable for the acts of patent infringement.”
In a motion to dismiss last month, however, QCI countered that it engages in none of the accused conduct — which, it says, is tied to research, development, marketing and sales.
While conceding, in a footnote, “there are instances in which group pleading is permissible,” QCI says the instant dispute over Polaris’s US Patent Nos. 7,184,339, 7,499,371, 7,872,936 and 8,161,344 is not one of them.
“The Complaint contains no plausible factual allegations that QCI committed patent infringement by ‘making, using, selling’ the Accused Products,” QCI contends, it and QTI “are, in fact, separate businesses with separate functions.”
Polaris — an Ireland-based nonpracticing entity and subsidiary of Wi-LAN Inc., itself jointly owned by Quarterhill and Owlpoint Capital Management — fired back last week (see here) that if the wrong defendant is named, it is through no fault of its own. Instead, Polaris contends, the “opaque” corporate structure in place at Qualcomm is to blame.
“In this case, Polaris at least plausibly alleges infringement by QCI. For example, given that QCI is registered to do business in Texas, it is at least plausible that QCI performs some of the infringing activities, such as selling the accused products," it said.
Instead of dismissal, Polaris says, more discovery is needed to discern whether QCI should remain in the suit.
In support of its position, the patent owner draws heavily from the 2022 Western District of Texas decision in ACQIS v. Lenovo. The case, which Polaris deems “pertinent,” involved similar questions surrounding a different multinational conglomerate — Lenovo Group.
The China-based Lenovo argued that because it did not engage in the infringement alleged by ACQIS and because foreign conduct cannot constitute direct infringement, it and several subsidiaries were entitled to dismissal, leaving only Lenovo (United States) as a defendant.
US District Judge Alan Albright disagreed, deeming dismissal warranted only where it is “entirely implausible” that grouped defendants “acted as alleged.”
Crucially, he deemed allegations of an “obfuscated corporate structure” entitled to weight, per the 2014 decision in Zond v. Fujitsu, in which a Massachusetts federal judge said it would be “illogical” to allow a defendant to “escape liability because of its ability to keep its corporate structure confidential.”
That’s good news for Polaris, which, like ACQIS, is proceeding before Albright.
In pushing back on QCI’s assertion it is not a properly named defendant, Polaris says QCI's latest annual report with the US Securities and Exchange Commission “lumps together all of its corporate entities under the name Qualcomm.”
Moreover, Polaris says, the QCI website identifies QTI as operating “substantially all of our engineering, research and development functions, and substantially all of our products and services businesses, including our QCT semiconductor business.”
“But ‘substantially all’ is not ‘all’ and implies that QTI alone does not account for all ‘engineering, research and development functions’ and ‘products and services businesses’ attributable to Qualcomm. Indeed, this is why the Complaint states QTI ‘together with its affiliates, serves and performs substantially all of Qualcomm’s research and development efforts, its engineering operations, and its products and services businesses,’” Polaris observes.
“Notably,” the Polaris adds, “QCI is an affiliate of QTI.”
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