Qualcomm's Quandary


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By now the numbers are well known. 46,000: The number of relevant, occasionally case-shattering e-mails and documents Qualcomm failed to turn over during discovery in the patent infringement suit it brought against Broadcom. 200,000: The number of pages contained in those documents, of which Qualcomm claimed to be unaware. $8.6 million: The estimated cost of Broadcom's legal fees in Qualcomm Inc. v. Broadcom Corp., for which Qualcomm will be forced to foot the bill after Federal District Judge Rudi Brewster's none-too-pleased August 2007 order decrying the company's "deliberate plan to conceal evidence."

After presiding over a sanctions hearing, Federal Magistrate Judge Barbara Major was similarly indignant over what she deemed Qualcomm's "monumental and intentional discovery violation." With fiery orders from both judges, it was clear someone would have to pay.

Qualcomm, which declined to comment for this story, maintained it was not to blame for the unearthed e-mails. After fighting to preserve attorney-client privilege, Qualcomm filed four unsealed declarations in October 2007 in which employees exonerated the company while criticizing its outside attorneys. These declarations invoked a self-defense exception to the attorney-client privilege, and in a March order, Brewster lifted privilege. Now six of Qualcomm's outside attorneys--five from Day Casebeer Madrid & Batchelder and one from Heller Ehrman--will have the chance to tell outside counsel's side of the story. There's no telling what those hearings could reveal, but some experts expect an inside look at a case of discovery gone wrong.

"This has put a shiver down the spine of both inside and outside counsel," says Ken Withers, director of judicial education and content for The Sedona Conference. "The sanction orders may expose a tense and sometimes hostile relationship between inside and outside counsel when it comes to the conduct
of discovery in complex cases. The Qualcomm situation is unusual, but it provides a window on a common problem."


Standards and Sanctions
When Qualcomm sued Broadcom for patent infringement in October 2005, there was no inkling the case would be anything more than another patent action. Broadcom's defense hinged on Qualcomm's participation in the Joint Video Team (JVT), a standard-setting body.

JVT participants holding patents associated with the content of the standards--such as the patents Qualcomm sued over--must agree to certain terms, such as granting royalty-free licenses. Essentially, if Qualcomm had participated with the JVT in creating a video standard published in 2003, its lawsuit against Broadcom would be invalidated.

"Throughout the trial, [Qualcomm] kept up a drumbeat that it hadn't participated and that there was no evidence it participated," says David Rosmann, vice president of intellectual property litigation for Broadcom. "So the central defense of Broadcom failed because there was no evidence."

Then during trial in January 2007, a Qualcomm employee admitted under cross-examination to receiving e-mails from the JVT's mailing list before the standard was published. "This was the tip of the iceberg that led to everything else," says Jack Regan, a partner with Wilmer Hale, which represented Broadcom in the Qualcomm action.

Namely, it led to production of the 46,000 JVT-related e-mails Qualcomm hadn't turned over during discovery, which proved involvement in the JVT in 2002. The jury returned a verdict for Broadcom and criticized Qualcomm's "inequitable conduct." In turn, Brewster referred Qualcomm and its lawyers to Major for sanctions.

Major ordered the outside attorneys to the California state bar for sanctions. (That could change after they're allowed to break privilege, for which a Day Casebeer partner says it is "gratified.") She also ordered Qualcomm and its lawyers to participate in a court-run program to identify Qualcomm's failures. Filings in the so-called case review and enforcement of discovery obligations (CREDO) program, over which Major will preside, were expected April 10.

If nothing else, Major hopes the program "will provide a road map to assist counsel and corporate clients." According to Withers, one thing it could reveal is that the pitfall of discovery often lies in the relationship between inside and outside counsel. "As discovery itself has become more cumbersome and expensive, more sophisticated in-house counsel have been doing more to bring operations in house and reduce costs," Withers says. "That has created a conflict with outside counsel still under an obligation under the rules to certify [proper discovery conduct]."


Communication Breakdown
Broadcom maintains what happened in Qualcomm's suit was the fault of Qualcomm, not the discovery system. "Once you've read the courts' conclusions and findings here, you'll see this was not, at least in the courts' view, a simple oversight," Rosmann says. "This isn't discovery as usual; this isn't a typical case."

Still, the case--especially Major's January order--underscores the need for good e-discovery practices in eliminating chance of a Qualcomm situation.

"For the current 'good faith' discovery system to function in the electronic age, attorneys and clients must work together to ensure understanding and to determine how best to locate, review and produce responsive documents," Major wrote. "Attorneys must take responsibility for ensuring that their clients conduct a comprehensive and appropriate document search."

This call to action has driven both in-house and outside counsel to take notice and re-evaluate their e-discovery protocol. "I've received calls from law firms across the country talking about this case," says Michael Arkfeld, an e-discovery consultant with Arkfeld & Associates. "They say, 'We know [Qualcomm's outside lawyers] are very bright, highly credentialed lawyers from major law schools--how did they get into this kind of trouble?'"

Arkfeld believes the answer lies in the shaky transition from a paper to an electronic world. He says lawyers often don't understand all the issues associated with e-discovery, which can result in a disconnect between client and counsel.

Withers agrees that poor communication is at the root of the problem. "If anything is revealed from the attorney-client communications," he says, "I think the lack of attorney-client communications is going to be the most revealing."

Maintaining long-term, structured relationships with discovery counsel can bolster communication, Withers says. Another option is hiring in-house e-discovery experts who can get to know the inner workings of a company's electronically stored information. Software company Oracle Corp. has taken such steps.


Wake-Up Call
For companies less prepared than Oracle, Withers thinks the Qualcomm debacle may be just the jolt they need to overhaul not only rusty processes but also interactions with e-discovery counsel.
"We're going to have to see an awful lot of transparency," he says. "Discovery conducted more or less secretly or unilaterally makes these kinds of situations almost inevitable."

That said, companies can take comfort that absent intent and negligence, they aren't likely to face Qualcomm's dilemma. "You're going to miss data, but if you make a good faith effort to look for information and disclose it to the other side, the court will not be extremely harsh with you," Arkfeld says. "But here they didn't bother looking for it."

Or, as Broadcom contends and the courts seem to back up, Qualcomm and its lawyers made a concerted, calculated effort not to find the documents. "Cases are going on all over the country with this kind of information and nothing like this occurs," Regan says.

Withers concedes that many aspects of the case make it unusual, such as the extent of the misconduct and the fact that Qualcomm was the plaintiff. Still, its novelty does not mean it should be ignored.
"Bad cases not only make the law for the most part, but bad cases are what get into the news," he says. "Qualcomm is the worst-case scenario, but it's also the wake-up call. Nobody wants to be the next Qualcomm."

Associate Editor

Melissa Maleske

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