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Case5:00-cv-20905-RMW Document4092
Filed12/05/11 Page1 of 91
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KENNETH L. NISSLY (SBN 77589) knissly@omm.com SUSAN van KEULEN (SBN 136060) svankeulen@omm.com SUSAN ROEDER (SBN 160897) sroeder@omm.com OMELVENY & MYERS LLP 2765 Sand Hill Road Menlo Park, CA 94025 Telephone: (650) 473-2600 Facsimile: (650) 473-2601 [Additional counsel listed on signature page.] Attorneys for Plaintiffs HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR MANUFACTURING AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH, Plaintiffs, v. RAMBUS INC., Defendant.
Case No. C-00-20905 RMW HYNIXS OBJECTIONS TO RAMBUS INC.S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW Date: Time: Ctrm: Judge: December 16, 2011 9 AM 6 Honorable Ronald M. Whyte
HYNIXS OBJECTIONS TO RAMBUS INC.S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW C-00-20905 RMW
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INTRODUCTION AND GENERAL OBJECTIONS In this remand proceeding, Hynix Semiconductor Inc., Hynix Semiconductor America Inc., Hynix Semiconductor Manufacturing America Inc., Hynix Semiconductor U.K. Ltd., and Hynix Semiconductor Deutschland GmbH (collectively Hynix) objects to the use of this Courts findings of fact and conclusions of law because they have been vacated by the Federal Circuit in Hynix II. Hynix further objects to all proposed findings by Rambus as barred by collateral estoppel based upon the holdings of Micron II and articulated in Hynixs briefs regarding issues on remand, which are incorporated herein by reference. Hynix further objects to Rambuss proposed conclusions of law for the reasons set forth in Hynixs briefs regarding issues on remand, which are incorporated herein by reference. To the extent Rambus has proposed modifications to this Courts findings of fact, Hynixs specific objections are set forth in the attached Exhibit A. The Courts original findings and conclusions appear in plain text; Rambuss proposed additions and modifications to the Courts January 2006 Findings are indicated by underlined blue text; Rambuss proposed deletions are indicated by stricken-through red text; Hynixs objections to Rambuss proposed modifications are shown in bold text.
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Dated: December 5, 2011 By: /s/ Susan van Keulen Susan van Keulen KENNETH L. NISSLY SUSAN van KEULEN SUSAN ROEDER OMELVENY & MYERS LLP KENNETH R. OROURKE WALLACE A. ALLAN BELINDA M. VEGA OMELVENY & MYERS LLP THEODORE G. BROWN III JULIE J. HAN TOWNSEND and TOWNSEND and CREW LLP Attorneys for Plaintiffs HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR MANUFACTURING AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH
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EXHIBIT A
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FINDINGS OF FACT AND CONCLUSIONS OF LAW WITH RAMBUS MODIFICATIONS C-00-20905 RMW
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH, Plaintiffs,
Case No. C-00-20905 RMW FINDINGS OF FACT AND CONCLUSIONS OF LAW ON UNCLEAN HANDS DEFENSE WITH RAMBUS INC.S PROPOSED MODIFICATIONS [ANNOTATED VERSION]
v. RAMBUS INC., Defendant.
Hynixs unclean hands defense to Rambuss patent infringement claims was tried before the court on October 17 - 19 and October 24 - November 1, 2005. The essential issues were (1) whether Rambus adopted a document retention plan in order to destroy documents in advance of a planned litigation campaign against DRAM manufacturers and (2) whether in light of any such conduct, the court should dismiss Rambuss patent claims against Hynix as a sanction for unclean hands. The court now issues its Findings of Fact and Conclusions of Law.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5,953,263 5,954,804 5,995,443 6,032,214 6,032,215 6,034,918 6,035,365 6,038,195 6,067,592 6,101,152 6,324,120 6,378,020 6,426,916 9/14/99 9/21/99 11/30/99 2/29/00 2/29/00 3/7/00 3/7/00 3/14/00 5/23/00 8/8/00 11/27/01 4/23/02 7/30/02 A. 1.
I. The Current Litigation
FINDINGS OF FACT
On August 29, 2000, plaintiffs Hynix Semiconductor America, Inc., Hynix
Semiconductor, Inc., Hynix Semiconductor UK, Ltd, and Hynix Semiconductor Deutschland, GmbH (collectively Hynix)1 filed a complaint, later amended, against Rambus Inc. (Rambus) that in part sought a declaratory judgment of non-infringement, invalidity, and unenforceability of eleven Rambus patents. In February 2001, Rambus filed counterclaims asserting that Hynix infringed those eleven patents. Hynix subsequently answered the counterclaims and asserted various defenses. Rambus subsequently amended its counterclaims to add four additional patents. 2. The patents that have been asserted by Rambus in this case and their issue dates
are set out in the following table: Patent 5,915,105 Issue Date 6/22/99 Title Integrated circuit I/0 using a high performance bus interface Synchronous memory device having a programmable register and method of controlling same Synchronous memory device having an internal register Synchronous memory device Method of operating a synchronous memory device having a variable data output length Synchronous memory device utilizing two external clocks Method of operating a memory having a variable data output length and a programmable register Dual clocked synchronous memory device having a delay time register and method of operating same Synchronous memory device having a delay time register and method of operating same System having a synchronous memory device Method of operating a synchronous memory device Memory device having a variable data output length System having double data transfer rate and integrated circuit therefor Memory device having a variable data output length and a programmable register
Hynix was referred to as Hyundai prior to Hyundais merger with LG Semiconductor in 1999.1999.
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Patent 6,452,863 3.
Issue Date 9/17/02
Title Method of operating a memory device having a variable data input length
All of the patents-in-suit are continuation, continuation-in-part, or divisional
applications based on a single parent application, serial number 07/510,898 (898 application). 4. In January 2005, Hynix moved for leave to add the defense of unclean hands to its
pleadings. In an order dated March 7, 2005, this court granted that motion. In a separate order of the same date, the court ordered that Hynixs unclean hands allegations would be considered by the court in a separate, initial phase of the trial of the parties respective claims. 5. After conducting a bench trial, the Court rejected Hynixs unclean hands defense,
finding that Rambus did not have a duty to preserve evidence at the time of the alleged document destruction; that Rambus did not act in bad faith; and that Rambuss conduct did not prejudice Hynix, regardless of whether Rambus or Hynix had the burden of proof on prejudice. See generally Hynix Semiconductor Inc. v. Rambus Inc., 591 F. Supp. 2d 1038 (ND. Cal. 2006). HYNIX OBJECTION TO PROPOSED FINDING 5: Not supported in the record; Rambus inappropriately cites a vacated decision. 6. On appeal, the Federal Circuit held that this Court applied an incorrect legal
standard in determining when Rambuss duty to preserve evidence arose, and remanded for reconsideration of the spoliation issue under the framework set forth in Micron II Hynix Semiconductor Inc. v. Rambus Inc., 645 F.3d 1336, 1355 (Fed. Cir. 2011) (Hynix II) (citation omitted); see also Micron Technology, Inc. v. Rambus, Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011) (Micron II). The Federal Circuit declined to opine on the correctness of this Courts findings of no bad faith and no prejudice. Hynix II, 645 F.3d at 1347 n.2. HYNIX OBJECTION TO PROPOSED FINDING 6: Mischaracterizes the Federal Circuit holding in Hynix II by implying that the Federal Circuit approved this Courts findings of no bad faith and no prejudice; the Federal Circuit vacated those findings. See, Hynix II, 645 F.3d at 1347.
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B. 57.
The Farmwald/Horowitz Patent Applications Rambus was founded in 1990 by two professors, Dr. Michael Farmwald and
Dr. Mark Horowitz, who had been working together to address the increasing gap between microprocessor performance and dynamic random access memory (DRAM) performance. Trial Transcript (hereinafter Trial Tr.) 600:13-601:5; 1341:15-1343:2; 1540:12-19; HTX 005.001.2 68. From 1990 to the start of 2005, Geoffry Tate was the Chief Executive Officer of
Rambus. Tate is presentlyAt the time of the 2005 unclean hands trial, Tate was the Chairman of the Board at Rambus. Trial Tr. 1226:9-16. 79. On April 18, 1990, Farmwald and Horowitz filed the 898 application. Trial Tr.
at 364:11-365:19; 600:20-601:8; HTX 005.001. 810. The 898 application resulted in a number of continuation and divisional patent
applications (Farmwald/Horowitz family). Rambus received its first issued United States patent resulting from the 898 application in September 1993. The patents that are at issue in this case resulted from this process. HTX 005.001. 911. Rambus retained Blakely, Sokoloff, Taylor & Zafman (BSTZ) as outside
patent counsel from approximately 19811991 through sometime in 2001 or 2002 to prosecute Rambus patent applications, including many applications from the Farmwald/Horowitz family. Trial Tr. 784:14-785:2. Lester Vincent, Scot Griffin, and Roland Cortes were patent prosecutors at BSTZ who worked on the Farmwald/Horowitz family of applications. Trial Tr. 784:14-785:2; 1592:22-1593:9; 1603:14-1604:11. 1012. The first of the patents that Rambus has asserted against Hynix in this action issued on June 22, 1999. Rambuss Answer to Second Amended Complaint and Amended Counterclaim, filed 11/25/02, at 17-19.
HTX _____ refers to Hynixs trial exhibit number _____; RTX _____ refers to Rambuss trial exhibit number _____.
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C.
Rambuss RDRAM Technology
1113. Rambus does not manufacture its own products, rather, it licenses its intellectual property to DRAM manufacturers and collects royalties. Trial Tr. 1250:25-1251:2. As a company that generates revenue from its intellectual property alone, intellectual property protection is necessarily important to Rambus. 1214. In the 1996 - 1999 time frame, Intel Corporation planned to use Rambuss RDRAM (Rambus Dynamic Random Access Memory) technology in its next generation of chipsets to be used with its microprocessors. Trial Tr. 1237:20-1239:1. Because Rambus does not manufacture products, it relied upon DRAM manufacturers to license Rambuss intellectual property and produce RDRAM for use in Intels products. Trial Tr. 1251:3-6. 1315. Rambus referred to the RDRAM production by licensed DRAM manufacturers as the Direct RDRAM ramp. Trial Tr. 1238:4-8; 1330:21-24. Direct RDRAM licensees were granted a narrow license to produce RDRAM. Trial Tr. 1289:1-16. These licenses generally did not permit licensees to utilize Rambus intellectual property for purposes other than producing RDRAM pursuant to Rambuss specifications. Other uses of Rambuss technology were referred to as non-compatible uses, because they were non-compatible with the RDRAM specifications. Trial Tr. 1356:22-1359:24. 16. Before the late 1996 agreement between Intel and Rambus for the use of RDRAM
in next-generation chipsets, Intel already planned to use SDRAM-compatible chipsets. SDRAM was not in the performance range that would make it competitive with RDRAM. DDR SDRAM was closer in performance to RDRAM. Intel did not decide to support an alternative DDRcompatible chipset for PC desktops until 2000 or after. Trial Tr. 1354:24-1355:6. HYNIX OBJECTION TO PROPOSED FINDING 16: Irrelevant; misstates the record. D. Rambuss Participation in JEDEC
1417. Between 1992 to late 1995 or early 1996, Rambus was a member of the Joint Electron Device Engineering Council (JEDEC). Trial Tr. 786:21-795:8; 1148:11-12; 1161:1220.
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1518. Richard Crisp, a program manager for Rambus, was one of Rambuss representatives to JEDEC and attended JEDEC meetings on behalf of Rambus from 1992 to late 1995. Trial Tr. 1148:8-11. Billy Garrett was Rambuss other JEDEC representative. RTX 311; RTX 312. 1619. Crisp and Garrett submitted trip reports following each meeting of JEDEC they attended. Crisp took a Macintosh laptop computer with him and took notes electronically. He later distributed his JEDEC trip reports to members of the Rambus executive team and others in the sales division. 1720. Between 1992 and late 1995 or early 1996, Crisp, Tate, Tony Diepenbrock (inside patent counsel) and other Rambus executives and employees were informed that Rambuss participation in JEDEC might pose enforcement problems for some of its patents based on equitable estoppel for not disclosing to JEDEC Rambuss potential patent coverage of products (non-compatible with RDRAM) conforming to JEDEC standards. Trial Tr. 1156:4-1163:22; HTX 066; HTX 078; HTX 225. Rambus was also informed of this possibility by one of its outside patent attorneys, Lester Vincent. Trial Tr. 785:3-804:7; HTX 192. This concern was discussed within Rambus. Id. E. MoSys License
1821. In 1996, Rambus initiated patent licensing negotiations with Mosys. Mosys had been founded by two of Rambuss engineers and, according to Rambus, the Mosys product shared many characteristics with Rambuss products. Trial Tr. 1382:13-1384:17. Rambus wanted to avoid any legal battle with Mosys because litigation would have been disruptive, expensive, and likely unnecessary; Rambus expected to beat them in the marketplace regardless. Trial Tr. 1384:5-15. HYNIX OBJECTION TO PROPOSED FINDING 21: Irrelevant; mischaracterizes the record. 1922. Patent negotiations, which Tate stated Rambus was poorly equipped to handle (Trial Tr. 1385:13-16), resulted in MoSys taking a license from Rambus. However, Rambus determined that since patent licensing negotiations were more complex than it had originally
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thought, it needed to hire someone familiar with negotiation of patent licenses to handle future licensing negotiations. Trial Tr. 1385:17-24. F. Relationship with Hynix
2023. Prior to 1998, Rambus and Hynix (then Hyundai) had a licensing agreement that included an Other DRAM provision, which apparently allowed Hynix to make non-compatible DRAMs using Rambus Interface Technology for a 2.5% royalty. Trial Tr. 1295:19-1305:11; HTX 004.004; HTX 087. 2124. In July 1998, Rambus attempted to remove or amend the Other DRAM provision. Id. The reasons apparently were that Rambus wanted Hyundai to increase its marketing effort and productize the RDRAM device and to be able to claim infringement by Hyundai if it continued to work on SL DRAM (Synchronous Link DRAM). Id.; Trial Tr. 1038:21039:22. 2225. Thereafter, Hynix merged with LG Semiconductor (LGS). At the time of the merger, both companies had licenses with Rambus. Id. Hynix attempted to affirm the 1995 Hynix-Rambus license, asking Rambus to agree to use the royalty rate specified in the HynixRambus license. Id. 2326. Rambus apparently decided to treat the LGS license as governing the relationship between Rambus and the merged company. That agreement apparently did not have an other DRAM provision. Trial Tr. 1038:2-1039:22. G. Rambus Formulates its Licensing and Litigation Strategy 1. Rambus Hires Joel Karp to Develop a Backup Licensing Strategy
24.27 Rambus hired Joel Karp in October 1997 to assess its patent portfolio, determine if non-compatible chips infringed the patent portfolio, develop licensing strategies for infringing chips, and negotiate with companies that built and sold such chips. Trial Tr. 356:22-357:23; RTX 080; HTX 091. In advance of the commencement of Karps employment, Geoff Tate, Rambuss CEO, sent an e-mail to Rambus executives describing Karps role as to prepare and then to negotiate to license our patents for infringing drams (and potentially other infringing ics). HTX 091; RTX 080.
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28.
Whether Rambus would actually pursue non-compatible licensing was unclear at
this time. Tate observed that patents are really just a backup line of defense. RTX 080. He further explained: the #1 strategy for winning must continue to be having the best solution and delivering it on time, on spec, within cost commitments and satisfying our customers needs better than the competitors. I think we are well positioned to do this but we have a LOT to do to complete our programs/commitments on Direct Rambus and Concurrent Rambus over the next several quarters. RTX 080. As Allen Roberts, Rambuss vice president of engineering, testified, the discussion of non-compatible licensing within Rambus in 1998 was sort of come and go, never really went anywhere, and never really took ... any substance. Trial Tr. 1555:24-1556:8. HYNIX OBJECTION TO PROPOSED FINDING 28: Argumentative; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel; inconsistent with the record as set forth in Hynix Proposed Findings F43-125. 29. One aspect of the uncertainty was the unavailability of infringing devices.
Rambus executives knew that potentially infringing devices would have to be analyzed to assess whether there was infringement before any assertion of patent rights could be made. For instance, before Tate would consider non-compatible licensing negotiations, someone would need to demonstrate to him that we had patents that covered the inventions those products that were in the market actually infringed. And those products needed to be ... real products that were in production, because if they were just prototypes, there wasnt much worth in pursuing that kind of thing because prototypes can change. Trial Tr. 1392:2-11. See also HTX 098.002 (proposed strategy reviewed at meeting with outside counsel in February 1998, stating that [o]nce on the market, Rambus will purchase the competing product before determin[ing] what its next steps will be). In October 1997, Tate stated in an email that the strategy into downplay the whole
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infringement/IP issue until there is actual infringement. RTX 080. Tate testified that, as of October 1997, Rambus was not ... able to show that [Rambuss inventions] were actually being used, and we didnt want to be having people go out publicly saying that we thought there was infringement if we couldnt actually back that up or prove it. Trial Tr. 1390:18-1391:4. HYNIX OBJECTION TO PROPOSED FINDING 29: Argumentative; improper reference to a contingency (unavailability of infringing devices) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel; inconsistent with the record as set forth in Hynix Proposed Findings F43-125. 30. Further, any licensing strategy was contingent on Rambuss patent portfolio as
well as changing business conditions. Rambus had not determined whether it would make business sense to seek licenses for non-compatible products. Tates goal was to get our patents in place and then see if it made business sense for us even to enforce those patents, and if so, go forward with the licensing plan, and if we did have a licensing plan, we want to think through what the steps would be and where it could lead us. Trial Tr. 1256:18-1257-12. One issue Rambus would need to consider was that these companies who would be infringing in the DRAM field were the same companies that we needed to work with in order to make the RDRAM successful, among other issues. Trial Tr. 1391:8-12. Tate believed that Rambus DRAM ... was on a good trajectory, and if the Rambus DRAM was going to be the bulk of the market, perhaps it wouldnt be worth the effort and the friction in order to pursue our patent [rights] with respect to infringing DRAMs. Trial Tr. 1393:3-9. HYNIX OBJECTION TO PROPOSED FINDING 30: Argumentative; improper reference to contingencies (Rambus patent portfolio; business conditions) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999)
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and barred by collateral estoppel; inconsistent with the record as set forth in Hynix Proposed Findings F43-125. 31. Hynix agrees that as of mid-1998, Rambus believed that RDRAM would become
the dominant DRAM product in the personal computer industry and would, for all practical purposes, be the only commodity DRAM. Trial Tr. at 27:18-22. 40:17-21 (Hynix counsel). HYNIX OBJECTION TO PROPOSED FINDING 31: Not supported in the record; inappropriate citation to Hynix opening statement. 2532. Before his employment at Rambus, Karp was employed by Samsung from September 1990 through July 1997. When he left Samsungs employment, he was a senior vice president. During his employment with Samsung, Karp attended JEDEC meetings on Samsungs behalf, describing his role as Samsungs mouthpiece. Karp met Richard Crisp, Rambuss JEDEC representative, at JEDEC meetings. Trial Tr. 136:16-25. 2633. Karp had learned through his experience that the DRAM industry was very litigious. Trial Tr. 138:23-134:3. 2734. While at Samsung, Karp participated in licensing and litigation activities on behalf of Samsung. Trial Tr. 138:2-22. In one action against Texas Instruments (TI), Karp submitted a declaration asserting that TI was subject to equitable estoppel because it was contrary to industry practice for an intellectual property owner to remain silent during the standard setting practiceprocess if its intellectual property covered the standard being considered. Trial Tr. 150:12-151:7. 2835. On January 7, 1998, Tate met one-on-one with Karp. Karp was instructed to prepare a plan for licensing infringing DRAMs for presentation to the Rambus Board of Directors in early March. That strategy was to include a litigation strategy. Trial Tr. 170:2-171:12; HTX 013.020; see also HTX 395.02 (Cooley Godward attorney Peter Leals notes from a January 13, 1998 meeting with Tate and Karp stating Want litigation strategy by March board meeting. Six weeks from now.). 36. It is undisputed that as of early 1998, Rambus did not believe that it had an issued
patent covering SDRAM. Trial Tr. 26:15-18 (Hynix counsel argument); Trial Tr. 1254:14-16
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(Tate testimony). Nor had Rambus completed its infringement analysis of DDR SDRAM. Karp wrote in his notebook, in an entry dated January 28, 1998: DDR samples still a pipe dream. HTX 013.027. It was not until sometime in 1999 that Rambus came to believe that it could show actual infringement. Trial Tr. 1391:13-17. HYNIX OBJECTION TO PROPOSED FINDING 36: Improper reference to belief regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel; inconsistent with the record as set forth in Hynix Proposed Findings F43-125; not supported by the record; inappropriate citation to argument. 37 Tate had an ambitious list of twenty-seven top level goals for 1998 that focused
predominantly on the success of RDRAM. Under the heading Successful Product/Project Completion and Planning/Tracking Process, Tates first three goals were Concurrent RDRAM 600Mhz MP:18M early 98 ...., Direct Rambus 1.0 memory system implemented on spec, on cost, on schedule for production ramp late 98, and Deliver RACs in spec when customer needs with a profit on implementation fees HTX 094. Tates next twelve goals likewise focused on making RDRAM successful, such as implement[ing] project and program management process[] similar to Intels and winning or gaining momentum in a variety of markets including inter alia Desktop PC Main Memory, Mobile PC Main Memory, Intel server/workstations, Handheld/PDAs, PC Multimedia market segment, home game system market segment, Consumer digital video market segment, Microsoft Web TV next generation, Sun Ultrajava MPU, Networking, and DSP market segment. HTX 094. HYNIX OBJECTION TO PROPOSED FINDING 37: Incomplete summary of HTX 094; irrelevant; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel.
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2938. According to Tates top level goals for 1998, Rambuss ITIP goals included positioning Rambus intellectual property for the future. Under the heading Position Rambus for the Future Including IP, Tates top level goals included the following: Develop and enforce IP A. Get access time register patent issued that reads on existing SDRAM B. Broad patents in place for Direct Rambus, next generation signaling; and chiptochip-to-chip interconnect C. Get all infringers to license our IP with royalties > RDRAM (if it is a broad license) OR sue. HTX 094. This goal was the eighteenth among the twenty-seven goals. Other goals under the
9 same heading of Position Rambus for the Future Including IP were: Identify key advanced 10 technology development required ...; Determine direction for Rambus `whats next to expand 11 past our core business ...; and Plan and begin implementation of how to make Rambus a 12 consumer brand .... HTX 094. 13 HYNIX OBJECTION TO PROPOSED FINDING 38: 14 Incomplete summary of and mischaracterizes HTX 094; irrelevant; improper 15 reference to an individuals state of mind regarding reasonable foreseeability of litigation, 16 which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; 17 inconsistent with Micron II and barred by collateral estoppel. 18 2. 19 39. 20 needed legal assistance to address a potential conflict of interest presented by the law firm 21 Townsend, Townsend & Crews simultaneous representation of Rambus and the SLDRAM 22 consortium, which was trying to design a rival product to compete with RDRAM in the 23 marketplace. Trial Tr. 402:13-403:15, 1674:11-21. Karp also needed help thinking through a 24 licensing strategy. There was no resource for Karp inside Rambus at the time, so he looked for an 25 outside law firm. Trial Tr. 393:12-394:7. 26 27 28
Rambus Meets With Cooley Godward Attorneys
After joining Rambus, Karp realized that he needed legal advice. Karp also
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HYNIX OBJECTION TO PROPOSED FINDING 39: Argumentative; misstates the record; Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 3040. In late 1997, Karp called Diane Savage, an attorney at the law firm of Cooley Godward (Cooley) with whom he had worked before coming to Rambus, seeking a recommendation for someone to help set up a licensing program. Trial Tr. 393:22-394:10. Attorney Savage, who was a partner in Cooleys technology transactions group, introduced Karp to her colleagues John Girvin, Dan Johnson, and Peter Leal. Trial Tr. 394:17-22; 585:16-19. 3141. In January and February 1998, Karp began to meet with the Cooley lawyers to discuss issues relating to patent licensing. HTX 007; HTX 376; HTX 395. At the January 13, 1998, January 15, 1998, and February 12, 1998 meetings between Cooley attorneys and Rambus executives Tate and Karp, the discussion about a licensing strategy included formulating a litigation strategy as a part of a licensing strategy. HTX 376, HTX 395, HTX 403. 3242. On January 13, 1998, Karp and Tate met with Cooley attorney Leal, an attorney specializing in licensing matters. On January 15, 1998, Karp and Leal met again. HTX 376, HTX 395. 3343. At the January 13, 1998 meeting, the parties discussed the concept [n]o negotiation w/out full strategy and prep. HTX 395 (Leals hand-written notes). If licensing negotiations were to commence, Rambus wanted to be prepared to go in and quickly proceed to either a license or litigation. Further, Rambus was looking for a royalty rate that tells [the DRAM industry] it costs to infringe. Rambus wanted to [t]ry win-win first; do not prejudice g f for litigation. HTX 395. Tate did not recall the specifics of the meeting, but testified that his general thinking at this time was to look and see what makes sense. Trial Tr. 1263:10-25. He testified: [I]f were going to do something, we want to think it through. But were not going to do anything without having thought it through and through and without ... my say so. Trial Tr. 1263:10-25. At that time, Tate hadnt made a decision that [Rambus] wanted to proceed to licensing. Trial Tr. 1264:21-22.
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HYNIX OBJECTION TO PROPOSED FINDING 43: Irrelevant; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 3444. At the January 15, 1998 meeting, Karp and Leal discussed a proposed sequence for negotiating meetings with potential infringers, including roles Rambus executives and Cooley attorneys might play in negotiations and what information would be presented at each meeting, labelledlabeled in Leals notes as the Middle Ground, delaying meeting and the Pound Sand meeting. Rambus at this time was very, very sensitive to costs. HTX 376. Leal noted that [t]hey are spartan in their offices and even the CEO has a small cubicle and there are no secretaries, to save costs. HTX 376. So Joels message is to use budget selectively until first license payments are booked. HTX 376. HYNIX OBJECTION TO PROPOSED FINDING 44: Argumentative; improper reference to an uncertainty (costs) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case. 3545. On February 12, 1998, Karp met with three Cooley attorneys,: Johnson, Girvin, and Leal. Leal, a licensing attorney, reported to Girvin, head of the Information Technology Patent group. Trial Tr. 586:9-16. Girvin, in turn, reported to Johnson, head of Cooleys litigation group. 3646. The purpose of the February 12, 1998 meeting was to develop the licensing strategy Tate had requested at the one-on-one meeting between him and Karp. HTX 097; HTX 403. The licensing strategy envisioned optimizing Rambuss notice to potential infringers, a negotiation strategy and a litigation strategy. HTX 403. 3747. As of the February 12, 1998 meeting, the Cooley attorneys were aware of Karps draft licensing term sheet, which specified that Rambus would charge a 5% running royalty for a license to make non-compatible DRAMs. RTX 088. Karp acknowledged that these royalty rates will probably push us into litigation quickly. HTX 097. There is no evidence, however, that
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Rambus ever decided to seek or actually sought the 5% royalty rate contemplated in the draft term sheet. HYNIX OBJECTION TO PROPOSED FINDING 47: Misstates the evidence. See, Hynix Proposed Findings F269, F284-287. 3848. At the February 12, 1998 meeting, Johnson expressed concern about Rambus having no document control system in place. Q. Okay. The next bullet point says Make ourselves battle ready. Do you see that, thats the first part of it? A. Correct. Q. Do you recall somebody saying words to that effect at this meeting? A. That sounds like something I would do. Q. And what did you mean by that phrase? A. Very simply, Rambus was essentially an old start-up, as far as I was concerned. It had been around probably eight, nine years. They had, as best I could tell, no central document control system in place ... and if you want to have a licensing program, if you end up filing lawsuits against anybody, putting in place a system that gets your documents organized. *** Q. And the last sentence in this bullet point says Need company policy on document retention policy. Do you see that? A. Correct. Q. Is this something you said at this meeting? A. Absolutely. Q. . . . . What led you to say that to Rambus? A. Typical start-up. As I said, they didnt have a policy, as best I could tell. I cant recall if somebody mentioned it to me at this point in time, but Id just litigated a case where a company was, either had to spend, I cant remember if it was $60,000 or $100,000 trying to retrieve data, and the President was screaming. And theyd gone back through and recycled and they didnt have a document retention policy. They got accused of spoliation. So you get yourself a document retention policy. Trial Tr. 1675:21-1678:20.
27 28
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3949. Johnson advised Rambus to gather critical company documents to start putting together an electronic database and to adopt a company policy on document retention. HTX 097. Johnson testified that he recommended adopting a document retention policy for three principal reasons. First, a document retention policy would reduce the expense of retrieving electronic data stored on obsolete or corrupted back-up media. Trial Tr. 1676:24-1677:10. Second, a document retention policy would reduce search costs in the event that Rambus was someday required to respond to subpoenas or document requests that might possibly be issued in connection with future lawsuits or investigations. Trial Tr. 1677:11-14. Third, the absence of a company-wide policy for the retention and destruction of documents might be cited by a future litigant as evidence of spoliation. Trial Tr. 1678:10-20. 50. There is no evidence that Rambus contemplated adopting a formal document
retention policy before Johnson advised Rambus to do so. The evidence shows that the discussions of the policy were initiated by Johnson. HYNIX OBJECTION TO PROPOSED FINDING 50: No citation to the record; mischaracterizes the record. 4051. Johnson testified that the advice he gave Rambus regarding document retention was commonplace and that he probably gave similar advice to at least eight to ten start-up companies in the Silicon Valley. Trial Tr. 1678:21-1679:9. 4152. At this February 12, 1998 meeting, Johnson also advised Rambus to instruct its patent prosecution attorneys to clean up their files for issued patents to ensure that the file was the same as the official file, a recommendation that Johnson characterized as standard advice. Trial Tr. 409:18-410:1; 1679:10-1680:3; HTX 097. 4253. On February 23, 1998, Cooley presented its Proposed Strategy for Rambus. HTX 098. The document briefly outlines a licensing strategy, starting with criteria for selecting initial targets for negotiation. The proposed strategy progresses to a discussion of a tiered litigation strategy. One of the basic assumptions was that Rambus would not initiate action until a competing product enters the market, at which time Rambus would conduct reverse engineering and determine what action to take next. HTX 098.002.
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4354. Cooleys proposed strategy offered two optionsthree options [i]n the event that licensing discussions do not result in resolution: first, pursuing a breach of contract remedy against existing licensees; second, initiating a patent infringement suit against an unlicensed competitor; third, bringing an action against SLDRAM. HTX 098.002. With respect to possible litigation, the proposed strategy memo states: To implement the above strategy, Rambus has authorized outside counsel to begin organizing documents and preparing a discovery data base, so that if and when Rambus elects to proceed with litigation, it will not unduly disrupt the companys activities. More importantly, with proper planning, Rambus may be able to obtain an advantage over its competitors by choosing a court such as the eastern district of Virginia, the rocket docket or the ITC. Because these courts proceed at an accelerated schedule, early preparation will benefit Rambus. HTX 098.002-003. HYNIX OBJECTION TO PROPOSED FINDING 54: Argumentative; improperly refers to a contingency (failed licensing negotiations) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case. 4455. The Cooley document does not specifically mention establishing a document retention policy at Rambus, but does state that Rambus has authorized outside counsel to begin organizing documents and preparing a discovery database, so that if and when Rambus elects to proceed with litigation, it will not unduly disrupt the companys activities. HTX 098.002. The Cooley Proposed Strategy for Rambus ends stating it bears emphasis that each of the above scenarios is dependent on the facts that exist at the time the decision to litigate is made. Factors unknown at this time may result in a change of strategy. HTX 098.003. Karp added in handwriting document retention policy and patent attorney files after the text of the proposed strategy. 56. Neither Rambus nor its counsel began to prepare a discovery database at this time.
Karp testified that he started a program to gather documents during the Second half of 1999. Trial Tr. 406:2-3. Karp worked with a paralegal to create a database of contract files for Rambuss technology licenses. Trial Tr. 406:7-18. Karp did not undertake further efforts to create a document collection database. Trial Tr. 416:3-15.
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HYNIX OBJECTION TO PROPOSED FINDING 56: Irrelevant; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999); barred by collateral estoppel. 4557. On February 25, 1998, Karp had a regular one-on-one meeting with Tate at which they reviewed the developing licensing and litigation strategy. HTX 013.034. 3. Karp Presents a Licensing and Litigation Strategy to the Board
4658. On March 4, 1998, Karp presented the licensing strategy to the Rambus Board of Directors. HTX 031. The strategy included demanding the 5% running royalty rate and other financial Willisterms that Karp had reviewed with Cooley at the February 12, 1998 meeting. HTX 006.001. Johnson was aware of the contents of this presentation, as a copy of it was produced from his files. RTX 088. 4759. The minutes following the March 4, 1998 board meeting memorialize that the meeting included an update by Karp of the Companys strategic licensing and litigation strategy. HTX 031.002. 4860. In the presentation, Karp recommended that [i]f licensing discussions do not result in resolution, tiered litigation strategy kicks in. HTX 006.003. This language came from the Cooley memorandum dated February 23, 1998. Trial Tr. 418:19-419:4; HTX 098. He suggested that the first targets for licensing non-compatible uses should be present licensees which currently have released non-compatible product, and that the second group of targets should be present licensees which are currently well along with alternate development. HTX 006.006. This suggestion likewise reflected Cooleys recommendation. HTX 098. HYNIX OBJECTION TO PROPOSED FINDING 60: Irrelevant; Rambus has waived advice of counsel defense. See, Hynix Prosed Finding F332. 61. The March 4, 1998 presentation included a slide regarding Potential legal action
against SLDRAM, Inc. The slide noted that Rambus [m]ay have cause of action for unfair competition [b]ased on public anti-Rambus statements. The slide also noted a suspicion that Rambus licensee may have disclosed Rambus information, which was transmitted by Rambus
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under NDA, to SLDRAM, Inc. HTX 006.005. The record does not show that Rambus ever asserted any claims against SLDRAM, Inc. HYNIX OBJECTION TO PROPOSED FINDING 61: Mischaracterizes HTX006.005. 4962. The March 4, 1998 presentation included a timetableThe March 4, 1998 presentation included a set of Timing Issues for executing the proposed licensing and litigation strategy. The first milestone was the delivery of issue was that Rambus will not contact potential licensees until D-RDRAM achieves initial samples of Direct RDRAM (D-RDRAM).. This was to ensure that DRAM manufacturers would be locked into the RDRAM ramp. HTX 006.007. Thereafter, the strategy included procuring customer sample (CS) quality parts of potentially infringing devices, reverse engineering the products and creating claim charts, notifying the potential infringer, conducting two meetings, and if the meetings did not result in agreement on a license, commencing legal action. The timetable projected 4-6 months from procuring CS quality parts to the commencement of litigation. HTX 006.007. HYNIX OBJECTION TO PROPOSED FINDING 62: Argumentative; improper reference to a contingency (initial samples) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case. 63. There is no evidence that Rambuss Board of Directors approved, or was asked to
approve, a licensing plan at the March 1998 meeting. HYNIX OBJECTION TO PROPOSED FINDING 63: Misstates the record; see Hynix Proposed Finding F94. 5064. At the time of the March 1998 board meeting, Rambuss anticipation was that the D-RDRAM would not be ready for high volume production until late 1998. HTX 094 (Item 2: Direct Rambus 1.0 memory system implemented on spec, on cost, on schedule for production ramp late 98); Trial Tr. 1250:1-11.
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4.
Rambus Revises its Strategy
5165. In late 1998, Rambus revised its approach toward licensing non-compatible technology to its existing licensees. Rambus initially planned to begin its licensing strategy, if it could prove infringement and if it made business sense to pursue non-compatible licensing, only at the time the DRAM manufacturers were locked in to RDRAM production. By October 1998, the projected time frame for this was early 2000. Karp in an October 1998 strategy update2000 at the earliest. Karp, in a set of presentation slides entitled Strategy Update 10/98, projected that Rambus might be able to demonstrate that Mosel and Nanya had SDRAM products that directly infringed a pending access time register patent by the first quarter of 1999, thus enabling Rambus to potentially state contributory infringement and inducement claims against companies like Acer, SIS, and VIA for SDRAM and DDR. However, the presentation recommended not even initiating licensing negotiations. Karp noted that there was no compelling business reason to make a business decision to initiate licensing: # DO NOT ROCK THE DIRECT BOAT. P We should not assert patents against Direct partners until ramp reaches point of no return (TBD) P Probably not until Q100 *** # However, the Big Question Is - WHATS THE RUSH? P What is the compelling business reason? I cant think of any. P Keeping the Maytag repairmanrepair man busy is not a valid reason P IMHO, risks of damaging establishment of dominant standard outweigh potential return P Lets not snatch defeat from the jaws of victory. HTX 128.003; Trial Tr. 1319:17-1321:5; 282:20-284:2. This point of no return was projectedTBD, or to be indetermined, and would probably not be reached until the first quarter of 2000. Id HTX 128.003. HYNIX OBJECTION TO PROPOSED FINDING 65: Argumentative; improper references to contingencies (proof of infringement; a business case for licensing) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; improper
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reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 52.66. In fact, as of fall 1998 Tate was disappointed with the progress Karp had made on Rambuss patent portfolio, because we had been unable to get patents, or claims, which cover our inventions, a task Tate considered to be Karps job one. Trial Tr. 1258:18-22. Karps October presentation recommended that, for Rambuss backup licensing strategy, Top priority Should Be Strengthening of Portfolio by covering SDRAM, DDR, SLDRAM, any and all fonnsforms of synchronous memory (static and dynamic) by aggressively prosecuting claims that provide such coverage. HTX 128.005. The projected date by which Rambuss strategic portfolio would be ready for presentation to the industry was calendar year 2000. HTX 128.006. Karp further proposed filing 8-12 new continuation cases (cost ~35-40K). HTX 128.006. HYNIX OBJECTION TO PROPOSED FINDING 66: Argumentative; improper reference to a contingency (issuance of a patent) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 67. Karps October 1998 presentation emphasized the need to complete all reverse
engineering efforts in advance before the strategic patent portfolio could be presented to the industry. HTX 128.006. He noted that reverse engineering would cost ~$1020K/Device/Vendor. HTX 128.006. He suggested that Rambus proceed with reverse engineering efforts, and noted: DDR (Samsung now in progress at S11 ~45-55K). HTX 128.005. He also suggested that Rambus proceed with reverse engineering for SLDRAM if we ever see one - Q1? HTX 128.05. That the memorandum addressed reverse-engineering a
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product that Rambus was not sure it would ever see tends to show that litigation remained no more than a possibility at this time. HYNIX OBJECTION TO PROPOSED FINDING 67: Argumentative; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 68. Karps multiple references to estimated costs for his proposed actions, all in the
low-to-mid five-figure range, show that, in the fall of 1998, Rambus continued to be very sensitive to costs expended on the development of licensing. It also indicates that Karp still needed to explain his proposals from a cost/benefit business perspective, so that Rambuss senior managers could consider the potential benefits in light of the estimated costs. This is consistent with the licensing programs role as a backup business strategy. HYNIX OBJECTION TO PROPOSED FINDING 68: Argumentative; improper reference to a contingency (cost) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 69. Rambuss management continued to hope at the time of Karps October 1998
presentation that RDRAM was going to be successful, and that there would be no need to pursue a licensing strategy for non-compatible products. Tate testified with respect to the presentation that he believed direct Rambus DRAMs were going to be successful, and that was our number one focus. Trial Tr. 1320:5-6. He explained that if RDRAM was going to be successful, we might never need to have that [licensing] negotiation, because RDRAM could be, by far, the bulk of the market. Trial Tr. 1321:24-1322:1. As of late 1998, vice president Roberts likewise believed that Rambus[s] product was headed to be a majority player in the PC main memory
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market. Trial Tr. 1566:24-1567:10. His view at the time was that it didnt really make sense for Rambus to pursue non-compatible licensing, because we were on a position at that time to be very successful with our product that was in development. Trial Tr. 1565:11-1565:24. HYNIX OBJECTION TO PROPOSED FINDING 69: Argumentative; improper reference to a contingency (success of RDRAM) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 5370. In December 1998 or January 1999, Karp drafted and distributed to Rambus executives a Nuclear Winter Scenario memorandum relating to Rambuss Patent Enforcement strategy for 1999. That memo set forth a hypothetical scenario in which Intel suddenly opted to move away from Rambuss technology, and instead implemented something else, for example DDR or SLDRAM. Karp set forth a strategy for convincing Intel that without access to Rambus IP, it will be difficult and costly to continue selling its current processor based products and its new, more advanced products because the memory needed for these Intel products require use of Rambus IP. HTX 004.2. 5471. The Nuclear Winter Scenario memorandum proposedobserved that Rambus could establish its intellectual property position by showing by clear and convincing evidence that three of Rambuss then issued patents covered alternate competing devices: the 327 patent covered DDR (dual edged clocking); the 481 covered DDR (phase locked loop circuitry); and the 580 covered DDR and PC100 (access time register). HTX 004.002. At the same time, the memorandum acknowledged that we have very limited information about DDR parts so we will not be able to produce actual claim charts based on information gleaned from real designs. HTX 004.002. After Rambus completed reverse engineering analysis, Karp formed the view that Rambus did not have strong claims based on the 327 patent. Trial Tr. 510:12-516:22. He also believed that the 481, and 580 patents did not read directly on the suspected products and that
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Rambus did not have strong claims based on these patents. Trial Tr. 510:12-516:22. As of late 1998 and early 1999, Roberts did not believe that Rambus had issued patents that could have been licenseable for SDRAM or DDR. Trial Tr. 1566:11-23. HYNIX OBJECTION TO PROPOSED FINDING 71: Misstates the record, see Hynix Proposed Findings F118-125; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 72. The Nuclear Winter Scenario memorandum confirms that litigation remained a
remote and unlikely possibility as of December 1998 or January 1999. Karp framed the potential litigation scenarios discussed in the memorandum as speculative and contingent on future events, the occurrence of which Rambus considered to be highly unlikely. The memorandum begins with its major assumption, described as follows: Intel decides to cancel ramp and move away from Rambus to something else (DDR, SLDRAM, PC133, or something else that may be totally new, having been developed in secret by elves in the Black Forest at a cost of $10B, for example). HTX 004.002. It is a rare memorandum that begins a discussion of a companys policy and anticipated court action with a reference to Black Forest elves. The memorandum continued: I need to point out at this time that this is a very unlikely scenario, even for something thats purely hypothetical. HTX 004.002. HYNIX OBJECTION TO PROPOSED FINDING 72: Misstates the record, see Hynix Proposed Findings F118-125; argumentative; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 73. As of the time of the Nuclear Winter Scenario memorandum, licensing remained a
backup line of defensea backup to winning with RDRAMas it had been in October 1997. RTX 080. Litigation was yet a further backup to this licensing strategy. The Nuclear Winter Scenario memorandum discussed suing DRAM manufacturers only in the context of trying to put
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pressure on Intel to continue its support for RDRAM, in the purely hypothetical and very unlikely scenario where Intel moves away from RDRAM. HTX 004.002. Indeed, the memorandum expressed the view that litigation against DRAM manufacturers would hopefully never occur. HTX 004.005. The memorandum recognized that litigation might have serious repercussions for Rambuss business relationships because once we engage in litigation with someone a tremendous amount of animosity develops and it is highly unlikely that we will ever cooperate, or partner, with this party in the future. HTX 004.005. Thus, legal options may apply only if we reach the end of our rope with Intel where no other options are available and we have no chance of achieving the Major Goal, i.e. winning through RDRAM. HTX 004.003. HYNIX OBJECTION TO PROPOSED FINDING 73: Misstates the record, see Hynix Proposed Findings F118-125; argumentative; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 74. The Nuclear Winter Scenario memorandum ended its discussion of potential
litigation against a DRAM manufacturer by emphasizing that for such a suit costs would be high ($1.5-3.0 M) since we would be fast-tracking everything, which further suggests Rambuss continued sensitivity to costs. HTX 004.006. HYNIX OBJECTION TO PROPOSED FINDING 74: Argumentative; improper reference to a contingency (cost) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case. 75. The Nuclear Winter Scenario memorandum included content provided by attorney
Johnson. Johnson provided information regarding potential causes of action and the amount of time it would take to get to trial. HTX 004.003-.005; Trial Tr. 516:23-518:18; 1703:14-1704:5. Johnson also drafted the sample letter addressed to potential licensees attached to the memorandum. HTX.004-007; Trial Tr. 516:23-518:18.
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HYNIX OBJECTION TO PROPOSED FINDING 75: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 5576. In a strategy update presentation titled IP Strategy 9/24/99, Rambus recognizedKarp suggested that itRambus might be losing Intels business (Intel Has Already Started To Let Go) and that, absent that relationship, the DRAM industry did not have respect for Rambuss intellectual property. HTX 244. The presentation stated that Rambus must earn that respect by substantiating our claims that cover pioneering technology and that [p]atent claims are substantiated either by P P HTX 244.004. HYNIX OBJECTION TO PROPOSED FINDING 76: Misstates the record. See, Hynix Proposed Findings F213-215. H. Rambuss Formulation of its Document Retention Policy signing a lucrative license deal with (an) industry powerhouse(s) winning in court
5677. At the meeting on February 12, 1998, outside counsel Johnson advised Rambus to adopt a document retention policy. Trial Tr. 1675:21-1678:20. At a one-on-one meeting with Tate on February 25, 1998, Karp reported that he was already [w]orking with J. Lau on a document retention policy, discovery database, email, etc. HTX 013.034. Tate did not recall this meeting with Karp. Trial Tr. 1275:8-12. However, it was Tates practice to meet with his executive staff one-on-one every week to discuss goals and progress toward goals. Tates inability to recall discussing document retention and litigation strategy as part of licensing strategy suggests that he either was focused on issues other than document retention or wants to avoid being involved in the current phase of the litigation.Tate recalled generally that he spoke with Karp about having a document retention policy, which stemmed from a recommendation made by Johnson. Trial Tr. 1276:19-1277:20. HYNIX OBJECTION TO PROPOSED FINDING 77: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332.
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5778. On March 16, 1998, Allen Roberts, Vice President of Engineering, advised Joseph Lau, Engineering Department Head, that Rambus should begin recycling its e-mail backups so that the backups had a shorter shelf life. HTX 100. Roberts suggested three months. Id. Roberts understood a concern that Rambuss e-mails were discoverable. Trial Tr. 1575:171577:4. As I recall, the general concept was ... that we were generating gigabytes of information on surely a weekly basis, but maybe even on a daily basis that went onto tapes. And that those tapes were being kept kind of continuously, and that if there was any case where somebody said we want to see all this information, it would be a huge expense to pull all that information back and pay people to review it all. Trial Tr. 1577:7-18. 5879. In early 1998, while Rambus was separately consulting with outside counsel regarding the adoption of a document retention policy, Rambus retained Kroll Associates, a specialist in the field of information and computer security, to do a security audit of Rambus. Rambus contacted Kroll because it had security concerns after a hacking attempt on Rambuss computers. Trial Tr. 369:18-370:20. In an April 24, 1998 presentation at the conclusion of the security audit, Kroll advised that Rambus adopt a variety of measures to better protect its confidential information and the confidential information of its business partners. September 20, 2005 Deposition Transcript of Alan Brill at 49:15-50:1; 50:13-18 (played at trial on October 28, 2005, Trial Tr. 1515:21-23; 1527:8-9). Among the specific recommendations from Kroll was the confirmation that Rambus should work with outside counsel to develop a document retention policy. Trial Tr. 372:25-373:23; RTX 160 at 26. 5980. On March 19, 1998, after an inquiry about document retention policy by Karp, Attorney Savage forwarded to Karp a seven page standard document retention policy template that had been developed by Cooley. Trial Tr. 579:19-580:19, 582:19-24; RTX 091. Attorney Savage was unaware of any litigation strategy at the time she forwarded the template. Trial Tr. 583:15-17. In her forwarding memorandum to Karp, she recommended that he consult Cooley attorney David Lisi if he had any specific litigation oriented issues. Trial Tr. 579:19-584:2; RTX 091 at 1.
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6081. The memorandum sent to Rambus by Cooley was a generic template for a document retention program drafted by the law firm for its clients. Trial Tr. 580:15-19. Karp did not consult Attorney Savage or Lisi regarding tailoring the template for Rambus. 6182. On March 27, 1998, after he had left Cooley to join Fenwick & West, Attorney Johnson had a lunch meeting with Karp. Following that lunch, Johnson wrote Karp saying I am excited about the possibility of working with you. Attorney Johnson also enclosed a standard set of document requests, saying [t]his should give you some idea of the type of information requested in patent cases. HTX 368; Trial Tr. 1713:15-1716:9. 6283. The Cooley template retention policy stated that [t]hat Policy should inform employees email is subject to review by the Company and is not private. RTX 091 at R401092. The Cooley template also recommended that the company should permanently remove emails from system server on a periodic basis and if back-up tapes of e-mail are kept, they should be destroyed on a periodic basis as well. Id. It also stated that the Company and individual employees should be discouraged from archiving email and that E-mail that needs to be saved should be either: (a) printed in hard copy and kept in the appropriate file; or (b) downloaded to a computer file and kept electronically or on disk as a separate file. Id. The memorandum also recommended that Rambus regularly discard outdated electronic files and discard all draft documents once a document is finalized. Id. Brill of Kroll Associates similarly recommended that Rambus keep e-mail only as long as required and that backup tapes should not be kept indefinitely. RTX 160 at 26, 47; September 20, 2005 Deposition Transcript of Alan Brill at 55:19-57:14 (played at trial on October 28, 2005, Trial Tr. 1515:21-23, 15:178-9). HYNIX OBJECTION TO PROPOSED FINDING 83: Misstates the record; see RTX091 at R401092; Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 6384. On May 14, 1998, Karp met with a group of representatives of the four operating divisions to decide on a policy for saving back-up tapes. He then sent a memorandum to the Rambus board, engineering managers, and others at Rambus stating: Effective immediately, the policy is that full system backup tapes will be saved for 3 months only. Therefore, you can no
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longer depend on the full back ups for archival purposes. Any valuable data, engineering or otherwise, must be archived separately. RTX 104. Karp had consulted with Attorney Johnson about Rambuss policy to retain backup tapes for 3 months. Trial Tr. 528:21-530:4; 1691:231692:6; RTX 104. Johnson recommended against adopting a proposal to create a full system backup every two years, citing the problems and potential expense that could arise from stale data, operating system changes, and corrupt data. Trial Tr. 1692:7-17. Johnson explained that rapid technological changes would quickly make backup tapes unreadable without extraordinary effort and substantial expense, leaving the company with a bunch of data that you could not recreate because you did not have a system in place that allowed you to do it. Trial Tr. 1676:241677:10. A company could spend a ton of money just trying to respond to a subpoena if you dont put in place a document retention system. Trial Tr. 1677:11-14. HYNIX OBJECTION TO PROPOSED FINDING 84: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 6485. Karp drafted Rambuss Document Retention Policy shortly before July 22, 1998, based upon the memorandum forwarded by Attorney Savage, and incorporating some of its language verbatim. Trial Tr. 525:7-17; HTX 023. The Rambus policy provided with respect to Electronic Mail and Documents that Rambus maintains complete system tape back-ups for a period of 3 months. Employees should not utilize email as a place to save documents beyond 3 months. Email that is required to be saved more than 3 months can be kept either in paper or a separate file on your hard drive. HTX 023. 6586. The Rambus Policy stated that: documents, notebooks, computer files, etc., relating to patent disclosures and proof of invention dates are of great value to Rambus and should be kept permanently. Engineering personnel should not depend on the electronic system back-up tapes to archive their work, since these tapes are only kept for 3 months. They should create their own archive copies of, for example, tape out and major project milestone databases, which can then be kept indefinitely in Rambus offsite, secure storage facility. HTX 023.001-002. This tracked the Cooley memorandums recommendation for documents related to Laboratory and Development/Intellectual Property and Trade Secrets: Laboratory and development documents are often subject to intellectual property protection in their final
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form (e.g., patents and copyrights). The documents detailing the development process are often also of value to the Company .... The Company should keep all laboratory and development notebooks and documents in a central location with restricted access. RTX 091 at 5-6. HYNIX OBJECTION TO PROPOSED FINDING 86: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 6687. The Rambus policy pronounced that Final, execution copies of all contracts entered into by Rambus are kept at least 5 years after the expiration of the agreement .... All drafts ... and any materials used during negotiations that are not part of the final binding contract ... should be destroyed or systematically discarded. HTX 023.002. This tracked the recommendation for such documents in the Cooley memorandum, which likewise stated: Final, execution copies of all contracts entered into by the Company should be kept by the Company. The Company, should, upon execution of a contract, destroy or systematically discard all internal drafts and any materials used during negotiations that are not part of the final contract .... RTX 091 at 6. HYNIX OBJECTION TO PROPOSED FINDING 87: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 6788. The terms of Rambuss two -page Document Retention Policy were based on the template provided by Attorney Savage, referred only to categories of documents, and were content neutral within those categories. HTX 023; RTX 091. The Policy contained no directive to discard documents relating to specific companies or to certain subjects. The evidence does not suggest that Karp used the document request sample provided by Attorney Johnson to tailor Rambuss Document Retention Policy language to target particular categories of harmful document. 6889. Hynix is not challenging the propriety of any of the written provisions of the Rambus document retention policy itself nor arguing that any of the provisions is inconsistent with industry custom or practice. Trial Tr. 7:15-8:3.
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I.
Presentation of Rambuss Document Retention Policy
6990. After Karp had drafted the Policy, he created slides for use in a presentation introducing the document retention policy to Rambuss managers. Karp sent his two-page document retention policy to Attorney Johnson for his review. Trial Tr. 521:20-522:10; 1692:181693:2; 1693:13-25. 7091. Only July 22, 1998, Rambus distributed its two-page document retention policy to Rambus employees. HTX 023. 7192. On July 22, 1998, Attorney Johnson and Karp gave a presentation to Rambuss managers about the need for such a policy and the legal requirements involving such policies. RTX 130. 7293. Karps portion of the presentation consisted of a summary of the types of documents Rambus wanted to keep and for how long. Attorney Johnson reviewed and commented on drafts of Karps slides. Trial Tr. 535:4-11; 1699:11-1701:4; RTX 112; RTX 115; RTX 123. Karp in presenting his slides to Rambus managers and employees gave explicit instructions to delete e-mails. Trial Tr. 261:4-265:1. 7394. Attorney Johnsons portion of the presentation was litigation-oriented. Slide 3 lists what kind of records are discoverable. Slide 4 cautions specifically about e-mail and electronic documents. Slide 5 recounts what Johnson referred to as horror stories of cases where deleted e-mails had been used to prove age discrimination and sexual harassment. Slides 6 and 7 warn that the rules for document retention change once litigation begins. RTX130; HTX111.004-008. Attorney Johnson testified that [a]nd the act of deleting, when you are actively involved in litigation, that can give rise to a claim, and I was trying to explain to the client that this was serious business. Trial Tr. 1699:7-10. Johnson also advised that [a] formal document retention policy will likely shield a company from any negative inferences ... due to destruction of documents, unless the policy was instituted in bad faith or exercised in order to limit damaging evidence available to potential plaintiffs. RTX 130 at R124523. He also warned Rambus managers that destroying relevant documents once litigation started would be improper. RTX 130 at 124527-28, 124545-49; Trial Tr. 1722:2-11. He counseled that, after a lawsuit is
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filed, Rambus should gather all sensitive files as soon as possible to avoid inadvertent destruction. RTX 130 at 124548. HYNIX OBJECTION TO PROPOSED FINDING 94: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 95. The slides Johnson used for his presentation at Rambus were very similar to, and
in many places tracked verbatim, a set of slides he used internally for training at Fenwick & West, which was entitled: The Eve of Litigation[:] The Need for an Effective Document Retention Policy. RTX 006 at 1. Johnson explained that he used these slides internally to teach the rookies, i.e. new associates. Trial Tr. 1695:12-1696:6. He also used a similar set of slides at a Practicing Law Institute presentation. Trial Tr. 1695:12-1696:6. Like the slides Johnson used at Rambus, the internal Fenwick slides mentioned Horror Stories about the use of deleted emails to prove age discrimination and sexual harassment. RTX 006 at 8. The slides also warned against document destruction after the commencement of litigation. RTX 006 at 15. HYNIX OBJECTION TO PROPOSED FINDING 95: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 96. While electronic discovery is commonplace today, Johnson testified that in 1998
the treatment of electronic documents presented new challenges to companies as well as to lawyers. Trial Tr. 1676:22-1677:6. Johnson explained that in 1998, as email was now becoming more popular, the issue was whether or not email would constitute a document within the Federal Rules of Civil Procedure, and we were telling people that yes, they were. Trial Tr. 1698:11-17. Spoliation was a hot issue at the time, so Johnson used presentation slides to teach the issue internally with the new associates. Trial Tr. 1695:12-20. HYNIX OBJECTION TO PROPOSED FINDING 96: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 7497. The slides that Karp prepared for Attorney Johnsons review repeatedly directed Rambus employees to look for things to keep. HTX 112. Johnson told Karp that such a The look for things to keep language appeared in slides that addressed various subjects, including email, marketing and sales, engineering, and contracts, but the slides gave no instruction on what
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kind of materials to retain. HTX 112. Johnson told Karp that his look for things to keep directive would result in the retention of more documents than Rambus employees were otherwise required to keep. Trial Tr. 1700:13-1701:1. Johnson told Karp that unless youve got some kind of a standard as to what to keep and what not to keep, theyre going to keep everything, because engineers are pack rats. Trial Tr. 1700:18-1701:1. Karp nevertheless chose to keep the language in his slides. Trial Tr. 1701:2-4. HYNIX OBJECTION TO PROPOSED FINDING 97: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 7598. Karps instruction to look for things to keep was non-specific, and addressed such broad categories of documents as emails and marketing and sales. The record does not show that Karp intended to target for retention documents that would aid Rambuss possible claims in potential litigation against DRAM manufacturers. Nor does the record show that Karp advised anyone at Rambus to target such documents for retention. When Karp received questions from Rambus employees about what kind documents to keep, his response was content-neutral. He couldnt tell them what to do specifically within their area, and could only explain what my practice was. Trial Tr. 539:16-24. Karp testified: I told them that I ... kept things that where either I was author or where I was the intended recipient, or ... specifically things that went outside the company, either to partners or customers ... I kept those kinds of things as opposed to the kind, lets have lunch tomorrow, those kind of things, or things that came to a wide distribution list. Trial Tr. 540:2-11. HYNIX OBJECTION TO PROPOSED FINDING 98: Mischaracterizes the record; see, Hynix Proposed Findings 140-165; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel. 99. Following the July 22, 1998 presentation by Johnson, Johnson no longer assisted
Rambus in its licensing, litigation, or patent prosecution strategy. Karp merely asked Johnson truly random questions from time-to-time about general litigation related matters, such as arbitration and different venues for litigation. Trial Tr. 1719:20-1721:17; RTX 348; RTX 350;
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RTX 354. Johnson kn[e]w [Rambus] had patents in the pipeline, Trial Tr. 1720:9-10, but characterized Rambuss questions as raising what if scenarios, Trial Tr. 1705:6-7. HYNIX OBJECTION TO PROPOSED FINDING 99: Irrelevant; Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 76100. After presenting the document retention policy jointly with Attorney Johnson to the Rambus managers, Karp made presentations to various groups of Rambus employees using a different set of slides, which were based on the written policy. Trial Tr. 262:19-263:5; HTX 112. Johnson reviewed and commented on drafts of these slides. Trial Tr. 535:4-11; 1699:11-1700:15. HYNIX OBJECTION TO PROPOSED FINDING 100: Misstates the record; Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 77101. All versions of the presentation utilized a slide discussing e-mail entitled Email Throw it Away. The slide emphasized that e-mail was discoverable in litigation and that elimination of e-mail is an integral part of document control. It also advised that messages that must be saved should be saved to a separate file or printed and retained. HTX 111.010. Apart from the look for things to keep language added by Karp, the content of the slide discussing email tracks the advice Karp received from Cooley and Johnson. The Cooley memorandum on document retention had advised that emails should be destroyed periodically, because otherwise documents that are not retained in hard copy may linger on electronically and may be subject to discovery in litigation. RTX 091 at 7 (emphasis added). The Cooley memorandum further counseled that emails that need to be saved should either be printed and retained or saved to a separate file. RTX 091 at 7. HYNIX OBJECTION TO PROPOSED FINDING 101: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. 102. Indeed, overall, the presentations Karp gave on the document retention policy
reflected the advice he received from Cooley and Johnson. The record does not show that Karp was concerned that any category of documents, or any particular document, might have been
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harmful to Rambuss potential litigation against DRAM manufacturers. And it does not show that Karp knew or investigated how such content might be identified in Rambuss records. It does not show that Karp was aware of any adverse content in the documents slated for destruction under the document retention policy. HYNIX OBJECTION TO PROPOSED FINDING 102: Not supported by the record; Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332. J. Specific Events Involving the Destruction of Documents 1. Shred Days
78103. On September 3 and 4, 1998, Rambus employees participated in a company-wide shred day (Shred Day 1998). Rambus employed an outside company, Sure Shred, to provide on-site document shredding services. See HTX 125; Trial Tr. 1614:16-1615:11. Employees were instructed to follow the Document Retention Policy guidelines to determine what to keep and what to throw away. Trial Tr. 272:14-273:14; HTX 122. Employees were given burlap sacks from Sure Shred for material that needed shredding. The burlap sacks were then taken to a shredding truck in the parking lot of the company. Id. 79104. Rambus destroyed approximately 185 bags and 60 boxes of material on Shred Day 1998. HTX 125. The amount of documents destroyed would have totaled, on the high side, 430 banker boxes of material. Trial Tr. 1615:12-1616:18. The parties have stipulated that Rambus had 145 employees in 1998. Joint Pretrial Statement, Oct. 4, 2005, at 8. Therefore, the volume of boxes shredded amounted to, on average, only two to three boxes per employee. There is nothing unusual about shredding two or three boxes per employee, and indeed the amount of documents destroyed appears to be low. David Rhoads, a vice president of Sure Shred, testified that he personally accumulated two banker boxes per week for disposal. Trial Tr. 1610:9-11; 1617:20-23. HYNIX OBJECTION TO PROPOSED FINDING 104: Irrelevant.
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80105. A year later, on August 26, 1999, Rambus had another housekeeping event, or shred day (Shred Day 1999). The volume of documents destroyed on that day would have totaled, on the high side, 300 banker boxes. Trial Tr. 1620:1-9. The parties have stipulated that Rambus had 165 employees in 1999. Joint Pretrial Statement, Oct. 4, 2005, at 8. Therefore, the volume of boxes shredded on Shred Day 1999 was less than two boxes per employee on average. The vast majority of Rambuss employees were engineers working on RDRAM technology. Trial Tr. 1395:13-20; 1542:8-1544:2. The bulk of the documents destroyed on the two shred days was mountains of printouts of circuit design that engineers had. Trial Tr. 337:10-338:3. HYNIX OBJECTION TO PROPOSED FINDING 105: Irrelevant; mischaracterizes the record; see, Hynix Proposed Findings F173-175; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel. 81106. The use of burlap bags and shredders, the volume of material shredded, and the social events at the end of the shred days were unexceptional. Prior to Shred Day 1998, 1998 and prior to the adoption of the document retention policy, each employee had a box in his or her office area for confidential documents that needed to be shredded, and a truck came once a week to pick up the documents for shredding. Trial Tr. 1581:13-1582:10. There was nothing unusual about the volume of material that Rambus shredded. In particular, David Rhoads of Sure Shred suggested that Rambuss disposal practices were no different from the disposal habits of other similarly situated companies. Trial Tr. 1612:5-1623:15. Rhoads testified that his company frequently provided pick up services where its time to purge records on an annual basis, or [a company has] just begun a document destruction program so they call us out to do a big purge. Trial Tr. 1612:24-1613:2. He observed that on these annual purge days, companies often have an event and serve food as part of that event as Rambus did. Trial Tr. 1613:18-21. A contemporaneous news article offered by Hynix also demonstrates the commonplace nature of both shred days and of social events associated with them. HTX 130 (a November 11, 1998 article from The New York Times that refers in part to an event at Amazon where employees were asked to purge e-mails that were no longer needed for business or legal purposes). See
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also David O. Stephens and Roderick C. Wallace, Electronic Records Retention: An Introduction 19, Chapter 7- Implementation Issues, at 48 (Arma International 1997) (Setting aside one day a year for office workers to clean out files, destroy old records, and transfer records to the records center is popular in some organizations. Management allows people to dress down, and provides a free lunch on purge day. Sometimes awards are given to those persons and departments that recycle the most paper.). HYNIX OBJECTION TO PROPOSED FINDING 106: Irrelevant. 107. The record does not show that Rambus implemented Shred Day 1998 and Shred
Day 1999 to get rid of documents that were harmful to Rambus in potential litigation against DRAM manufacturers. As noted above, Rambuss document retention policy was content neutral, and the record does not show that Karp was aware of any adverse content in the destroyed documents that would have harmed Rambuss potential claims. Karp expected everyone at Rambus to follow the document retention policy in discarding documents. Trial Tr. 334:13-17. HYNIX OBJECTION TO PROPOSED FINDING 107: Mischaracterizes the record; see, Hynix Proposed Findings F173-175; 177-203; 225228; 301-322; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel. 108. Nothing in the record suggests that Rambus was aware of any duty to preserve
documents before Shred Day 1998. Rambuss outside counsel, including Johnson, were heavily involved in developing both Rambuss backup licensing strategy and document retention policy. It was Johnson who first advised Rambus to adopt a document retention policy, at the same February 12, 1998 meeting when he advised Rambus about a potential licensing strategy and the possibility of litigation. Thereafter, Johnson, along with Karp, gave a presentation on document
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retention to Rambus managers on July 22, 1998, and reviewed and commented on the slides Karp used for his own presentations to Rambus employees. Johnson did not advise Rambus that it had a duty to preserve documents at that time. HYNIX OBJECTION TO PROPOSED FINDING 108: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel. 109. Nor does the record show that Rambus believed or was aware that a duty to
preserve documents had attached at the time of Shred Day 1999. Although Rambus occasionally asked Johnson general questions about litigation in 1999, Johnson never suggested to Rambus that it had a preservation duty. Johnson had provided the information regarding potential causes of action and forums, as well as the sample letter addressed to potential licensees, in the Nuclear Winter memorandum. Trial Tr. 516:23-518:18; 1703:14-1704:5. On June 24, 1999, Johnson sent a fax transmission to Karp enclosing a Patent Litigation Timeline for the Northern District of California. RTX 350. The timeline showed the number of days it would take to proceed from filing the complaint to various stages of litigation, such as the filing of claim construction statements. RTX 350, at 2-3. The fax transmission sheet also noted: Typically, the cost through trial is $2.3 to $3 million. RTX 350, at 1. On July 8, 1999, Johnson sent a fax transmission to Karp and Steinberg enclosing another Patent Litigation Timeline that compared the Northern District of California and the Eastern District of Virginia. RTX 348; Trial Tr. 1707:16-1708:4. This Timeline used October 1, 1999 as the hypothetical complaint filing date for purposes of comparing the two district courts. RTX 348, at 2. Johnson did not advise Rambus in these or any other communications that a duty to preserve had attached.
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HYNIX OBJECTION TO PROPOSED FINDING 109: Rambus has waived advice of counsel defense. See, Hynix Proposed Finding F332; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel; inconsistent with Micron II finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel. 2. Electronic Documents
82110. Until approximately 1996, business work was done on Macintosh computers. Engineering work, by contrast, was typically done on UNIX workstations. Trial Tr. 1439:4-6, 1440:2-11. Rambus maintained backup tapes of some of the data created on the Macintosh computers. In May 1998, Karp confirmed that backup tapes of the companys Macintosh computers were gone. Trial Tr. 208:19-218:14; HTX 013.097. 83111. On or before July 21, 1998, Rambus sent 1269 computer tapes out to be degaussed (magnetically scrambled to prevent data recovery). Trial Tr. 221:22-223:4, 1105:25-1106:25; HTX 107, HTX 157, HTX 029. Prior to sending the tapes to be degaussed, Rambus separated its backup tapes into two sets: (1) project tapes containing only technical project data and (2) other tapes. The other tapes were sent for degaussing without further review of the contents. Trial Tr. 1105:17-1106:25. 112. There is no evidence that Karp was aware of any adverse content on the degaussed
tapes that would have been harmful to Rambuss potential claims against DRAM manufacturers. Nor is there evidence that such adverse content existed. Karp testified that no one at Rambus suggested that he inspect the contents of the backup tapes before they would be degaussed, and he did not conduct such an inspection. Trial Tr. 524:14-21; 231:8-9. Since Karp joined Rambus only in October 1997, he would have had no knowledge of information that was archived on backup tapes before that time.
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HYNIX OBJECTION TO PROPOSED FINDING 112: Irrelevant; speculative; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel; inconsistent with finding that Rambus anticipated litigation by at least 2nd Shred Day (Aug. 1999) and barred by collateral estoppel. 3. Prosecution Files
84113. Attorney Johnson advised Karp at the February 12, 1998 meeting that Rambus should clean out its patent prosecution files so that the files mirrored the Patent Office (PTO) file. Hynix does not allege that there is anything improper in the general practice of cleaning patent files upon issuance. Trial Tr. 837:12-22. 85114. Attorney Vincent of BSTZ prosecuted patent applications on behalf of Rambus claiming priority to Rambuss original 898 application, as did other BSTZ attorneys including Roland Cortes and Scot Griffin. Trial Tr. 784:1-785:2; 1592:22-1593:9; 1603:19-1604:11. 86115. In April 1999, Karp instructed Vincent to clean out BSTZs patent prosecution files for patents which had issued. Trial Tr. 806:5-807:5; 812:3-14; HTX 135.004. Vincent was not told that any litigation was planned against manufacturers of JEDEC standard SDRAM or other non-conforming DRAM. Trial Tr. 812:15-21. Karp did not provide details as to what documents should be discarded from the files; rather, Vincent was guided by his general professional knowledge regarding document retention for patent files. Trial Tr. 904:11-24. 87116. Vincent was not instructed to, and did not, clean out any of BSTZs general Rambus files. Trial Tr. 908:25-909:7. The general files contained, among other papers, Vincents notes and other documents relating to his advice to Rambus concerning the JEDEC disclosure policy and equitable estoppel. Trial Tr. 908:20-24 (See, e.g., HTX 192.001 (March 27, 1992 notes by Lester Vincent referring to JEDEC and equitable estoppel)). These documents were retained and produced. Trial Tr. 909:10-910:6; 911:9-25; RTX 179 (January 31, 2000 cover letter from Vincent to Neil Steinberg transmitting copies of various BSTZ general files).
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88117. Some drafts and notes from BSTZs patent prosecution files which were copies or otherwise not important were discarded as a matter of common practice of BSTZs attorneys before Karp made his request to Vincent. Trial Tr. 905:12-906:8; 1607:19-609:5. Attorneys Griffin and Cortes understood that it was the firm policy at BSTZ to clean out patent files upon issuance with respect to all patent files. Trial Tr. 1598:2-1600:19; 1606:18-1607:10. They followed this policy and cleaned out patent files upon issuance (or sometimes had clerical personnel conduct the cleaning) before Karp ever issued such a request to BSTZ. Trial Tr. 1598:2-1600:19; 1606:18-1607:10. Griffin left BSTZ in April 1996, approximately three years before Karps request to Vincent, and Cortes left BSTZ in April 1999, at approximately the time of Karps request. Trial Tr. 1592:11-14; 1603:14-18. Cortes and Griffin each prosecuted to issuance Rambus patent applications claiming priority to the original Rambus patent application, including at least three, namely, U.S. Patent Nos. 5,513,327, 5,657,481, and 5,841,580. These files presumably would have been purged by them after issuance of the patents. Trial Tr. 1593:10-1598:1; 1604:12-1606:17; HTX 005A (indicating that the 327, 481, and 580 patents correspond to BSTZ file numbers P001C2, P007DC and P043D2, respectively). In addition, Vincent had a practice of sometimes discarding notes and drafts apart from any particular document retention policy. He would discard documents, for example, when his files g[o]t quite large. Trial Tr. 905:12-906:8. HYNIX OBJECTION TO PROPOSED FINDING 117: Mischaracterizes the record; inconsistent with the findings in Micron II and barred by collateral estoppel. 89118. BSTZs patent prosecution files were organized into three parts: left, center, and right. The left side had correspondence and notes, the center typically had prior art, conception, and reduction to practice documents and drafts, and the right side had communications with the PTO. Trial Tr. 895:3-896:11. When cleaning Rambus patent prosecution files for issued patents, Vincent retained, among other things, conception and reduction to practice documents and communications with the PTO, which constituted the right side of the file, and prior art. Id. The
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portions of the files from which documents were discarded came from the left and center portions. Id. 90119. On February 1, 2000, Vincent provided copies to Rambus of the left and center parts of the files of all but one of BSTZs patent prosecution files for applications claiming priority to the 898 application. Trial Tr. 912:1-23; RTX 181 (February 1, 2000 cover letter from Lester Vincent to Neil Steinberg enclosing copies of files). The remaining file had been omitted due to an oversight and was provided later. Trial Tr. 913:3-17. 91120. Vincent did not clean any Rambus patent files between July 28, 1999 and June 23, 2000. HTX 327. Vincents renewed cleaning of patent files on or after June 23, 2000 apparently had no impact on the documents produced in this litigation. As noted above, copies of any documents from the files of patents claiming priority to the 898 application that Vincent may have discarded on or after June 23, 2000 had already been provided to Rambus. Trial Tr. 914:312. 92121. No material documents have been rendered unavailable to Hynix from the files of any of the patents-in-suit as a result of Karps request to Vincent. Of the 15 patents that have been asserted by Rambus in this litigation, Hynix has alleged that the files of three of them U.S. Patent Nos. 5,915,105, 5,954,804, and 6,101,152 were cleaned by Vincent. HTX005A. These patents correspond to internal BSTZ file numbers P001C5, P010DCD, and P043D2C2D1 and were among the files reviewed by Vincent on June 23, 2000, after copies of any documents that might have been discarded from the file had been provided to Rambus. HTX 327. Also, no evidence suggests that any material evidence was discarded from any prosecution files. Prior art was retained. K. 122. Rambus ImplementsDevelops its Backup Licensing Strategy
In the summer of 1998, Attorney Neil Steinberg first did a small assignment for
Rambus, which was to consider whether Rambus needed to take a license under a third party patent. (Trial Tr. 1461:4-15.) He began working again for Rambus in mid-August 1998 and he continued until April 1999 at which time he became Rambuss General Patent Counsel. Trial Tr.
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1443:2-1444:20. Starting in October 1998 Steinbergs work included prosecuting continuation applications for the Farmwald/Horowitz family of patents. Trial Tr. 1463:7-1464:13. 93.123. On July 10, 1998, Tate sent an internal e-mail to Roberts and Karp
regarding the license agreement between Hyundai and Rambus. As discussed above, Rambus was interested in renegotiating the Other DRAM provision. As part of a discussion of revised license terms, Tate suggested that Hyundai would be a great company to start Joels plan with in q1/99 potentially if Rambus obtained a patent on the use of an access time register, sent Hyundai an infringement notice, and the parties failed to reach a negotiated agreement. HTX 087. Rambus did not initiate licensing negotiations under the Other DRAM provision with Hyundai or Hynix in 1999. HYNIX OBJECTION TO PROPOSED FINDING 123: Argumentative; improper reference to a contingency (licensing negotiations) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case. 94.124. Karps Strategy Update 10/98 presentation suggested that there was no rush
to begin seeking and no compelling business reason to make a decision to seek non-compatible licenses until ramp reaches a point of no return. HTX 128.004. This point of no return was projected to be, in the first quarter of 2000. Id.TBD, or to be determined, and [p]robably not until Q100. Id. Karps main priority for the backup licensing strategy at that time was to strengthen Rambuss patent portfolio, and he recognized that reverse engineering still needed to be completed in advance of any assertion of patent rights. Trial Tr. 1258:18-22; HTX 128:00506. After reverse engineering and infringement analysis, Karp concluded that Rambus did not have, at that time, strong infringement claims against the suspected products based on the 327, 580, and 481 patents. Trial Tr. 510:12-516:24. He didnt think anyone would want to license these three patents. Trial Tr. 511:23-512:3. HYNIX OBJECTION TO PROPOSED FINDING 124: Irrelevant; improper reference to an to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in
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Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 95. In the summer of 1998, Attorney Neil Steinberg first did a small assignment for
Rambus. He began working again for Rambus in mid-August 1998 and he continued until April 1999 at which time he became Rambuss General Patent Counsel. Trial Tr. 1443:2-1444:20. Starting in October 1998 Steinbergs work included prosecuting continuation applications for the Farmwald/Horowitz family of patents. Trial Tr. 1463:7-1464:13. 125. At the time Karp prepared the Nuclear Winter Scenario memorandum in
December 1998 or January 1999, licensing remained a backup strategy, which Rambus had yet to decide to implement. Karp expressly characterized that scenario as purely hypothetical and very unlikely, referencing Black Forest elves. HTX 004.002. The memorandum discussed potential litigation against DRAM manufacturers only in the context of maneuvering to pressure Intel to renew its support for RDRAM in the unlikely event that it moved away. This shows that, at of the end of 1998, Rambus had not made a decision to seek non-compatible licenses. Indeed, Roberts testified that Rambus never made a decision to pursue non-compatible licensing in the 1998 timeframe. Trial Tr. 1564:12-19. HYNIX OBJECTION TO PROPOSED FINDING 125: Irrelevant; improper reference to an individuals state of mind regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with Micron II and barred by collateral estoppel. 96126. Karps intellectual property goals for the third quarter of 1999 set forth in a document dated July 1, 1999 included developing and presenting hisa complete licensing strategy to Rambuss board for approval in the fourth quarter. These goals also included preparing licensing positions against three manufacturers and a litigation position against one of those three licensing targets. HTX 139.001. HYNIX OBJECTION TO PROPOSED FINDING 126: Mischaracterize the record; inconsistent with the findings in Micron II and barred by collateral estoppel.
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97127. Karp and Steinberg developed a formula for selecting licensing targets. The formula was set forth in a presentation dated October 14, 1999. HTX 151. The formula considered both business and legal factors. Among the factors weighed were confirmation of Rambus IP, experience in battle, exposure to Rambus IP, and litigation story. HTX 151.002. Hynix was identified as the number three target after Hitachi and Samsung. HTX 151.006. 128. In October 1999, Rambuss board and management approved the commencement
of licensing negotiations for non-compatible products. Trial Tr. 350:8-20 (board approval); 1469:14-18 (executive core approval). HYNIX OBJECTION TO PROPOSED FINDING 128: Argumentative; improper reference to a contingency (licensing negotiations) regarding reasonable foreseeability of litigation, which standard was rejected by the Federal Circuit in Hynix II and is now law of the case; inconsistent with the findings in Micron II and barred by collateral estoppel. L. Rambus Executes its Litigation Strategy
98129. At the beginning of each year, Rambus would go through a budgeting process to allocate where money would be spent. Tate testified that through 1999, expenditures over $5,000 to $10,000 would be in the budget. Trial Tr. 1570:1-1571:13. In 1998, Attorney Johnson told Rambus that the cost of pursuing litigation against a DRAM manufacturer would likely cost between $1.5 and $3 million. Trial Tr. 518:13-519:3; HTX 004.006; RTX 354 at R125823. Rambus did not budget any money in 1998 or 1999 for litigation against a DRAM manufacturer. Trial Tr. 376:23-378:21, 383:15-18, 383:23-384:14; RTX161. 99130. Rambus initiated licensing negotiations with Hitachi on October 22, 1999 by sending Hitachi a letter suggesting that Hitachis products infringed Rambuss patents. HTX 015. Negotiations with Hitachi broke down when Hitachi refused to respond to Rambuss efforts to negotiate.
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100131.
Rambus conducted a beauty contest in late November or early December
1999 to select counsel for litigation against Hitachi. Trial Tr. 1475:9-23. Rambus retained Gray Cary as litigation counsel for the Hitachi matter in late 1999. Trial Tr. 705:6-9. 101132. 102133. Rambus filed suit against Hitachi on January 18, 2000. Steinberg testified that in or around December 1999, he and Karp identified
Rambus personnel who were likely to have relevant documents and told them to retain all such documents. Lawyers from Gray Cary, after the firm was retained in connection with the Hitachi litigation, also instructed dozens of Rambus employees that they needed to preserve all documents that could be relevant to the litigation. Trial Tr. 775:12-776:10. M. Rambuss Resumption of the Destruction of Documents The Hitachi litigation was settled on June 23, 2000. On that day, Rambus
103134.
sent an infringement notice to Hynix (then Hyundai), another DRAM manufacturer, initiating Rambuss licensing strategy as to Hynix. 104135. On or about that day, Attorney Vincent resumed purging his patent files,
approving his secretarys selection from the Rambus prosecution files of documents to discard. 105136. In December 2000, Rambus moved to a new office building. As part of the
office move, Sure Shred disposed of materials that did not need to be moved from the old site to the new site. Rhoads of Sure Shred explained that shredding in connection with office moves is one of the primary reasons his company is called because it is cheaper to shred than to move materials and destroy them later. Trial Tr. 1623:5-15. 106137. Prior to the current litigation with Hynix, Rambus had not disclosed the
amount of document destruction it had undertaken. Sean Cunningham, one of the Gray Cary attorneys on the Hitachi litigation team, was not aware of the Shred Days. Cecilia Gonzales, one of the Howrey Simon attorneys on the Hitachi and Infineon litigation teams, was told by Attorney Steinberg about Shred Day 1998, but only found out about Shred Day 1999 and the 2000 destruction of documents after reading the Federal Circuit decision in the appeal from the original judgment in Rambus v. Infineon. Steinberg was not present at Rambuss office on Shred Day
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1999. At that time, he was in the process of moving from Virginia to California, and he did not learn about Shred Day 1999 until 2004. Trial Tr. 1471:4-1472:6. HYNIX OBJECTION TO PROPOSED FINDING 137: Mischaracterizes the record; see, Hynix Proposed Findings F323, 326, 453-454. N. Effect of Document Destruction on Current Litigation with Hynix Rambus kept no record of the documents it destroyed. Trial Tr. 334:2-12;
107138.
524:22-525:1; 1118:15-19. Karp expected everyone at Rambus to follow the document retention policy in discarding documents. Trial Tr. 334:13-17. 1. 108139. JEDEC-Related Documents at Rambus Rambuss JEDEC representative Richard Crisp destroyed materials that he
had received from JEDEC, such as unopened envelopes containing paper ballots and official minutes of JEDEC meetings. This took place during Shred Day 1998. Trial Tr. 1167:22-1169:4; 1174:25-1175:9. These documents, however, are publicly available from JEDEC. HYNIX OBJECTION TO PROPOSED FINDING 139: Mischaracterizes the record; inconsistent with the findings in Micron II and barred by collateral estoppel. 109140. After Crisp had left Rambus in June 2000 (Trial Tr. 1187:20-22) and after
patent litigation had commenced, Crisp located various JEDEC trip reports and other JEDECrelated e-mails on a Macintosh drive in his attic. Upon locating these e-mails, Crisp turned them over to Attorney Steinberg for production in litigation. Steinberg then turned these e-mails over to outside counsel for use in the various lawsuits, including the instant case. Rambus appears to have produced to Hynix a complete set of Rambuss JEDEC trip reports. Trial Tr. 756:8-757:14; 1213:15-1215:10; HTX 182; RTX 206. 141. The preservation of Crisps JEDEC-related records was not accidental. Crisp also
preserved a copy of his JEDEC documents on his PC laptop computer, after Rambus transitioned from Macintosh to IBM and then to Toshiba laptops. Trial Tr. 1212:10-1213:4. Crisp was told to look for things to keep, so he went through [his] email files and sought out and kept things that related to JEDEC. Trial Tr. 1211:9-1212:4. Crisp kept the JEDEC-related emails because he
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thought they were important documents and they were essentially the records of what [he had] been doing for a number of years while working for the company. Trial Tr. 1213:5-14. Rambus provided a complete set of Crisps JEDEC emails to its counsel in the Hitachi matter in March 2000, before Crisp left Rambus and before he found the hard drive in his attic. HTX 277.001, .028; Trial Tr. 757:9-23; RTX 041. HYNIX OBJECTION TO PROPOSED FINDING 141: Mischaracterizes the record; inconsistent with Micron II and barred by collateral estoppel. 110142. Although there could have been internal e-mail correspondence at Rambus
about these trip reports which was destroyed pursuant to Rambuss document retention policy, such correspondence likely would have included Crisp as an author or recipient. Crisp produced the contents of his mailbox, after the InfineonHitachi litigation had commenced in January 2000. That mailbox contained Crisps trip reports and other e-mails related to JEDEC. RTX 359. Crisp had specifically retained his JEDEC e-mails. Trial Tr. 121:15-1213:14. Therefore, with the trip reports and Crisps e-mail, it appears that essentially the material JEDEC materials are available. HYNIX OBJECTION TO PROPOSED FINDING 142: Mischaracterizes the record; inconsistent with Micron II and barred by collateral estoppel. 143. In fact, Crisp retained, and Rambus produced, two different sets of Crisps emails,
including his JEDEC trip reports. RTX 41; RTX 359; Trial Tr. 770:4-24. Because Crisp was Rambuss representative at JEDEC and would have been at the center of JEDEC-related discussions and communications, it appears that essentially the material JEDEC materials are available. HYNIX OBJECTION TO PROPOSED FINDING 143: Mischaracterizes the record; inconsistent with Micron II and barred by collateral estoppel.
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2. 111144.
Contracts Between Hynix and Rambus A fairly complete record has been produced of the external
communications between Rambus and Hyundai regarding the negotiations for proposed amendment to their December 1995 RDRAM agreement. Trial Tr. 982:23-983:3. 112145. The external correspondence between the parties regarding the Hyundai-
LG merger and adoption of the LG Semiconductor licensing terms has been preserved and produced. Trial Tr. 983:10-24. 113146. Rambus has either preserved and produced or logged as privileged
numerous internal communications regarding these topics, including numerous internal communications discussing possible elimination or modification of the Other DRAM clause contained in the 1995 agreement and internal documents regarding the consequences of the Hyundai-LG merger. These communications include the following: (a) an internal e-mail from Tate to Roberts dated April 2, 1998, discussing Hyundai
and the possibility of terminating their royalty deal for non-Rambus DRAMs (Trial Tr. 1031:10-1032:23); (b) an internal e-mail dated April 3, 1998, incorporating and replying to the April 2,
1998 Tate e-mail (Trial Tr. 1032:24-1034:1); (c) an internal document dated April 3, 1998, discussing Hyundai and that Rambuss
action would most likely force them back to the negotiating table at which time we could argue to change some of the favorable terms we granted them first time around(Trial Tr. 1047:2-1048:19); (d) an internal e-mail from Mr. Mithani to executives at Rambus discussing Tates
April 2, 1998 directive, and noting that Rambus could negotiate the special arrangement for allowing [Hyundai] to use our IP for the competing devices (Trial Tr. 1048:201050:3); (e) an internal e-mail reporting on a meeting with Mr. Yoo of Hyundai, and noting
that Yoo was informed that one option was to renegotiate the agreement and remove the Other DRAM clause (Trial Tr. 1050:4-1051:2);
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(f)
an internal e-mail from Tate to Roberts dated July 10, 1998, discussing the
amendment negotiations with Hyundai (HTX087; Trial Tr. 1029:1-20); (g) an internal e-mail written by Tate regarding his discussion with K.H. Oh of
Hyundai, regarding Rambuss request for [Hyundai] to take goodie out of the contract, and reflecting Tates agreement to hold off on our concurrent/contract issues pending agreement from Hyundai on marketing commitments (Trial Tr. 1051:3-1052:5); (h) an internal meeting report by Mithani stating that Hyundai had a change in
attitude and appeared to be 100 percent behind Rambus in marketing (Trial Tr. 1055:31056:11); (i) an internal e-mail from Steinberg to various Rambus executives dated January 4,
2000, providing legal advice regarding assignment of license agreement (HTX 216 (Rambus Privilege Log Entry 963)); and (j) an internal memorandum from Mr. Bernsten to Steinberg dated January 27, 2000,
reflecting legal advice and analysis regarding Hyundais licensing obligations to Rambus (HTX 216 (Rambus Privilege Log Entry 4048)). 3. 114147. Patent-Related Documents Rambus has produced various documents relating to the conception and
reduction to practice of the patented inventions prior to the April 1990 filing date of the 898 application. Trial Tr. 930:2-9. These include inventor notes (Trial Tr. 932:24-933:15; 935:12-16; 1003:2-23), computer simulations (Trial Tr. 1004:19-1005:19), drafts of patent applications (Trial Tr. 1045:22-1046:4), and technical presentations given by the inventors. Trial Tr. 1046:20-24. 115148. Rambus has produced several boxes of prior art. Trial Tr. 949:17-19. The
prior art produced by Rambus includes prior art references with fax lines showing that the art was ordered in 1996, prior art references with a few portions underlined, and prior art references containing a few other sorts of notations. Id. at 1009:17-1022:13. The evidence does not support a contention that Rambus reconstructed prior art that had been destroyed in advance of litigation. Further, no evidence was offered to show any prior art that any of Rambuss litigation opponents
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has identified as material and not cited by the inventor to the Patent Office in connection with the Farmwald/Horowitz line of applications. See Trial Tr. 1786:24-1787:20. 116149. The evidence does not show that Rambus targeted or destroyed prior art
pursuant to its document retention policy. All witnesses who testified on the matter confirmed that they had retained prior art and that they did not destroy it in implementing the Document Retention Policy. The evidence also does not show that infringement analyses or reverse engineering documents were targeted or destroyed as a result of Rambuss Document Retention Policy. The evidence established that Rambus conducted infringement analyses for the patentsin-suit after they issued in the 1999 and 2000 time frame, and that these documents were maintained under the Document Retention Policy and produced (or logged) in this case. 117150. Jose Moniz began working on Rambus matters at Neil Steinbergs law firm
in Virginia in January 1999. Trial Tr. 1626:15-1627:3; 1628:7-12. In late September or early October of 1999, Moniz became a Rambus employee. Trial Tr. 1626:10-12. 118151. As part of his duties while working for Steinberg in early 1999, Moniz
conducted a search for prior art relating to Rambus patent applications claiming priority to the original 898 application. Trial Tr. 1629:12-25. 119152. Moniz obtained copies of any prior art that he believed might be material to
one or more of Rambuss patent applications. This prior art was all submitted to the PTO. Trial Tr. 1631:23-1632:6; 1637:9-23. 120153. Moniz added copies of the prior art that he found in his search to a
collection of prior art that had already been gathered and stored the combined collection in bankers boxes. Trial Tr. 1632:718; 1638:16-25. 121154. When Moniz joined Rambus, the boxes of prior art that he had maintained
in Virginia were shipped to Rambus where Moniz continued to maintain them until two or three years ago when they were turned over to the litigation group. Trial Tr. 1639:15-25; 1658:5-9. 122155. The prior art collected by Moniz in 1999 does not appear to have been
destroyed, and copies of that prior art was produced to Hynix in this litigation. Trial Tr. 1641:131642:9; 1649:11-18; 1653:8-1658:4.
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123156.
Moniz and Steinberg testified that they may have discarded duplicate
copies of prior art containing notes related to their categorization of the art in order to determine to which of the Rambus patent applications the art could be material. Trial Tr. 1452:1-8; 1454:231455:4; 1641:3-12. Moniz also no longer has a spreadsheet, created and maintained while he was employed by Steinberg, logging the prior art collected for disclosure to the PTO. Trial Tr. 1659:13-25. However, the court concludes that no information was lost because the substance of the notes and spreadsheet was preserved in the Information Disclosure Statements submitted to the PTO, which show in which applications a particular prior art reference was cited. Trial Tr. 1481:7-1482:20; 1661:10-22. II. A. Focus of Dispute CONCLUSIONS OF LAW
The dispute between Rambus and Hynix focuses on the circumstances in which Rambus formulated, adopted, and implemented its document retention policy. Hynix argues that Rambuss contemplation of litigation against DRAM manufacturers triggered a duty requiring Rambus to retain all documents relevant to any potential patent litigation between it and any DRAM manufacturer. Hynix further asserts that since Rambus adopted its document retention policy and destroyed documents at the same time it was contemplating litigation, it spoliated evidence. This spoliation, claims Hynix, prejudiced its rights and warrants the application of the unclean hands doctrine and the dismissal of Rambuss patent claims. B. The Defense of Unclean Hands
Under both federal and California law, one who has behaved inequitably or in bad faith is denied relief under the unclean hands doctrine. Precision Instr. Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945),; Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 841 (9th Cir. 2002); Fireboard Paper Products Corp., 227 Cal. App. 2d 675, 726-29 (1964). The unclean hands doctrine closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief. Precision Instr. Mfg. Co., 324 U.S. at 814. To establish this defense, the defendant must show (1) that the plaintiff acted in bad faith in relation to the claim to which [unclean hands] is asserted as a defense, Jarrow Forumulas, 304
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F.3d at 841-42; and (2) that the defendant has personally been injured by the plaintiff s conduct, Dream Games of Ariz. Inc. v. PC Onsite, 561 F.3d 983, 990 (9th Cir. 2009) (citation omitted); accord Republic Molding Corp. v. B. W. Photo Utils., 319 F.2d 347, 349-50 (9th Cir. 1963).3 The party seeking the application of the unclean hands doctrine generally bears the burden of proving each element. Omega Industries, Inc. v. Raffaele, 894 F. Supp. 1425, 1431 (D. Nev. 1995) (citing Conan Properties, Inc., v. Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir. 1985)). Spoliation of evidence can constitute the necessary inequitableness or bad faith for successful assertion of the unclean hands defense. See Samsung Electronics Co., Ltd. v. Rambus, Inc., 386 F.Supp. 2d 708 (2005). Further, ifIf bad faith spoliation is shown, however, the burden of proof logically shifts to the guilty party to show that no prejudice resulted from the spoliation. Micron II 645 F.3d at 1328. The reason is that it is in a much better position to show what was destroyed and should not be able to benefit from its wrongdoing. See Anderson v. Cryovac, Inc., 862 F.2d 910, 925 (1st Cir. 1988); National Association of Radiation Survivors v. Turnage, 115 F.R.D. 543, 557 (N.D. Cal. 1987). C. Spoliation of Evidence
The court first addressees the question of whether Rambus spoliated evidence. Spoliation of evidence is the destruction or significant alteration of evidence, or the failure to properly preserve property for anothers use as evidence in pending or reasonably foreseeable litigation. Zubulake v. UBS Warburg LLD, 220 F.R.D. 212, 216 (S.D.N.Y. 2003) (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)). Defendants engage in spoliation of documents as a matter of law only if they had some notice that the documents were potentially relevant to the litigation before they were destroyed. United States v. Kitsap
Following Micron II, the same requirements apply if a defendant seeks terminating sanctions under the courts inherent authority. The Federal Circuit held there that a court may dismiss an action on spoliation grounds only if it finds clear and convincing evidence of both bad faith spoliation and prejudice to the opposing party. Micron II, 645 F.3d at 1328-29. Thus, while Hynix has consistently framed its request for terminating sanctions as an unclean hands issue, the same result would follow if it invoked this Courts inherent authority.
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Physicians Service, 314 F.3d 995, 1001 (9th Cir. 2002) (citing Akiona v. United States, 938 F.2d 158, 161 (9th Cir.1991)). A legitimate consequence of a document retention policy is that relevant information may be kept out of the hands of adverse parties. See Arthur Andersen LLP v. United States, 125 S.Ct. 2129, 2135 (2005) (Document retention policies, which are created in part to keep certain information from getting into the hands of others, including the Government, are common in business.). It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances. Id. In contrast, however, a document retention policy adopted or utilized to justify the destruction of relevant evidence is not a valid it is improper to implement a document retention policy. See, e.g., Carlucci v. Piper Aircraft Corp., 102 F.R.D. 472, 486 (D.C. Fla. 1984) (entering default against defendant who deliberately destroyed documents to prevent discovery, finding that the defendant utterly failed to provide credible evidence that a [bona fide, consistent and reasonable document retention policy] existed). It follows that implementing such a policy in advance of reasonably foreseeable litigation would not be proper and could constitute spoliation. The primary question before the court is whether Rambus adopted and implemented its document retention policy in advance of reasonably foreseeable litigation for the purpose of destroying relevant information. for the purpose of hiding adverse information and to impair the ability of the potential defendant to defend itself. Micron II, 645 F.3d at 1326 (citation omitted). D. Pending or Reasonably Foreseeable Litigation
Rambus initiated its first suit against a DRAM manufacturer, Hitachi, on January 18, 2000. Litigation was not actively pending when Rambus formulated and adopted its document retention policy. Thus, litigation was not pending at the time of the 1998 and 1999 Shred Days. The questions are, however, when litigation by Rambus was reasonably foreseeable and when a duty to preserve evidence arose. Sanctions may be imposed on a litigant who is on notice that documents and information in its possession are relevant to litigation, or potential litigation, or are reasonably calculated to lead to the discovery of admissible evidence, and destroys such documents and information.
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Wm. T. Thompson Co. v. General Nutrition Corp., 593 F. Supp. 1443; 1455 (C.D. Cal. 1984) (emphasis added); see also Bayoil, S.A. v. Polembros Shipping Ltd., 196 F.R.D. 479, 483 (S.D. Tex. 2000) (Notice does not have to be of actual litigation, but can concern potential litigation. [citation] Otherwise, any person could shred documents to their hearts content before suit is brought without fear of sanction.). The Ninth Circuit has not expressly defined the term potential litigation.The duty to preserve evidence begins when litigation is pending or reasonably foreseeable. Id. at 1320 (citation and internal quotation marks omitted). When litigation is `reasonably foreseeable is a flexible fact-specific standard that allows a district court to exercise the discretion necessary to confront the myriad factual situations inherent in the spoliation inquiry. Id. (citation omitted). This standard does not trigger the duty to preserve documents from the mere existence of a potential claim or the distant possibility of litigation. Id. (citation omitted). On the other hand, this standard does not carry a gloss requiring that litigation be `imminent, or probable without significant contingencies. Hynix II, 645 F.3d at 1345. In the Second Circuit, the obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigationmost commonly when suit has already been filed, providing the party responsible for the destruction with express notice, but also on occasion in other circumstances, as for example when a party should have known that the evidence may be relevant to future litigation. Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998). The American Bar Associations Civil Discovery Standards from August 1999 also provide some guidance. Standard No.10 states, When a lawyer who has been retained to handle a matter learns that litigation is probable or has been commenced, the lawyer should inform the client of its duty to preserve potentially relevant documents . . . . ABA Section of Litigation, Civil Discovery Standards, August 1999, Standard No. 10. The comments to this standard clarify that the probable language means that litigation must be more than a possibility, citing Iowa Ham Canning, Inc. v. Handtmann, Inc. 870 F. Supp. 238, 245 (N.D. Ill. 1994) (noting that under Iowa law [t]he requisite knowledge for imposing sanctions . . . is not the potential for litigation; but the contemplation or anticipation of product litigation.) (citing State Farm Fire & Cas. Co. v.
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Frigidaire, 146 F.R.D. 160, 162 (N.D. Ill. 1992)). Litigation is an ever-present possibility in American life. Natl Union Fire Ins. Co. v. Murray Sheet Metal Co., Inc., 967 F.2d 980, 984 (4th Cir. 1992). 1. Litigation Was Not Reasonably Foreseeable As Of Shred Day 1998
Hynix correctly argues that in this case probablereasonably foreseeable must be viewed from the perspective of a plaintiff, who is in control of when thethen litigation is to be commenced. This, according to Hynix, means that litigation is probable when litigation is contemplated. And, here, Hynix contends that Rambus contemplated litigation as of the time that it began to formulate a litigation strategy. in the first half of 1998, before the first shred day of September 1998 and before the degaussing of backup tapes in July 1998. In support of its argument, Hynix cites Silvestri v. General Motors Corp., 271 F.3d 240583 (4th Cir. 2001), in which the court found sanctionable spoliation where the plaintiff caused a car that was the subject of a product liability suit to be unavailable for litigation prior to filing suit. There are, however, significant factual distinctions between Silvestri and the present case. In Silvestri, there was a single piece of critical evidence, the damaged car. Plaintiff knew he was going to make a claim, had experts inspect the car for litigation purposes, had hired litigation counsel, and had even been advised by one of his experts that the car should be retained because the defendant would want to inspect it. The plaintiff nevertheless allowed the car to be destroyed. Here, by contrast, the path to litigation was neither clear nor immediate. Although Rambus began to plan a litigation strategy as part of its licensing strategy as early as February 1998, the institution of litigationtentative, speculative, and inchoate as of Shred Day 1998. In the first half of 1998, Rambus was in the preliminary planning stages for a backup licensing strategy. Non-compatible licensing was not a business strategy that Rambus expected or hoped to implement. Rather, the companys hopes and expectations were tied to Direct RDRAM, and it viewed licensing as a fall-back strategy, to be considered only if something unexpected happened with RDRAM. Litigation was a still more remote possibility. It could not be said to be reasonably probableforeseeable because several contingencies had to occur before Rambus would engage in litigation: (1) the direct RDRAM ramp had to be sufficiently developed so as not to
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jeopardize RDRAM productionbefore Rambus would be in a position to make a business decision on whether to pursue non-compatible licensing; (2) Rambuss patents covering non-RDRAM technology had to issue; (3) product samples from potentially infringing DRAM manufacturers had to be available in the market; (4) the non-compatible products had to be reverse engineered and claim charts made showing coverage of the actual products; (5) Rambuss board and management had to approve commencement of negotiations with a DRAM manufacturer; and (6) the targeted DRAM manufacturer had to reject Rambuss licensing terms. The evidence shows that prior to (and well after) Shred Day 1998, Rambus did not fully expect those contingencies to be resolved in favor of filing a patent infringement action against DRAM manufacturers. Cf Hynix II, 645 F.3d at 1346. Rambus planned to begin its licensing strategy only at the time the DRAM manufacturers were locked in to RDRAM production. By October 1998, the projected time frame for this was early 2000. Although Karps October 1998 presentation projected that Rambus might be able to demonstrate that Mosel and Nanya had SDRAM products that directly infringed a pending access time register patent by the first quarter of 1999 and thus Rambus could potentially state contributory infringement and inducement claims against companies like Acer, SIS, and VIA for SDRAM and DDR, the presentation also recommended not even initiating licensing negotiations. DO NOT ROCK THE DIRECT BOAT. We should not assert patents against Direct partners until ramp reaches a point of no return (TBD) Probably not until Q100 *** However, the Big Question Is - WHATS THE RUSH? What is the compelling business reason? I cant think of any. Keeping the Maytag repairman busy is not a valid reason IMHO, risks of damaging establishment of dominant standard outweigh potential return Lets not snatch defeat from the jaws of victory
HTX 128.003. The recommendation not to go forward with licensing against potential infringers at the time was consistent with Rambuss desire to ensure that DRAM manufacturers fulfill Intels 26 RDRAM requirements. 27 28
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The patents Rambus asserts in this case did not begin to issue until June 22, 1999. Hynix nevertheless contends that Rambus had issued patents that it could have asserted against DRAM manufacturers as of January 13, 1998, the day it began meeting with Cooley attorneys. As of that date Rambus had identified to Cooley the 481 and 327 patents as two key patents. HTX 376. In the Nuclear Winter Scenario memo, written at the end of 1998 or beginning of 1999, Rambus hypothesized how to convince Intel to continue their dealings in the event that the relationship between Intel and Rambus was compromised by the existence of another technology. This memorandum suggested that three Rambus patents could be leveraged to demonstrate that Rambus possessed intellectual property that covered DRAM solutions: 481, 327, and 580. Id. Karp testified that these patents were not strong patents and that Rambus preferred not to have to litigate them and that the hypothetical situation was set forth as a worst case scenario. Although there is no specific expression in the memorandum that the patents were potentially weak, the entire scenario was presented as a potential last resort tactic to convince Intel that RDRAM was still the best technology option and that Intel would not be able to completely walk away from Rambuss intellectual property by moving to other DRAM solutions. Once customer samples were available in the market, Rambus planned to engage in reverse engineering to produce claim charts for use in its license negotiations. The Nuclear Winter Scenario memorandum demonstrates that, as of the beginning of 1999, customer samples of potentially infringing devices were not yet available and Rambus would, in the event of litigation, have to build claim charts based on datasheets rather than reverse engineering actual product. While the availability of customer samples does not appear to have been a necessary requirement for initiating licensing discussions, the fact that customer samples were not yet available supports the conclusion that, at least as of early 1999, Rambus was not contemplating initiating either licensing negotiations or litigation at that time. Approval by Rambuss board to begin negotiation with DRAM manufacturers had not been obtained as of August 1999. Furthermore, and even more telling, Rambus had not budgeted for litigation. As of the June 1999 budget presentation, Rambus had budgeted for continued
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reverse engineering, and for continued prosecution of its patents, but had not budgeted the $1.5 to $3 million projected to pursue litigation. Rambus did view in early 1998 that future litigation against some DRAM manufacturer was possible if licensing negotiations failed. This expectation of involvement in litigation in this particularly litigious field was probably similar to that held by others in the industry who either anticipated the possibility of suing or being sued. Although Tate insisted that Rambus really wanted to avoid litigation when he and Karp began meeting with the Cooley attorneys, the evidence presented demonstrates that, once license negotiations commenced, Rambus wanted to go in quickly and proceed either to a license or litigation. HTX 395. Rambus was also looking for licensing rate that tells them it costs to infringe. Id. And Tate acknowledged that the 5% royalty Rambus was contemplating in early 1998 was challenging and that manufacturers might tell Rambus to pound sand. Trial Tr. 1290:16-1291:1. In light of the direction given to the Cooley attorneys and the bullet item in Geoff Tates July 1998 goals (license OR sue), HTX 094, Tates testimony that the last thing he wanted was litigation with a major company reflects a less aggressive approach than the contemporaneous documents suggest. Nevertheless, it does appear that Rambus did not actually intend to initiate licensing negotiations for non-compatible users until certain contingencies occurred, which did not happen until late 1999. Karps IP Strategy Update dated September 24, 1999 reflects the turning point in Rambuss litigation intentions. In that document, Rambus acknowledges that Intel has already started to let go. HTX 244.002. The presentation clearly states that Rambuss intellectual property in its patents must be substantiated by either settlement with an industry powerhouse or winning in court, and acknowledges that some manufacturers will never settle. Id. At this point, Rambus appears to be ready to seriously consider actually filing suit against someone. Rambuss concerns about the direct RDRAM ramp were now outweighed by the prospect of losing Intel business; Rambuss patents had begun to issue; product samples from DRAM manufacturers were available in the market; Rambus was in the process of reverse engineering those products and producing claim charts; Rambuss board was now being presented with the necessity of launching the licensing and litigation strategy; and there was an explicit
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acknowledgment that at least some targeted DRAM manufacturers would probably reject Rambuss licensing terms. Notably, this presentation occurred after the Shred Day in August 1999. In sum, although Rambus began formulating a licensing strategy that included a litigation strategy as of early 1998, Rambus did not actively contemplate litigation or believe litigation against any particular DRAM manufacturer to be necessary or wise before its negotiation with Hitachi failed, namely in late 1999. While hiring of litigation counsel or actually filing suit is certainly not necessary to demonstrate that a company anticipates litigation, in light of the record presented, it would appear that litigation became probable shortly before the initiation of the beauty contest in late 1999 in which litigation counsel for the Hitachi matter, Gray Cary, was selected. Thus, Rambuss adoption and implementation of its content neutral Document Retention Policy in mid-1998 was a permissible business decision. The destruction of documents on the 1998 and 1999 Shred Days pursuant to the policy did not constitute unlawful spoliation. (a) Licensing Was A Tentative Backup Strategy
The record shows that beforeand indeed well afterthe summer of 1998, mincompatible licensing was a speculative and disfavored fallback strategy. In developing a licensing program for competing products, Rambus management was charting a possible course that it hoped the company would never need to follow. This is illustrated by the Nuclear Winter Scenario memorandum at the end of 1998the actual title of which, Patent Enforcement 1999, has been obscured by that more colorful language. The memorandum discussed potential litigation against DRAM manufacturers only in the purely hypothetical and very unlikely nuclear winter scenario where, for example, elves in the Black Forest developed a competing design and Intel moved away from RDRAM. HTX 004.001. Karp described the timing of litigation as hopefully never. HTX 004.005. It is undisputed that Rambus, both before and after Shred Day 1998, actually and reasonably expected RDRAM to succeed on its own accord. As Hynix counsel acknowledged, Rambus believed that RDRAM would, for all practical purposes, be the only commodity DRAM. Trial Tr. at 40:17-21. Intel had recently chosen Direct RDRAM for its next generation
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of chipsets, and there was every reason to expect that this would give Direct RDRAM a major share of the DRAM market. Trial Tr. 1251:3-6. Given Rambuss expectations for RDRAMs success, it was not reasonably foreseeable that Rambus would need to implement its backup line of defense, which carried substantial risks. RTX 080; Trial Tr. 1392:12-1393:9. As Tate explained: Rambus DRAM ... was on a good trajectory, and if the Rambus DRAM was going to be the bulk of the market, perhaps it wouldnt be worth the effort and the friction in order to pursue our patent [rights] with respect to infringing DRAMs. Trial Tr. 1393:3-9. As of 1998, Rambus management not only hadnt made a decision that we
9 wanted to proceed to licensing, Trial Tr. 1264:21-22, 1564:12-19, but viewed that decision as 10 one they hoped to avoid. The auxiliary role that licensing served in Rambuss business plans in 11 1998 is reflected in Tates goals for the year. Non-compatible licensing was listed under the 12 heading Positioning Rambus for the Future Including IP, alongside other amorphous and 13 speculative goals such as Determine directions for ... whats next and Identify key advanced 14 technology development required ..., all of which were secondary to a long list of more concrete, 15 RDRAM-focused objectives for numerous specifically identified market segments. HTX 16 094.001. That Rambus wanted to position itself for the future did not mean that every 17 possible future event it contemplated was likely to occur. 18 Litigation is not made foreseeable as of the summer of 1998 merely because Rambus, 19 working with outside counsel, explored what a licensing strategy might look like and its potential 20 litigation implications. Companies often plan, and indeed must plan, for unlikely events. 21 Strategizing about potential business options and scenarios a company might or might not face on 22 the horizon does not make their occurrence foreseeable. When Tate tasked Karp with developing 23 a backup line of defense in early 1997, Tates goal was to get our patents in place and then see 24 if it made business sense for us even to enforce those patents.... [W]e want to think through what 25 the steps would be and where it could lead us. Trial Tr. 1257:7-12. It was precisely because 26 non-compatible licensing was so contingent that Cooley emphasized in its February 1998 strategy 27 memorandum that each of the above scenarios [for licensing or litigation] is dependent on the 28
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facts that exist at the time the decision to litigate is made. Factors unknown presently may result in a change of strategy. HTX 098.003. As one might expect for such backup planning, the discussions about non-compatible licensing in 1998 would sort of come and go, but never really went anywhere. Trial Tr. 1555:24-1556:8. In the 1998 timeframe, Rambus never made a decision to pursue non-compatible licensing. Trial Tr. 1564:12-19. As the Federal Circuit observed, litigation is an ever-present possibility in American life. Micron II, 645 F.3d at 1322 (citation omitted). If think[ing] through the potential ramifications of a fall-back business strategy suffices to make litigation foreseeable, then companies would be under a permanent duty to retain documents about everything. Merely contemplating a possible future event that might trigger litigation would be taken as evidence that occurrence of litigation is foreseeable. This is not the rule. There is no legal duty to be a pack rat. Fidelity Natl Title Ins. Co. v. Intercounty Natl Title Ins. Co., 412 F.3d 745, 751 (7th Cir. 2005) (Posner, J.). (b) Rambus Could Not Demonstrate Actual Infringement
Litigation was not reasonably foreseeable as of the summer of 1998 for the further reason that Rambus did not believe that it had viable patent claims against potentially infringing products, and it was uncertain when, if ever, it would obtain such claims. Around the time Karp joined Rambus in October 1997, Rambus was not ... able to show that [its inventions] were actually being used by the DRAM manufacturers Rambus suspected of infringement. Trial Tr. 1390:18-1391:4. It is undisputed that, as of the summer of 1998, Rambus did not believe it had patents covering SDRAM. Trial Tr. 1254:14-16; 26:15-18. As for DDR, as of the end of 1998, Rambus still had very limited information about DDR parts and was not ... able to produce actual claim charts based on information gleaned from real designs. HTX 004.001. While Rambus suspected at the time of the Nuclear Winter Scenario memorandummonths after Shred Day 1998that DDR and SDRAM infringed three existing patents (481, 327, and 580), Rambus determined, based on reverse engineering and infringement analysis, that it did not have strong claims, if any, based on those patents. Trial Tr. 510:12-516:24. It was not until sometime
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in 1999 that Rambus came to believe that it could show actual infringement. Trial Tr. 1391:1317. Rambus certainly applied for patents that it hoped would protect the full scope of its inventions and encompass competing products that used those inventions. But Rambus had no control over when or whether the PTO would allow the claims it sought, and could not be certain in early 1998 that the claims would issue. By late 1998, a year after hiring Karp to strengthen Rambuss strategic patent portfolio, CEO Tate remained frustrated by the lack of progress in obtaining patents that covered what Rambus believed to be its inventions. Trial Tr. 1258:18-22. Nor could Rambus be certain that the claims it applied for would actually read on the products it suspected of infringement. As noted above, Rambus changed its view regarding suspected infringement after reverse engineering analysis. Trial Tr. 510:12-516:24. Rambus would not make a decision to initiate non-compatible licensing unless it was shown that products in the market actually infringed. And those products needed to be ... real products that were in production, because if they were just prototypes, there wasnt much worth in pursuing that kind of thing because prototypes can change. Trial Tr. 1392:2-11. It is not ... enough to have a target in sight that the patentee believes may infringe, Micron II, 645 F.3d at 1323, and Rambus did not have enough information even to fix a clear target through 1998 and at least the first half of 1999. See Trial Tr. 1566:20-23 (Roberts testimony that Rambus did not have licenseable patents as of late 1998 and early 1999). (c) Lack of Litigation Budget
As the Federal Circuit noted, whether litigation was reasonably foreseeable was largely dependent on whether Rambus chose to litigate. 645 F.3d at 1325. The fact that Rambus did not include litigation costs in its budget confirms that litigation remained hypothetical up through, and beyond, Shred Day 1998. The evidence showed that Rambus was very, very sensitive to costs. HTX 376. Despite budgeting expenditures as small as $5,000 to $10,000, Rambus did not include litigation costs in its 1998 budget. As of September 1998, Karp had as one of his goals [r]everse engineer suspect devices, as budget allows, suggesting that it was not then certain that he would have sufficient
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funds allocated for infringement analysis. HTX 001.003. After Shred Day 1998, Karp took care to identify cost items in his October 1998 presentation on the backup licensing strategy, including 35-40k for new continuation patent applications and ~10-20K for reverse-engineering each suspected device. HTX 128.005-006. If Karp listed these licensing-related costs, one could have expected him to identify and list litigation-related costs if they were likely to arise. Rambus had been told that a lawsuit would cost $1.5 to $3 million, an amount that Karp characterized as high in his Nuclear Winter Scenario memorandum. HTX 004.006. Rambuss continued sensitivity to the relatively small costs associated with developing a licensing strategy tends to show that Rambus did not view litigation as a likely scenario at the end of 1998, let alone before the summer of that year. (d) Lack of Management/Board Approval
There is no evidence that the Rambus board of directors was asked to approve, or approved, the backup licensing strategy in 1998, or at any time before late 1999. Nor does the record show that Rambuss executives, including CEO Tate, issued such an approval in 1998. Indeed, in the summer of 1999, a year after Shred Day 1998, Karp still needed to prepare a licensing strategy for both board and executive approval. HTX 139.001. On this score, it is worth noting that the Micron I district court, which had dismissed Rambuss patent counterclaims in that case as a spoliation sanction, found that Rambuss duty to preserve did not arise until December 1998, well after Shred Day 1998. The Micron I district court found that Rambuss contemplation of a potential licensing and litigation strategy before December 1998 amounted, at most, to an assertive approach to business, Micron Tech., Inc. v. Rambus Inc., 255 F.R.D. 135, 150 (D. Del. 2009), and did not give rise to a duty to preserve. The Federal Circuit stopped short of affirming even that date, instead issuing a binary holding that the duty to preserve attached sometime before Shred Day 1999. See Micron II, 645 F.3d at 1321. For all of these reasons, the duty to preserve did not attach before Shred Day 1998.
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2.
Hynix Has Not Shown That Evidence Was Destroyed on Shred Day 1999
Hynix also argues that Rambus engaged in spoliation on the second shred day on August 26, 1999. To show that spoliation occurred on that day, Hynix must demonstrate that (1) a duty to preserve attached before that day, and (2) Rambus destroyed evidence in contravention of that duty. As the Federal Circuit noted, [s]poliation refers to the destruction or material alteration of evidence or to the failure to preserve property for anothers use as evidence in pending or reasonably foreseeable litigation. Hynix II, 645 F.3d at 1344-45 (emphasis added). Duty Date
The Federal Circuits analysis in Micron II, and in particular the evidence it cited, suggests that Rambuss duty to preserve did not attach until July or August 1999 at the earliest, for example, when Rambus requested and received a litigation timeline (on July 8, 1999) with a hypothetical October 1999 complaint filing date. 645 F.3d at 1323-24. The record here does not suggest that, before mid-summer of 1999, litigation became any more foreseeable than the purely hypothetical and very unlikely scenario that it was as of December 1998. HTX 004.001. Hynix has pointed to nothing that happened between the Nuclear Winter Scenario memorandum and the summer 1999 events stressed by the Federal Circuit in Micron 11 that would trigger a preservation duty. Indeed, the first patent-in-suit did not issue until June 22, 1999. Hynix therefore cannot premise its unclean hands defense on documents that were legitimately destroyed before that time. See Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672, 681 (7th Cir. 2008) (courts find spoliation only where a party has a duty to preserve evidence). This would include the documents Rambus discarded on an ad hoc basis in the years before it adopted the document retention policy. This would also include documents destroyed on Shred Day 1998 and the backup tapes degaussed in July 1998. This would further include the patent file cleaning by Vincent before July 1999. Hynixs unclean hands defense is therefore limited, and limited as a matter of law, to evidence that (I) survived, or was created after, these legitimate document destruction events and (2) was destroyed on Shred Day 1999.
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(b)
Spoliation
Hynix argues that this Court must find spoliation because the Hynix 11 Court held that its analysis compel[led] a finding that litigation was reasonably foreseeable prior to Rambuss Second Shred Day. 645 F.3d at 1347. But the Federal Circuits opinion is not conclusive as to the question of spoliation, because it also observed that, on remand, this Court could determine[] that Rambus did not spoliate documents ..., Hynix 11 645 F.3d at 134748. At a minimum, the issue of whether Rambus destroyed evidence on Shred Day 1999as opposed to irrelevant documentsremains to be decided in the first instance. Even if it is assumed that the duty to preserve had attached by Shred Day 1999, there was no spoliation because Hynix has not shown that Rambus destroyed relevant evidence on that day. Hynix has not articulated what evidence would have been available, and destroyed, on Shred Day 1999. The bulk of destroyed documents were printouts of circuit designs. That is to be expected, because the vast majority of Rambuss employees were engineers working on RDRAM technology. Trial Tr. 1395:13-20; 1542:8-1544:2. Their documents are unlikely to have been relevant to Hynixs defenses against Rambuss infringement counterclaims. Hynix does not argue otherwise. And the record shows that material documents in the categories Hynix argued at trial would not have been destroyed in any event. With respect to JEDEC documents, for example, Rambus preserved and produced two complete sets of the JEDEC-related emails and JEDEC trip reports from the records of Richard Crisp, Rambuss JEDEC representative. While some JEDEC-related documents were destroyed, the record indicates both that they were publicly-available and that they would have been destroyed on Shred Day 1998, before a duty to preserve attached. As part of Shred Day 1998, Crisp discarded JEDEC-related documents that were publicly available from JEDEC, such as official minutes of JEDEC meetings and unopened envelopes containing paper ballots. Trial Tr. 1167:22-1169:4; 1174:25-1175:9. However, Crisp had gone through his emails and specifically preserved his internal JEDEC materials because he was told to look for things to keep and he thought those emails were important. Trial Tr. 1211:9-1212:4. There is no reason to think that documents that Crisp specifically preserved in September 1998 were somehow destroyed in
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August 1999his emails and trip reports, after all, survived and ultimately were produced. This indicates that the JEDEC-related documents that were destroyed would have been destroyed on or before Shred Day 1998, before a duty to preserve attached, and that Rambus did not spoliate JEDEC-related evidence on Shred Day 1999. With respect to BSTZs patent prosecution files, even before Karp asked Vincent to conform patent prosecution files for issued patents in April 1999, BSTZ attorneys already had a policy and practice of doing so. The cleaning that began upon Karps request also started before July 1999, the earliest time when the duty to preserve could have attached. While Vincent cleaned some patent files in July 1999, none of the files were for the patents-in-suit, and the discarded documentsdraft applications and noteswould have been privileged and not discoverable. In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 805-06 (Fed. Cir. 2000) (invention record privileged); Avago Techs. General IP PTE Ltd v. Elan Microelecs. Corp., 2006 WL 3290400 (ND. Cal. Nov. 13, 2006) (notes and drafts); Fed. R. Civ. P. 26(b) (permitting discovery of relevant nonprivileged matter) (emphasis added). Rambus did shred additional records when it moved its offices in December 2000. Hynix initiated the instant lawsuit against Rambus on August 29, 2000. Therefore, Rambus was engaged in litigation at the time of its move and attendant disposal of documents. This raises the question of whether the third shredding event constituted spoliation. The evidence presented by Hynix diddoes not demonstrate that any documents material to Rambuss patent claims were destroyed in conjunction with the 2000 move. At best, Hynix speculated that internal documents relating to the 1998 negotiations between Rambus and Hynix over the Other DRAM provision or the Hynix-LGS post-merger license had been destroyed to the extent those documents survived the shred days in 1998 and 1999. Rambus has negated that speculation by producing or logging as privileged numerous internal communications regarding these topics. The fact that Rambus has previously claimed work product protection for some documents dated prior to late 1999 does not dictate a finding that Rambus was anticipating litigation at the time the documents were created. A reference to work product on a privilege log does not support the conclusion that litigation was anticipated because the log was prepared
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by California lawyers. California law differs from federal law, in that it protects a lawyers work product prepared in a nonlitigation capacity. County of Los Angeles v. Superior Court, 82 Cal. App. 4th 819, 833 (2000). Thus, [t]he protection afforded by the privilege [under California law] is not limited to writings created by a lawyer in anticipation of a lawsuit. It applies as well to writings prepared by an attorney while acting in a nonlitigation capacity. Id. Additionally, Gray Cary attorney Sean Cunningham testified that his understanding of the California work product doctrine at the time the Rambus privilege logs were prepared was that it could apply even where anticipation of litigation wasnt necessarily present, that if it were the mental impressions of a lawyer, that it could be claimed as work product. Trial Tr. 765-66. Cunningham was not aware of any determination that his team of lawyers and paralegals who worked on the privilege logs made, as to any specific date and time by which Rambus anticipated litigation against a DRAM manufacturer. Id. at 766. The court concludes that Rambus did not engage in unlawful spoliation of evidence. This conclusion does not mean that a party can destroy documents with impunity prior to contemplation of actual litigation. The implementation of a document retention policy that was intentionally designed to discard damaging documents should litigation later become probable or actually commence would be improper. The evidence here does not support the conclusion that Rambus intentionally designed its Document Retention Policy to get rid of particular damaging documents. Because Hynix has not shown that discoverable evidence was destroyed on or after Shred Day 1999 even assuming that a duty to preserve had attached, the Court finds that Rambus did not engage in spoliation. E. Additional Requirements for Application of Unclean Hands Defense 1. Bad Faith Requirement
Although Rambus did not unlawfully spoliate evidence, it may have shredded relevant documents. The destruction of relevant documents, without more, does not But even if Rambus engaged in spoliation, that would not be enough to support an unclean hands defense. Bad intent is the essence of the defense of unclean hands. Dollar Systems v. Avcar Leasing Systems, 890
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F.2d 165, 13 (9th Cir. 1989). Accidental, inadvertent, or even grossly negligent behavior does not support the application of unclean hands. Id.; cf. Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107, 131 (S.D. Fla. 1987) (Resort to the most severe in the spectrum of sanctions dismissal of an action or the entry of default judgmentis clearly appropriate where the offending party is found to have exhibited flagrant bad faith and its counsel has acted with callous disregard for the rules of discovery.) (citing National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639, 643 (1976)). The unclean hands defense applies only if the court is left with a firm conviction that the defendant acted with a fraudulent intent in making the challenged claims. Jarrow Formulas, 304 F.3d at 842. Because the remedy of unenforceability is the atomic bomb of patent law, cf. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288 (Fed. Cir. 2011), the intent requirement is particularly strict in the patent context, id. at 1287. As the Federal Circuit explained, the defense of unclean hands typically applies only to deliberately planned and carefully executed scheme[s] to defraud ... the courts, and requires proof of knowledge and deliberate action. Id. at 1287, 1290 (surveying unclean hands case law). Under Micron II, document destruction rises to this level only if the spoliator intended to suppress the truth in a judicial proceeding, 645 F.3d at 1326 (equating bad faith spoliation with fraud and a desire to suppress the truth) (quoting Gumbs v. Intl Harvester, Inc., 718 F.2d 88, 96 (3d Cir. 1983)), and thereby to undercut its opponents ability to mount its defense or present its case, id. (bad faith requires a showing that the spoliating party intended to impair the ability of the potential defendant to defend itself, and that documents were destroyed for the purpose of hiding adverse information) (quoting Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 80 (3d Cir. 1994), and Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008)); see also Anderson v. Cryovac, Inc., 862 F.2d 910, 925 (1st Cir. 1998) (bad faith embraces intentionally shredding documents in order to stymie the opposition). Bad faith spoliation thus requires proof that the accused spoliator knew that it was under a duty to preserve evidence, knew that certain evidence was harmful, and made a deliberate decision to destroy that evidence in order to prevent its use in court.
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That standard flows from the need to distinguish between legitimate document destruction and spoliation, and between negligent spoliation and bad faith spoliation. Arthur Anderson made clear that it is legitimate to implement a document policy to keep certain information from getting into the hands of others, including the Government. 544 U.S. at 704. What distinguishes spoliation from such legitimate efforts to keep adverse documents out of the hands of others is the onset of a duty to preserve. Furthermore, Micron II held that intentional breach of a duty to preserve is not the same thing as bad faith spoliation. Micron II, 645 F.3d at 1326 (That the documents were destroyed intentionally no one can doubt, but `bad faith means destruction for the purpose of hiding adverse information.) (quoting Mathis v. John Morden Buick, Inc., 136 F.3d 1153, 1155 (7th Cir. 1998) (no bad faith even though documents destroyed after commencement of litigation)) (emphasis in Micron I)). For spoliation to be in bad faith, there must have been a deliberate decision to fraudulently stack the evidentiary deck in the litigants favor. If a spoliator did not know it had a preservation duty, or that litigation had reached the reasonable foreseeability threshold, it is unlikely that the spoliator had the requisite intent to defraud and corrupt the unforeseen proceeding. Hynix has not met this burden on remand. Regardless of when the duty to preserve documents attached, Rambuss adoption and implementation of its document policy on Shred Day 1998 and Shred Day 1999 was not in bad faith. (a) Rambus Adopted The Policy In Good Faith And At The Behest Of Counsel
The record shows that Rambus adopted a document retention policy because outside counsel advised that it was the appropriate and customary course. There is no evidence that Rambus even considered adopting a document retention policy prior to the meeting with attorney Johnson on February 12, 1998. Before then, each Rambus employee had a box for confidential documents that needed to be shredded, and a truck came weekly to pick up documents for shredding, but there was no formal document policy. In February 1998, in the context of discussions regarding developing a backup licensing strategy, Johnson initiated a discussion on document retention and advised Rambus to adopt a formal policy. Johnson believed that Rambuss existing document retention practices were anathema, because Rambus had kept old
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data that would have been technically difficult and expensive to search in the hypothetical event of a subpoena. Trial Tr. 1676:6-1677:14. Johnson also believed a document retention policy would help shield a company from spoliation allegations. Trial Tr. 1678: 10-20. The advice Johnson gave Rambus was commonplace, the same advice he had given eight or ten times to different startup companies. Trial Tr. 1678:21-1679:9. In addition, Rambus was independently advised by a security consultant to work with counsel to develop a document retention policy. RTX 160.026; Trial Tr. 369:18-373:23. The document retention policy Rambus ultimately adopted closely tracked the standard template provided by outside counsel. All of its categories came from the Cooley template, and most of its language was drawn verbatim from that source. Rambus also called on Johnsons help in implementing the policy. Rambus had Johnson, along with Karp, give a presentation on the policy to Rambus managers before Shred Day 1998, and made sure that Johnson reviewed the presentation slides that Karp would use on his own with other Rambus employees. Nothing in this course of conduct suggests that Rambus fraudulently intended to corrupt an anticipated judicial proceeding by adopting a document retention policy. Rambus just wanted to implement the advice of counsel. (b) Rambus Did Not Destroy an Unusual Amount of Documents
The undisputed evidence was that the volume of documents destroyed by Rambus was not unusual. In both shred days, Rambus destroyed an average of 2-3 banker boxes per employee. Sure Shred, a company experienced in corporate document disposal, confirmed that this volume was consistent with typical business practice and, if anything, was on the low side for regular document destruction events. (c) Rambus Was Not Aware Of Any Duty To Preserve Prior To Shred Day 1999
Hynix has not shown that, as of Shred Day 1999 or prior to that event, Rambus knew it had a duty to preserve, much less that it made a deliberate decision to breach that duty. Cf Therasense, 649 F.3d at 1290; Arthur Andersen, 544 U.S. at 706 (requiring consciousness of wrongdoing for criminal spoliation).
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The record does not show that Rambus thought there was anything improper about its adoption or implementation of the document retention policy. The policy was the product of extensive consultation with counsel. And the openness with which Rambus adopted and implemented the policy tends to refute any inference of a fraudulent plot to subvert the judicial process. Both Shred Day 1998 and Shred Day 1999 were company-wide events known to all employees, and included service of pizza and beverages. Throughout 1998 and 1999, the period in which Johnson proposed and helped develop Rambuss document retention policy, Johnson never suggested that it had incurred a preservation duty or was about to incur one. Nor did Johnson indicate that Rambuss simultaneous work on this policy and a back-up licensing plan, with follow-on litigation issues, meant that it crossed the threshold for reasonable anticipation of litigation. At the February 12, 1998 meeting, Johnson counseled Rambus that it needed a document retention policy and addressed possible licensing and the litigation issues attending it. Trial Tr. 1680:4-25. In July 1998, when Johnson gave a presentation to Rambus managers, he cautioned that destroying documents once litigation commenced would be improper. Johnson did not advise Rambus that it already had a duty to preserve, or that its contemplation of a possible licensing strategy would give rise to such a duty. There is no evidence that Rambus thought it had a such a duty before Shred Day 1998. That had not changed by Shred Day 1999. Although Karp continued to consult Johnson on licensing and hypothetical litigation issues, Johnson never told Rambus that a preservation duty had attached. Johnson knew that Rambus had patents in the pipeline, and continued to answer questions about what if scenarios for patent enforcement. Trial Tr. 1720:9-10; Trial Tr. 1705:6-7. A substantial portion of the contents of the December 1998 Patent Enforcement 1999 memorandum (a.k.a the Nuclear Winter memorandum) came from Johnson, including the parts that discussed potential causes of action, the amount of time it would take to get to trial, and litigation costs. HTX 004.003-.005; Trial Tr. 516:23-518:18. Johnson also provided a sample letter to prospective licensees asserting infringement. HTX 004.007; Trial Tr. 516:23-518:18. In June and July of 1999, less than two months before Shred Day 1999, Johnson prepared and sent to Rambus two litigation timelines, with the July timeline positing October 1, 1999 as the
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hypothetical filing date for a patent infringement complaint. RTX 348, at 2; RTX 350. These are the same timelines that the Federal Circuit cited in Micron II in holding that the Micron I Court did not clearly err in finding that a duty to preserve arose before Shred Day 1999. Micron II, 645 F.3d at 1324. However, Johnson did not advise Rambus that its contemplation of a hypothetical October 1999 filing date gave rise to a duty to preserve. Reasonable foreseeability is a flexible fact-specific standard. Micron II, 645 F.3d at 1320. Judges who have opined on when Rambuss duty to preserve arose have reached different conclusions on that issue. See Micron I, 255 F.R.D. at 150; Micron II, 645 F.3d at 1321; Hynix 591 F. Supp. 2d at 1064; Hynix II, 645 F.3d at 1356 (Gajarsa, J., dissenting in part). The fact that reasonable judicial minds have disagreed over whether Rambus even had a duty to preserve before Shred Day 1999 tends to confirm that Rambus did not know that it had such a duty and did not knowingly breach that duty in order to defraud the courts. That suffices to defeat Hynixs assertion of bad faith. (d) Rambus Did Not Intend To Hide Harmful Information
Hynix argues that Rambus adopted its Document Retention Policy intending to destroy adverse evidence relevant to potential patent litigation and breach of contract claims. It also asserts that Rambus was aware of potential antitrust counterclaims and the possibility of an equitable estoppel defense based upon its non-disclosure to JEDEC members of its patent activities. With regard to patent-related materials within Rambus, the document retention policy and Karps presentation emphasized that engineering notebooks and other patent-related documents were important to keep. Karps presentation encouraged keeping technical meeting minutes, technical presentations, problem summaries, and the like. The record does not support that contention. First, Rambuss content-neutral document retention policy did not target for destruction documents containing information that would have harmed Rambus in potential patent infringement litigation against DRAM manufacturers. Hynix does not dispute that Rambuss policy was content-neutral and consistent with industry custom. Trial Tr. 7:19-23. The policy covered a wide variety of document categories, including categories (such as sales and marketing)
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that could have no relevance to the present litigation. It urged the preservation of certain general types of documents as well, such as patent related documents. HTX 023.001-002 (certain patentrelated documents are of great value and should be kept permanently). And, as noted, the Policy was based on, and closely tracked, the Cooley memorandum. RTX 091. Second, the materials and presentations Rambus used to explain the document retention policy to employees in the summer of 1998 were likewise content neutral. Karps instruction to look for things to keep was generalized, provided no further detail on what kind of documents to keep, and, like the policy itself, encompassed categories of documents that had nothing to do with claims against DRAM manufacturers. When asked by employees to explain what kind of documents to keep, Karps response was likewise content neutral. He explained that he would keep emails that went out to clients or other firms, as well as emails where he was author or recipient, and discard mass emails or emails about lunch invitations. This advice is not consistent with an intent programmatically to hide harmful information. Having well over a hundred employees look for things to keep, without targeted instruction, is hardly the way to purge a companys files of harmful documents. Indeed, Rambus has preserved and produced 1.2 million of pages of documents to Hynix, many of which are potentially harmful to Rambuss litigation positions and which Hynix and Rambuss other opponents have used against Rambus. Trial Tr. 924:7-12. Third, the fact that Rambus adopted and implemented its document retention policy in the context of considering a backup licensing strategy does not evidence an intent to hide harmful information. It was Johnson who suggested that Rambus needed a document retention policy, and he suggested it in the context of a crafting a possible licensing strategy. Trial Tr. 1675:211678:20. When he stressed the need to be battle ready, Johnson meant that a document retention policy would limit discovery costs by reducing the volume of documents, particularly old data that are technically difficult to retrieve, and reduce the risk of spoliation allegations that could arise from ad hoc document disposal. Trial Tr. 1675:21:1678:20. Similarly, when a proposal came from within Rambus to create a full system backup every two years, Johnson advised against it, citing the technical challenges and expenses associated with maintaining old
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data. Trial Tr. 1692:7-17. These are legitimate goals for a document retention policy. See Micron II, 645 F.3d at 1322 (noting legitimate housekeeping objectives including limiting the volume of a partys files and general concern for the possibility of litigation). Karp included in his 1998 presentation a slide, which Johnson had reviewed, that encouraged employees to discard emails and noted that Email Is Discoverable in Litigation Or Pursuant To A Subpoena. HTX 111.018; HTX 112.001. That warning, however, merely reflected the advice that Rambus received from Cooleys generic document retention memorandum. Cooley had counseled that electronic documents should be destroyed periodically because they may linger on ... and may be subject to discovery in litigation. RTX 091 at 7 (emphasis added). Johnson used a slide on email horror stories for his Rambus presentation to highlight the importance of having a policy. That was the same slide he used to train Fenwick lawyers and for a Practicing Law Institute presentation, and was not tailored in any way to Rambuss objectives. That does not evidence intent by Rambus to hide harmful information. Fourth, the record does not show that Karp and Johnson were aware of the existence of any adverse information in Rambuss office files or in the backup tapes. Johnson recommended the adoption of a document policy in his first meeting with Karp, on February 12, 1998, based on the standard advice that he gave over and over again to other companies. There is no reason to think that Johnson knew the contents of Rambuss records, let alone any adverse information that he knew would be important or useful to [its opponent] in defending against [the action]. Micron II, 645 F.3d at 1326. Nor is there evidence that Karp had any concerns about any adverse information in Rambuss records. Hynix places much weight on the degaussing of backup tapes in July 1998, but Karp did not inspect the contents of the backup tapes before their destruction, and there is no evidence that he knew of any harmful information in those tapes before their destruction. Nor does the record suggest that Karp reviewed or inspected other Rambus records in order to identify harmful information and ensure their purging. To the contrary, he told Rambus employees to look for things to keep.
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Fifth, Hynix also asserts that Rambus was aware of potential antitrust counterclaims and the possibility of an equitable estoppel defense based upon its non-disclosure to JEDEC members of its patent activities. With regard to JEDEC materials, Karp testified that he never thought that Rambus had any JEDEC issues because he had attended JEDEC meetings on behalf of Samsung and believed that Rambus was an open book at JEDEC. Trial Tr. 504:5-505:3. Moreover, Karp never thought there was an obligation at JEDEC to disclose patent applications, and he never saw one disclosed. Trial Tr. 505:4-11. In fact, Karp testified that the first time he became aware that someone might assert an equitable estoppel defense based on JEDEC was when he saw Hitachis counterclaims. Trial Tr. 506:11-16. Although this testimony is difficult to believe given that Karp was specifically warned about equitable estoppel and had some prior litigation experience involving it, Gordon Kelly, Chairman of the JEDEC committee Rambus attended, stated in 1993 that JEDEC did not require the disclosure of patent applications and that his company, IBM, would not disclose them. Trial Tr. 1198:5-1199:5; RTX 312. Further, the Federal Circuit has held that Rambus was not obligated by virtue of its membership in JEDEC to disclose any of the patents or patent applications that were issued or filed while Rambus was a JEDEC member. See Rambus Inc. v. Infineon Technologies AG, 318 F.3d 1081, 1105 (Fed. Cir. 2003). Even though Karp may have had more concern about equitable estoppel than he was willing to acknowledge, The Federal Circuit has re-affirmed that result in this case. Hynix II, 645 F.3d at 1348-50. The Document Retention Policy formulated by Karp did not single out JEDEC related documents for destruction. To the contrary, Richard Crisp, Rambuss JEDEC representative, was told to look for things to keep and specifically looked for and preserved a complete set of his JEDEC-related emails and JEDEC trip reports. In fact, documents were produced that clearly show that Rambus was warned about the risks of equitable estoppel being applied because it participated in JEDEC and failed to disclose its potential patent coverage. Sixth, far from targeting patent-related materials within Rambus, the document retention policy and Karps presentation emphasized that engineering notebooks and other patent-related documents were important to keep. Karps presentation encouraged keeping technical meeting
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minutes, technical presentations, problem summaries, and the like. The document retention policy did include Rambuss explicit request in April 1999 to Attorney Vincent at BSTZ to conform outside counsels patent files for issued patents to the PTO file wrapper. This practice resulted in the destruction of documents on the left side and center of the prosecuting attorneys trifold application files. Hynix does not challenge the practice of conforming the files, merely the circumstances under which the request was made by Rambus. These discarded documents would have included attorney interviews and correspondence with Rambus employeesinventors as well as drafts of the application that were not submitted to the PTO. Attorney Johnson advised Rambus to initiate this practice, and Vincent was not supplied with guidelines by Rambus as to what sorts of documents to discard. However, his own practice at BSTZ included purging of files after patent issuance. There is no indication that Rambus had particular concerns regarding the contents of those files. Rambus just wanted Attorney Johnsons recommendation carried out., and gave no detailed instructions to Vincent on what to keep and what to discard. Vincent cleaned the files using his general professional knowledge. Prior art documents were retained. In sum, Hynix has not met its burden of proving bad faith by clear and convincing evidence. 2. Nexus of Discarded Claims with Patent Claims
It is fundamental to [the] operation of the [unclean hands] doctrine that the alleged misconduct by the plaintiff relate directly to the transaction concerning which the complaint is made. Dollar Systems, 890 F.2d at 173 (quotation omitted) (first alteration in original). The Supreme Court has explained that courts do not close their doors because of plaintiffs misconduct, whatever its character, that has no relation to anything involved in the suit, but only for such violations of conscience as in some measure affect the equitable relations between the parties in respect of something brought before the court for adjudication. They apply the maxim, not by way of punishment for extraneous transgressions, but upon considerations that make for the advancement of right and justice. They are not bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion. Keystone Driller Co., 290 U.S. at 245-46; see Jarrow Formulas, 304 F.3d at 841 ([U]nclean hands does not constitute misconduct in the abstract, unrelated to the claim to which it is asserted
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as a defense.) (quoting Republic Molding, 319 F.2d at 349); United States v. United Energy Corp., 1987 WL 4787, at *13 (N.D. Cal. Feb. 25, 1987) (requiring direct nexus between alleged misconduct and claims at issue in litigation). Because the unclean hands defense requires that any alleged misconduct must pertain to the very subject matter involved and affect the equitable relations between the litigants, the defense will not act to deny relief simply because the plaintiff may have acted improperly in the past or because such prior misconduct may indirectly affect the problem before the court. Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472, 478-79 (9th Cir. 1969) (quotation omitted). To establish the required nexus, Hynix was required to prove more than the mere fact that Rambus destroyed documents, or even a large number of documents. The duty to preserve evidence, once it attaches, does not extend beyond evidence that is relevant and material to the claims at issue in the litigation. See Zubulake, 220 F.R.D. at 217-18 (recognizing that rule requiring retention of all documents upon recognition of threat of litigation would cripple large corporations). Hynix did show that some relevant documents were probably destroyed pursuant to the document retention policy, but Hynix has not shown that evidence was destroyed while Rambus was under a duty to preserve. For example, Horowitz testified that some original slides of early presentations he had been saving for his children had been destroyed in the first Shred Day, before the duty to preserve attached. Trial Tr. 611:13-25; 613:15-616:20. Horowitz explained, however, that these presentations had been made publicly and copies were available elsewhere. Id. It is also probable that Rambuss request that BSTZ conform the patent prosecution files resulted in the destruction, at minimum, of notes of inventor meetings and correspondence between Rambus inventors and BSTZ attorneys regarding the patent applications. However, these documents would have been privileged and not discoverable. Thus, the court concludes that Rambus disposed of some documents, while under a duty to preserve, did not dispose of evidence pursuant to its Document Retention Policy that had a nexus to the patent claims at issue. In any event, as discussed below, the disposal did not prejudice Hynix and does not support a finding of unclean hands.
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3.
Prejudice to Hynix
An unclean hands defense further requires proof that the offending conduct materially prejudiced a partys ability to defend itself. See Republic Molding Corp., 319 F.2d at 349-50 (in applying the unclean hands defense, the extent of actual harm caused by the conduct in question is a highly relevant consideration); PenneCom B. V., 372 F.3d at 493 (unclean hands defense requires proof that the plaintiff has injured the party attempting to invoke the doctrine); Lawler v. Gilliam, 569 F.2d 1283, 1294 n.7 (4th Cir. 1978) (denying unclean hands defense where defendant failed to prove that it had been injured by plaintiffs conduct because [t]he party to a suit, complaining that his opponent is in court with unclean hands because of the latters conduct in the transaction out of which the litigations arose, or with which it is connected, must show that he himself has been injured by such conduct, to justify the application of the principle to the case) (quoting J. Pomeroy, A Treatise on Equity Jurisprudence 399)); JTH Tax, Inc. v. H&R Block Eastern Tax Servs., Inc., 128 F. Supp. 2d 926, 949 (E.D. Va. 2001) (To establish the affirmative defense of unclean hands, a defendant must demonstrate ... plaintiffs conduct injured the defendant.), affirmed in part and rev d in part on other grounds, 28 Fed. Appx. 207, 2002 WL 27257 (4th Cir. 2002). The standard does not require, as Hynix suggests, that all documents destroyed by Rambus were either irrelevant or redundant. Hynixs only support for that argument comes from a passage in Micron II where the Federal Circuit remarked on a possible outcome on remand in the Delaware case: On the other hand, because it is not clear what documents were destroyed, it may be, as Rambus argues, that all the documents destroyed were either redundant or irrelevant to the trial. 645 F.3d at 1328. This language does not purport to articulate a prejudice standard. The standard is set forth, instead, in the immediately preceding paragraph of the opinion, and it specifically requires that the spoliation materially affect[] the substantial rights of the adverse party and [be] prejudicial to the presentation of his case. Id. (quoting Wilson v. Volkswagen of Am. Inc., 561 F.2d 494, 504 (4th Cir. 1977)) (emphasis added). This means that Hynix must show substantially more than the destruction of relevant documents. Cf. US. v. Olano, 507 U.S. 725, 734 (1993) (affects substantial rights is harmless error standard:
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[I]n most cases it means that the error ... must have affected the outcome of the district court proceedings.) AlthoughAs noted, which party bears the burden on the prejudice element of unclean hands depends on whether bad faith is shown. Because the Court finds that Rambus did not act in bad faith, Hynix properly bears the burden. But even if Rambus bore the burden to disprove prejudice, it met that burden here. There are two fundamental problems with Hynixs theories of prejudice. The first is structural; the legal standards governing Hynixs defenses make the universe of internal Rambus documents that are relevant exceedingly narrow. This is true of Hynixs patent-related defenses, its abandoned inequitable conduct defense, and its JEDECrelated defenses. Second, although Hynix has made a showing that Rambus destroyed some relevant documents, Rambus established that adequate similar and material documents or classes of documents were not destroyed. The evidence showedthe evidence demonstrated that Rambus has produced to Hynix a large volume of relevant and material documents. According to the testimony of Hynixs counsel, Rambus has produced approximately 1.2 million pages of documents responsive to Hynixs discovery requests in this case. Moreover, forAs to each category of documents for which Hynix claimed material prejudice, Rambus established that adequate similar and material documents or classes of documents were not destroyed. Hynixs substantial rights were not affected. (a) Patent-Related Defenses
For each category of documents material to the validity or enforceability of Rambuss patents that Hynix argued Rambus did not preserve and produce, Rambus has shown by clear and convincing evidence that documents in that category were in fact produced. Although Hynix complained that a notebook, models, and detailed diagrams authored by Dr. Farmwald that Farmwald himself described as being from early to mid - 1988 in a September 1995 e-mail to Crisp were never produced, Rambus has produced various documents relating to the conception and reduction to practice of the patented inventions prior to the April 1990 filing date of the 898 application. These include inventor notes, computer simulations, drafts of patent applications, technical presentations given by the inventors, and several boxes of documents that had been in
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Farmwalds possession (and thus not subjected to Rambuss enforcement of its Document Retention Policy). Rambus also produced several boxes of prior art. The prior art produced by Rambus included prior art references with fax lines showing that the art was ordered in 1996, prior art references with a few underlines, and prior art references containing a few notations. No evidence suggested that material, non-cumulative prior art exists that Rambus has not produced. Thus, it does not appear that Hynix has been deprived of material, non-privileged, and noncumulative documents. Additionally, to the extent that documents such as notes of interviews with the inventors and draft responses to the patent examiner may have been discarded when Attorney Vincent conformed the issued patent files to the PTO file wrapper, those documents would probably be privileged and not been discoverable. See In re Spalding Sports Worldwide, Inc.,203 F.3d 800, 805-06 (Fed. Cir. 2000, 203 F.3d at 805-06 (documents in an invention record): Avago Techs., 2006 WL 3290400 (holding that multiple versions of a patent application were privileged); Advanced Cardiovascular Systems, Inc. v. C.R. Bard, Inc., 144 F.R.D. 372, 378 (N.D. Cal. 1992) ([W]e believe that inventors and their patent lawyers often engage in quite substantial private dialogue as part of the process of shaping and focusing a patent application, and that it is reasonable for them to expect that dialogue to remain confidential.); McCook Metals L.L.C. v. Alcoa Inc., 192 F.R.D. 242, 252 (N.D. Ill. 2000) (A draft necessarily reflects the communications between a client and his attorney as the attorney attempts to put forth the invention in the best light possible to protect a clients legal right.). The same would be true of inventor notes taken with an eye towards helping an attorney prosecute a valid patent. Avago Teens., 2006 WL 3290400, at *1. (b) Inequitable Conduct Defenses
Hynixs contention that its inequitable conduct defense was prejudiced is unavailing. The Federal Circuits recent decision in Therasense narrows this defense and tightens the standards for finding both intent and materiality. 649 F.3d at 1290. The defendant must now show by clear and convincing evidence both that the specific intent to deceive [is] the single most reasonable inference to be drawn from the evidence, and that the patentholder withheld prior art
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that was non-cumulative and a but-for condition for issuance of the patent. Id. at 1290-91. The Federal Circuit specifically rejected a sliding scale approach to these elements, so a stronger showing with respect to one element will not suffice to balance a weak showing with respect to the other. And because materiality is a purely objective standard, turning on publicly-available art, Rambuss internal documents could only have potential relevance to the intent element. Because the evidence establishes that Rambus preserved, rather than destroyed, its prior art records, and because the other types of potentially relevant patent prosecution file records (such as communications between counsel and inventors) are likely privileged, the record does not support an inference of prejudice on the intent element. There are two further independent bases to reject Hynixs prejudice theory based on inequitable conduct: (1) Hynixs failure to adequately plead inequitable conduct, and (2) waiver and operation of the mandate rule. Hynixs inequitable conduct defense could not have been prejudiced because Hynix did not plead sufficient facts to state a cognizable defense. In Exergen v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009), the Federal Circuit held that an inequitable conduct pleading must must identify the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO, as well as particularized facts supporting an inference of scienter, id. at 1328. Hynixs conclusory pleading fails in every respect. See Hynixs Reply to Defendant and Counterclaim Plaintiff Rambus Inc.s Amended Counterclaim, Dec. 16, 2002, at 209-219. Hynix did not name the specific individual ... who both knew of the material information and deliberately withheld or misrepresented it. Exergen, 575 F.3d at 1329. Nor did Hynix identify which claims, and which limitations in those claims, the withheld references are relevant to, and where in those references the material information is found, nor the specifics of why and how the supposedly withheld information is material and not cumulative. Id. Much less did Hynix allege particularized facts to show scienter, including both knowledge of the withheld material information ... and specific intent to deceive the PTO. Id. at 1330. A finding of prejudice cannot be premised on allegations that do not even state a defense. See, e.g., Micron II, 645 F.3d at 1328 (prejudice entails affecting substantial rights); Nelson v. Original Smith &
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Wesson Business, No. 10-35562, 2011 WL 3855852, at *3 (9th Cir. Sept. 1, 2011) (no prejudice in the absence of underlying viable claims). In any event, the mandate rule provides that issues actually decided on appealthose within the scope of the judgment appealed from, minus those explicitly reserved or remanded by the courtare foreclosed from further consideration. Clark v. United States, 656 F.3d 1317, 1320-21 (Fed. Cir. 2011). This Courts final judgment specifically noted that Hynixs defense of inequitable conduct ... [was] abandoned ... and ... therefore [is] dismissed with prejudice. Final Judgment, at 1. Because Hynix made no effort to preserve its inequitable conduct defense in this Court or to challenge its dismissal in the Federal Circuit, it may not raise this defense on remand. See Cardiac Pacemakers Inc. v. St. Jude Med., Inc., 570 F.3d 1348, 1357 (Fed. Cir. 2009) (reasoning that because the defendant either failed to pursue [inequitable conduct] arguments at trial, thereby waiving the arguments, or failed to appeal the arguments to this court, they cannot now be heard to raise those arguments again on remand). (c) JEDEC-Based Defenses
Hynix maintains that Rambuss destruction of documents prejudiced its equitable estoppel and implied waiver defenses, both of which center on Rambuss conduct at JEDEC. In particular, Hynix contends that Rambuss internal documents about how it understood its disclosure duties at JEDEC would have been highly relevant to its defenses. Hynixs Resp. to Rambuss Br. on Remand Proceedings at 11. The Opinion in Hynix II, however, treated the Federal Circuits prior ruling in Infineon as dispositive of Rambuss disclosure duties and compliance with those duties. See 645 F.3d at 1348-49 (citing Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081, 1100 (Fed. Cir. 2003)). As to the question of what the disclosure duty was, the Hynix II panel quoted the Infineon panels statement of the duty and then observed: The determination that there was a dutyand the categorization of its scope as extending to all pending or issued claims that were reasonably necessary to practice the standardis dispositive in this case and should never have been submitted to the jury. Hynix II, 645 F.3d at 1348 (quoting Infineon, 318 F.3d at 1100). In other words, the Federal Circuit considers the issue finally resolved by Infineon. And as to the question of breach,
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Infineon made clear that the issue turns on an objective standard. The Federal Circuit reasoned there that JEDECs disclosure duty erects an objective standard, and specifically held that [a] members subjective beliefs, hopes, and desires are irrelevant. Infineon, 318 F.3d at 1104. Rambus did not breach this standard because it had no pending or issued claims that were reasonably necessary to practice the [SDRAM] standard. Hynix II, 645 F.3d at 1348. Because Rambuss subjective views are irrelevant to the issues underlying Hynixs JEDEC defenses, Hynix could not have been prejudiced by any destruction of internal Rambus documents. Even apart from the legal irrelevance of Rambuss internal documents, the record does not support an inference that Rambus destroyed JEDEC-related documents that would have materially affected Hynixs ability to mount its equitable estoppel and implied waiver defenses. As noted, Rambus has demonstrated that it preserved and produced the material documents and communications of its participation in JEDEC. Richard Crisp was Rambuss representative to JEDEC, and two distinct sets of his email box, including his trip reports from JEDEC meetings, were produced. Given the role played by Crisp at JEDEC, these two sets almost certainly contained all material Rambus documents on its JEDEC tenure. (d) Defenses Based on Prior License Agreement
With regard to the prior license agreement between Rambus and Hyundai, Hynix acknowledges that a fairly complete record has been produced of (1) the external communications between the parties regarding negotiations between Rambus and Hyundai in or around July 1998 for a proposed amendment to the parties December 1995 RDRAM agreement and (2) the external correspondence between the parties regarding the Hyundai-LG merger and adoption of the LG Semiconductor licensing terms. Rambus has either produced or logged as privileged numerous internal communications regarding these topics, including numerous internal communications discussing possible elimination or modification of the Other DRAM clause contained in the 1995 agreement and internal documents regarding the consequences of the Hyundai-LG merger. The court concludes that Hynix has not been prejudiced by the destruction of Rambus documents. Rambus disproved, by clear and convincing evidence, Hynixs claims of material
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prejudice. That showing is further strengthened by the Courts determination that Rambuss destruction of documents on Shred Day 1998 did not violate a preservation duty. There is no evidence that documents materially affecting Hynixs defenses were either created after Shred Day 1998, or survived Shred Day 1998, and were then destroyed in Shred Day 1999. F. No Basis for Dismissal
Default and dismissal are proper sanctions for willful destruction of documents and records that deprive the opposing party of the opportunity to present critical evidence on its key claims to the jury. See, e.g., Professional Seminar Consultants, Inc. v. Sino American Technology Exchange Council, Inc., 727 F.2d 1470, 1474 (9th Cir. 1984). Although a particularly severe sanction, outright dismissal of a lawsuit is within the courts discretion. Aptix Corp. v. Quickturn Design Sys., 269 F.3d 1369, 1378 (Fed. Cir. 2001) (citing Chambers, 501 U.S. at 44 ). However, the Supreme Court has cautioned that inherent powers must be exercised with restraint and discretion. Chambers, 501 U.S. at 44. Dismissal is a harsh penalty and should be imposed only in extreme circumstances. See Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir.1992). Here, the court does not find dismissal to be an appropriate sanction because it does not find the application of the unclean hands doctrine to be warranted. Further, the evidence presented does not bear out Hynixs allegations that Rambus adopted its Document Retention Policy in bad faith. The evidence also does not demonstrate that Rambus targeted any specific document or category of relevant documents with the intent to prevent production in a lawsuit such as the one initiated by Hynix. The evidence here does not show that Rambus destroyed specific, material documents prejudicial to Hynixs ability to defend against Rambuss patent claims. Therefore, Hynixs unclean hands defense fails. G. Lesser Sanctions Are Not Warranted
Hynix has argued on remand that if the Court does not dismiss Rambuss claims on unclean hands grounds, it will seek lesser sanctions, such as evidentiary sanctions or jury instructions. Hynixs Opening Br. Regarding Proceedings on Remand 10. Because Hynix has not proven spoliation, nexus, or bad faith, and because Hynix has not been prejudiced, the Court finds that no sanction is appropriate. In any event, Hynix has repeatedly disavowed any request
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for lesser sanctions short of dismissal, and both waiver and mandate rule principles foreclose it from seeking these remedies now. See Mathis, 136 F.3d at 1155 (where party sought only one form of sanction for spoliation, all other sanctions are waived). Hynix first waived lesser sanctions when it argued in its trial brief that [t]he only proper remedy is dismissal of Rambuss patent claims, and did not seek lesser sanctions even in the alternative. Hynixs Trial Br. on Unclean Hands and Litigation Misconduct, Oct. 4, 2005, at 19; see also Hynixs Proposed Findings of Fact and Conclusions of Law for Unclean Hands and Litigation Misconduct, Oct. 4, 2005, at 41 (No sanction short of dismissal ... is appropriate). Hynix waived lesser sanctions again in the final pretrial conference statement, where it contended only that [t]he patents-in-suit are unenforceable due to Rambuss Unclean Hands, and did not seek lesser sanctions. (Final Pretrial Statement for Unclean Hands Trial, Oct. 4, 2005, at 8; id. at 11.) See Northwest Acceptance Corp. v. Lynnwood Equip., Inc., 841 F.2d 918, 924 (9th Cir. 1988) (defense not raised in the pretrial conference order is waived). Hynix then waived lesser sanctions a third time at trial, where it argued that dismissal is the proper remedy here (11/1/2005 RT 1795-96), asked that the Court dismiss these claims (id at 1872), and never sought a sanction short of dismissal. Hynix waived lesser sanctions a fourth time in its proposed findings of fact and conclusions of law, which were filed after trial. There, Hynix again stated that dismissal is the only appropriate remedy for the spoliation and other misconduct that has occurred in this case. (Proposed Findings of Fact and Conclusions of Law on Spoliation, Nov. 14, 2005, at 92 (emphasis added).) Because lesser sanctions were not raised sufficiently for the trial court to rule on it, they were conclusively waived before Hynix even pressed its appeal. Broad v. Sealaska Corp., 85 F.3d 422, 430 (9th Cir. 1996); see also Cardiac Pacemakers, 576 F.3d at 1357 (party failed to pursue those arguments at trial, thereby waiving the arguments). On appeal, Hynix went on to cement its waiver by framing the spoliation issue solely in terms of the complete defense of unclean hands. Hynix argued that Rambuss unclean hands preclude it from enforcing its patents against Hynix (Hynixs Opening Brief on Appeal at 20, available at 2009 WL 3186084), and [i]n light of its spolation, Rambus may not enforce its patents against Hynix (id. at 28). That failure to raise the issue of lesser sanctions under an
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inherent authority theory constitutes yet another independent waiver, see Monsanto Co. v. Bayer Bioscience N. V., 514 F.3d 1229, 1240 n.I6 (Fed. Cir. 2008), and invokes the mandate rules bar on attempting to revive the issue on remand, Cardiac Pacemakers, 576 F.3d at 1357; see also Tronzo v. Biomet, Inc., 236 F.3d 1342, 1349 (Fed. Cir. 2001) (on remand, barring constitutional that was not raised in prior proceedings). The Court concludes that Hynix waived any sanction short of dismissal.
DATED: _____1/04/06 /s/ Ronald M. Whyte RONALD M. WHYTE United States District Judge
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Case5:00-cv-20905-RMW Document4092

v. RAMBUS INC., Defendant.

I. The Current Litigation

On August 29, 2000, plaintiffs Hynix Semiconductor America, Inc., Hynix

Issue Date 9/17/02

All of the patents-in-suit are continuation, continuation-in-part, or divisional

Rambuss RDRAM Technology

Whether Rambus would actually pursue non-compatible licensing was unclear at

Rambus Meets With Cooley Godward Attorneys

Rambus Revises its Strategy

Presentation of Rambuss Document Retention Policy

Rambus conducted a beauty contest in late November or early December

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