Rambus and Spoliation: Six Years Later, the Federal Circuit Decides Judge Payne was Right
In early 2005, Judge Robert E. Payne of the EDVA dismissed Rambus’ long-running patent infringement litigation against Infineon on the grounds that Rambus had destroyed documents after litigation became reasonably foreseeable. The Infineon case settled before Judge Payne could issue a written opinion and Rambus mooted a similar case before Judge Payne, Samsung Electronics Co. v. Rambus Inc., 439 F.Supp.2d 524 (E.D. Va. 2006), by granting Samsung covenants not to sue on the patents at issue.
It took six years and two other Rambus suits, but the Federal Circuit has finally agreed with Judge Payne, essentially adopting his spoliation reasoning in its twin opinions in Micron Technology, Inc. v. Rambus, Inc., No. 2009-1263, 2011 U.S. App. LEXIS 9730 (Fed. Cir. May 13, 2011) (found here) and Hynix Semiconductor, Inc. v. Rambus, Inc., No. 2009-1299, 2011 U.S. App. LEXIS 9728 (Fed. Cir. May 13, 2011) (found here).
Rambus sued Infineon in the EDVA way back in 2000. Rambus, Inc. v. Infineon Tech’s. AG, 3:00CV524 (E.D.Va.). After a trial which went in Infineon’s favor and a Federal Circuit appeal which resulted in a partial remand, post-remand discovery revealed that Rambus had destroyed documents as part of several “shred-days” in 1998 and 1999. Judge Payne ruled that the spoliation warranted piercing the attorney-client privilege and held a bench trial on Infineon’s defense of unclean hands. In February, 2005, Judge Payne ruled from the bench that Infineon had proven that Rambus had spoliated evidence, for which dismissal was the appropriate sanction. Before the Court could issue a written opinion, however, Rambus and Infineon settled.
Soon after, Samsung filed a declaratory judgment action against Rambus in the EDVA based on the same theories of spoliation and unclean hands asserted by Infineon. Samsung Elec’s. Co. v. Rambus, Inc., Case No. 3:05CV406 (E.D.Va.). In an apparent attempt to avoid any ruling on spoliation by Judge Payne, Rambus granted Samsung covenants not to sue on the four patents at issue, made an offer of judgment to pay Samsung’s attorney’s fees incurred in the EDVA action and then moved to dismiss for lack of subject matter jurisdiction. Judge Payne, however, held that he retained jurisdiction to determine whether the case was exceptional, and, in a lengthy opinion relying primarily on Silvestri v. General Motors Corp., 271 F.3d 583 (4th Cir. 2001), he held that Rambus had destroyed relevant documents at a point in time when it anticipated or reasonably should have anticipated litigation and that such destruction rendered the case exceptional. On appeal, the Federal Circuit vacated Judge Payne’s opinion on the grounds that the covenants not to sue and the offer to pay attorney’s fees rendered the case moot. Samsung Elec’s. Co. v. Rambus, Inc., 523 F.3d 1374 (Fed. Cir. 2008).
In the meantime, Hynix and Micron filed declaratory judgment actions against Rambus (Hynix in the Northern District of California and Micron in Delaware) and both asserted that Rambus’ document destruction barred any infringement claims. In Hynix, Judge Ronald Whyte ruled that Rambus did not actively contemplate litigation at the time of the document shredding, and so the document destruction did not constitute spoliation. In Micron, Judge Sue Robinson reached the opposite conclusion, holding that litigation was reasonably foreseeable at the time of the document destruction and held that the patents were unenforceable as a sanction.
The Federal Circuit sided with Judge Robinson, holding that the duty to preserve documents attaches when a reasonable party in the same factual circumstances would have reasonably foreseen litigation. Litigation need not be “imminent or probable without significant contingencies” as Rambus contended. Like Judge Payne six years earlier, the Federal Circuit relied on the Silvestri decision to conclude that the duty to preserve evidence begins when litigation is “pending or reasonably foreseeable.” Likewise, in language very similar to Judge Payne’s decision in Samsung, the Federal Circuit rejected Judge Whyte’s conclusion that litigation was not reasonably foreseeable because multiple contingencies had not yet occurred. While certain contingencies had to occur before litigation would begin, “contingencies whose resolution are reasonably foreseeable do not foreclose a conclusion that litigation is reasonably foreseeable.”
The Federal Circuit cited several considerations which “compel a finding that litigation was reasonably foreseeable” prior to the second shred day in August, 1999:
- It was not clear error for Judge Robinson to conclude that Rambus adopted its document retention policy to further its litigation strategy;
- Rambus was on notice of infringing activities . “While it might not be enough to have a target in sight, the knowledge of likely infringing activity by particular parties makes litigation more objectively likely to occur.”
- Rambus took several steps in furtherance of litigation prior to the second shred day.
- That the Rambus had not received Board approval for licensing negotiations or litigation showed only that litigation was not imminent, not that litigation was not reasonably foreseeable.
- As the plaintiff-patentee, the decision whether litigation would ensue was within Rambus’ control;
- Rambus’ business relationship with the manufacturers did not make litigation significantly less likely, nor was there a longstanding and mutually beneficial relationship that made litigation less foreseeable;
Digging a little deeper, findings of spoliation such as in Rambus may be rare in the future. In Rambus, a great deal of the evidence about Rambus’ “shred days” and its litigation strategy was available to Hynix and Micron because all three district judges pierced the attorney-client privilege based on the basis of the crime-fraud exception. Without that evidence, it would have been difficult to satisfy the “reasonably foreseeable litigation” standard. Such evidence may not be available in other cases, though the Federal Circuit’s Micron decision provides litigants with a roadmap for establishing a prima facie case of the crime-fraud exception to the attorney-client privilege.