June.03.2011
In two highly anticipated rulings, the Court of Appeals for the Federal Circuit issued opinions in Micron Tech., Inc. v. Rambus Inc., No. 2009-1263 (Fed. Cir. May 13, 2011) and Hynix Semiconductor Inc. v. Rambus Inc., No. 2009-1299 (Fed. Cir. May 13, 2011). In Micron, the District Court for the District of Delaware had found that Rambus had engaged in spoliation of documents, and ruled that the patents-in-suit were thereby unenforceable. In Hynix, however, the District Court for the Northern District of California came to the opposite conclusion, finding no spoliation.
In Micron, the Federal Circuit affirmed the District Court's ruling that Rambus had engaged in the spoliation of critical documents related to its patent program during a "shred day," but reversed the District Court's conclusion that the spoliation warranted dismissal as a sanction. The Federal Circuit held that "the totality of the circumstances as of the date of document destruction made litigation reasonably foreseeable," citing, among other facts, that Rambus, as the potential plaintiff, was on notice of potentially infringing activities, and that it took "several steps in furtherance of litigation" prior to one of its "shredding parties," including selecting forums for planned litigations, prioritizing manufacturers to sue, creating claim charts and including litigation "as an essential component of its business model."
With respect to the dismissal sanction, the Federal Circuit held the district court failed to apply the proper standard for determination of bad faith, and remanded for further fact findings on that particular issue. The court also remanded to permit the District Court to re-assess its finding of prejudice, but did not preclude the District Court from re-entering the earlier sanction of dismissal if warranted under the proper analysis that Rambus acted in bad faith, and that the JEDEC community was prejudiced.
The Federal Circuit further found the district court correctly held Rambus' attorney-client privilege was pierced by application of the crime-fraud exception. Part of the evidence used to support the court’s spoliation finding was found in attorney-client communications; the district court found that those privileged communications were in furtherance of Rambus’ violation of a California destruction of evidence statute, and therefore held that the privilege was pierced. Rambus had argued that the California destruction of evidence statute was only applicable when "immediacy of temporal closeness" existed between when the destruction occurred and when production was to occur. The Federal Circuit noted, however, that Rambus controlled the timing of both events, and that it would "make no sense to allow Rambus to escape liability" by intentionally destroying evidence and then waiting for an "arbitrary period of time before choosing to file suit."
In Hynix, the Federal Circuit reversed the District Court and held the District Court applied too narrow a standard of foreseeability in determining that litigation was not reasonably foreseeable until late 1999. The District Court held the standard for reasonably foreseeability was, "imminent, or probable without significant contingencies," and that because some contingencies were present, litigation was neither clear nor immediate. The Federal Circuit, however, stated the District Court's approach was a mistaken view of the importance of the contingencies, and held that contingencies "whose resolutions are reasonably foreseeable do not foreclose a conclusion that litigation is reasonably foreseeable." The Federal Circuit thus vacated and remanded the case to the district court for a determination of when Rambus' duty to preserve documents began under the proper test, and to determine what relief, if any, was appropriate. Orrick’s appellate partner Mark Davies was the primary author of the winning brief for Hynix.