In a recent U.S. patent dispute between two information technology players, a court has ruled that a patentee’s destruction of potentially relevant evidence may be sanctioned by a declaration of patent unenforceability.
The ruling in Micron Technology, Inc. v. Rambus, Inc. (Civ. No. 00-792-SLR, 2009 U.S. Dist. LEXIS 1260 (D.Del., Jan. 9, 2009)) penalizes Rambus, a corporation that develops and licenses technology to manufacturers of semiconductor memory devices, such as Direct Random Access Memory (“DRAM”). As part of its internal business development plan, Rambus had planned to license and enforce its patented DRAM technology throughout the industry in an attempt to achieve recognition as the industry standard. To implement that plan, Rambus had designed a litigation strategy to enforce its proprietary technology, which included a document retention policy. That retention policy included pre-determined “Shred Days,” during which employees would destroy documents. No records were kept of what was destroyed.
In order to avoid licensing from Rambus, Micron initiated an action seeking a declaration of patent invalidity. One of the issues at trial was whether Rambus, through its document retention policy, had breached any duty to preserve potentially relevant evidence and, if so, what the appropriate sanction should be.
In finding in Micron’s favour, the court emphasized that even though litigation of the patents in issue was reasonably foreseeable, Rambus went ahead and destroyed documents relevant to the patents relating to contract and licensing negotiations, patent prosecution, Board meetings and finances. According to Judge Robinson, “Rambus knew, or should have known, that a general implementation of the policy was inappropriate because the documents destroyed would become material at some point in the future.” Micron at para. 55). Although the penalty of unenforceability was harsh, in the opinion of Judge Robinson, the showing of bad faith was “clear and convincing.”
Although two other courts had previously addressed the potential spoliation of evidence by Rambus (see Rambus, Inc. v. Infineon Techs. AG, 220 F.R.D. 264 (E.D. Va. 2004); and Hynix Semiconductor Inc. v. Rambus, Inc., No. C-00-20905 RMW, 2006 WL 565893 (N.D. Cal. Jan. 5, 2006)), only one of those courts held that spoliation had occurred. Regardless of the split in outcome, the result serves as a reminder that potentially relevant evidence should be preserved in order to avoid dire results.
Interesting case. The judge found that Rambus acted in bad faith
because their business strategy required the use of litigation to be
implemented at a particular moment, and they unfairly planned for this
moment. They seem to have been playing their cards in order to (in
loose terms) direct a windfall. It makes sense that the court would
seek to prevent such practices, even in our litigious times, since it
can be argued that lawsuits brought forward should have the primary
purpose of righting a wrong. It seems that this basic premise has been
long forgotten, as it’s no secret that strategic litigation happens
all the time, but perhaps the line was simply crossed here.
It’s a longstanding principle, in many jurisdictions, that one should
take reasonable steps to mitigate one’s damages. In this case, it
seems that the opposite may have occurred, since a lack of mitigation
brought along with it additional potential long term benefits for
Rambus. They strategically waited before initiating a claim, despite
their prior knowledge of infringement, and allowed Micron and others
to gain a larger share of the market, ostensibly damaging Rambus by
cutting into their profits. They could have mitigated their losses by
notifying the infringing companies earlier on, but chose not to do
this because their losses would turn into long term gains according to
their business strategy (i.e. forced licensing on the infringing
companies, and thus a large cut of the market). I still wonder whether
or not the judgement was too harsh. However, since the counterclaim of
unenforceability was brought up by Micron, this may have been the only
way for the court to have gone.
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