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Gregory P. Stone (State Bar No. 78329) Keith R. D. Hamilton (State Bar No. 252115) MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue, 35th Floor Los Angeles, California 90071-1560 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 Email: [email protected]; [email protected] Burton A. Gross (State Bar No. 166285) Carolyn Hoecker Luedtke (State Bar No. 207976) Miriam Kim (State Bar No. 238230) MUNGER, TOLLES & OLSON LLP 560 Mission Street, 27th Floor San Francisco, California 94105 Telephone: (415) 512-4000 Facsimile: (415) 512-4077 Email: [email protected]; [email protected]; [email protected]

11 Attorneys for RAMBUS INC. 12 UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION 14 15

RAMBUS INC.,

16

Plaintiff,

17 18

CASE NO. C 05-00334 RMW

v.

RAMBUS’S TRIAL BRIEF REGARDING SAMSUNG’S COUNTS I-III

HYNIX SEMICONDUCTOR INC., et al., [PUBLIC REDACTED VERSION]

19

Defendants.

20

Judge: Trial Date:

21 22

RAMBUS INC.,

23

CASE NO. C 05-02298 RMW Plaintiff,

v.

24 25

Hon. Ronald M. Whyte September 22, 2008

SAMSUNG ELECTRONICS CO., LTD., et al.,

26 Defendants. 27 28 5883160.1

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I.

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INTRODUCTION For more than a decade, through various stratagems, Samsung has sought to pay less and

3

less for its continued use of Rambus’s patented inventions. This litigation is the latest of these

4

efforts. Besides reasserting claims and defenses alleged by other DRAM manufacturers (and

5

rejected in earlier trials), Samsung has raised additional Samsung-specific claims and defenses.

6

This Court’s August 11, 2008 summary judgment order, dismissing on statute of limitations

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grounds, Samsung’s claims related to its former employee, Neil Steinberg, eliminated several of

8

those claims. Therefore, it appears that the focus of this trial will be on Counts I-III, Samsung’s

9

counterclaims involving its interpretation of the parties’ license agreement, signed in October

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2000, effective in June 2005, and covering the June 2000-June 2005 time period (the “SDR/DDR

11

License”). Rambus submits this trial brief to provide an overview of the applicable law and

12

evidence on these three claims.1

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Samsung asserts that Rambus breached the SDR/DDR License and its accompanying duty

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of good faith and fair dealing. Specifically, Samsung contends that two provisions of the

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SDR/DDR License should be interpreted so as to limit Rambus’s damages recovery to a small

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fraction of the reasonable royalty to which Rambus otherwise would be entitled.

17 18 19 20 21 22 23 24 25 26 27 28

The first of these provisions is Section 3.8, which provided that

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The other Samsung claims and defenses that remain at issue for the September 22 Trial and that Samsung presumably will address involve issues already familiar to this Court. First, Samsung alleges Rambus acted improperly while attending JEDEC and in RDRAM license negotiations with Samsung. The majority of this aspect of the case was presented in the coordinated January 2008 Trial. However, Rambus intends to supplement that record with additional Samsungspecific evidence, such as evidence of Samsung’s knowledge and concern about the potential scope and application of Rambus’s intellectual property as early as 1991. This evidence is fatal to Samsung’s ability to show reliance. Second, Samsung alleges that Rambus spoliated evidence through its document retention program. The Court addressed these allegations in the Hynix I matter, and Rambus addresses them in its Proposed Findings of Fact and Conclusions of Law filed herwith. To the extent Samsung has new arguments or evidence, Rambus understands Samsung plans to identify in its Trial Brief what distinguishes Samsung from Hynix, and Rambus will respond to that evidence and argument at trial and in Post-Trial Findings of Fact and Conclusions of Law. Third, Samsung asserts estoppel and equitable estoppel defenses based on allegations that Neil Steinberg improperly used Samsung information in his work at Rambus. There is no merit to these allegations. Moreover, for the reasons set forth in this Court’s August 11, 2008 summary judgment order on Counts IV through VII, Samsung cannot show it relied to its detriment on any nondisclosure by Mr. Steinberg or Rambus, an element required to prevail on its equitable defenses. Fourth, Rambus asserts that under Samsung’s incorrect theory of spoliation, Samsung has unclean hands because of its destruction of documents. 5883160.1

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Rambus to reduce Samsung’s royalty rates for the final quarter of the license term REDACTED

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by more than 85 percent based upon Rambus’ agreement with Infineon to resolve a number

REDACTED Samsung contends that this provision obligated

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of pending disputes between the two companies, both in the United States and abroad, under a

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global agreement that included a grant of license rights to Infineon for certain Rambus patents

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(“Infineon Settlement Agreement”).

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The second provision of the SDR/DDR License upon which Samsung relies is Section

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8.5. Samsung contends that Section 8.5, which

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enter into a new license with Samsung, beginning in the third quarter of 2005, that incorporated

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this same drastically reduced “effective royalty rate” derived from the Infineon Settlement

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Agreement, and limited Samsung’s total royalty obligation to a fixed sum. Samsung further

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contends that, in exchange for this fixed sum, Samsung should have received not merely another

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five-year license term, but a license for the entire remaining life of Rambus’ patents, and a license

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which would encompass products not even covered by the original SDR/DDR License.

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Samsung’s contractual arguments are without merit. As discussed below, Section 3.8 of

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the SDR/DDR License did not have the sweeping scope claimed for it by Samsung. By its

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express terms, Section 3.8

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the terms of any third-party agreement that Rambus entered into, including an agreement, like the

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Infineon Settlement Agreement, that

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REDACTED The provision did not entitle Samsung to step into

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Indeed, the evidence reflects that, during the negotiations of the SDR/DDR license, Samsung 5883160.1

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sought, but failed to obtain, a “most favored licensee” provision of the type into which it now

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seeks to transform Section 3.8. Put simply, Samsung asked for such a provision, Rambus refused,

3

yet Samsung now asks the Court to believe that the SDR/DDR License contained such a

4

provision all along.

5

Samsung’s Section 8.5 argument is even more strained. Nothing in the text of Section 8.5

6

supports the notion that Rambus had to extend the terms of the SDR/DDR License to a new

7

license, let alone expand the scope of such a license to include new products and to last through

8

the expiration of Rambus’s patents. Instead, the contract language makes clear that the parties

9

committed merely to negotiate, not to bind themselves to a new agreement under particular terms.

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Indeed, it is precisely because the terms of any agreement the parties might have agreed

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upon after a “good faith negotiation” are inherently speculative and unknowable that California

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law does not permit a party to seek the relief Samsung seeks here – an order treating it as though

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the parties’ negotiations had resulted in a new license incorporating the terms of the Infineon

14

Settlement Agreement. Indeed, Samsung ignores this quite probable scenario – as in fact

15

happened here – where good faith negotiations are unsuccessful and no agreement results.

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Samsung’s Section 8.5 claim is untenable and must be rejected.2

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Accordingly, the Court should enter judgment for Rambus on Samsung’s contract and

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implied covenant counterclaims.

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II.

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BACKGROUND The Court is already familiar with the procedural background of Samsung’s contract

claims, so Rambus will only briefly summarize that history here.

22

A.

23

Samsung and Rambus first entered into a license agreement in November 1994, when

24

The 1994 RDRAM Agreement

Samsung agreed to pay Rambus for certain intellectual property used in the manufacture and sale

25 26 27 28

2

Samsung also asserts a cause of action for breach of duty of the implied covenant of good faith and fair dealing. This claim is predicated on Samsung’s mischaracterization of Rambus’s contractual obligations under Sections 3.8 and 8.5, and thus also fails. See Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 36 (1995)(citing with approval Love v. Fire Ins. Exchange, 221 Cal. App. 3d 1136, 1153 (1990). 5883160.1

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of RDRAM devices (the “1994 RDRAM Agreement”). In that contract, the parties agreed to an

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expansive most-favored-licensee clause, which provided:

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Rambus Trial Exhibit (“Tr. Ex.”) No. 6110 at § 10.16 (emphasis added).3 This initial agreement

10

thus illustrates that, long before the SDR/DDR License, Samsung and Rambus showed

11

themselves to be fully capable of executing a broad most-favored-licensee clause that afforded

12

Samsung the option of adopting the terms of a subsequent license agreement with a differing

13

structure that was deemed more favorable overall.

14

B.

15

In October 2000, Rambus and Samsung entered into the SDR/DDR License. Tr. Ex. No.

The SDR/DDR License

16

9084. The Agreement

17

REDACTED

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pay a set of running royalty rates based on a percentage of Samsung’s sales of relevant products,

19

specifically,

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REDACTED REDACTED

these, Section 3.8, states: REDACTED

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REDACTED REDACTED

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REDACTED

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REDACTED Under Section 3.1(b) of that License, Samsung agreed to

Samsung’s counterclaims focus on two provisions of the SDR/DDR License. The first of

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For the convenience of the Court, Rambus will be lodging with this brief an appendix containing a copy of the evidence cited herein. 5883160.1

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As the foregoing language reflects, Section 3.8 is worded much differently, and is

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narrower in scope, than the most-favored-licensee clause executed by the parties in their earlier

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1994 RDRAM Agreement. For example, Section 3.8 does not grant Samsung

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but instead only grants

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Samsung the right

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As discussed further below, and as the evidence to be presented at trial will conclusively

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demonstrate, this provision comes into play only when Rambus grants a third-party a readily

16

ascertainable lower royalty rate than that specified in Section 3.1(b) of the SDR/DDR License for

17

one or more of the specific products covered by Section 3.8.

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The second provision of the SDR/DDR License on which Samsung’s claims is founded is Section 8.5 of the Agreement. It provided as follows:

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REDACTED

Contrary to Infineon’s theory, this provision expressly REDACTED

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REDACTED

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REDACTED As discussed below and as the evidence will show, the negotiation history further demonstrates that Samsung’s interpretation of Section 8.5 is incorrect.

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C.

2

Following the adverse judgment against Rambus in the original Infineon trial, Samsung

The 2001 Amendment

3

requested, and obtained, an amendment of the SDR/DDR License (the “2001 Amendment”). Tr.

4

Ex. No. 9201. Among other things, the 2001 Amendment: REDACTED

5 6

REDACTED REDACTED

Samsung also requested that the 2001 Amendment include a modified version of the mostfavored-licensee provision from the SDR/DDR License. In particular, Samsung requested and

10

obtained provisions (i)

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and (ii)

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as follows:

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16 Id. at ¶ 8. The 2001 Amendment further provided that

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in which case

18 the terms of the original SDR/DDR License would resume in force. Id. at ¶ 7. That is precisely 19 what happened when, as described below, Rambus settled its litigation against Infineon. 20 D.

21

In March 2005, Rambus entered into the Infineon Settlement Agreement, a global

22 23 24 25 26

settlement and license agreement. Tr. Ex. No. 10252. This settlement was unique among agreements Rambus entered into with DRAM manufacturers, and, as summarized below, it included a variety of significant consideration flowing between the parties. The various forms of consideration captured by the agreement included: 1.

27 28

The Infineon Settlement Agreement

Dismissal of Eastern District Litigation. The impetus for Rambus’s negotiation

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find Rambus to have committed spoliation and subsequently issue written findings to that effect.

2

The parties promptly entered into a global settlement of all of their disputes, thus avoiding an

3

adverse judgment that potentially had far-reaching negative economic consequences for Rambus

4

beyond that immediate case. After the settlement, Judge Payne dismissed the case without entry

5

of any findings against Rambus or a judgment based on such findings. Tr. Ex. No. 10252 §

6

4.5(a). This Court has recognized the obvious value of that dismissal to Rambus, noting “that

7

Rambus settled the Infineon litigation, at least in part, to avoid the risk that Judge Payne’s unclean

8

hands findings and dismissal thereon would have collateral estoppel effect” in litigation with

9

other DRAM manufacturers. Hynix Semiconductor Inc. v. Rambus Inc, Case No. CV-00-20905,

10

Order Denying Hynix’s Motion to Dismiss Patent Claims for Unclean Hands on the Basis of

11

Collateral Estoppel at 6 (filed Apr. 22, 2005).

12

2.

Dismissal of Infineon from Rambus’s price-fixing suit. Rambus agreed to

13

dismiss Infineon, which had already pled guilty to price-fixing in United States federal court,

14

from Rambus’s ongoing price-fixing and boycott lawsuit in San Francisco state court. Tr. Ex.

15

No. 10252 at § 4.5(a).

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3.

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Patent licenses to Infineon. Rambus granted Infineon

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REDACTED REDACTED See id. at §§ 2.1-2.2. Both the term and the

20

scope of products covered by the Infineon license were broader than those of the SDR/DDR

21

License.

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REDACTED

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REDACTED Rambus also released any claims for

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past infringement, thus effectively granting Infineon a retroactive license back to at least 2000,

25

when Rambus sued Infineon. See id. at § 4.1. The license set forth in the Infineon Settlement

26

Agreement thus encompassed a broader portfolio of Rambus’s patents for a longer period of time

27

than did the license granted under the SDR/DDR License.

28

In addition to having a broader temporal scope, the license provisions in the Infineon 5883160.1

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Settlement Agreement applied to a generally broader scope of products. The settlement

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agreement granted Infineon rights to incorporate Rambus technology into many products not

3

covered by the SDR/DDR License, REDACTED

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4.

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Id. at § 1.8.4

Monetary payment to Rambus. Infineon agreed to pay Rambus a lump sum of

6

either $50 million, $100 million, or $150 million (depending on the number of other leading

7

DRAM manufacturers Rambus was able to license), payable in quarterly installments. Id. at §§

8

6.3-6.4.

9

In negotiating the multi-layered Infineon Settlement Agreement, the parties did not

10

allocate any monetary value to any of the non-pecuniary consideration flowing between them, nor

11

did they make any attempt to allocate a “royalty rate” to any of the many different memory

12

products licensed to Infineon under the agreement.

13

E.

14

On March 22, 2005, soon after executing the Infineon Settlement Agreement, Rambus

Negotiations Between Rambus and Samsung

15

sent Samsung a press release disclosing the major terms of the Agreement.5 Tr. Ex. 10254. In

16

response to Samsung’s inquiry as to the possible effect of the Infineon Settlement Agreement on

17

the SDR/DDR License, Rambus notified Samsung that the Infineon Settlement Agreement did

18

not trigger Section 3.8 of the Samsung license.

19

The SDR/DDR License

REDACTED

REDACTED. As that date

20

approached, the parties engaged in negotiations concerning the terms of a new license agreement.

21

The parties were unsuccessful in these efforts. Samsung asked that it be given an even better deal

22

than Infineon received. Rambus was unwilling to agree to this, or to offer Samsung new license

23

terms based at all on the Infineon Settlement Agreement. On June 6, 2005, three weeks before

24

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The Infineon Settlement Agreement did not, however, cover

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Rambus in the same letter gave notice that it was terminating the 2001 Amendment to the SDR/DDR License that the parties entered into following the original Infineon trial. This termination took effect on April 1, 2005, and the terms of the SDR/DDR License then resumed in force. Samsung’s claims, which are based upon Sections 3.8 and 8.5 of the SDR/DDR License, thus focus on the period from resumption of the SDR/DDR License until its termination. 5883160.1

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the SDR/DDR License was otherwise due to expire, Rambus exercised its right to terminate the

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Agreement based on Samsung’s persistent and unremedied breach of its obligations to cooperate

3

with Rambus’s efforts to audit Samsung’s compliance with its royalty reporting obligations.

4

III.

5 6

OVERVIEW OF CALIFORNIA CONTRACT LAW The SDR/DDR License states, and Samsung agrees, that it is governed by California law.

Tr. Ex. No. 9084 at § 9.1; Samsung’s Second Amended Answer and Counterclaims at ¶ 193.

7

Under California law, a contract “must be so interpreted as to give effect to the mutual

8

intention of the parties as it existed at the time of contracting, so far as the same is ascertainable

9

and lawful.” Cal. Civ. Code § 1636. “When a contract is reduced to writing, the intention of the

10

parties is to be ascertained from the writing alone, if possible.” Cal. Civ. Code § 1639. When the

11

meaning of the contract is based on the words of the agreement alone, or when there is no conflict

12

in the extrinsic evidence, the Court may interpret the contract as a matter of law. City of Hope

13

Nat’l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 395 (2008).

14

In discerning the meaning of an ambiguous or unclear contract, the court may consider

15

relevant conduct by the parties either prior or subsequent to its formation. City of Stockton v.

16

Stockton Plaza Corp., 261 Cal. App. 2d 639, 644 (1968) (“Both prior negotiations and prior

17

conversations may be construed as well as the subsequent acts of the parties in ascertaining the

18

true intention of the parties to the contract.”). Where alternative terms have been proposed and

19

rejected during negotiations, a contract should not be construed as encompassing those rejected

20

terms. See Sun Pacific Farming Coop., Inc. v. Sun World Int’l, 2006 WL 1716206, at *10 (E.D.

21

Cal. 2006) (“[W]here the parties’ negotiation history or extrinsic evidence shows that terms were

22

unacceptable, the court may not read rejected terms into the contract.”), aff’d in relevant part and

23

vacated and remanded on separate topic, 277 Fed. Appx. 727 (9th Cir. May 8, 2008); People v.

24

Goodloe, 37 Cal. App. 4th 485, 490-91 (1995) (applying same principle in interpreting statutes).

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IV.

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ARGUMENT Samsung’s breach-of-contract counterclaims rest on two arguments. First, Samsung

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95 percent reduction of its royalty obligations6 and that extends to all of the patents and products

2

covered by the Infineon Settlement Agreement. Second, Samsung contends that, under Section

3

8.5, Rambus was legally obligated to negotiate a successor agreement that would have given

4

Samsung this same purported “effective royalty rate” on a going-forward basis through the life of

5

Rambus’s patents.

6

At the outset, it is important to note that these claims relate to how much money Samsung

7

owes to Rambus under the terms of the SDR/DDR License. Samsung owes Rambus money,

8

under its own theory, because it has not paid Rambus any of the royalties that it now

9

acknowledges it was obligated to pay for the last three months of that contract. It also has not

10

paid royalties for any period thereafter, even though it continued to sell products that infringed

11

Rambus’s patents during that entire period. Samsung, under its construction of the SDR/DDR

12

License, has been in breach of that agreement for three years now because it has not paid even the

13

amount that it admits, under its own theory, it owes Rambus. Obviously, then, Samsung has not

14

suffered any damage. Rather, what it claims as “damages” for Rambus’s purported breaches of

15

contract is instead a request that the Court establish a cap to any patent damages award for

16

products covered by the SDR/DDR License that Rambus may recover against Samsung in the

17

January patent infringement trial.

18

For the reasons set forth below, the Court should reject Samsung’s attempt to discount its

19

patent infringement liability to a few pennies on the dollar. With respect to Section 3.8, Rambus

20

had no obligation to allow Samsung to step into the shoes of a third-party agreement containing a

21

lump sum monetary payment and multiple levels of other consideration exchanged between the

22

parties, with no royalty rate for particular products covered by Section 3.8. With respect to

23 24 25 26 27 28

6

Samsung’s damages expert, Dr. Keith Ugone, identifies various potential “effective royalty rates” for the Infineon Settlement Agreement. Depending on the rate applied, Samsung would have owed Rambus REDACTED REDACTED REDACTED REDACTED REDACTED The claimed “effective royalty rate” thus represents a discount of at least 85 percent, and as much as 95 percent, from the $46.58 million in royalties that Samsung owed Rambus under the terms set forth in Section 3.1 of the SDR/DDR License. See Ugone Expert Report at 32. Of course, the fact that Samsung’s expert calculates five different possible royalty payments after applying the Infineon Settlement Agreement is strong evidence that no “effective royalty rate” actually exists. 5883160.1

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Section 8.5, Rambus did not commit to automatic renewal of the SDR/DDR License, or to

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renewal on any particular terms, and thus had no obligation to incorporate terms of the Infineon

3

Settlement Agreement into any renewal license with Samsung.

4

A.

5 6

Section 3.8 Of The SDR/DDR License Did Not Entitle Samsung To An Infineon-Based “Effective Royalty Rate” For The Final Quarter Of The License Term

Samsung’s breach of contract claim under Section 3.8 is premised on its interpretation of

7

that provision as granting Samsung the right to renegotiate its royalty obligations whenever

8

Rambus entered into any third-party agreement that Samsung preferred to its own. Through this

9

theory, Samsung seeks to reduce its royalty obligations

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Although the parties certainly could have created a licensing arrangement that would have

See supra note 6.

14

allowed Samsung such a windfall, they did not do so, and the language of Section 3.8

15

demonstrates that it is not the sweeping most-favored-licensee clause Samsung claims. Further,

16

the history of negotiations between the parties with respect to the SDR/DDR License, including

17

the earlier and later agreements entered into by Samsung and Rambus, demonstrate that they

18

knew how to create such a broad most-favored-licensee clause, but did not do so here. Instead,

19

they agreed to a narrower provision applicable only where Rambus agreed to or obtained through

20

litigation a clearly ascertainable royalty rate for one or more of the specific products covered by

21

Section 3.8. Because the Infineon Settlement Agreement did not constitute such an agreement, it

22

did not trigger application of Section 3.8.

23

1.

24

The Language Of Section 3.8 Is Limited To Agreements Providing For Clearly Ascertainable Royalty Rates

By its terms, Section 3.8 is limited in scope. The provision comes into play only if, 25 during the term of the Agreement,

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In that event,

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Rambus is

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Section 3.8 thus contemplates a third-party agreement in which the third party actually has agreed

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REDACTED REDACTED

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REDACTED

The SDR/DDR License further contemplates that

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REDACTED

, so that Rambus can simply notify Samsung of the lower rate soon after it

9

takes effect, and such rate will then be carried over to the same category of products for purposes

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REDACTED

of the SDR/DDR License.

11

The provision is thus written so as to be routinely and automatically applied whenever

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Rambus enters into a license containing clearly ascertainable product-specific royalty rates that

13

are lower than those set forth in the SDR/DDR License. It does not contemplate a more

14

complicated scenario where Rambus might enter into an agreement having multiple components,

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some of which are license-related and some of which are not.

16

The Infineon Settlement Agreement constituted this more complicated type of agreement.

17

As noted, it included substantial non-pecuniary consideration flowing in both directions – for

18

example, the dismissal of Infineon’s Virginia litigation, and the dismissal of Rambus’s price-

19

fixing claims against Infineon – that prevent a determination of what “royalty rate” Infineon

20

could be said to have paid for the products that it licensed. See Tr. Ex. 10252 § 4.5. In light of

21

these other various forms of consideration exchanged under the Infineon Settlement Agreement, it

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is not possible to determine a royalty rate that Infineon “agreed” to pay for the patent rights it

23

received in the Settlement Agreement.

24

Even leaving aside this other consideration, and hypothetically viewing REDACTED

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REDACTED as a one-for-one exchange for patent license rights – which clearly is an

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inaccurate view of the agreement – that payment granted Infineon license rights to many products

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not covered by the SDR/DDR License,

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was not allocated across

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the many broad product categories covered by the Infineon Settlement Agreement, let alone

2

REDACTED 7 Indeed, the indeterminacy of any so-called

REDACTED

3

“effective royalty rate” in the Infineon Settlement Agreement is essentially conceded by

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Samsung’s own expert, who in his analysis “pretends” that Infineon’s payments were entirely

5

royalties for products covered by Section 3.8 (and thus ignores both the non-patent-related

6

consideration and the broader scope of products covered by Infineon’s license), and who still

7

comes up with five separate royalty rates that he admits “reasonably” could be argued to be the

8

appropriate rates. See

9

REDACTED

10

REDACTED

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Thus, any attempt to fashion an “effective royalty rate” from the Infineon Settlement

11

Agreement is doomed to failure. As a mathematician might describe it, there are more variables

12

than there are equations, so multiple solutions are possible. From a lawyer’s perspective, as well

13

as from a businessman’s perspective, fashioning an “effective royalty rate” would require far

14

more than the automatic adjustment of royalty rates contemplated by Section 3.8. It would, at a

15

minimum, require negotiation and, if that was unsuccessful, some form of binding mediation or

16

arbitration, Indeed, as noted earlier, Samsung’s expert admitted that one cannot simply look at

17

the Infineon Settlement Agreement and determine what “royalty rate” was being paid for the

18

products covered by Section 3.8. REDACTED Instead, the parties would have needed to

19

undertake a negotiation of what, if any, “royalty rate” could be attributed to licensing of products

20

subject to Section 3.8 – a task that simply is not possible in the apples-to-oranges comparison

21

between the SDR/DDR License and Infineon Settlement Agreement.

22 23 24 25 26 27 28

This is not, moreover, what Section 3.8 contemplates. Section 3.8 contains no terms 7

Samsung contends that some of these products, specifically REDACTED REDACTED REDACTED , and thus fall within the scope of Section 3.8 of the SDR/DDR License. Rambus will demonstrate at trial that this is not the case, and that the SDR/DDR license does not cover such next-generation products. Samsung’s theory is belied by the plain language of the SDR/DDR License, including among other provisions Sections 1.5 and 1.7, which define REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED in the Infineon Agreement do not fall within the protections of Section 3.8. REDACTED 5883160.1

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setting forth procedures for the parties to determine an “effective” royalty rate from a complex,

2

multi-tiered agreement that specifies no such rates, or to resolve any disagreements over what

3

such an appropriate rate would be. It contemplates a straightforward third-party patent license

4

like the SDR/DDR License itself, which specifies a product-specific rate for particular products.

5

The absence of any provisions to deal with more complicated and densely-layered third-party

6

agreements is strong evidence that the parties intended Section 3.8 to be triggered only by a

7

license with readily ascertainable product-specific royalty rates for the relevant products.8

8

2.

9

The Parties’ Negotiating History Reflects That Section 3.8 Did Not Apply To Agreements Like The Infineon Settlement Agreement.

The negotiations between Samsung and Rambus, including those occurring before, during 10 and after the execution of the SDR/DDR License, all reflect that Samsung was familiar with the 11 type of most-favored-licensee provision that would be applicable to an agreement like the 12 Infineon Settlement Agreement, and demonstrate that the parties did not intend to place such a 13 provision into the SDR/DDR License. 14 a.

15 16

The 1994 RDRAM Agreement Contained The Broader Type Of Most-Favored-Licensee License Necessary To Include A Complex Third-Party Agreement With Differing Terms.

The 1994 RDRAM Agreement between Rambus and Samsung shows that the parties 17 knew full well how to draft a broad most-favored-licensee provision that would apply to 18 agreements with different terms and different royalty payment structures. See Tr. Ex. No. 6110 § 19 10.16. In the 1994 RDRAM Agreement, the parties agreed

REDACTED

20 REDACTED

REDACTED

, id. at § 4.2(a), but also

21 differed from Section 3.8 in several important ways. 22 First, the 1994 RDRAM Agreement gave Samsung

REDACTED

23 REDACTED

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Second, it explicitly required that

24 REDACTED

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provided that

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Third, it

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8

Rambus entered into many such licenses, including for example, REDACTED REDACTED that contain running royalty rates for some or all of the same product categories identified in the SDR/DDR License. 5883160.1

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REDACTED

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Id. at § 10.16. In this sense,

3

the 1994 RDRAM Agreement recognized that “royalty rate” was merely one aspect to be

4

considered in evaluating a comprehensive licensing arrangement that potentially could involve

5

different products or license periods. Finally, the 1994 RDRAM Agreement stated that,

6 7

REDACTED REDACTED

REDACTED

REDACTED

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8

These are the types of terms and conditions that need to be included in a most-favored-

9

licensee provision if the parties intend to grant the licensee protection against a situation where

10

the patent-holder grants another party a license whose royalty payments cannot readily be

11

compared to rates paid by the original licensee.9 If Rambus and Samsung had intended to adopt

12

such a broad and flexible most-favored-licensee provision in 2000, they had an obvious template

13

for doing so. Their decision not to employ a similar provision in the SDR/DDR License indicates

14

that Section 3.8 was more limited, and was intended to be so. Consequently, this important

15

distinction between the two provisions must be given effect.10

16

9

17 18 19 20 21 22 23 24 25 26 27 28

The four cases cited by the Court in its summary judgment order similarly illustrate the type of most-favored-license clauses that are capable of transcending different types of royalty arrangements. One pertained to a sweeping clause granting the licensee the benefit of “all other terms and conditions . . . at least as favorable as the terms and conditions of any other license then or thereafter granted to others.” Hazeltine Corp. v. Zenith Radio Corp., 100 F.2d 10, 12 (7th Cir. 1938). The other three cases involved options contracts under which the licensee had the right to choose to subscribe to the terms and conditions of any agreement with any other licensee. See Cardinal of Adrian, Inc. v. Amerock Corp., 208 U.S.P.Q. (BNA) 822, 823 (E.D. Mich. 1979); Studiengesellschaft Kohle, m.b.H. v. Hercules, Inc., 105 F.3d 629, 631 (Fed. Cir. 1997); Epic Sys. Corp. v. Allcare Health Mgmt. Sys., Inc., 2002 WL 31051023, at *3 (N.D. Tex. Sept. 11, 2002). The SDR/DDR License at issue here does not contain similarly expansive language, nor does it provide Samsung REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED 10

Samsung’s 1996 license agreement with InterDigital Technology Corporation further shows that Samsung’s knew how to draft a broad MFL provision that covers agreements with differing payment structures, product coverage, or other economic terms. That agreement gave Samsung REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED TDMA Patent License Agreement between InterDigital Technology Corporation and Samsung Electronics Co., Ltd. at § 8.4.4 (Tr. Ex. No. 10009). Samsung’s negotiators for the SDR/DDR License were, moreover, keenly aware of this provision because REDACTED REDACTED 5883160.1

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b.

2 3 4 5

Shim sent Rambus proposed language for Section 3.8 that REDACTED

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13

REDACTED

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Tr. Ex. No. 9102 (emphasis added). In Section 9.3 (the dispute resolution provision), Mr. Shim further proposed that REDACTED

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REDACTED

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REDACTED

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REDACTED Id.

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REDACTED REDACTED

12

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REDACTED Notably, he also proposed adding the

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REDACTED

following two provisions:

10

16

Samsung Unsuccessfully Tried To Obtain A Broader MostFavored-Licensee Provision In The SDR/DDR License.

transformed into product-specific royalty rates. On October 16, 2000, Samsung negotiator Jay

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intend Section 3.8 to cover a deal, like the Infineon Settlement Agreement, that cannot readily be

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The parties’ negotiations over the language of Section 3.8 also show that they did not

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Samsung’s proposed language again reflects the type of provision necessary if a licensee wishes to have the right to claim the benefits of any third-party agreement it deems preferable to its own. Samsung’s proposal not only

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REDACTED

but also would have

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REDACTED REDACTED REDACTED REDACTED REDACTED REDACTED See Samsung v. InterDigital; arbitration transcript, testimony of Charles Donohoe at 297:16-312:21 (Tr. Ex. No. 10057). 5883160.1

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REDACTED

2

The fact that Samsung felt it necessary to propose the above-quoted language

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demonstrates that it understood Section 3.8, without such language, would not cover lump-sum

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payments in general, let alone payments made pursuant to a multi-layered agreement in which a

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lump sum payment by Infineon and a patent license for covered products from Rambus were but

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two components of a global exchange of much broader consideration in both directions.

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Samsung’s proposal also confirms what common sense would otherwise suggest – that provisions

8

addressing REDACTED

9

if the parties intended to include agreements, like the Infineon Settlement Agreement, that did not

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REDACTED

would have had to be included

constitute standard patent licenses having readily ascertainable royalty rates.

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By contrast, it flies in the face of common sense to suggest, as Samsung does, that the

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parties understood negotiation and dispute resolution provisions to be “implicit” within Section

13

3.8, even though such provisions were consciously considered and omitted. A provision that

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confers only REDACTED

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“interpretation,” be construed to encompass and resolve such complicated issues as REDACTED

REDACTED simply cannot, under the guise of contract

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REDACTED

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REDACTED

Vikco Ins. Servs., Inc. v. Ohio Indem. Co., 70 Cal.

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App. 4th 55, 70 (1999) (“The courts will not imply a better agreement for parties than they

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themselves have been satisfied to enter into, or rewrite contracts whenever they operate

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harshly.”). The parties’ decision not to include the language proposed by Samsung in the final

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agreement thus strongly supports the conclusion that Section 3.8 was not intended to cover

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complicated and dissimilar third-party deals like the Infineon Settlement Agreement that would

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require negotiation and potentially dispute resolution to address reformation of the agreement.

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See Sun Pacific Farming Coop., 2006 WL 1716206, at *10 (holding that, under California law,

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“where the parties’ negotiation history or extrinsic evidence shows that terms were unacceptable,

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the court may not read rejected terms into the contract”), Goodloe, 37 Cal. App. 4th at 490

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(noting that, in the interpretation of statutes, the “rejection of a specific provision which appeared

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in the original version of an act supports the conclusion that the act should not be construed to 5883160.1

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include the omitted provision”).

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c.

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The 2001 Amendment Included A Broader Most-Favored-Licensee Provision That Recognized The Inapplicability of Section 3.8 To Lump-Sum Licensing Agreements.

The 2001 Amendment further demonstrates that Section 3.8 does not apply to lump-sum

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deals such as the Infineon Settlement Agreement. Paragraph 8 of the 2001 Amendment

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introduced a new provision that

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in which case the 2001 Amendment provided that REDACTED

Tr. Ex. No.

10

9201. For several reasons, the 2001 Amendment suggests that the parties did not understand

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Section 3.8 to be triggered by a lump-sum third-party license. First, the very decision to adopt a

12

new provision in this area reflects the parties’ recognition that lump-sum deals like Infineon’s

13

were not already covered in the existing Agreement. If lump-sum deals had already been

14

included, this provision would have been unnecessary and the language of Section 3.8 simply

15

could have been retained in the 2001 Amendment.

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Second, the language of this paragraph shows that Rambus and Samsung understood

17

lump-sum payments and a percentage-of-net-sales royalty to be separate and distinct concepts,

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with the former typically differing sufficiently from the latter to require more than merely some

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automatic application of REDACTED

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process for addressing necessary contract changes through a good faith negotiation process to

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modify the license once again demonstrates that the parties recognized the need for such a

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provision if Samsung’s rights were to be extended to agreements that do not contain comparable

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product-specific royalty rates. By suspending section 3.8 and establishing this new and different

24

provision only in the 2001 Amendment, the parties made clear that their original provision was

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more narrow and applied only to agreements for which a comparable set of product-specific

26

royalty rates could be readily ascertained.

REDACTED The parties’ decision to include a

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3.

2 3 4 5 6 7 8 9

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be rejected because it seeks to ascribe a meaning to Section 3.8 that is contrary to its express terms. As the foregoing discussion illustrates, the actual language of the SDR/DDR License does not contemplate application of Section 3.8 to a complex agreement involving substantial nonmonetary consideration and containing no enumerated or ascertainable royalty rates for particular SDR or DDR product categories. Had the parties intended for Section 3.8 to be triggered by non-analogous agreements like the Infineon Settlement Agreement, they could, and would, have included a provision to that effect. For example, the parties could have granted Samsung REDACTED

REDACTED

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REDACTED

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— the very provision that Samsung requested during negotiations.

Or they could have included a provision

21

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as they did in their 1994

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REDACTED

RDRAM Agreement. Or they could have included a provision expressly stating REDACTED

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Rambus Did Not Agree To Give Samsung The Most Favorable Economic Deal

would be entitled to the best overall economic deal under all circumstances. This argument must

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notwithstanding the actual limited language of Section 3.8, the parties intended that Samsung

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Rambus anticipates that Samsung will continue to rely on parol evidence to argue that,

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REDACTED REDACTED

REDACTED REDACTED

as they did in the 2001 Amendment.

Of course, adding such greater protections to Section 3.8 would have come at a corresponding cost, namely, the possibility of time-consuming and adversarial negotiations over whether a third-party agreement contained more favorable economic terms, and the possibility of disputes between the parties on that issue requiring arbitration. The key point, however, is that the parties did not agree to such a provision. Having failed to obtain such broader protections, Samsung cannot now resuscitate such terms through the introduction of parol evidence, nor should it be heard to claim the benefit of terms expressly considered but excluded from the

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SDR/DDR License.

2

In this regard, it is important to keep in mind that the SDR/DDR License is a fully 11

3

integrated agreement REDACTED

4

evidence “of intention which is contrary to a contract’s express terms” is inadmissible because it

5

“does not give meaning to the contract” but “rather . . .seeks to substitute a different meaning”

6

from the one the parties ultimately settled upon. Gerdlund v. Electronic Dispensers Int’l, 190

7

Cal. App. 3d 263, 273 (1987); see also Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1091

8

(9th Cir. 2005) (“[P]arties may introduce evidence to explain the terms of the contract, but they

9

may not introduce evidence of terms not specifically included in the contract or evidence that

10

REDACTED

Parol

contradicts the terms of the contract.”).

11

This is exactly what Samsung seeks to accomplish, however, by pointing to statements

12

made by negotiators during the course of the negotiations. Samsung simply ignores the actual

13

language of the Agreement, and contends that Section 3.8 should be interpreted as a guarantee

14

that Rambus would give Samsung the best economic deal in all circumstances. This is not what

15

the contract says, and it is not how the contract reasonably can be interpreted.

16

Indeed, the notion that Rambus committed to give Samsung the best possible deal under

17

all circumstances is flatly belied by the undisputed fact that Section 3.8 does not even purport to

18

apply to all licensed products, but rather

REDACTED

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See Ugone Dep. at 57; Jun Park 30(b)(6) Dep. at 97-98.

This underscores the peril of giving weight to parol evidence of statements made during

23

negotiations that do not end up in the final agreement. Were the Court to accept Samsung’s

24

assertions of the oral commitments it was purportedly given, and ignore the actual language of the

25

contract, it could easily find Rambus to have granted most-favored-licensee status even as to

26

products excluded from Section 3.8. As even Samsung concedes, such a result would be

27 28

11

Tr. Ex. 9084 § 10.14.

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1

inconsistent with the parties’ actual agreement. For the same reason, the Court should not expand

2

the scope of Section 3.8 for those products to which it does apply, based on Samsung’s parol

3

evidence that it believed that provision to be broader than its words reasonably suggest.

4

The dangers of applying most-favored-nations provisions beyond the scope of their actual

5

language was underscored in Studiengesellschaft Kohle m.b.H v. Novamont Corp., 704 F.2d 48

6

(2d Cir. 1983). There, the court refused to try to translate a lump-sum settlement into a

7

“standard” royalty rate for purposes of a most-favored-licensee provision, citing the

8

“imponderables” inherent in such an undertaking. Id. at 57. The Second Circuit remarked that

9

any attempt to “maintain competitive equality” among licensees under such vastly different

10

licensing arrangements “would place the court in the position of an arbitrator,” and the court

11

therefore concluded that “there is no basis in fact for the conversion of a lump sum rate of royalty

12

into a rate of per cent of selling price royalty.” Id. at 57-58. Distinguishing other cases in which

13

courts had applied lump-sum payments on the grounds that they involved “only a simple

14

mathematical computation,” the Second Circuit “decline[d] to construe the MFL clause as

15

entitling an MFL licensee to the type of customizing of the royalty provisions of the second

16

license sought by [the MFL licensee].” Id. at 58.

17

That same logic militates against allowing Samsung to use the straightforward language of

18

Section 3.8 to claim entitlement to a complex calculation and application of an “effective royalty

19

rate” derived the Infineon Settlement Agreement — a feat that its own expert witness has not

20

accomplished. More fundamentally, the very difficulty of applying Samsung’s theory to the

21

Infineon Settlement Agreement further illustrates that the parties did not have such agreements in

22

mind when they drafted Section 3.8. Accordingly, the Court should not rewrite and expand

23

Section 3.8 to apply to situations not intended to be covered by the parties and not encompassed

24

by the language of the SDR/DDR License.12

25

12

26 27 28

Samsung has also alleged that Rambus breached the covenant of good faith and fair dealing that is implicit in Section 3.8 by failing to notify Rambus of the terms of the Infineon deal and adjust the rates Samsung pays to what Samsung claims is the Infineon effective royalty rate. See Samsung’s Second Amended Answer and Counterclaims at ¶¶ 194-98. This claim equally lacks merit because the underlying contractual provision, as discussed above, does not entitle Samsung to opt into the Infineon Settlement Agreement or otherwise to obtain the benefit of its terms. California law is clear that covenant of good faith and fair dealing does not apply when it “has 5883160.1

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B.

2 3 4 5 6 7 8 9 10 11

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Section 8.5 Expressly Rejects Samsung’s “Going-Forward” Theory For the Post-Contract Period

agreement — beginning on July 1, 2005, continuing through the post-contract period until present, and extending on through the life of Rambus’s patents — equivalent in terms to the Infineon Settlement Agreement. Under this theory, any damages based on Samsung’s ongoing infringement of Rambus’s patents must be limited to those payments made to Rambus by Infineon, adjusted only to account for Samsung’s higher sales volume. This would limit Samsung’s payments for infringement from July 1, 2005 going forward to the same effective royalty rate that Samsung identifies for the second quarter of 2005, thus allowing Samsung to pay only a tiny fraction of what it would otherwise be obligated to pay for infringing Rambus’s patents. Even if the Court were to conclude that the Infineon Settlement Agreement somehow triggered Section 3.8 for the Second Quarter 2005, thus reducing Rambus’s potential recovery for that one quarter, Samsung’s claim that Rambus was obligated to carry the “effective royalty rate” from the Infineon Settlement Agreement forward into a renewal license under the Agreement’s “good faith negotiation” provision is entirely baseless. This argument contradicts the plain text of the Agreement, ignores negotiating history demonstrating that this very proposal was considered and rejected, and is belied by the sworn testimony of Samsung’s negotiator in a earlier proceeding.

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Samsung claims that Rambus was contractually obligated to negotiate a successor

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The parties’ duty to negotiate a successor agreement is set forth in Section 8.5, which provides as follows:

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REDACTED

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REDACTED REDACTED

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25 26 27 28

nothing upon which to act as a supplement, and ‘should not be endowed with an existence independent of its contractual underpinnings.’” Waller, 11 Cal. 4th 1, 36; Love, 221 Cal. App. 3d at 1153. This is exactly what Samsung is attempting to do here. 5883160.1

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1

Tr. Ex. No. 9084 (emphasis added). This provision cannot reasonably be read to suggest that the

2

parties’ good faith negotiation obligation included an obligation to agree to any particular

3

substantive terms for the successor agreement, let alone an obligation by Rambus to give

4

Samsung economic terms equal to the most favorable terms it had given any other licensee. To

5

the contrary, the parties expressly provided that

6

REDACTED

REDACTED

REDACTED While it is obvious that

7

Samsung would have been satisfied with a new life-of-the-patents license that allowed it to pay

8

vastly less than it had previously paid for a license covering fewer products, it is absurd to

9

suggest that such an agreement

10

REDACTED

REDACTED

REDACTED, when the cloud on its patents presented by the Infineon litigation had been lifted.

11

Nor can the statement that REDACTED

12

REDACTED

REDACTED

REDACTED be squared with

13

Samsung’s contention that Rambus effectively was “locked in” to offering Samsung an extension

14

of the SDR/DDR License including the drastically reduced royalty rates it claims were embedded

15

in the Infineon Settlement Agreement. Even assuming arguendo that Samsung were entitled to

16

some “effective royalty rate” derived from the Infineon Settlement Agreement for the Second

17

Quarter 2005, Rambus would only be obligated to provide such terms on a going-forward basis if

18

Samsung had some right to automatic extension or renewal of the SDR/DDR License. Such

19

provisions, called evergreen clauses, are common in licensing agreements, as are clauses that give

20

one party an option to renew the agreement. As Samsung’s expert concedes, however,

21

REDACTED

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REDACTED

REDACTED REDACTED

REDACTED

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Instead, it has merely a good faith negotiation provision, which by its very terms allows Rambus

24

to negotiate for a new agreement with new terms.

25

In short, it is difficult to conceive of a “good faith negotiation” provision that could more

26

clearly reserve for each party the right to determine the economic terms they are willing to offer

27

in negotiations for a successor agreement. Because the contract language is both explicit and

28

clear, it governs. Samsung’s attempt to redraft Section 8.5 to require a new contract on terms 5883160.1

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dictated by Samsung thus must be rejected. See Powerine Oil Co. v. Superior Court, 37 Cal. 4th

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377, 390 (2005) (“If contractual language is clear and explicit, it governs.”)13

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Samsung’s theory that Rambus effectively would have had a continuing obligation under

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Section 3.8 to extend most-favored-licensee treatment to a new license agreement between the

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parties is also directly contradicted by the language and negotiation history for Section 8.6 of the

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SDR/DDR License. That provision identified

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It is, moreover, clear from the negotiations that the parties specifically considered this

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issue and that

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Samsung witness Mr. Han Yong Uhm, a member of Samsung’s negotiation team and a

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participant in the 2000 license negotiations, on September 19, 2000, Samsung proposed – and

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Rambus rejected – a substantive good faith renegotiation provision that would have REDACTED

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REDACTED

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. According to

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Samsung also cannot rely on Section 8.5 to establish any such obligation for another wholly independent reason: the provision expressly states that REDACTED REDACTED REDACTED REDACTED REDACTED As set forth in Rambus’s Proposed Findings of Fact and Conclusions of Law, Samsung was in breach of the Agreement by no later than July 2004 due to its failure to permit access to information necessary for Rambus’s auditors to successfully perform a contractually authorized royalty audit, and Rambus properly terminated the Agreement on that basis on June 6, 2005. See Rambus’s Proposed Findings of Fact and Conclusions of Law, at Section V. Samsung never contested or objected to Rambus’s termination of the agreement, thus tacitly acknowledging Rambus’s right to terminate based on its breach. Moreover, as discovered in the audit, Samsung also breached the Agreement by improperly deducting various unauthorized expenses from gross sales in establishing the net sales amounts to which its royalty payment obligations applied, thus enabling it to substantially understate and underpay its royalties. See id. Samsung does not contend that its Section 8.5 claim would have any applicability if the Court concludes that Samsung was in breach of the SDR/DDR License during the last Quarter 2005. Ugone Dep. at 207-09. 5883160.1

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REDACTED July 25, 2008 Deposition of Han Yong Uhm, Tr. 27:20-37:2.14

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Subsequently, on October 16, 2000, Samsung’s negotiator (Mr. Shim) sent Rambus an

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email requesting a variety of changes to the draft SDR/DDR License, including REDACTED

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Tr. Ex. No. 9102.15 Rambus responded to this request by email the

next day, agreeing REDACTED

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Tr. Ex. No. 9087 (emphasis added). Rambus thus expressly rejected Samsung’s request

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REDACTED and, as demonstrated by the final language

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REDACTED

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. Requiring

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Rambus to abide by Section 3.8 on a going-forward basis would directly contradict the express

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intention of the parties, as demonstrated in both Sections 8.5 and 8.6.

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The foregoing negotiation history thus demonstrates that, consistent with the express language of Section 8.5, the Agreement created no obligation for Rambus agree to any specific

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Mr. Uhm described Samsung’s proposal and Rambus’s response as follows: REDACTED

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7/25/08 Uhm Depo. at 34:20-37:2; see also Tr. Ex. Nos. 9077, 9078. 15

In specific, Mr. Shim’s request was as follows: REDACTED REDACTED .” Tr. Ex. No. 9102 at R2215881.

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royalty terms upon renegotiation of the Agreement, let alone agree to extend any status as a most-

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favored-licensee beyond the date of the Agreement.

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Indeed, Samsung’s own negotiator, Mr. Shim, admitted that the Agreement did not

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encompass any such obligation upon renewal. In sworn testimony given shortly after Rambus

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terminated the Agreement, Mr. Shim testified as follows:

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8/23/05 Shim E.D. Va. Test. at 79:19-80:14. Samsung’s eleventh-hour attempts to circumvent its

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patent infringement liability by positing some ongoing obligation by Rambus to provide

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preferential treatment extending to some hypothetical future license is thus specious on its face.

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In sum, the parties expressly left the terms of renewal open in the Agreement, and did not

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agree that Samsung would be entitled to most-favored-licensee status on a going-forward basis

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after the end of the Agreement’s term.

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Precisely because agreements to negotiate of the type set forth in section 8.5 do not

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require a party to enter into an agreement with pre-ordained terms, California law does not permit

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a party to seek expectation damages based on a claim for breach of a duty to negotiate in good

27

faith. In fact, California law precludes the very remedy that Samsung seeks in this case – a

28

judicial determination that it should be treated as though it had entered into a new SDR/DDR 5883160.1

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License upon terms of its choosing. This is because, in any negotiation, “there is no way of

2

knowing what the ultimate terms of the agreement would have been or even if there would have

3

been an ultimate agreement.” Copeland v. Baskin Robbins U.S.A., 96 Cal.App.4th 1251, 1262-63

4

(2002). Whether based on an express contractual provision or the implied covenant of good faith

5

and fair dealing, “damages for the injured party’s lost expectations under the prospective

6

contract” are not available and “reliance damages are the only form of recovery available in an

7

action on a [failure] to negotiate an agreement.” Id. at 1260-61, 1263. Here, Samsung has not

8

offered and cannot offer any evidence of any reliance damages, and thus cannot demonstrate any

9

legally cognizable injury, even if it could establish that Rambus did not negotiate in good faith

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(which it cannot). For that reason as well, Samsung’s Section 8.5 claim necessarily fails.

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For all of these reasons, Samsung’s breach of contract claim for the period after June 2005

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must be rejected regardless of whether the Infineon Settlement Agreement triggered Section 3.8

13

of the SDR/DDR License for the three months that remained after the Infineon Settlement

14

Agreement was executed.16

15

V.

CONCLUSION

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For the reasons set forth above, the Court should conclude that Samsung has failed to

17

show that Rambus breached the Agreement, and judgment should be entered for Rambus on

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Counts I-III of Samsung’s counterclaims.

19 20 21 22 23 24 25 26 27 28

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For similar reasons, Samsung’s claim of an alleged a breach of the implied covenant of good faith and fair dealing based on Section 8.5 must fail. Samsung’s claim in this regard is based on Rambus’s alleged failure to enter into a new license agreement having the terms of the Infineon Settlement Agreement. But as discussed above, Section 8.5 includes no such obligation and is nothing more than an agreement to negotiate in good faith. Because Samsung’s implied covenant claim is based upon a fundamental misstatement of the underlying contractual obligation, it must fail. See Waller, 11 Cal. 4th 1, 36; Love, 221 Cal. App. 3d at 1153. 5883160.1

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DATED: September 8, 2008

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MUNGER, TOLLES & OLSON LLP

2 3

By:

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/s/ Burton A. Gross BURTON A. GROSS

Attorneys for RAMBUS, INC.

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5883160.1

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