2163
This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA
Overview
Download & View 2163 as PDF for free.
More details
- Words: 27,670
- Pages: 77
Case 5:05-cv-00334-RMW
1 2 3 4 5 6 7 8 9 10
Document 2163
Filed 09/09/2008
Page 1 of 77
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 FOR THE NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION 14 15 16
RAMBUS INC., Plaintiff,
17
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW ON SAMSUNG’S CLAIMS AND DEFENSES
v.
18 19
CASE NO. C 05-00334 RMW
HYNIX SEMICONDUCTOR INC., et al., [PUBLIC REDACTED VERSION] Defendants.
20
Judge: Trial Date:
21 22
RAMBUS INC.,
Hon. Ronald M. Whyte September 22, 2008
CASE NO. C 05-02298 RMW Plaintiff,
23 v. 24 25
SAMSUNG ELECTRONICS CO., LTD., et al.,
26
Defendants.
27 28
5884923.1
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2 3
Document 2163
Filed 09/09/2008
Page 2 of 77
TABLE OF CONTENTS PROPOSED FINDINGS OF FACT ............................................................................................ 1 I.
THE CURRENT LITIGATION ...................................................................................... 1
4
A.
‘334 Case ................................................................................................................. 1
5
B.
‘2298 Case ............................................................................................................... 3
C.
Claims and Defenses At Issue ................................................................................. 4
6 7
II.
RAMBUS AND ITS INVENTIONS ................................................................................ 5
III.
RAMBUS LICENSING NEGOTIATIONS .................................................................... 6
8
A.
Samsung’s Early Knowledge of the Potential Scope of Rambus’s Intellectual Property ................................................................................................ 6
B.
1994 RDRAM License Agreement ......................................................................... 7
C.
1997 Addendum No. 1 to the RDRAM License Agreement .................................. 9
D.
The SDR/DDR IC and SDR/DDR Memory Module Patent License Agreement ............................................................................................................. 10
E.
The Infineon Litigation And The July 2001 Amendment ..................................... 12
F.
The Infineon Settlement and License Agreement ................................................. 14
G.
Rambus Notifies Samsung of the Infineon Settlement Agreement and Terminates the 2001 Amendment ......................................................................... 16
9 10 11 12 13 14 15 16
IV.
THE 2000 SDR/DDR LICENSE BETWEEN RAMBUS AND SAMSUNG .............. 17 A.
17 18 19 20
The Parties Agreed to a Limited Most-Favored-Licensee Provision that Does Not Cover the Infineon Settlement Agreement............................................ 17 1.
The Language Of Section 3.8 Is Limited To Agreements Providing For Clearly Ascertainable Royalty Rates .................................................. 17
2.
The Parties’ Negotiating History Reflects That Section 3.8 Did Not Apply To Agreements Like The Infineon Settlement Agreement. ........... 19
21
B.
Section 8.5 Expressly Rejects Samsung’s “Going-Forward” Theory For the Post-Contract Period.............................................................................................. 23
22
C.
Products Were Not Covered by the SDR/DDR License....................................................................... 27
23 24 25
V.
SAMSUNG BREACHED THE SDR/DDR LICENSE BY FAILING TO COOPERATE IN THE ROYALTY AUDIT ................................................................ 27 A.
Rambus’s Royalty Audit Entitlement And The Initiation Of The Royalty Audit ...................................................................................................................... 27
B.
Samsung’s Failure To Comply With Its Contractual Audit Obligations .............. 28
26 27 28
-i-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
C.
2 3 4
Filed 09/09/2008
Page 3 of 77
Rambus’s Repeated Warnings That Samsung Was In Breach Of Its Royalty Audit Obligations, Samsung’s Failure To Cure, And Rambus’s Exercise Of Its Right To Terminate .......................................................................................... 30
VI.
SAMSUNG HAD KNOWLEDGE OF AND RELEASED ITS JEDECRELATED 17200 CLAIM WHEN IT ENTERED THE SDR/DDR LICENSE ........ 30
VII.
SAMSUNG COULD NOT HAVE RELIED ON RAMBUS’S ALLEGED NONDISCLOSURE IN RDRAM LICENSE NEGOTIATIONS OR AT JEDEC .............................................................................................................................. 33
5 6
Document 2163
7
VIII. SAMSUNG CONCEDES THAT CONFIDENTIALITY CONCERNS JUSTIFY NON-DISCLOSURE OF PATENT APPLICATIONS .............................. 34
8
IX.
THERE IS NO FACTUAL BASIS FOR SAMSUNG’S AFFIRMATIVE DEFENSES BASED ON NEIL STEINBERG .............................................................. 34
9
X.
10
RAMBUS DID NOT IMPROPERLY DESTROY RELEVANT AND MATERIAL EVIDENCE IN ANTICIPATION OF LITIGATION WITH SAMSUNG ....................................................................................................................... 35
11
A.
Rambus Adopted A Content Neutral Document Retention Policy In July 1998 That Conformed To Industry Standards....................................................... 36
B.
Rambus’s Implementation Of Its Document Retention Policy Conformed To Industry Standards ........................................................................................... 39
12 13 14 15 16
C.
17
1.
Rambus’s Handling Of Paper Materials Conformed To Industry Standards ................................................................................................... 39
2.
Rambus’s Handling Of Email Conformed To Industry Standards............ 42
Rambus And Its Outside Patent Counsel Did Not Target Specific Categories Of Documents For Destruction ........................................................... 43 1.
The Treatment Of Patent Prosecution Files Was Entirely Proper............. 43
2.
Rambus Maintained Prior Art And Other Relevant Patent-Related Documents................................................................................................. 45
20
3.
Rambus Maintained Relevant Internal Communications Regarding License Negotiations ................................................................................. 47
21
4.
Rambus Maintained JEDEC Related Documents ..................................... 48
22
5.
Relevant Presentations to the Board of Directors Were Maintained......... 48
18 19
D.
23 24
XI.
Litigation Against Samsung Was Not Reasonably More Than A Possibility Until 2005.............................................................................................................. 48
SAMSUNG DESTROYED RELEVANT AND MATERIAL EVIDENCE ............... 52
25 26 27 28 - ii -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 4 of 77
1
PROPOSED CONCLUSIONS OF LAW.................................................................................. 53
2
I.
3 4 5
II.
BREACH OF CONTRACT CLAIMS .......................................................................... 53 A.
Breach of Section 3.8 ............................................................................................ 54
B.
Breach of Section 8.5 ............................................................................................ 54
C.
Breach of the Implied Duty of Good Faith and Fair Dealing................................ 55
SECTION 17200 CLAIM ............................................................................................... 56
6
A.
JEDEC 17200 Claim ............................................................................................. 58
7
B.
Spoliation 17200 Claim......................................................................................... 60
8
III.
9
EQUITABLE ESTOPPEL AND ESTOPPEL DEFENSES ........................................ 61 A.
JEDEC Equitable Estoppel and Estoppel Defenses .............................................. 62
B.
Equitable Estoppel and Estoppel Defenses Based on Licensing Negotiations with Samsung Prior to 2000............................................................. 63
C.
Equitable Estoppel and Estoppel Defenses Based on Neil Steinberg’s Work at Rambus .............................................................................................................. 64
10 11 12
IV.
IMPLIED LICENSE DEFENSE ................................................................................... 65
13
V.
DECLARATORY JUDGMENT OF UNENFORCEABILITY .................................. 66
14
VI.
SAMSUNG’S UNCLEAN HANDS DEFENSE ............................................................ 66 A.
Spoliation............................................................................................................... 66
B.
Bad Faith ............................................................................................................... 69
16
C.
Material Prejudice ................................................................................................. 70
17
D.
Overall Equitable Discretion ................................................................................. 71
15
18 19
VII.
RAMBUS’S UNCLEAN HANDS DEFENSE ............................................................... 72
VIII. CONCLUSION ................................................................................................................ 73
20 21 22 23 24 25 26 27 28 - iii -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 5 of 77
1
Rambus Inc. (“Rambus”) respectfully submits these proposed findings of fact and
2
conclusions of law with respect to the claims and defenses asserted by Samsung Electronics Co.,
3
Ltd., Samsung Electronics America, Inc., Samsung Semiconductor, Inc., Samsung Austin
4
Semiconductor, L.P. (collectively hereinafter “Samsung”) in the September 22, 2008 bench trial
5
of the claims and defenses delineated in the parties’ August 27, 2008 and September 2, 2008 Joint
6
Pretrial Statements (hereinafter the “September 2008 Trial”). Further, Rambus incorporates by
7
reference as if fully set forth herein its January 25, 2008 Proposed Findings of Fact and
8
Conclusions of Law, its Rule 50 and Rule 52 motions from the coordinated January 2008 Trial,
9
and its response to the Manufacturers’ post-trial brief regarding their equitable defenses.1
10 11
PROPOSED FINDINGS OF FACT I.
12
THE CURRENT LITIGATION 1.
The cases at issue are two coordinated proceedings: (A) Case No. 05-00334
13
between Rambus; Samsung; Hynix Semiconductor, Inc., Hynix Semiconductor America, Inc.,
14
Hynix Semiconductor U.K., Ltd., and Hynix Semiconductor Deutschland Gmbh (“Hynix”); and
15
Nanya Technology Corp., and Nanya Technology Corp. U.S.A. (“Nanya”) (hereinafter the “‘334”
16
case), and (B) Case No. 05-02298 between Rambus and Samsung (hereinafter the “‘2298” case).
17
A.
‘334 Case
18
2.
The ‘334 action commenced on January 25, 2005, when Rambus sued Hynix,
19
Infineon, Nanya, and Inotera Memories, Inc. for infringement of the following Rambus patents:
20
U.S. Patent Nos. 6,182,184, 6,260,097, 6,266,285, 6,314,051, 6,324,120, 6,378,020, 6,426,916,
21
6,452,863, 6,493,789, 6,496,897, 6,546,446, 6,564,281, 6,584,037, 6,697,295, 6,701,446,
22
6,715,020, 6,781,696, and 6,807,598. Inotera Memories, Inc. and Infineon were later dismissed
23 24 25 26 27 28
1
See Rambus’s Renewed Motion for Judgment as a Matter of Law Under Rule 50(a) (Case No. 05-00334, Docket No. 1633) (Mar. 24, 2008); Rambus’s Motion for Judgment as a Matter of Law (Case No. 05-00334, Docket No. 1488) (Mar. 10, 2008); Rambus’s Motion for Judgment as a Matter of Law on Certain of Manufacturers’ Claims and Defenses (Case No. 05-00334, Docket No. 1482) (Mar. 10, 2008); Proposed Findings of Fact and Conclusions of Law (Case No. 0500334, Docket No. 1110) (Jan. 25, 2008); Rambus’s Response to Manufacturers’ Brief Regarding Equitable Defenses (Case No. 05-00334, Docket No. 1690) (April 17, 2008). -1-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 6 of 77
1
from the case. Rambus filed its First Amended Complaint on June 6, 2005, asserting the same
2
patents as the original January 25, 2005 complaint, but adding Samsung as a defendant.
3
3.
Samsung answered the First Amended Complaint and alleged its own
4
counterclaims on June 22, 2005. It filed a First Amended Answer and Counterclaims on
5
November 17, 2005. It then filed a Second Amended Answer and Counterclaims on January 24,
6
2007. Samsung’s answers and counterclaims included claims for breach of contract, breach of
7
the duty of good faith and fair dealing, aiding and abetting a breach of fiduciary duty, intentional
8
interference with contractual relations, Section 17200, and affirmative defenses such as unclean
9
hands, equitable estoppel, estoppel, and implied license.
10
4.
In response to Samsung’s answers and counterclaims, Rambus filed its answer and
11
Counterclaims in Reply on July 9, 2007. In these Counterclaims in Reply, Rambus added
12
infringement claims against, inter alia, DDR3 SDRAM and GDDR4 SDRAM products.
13
5.
On January 4, 2008, Samsung replied to Rambus’s Counterclaims in Reply and
14
filed its own Counterclaims in Reply to the Counterclaims in Reply, alleging the same claims and
15
defenses as its Second Amended Answer and Counterclaims had alleged earlier. Rambus
16
responded to Samsung’s counterclaims in reply on January 28, 2008.
17
6.
The Court commenced a trial on January 29, 2008 on the Manufacturers’
18
monopolization, attempted monopolization, Section 17200, fraud, and declaratory judgment of
19
unenforceability claims, and equitable defenses including prosecution laches, estoppel, equitable
20
estoppel, laches, waiver, and patent misuse (“January 2008 trial”).
21
7.
Samsung was excused from active participation in the January 2008 trial on
22
December 14, 2007 on the conditions that “Samsung agreed to be bound by the result on the
23
prosecution laches aspect” of the January 2008 trial, that “Samsung agreed to the admissibility of
24
any relevant evidence” from the January 2008 trial, that “Samsung agreed that it will not claim
25
collateral estoppel with respect to any factual finding” from the January 2008 trial, and that “the
26
remaining issues” as to Samsung “would be tried to the Court within six months of the result” of
27
the January 2008 trial. Superseding Order Regarding Procedural Schedule and Related Matters
28 -2-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 7 of 77
1
for September 22, 2008 Trial (Case No. 05-00334, Docket No. 1681), at ¶ 3 (May 7, 2008).
2
Samsung agreed to these conditions. See December 14, 2007 Hearing Transcript at 6, 9.
3 4 5
8.
On March 26, 2008, the jury returned a verdict in favor of Rambus on Hynix,
Micron, and Nanya’s monopolization, attempted monopolization, and fraud claims. 9.
On August 11, 2008, the Court granted summary judgment in Rambus’s favor on
6
Samsung’s claims for aiding and abetting a breach of fiduciary duty (Counts IV-V), intentional
7
interference with contract (Count VI), and the Steinberg-related aspects of the Section 17200
8
claim (Count VII). Order Granting Rambus’s Motion for Summary Judgment on Counts IV-VII
9
of Samsung’s Counterclaims (Case No. 05-00334, Docket No. 1764) (Aug. 11, 2008).
10
B.
‘2298 Case
11
10.
The ‘2298 action commenced on June 6, 2005, when Rambus sued Samsung
12
alleging infringement of the following Rambus patents: U.S. Patent Nos. 5,915,105, 5,953,263,
13
6,034,918, 6,038,195, 6,067,592, 6,101,152, 6,324,120, 6,378,020, 6,426,916, and 6,452,863.
14
11.
Samsung answered the Complaint and alleged its own Counterclaims on June 22,
15
2005. It filed a First Amended Answer and Counterclaims on November 17, 2005. It then filed a
16
Second Amended Answer and Counterclaims on January 24, 2007. Samsung’s answer and
17
counterclaims included claims for breach of contract, breach of duty of good faith and fair
18
dealing, aiding and abetting breach of fiduciary duty, intentional interference with contractual
19
relations, Section 17200, and declaratory judgment of unenforceability and affirmative defenses
20
such as unclean hands, equitable estoppel, estoppel, and implied license.
21 22 23
12.
On July 9, 2007, Rambus replied to Samsung’s Second Amended Answer and
Counterclaims. 13.
On August 11, 2008, the Court granted summary judgment in Rambus’s favor on
24
Samsung’s claims for aiding and abetting a breach of fiduciary duty (Counts IV-V), intentional
25
interference with contract (Count VI), and the Steinberg-related aspects of the Section 17200
26
claim (Count VII). Order Granting Rambus’s Motion for Summary Judgment on Counts IV-VII
27
of Samsung’s Counterclaims (Case No. 05-02298, Docket No. 828) (Aug. 11, 2008).
28 -3-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 8 of 77
1
C.
Claims and Defenses At Issue
2
14.
As a result of the August 11, 2008 summary judgment order and the Court’s
3
bifurcation of these cases, Samsung’s claims and defenses from the ‘334 and ‘2298 cases that
4
were tried in this phase of the trial of these actions are:
5
Count I – Breach of Section 3.8 of the SDR/DDR License;
6
Count II – Breach of Section 8.5 of the SDR/DDR License;
7
Count III – Breach of Duty of Good Faith and Fair Dealing of Sections 3.8 and 8.5
8
of the SDR/DDR License;
9
Count VII – Section 17200 Based on Rambus’s Participation in JEDEC and
10
Unclean Hands;
11
Count X – Declaratory Judgment of Unenforceability Based on Unclean Hands
12
and Estoppel;
13
Fifth Affirmative Defense – Unclean Hands;
14
Sixth Affirmative Defense – Equitable Estoppel;
15
Seventh Affirmative Defense – Estoppel; and
16
Eighth Affirmative Defense – Implied License.
17 18
15.
Rambus’s defenses from the ‘334 and ‘2298 cases that were tried in this phase of
the trial of these actions are:
19
Second Affirmative Defense – Unclean Hands;
20
Fourth Affirmative Defense – Waiver;
21
Fifth Affirmative Defense – Estoppel;
22
Sixth Affirmative Defense – No Loss or Damages;
23
Seventh Affirmative Defense – Failure to Mitigate;
24
Ninth Affirmative Defense – Conduct of Samsung;
25
Tenth Affirmative Defense – Business Justification;
26
Eleventh Affirmative Defense – Ratification;
27
Twelfth Affirmative Defense – Statute of Limitations;
28 -4-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 9 of 77
1
Thirteenth Affirmative Defense – Laches;
2
Fourteenth Affirmative Defense – Consent;
3
Sixteenth Affirmative Defense – First Amendment/Noerr Pennington;
4
Nineteenth Affirmative Defense – California Litigation Privilege; and
5
Twentieth Affirmative Defense – Release.
6 7
II.
RAMBUS AND ITS INVENTIONS 16.
Rambus was founded by two young professors of electrical engineering,
8
Drs. Michael Farmwald and Mark Horowitz, who foresaw an impending crisis in computer
9
memory technology and invested their time and energy to devise novel solutions to the problem.
10
Farmwald realized in the late 1980s that developments in microprocessor technology would lead
11
to significant speed increases in microprocessors while memory chip performance would not keep
12
up. Farmwald recognized that the result of these trends would be a “bottleneck” – memory
13
technology would limit computer system performance.
14
17.
In an effort to solve the memory bottleneck problem, Farmwald conceived the
15
general idea of a new memory interface and protocol (an organization of the bits and timing of
16
bits transferred by a memory chip) that would allow a single DRAM chip to have higher
17
performance than a board containing 320 existing DRAM chips. Farmwald enlisted the help of
18
Dr. Mark Horowitz, an expert in circuit design, who took a leave from his professorship at
19
Stanford to work with Dr. Farmwald.
20
18.
Farmwald and Horowitz realized that although then-existing DRAM memory
21
chips were asynchronous, they needed to develop a synchronous device with mechanisms for
22
exercising very tight control over timing with respect to the clock to make sure that each bit of
23
data – traveling at a very high speed – was read during the very narrow window of time when it
24
was valid.
25
19.
By early 1990, Drs. Farmwald and Horowitz had put together a set of their ideas
26
that they proceeded to describe in a patent application. This patent application, serial number
27
07/510,898 (the “’898 application”), was filed on April 18, 1990. On April 16, 1991, Rambus
28
filed an international patent application pursuant to the Patent Cooperation Treaty (the “PCT -5-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 10 of 77
1
application”). See Admitted Trial Exhibit (“Adm. Tr. Ex.”) 3583. The PCT application was
2
published on October 31, 1991. Id. The specification contained in the PCT application was
3
identical to that contained in the ’898 application and described the inventions at issue in this
4
case.
5
20.
After the filing of the ’898 application, Rambus received an 11-way restriction
6
requirement from the United States Patent and Trademark Office (“PTO”) – that is, the Patent
7
Examiner determined that Rambus was claiming 11 distinct inventions in the ’898 application.
8
Rambus was, therefore, required to file numerous divisional applications in order to pursue all of
9
the inventions identified by the Patent Examiner. The Rambus patents at issue here have all
10
issued from applications that are continuations or divisionals stemming from the original ’898
11
application. All of those patents are based upon and contain the same specification as the original
12
application. In other words, they are all based on the description of the inventions that was
13
included in the ’898 application.
14
III.
2
RAMBUS LICENSING NEGOTIATIONS A.
15
Samsung’s Early Knowledge of the Potential Scope of Rambus’s Intellectual Property
16 On or around October 1991, Joel Karp (who was then Samsung’s senior vice 17 president responsible for strategic product planning, was actively involved in various licensing 18 negotiations, and frequently attended on Samsung’s behalf JEDEC meetings related to DRAM) 19 reviewed Rambus’s PCT application. Upon review of Rambus’s PCT application, Mr. Karp 20 concluded that 21 22 23 24 25 26 27 28
2
Under United States patent law, an inventor is entitled to file later applications called “continuation applications,” claiming different inventions from those claimed in the initial application, so long as those later-claimed inventions are supported by the disclosure, known as the “written description,” in the initial application. Such continuation practice can legitimately be used to add claims to cover later developed, competing products, again so long as those claims are supported by the original disclosure. Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 874 (Fed. Cir. 1988). That is, the original written description must clearly convey to one of ordinary skill in the art that the inventor was in possession of the later-claimed invention at the time that the initial application was filed. Id. For purposes of the September 2008 Trial, the Court considered that all the asserted claims are valid as to Samsung such that the written description requirement was satisfied. -6-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 11 of 77
1 2 3 4 5 6 7
23.
After reviewing the PCT application, Mr. Karp sought to understand more about
Rambus and its intellectual property, current and future.
8 9
Mr. Karp attended JEDEC meetings on behalf of Samsung. He attended
10
most of the meetings from 1991 through 1994, and he attended at least one meeting in 1996.
11
During that time, JEDEC adopted the SDRAM standard in 1993. Based on his review of
12
Rambus’s PCT application, Mr. Karp made the assumption at that time that
13 14
25.
Armed with this awareness of the potential scope of Rambus’s potential patent
15
coverage, Samsung entered into license negotiations with Rambus for certain RDRAM products,
16
and aggressively pursued
17 18
. Those negotiations broke down in 1993 because the parties could not reach agreement on
19 20
p
. License negotiations resumed again in 1994 and again focused on
21
B.
1994 RDRAM License Agreement
22
26.
In November 1994, Rambus and Samsung signed the Semiconductor Technology
23
License Agreement (“RDRAM Agreement”). Adm. Tr. Ex. 6110. This agreement covered
24
certain intellectual property used in the manufacture and sale of RDRAM devices and required
25
Samsung to pay license fees and several different percentage-of-net-sales royalties as follows:
26 27 28 -7-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 12 of 77
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Id. § 4.2(a). 27.
Section 2.8 of the RDRAM Agreement included a non-assertion clause that
provided:
17 18 19 20 21
Id. § 2.8.
22
28.
23
provision:
Section 10.16 of the RDRAM Agreement included a “most favored licensee”
24 25 26 27 28 -8-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 13 of 77
1 2 3
Id. § 10.16.
4
C.
1997 Addendum No. 1 to the RDRAM License Agreement
5
29.
In late 1995, Rambus and Samsung revisited the 1994 RDRAM Agreement
6
because Samsung wanted
7 8
and Rambus in turn wanted
9
30.
During a meeting in Korea in October 1995, Rambus informed Samsung that
10 11
See Rambus Trial Exhibit (“Tr. Ex.”) 6814 at 109.
12
31.
The pace of the re-negotiations escalated in late 1996 when Samsung learned that
13
Intel planned to endorse Rambus’s “Rambus 2” technology. Tr. Exs. 7767 & 7767A; Tr. Exs.
14
9243 & 9244.
15
32.
Throughout this negotiation of an amendment to the RDRAM Agreement,
16
Samsung was aware of the potential application of Rambus’s intellectual property to products
17
such as
18
1996, one purpose of the meeting was to discuss p
. For example, at an internal Samsung meeting on April 9,
19 20
Tr. Exs. 9232 & 9233. At this meeting, Samsung engineers were concerned about
21
Id. In the end, the Samsung engineers at the April 1996 meeting concluded that
22 23 24
Id. 33.
During this renegotiation of
on or before December 2,
25
1996, Dr. Seong Soo Kim or someone under his direction at Samsung prepared a chronology of
26
key events in the Rambus licensing negotiations and communicated that chronology to the top
27
management team of Samsung. See Tr. Exs. 9243 & 9244. Among the key developments
28 -9-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 14 of 77
reported by the author to the top executives at Samsung was the following:
r
2 3 4 5
Id. (emphasis added). The summary goes on to report to the higher-ups at Samsung:
6 7
e
8 9
Id. (emphasis added).
10
34.
After the circulation of the negotiation chronology to top management at Samsung,
11
negotiations with Rambus continued. In meetings in December 1996, among the major issues
12
during negotiations was Rambus’s requested revision to
13
On December 18 and 19, 1996, a variety of Samsung executives met with
14
Mr. Tate and Mr. Mooring from Rambus. See Aug. 10, 2007 S.S. Kim Dep. Tr. at 149:1-151:6;
15
Tr. Exs. 9237 & 9238.
16
35.
During this time, Samsung was analyzing
. See Adm. Tr.
17
Ex. 7228A. And, Samsung executive C.H. Kim was worrying about the best way to attack
18
Rambus’s patents. See Tr. Exs. 10014 & 10015. Samsung did not inform Rambus of its plan to
19
investigate the best means to attack Rambus’s patents.
20
36.
Ultimately, in February 1997, the parties finalized the Addendum No. 1 to the
21
RDRAM Agreement.
22
9231.
23
See Tr. Ex.
D.
The SDR/DDR IC and SDR/DDR Memory Module Patent License Agreement
37.
In October 2000, Rambus and Samsung signed the SDR/DDR IC and SDR/DDR
24 25 Memory Module Patent License Agreement (hereinafter the “SDR/DDR License”). Tr. Ex. 9084. 26 The SDR/DDR License had 27 Id. §§ 1.1, 8.1. Under the terms of this agreement, 28 - 10 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 15 of 77
1
Rambus granted Samsung a license under Rambus patents to make and sell certain Licensed
2
Products –
3
– which were
4 5
Id. § 1.12.
6 7
38.
Section 3.1 of the SDR/DDR License established two different payment
obligations. Section 3.1(a) first required Samsung to make
8 9
Id. § 3.1(a). Section 3.1(b) established an ongoing royalty payment obligation requiring Samsung to pay Rambus
10 11 12
Specifically, those royalty rates were as follows:
13 14 15 16 17 18
Id. These
19
4.2.
20
39.
royalty payments were to be made on a quarterly basis. Id. §
Section 3.8 of the SDR/DDR License contained a limited most-favored-licensee
21
provision that would apply if Rambus subsequently entered into a license agreement with another
22
party in which
23 24
Id. § 3.8. Two
25
product categories –
26
agreement, id. §§ 1.9, 1.10, were excluded from Section 3.8. Section 3.8 reads in full:
– that are otherwise covered by the
27 28 - 11 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 16 of 77
1 2 3 4 5 6 7 8
Id. § 3.8.
9 10
40.
Section 8 governed the term and termination of the SDR/DDR License. Id. § 8.
Section 8.5 provided as follows:
11 12 13 14 15 Id. § 8.5. 16 17
41.
The parties specified that the Agreement would be interpreted under California and
federal law. Id. § 9.1.
18
42.
The Agreement concluded with an integration clause providing that
19 20 21 w 22 23 24 25 26 27
p
j
§ 10.14.
E.
The Infineon Litigation And The July 2001 Amendment
43.
On August 8, 2000, Rambus filed suit in United States District Court for the
Eastern District of Virginia against Infineon Technologies AG and related entities (collectively “Infineon”) alleging that Infineon’s sale, manufacture, and use of SDRAM and DDR SDRAM memory devices infringe certain Rambus patents. Rambus Inc. v. Infineon Technologies AG et al., No. 3:00cv524 (E.D. Va. Filed Aug. 8, 2000). On September 25, 2000, Infineon filed
28 - 12 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 17 of 77
1
counterclaims against Rambus including claims for declaratory judgment of noninfringement,
2
invalidity, and unenforceability, as well as claims for breach of contract and fraud.
3
44.
On May 4, 2001, the District Court granted Infineon a directed verdict on
4
Rambus’s patent infringement claims. On May 9, 2001, a jury returned a verdict against Rambus
5
on the fraud claims.
6
45.
Following the adverse judgment against Rambus in the Infineon trial, Samsung
7
requested, and obtained, an amendment of the SDR/DDR License (the “2001 Amendment” or
8
“Amendment”). Tr. Ex. 9201. Among other things, the 2001 Amendment: (i)
d
9 10
and (ii)
11 12 13
Id. §§ 3, 5. 46.
Samsung also requested that the 2001 Amendment include a modified version of
14
the most-favored-licensee provision from the SDR/DDR License. In particular, Samsung
15
requested and obtained provisions (i)
16
and (ii)
17 18 19 20 21 22 23 24
Id. § 8 (emphasis added). 47.
The 2001 Amendment further provided that, [ ]
, r
25 26 27
in which case,
[
] g
l
Id. § 7.
28 - 13 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2
48.
Document 2163
Filed 09/09/2008
Page 18 of 77
The 2001 Amendment did not amend or modify Section 3.8 of the SDR/DDR
License.
3
F.
The Infineon Settlement and License Agreement
4
49.
On January 29, 2003, the Federal Circuit Court of Appeals reversed the fraud
5
judgment against Rambus in the Virginia Infineon litigation, vacated the directed verdict of non-
6
infringement, and remanded for retrial of the infringement claims. Rambus Inc. v. Infineon
7
Technologies AG, 318 F.3d 1081 (Fed. Cir. 2003).
8 9
50.
On remand, Infineon raised allegations of litigation misconduct, and the District
Court (Payne, J.) heard arguments on Infineon’s unclean hands defense. On March 1, 2005,
10
Judge Payne stated that he would find Rambus to have committed spoliation and subsequently
11
issue written findings to that effect. See Samsung Electronics Co., Ltd. v. Rambus, Inc., 440 F.
12
Supp. 2d 512, 515 (E.D. Va. 2006), vacated by 523 F.3d 1374 (Fed. Cir. 2008). As this Court has
13
previously recognized, this was a “disastrous turn” for Rambus’s litigation. See Order Denying
14
Rambus’s Motion for Summary Judgment on Samsung’s Counterclaims I, II and III (Case Nos.
15
05-00334, 05-02298 RMW), at 4 (July 9, 2008).
16
51.
On March 21, 2005, prior to the Court issuing any such findings, Rambus and
17
Infineon entered into a global settlement of all of their disputes (the “Infineon Settlement
18
Agreement”), thus avoiding an adverse judgment that potentially had far-reaching negative
19
economic consequences for Rambus beyond that immediate case. Tr. Ex. 10252 §§ 2.5, 4.5(a).
20
After the settlement, Judge Payne dismissed the case without entry of any findings against
21
Rambus or a judgment based on such findings. This Court has previously recognized the obvious
22
value of that dismissal to Rambus, noting “that Rambus settled the Infineon litigation, at least in
23
part, to avoid the risk that Judge Payne’s unclean hands findings and dismissal thereon would
24
have collateral estoppel effect” in litigation with other DRAM manufacturers. Hynix
25
Semiconductor Inc. v. Rambus Inc, Case No. CV-00-20905, Order Denying Hynix’s Motion to
26
Dismiss Patent Claims for Unclean Hands on the Basis of Collateral Estoppel, at 6 (Apr. 22,
27
2005).
28 - 14 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
52.
Document 2163
Filed 09/09/2008
Page 19 of 77
As part of its global settlement with Infineon, Rambus agreed to dismiss Infineon,
2
whose executives had already pled guilty to price-fixing in United States federal court, from
3
Rambus’s ongoing price-fixing and boycott lawsuit in the San Francisco state court. See Rambus
4
Inc. v. Micron Technology Inc. et al., No. 04-431105 (Supr. Ct. Cal., San Fran. Filed May 5,
5
2004). Rambus also agreed to dismiss Infineon from the ongoing patent litigation before this
6
Court (Case No. C05-00334 RMW) as well as various actions in Europe. See Tr. Ex. 10252 §
7
4.5.
8
53.
As part of its global settlement with Infineon, Rambus granted Infineon
9 10 11
See id. §§ 2.1-2.2. Both the term and
12
the scope of products covered by the Infineon Settlement Agreement were broader than those of
13
the SDR/DDR License. Whereas the SDR/DDR License
, Infineon’s
14 15 16
Rambus also released any claims for past infringement, thus effectively granting Infineon a
17
retroactive license back to at least 2000, when Rambus sued Infineon. See id. § 4.1. The license
18
set forth in the Infineon Settlement Agreement thus
p
19 20 21
54.
In addition, the Infineon Settlement Agreement applied to a generally broader
scope of products than the SDR/DDR License, including
22 23
3
Id. § 1.8 (emphasis added).
24 25
55.
In contrast to the SDR/DDR License, the Infineon Settlement Agreement did not
require Infineon to pay a royalty rate based on a percentage of net sales of any particular product
26 27
3
The Infineon Settlement Agreement did not, however, cover
28 - 15 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 20 of 77
1
or product category. Instead, the Infineon Settlement Agreement required Infineon to make fixed
2
lump sum payments on a periodic, going-forward basis irrespective of any sales revenue amounts
3
for any of its products. Specifically, Section 6.2 of the Infineon Settlement Agreement required
4
Infineon to pay to Rambus
5 6 7
Id. § 6.2. Succeeding provisions in the Infineon Settlement Agreement
8 9
Id. §§ 1.13, 6.3-6.4.
10 11
See id. §§ 6.3-6.4.
12
56.
In negotiating the multi-layered Infineon Settlement Agreement, the parties did not
13
allocate any monetary value to any of the non-pecuniary consideration flowing between them, nor
14
did they make any attempt to allocate a “royalty rate” to any of the many different memory
15
products licensed to Infineon under the agreement.
16
G.
Rambus Notifies Samsung of the Infineon Settlement Agreement and Terminates the 2001 Amendment
57.
On March 21, 2005, soon after executing the Infineon Settlement Agreement,
17 18 Rambus issued a press release disclosing the major terms of the Agreement. See Tr. Ex. 10254 at 19 3. 20 58.
Along with that press release, Rambus’s Vice President of Licensing, Ira
21 Blumberg, sent Samsung a notice of termination of Amendment No. 1 to the SDR/DDR License. 22 The notice informed Samsung that 23 Id. at 24 25 26 27
2. The notice further stated that Id. As a result of Rambus’s termination of the Amendment, the parties reverted back to the original provisions and royalty payment terms of the SDR/DDR License.
28 - 16 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
59.
Document 2163
Filed 09/09/2008
Page 21 of 77
On April 29, 2005, Rambus filed a redacted version of the Infineon Settlement
2
Agreement with the Securities and Exchange Commission. See Tr. Ex. 10324 at 79. The
3
redacted version contained the major terms of the Agreement, including the scope of products
4
covered, id. at 81-83 (§§ 1.6-1.12), and the lump sum payments of $50 million, $100 million, or
5
$150 million, id. at 89 (§§ 6.2-6.5). The evidence showed that Samsung, including the personnel
6
negotiating the renewal of the SDR/DDR License, became aware of the major terms of the
7
Infineon Settlement Agreement and of the fact that the redacted version of the Agreement was
8
publicly available. See Tr. Ex. 9205 at 2-3; July 25, 2008 Samsung 30(b)(6) Dep. Tr. at 195:9-10,
9
13-18, 21-23.
10
60.
In response to Samsung’s inquiry as to the possible effect of the Infineon
11
Settlement Agreement on the SDR/DDR License, Rambus notified Samsung that the Infineon
12
Settlement Agreement did not trigger Section 3.8 of the Samsung license. Tr. Ex. 4268. The
13
SDR/DDR License was set to expire by its own terms
14
the parties engaged in negotiations concerning the terms of a new license agreement. The parties
15
were unsuccessful in these efforts. Samsung asked that it be given an even better deal than
16
Infineon received, and Rambus unwilling to offer Samsung terms in a new license based on the
17
Infineon Settlement Agreement.
18
IV.
19
THE 2000 SDR/DDR LICENSE BETWEEN RAMBUS AND SAMSUNG A.
20
23 24 25
The Parties Agreed to a Limited Most-Favored-Licensee Provision that Does Not Cover the Infineon Settlement Agreement 1.
21 22
. As that date approached,
61.
The Language Of Section 3.8 Is Limited To Agreements Providing For Clearly Ascertainable Royalty Rates
Samsung contends that, under Section 3.8, Rambus was required to give Samsung
the benefit of an implied “effective royalty rate” based on the Infineon Settlement Agreement. By its terms, Section 3.8 is limited in scope. The provision comes into play only if, during the term of the Agreement,
26 27 28
Tr. Ex. 9084 § 3.8. In that event, Rambus is to - 17 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 22 of 77
1 2 3 4 5
Id. 62.
Section 3.8 thus contemplates a third-party agreement in which the third party has
agreed to pay a specified “royalty rate” for
6
that is lower than the running royalty rates set forth for those products in the
7
SDR/DDR License. The SDR/DDR License further contemplates that this royalty rate would be
8
readily ascertainable, 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
10 11
of the SDR/DDR License. 63.
The Infineon Settlement Agreement constituted a more complicated type of
12
agreement that does not trigger Section 3.8. As noted, it included substantial non-pecuniary
13
consideration flowing in both directions – for example, the dismissal of the Virginia Infineon
14
Litigation, and the dismissal of Rambus’s price-fixing claims against Infineon – that prevents any
15
determination of what “royalty rate” Infineon could be said to have paid for the products that it
16
licensed. Tr. Ex. 10252 § 4.5. In light of these other various forms of consideration exchanged
17
under the Infineon Settlement Agreement, it is not possible to determine a royalty rate that
18
Infineon “agreed” to pay for the patent rights it received in the Settlement Agreement.
19
64.
Even leaving aside this other consideration, and hypothetically viewing Infineon’s
20 21
as a one-for-one exchange for patent license rights, that payment granted Infineon license rights to many products not covered by the SDR/DDR License, including
22 23
Id. § 1.8. Infineon’s
was not
24
allocated across any of these broad product categories, let alone the four specific categories
25
covered by Section 3.8.
26
65.
Thus, any attempt to determine an “effective royalty rate” from the Infineon
27
Settlement Agreement would require a far more involved and complicated process than the
28
automatic adjustment to Samsung’s royalty rates contemplated by Section 3.8. As Samsung’s - 18 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 23 of 77
1
economics expert admitted, one cannot simply look at the Infineon Settlement Agreement and
2
determine what “royalty rate” was being paid for the products covered by Section 3.8. Instead,
3
the parties would have needed to undertake a negotiation of what, if any, “royalty rate” could be
4
attributed to licensing of products subject to Section 3.8 – a task that simply is not possible in the
5
apples-to-oranges comparison between the SDR/DDR License and the Infineon Settlement
6
Agreement.
7
66.
This is not, moreover, what Section 3.8 contemplates. Section 3.8 contains no
8
terms setting forth procedures for the parties to determine an “effective” royalty rate from a
9
complex, multi-tiered agreement that specifies no such rates, or to resolve any disagreements over
10
what such an appropriate rate would be. It contemplates a straightforward third-party patent
11
license like the SDR/DDR License itself, which specifies a product-specific rate for particular
12
products. The absence of any provisions to deal with more complicated and densely-layered
13
third-party agreements is strong evidence that the parties intended Section 3.8 to be triggered only
14
by a license with readily ascertainable product-specific royalty rates for the relevant products.
4
2.
15 16 17
67.
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,
18
during and after the execution of the SDR/DDR License, all reflect that Samsung was familiar
19
with the type of most-favored-licensee provision that would be applicable to an agreement like
20
the Infineon Settlement Agreement, and demonstrate that the parties did not intend to place such a
21
provision into the SDR/DDR License.
22 23 24 25 26 27
4
Rambus entered into many such licenses, including for example, licenses
,
28 - 19 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
a.
2
Document 2163
Filed 09/09/2008
Page 24 of 77
The 1994 RDRAM Agreement Contained The Broader Type Of Most-Favored-Licensee Provision Necessary To Include Complex Third-Party Agreements With Differing Terms.
3 68.
The RDRAM Agreement between Rambus and Samsung shows that the parties
4 5 6 7 8 9 10
knew full well how to draft a broad most-favored-licensee provision that would apply to agreements with different terms and different royalty payment structures. See Adm. Tr. Ex. 6110 § 10.16. In the RDRAM Agreement, the parties agreed to a more sweeping most-favoredlicensee provision that included different royalty rates based on percentages of net sales, id. § 4.2(a), but also differed from Section 3.8 in several important ways. 69.
First, the RDRAM Agreement gave Samsung Second, it explicitly required that
11
Third, it
12 13
e
provided that
14 Id. § 10.16. In this sense, the
15 16 17 18 19
RDRAM Agreement recognized that “royalty rate” was merely one aspect to be considered in evaluating a comprehensive licensing arrangement that potentially could involve different products or license periods. Finally, the RDRAM Agreement stated that, based on such a comprehensive comparison, Samsung Id.
20 21 22 23 24
70.
favored-licensee provision in 2000, they had an obvious template for doing so. Their decision not to employ a similar provision in the SDR/DDR License indicates that Section 3.8 was more limited, and that this important distinction between the two provisions must be given effect. b.
25 26 27 28
If Rambus and Samsung had intended to adopt such a broad and flexible most-
71.
Samsung Unsuccessfully Tried To Obtain A Broader Most-Favored-Licensee Provision In The SDR/DDR License.
The parties’ negotiations over the language of Section 3.8 also show that they did
not intend Section 3.8 to cover a deal, like the Infineon Settlement Agreement, that cannot readily - 20 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 25 of 77
1
be transformed into product-specific royalty rates. On October 16, 2000, Samsung negotiator Jay
2
Shim sent Rambus proposed language for Section 3.8 that included
3 4
y
Notably, he also proposed adding the following two provisions:
5 6 s
7 8 9 10 11 12
Tr. Ex. 9102 at 5 (emphasis added). In Section 9.3 (the dispute resolution provision), Mr. Shim
13
further proposed that
14 15 16 17
Id. at 6. Samsung’s proposed language for Section 3.8 subsections (d) and (e) is not included in the final agreement. See Tr. Ex. 9084. 72.
The fact that Samsung felt it necessary to propose the above-quoted language
18
demonstrates that it understood Section 3.8, without such language, did not cover lump-sum
19
payments in general, let alone payments made pursuant to a multi-layered agreement in which a
20
lump sump payment by Infineon and a patent license for covered products from Rambus were but
21
two components of a global exchange of much broader consideration in both directions.
22
Samsung’s proposal also confirms Samsung’s understanding that provisions
23
would have had to be included if the parties intended
24
to include agreements, like the Infineon Settlement Agreement, that did not constitute standard
25
patent licenses having readily-ascertainable royalty rates.
26
73.
The parties’ decision not to include the language proposed by Samsung in the final
27
agreement thus strongly supports the conclusion that Section 3.8 was not intended to cover
28
complicated and dissimilar third-party deals like the Infineon Settlement Agreement that would - 21 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 26 of 77
1
require
2
See Sun Pacific Farming Coop., Inc. v. Sun World Int’l, 2006 WL 1716206, at *10 (E.D. Cal.
3
2006) (holding that, under California law, “where the parties’ negotiation history or extrinsic
4
evidence shows that terms were unacceptable, the court may not read rejected terms into the
5
contract”); People v. Goodloe, 37 Cal. App. 4th 485, 490 (1995) (noting that, in the interpretation
6
of statutes, the “rejection of a specific provision which appeared in the original version of an act
7
supports the conclusion that the act should not be construed to include the omitted provision”).
8
c.
9
The 2001 Amendment Included A Broader MostFavored-Licensee Provision That Recognized The Inapplicability of Section 3.8 To Lump-Sum Licensing Agreements.
10 11 12 13
74.
The 2001 Amendment further demonstrates that Section 3.8 does not apply to
lump-sum deals such as the Infineon Settlement Agreement. Paragraph 8 of the 2001 Amendment introduced a new provision that p
y pp
s
14 in which case the 2001 Amendment provided that
15
Tr.
16 17 18 19 20 21 22 23 24 25 26
Ex. 9085. For several reasons, the 2001 Amendment suggests that the parties did not understand Section 3.8 to be triggered by a lump-sum third-party license. First, the very decision to adopt a new provision in this area reflects the parties’ recognition that lump-sum deals like Infineon’s were not already covered in the existing Agreement. If lump-sum deals had already been included, this provision would have been unnecessary and the language of Section 3.8 simply could have been retained in the 2001 Amendment. 75.
Second, the language of this paragraph shows that Rambus and Samsung
understood lump-sum payments and a percentage-of-net-sales royalty to be separate and distinct concepts, with the former differing sufficiently from the latter to require more than merely some automatic application of a lower “royalty rate” to Samsung. The parties’ decision to include a
27 28
once again demonstrates that the parties recognized the need for such a - 22 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 27 of 77
1
provision if Samsung’s rights were to be extended to agreements that do not contain comparable
2
product-specific royalty rates. By suspending section 3.8 and establishing this new and different
3
provision only in the 2001 Amendment, the parties made clear that their original provision was
4
narrower and applied only to agreements for which a comparable set of product-specific royalty
5
rates could be readily ascertained.
6
B.
Section 8.5 Expressly Rejects Samsung’s “Going-Forward” Theory For the Post-Contract Period
76.
Samsung claims that Rambus was contractually obligated to negotiate a successor
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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. 77.
Even if the Infineon Settlement Agreement somehow triggered Section 3.8 for the
Second Quarter 2005, thus reducing Rambus’s potential recovery for that one quarter, Rambus was not 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. This interpretation 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 an earlier proceeding. 78.
As explained above, Section 8.5 of the SDR/DDR License set forth the parties’
duty to negotiate a successor agreement. That provision obligated Rambus and Samsung
23 24 25 26 27 28
p
,
g,
, n
Tr. Ex. 9084 § 8.5 (emphasis added). This provision cannot reasonably be read to suggest that the parties’ good faith negotiation obligation included an obligation to agree to any particular substantive terms for the successor agreement, let alone an obligation by Rambus to give Samsung economic terms equal to the most favorable terms it had - 23 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 28 of 77
given any other licensee. To the contrary, the parties expressly provided that
s
2 3
Id. (emphasis added). While Samsung may have been satisfied with a new patent
4
license that allowed it to pay vastly less than it had previously paid for a license covering fewer
5
products, it is unreasonable to suggest that such an agreement
6
Rambus between April and June 2005, when the cloud on its patents presented by the Infineon
7
litigation had been lifted.
8 9
79.
The open-ended nature of the rest of the substantive terms is reinforced by the
language stating that
10
Id. (emphasis
11
added). Even assuming arguendo that Samsung were entitled to some “effective royalty rate”
12
derived from the Infineon Settlement Agreement for the Second Quarter 2005, Rambus would
13
only be obligated to provide such terms on a going-forward basis if Samsung had some right to
14
automatic extension or renewal of the SDR/DDR License. While such provisions, called
15
evergreen clauses, are common in licensing agreements, as are clauses that give one party an
16
option to renew the agreement, the SDR/DDR License contained no such provision. Instead, it
17
has merely a good faith negotiation provision, which by its very terms allows Rambus to
18
negotiate for a new agreement with new terms.
19
80.
Samsung’s theory that Rambus effectively would have had a continuing obligation
20
to extend most-favored-licensee treatment to a new license agreement between the parties is also
21
directly contradicted by the language and negotiation history for Section 8.6 of the SDR/DDR
22
License. That provision
23 24
It states that,
p
p
y
d
25 26
. Tr. Ex. 9084 (emphasis added). Section 3.8, the royalty-rate
27
provision,
28
licensee status under that provision came to an end at the conclusion of the license term.
, meaning that any right Samsung had to most-favored-
- 24 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 29 of 77
1
81.
2
this issue and that
3
to Samsung witness Mr. Han Yong Uhm, a member of Samsung’s negotiation team and a
4
participant in the 2000 license negotiations, on September 19, 2000, Samsung proposed – and
5
Rambus rejected –
It is, moreover, clear from the negotiations that the parties specifically considered According
6 7 5
8
See July 25, 2008 Uhm Dep. Tr. at 34:20-23, 35:1-10, 36:19-21, 36:25-37:2.
9
82.
Subsequently, on October 16, 2000, Samsung’s negotiator (Mr. Shim) sent
10
Rambus an email requesting a variety of changes to the draft SDR/DDR License, including a
11
request
12 13
Tr. Ex. 6 9102. Rambus responded to this request by email the next day, agreeing
14 15
Tr. Ex. 10029 at 2 (emphasis added). Rambus thus expressly rejected Samsung’s request to have the most-favored-licensee
16 17
5
Mr. Uhm described Samsung’s proposal and Rambus’s response as follows:
18 19 20 21 22 23 24 25 26 27
July 25, 2008 Uhm Dep. Tr. at 34:20-23, 35:1-10, 36:19-21, 36:25-37:2; see also Tr. Ex. 9077 & 9078. 6 In specific, Mr. Shim’s request was as follows:
28 - 25 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 30 of 77
royalty-rate obligations of the Agreement carry on beyond the contract term and,
2
Samsung ultimately dropped its request for
3
Requiring Rambus to abide by Section 3.8 on a going-
4
forward basis would directly contradict the express intention of the parties, as demonstrated in
5
both Sections 8.5 and 8.6.
6
83.
Indeed, Samsung’s own negotiator, Mr. Shim, admitted that the Agreement did not
7
encompass any such obligation upon renewal in sworn testimony given shortly after Rambus
8
terminated the Agreement. In sworn testimony given shortly after Rambus terminated the
9
Agreement, Mr. Shim testified as follows:
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Aug. 23, 2005 Shim E.D. Va. Test. at 79:19-80:14. 84.
Based on this record, the Court finds that, consistent with the express language of
25
Section 8.5, the parties expressly left the terms of renewal open in the Agreement, and did not
26
agree that Rambus would be obligated to extend any status as a most-favored-licensee beyond the
27
date of the Agreement.
28 - 26 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
C.
Page 31 of 77
Products Were Not Covered by the SDR/DDR License
2 85.
The SDR/DDR License is limited by its terms to certain identified part numbers
3 and other products as defined by Sections 1.5 through 1.10. See Tr. Ex. 9084. The language of 4 the SDR/DDR License does not confer a license on Samsung for 5 or other products that are not covered by the
6 7
definition of “Licensed Products” in the Agreement. Moreover, the patents infringed by these products include
8 9
patents that were not covered by Section 1.12 of the SDR/DDR License. 86.
10 11 12
Indeed, during the negotiation of the SDR/DDR License, Rambus refused to
license Samsung on future generations of DRAM technology such as V.
SAMSUNG BREACHED THE SDR/DDR LICENSE BY FAILING TO COOPERATE IN THE ROYALTY AUDIT
13 A. 14 15
87.
Rambus’s Royalty Audit Entitlement And The Initiation Of The Royalty Audit In order to ensure that Samsung was accurately reporting and paying royalties,
16
the parties agreed in the SDR/DDR License to a provision that entitles Rambus to perform royalty
17
audits of Samsung on a periodic basis. Tr. Ex. 9084 § 4.1. The Agreement requires
18 19 20 21 22 23 24
. 88.
In December 2003, Rambus notified Samsung that Rambus would be conducting
25
a royalty audit pursuant to Section 4.1. Tr. Ex. 10064. Rambus selected Ernst & Young LLP
26
(“E&Y”) and Nigel Shepherd, an E&Y partner with more than ten years of royalty audit
27 28 - 27 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 32 of 77
1
experience, to conduct the audit. The scope of the audit included royalty payments made under
2
the SDR/DDR License and the RDRAM Agreement. See Tr. Ex. 10077.7
3
89.
Mr. Shepherd and his team from E&Y informed Samsung of the materials that
4
E&Y would need to be able to successfully complete the audit, including, among other things,
5
information about Samsung’s product inventory sufficient for E&Y to be able to determine that
6
Samsung was properly including as royalty-bearing all of the products for which it was obligated
7
to pay a sales-based royalty under the SDR/DDR License. E&Y also informed Samsung that the
8
period to be audited for the SDR/DDR License was from the inception of the agreement in
9
8 October 2000 through December 31, 2003. Tr. Ex. 10077. In February 2004, Samsung agreed
10
to a March 31 deadline for completing the audit. Id.
11
B.
12
90.
13
Samsung’s Failure To Comply With Its Contractual Audit Obligations It would be an understatement to say that E&Y’s royalty audit did not go
smoothly. Samsung failed to comply with its audit obligations in several different respects.
14
91.
First, there were numerous delays by Samsung, which collectively interfered
15
with the progress of the audit and undermined its integrity. Among other things, Samsung
16
repeatedly missed or postponed conference calls with E&Y and/or Rambus, postponed on site
17
visits because it purportedly needed more time to prepare the materials needed by E&Y, and
18
failed to provide source information that would allow E&Y to verify its product identification and
19
sales calculations. See, e.g., Tr. Exs. 10125, 10126, 10093. Samsung’s delay tactics precluded
20
E&Y from completing the audit by the March 31 deadline and caused E&Y to raise questions
21
with Rambus about whether Samsung was seeking to filter the data E&Y received. Mr. Shepherd
22
explained E&Y’s concerns to Rambus as follows:
23 24 25 26 7
27 28
The RDRAM Agreement contains a royalty audit provision that closely tracks the language in the SDR/DDR License. Adm. Tr. Ex. 6110 § 4.3(a). 8 For the RDRAM License, Rambus agreed that the audit period would be 2001-2003. - 28 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2
Document 2163
Filed 09/09/2008
Page 33 of 77
Tr. Ex. 10120. 92.
Second, E&Y ultimately was not able to complete the royalty audit due to
3
Samsung’s refusal to provide information the auditors needed to perform their analysis.
4
Specifically, Samsung refused, over a period spanning nearly a year, to cooperate in providing
5
complete product information, with proper product codes and supporting information, which was
6
necessary to enable E&Y to determine whether Samsung was properly identifying all the products
7
for which it had an obligation to pay royalties. See, e.g., Tr. Exs. 10147, 10190, 10123. Instead,
8
Samsung offered several unworkable alternatives, including but not limited to
9 10
(see Tr. Ex. 10153) (see Tr. Ex. 10201);
11 12 13
(see Tr. Exs. 10243 & 10260 93.
Third, after a year of waffling back and forth on whether it would provide any
14
audit information for the October-December 2000 time period, Samsung ultimately refused to do
15
so without any valid basis or even an explanation for its decision. See, e.g., Tr. Exs. 10190,
16
10201, 10228.
17
94.
In addition to this lack of cooperation in the audit process, the limited auditing
18
that E&Y was able to perform also turned up serious problems with Samsung’s royalty reporting
19
practices,
20
. E&Y discovered that
21 22 23 24 25
See Tr. Ex. 9084 § 1.13; Adm. Tr. Ex. 6110 § 1.30. 95.
Based on this record, the Court finds that Samsung has failed to comply with,
and has breached, Section 4.1 of the SDR/DDR License.
26 27 28 - 29 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
C.
2 3
96.
Document 2163
Filed 09/09/2008
Page 34 of 77
Rambus’s Repeated Warnings That Samsung Was In Breach Of Its Royalty Audit Obligations, Samsung’s Failure To Cure, And Rambus’s Exercise Of Its Right To Terminate On July 9, 2004, Rambus detailed Samsung’s by-then four-month-long delay in
4
providing information needed to complete the audit and notified Samsung that its failure to
5
cooperate constituted a “breach” of the SDR/DDR License. Tr. Ex. 9275. Rambus repeatedly
6
notified Samsung of its breach and demanded that it be cured. For example, in an October 21,
7
2004 letter, Rambus General Counsel John Danforth informed Samsung’s counsel that
8 9
Tr. Ex. 10217. Rambus,
10
moreover, repeatedly informed Samsung during the parties’ licensing negotiations that Samsung
11
was not in compliance with the audit and thus was in breach of its contractual obligations.
12
97.
Samsung, however, failed to cure the breaches of its obligations. As a result, on
13
June 6, 2005, Rambus exercised its right to terminate the SDR/DDR License pursuant to Section
14
8.2 of the Agreement. On that date, John Danforth notified Samsung in writing that
15 16 17 18
Tr. Ex. 10271. VI.
SAMSUNG HAD KNOWLEDGE OF AND RELEASED ITS JEDEC-RELATED
19
17200 CLAIM WHEN IT ENTERED THE SDR/DDR LICENSE
20
98.
The evidence is clear that Samsung had knowledge of its potential unfair
21
competition claim based on Rambus’s participation in JEDEC when it signed the SDR/DDR
22
License in October 2000. Charles Donohoe, Samsung’s chief patent counsel at the time of the
23
negotiations, testified that
24 25 26
See May 14, 2008 Donohoe Dep. Tr. at 27:1-10; see also id. 25:1-22, 28:4-17; Tr. Ex. 9069.
27
Tr. Ex. 9138.
28 - 30 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 35 of 77
1 2 3 4 5 6
Tr. Ex. 9321 at 2. 99.
Other DRAM manufacturers had already raised JEDEC-related misconduct claims
7
and defenses in ongoing patent litigation with Rambus, and Samsung’s lawyers were actively
8
following that litigation. For example, on September 26, 2000, Infineon’s counsel sent
9
Samsung’s lead outside counsel in this litigation (David Healey)
10
which contains highly
11
detailed allegations of misconduct by Rambus, asserts an equitable estoppel affirmative defense
12
based on JEDEC, and brings various counterclaims against Rambus based on its conduct at
13
JEDEC, including claims for fraud. Tr. Ex. 9070 at 22, 29-45. On August 31, 2000, Samsung’s
14
outside counsel also sent Samsung’s lead negotiator for the License Agreement (Charles
15
Donohoe) a
16
breach of contract and other claims against Rambus based on Rambus’s purported violation of
17
JEDEC patent disclosure policies. Tr. Ex. 9068 at 6-10. Therefore, the evidence showed that, by
18
September 2000 (at the latest), Samsung possessed knowledge of its JEDEC-related Section
19
17200 claim.
20 21
100.
bringing
Aware of its potential JEDEC claim, Samsung agreed to the broad general release
in Section 2.12 of the SDR/DDR License. Section 2.12 provides:
22 23 24
S k
25 26 27 28 - 31 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 36 of 77
Tr. Ex. 9084 § 2.12 (emphasis added).9 The parties expressly provided that the release
2
Id. § 8.6.
3
101.
As this Court previously held, the “subject matter of this Agreement” set forth in
4
Section 2.12 encompasses Rambus’s patents, and “[c]ombined, the ‘relating to’ and ‘arising out
5
of’ language demonstrate a clear intent to release all claims having anything to do with the
6
licensing of the patents.” Order Denying Rambus’s Motion for Summary Judgment on the
7
JEDEC Claim in Count VII of Samsung’s Counterclaims (No. C 05-02298, Docket No. 284), at
8
6, 7 (Aug. 6, 2008).
9
102.
The evidence demonstrates that Samsung’s JEDEC claim – a claim known to
10
Samsung during the negotiations – falls within the scope of the release. Among other things,
11
Samsung carved out equitable defenses against enforcement of Rambus’s patents with a provision
12
stating that
13
Tr. Ex. 9084 § 2.10(d). If
14
Samsung had not otherwise released Rambus for its JEDEC-related conduct, the carve-out in
15
Section 2.10(d) for
16
103.
17
would not have been necessary.
Indeed, there is evidence that Samsung read Section 2.12 broadly as releasing any
affirmative JEDEC-related claim.
18 19 20
Tr. Ex. 9335. If Samsung believed that the
21
release was not so broad, there would be no reason to invoke Section 2.10(d). See Univ. Sales
22
Corp., Ltd. v. Cal. Press Mfg. Co., 20 Cal. 2d 751, 761 (1942) (“[W]hen a contract is ambiguous,
23
a construction given to it by the acts and conduct of the parties with knowledge of its terms,
24
before any controversy has arisen as to its meaning, is entitled to great weight, and will, when
25 26
9
In the next sentence, in all capital letters,
27 28
. Id. - 32 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 37 of 77
1
reasonable, be adopted and enforced by the court.”). The fact that Samsung construed the release
2
so broadly before the termination of the Agreement supports the conclusion that the parties
3
intended the release to cover an affirmative JEDEC claim.10
4
VII.
SAMSUNG COULD NOT HAVE RELIED ON RAMBUS’S ALLEGED
5
NONDISCLOSURE IN RDRAM LICENSE NEGOTIATIONS OR AT JEDEC
6
104.
7
As set forth in section III.A. above, Samsung knew about the potential scope of
Rambus’s intellectual property as early as 1991 when Joel Karp
d
8 9 10 11 12
105.
Further, Rambus disclosed to Samsung during the early 1990s that it was filing
broad patent applications and seeking to enforce and protect its intellectual property.
13
106.
Samsung recognized this and, as a result, sought
15
107.
In conversations with Rambus in 1996, Mr. Karp (still with Samsung) informed
16
Rambus that
14
17
This message from Mr. Karp was communicated to high level Samsung management.
18
By at least 1996,
19 20 21 22
109.
Rambus
and eventually succeeded with Addendum No. 1 signed in February 1997. See Tr. Ex. 9231.
23
110.
In its pretrial disclosures, Samsung disclosed no witnesses or exhibits in support of
24
its burden to show reliance on Rambus’s alleged nondisclosure in connection with JEDEC and/or
25
RDRAM license negotiations, and Samsung offered no such evidence of its reliance at trial.
26 27 28
10
Among other things, the conduct set forth in this Section supports Rambus’s affirmative defenses of release, waiver, statute of limitations, conduct of Samsung, failure to mitigate, estoppel, ratification, laches, and consent. - 33 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
111.
Document 2163
Filed 09/09/2008
Page 38 of 77
Rambus further incorporates by reference its January 25, 2008 Proposed Findings
2
of Fact and Conclusions of Law from the January 25, 2008 coordinated trial. See Proposed
3
Findings of Fact and Conclusions of Law (Case No. 05-00334, Docket No. 1110) (Jan. 25,
4
2008).11
5
VIII. SAMSUNG CONCEDES THAT CONFIDENTIALITY CONCERNS JUSTIFY
6
NON-DISCLOSURE OF PATENT APPLICATIONS
7
112.
Further, any nondisclosure by Rambus of its anticipated or pending patent
8
applications at JEDEC and/or during RDRAM license negotiations was justified by the generally
9
accepted principle that patent applications are confidential business information and kept
10
confidential until the patent has issued.
11
113.
Samsung concedes that when it has pending patent applications related to license
12
negotiations, its general practice is not to disclose those patent applications, but instead to keep
13
them confidential within Samsung.
14
IX.
THERE IS NO FACTUAL BASIS FOR SAMSUNG’S AFFIRMATIVE DEFENSES
15
BASED ON NEIL STEINBERG
16
114.
Samsung alleges that Neil Steinberg, an attorney formerly employed by Samsung,
17
used confidential Samsung information in his work for Rambus. Mr. Steinberg resigned from
18
Samsung effective August 7, 1998. He served as outside counsel for Rambus beginning in 1998
19
and joined Rambus as in-house counsel in 1999.
20
115.
Samsung failed at trial to meet its burden of proof to support its affirmative
21
defenses related to Mr. Steinberg’s work at Rambus. In its pretrial disclosures, Samsung
22
disclosed no witnesses or exhibits in support of its allegations related to Neil Steinberg, and
23
Samsung offered no such evidence in support of these defenses at trial.
24 25 26 27 28
11
Among other things, the conduct set forth in this Section supports Rambus’s affirmative defenses of waiver, conduct of Samsung, failure to mitigate, estoppel, ratification, laches, and consent. - 34 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
116.
Document 2163
Filed 09/09/2008
Page 39 of 77
There is no evidence that Mr. Steinberg’s work as outside counsel for Rambus
2
during the time he was still employed by Samsung had any relationship or connection to the
3
patents-in-suit in the above-captioned cases.
4 5
117.
There is no evidence that Mr. Steinberg used any Samsung confidential
information of any kind in his work for Rambus.
6
118.
This Court has previously found that Samsung had knowledge and concern about
7
Mr. Steinberg’s work for Rambus and his alleged wrongdoing before, during, and immediately
8
after the signing of the SDR/DDR License in October 2000. See Order Granting Rambus’s
9
Motion for Summary Judgment on Counts IV-VII of Samsung’s Counterclaims, at 4-8, 10 (Aug.
10
11, 2008). Despite these concerns, Samsung made a “pure business decision” to negotiate the
11
SDR/DDR License opposite Mr. Steinberg and to renegotiate the license. See id. at 10; Feb. 6,
12
2001 Donohoe Micron Dep. Tr. at 31:20-33:6; May 13, 2008 Donohoe Dep. Tr. at 100:19-101:3,
13
102:9-16.
14
119.
After the SDR/DDR License had been signed, “Samsung engaged in extensive
15
preparation, research and investigation of its potential claims against Neil Steinberg and Rambus
16
to be ready in case it terminated the [SDR/DDR] license agreement and Rambus sued.” Aug. 11,
17
2008 Order at 9-10.
18
120.
19
work for Rambus.12
20
X.
There is no evidence that Samsung was prejudiced in any way by Mr. Steinberg’s
RAMBUS DID NOT IMPROPERLY DESTROY RELEVANT AND MATERIAL
21
EVIDENCE IN ANTICIPATION OF LITIGATION WITH SAMSUNG
22
121.
In October and November 2005, a trial was held before this Court with respect to
23
the defense of unclean hands asserted by Hynix Semiconductor, Inc. (and related entities) against
24
the patent infringement counterclaims asserted by Rambus in Case No. C 00 20905 (“Hynix UCH
25 26 27 28
12
Among other things, the conduct set forth in this Section supports Rambus’s affirmative defenses of waiver, conduct of Samsung, failure to mitigate, estoppel, laches, and consent. - 35 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 40 of 77
1
Trial”). The patents asserted by Rambus against Hynix include some of the same patents as the
2
patents in suit in ‘2298 and ‘334 Cases.
3
122.
Pursuant to the stipulation between Rambus and Samsung on August 29, 2008, the
4
documents and testimony admitted at the Hynix UCH Trial shall be treated as though such
5
documents and testimony were presented and admitted in the September 22 Trial with respect to
6
Samsung’s claims and defenses based on spoliation, with the exception of documents produced
7
by Rambus and its counsel pursuant to various crime/fraud piercing orders related to document
8
retention as well as testimony regarding those documents or pursuant to those orders. In addition,
9
the Court heard and admitted additional evidence at the September 22 Trial.
10
A.
Rambus Adopted A Content Neutral Document Retention Policy In July 1998 That Conformed To Industry Standards
123.
As of 1998, content neutral document retention policies were in common use
11 12 among American businesses as a tool to manage the size and organization of paper records and 13 electronic data, and the associated costs. The percentage of businesses adopting such policies has 14 only increased since that time. Indeed, Samsung Electronics America, Inc. (“SEA”) adopted a 15 written document retention policy in October 2000, and has made various revisions thereto over 16 time. See Tr. Ex. 9220 (SEA document retention policy dated October 1, 2000); Tr. Ex. 9221 17 (SEA document retention policy dated August 1, 2006); Tr. Ex. 9222 (SEA document retention 18 19 20 21 22 23 24 25
policy dated January 1, 2008. 124.
Among the commonly accepted reasons for adoption and implementation of
content neutral document retention policies was and is the reduction of the high costs of complying with discovery requests in the event a business should become involved in litigation, by limiting the extent of paper records and electronic data that would have to be searched for discoverable materials. Indeed, SEA’s current document retention policy explicitly acknowledges , Tr. Ex. 9222 at 3 (“Underlying Principles” ¶ 1), and
26 27
their potential discoverability:
28 - 36 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 41 of 77
1 2 3 4 5 6 7
Tr. Ex. 9222 at 3 (SEA January 1, 2008 document retention policy provision for “Personal files”) (italics in original). 125.
In early 1998, Rambus retained Kroll Associates, a specialist in the field of
information and computer security, to do a security audit of Rambus. Rambus contacted Kroll
8 because it had security concerns after a hacking attempt on the Rambus computers. Hynix UCH 9 Trial Tr. at 369:18-370:20. In an April 24, 1998 presentation concluding the security audit and 10 issuing recommendations, Kroll observed that Rambus needed to adopt a variety of measures to 11 better protect its confidential information and the confidential information of its business partners. 12 Sept. 20, 2005 Brill Dep. at 49:15-50:1; 50:13-18 (played at trial on October 28, 2005, Hynix 13 UCH Trial Tr. at 1517). Among the specific recommendations from Kroll was that Rambus 14 should work with outside counsel to develop a document retention policy. RTX160 at 26; Hynix 15 UCH Trial Tr. at 372-373. 16 126.
On July 22, 1998, Rambus provided its employees with a two-page document
17 retention policy. HTX023; Hynix UCH Trial Tr. at 249:22-250:4. 18 127.
The Rambus policy provided with respect to “Electronic Mail and Documents”
19 that: “Computer files and email are treated in the same manner and are subject to the same 20 document retention policies as paper documents. Rambus maintains complete system tape back21 ups for a period of 3 months. Employees should not utilize email as a place to save documents 22 23 24 25 26 27 28
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 you hard drive.” HTX023 at 1. As Rambus’s expert on document retention policies, John Montana testified, this is consistent with prevailing standards for document retention policies in 1998 and today. See, e.g., David O. Stephens and Roderick C. Wallace, Electronic Records Retention: An Introduction 19, Chapter 7- Implementation Issues, at 19 (Arma International 1997) (hereinafter “Stephens 1997”) (Providing a sample email retention - 37 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 42 of 77
1
policy which states: “The maximum retention period for all E-mail is 30 days after the message is
2
read by its recipient, but employees are encouraged to delete the messages DAILY, immediately
3
after reading, replying, or taking other action concerning them. All E-mail will be automatically
4
purged upon the expiration of the retention period. If the content of an E-mail message possesses
5
longer-term business value, employees are required to migrate the document from the E-mail
6
system for archival storage on another platform IF it requires continuing retention in a computer-
7
processable format, or generate a hard copy printout and place it in the proper paper file for
8
further retention, according to the approved records retention schedule.”) (emphasis in original).
9
Indeed, SEA’s current document retention policy contains a substantially similar provision with
10
respect to email. See Tr. Ex. 9222 at 4-5 (SEA January 1, 2008 document retention policy
11
provision for “Electronic mail”). This is also consistent with the April 1998 recommendation of
12
Mr. Brill of Kroll Associates that Rambus keep e-mail only as long as required and that backup
13
tapes should not be kept indefinitely. RTX160 at 26, 47; September 20, 2005 Brill Dep. at 55:19-
14
57:14 (played at trial on October 28, 2005, Hynix UCH Trial Tr. at 1517).
15
128.
The Rambus policy provided with respect to “Contracts” that: “Final, execution
16
copies of all contracts entered into by Rambus are kept for at least 5 years after expiration of the
17
agreement, and longer in the case of publicly filed contracts. All drafts. . . and any materials used
18
during negotiations that are not part of the final contract . . . should be destroyed or systematically
19
discarded.” HTX023 at 2. As Rambus’s expert on document retention policies, John Montana
20
testified, this too is consistent with prevailing standards for document retention policies in 1998
21
and today. Indeed, SEA’s current document retention policy likewise only calls for
22 23
See Tr. Ex. 9222 at 2, 7 (SEA January 1, 2008 document retention policy). 129.
The Rambus policy further provided that “Engineering and development
24
documents are often subject to intellectual property protection in their final form (e.g. patents,
25
copyrights, trade secrets, proprietary information). The documents, notebooks, computer files,
26
etc., relating to patent disclosures and proof of invention dates are of great value to Rambus and
27
should be kept permanently. Engineering personnel should not depend on the electronic system
28
back-up tapes to archive their work, since these tapes are only kept for 3 months. They should - 38 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 43 of 77
1
create their own archive copies of, for example, tape out and major project milestone databases,
2
which can then be kept indefinitely in Rambus' offsite, secure storage facility.” HTX023 at 1-2.
3
As Rambus’s expert on document retention policies, John Montana testified, this again is
4
consistent with prevailing standards for document retention policies in 1998 and today. Indeed,
5
SEA’s current document retention policy contains a substantially similar provision. See Tr. Ex.
6
9222 at 6 (SEA January 1 2006 document retention policy provision for “Development /
7
Intellectual Property and Trade Secrets”).
8 9
130.
The terms of Rambus’s two page document retention policy referred only to
categories of documents that were content neutral. See HTX023. The policy contained no
10
directive to discard documents relating to specific companies or to certain subjects. The evidence
11
does not suggest that the policy was tailored to target particular categories of harmful documents.
12
131.
In July 1998, in connection with the roll out of the Rambus document retention
13
policy, a presentation was provided to Rambus’s managers by outside legal counsel Daniel
14
Johnson and by Joel Karp, a Rambus Vice President. Hynix UCH Trial Tr. at 252:1-5, 254:10-
15
16.
16
132.
Mr. Karp thereafter made presentations regarding document retention to various
17
groups of Rambus employees. Consistent with the two page document retention policy, Mr.
18
Karp's presentation consisted of a summary of the types of documents Rambus wanted to keep
19
and for how long. Hynix UCH Trial Tr. at 261:4-19; HTX112. The slides that Mr. Karp
20
prepared repeatedly directed Rambus employees to “look for things to keep.” HTX112.
21
B.
22
1.
23 24
Rambus’s Implementation Of Its Document Retention Policy Conformed To Industry Standards
133.
Rambus’s Handling Of Paper Materials Conformed To Industry Standards
On September 3 and 4, 1998, Rambus employees participated in a company-wide
25
housecleaning, more colloquially referred to as a “shred day.” Rambus employed an outside
26
company, Sure Shred, to provide on-site document shredding services for that day. See HTX125;
27
Hynix UCH Trial Tr. at 1614:16-1615:11. Employees were instructed to follow the document
28
retention policy guidelines to determine what to keep and what to throw away. See Hynix UCH - 39 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 44 of 77
1
Trial Tr. at 272:14-273:14. Employees were given burlap sacks from Sure Shred for material that
2
needed shredding. The burlap sacks were then taken to a shredding truck in the parking lot of the
3
company and their contents destroyed. At the close of business on September 3, 1998, Rambus
4
served pizza and beer to its employees. See also Hynix UCH Trial Tr. at 273:15-274:8 (noting
5
that Rambus “often” served pizza and beer to its employees).
6 7 8 9
134.
A year later, on August 26, 1999, Rambus held another housekeeping event, or
“shred day.” See HTX147; Hynix UCH Trial Tr. at 1619:19-1620:4. 135.
In December 2000, Rambus moved into 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
10
building to the new building. See RTX216; see also Hynix UCH Trial Tr. at 1120. Rambus’s use
11
of an outside shredding company in connection with its office move is not unusual. David
12
Rhoads, owner of Sure Shred, testified that one of the “primary movers” in the shredding business
13
is a desire to eliminate unneeded material in connection with office moves. See Hynix UCH Trial
14
Tr. at 1623:5-15 (stating that it is “less expensive for a client to have us come in and shred
15
material that is no longer needed than it is to pay a moving company to move it and then destroy
16
it later”). As of the time of the office move, a litigation hold had been put in place. See Hynix
17
UCH Trial Tr. at 705:6-707:2, 775:12-776:10.
18
136.
Rambus’s use of burlap bags and shredders during these three housekeeping days
19
was also unremarkable. Because Rambus’s work involves research and development, and
20
because its documents often include confidential information that is proprietary to Rambus or
21
obtained from third parties under non-disclosure agreements, Rambus shreds much of the material
22
it no longer needs. In Kroll Associates’ 1998 security audit of Rambus, Mr. Brill emphasized to
23
Rambus executives the importance of shredding confidential information to protect from
24
inadvertent disclosure. Among his recommendations were the need to add better and more
25
convenient shredders in copy rooms and to put small shredders under the desks of executive and
26
staff members who generate highly confidential waste. See RTX160 at 0239; Hynix UCH Trial
27
Tr. at 1517 (Brill Dep. at 61:24-63:5, 94:25-97:12). Mr. Brill explained that the “point was to
28
make it as convenient as possible for people to do the right thing; that if it is your policy to get rid - 40 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 45 of 77
1
of this stuff, that you have to have a way of doing it that is secure….” Id. at 97:2-5. In fact,
2
shredding at Rambus was not a new procedure. Prior to the initial shred day in 1998, each
3
employee had a box in his or her office area for confidential documents that needed to be
4
shredded, and a truck came once a week to pick up the documents for shredding. See Hynix UCH
5
Trial Tr. at 1581:13-1582:10.
6
137.
In addition, there was nothing unusual about the volume of material that Rambus
7
shredded. In particular, Mr. Rhoads suggests that Rambus’s disposal practices were no different
8
from the disposal habits of other similarly situated companies. See Hynix UCH Trial Tr. at 1612-
9
1613, 1617-1618 (noting that there was nothing unusual about Rambus’s use of Sure Shred’s
10
shredding services). If anything, Mr. Rhoads’ testimony demonstrates that the volume of material
11
shredded by Rambus was less than one would have expected. During the three annual
12
housekeeping events, Sure Shred shredded between two to three bankers boxes per Rambus
13
employee. See Hynix UCH Trial Tr. at 1616, 1620, 1622 (outlining the number of boxes
14
shredded per housekeeping event); Joint Pretrial Statement, filed August 27, 2008, at § B(11)
15
(stipulating to the number of employees at Rambus during those events). By comparison,
16
Mr. Rhoads himself generates two bankers boxes each week as part of his regular disposal of
17
confidential material. See Hynix UCH Trial Tr. at 1617-1618.
18
138.
Rambus employees used the housekeeping events as an opportunity to dispose of
19
outdated and voluminous material. For example, Joel Karp testified that the “bulk” of the
20
documents destroyed during the shred days were the “mountains of computer printouts of circuit
21
design that the engineers had.” Hynix UCH Trial Tr. at 337:10-338:3.
22
139.
The social events at the end of the “shred days” were also unexceptional; Rambus
23
and many other companies routinely sponsored such events for their employees. Mr. Rhoads of
24
Sure Shred testified that his company frequently provided pick up services “where it’s time to
25
purge records on an annual basis, or [a company has] just begun a document destruction program
26
so they call us out to do a big purge.” Hynix UCH Trial Tr. at 1612:24-1613:2. He observed that
27
on these annual “purge days,” companies often have an “event” and serve food as part of that
28
“event.” Id. at 1613:18-21. - 41 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
140.
Document 2163
Filed 09/09/2008
Page 46 of 77
A contemporaneous news article also demonstrates the commonplace nature of
2
both “shred days” and of social events associated with them. Admitted exhibit HTX130 is a
3
November 11, 1998 article from The New York Times that refers in part to an “event” at Amazon
4
where employees were asked to “purge” emails that were no longer needed for business or legal
5
purposes. The article also explains that those employees “who complied immediately” were
6
given “free lattes,” and it refers as well to a “delete fest” that was being planned at Polk Co., a
7
data resource firm. HTX130 at 1-3. See also Stephens 1997 at 48 (“Setting aside one day a year
8
for office workers to clean out files, destroy old records, and transfer records to the records center
9
is popular in some organizations. Management allows people to ‘dress down,’ and provides a
10
free lunch on purge day. Sometimes awards are given to those persons and departments that
11
recycle the most paper.”).
12
141.
Indeed, Samsung’s document retention policy also requires employees to “at least
13
semi-annually” discard and destroy information that is older that the document retention period
14
required by the document retention policy. See Tr. Ex. 9222 at 3, 4.
15 16
142.
Rambus’s actions in implementing its document retention policy with respect to
paper materials conformed to industry standards. 2.
17
Rambus’s Handling Of Email Conformed To Industry Standards
18 143.
Rambus told its employees to identify important emails to keep, save them in hard
19 copy or a separate electronic file, and delete the remainder. HTX112; HTX23. These 20 instructions were content neutral and were to be applied to any email on any topic. As Mr. 21 Montana testified, this instruction was appropriate and commonplace in the 1998 time frame. 22 144.
Allen Roberts, a Rambus Vice President of Engineering, understood that there was
23 a concern that back-up tapes of Rambus emails were “discoverable”: 24 25 26 27 28
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. - 42 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2
Document 2163
Filed 09/09/2008
Page 47 of 77
Hynix UCH Trial Tr. 1577:7-18; see HTX100; Hynix UCH Trial Tr. 1575:17-1577:4. 145.
Indeed, Rambus’s expert Mr. Montana agreed. Mr. Montana testified that based
3
on his experience in the document retention industry, a desire to curtail cost in future litigation is
4
one of the common and accepted goals of document retention policies.
5 6 7
146.
Rambus’s actions in implementing its document retention policy with respect to
emails conformed to industry standards. C.
8
Rambus And Its Outside Patent Counsel Did Not Target Specific Categories Of Documents For Destruction 1.
9 10
147.
The Treatment Of Patent Prosecution Files Was Entirely Proper
Lester Vincent prosecuted patent applications on behalf of Rambus claiming
11
priority to Rambus’s original application, Ser. No. 510,898 (“the ‘898 application”) at Blakely,
12
Sokoloff, Taylor & Zafman (“BSTZ”), as did other Blakely attorneys such as Roland Cortes and
13
Scot Griffin. Hynix UCH Trial Tr. at 784:1 - 785:2; 1592:22 - 1593:9; 1603:19 - 1604:10.
14
148.
Mr. Griffin and Mr. Cortes understood that it was the firm policy at BSTZ to clean
15
patent files upon issuance with respect to all patent files, and implemented that policy. Hynix
16
UCH Trial Tr. at 1598:2 - 1600:19; 1606:18 - 1607:10. Mr. Griffin left BSTZ in April 1996, and
17
Mr. Cortes left BSTZ in April 1999. Id. at 1592:11-14; 1603:14-18. Mr. Cortes and Mr. Griffin
18
each prosecuted to issuance Rambus patent applications claiming priority to the original Rambus
19
patent application, including U.S. Patent Nos. 5,513,327, 5,657,481, and 5,841,580 (none of
20
which are patents in suit). These files presumably would have been cleaned by them prior to their
21
departure. Hynix UCH Trial Tr. at 1593:10 - 1598:1; 1604:12 - 1606:17; HTX005A (indicating
22
that the ‘327, ‘481, and ‘580 patents correspond to BSTZ file numbers P001C2, P007DC and
23
P043D2, respectively).
24
149.
In April 1999, Mr. Vincent began to clean BSTZ’s patent prosecution files for
25
Rambus issued patents. HTX327. Mr. Vincent was guided by his “general professional
26
knowledge” regarding document retention for patent files. Hynix UCH Trial Tr. 904:19-24.
27 28
150.
BSTZ’s patent prosecution files were organized into three parts: left, center, and
right. Hynix UCH Trial Tr. at 895:3 - 896:11. When cleaning Rambus patent prosecution files - 43 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 48 of 77
1
for issued patents, Mr. Vincent retained, inter alia, communications with the Patent & Trademark
2
Office, which constituted the right side of the file, and prior art. Id. The portions of the files
3
from which documents might be discarded were the left and center portions. Id.
4
151.
On February 1, 2000, Mr. Vincent provided copies to Rambus of the left and
5
center parts of the file of all but one of BSTZ’s patent prosecution files for applications claiming
6
priority to the ‘898 application. RTX181 (February 1, 2000 cover letter from Lester Vincent to
7
Neil Steinberg enclosing copies of files); Hynix UCH Trial Tr. at 912:1-11. The remaining file
8
had been omitted due to an oversight and was provided later. Id. at 913:3-17.
9
152.
Mr. Vincent did not clean any Rambus patent files between July 28, 1999 and
10
June 23, 2000. HTX327. Mr. Vincent’s renewed cleaning of patent files on or after June 23,
11
2000 had no impact on the documents produced in this litigation. As noted above, copies of any
12
documents from the files of patents claiming priority to the ‘898 application that Mr. Vincent may
13
have discarded on or after June 23, 2000 had already been provided to Rambus. Hynix UCH
14
Trial Tr. at 914:3-12.
15
153.
No material documents have been rendered unavailable to Samsung from the files
16
of any of the patents-in-suit as a result of Mr. Vincent’s file cleaning. Of the 24 patents that have
17
been asserted by Rambus in the ‘2298 and ‘334 cases, only two of them – U.S. Patent Nos.
18
5,915,105, and 6,101,152 – allegedly were cleaned by Mr. Vincent. HTX005A. These patents
19
correspond to internal BSTZ file numbers P001C5, and P043D2C2D1, id., and were among the
20
files reviewed by Mr. Vincent on June 23, 2000, after copies of any documents that might have
21
been discarded from the file had been provided to Rambus. HTX327. Also, no evidence suggests
22
that any material evidence was discarded from any prosecution files.
23
154.
Mr. Vincent did not clean any of BSTZ’s “general” Rambus files. Hynix UCH
24
Trial Tr. at 909:5-7. The general files contained, inter alia, Mr. Vincent’s notes and other
25
documents relating to his advice to Rambus concerning the JEDEC disclosure policy and
26
equitable estoppel. Id. at 908:20-24. These documents were retained and produced. RTX179
27
(January 31, 2000 cover letter from Mr. Vincent to Neil Steinberg transmitting copies of various
28 - 44 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 49 of 77
1
BSTZ general files); Hynix UCH Trial Tr. at 909:10 - 910:6, 911:9-25. See, e.g., HTX192
2
(March 27, 1992 notes by Lester Vincent referring to JEDEC and equitable estoppel). 2.
3
Rambus Maintained Prior Art And Other Relevant PatentRelated Documents
4 155.
Rambus has produced various documents relating to the conception and reduction
5 to practice of the patented inventions prior to the April 1990 filing date of the ‘898 application. 6 Hynix UCH Trial Tr. at 930:2-9. These include inventor notes, id. at 932:24 - 933:15; 935:12-16; 7 1003:2-23, computer simulations, id. at 1004:19 - 1005:19, drafts of patent applications, id. at 8 1045:22 - 1046:4, and technical presentations given by the inventors. Id. at 1046:20-24. 9 156.
Rambus also has produced several boxes of prior art. Hynix UCH Trial Tr. at
10 949:17-19. The prior art produced by Rambus include prior art references with fax lines showing 11 that the art was ordered in 1996, prior art references with key portions underlined, and prior art 12 references containing other sorts of notations. Id. at 1009:17-1022:13. The evidence does not 13 support a contention that Rambus reconstructed prior art that had been destroyed in advance of 14 litigation. Further, no evidence was offered to show the destruction of any prior art that any of 15 Rambus's litigation opponents has identified as material and not cited by the inventor to the 16 Patent Office in connection with the Farmwald/Horowitz line of applications. 17 157.
The evidence did not show that Rambus targeted or destroyed prior art pursuant to
18 its document retention policy. Every witness who testified on the matter at the Hynix UCH Trial, 19 the testimony from which is admitted here as if presented here, confirmed that they had retained 20 prior art and that they did not destroy it in implementing the policy. The evidence also does not 21 show that infringement analyses or reverse engineering documents were targeted or destroyed as 22 a result of Rambus’s document retention policy. The evidence established that Rambus 23 conducted infringement analyses for the patents in suit after they issued in the 1999 and 2000 24 time frame, and that these documents were maintained under the document retention policy and 25 produced (or logged) in this case. 26 27 28 - 45 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
158.
Document 2163
Filed 09/09/2008
Page 50 of 77
Jose Moniz began working on Rambus matters at Neil Steinberg’s law firm in
2
Virginia in January 1999. Hynix UCH Trial Tr. at 1626:15 – 1627:3; 1628:7-12. In late
3
September or early October of 1999, Mr. Moniz became a Rambus employee. Id. at 1626:10-12.
4
159.
As part of his duties while working for Mr. Steinberg in early 1999, Mr. Moniz
5
conducted a search for prior art relating to Rambus patent applications claiming priority to the
6
original ‘898 application. Id. at 1629:12-25.
7
160.
Mr. Moniz obtained copies of any prior art that he found that he believed might be
8
material to one or more of the Rambus patent applications, and that prior art was all submitted to
9
the Patent & Trademark Office. Id. at 1631:23 – 1632:6; 1637:9-23.
10
161.
Mr. Moniz added copies of the prior art that he found in his search to a collection
11
of prior art that had already been gathered, and stored the combined collection in banker’s boxes.
12
Id. at 1632:7-18; 1638:16-25.
13
162.
When Mr. Moniz joined Rambus, the boxes of prior art that he had maintained in
14
Virginia were shipped to Rambus where Mr. Moniz continued to maintain them until two or three
15
years ago when they were turned over to a litigation group. Id. at 1639:15-25; 1658:5-9.
16
163.
The prior art collected by Mr. Moniz in 1999 has not been destroyed, and copies of
17
that prior art were produced to Hynix and Samsung. Id. at 1641:13 – 1642:9; 1649:11-18; 1653:8
18
– 1658:4.
19
164.
Mr. Moniz and Mr. Steinberg did testify that they may have discarded duplicate
20
copies of prior art containing notes related to their categorization of the art in order to determine
21
to which of the Rambus patent applications the art could be material. Hynix UCH Trial Tr. at
22
1452:1-8; 1455:1-4; 1641:3-12. However, no information was lost because the substance of the
23
notes was preserved in the Information Disclosure Statements submitted to the patent office
24
which show in which applications a particular prior art reference was cited. Hynix UCH Trial Tr.
25
at 1481:7 – 1482:20; 1661:10-22.
26 27 28 - 46 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
3.
Document 2163
Filed 09/09/2008
Page 51 of 77
Rambus Maintained Relevant Internal Communications Regarding License Negotiations
2 165.
At the Hynix UCH Trial, Hynix asserted that communications regarding 1998
3 DRAM license negotiations, and the impact of the Hyundai-LG merger on Rambus licenses with 4 the predecessor companies, was material. 5 166.
A “fairly complete record” has been produced of the external communications
6 between the parties regarding negotiations between Rambus and Hyundai in or around July 1998 7 for a proposed amendment to the parties’ December 1995 RDRAM agreement. See Hynix UCH 8 Trial Tr. at 982:23-983:3. 9 167.
The external correspondence between the parties regarding the Hyundai-LG
10 merger and adoption of the LG Semicon has been preserved and produced. See Hynix UCH Trial 11 Tr. at 983:10-24. 12 168.
Rambus has either preserved and produced or logged as privileged numerous
13 internal communications regarding these topics, including numerous internal communications 14 discussing possible elimination or modification of the “Other DRAM” clause contained in the 15 1995 agreement and internal documents regarding the consequences of the Hyundai-LG merger. 16 See Hynix UCH Trial Tr. at 1029:1-20, 1031:10-1034:1, 1047:2-1052:5, 1055:3-1056:11; Tr. Ex. 17 10588 (Rambus Privilege Log Entries 963 and 4048). 18 169.
In the ‘2298 and ‘334 Cases, Samsung asserts that communications regarding its
19 October 2000 SDR / DDR license is material. 20 170.
A fairly complete record has been produced of the external communications
21 between Rambus and Samsung regarding the negotiations for this license. See Tr. Exs. 9064, 22 9074, 9062, 9099, 9100, 9102, 10029-10031, 4223, 9107, 9108, 4227, and 4230-4233. Indeed, 23 for the majority of these licensing materials, it is Rambus, not Samsung, who produced the only 24 copy of the licensing materials exchanged between Rambus and Samsung. See, e.g., Tr. Exs. 25 4209; 4218; 4223-4225; 4227; 4230-4233 (bearing Rambus Bates numbers). 26 27 28 - 47 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
171.
Document 2163
Filed 09/09/2008
Page 52 of 77
Rambus has preserved and logged as privileged more than three dozen internal
2
communications described as relating to Samsung license negotiations and/or the Samsung
3
license. See Tr. Ex. 10592 (Supplemental Rambus Privilege Log).
4 5
172.
the licensing-related files for other potential or actual licensees. 4.
6 7
Finally, there is no evidence that Rambus failed to retain relevant documents from
173.
Rambus Maintained JEDEC Related Documents
Rambus's JEDEC representative Richard Crisp destroyed materials that he had
8
received from JEDEC, such as unopened envelopes containing paper ballots and official minutes
9
of JEDEC meetings. These documents, however, are publicly available from JEDEC. There is
10
no evidence that Mr. Crisp’s destruction of these duplicates did not occur during one of his many
11
office moves prior to Rambus’s adoption of its document retention policy in 1998. Hynix UCH
12
Trial Tr. 1210:15-1211:8.
13
174.
When implementing the document retention policy, Mr. Crisp specifically retained
14
his JEDEC-related emails, including his trip reports, pursuant to the directive to look for things to
15
keep. RTX359; Hynix UCH Trial Tr. 1211:9-1213:14. Therefore, the material JEDEC materials
16
are available. 5.
17
Relevant Presentations to the Board of Directors Were Maintained
18 175.
Rambus preserved and produced numerous written presentations that were made to
19 Rambus’s Board of Directors. These presentations include at least one or two by Mr. Mooring, 20 see Hynix UCH Trial Tr. at 984:12-17, as well as the following Board presentations that were 21 relied upon by Hynix during the Hynix UCH Trial: March 1998 Board presentation (HTX006; 22 Hynix UCH Trial tr. at 198:17-21); October 1998 Board presentation (Hynix UCH Trial Tr. at 23 289:14-23); October 1999 Board presentation (Hynix UCH Trial Tr. at 324:8-16); and January 24 2000 Board presentation (Hynix UCH Trial Tr. at 328:14-23). 25 D.
Litigation Against Samsung Was Not Reasonably More Than A Possibility Until 2005
176.
Rambus hired Joel Karp in October 1997 to assess its patent portfolio, determine if
26 27 28
chips infringed the patent portfolio, develop licensing strategies for infringing chips, and - 48 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 53 of 77
1
negotiate with companies that build and sell such infringing chips. RTX080; Hynix UCH Trial
2
Tr. at 357:17-24.
3
177.
In his email advising Rambus employees of Mr. Karp’s hiring, then Rambus CEO
4
Geoff Tate confirmed that Rambus’s primary business strategy remained the successful market
5
introduction of RDRAM:
6
as I’ve said before, patents are really just a back up line of defense 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 customer’s needs better than the competitors
7 8
RTX080. Rambus had confidence in the ability of RDRAM to win in the marketplace, 9 particularly given the support of Intel. In order to accomplish this, however, Rambus needed the 10 DRAM manufacturers to build the RDRAM devices. See, e.g., Hynix UCH Trial Tr. at 1237:2011 1239:1, 1251:3-6, 1321:20-1322:1, 1559:25-1560:14, 1565:11-24. 12 178.
The evidence showed an awareness on the part of Rambus executives as early as
13 the fall of 1997 that if some of Rambus’s patent applications ripened into patents, and if the 14 claims of those patents covered SDRAM or DDR SDRAM devices, and if it made business sense 15 for Rambus to seek licenses for those devices and it chose to do so, and if licensing negotiations 16 fell apart, there was a chance of litigation. See, e.g., Hynix UCH Trial Tr. at 1256:18-1257:12. 17 This awareness of a “general possibility” is not the equivalent of “anticipating” litigation. 18 179.
The evidence also showed that Rambus did not actively contemplate litigation or
19 believe litigation against any particular DRAM manufacturer to be necessary or wise before late 20 1999, after its negotiations with Hitachi for a license covering certain non-RDRAM devices broke 21 down. 22 180.
Mr. Karp and others inside Rambus did have discussions of potential non-
23 RDRAM licensing strategies in 1998 and 1999, and in the context of those discussions also 24 discussed the possibility of litigation. The evidence showed that Rambus understood that it is 25 important in the context of license negotiations to consider and assess litigation alternatives 26 because the potential licensee will itself be considering that alternative. The patentee needs to 27 anticipate whether the potential licensee is entering the negotiations confident, or uncertain, about 28 - 49 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 54 of 77
1
whether it would likely prevail in litigation, since that assessment will color the potential
2
licensee’s approach to the negotiations and its willingness to license the patents. Consideration of
3
the possibility of litigation in preparation for potential or even actual negotiations did not
4
constitute an expectation or anticipation of litigation. See, e.g., Hynix UCH Trial Tr. at 1398:16-
5
1399:8; 1400:13-1401:18.
6
181.
The evidence shows that in these discussions, Rambus wanted first and foremost to
7
license its patents rather than incur the risk and expense of litigation. See, e.g., RTX080 at 1
8
(10/21/97 Tate e-mail stating that Mr. Karp’s “role is to prepare and then to negotiate to license
9
our patents”). This approach was consistent with Rambus’s earlier experience in dealing with
10
another company, Mosys, that had infringed Rambus’s patents. Although the facts underlying
11
Mosys’ infringement were particularly egregious – Mosys had been founded by two former
12
Rambus employees with knowledge of Rambus’s trade secrets, who then released a product very
13
similar to Rambus’s – Rambus’s approach was not to litigate. See RTX066 (“Our strategy is to
14
avoid any legal battle . . . .”); Hynix UCH Trial Tr. at 1382:8-22; 1383:16-1384:15; 1552:5-
15
1553:13. Instead, Rambus sought to, and did, reach an amicable resolution with Mosys and
16
granted Mosys a license to use Rambus technology. See Hynix UCH Trial Tr. at 1384:5-20;
17
1553:21-1554:4.
18
182.
In 1998, litigation was considered a far-off contingency, to be considered as an
19
option only if all of the following occurred: (1) RDRAM production was established, (2) patents
20
were issued by the PTO that contained claims covering features used in competitive devices;
21
(3) product samples from potentially infringing DRAM manufacturers were available in the
22
marketplace; (4) the non-compatible products were reverse engineered and claim charts made that
23
showed coverage of the actual products under the Rambus patents; (5) infringing products
24
shipped in sufficient quantities to create an incentive to seek to license; (6) Rambus’s executive
25
management and board chose to seek licenses despite the perceived potential for friction with the
26
DRAM manufacturers; and (7) licensing negotiations failed. See, e.g., Hynix UCH Trial Tr. at
27
1321:6-1322:17, 1326:7-20, 1391:21-1393:9, 1565:11-24; Redacted HTX006 at 7; HTX128 at 2-
28 - 50 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 55 of 77
1
3. It is clear that when the document retention policy was adopted, none of these events had
2
occurred.
3
183.
The patents that Rambus has asserted against DRAM manufacturers did not issue
4
until June 22, 1999, at the earliest. See HTX005. In late September 1999, Karp made a
5
presentation discussing the possibility that Intel’s support for RDRAM could waver, and
6
recommending that a non-compatible licensing program be implemented. See Redacted HTX244
7
at 2-3. Following an October 1999 Board meeting, Rambus initiated licensing negotiations with
8
Hitachi, seeking first and foremost to obtain a negotiated license. See, e.g., Hynix UCH Tr.
9
1400:13-1401:18. When negotiations broke down, Rambus held a “beauty contest” in late
10
November or early December of 1999, and retained Gray Cary as litigation counsel. Rambus
11
filed suit against Hitachi in January 2000.
12
184.
The fact that Rambus did not budget any money in 1998 or 1999 for litigation
13
against a DRAM manufacturer shows that Rambus did not expect to be involved in litigation
14
prior to late 1999. At the beginning of each year, Rambus would go through a budgeting process
15
and allocate where money could be spent. Through 1999, expenditures over $5,000 to $10,000
16
would “certainly be in the budget.” Hynix UCH Trial Tr. at 1570:1-1571:13. Nevertheless,
17
Rambus did not allocate any money for litigation expenses in 1997, 1998, or 1999. See HTX013
18
at 18-19; Redacted RTX161; Hynix UCH Trial Tr. at 376:23-378:21, 383:15-18, 383:23-384:14.
19
185.
The record shows that prior to filing suit against Hitachi in early 2000, Rambus
20
and its counsel instructed employees with potentially relevant documents to preserve those
21
documents. Lawyers from the Gray Cary firm, after the firm was retained in connection with the
22
Hitachi litigation, also instructed dozens of Rambus employees that they needed to preserve all
23
documents that could be relevant to the litigation. See Hynix UCH Trial Tr. at 775:12-776:10.
24
186.
Samsung did not approach Rambus requesting a non-compatible license until later
25
in 2000. See, e.g., Tr. Ex. 9063. Rambus and Samsung successfully negotiated the SDR / DDR
26
license that they executed in October 2000 as described herein. That license provided for
e
27 28
Tr. Ex. 9084 § 2.1. - 51 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
187.
Document 2163
Filed 09/09/2008
Page 56 of 77
Rambus did not consider infringement litigation with Samsung reasonably more
2
than a possibility until the breakdown of negotiations with Samsung over a renewal to the
3
SDR/DDR License in 2005, as described herein.
4
XI.
5 6
SAMSUNG DESTROYED RELEVANT AND MATERIAL EVIDENCE 188.
As explained above, Samsung closely followed Rambus litigation with other
DRAM manufacturers in 2000 and 2001, and discussed
7
”
Tr. Ex. 9138; see supra at Section VI. On August 22, 2000, Samsung retained
8
joint defense counsel to attack Rambus’s patents and regularly communicated with counsel “in
9
anticipation of litigation.” See, e.g., Ex. 9104, 10607. And after the SDR/DDR License had been
10
signed, Samsung
11 12
See Tr. Exs. 9334 & 9335. 189.
However, Samsung did not put a litigation hold in place for Rambus-related
13
documents until after this litigation began in June 2005. See Tr. Ex. 9338, 9340. Indeed, some
14
employees did not receive a litigation hold notice until August 2007; other custodians of relevant
15
documents never received one at all. See Tr. Ex. 9339.
16
190.
With no litigation hold in place, Samsung automatically deleted and/or destroyed
17
e-mails up to at least June 2005 on an ongoing basis. See, e.g., Tr. Ex. 9219 at 65, 68 (testimony
18
of Samsung’s corporate designee stating that emails were only stored
19
); Tr. Ex. 9218 (explaining that Samsung’s e-mail system
20
); Aug. 28, 2007 Choi Dep. Tr. at 43:10-
21
44:4, 82:12-16. Samsung also continued its document retention policies that mandated the
22
shredding and burning of certain documents. See, e.g., Tr. Ex. 9218 at 5-6, 44-45.
23 24
191.
In 2006, after this litigation had already commenced, Samsung Electronics
America adopted a document retention policy that required employees, among other things, to
25
Tr. Ex. 9221.
26 27 28
Tr. Ex. 9222. Indeed, Samsung witnesses admitted that they have destroyed documents such as notebooks as part of a regular housecleaning process. See, e.g., - 52 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Page 57 of 77
Aug. 23, 2007 Kyung Dep. Tr. at 22:12-19, 22:22-23:4
2 3
Filed 09/09/2008
); June 19, 2008 Kang Dep. Tr. at 207:7-208:1 (
4
). 192.
In contrast to Rambus’s fairly complete production of documents described above,
5
Samsung has failed to produce several categories of relevant and material documents, including
6
but not limited to internal and external correspondence regarding the parties’ license negotiations;
7
company-issued notebooks, including notebooks of Samsung employees who have analyzed
8
Rambus patents and/or negotiated license agreements with Rambus; joint defense
9
communications related to the attack on Rambus patents, and communications expressing
10
concern or skepticism about Mr. Steinberg’s work at Rambus. The production of internal
11
Samsung e-mails has been particularly inadequate as a result of Samsung’s failure to implement a
12
litigation hold to modify Samsung’s electronic document retention policies.
13 14 15 16
PROPOSED CONCLUSIONS OF LAW I.
BREACH OF CONTRACT CLAIMS 1.
Under California law, a contract “must be so interpreted as to give effect to the
17
mutual intention of the parties as it existed at the time of contracting, so far as the same is
18
ascertainable and lawful.” Cal. Civ. Code § 1636. “When a contract is reduced to writing, the
19
intention of the parties is to be ascertained from the writing alone, if possible.” Cal. Civ. Code §
20
1639. When the meaning of the contract is based on the words of the agreement alone, or when
21
there is no conflict in the extrinsic evidence, the Court may interpret the contract as a matter of
22
law. City of Hope Nat’l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 395 (2008).
23
2.
In discerning the meaning of an ambiguous or unclear contract, the court may
24
consider relevant conduct by the parties either prior or subsequent to its formation. Stockton v.
25
Stockton Plaza Corp., 261 Cal. App. 2d 639, 644 (1968) (“Both prior negotiations and prior
26
conversations may be construed as well as the subsequent acts of the parties in ascertaining the
27
true intention of the parties to the contract.”). Where alternative terms have been proposed and
28
rejected during negotiations, a contract should not be construed as encompassing those rejected - 53 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 58 of 77
1
terms. See Sun Pacific Farming Coop., 2006 WL 1716206, at *10 (“[W]here the parties’
2
negotiation history or extrinsic evidence shows that terms were unacceptable, the court may not
3
read rejected terms into the contract.”), aff’d in relevant part and vacated and remanded on
4
separate topic, 277 Fed. Appx. 727 (9th Cir. May 8, 2008); Goodloe, 37 Cal. App. 4th at 490-91
5
(applying same principle in interpreting statutes).
6
A.
Breach of Section 3.8
7
3.
For the reasons set forth above in the Findings of Fact, Samsung has failed to
8
satisfy its burden of proof on Count I for breach of Section 3.8 of the SDR/DDR License. The
9
evidence showed that the parties did not intend Section 3.8 to apply to a multi-layered agreement
10
like the Infineon Settlement Agreement. Thus, upon reaching a settlement with Infineon, Rambus
11
did not owe a contractual duty to Samsung under Section 3.8 to reduce the royalty rate paid by
12
Samsung under the SDR/DDR License for the Second Quarter of 2005.
13
B.
Breach of Section 8.5
14
4.
Samsung has also failed to satisfy its burden of proof on Count II for breach of
15
Section 8.5. The evidence established that Section 8.5, by its express terms, only obligated the
16
parties
17
Tr. Ex. 9084 § 8.5. Section 8.5 cannot be reasonably interpreted as imposing a
18
contractual duty on Rambus under Section 8.5 to offer Samsung, let alone agree to, a renewal
19
with an equivalent or more favorable royalty rate than the purported “effective royalty rate” that
20
Samsung contends Infineon received through its settlement.
21
5.
Precisely because agreements to negotiate of the type set forth in Section 8.5 do
22
not require a party to enter into an agreement with pre-ordained terms, California law does not
23
permit a party to seek expectation damages based on a claim for breach of a duty to negotiate in
24
good faith. In fact, California law precludes a judicial determination that Samsung should be
25
treated as though it had entered into a new SDR/DDR License upon terms of its choosing. This is
26
because, in any negotiation, “there is no way of knowing what the ultimate terms of the
27
agreement would have been or even if there would have been an ultimate agreement.” Copeland
28
v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251, 1262-63 (2002). Whether based on an express - 54 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 59 of 77
1
contractual provision or the implied covenant of good faith and fair dealing, “damages for the
2
injured party’s lost expectations under the prospective contract” are not available and “reliance
3
damages are the only form of recovery available in an action on a [failure] to negotiate an
4
agreement.” Id. at 1260-61, 1263. Here, Samsung has not offered any evidence of any reliance
5
damages, and thus cannot demonstrate any legally cognizable injury. For that reason as well,
6
Samsung’s Section 8.5 claim necessarily fails.
7
6.
Samsung’s Section 8.5 also fails because that provision expressly states
8 9
Tr. Ex. 9084 § 8.5. As set forth in
10
the Findings of Fact, Samsung was in breach of the Agreement by no later than July 2004 due to
11
its failure to cooperate in the royalty audit, and Rambus properly terminated the Agreement on
12
that basis on June 6, 2005. See supra at Findings of Fact, Section V. Moreover, as discovered in
13
the audit, Samsung also breached the Agreement by improperly deducting various unauthorized
14
expenses, resulting in the understatement and underpayment of its royalties. See supra at
15
Findings of Fact, ¶ 94.
16
C.
Breach of the Implied Duty of Good Faith and Fair Dealing
17
7.
Samsung’s cause of action for breach of duty of the implied covenant of good faith
18
and fair dealing (Count III), also fails because it is predicated on Samsung’s mischaracterization
19
of Rambus’s contractual obligations under Sections 3.8 and 8.5. Waller v. Truck Ins. Exch., Inc.,
20
11 Cal. 4th 1, 36 (1995). With regard to Samsung’s Section 3.8 claim, because Samsung had no
21
right to an “effective royalty rate” from the Infineon Settlement Agreement, Rambus’s failure to
22
notify Samsung of the terms of the Agreement or offer such terms did not constitute a violation of
23
its duty of good faith and fair dealing: “[T]he covenant is implied as a supplement to the express
24
contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the
25
other party’s rights to the benefits of the agreement. . . . Absent that contractual right, however,
26
the implied covenant has nothing upon which to act as a supplement, and ‘should not be endowed
27
with an existence independent of its contractual underpinnings.’” Id. (quoting Love v. Fire Ins.
28
Exch., 221 Cal. App. 3d 1136, 1153 (1990)) (emphasis added). - 55 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
8.
Document 2163
Filed 09/09/2008
Page 60 of 77
Nor does Samsung’s implied covenant claim provide a basis for liability with
2
regard to its claim for breach of Section 8.5. Samsung’s claim in this regard is based on
3
Rambus’s alleged failure to enter into a new license agreement having the terms of the Infineon
4
Settlement Agreement. But as discussed above, Section 8.5 includes no such obligation and is
5
nothing more than an agreement to negotiate in good faith. See supra at Findings of Fact, ¶¶ 76-
6
84. Thus, Samsung is once again attempting to create a new obligation that is untethered to any
7
existing contractual underpinning. Waller, 11 Cal. 4th 1, 36; Love, 221 Cal. App. 3d at 1153.
8 9
9.
Moreover, as explained above, see supra ¶ 5, California law plainly holds that the
implied covenant of good faith and fair dealing does not entitle a party to obtain expectation
10
damages based on a hypothetical agreement that it contends it would have obtained had the other
11
party negotiated in good faith. See Copeland, 96 Cal. App. at 1262-63. Here, Samsung has
12
offered no evidence of any reliance damages as required by California law, and thus cannot
13
establish any legally cognizable damages for its claims under Section 8.5.
14
II.
15
SECTION 17200 CLAIM 10.
California Business & Profession Code §17200 defines “unfair competition” to
16
mean “any unlawful, unfair, or fraudulent business act or practice. Cal. Bus. Prof. Code. §17200.
17
“[I]t establishes three varieties of unfair competition – acts or practices which are unlawful, or
18
unfair, or fraudulent.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th
19
163, 180 (1999). “Although the unfair competition law is broadly written to permit courts to
20
restrain dishonest or unfair business dealings, the scope of the law is not unlimited. ‘Courts may
21
not simply impose their own notions of the day as to what is fair or unfair.’” Scripps Clinic v.
22
Superior Court, 108 Cal. App. 4th 917, 938 (2003).
23
11.
As an initial matter, Samsung’s § 17200 claim fails in light of Proposition 64,
24
which imposed various restrictions on the scope and application of California’s unfair
25
competition laws. Specifically, “[a]fter Proposition 64 . . . a private person has standing to sue
26
only if he or she ‘has suffered injury in fact and has lost money or property as a result of such
27
unfair competition.’” Californians for Disability Rights v. Mervyn’s, LLC, 39 Cal. 4th 223, 227
28 - 56 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 61 of 77
1
(2006) (emphases added). Samsung has not shown that it has lost money or property as a result
2
of the actions that they allege constitute unfair competition.
3
12.
In addition, Proposition 64 eliminated associational standing and provided that a
4
plaintiff may sue “on behalf of others only if the claimant meets the standing requirements of
5
section 17204 and complies with section 382 of the Code of Civil Procedure.” See Coalition for
6
ICANN Transparency, Inc. v. VeriSign, Inc., 452 F. Supp. 2d 924, 938 (N.D. Cal. 2006) (quoting
7
Bus. & Prof. Code § 17203).
8 9
13.
For the reasons set out above in the Findings of Fact and in Rambus’s Rule 52
motion filed in connection with the January 2008 portion of the trial, Samsung’s § 17200 claims
10
fail to satisfy these more restrictive requirements. See Docket No. 1633 (Case No. 05-00334);
11
Docket No. 1488 (Case No. 05-00334). Samsung did not, for example, meet its burden of
12
proving that it “lost money . . . as a result of [Rambus’s] unfair competition.” See Pfizer Inc. v.
13
Superior Court, 141 Cal. App. 4th 290, 305 (2006) (“Inherent in Proposition 64’s requirement
14
that a plaintiff suffered ‘injury in fact . . . as a result of’ the fraudulent business practice or false
15
advertising is that a plaintiff actually relied on the misrepresentation and as a result, was injured
16
thereby”) (emphasis in original). See generally Coalition for ICANN Transparency Inc., 452 F.
17
Supp. 2d at 939 (interpreting Proposition 64 broadly and applying California law that “[m]aterial
18
changes in the phraseology of statutes normally demonstrate an intent by the lawmakers to
19
change the meaning.”) (citation omitted); Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181,
20
1194 (S.D. Cal. 2005) (holding that “[t]he language of the UCL, as amended by Proposition 64,
21
makes clear that a showing of causation is required as to each representative plaintiff.”)
22
(emphasis in original); Hall v. Time Inc., 158 Cal. App. 4th 847, 853-55 (2008) (confirming that
23
Section 17204 requires both “injury in fact” and a causal link to the unfair competition).
24
14.
Moreover, to the extent that Samsung asserted its § 17200 claim on behalf of “the
25
consuming public” and/or “the public at large,” it has not satisfied the requirements of section
26
382 of the Code of Civil Procedure. See Second Amended Answer ¶¶ 288-89 (Case No. 05-
27
00334, Docket No. 141) (Jan. 31, 2007); Samsung’s Second Amended Answer ¶¶ 260-61 (Case
28
No. 05-02298, Docket No. 87) (Jan. 24, 2007). - 57 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
15.
Document 2163
Filed 09/09/2008
Page 62 of 77
Samsung’s § 17200 claim also fails as a matter of law because Rambus’s efforts to
2
enforce its patents cannot be deemed unfair competition under the Noerr-Pennington line of cases
3
and under FieldTurf Int’l, Inc. v. Sprinturf, Inc., 433 F.3d 1366, 1372 (Fed. Cir. 2006) (reversing
4
entry of judgment on § 17200 claim and holding that “[e]nforcement of a patent that is reasonably
5
believed to be infringed is not an act of unfair competition.”). Indeed, this Court has previously
6
held that, without more, Rambus’s use of litigation to enforce its patents is protected activity that
7
cannot form the basis for a 17200 claim.13 Hynix Semiconductor Inc. v. Rambus Inc., 2006 WL
8
1883353, at *1-*2 (N.D. Cal. July 7, 2006) (adjudicating that Rambus’s use of litigation, and
9
threats of litigation, to enforce its patents is protected petitioning activity and cannot form the
10
basis, without more, for a Section 17200 claim).
11
A.
JEDEC 17200 Claim
12
16.
One aspect of Samsung’s §17200 claim is based on Rambus’s participation in
13
JEDEC (hereinafter “JEDEC 17200 Claim”). See Second Amended Answer ¶ 287(e) (Case No.
14
05-00334, Docket No. 141) (Jan. 31, 2007); Samsung’s Second Amended Answer ¶ 259(e) (Case
15
No. 05-02298, Docket No. 87) (Jan. 24, 2007). Samsung’s JEDEC 17200 Claim necessarily fails
16
for several reasons. First, as explained in the Findings of Fact, see supra at Section VI, Samsung
17
possessed actual knowledge of the JEDEC 17200 Claim by September 2000 (at the latest) – more
18
than four years before Samsung filed the claim on June 6, 2005. Therefore, the JEDEC 17200
19
Claim is barred by the applicable statute of limitations. Cal. Bus. Prof. Code § 17208. Because
20
Samsung had actual notice of the JEDEC 17200 Claim, the discovery rule and equitable tolling
21
rules do not toll the statute of limitations. See Rita M. v. Roman Catholic Archbishop, 187 Cal.
22
App. 3d 1453, 1460 (1986).
23 24
17.
Second, Samsung’s JEDEC 17200 Claim fails because Samsung released the claim
when it entered into the SDR/DDR License. As explained above, the parties intended Section
25 26 27 28
13
Cal. Civil Code section 47(b) also provides Rambus absolute protection against liability premised upon its litigation activities. See generally People ex. Rel. Gallegos v. The Pacific Lumber Co., 158 Cal. App. 4th 950, 957-69 (2008). Section 47(b) provides an independent basis for granting judgment to Rambus on Samsung’s § 17200 claim. - 58 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 63 of 77
1
2.12 of the Agreement to be broad enough to encompass this claim that was known to Samsung at
2
the time of the negotiations of the Agreement. See supra at Findings of Fact, Section VI.
3
18.
Third, Samsung’s JEDEC 17200 Claim also fails because the patent laws provide a
4
“safe harbor” for many of the practices challenged by Samsung as “unfair.” It is well established
5
that “[w]hen specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair
6
competition law to assault that harbor.” Cel-Tech Communications, 20 Cal. 4th at 182; Shvarts v.
7
Budget Group, Inc., 81 Cal. App. 4th 1153, 1158 (2000); Schnall v. Hertz Corp., 78 Cal. App. 4th
8
1144, 1162 (2000). These principles apply in this case to bar § 17200 liability as a matter of law.
9
19.
It is also settled that patent applications contain trade secrets. The protection of
10
trade secrets is why the Patent Office maintains patent applications in strict confidence,14 and
11
why courts have prevented or severely limited third-party access to applications filed with the
12
Patent Office. See, e.g., Irons & Sears v. Dann, 606 F.2d 1215, 1220-21 (D.C. Cir. 1979)
13
(denying access through the Freedom of Information Act to patent applications to prevent
14
competitive harm); Cordis Corp. v. SciMed Life Sys., Inc., 982 F. Supp. 1358, 1360 (D. Minn.
15
1997) (“It is well-settled that the secrecy of pending and abandoned United States patent
16
applications should be preserved whenever possible”). As a consequence, Rambus had a
17
legitimate business justification for its refusal to disclose information regarding its patent
18
applications and future plans, and its decision not to reveal such trade secrets cannot be deemed
19
“unfair” under California law.
20
20.
It is also well-established that the patent laws may operate to preempt a § 17200
21
claim based on the enforcement of a patent in the marketplace. See 800 Adept, Inc. v. Murex
22
Securities, Ltd., -- F.3d --, 2008 WL 3982090, at *26 (Fed. Cir. Aug. 29, 2008); Globetrotter
23
Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1377 (Fed. Cir. 2004); Zenith Elec.
24
Corp. v. Exzec, Inc., 182 F.3d 1340, 1355 (Fed. Cir. 1999).
25 26 27 28
14
Effective in 2000, U.S. patent law was amended to conform more closely to international patent laws. As amended, U.S. patent law now provides that patent applications be published 18 months after filing unless the inventor requests that they not be published and certifies that the disclosed invention is not the subject of a foreign patent application that would be published. 35 U.S.C. § 122. This law was not in effect when Rambus was a member of JEDEC. - 59 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 64 of 77
1
B.
Spoliation 17200 Claim
2
21.
Samsung’s § 17200 claim based on Rambus’s alleged spoliation of evidence
3
(“Spoliation 17200 Claim”) also fails for several reasons. First, Rambus’s alleged spoliation does
4
not form a proper basis for a § 17200 claim. Section 17200 authorizes only equitable relief, and a
5
Section 17200 claim therefore is properly dismissed when as a matter of law the facts alleged
6
would not entitle the plaintiff to any equitable relief. See Olson v. Cohen, 106 Cal. App. 4th
7
1209, 1214-15 (2003) (sustaining demurrer without leave to amend to Section 17200 claim where
8
no basis on facts pled to award any equitable relief, even assuming a violation). That is precisely
9
the situation here because (1) one factor that weighs against awarding equitable relief to a party is
10
any injury to the public interest that will result from doing so, see Cota v. County of Los Angeles,
11
105 Cal. App. 3d 282, 292 (1980); Ukhtomski v. Tioga Mut. Water Co., 12 Cal. App. 2d 726, 729
12
(1936), and (2) the California Supreme Court already decided in Cedars-Sinai Med. Ctr. v.
13
Superior Court, 18 Cal. 4th 1 (1998) (no tort of intentional spoliation), that the injury to the
14
public interest that would result from permitting derivative claims based on spoliation outweighs
15
any interest of the non-spoliating party in having an additional affirmative remedy beyond those
16
defensive remedies already available in the original suit itself (at least where, as here, the alleged
17
spoliation was discoverable before trial).
18
22.
Second, in order to establish a § 17200 violation based on the alleged Rambus
19
spoliation, Samsung must prove its allegation that the document destruction by Rambus violated
20
California Penal Code § 135. In order to do so, Samsung must specifically prove that (1) Rambus
21
knew that the documents were “about to be produced in evidence” and (2) Rambus nevertheless
22
“willfully destroy[ed the documents] . . . with intent thereby to prevent [them] from being
23
produced.” Id. Samsung failed to prove either of these elements, however.
24
23.
Rambus did not actively contemplate litigation or believe litigation against any
25
particular DRAM manufacturer to be necessary or wise before its negotiation with Hitachi failed,
26
namely in late 1999. Therefore, Rambus did not know that any documents it destroyed prior to
27
that time were “about to be produced in evidence”. And, because Samsung failed to prove that
28 - 60 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 65 of 77
1
any documents destroyed after that time were known to be relevant to any pending litigation (or
2
litigation Rambus actively contemplated), Samsung did not prove that Rambus knew any
3
documents it destroyed were “about to be produced in evidence”. Furthermore, Samsung failed
4
to prove that Rambus “willfully destroy[ed the documents] . . . with intent thereby to prevent
5
[them] from being produced” in the pending or contemplated proceeding.
6
24.
Third, Samsung failed to establish that this Court should exercise its equitable
7
discretion to provide any relief under § 17200 in this case. Samsung has asserted spoliation as
8
part of an unclean hands defense. The Court finds that there is no basis in equity for it to provide
9
any more or different relief under Section 17200 than it finds is appropriate under the unclean
10
hands defense. The Court further finds, as explained below, that Samsung is not entitled to any
11
relief under its unclean hands defense.
12
III.
13
EQUITABLE ESTOPPEL AND ESTOPPEL DEFENSES 25.
Samsung asserts the doctrine of equitable estoppel (Sixth and Seventh Affirmative
14
Defenses) as a bar to Rambus’s claims for patent infringement. Each of these equitable defenses
15
is based on Rambus’s participation in JEDEC, Rambus’s alleged misrepresentations or
16
nondisclosures during license negotiations with Samsung prior to 2000, and the same facts
17
alleged in Counts IV-VII.15
18
26.
To establish this defense, Samsung must prove the following: “(i) [Rambus] must
19
communicate to [Samsung] (by words, conduct or silence) that [Rambus] will not pursue an
20
infringement claim; (ii) [Samsung] must rely on that communication; and (iii) [Samsung] must
21
establish that it would be materially prejudiced if the patentee is now permitted to proceed with
22
the infringement claim.” B. Braun Med., Inc. v. Abbott Labs., 124 F.3d 1419, 1425 (Fed. Cir.
23
1997) (citing A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041-43 (Fed. Cir.
24 25 26 27 28
15
Samsung has also asserted that it alleges a defense of estoppel based on the 2000 license negotiations. This defense is not pled in Samsung’s Second Amended Answer, Affirmative Defenses, and Counterclaims, nor is it set forth in the parties’ Joint Supplemental Case Management Conference Statement filed on July 31 2007. Therefore, Samsung is barred from asserting it. Moreover, there is no legal support for an estoppel by contract defense in the circumstances present here. - 61 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 66 of 77
1
1992)). “[T]hese elements require a determination that [Samsung] was misled and would have
2
acted differently had it not been misled.” Order Denying Hynix’s Motion for Summary Judgment
3
on Cal. Bus. & Prof. Code 17200 and Equitable Estoppel at 9 (holding that “a general finding that
4
JEDEC members were misled” is insufficient). Samsung failed, for the reasons set out in the
5
Court’s Findings of Fact and in Rambus’s Rule 50 and 52 motions (Docket Nos. 1488 & 1633
6
(Case No. 05-00334)) to establish any of these elements with respect to its estoppel defenses, and
7
those defenses are therefore dismissed.
8 9
27.
Moreover, because equitable estoppel is, as its name suggests, an equitable
defense, Samsung must come to the Court with clean hands in connection with the prosecution
10
and defense of this case. Although not necessary to the Court’s determination in light of the
11
Findings of Fact and Conclusions of Law described above, the Court has serious concerns about
12
the evidence showing that Samsung destroyed documents at a time when it had a duty to preserve
13
them as to Rambus. See infra at Section VII.
14
A.
JEDEC Equitable Estoppel and Estoppel Defenses
15
28.
Samsung has presented no evidence that Rambus’s conduct at JEDEC justified an
16
inference that Rambus would not enforce the patents-in-suit. See A.C. Aukerman, 960 F.2d at
17
1042 (“The patentee’s conduct must have supported an inference that the patentee did not intend
18
to press an infringement claim against the alleged infringer.”). Samsung did not allege that
19
Rambus communicated an intent to forego enforcement of its patents, but relied instead on
20
Rambus’s refusal to comment for this element of their defenses. Samsung failed to establish that
21
Rambus’s silence at JEDEC violated any “clear duty to speak” that would support its equitable
22
estoppel claims. A.C. Aukerman, 960 F.2d at 1043-44 (“silence alone will not create an estoppel
23
unless there was a clear duty to speak”); see also Hemstreet v. Computer Entry Sys. Corp., 972
24
F.2d 1290, 1295 (Fed. Cir. 1992) (“mere silence must be accompanied by some other factor
25
which indicates that the silence was sufficiently misleading as to amount to bad faith”). Further,
26
Samsung failed to prove that JEDEC policies imposed a clear duty upon members to disclose
27
patents or patent applications. Because Samsung has failed to establish the existence of such a
28
duty, Rambus’s silence cannot be treated as a violation of its obligations to disclose its patents. - 62 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 67 of 77
1
Accordingly, Samsung has not established that Rambus’s alleged silence and conduct at JEDEC
2
support an inference that Rambus renounced its patent rights.
3
29.
Samsung has also failed to establish that it relied on Rambus’s purported
4
misrepresentations at JEDEC. Proof of reliance is “essential” to equitable estoppel and requires
5
the infringer to show it had “a relationship or communication with the plaintiff which lulls the
6
infringer into a sense of security in going ahead with [its investments].” Gasser Chair Co. v.
7
Infanti Chair Mfg. Corp., 60 F.3d 770, 776 (Fed. Cir. 1995). Here, Samsung could not have
8
relied on Rambus’s silence at JEDEC because it knew about the potential scope of Rambus’s
9
intellectual property as early as 1991 and proceeded to demand
10
in its 1994
RDRAM license that
11
Moreover, Samsung analyzed and evaluated Rambus’s patents in and around 1996 and
12
thus were clearly aware of the written specification in those early patents and the potential scope
13
of future patents. There is no dispute that Rambus told Samsung that it would be filing patent
14
applications to obtain broad protection for the full scope of its intellectual property. Thus,
15
Samsung simply cannot say that it was lulled or relied in any way by Rambus’s alleged
16
nondisclosure, half-truths, or misrepresentations.
17
30.
Samsung has also failed to prove that it will be individually prejudiced by “a
18
change of economic position or loss of evidence” if Rambus is permitted to enforce its patents.
19
A.C. Aukerman, 960 F.2d at 1043. Like the reliance element of equitable estoppel, material
20
prejudice requires an infringer to establish that the economic harms are related to the patentee’s
21
conduct. See ABB Robotics, Inc. v. GMFanuc Robotics Corp., 52 F.3d 1062, 1065 (Fed. Cir.
22
1995). Samsung has failed to offer any proof of such prejudice. Indeed, in its pretrial
23
disclosures, Samsung disclosed no witnesses or exhibits to show its prejudice, and Samsung
24
offered no such evidence of prejudice at trial.
25
B.
Equitable Estoppel and Estoppel Defenses Based on Licensing Negotiations with Samsung Prior to 2000
31.
Samsung’s estoppel defenses based on the parties’ RDRAM licensing negotiations
26 27 also fail on their merits as set forth in the Findings of Fact above. These defenses are based upon 28 - 63 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 68 of 77
1
Rambus’s alleged misrepresentations in connection with the licensing negotiations between
2
Rambus and Samsung prior to 2000. See Second Amended Answer, Case No. 05-00334, ¶¶ 97-
3
98; Second Amended Answer, Case No. 05-02298, ¶¶ 72-73. Samsung has failed to establish that
4
it relied on Rambus’s statements or conduct during the RDRAM negotiations. To the contrary,
5
the evidence has shown that Samsung was aware of the potential scope of Rambus’s intellectual
6
property and therefore sought
7
Moreover, Samsung analyzed and evaluated Rambus’s patents in and around 1996 and thus were
8
clearly aware of the written specification in those early patents and the potential scope of future
9
patents. There is no dispute that Rambus told Samsung that it would be filing patent applications
in the 1994 RDRAM Agreement.
10
to obtain broad protection for the full scope of its intellectual property. Thus, Samsung simply
11
cannot say that it was lulled or relied in any way by Rambus’s alleged nondisclosure, half-truths,
12
or misrepresentations. Because Samsung has failed to prove reliance, this defense necessarily
13
fails.
14 15 16
32.
Samsung has also failed to offer any proof of prejudice resulting from the
RDRAM licensing negotiations. C.
Equitable Estoppel and Estoppel Defenses Based on Neil Steinberg’s Work at Rambus
33.
On August 11, 2008, this Court granted Rambus’s motion for summary judgment
17 18 on Counts IV-VI and the Steinberg-related aspects of Count VII on the ground that “[t]he 19 uncontradicted documentary evidence in the record shows that Samsung possessed knowledge 20 about Mr. Steinberg’s possible wrongdoing more than four years before Samsung filed its 21 counterclaims” (i.e., June 6, 2005). Order Granting Rambus’s Motion for Summary Judgment on 22 Counts IV-VII of Samsung’s Counterclaims (Aug. 11, 2008), at 10. As noted above, Samsung 23 had knowledge and concern about Mr. Steinberg’s work for Rambus before, during, and 24 25 26 27
immediately after the signing of the SDR/DDR License agreement in October 2000. As a result, Samsung has failed to carry its burden to show reliance sufficient to support its estoppel and equitable estoppel affirmative defenses.
28 - 64 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
34.
Document 2163
Page 69 of 77
Samsung has also failed to show that it was prejudiced in any way as a result of
2
Mr. Steinberg’s work for Rambus.
3
IV.
4
Filed 09/09/2008
IMPLIED LICENSE DEFENSE 35.
An implied license arises from conduct signifying the patentee’s waiver of its
5
statutory rights and requires proof of “a nexus between the patentee’s purported waiver and the
6
infringing action.” Winbond Elecs. Corp. v. ITC, 262 F.3d 1363, 1374 (Fed. Cir. 2001). “An
7
implied license may arise by legal estoppel, acquiescence, conduct, or legal estoppel,” but “the
8
relatively few instances where implied licenses have been found rely on the doctrine of equitable
9
estoppel.” Stickle v. Heublein, Inc., 716 F.2d 1550, 1559 (Fed. Cir. 1983). A finding of an
10
implied license through equitable estoppel requires “an affirmative grant of consent or permission
11
to make, use, or sell: i.e., a license.” Wang Lab. v. Mitsubishi Elecs. Am., 103 F.3d 1571, 1581
12
(Fed. Cir. 1997). A license also may be implied under a theory of legal estoppel “where a
13
patentee has licensed or assigned a right, received consideration, and then sought to derogate
14
from the right granted.” Wang Lab., 103 F.3d at 1581.
15
36.
Under any rationale, Samsung’s implied license defense fails because Samsung
16
could not reasonably or properly infer from Rambus’s language or conduct that Rambus had
17
consented to Samsung’s use of its patents outside of the terms of their explicit license agreements.
18
See McCoy v. Mitsuboshi Cutlery, 67 F.3d 917, 920 (Fed. Cir. 1995) (citing De Forest Radio Tel.
19
Co. v. United States, 273 U.S. 236, 241 (1927)). Among other things, as a sophisticated company
20
licensing certain Rambus patents, Samsung was aware that Rambus’s business model depended
21
upon the licensing of patents for revenue. Samsung could not properly infer given this licensing
22
history that Rambus had consented to Samsung’s use of its patents without a royalty. And as
23
explained above, Samsung has failed to prove that it reasonably relied on any statements or
24
conduct by Rambus at JEDEC, in the RDRAM negotiations, or in connection with Mr.
25
Steinberg’s work at Rambus. Absent evidence of an actual nexus between Rambus’s statements
26
or conduct and Samsung’s infringement, Samsung’s implied license defense fails. See Stickle,
27
716 F.2d at 1559 (“[A]n implied license cannot arise out of the unilateral expectations or even
28 - 65 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 70 of 77
1
reasonable hopes of one party. One must have been led to take action by the conduct of the other
2
party.”).
3
V.
4
DECLARATORY JUDGMENT OF UNENFORCEABILITY 37.
Samsung has alleged one or more claims seeking a declaration of unenforceability
5
(Count X). These claims are based, inter alia, on the allegations relating to Rambus’s
6
participation in JEDEC, the parties’ licensing relationship prior to 2000, and Mr. Steinberg’s
7
work at Rambus. For the reasons described above, Samsung has failed to satisfy its burden of
8
proof on these overlapping aspects of its declaratory judgment claims.16
9
VI.
10
SAMSUNG’S UNCLEAN HANDS DEFENSE 38.
Samsung bore the burden of proving each of the elements of its unclean hands
11
defense at trial. See Conan Properties, Inc. v. Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir.
12
1985); Omega Indus. v. Raffaele, 894 F. Supp. 1425, 1431 (D. Nev. 1995) (“The party asserting
13
this [unclean hands] doctrine has the burden of proving its application”).
14
39.
A number of courts have required litigants to establish the elements of an unclean
15
hands defense by clear and convincing evidence. See Scott Paper Co. v. Fort Howard Paper Co.,
16
432 F.2d 1198, 1204 (7th Cir. 1970); Grand Band, Inc. v. Lome, 2005 WL 1564924, at *5 (D.
17
Minn. 2005); Ristvedt-Johnson, Inc. v. Brandt, Inc., 805 F. Supp. 549, 556 (N.D. Ill. 1992). In
18
this case, under either a clear and convincing or a preponderance of the evidence standard,
19
Samsung has not met its burden.
20
A.
Spoliation
21
40.
Samsung based its unclean hands defense on Rambus’s alleged destruction of
22
evidence. There is nothing wrongful or inequitable about destroying documents unless there is a
23 24 25 26 27 28
16
Samsung failed to comply with the pretrial disclosure requirements of the Court’s August 22, 2008 Order Regarding Pretrial Calendar for September 22, 2008 Trial, as modified by the parties’ agreement set forth in the August 27, 2008 Joint Pretrial Statement, and thus has failed to prosecute the claims and defenses set forth in the August 27, 2008 Joint Pretrial Statement, specifically, Samsung’s claims for unfair competition under Cal. Bus. & Prof. Code § 17200 (Count VII), its claim for declaratory judgment of unenforceability (Count X), and the affirmative defenses of equitable estoppel, estoppel, and implied license. Therefore, these claims and defenses should therefore be dismissed on their merits. - 66 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 71 of 77
1
duty to preserve those documents. See Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216
2
(S.D.N.Y. 2003) (“It goes without saying that a party can only be sanctioned for destroying
3
evidence if it had a duty to preserve it.”). Samsung alleged that Rambus had such a duty because
4
it anticipated litigation with Samsung.
5
41.
A variety of linguistic formulations are used to describe when a duty to preserve
6
evidence arises in advance of actual litigation. These include when litigation is “probable”, see
7
Hynix Semiconductor Inc. v. Rambus Inc., 2006 WL 565893, at *21 (N.D. Cal. 2006) (discussing
8
ABA Section of Litigation standard and case law cited in comments), and (2) “reasonably
9
foreseeable”, Zubulake, 220 F.R.D. at 216. Even if these different formulations signify different
10
standards, Samsung has failed to demonstrate under any standard that Rambus owed a duty to
11
Samsung to preserve documents for the present litigation prior to the breakdown of negotiations
12
in 2005.
13
42.
Rambus did not actively contemplate litigation or believe litigation against any
14
particular DRAM manufacturer to be necessary or wise before its negotiation with Hitachi failed,
15
namely in late 1999. While hiring of litigation counsel or actually filing suit is not always
16
necessary to demonstrate that a company anticipates litigation, in light of the record presented, it
17
would appear that litigation only became probable and reasonably foreseeable against any DRAM
18
manufacturer shortly before the initiation of the “beauty contest” in late 1999 in which litigation
19
counsel for the Hitachi matter, Gray Cary, was selected. Thus, Rambus's adoption and
20
implementation of its content neutral Document Retention Policy in mid-1998 was a permissible
21
business decision. The destruction of documents on the 1998 and 1999 Shred Days pursuant to
22
the policy did not constitute unlawful spoliation.
23
43.
Rambus did shred additional documents when it moved offices in December 2000,
24
at which point it was in active litigation against Infineon and certain other DRAM manufacturers,
25
although not Samsung (with whom Rambus had successfully negotiated the SDR/DDR License).
26
The evidence presented did not demonstrate that any documents material to Rambus’s patent
27
claims against those DRAM manufacturers were destroyed in conjunction with the 2000 move.
28 - 67 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 72 of 77
1
“The duty to preserve evidence, once it attaches, does not extend beyond evidence that is relevant
2
and material to the claims at issue in the litigation.” Hynix, 2006 WL 565893, at *27.
3
44.
Even if Rambus had destroyed evidence it had a duty to preserve as to some other
4
DRAM manufacturer, however, it would be irrelevant to the unclean hands defense asserted by
5
Samsung in this litigation. To establish unclean hands, the allegedly “unconscionable act” must
6
have had an “immediate and necessary relation to the equity that [Rambus] seeks in respect of the
7
matter in litigation.” Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245 (1933)
8
(emphasis added). This nexus requirement is indispensable to any unclean hands defense: “It is
9
fundamental to [the] operation of the doctrine that the alleged misconduct by the plaintiff relate
10
directly to the transaction concerning which the complaint is made.” Dollar Systems v. Avcar
11
Leasing Systems, 890 F.2d 165, 173 (9th Cir. 1989) (quotation omitted and emphasis added)
12
(alteration in original). As the Supreme Court has explained, courts:
13 14 15
do not close their doors because of plaintiff’s 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. Keystone Driller Co., 290 U.S. at 245-46. See also Jarrow Formulas, Inc. v. Nutrition Now, Inc.,
16 304 F.3d 829, 841 (9th Cir. 2002) (“[U]nclean hands does not constitute ‘misconduct in the 17 abstract, unrelated to the claim to which it is asserted as a defense.’” (quoting Republic Molding 18 Corp. v. B.W. Photo Utils., 319 F.2d 347, 349 (9th Cir. 1963)). Accordingly, under the unclean 19 hands doctrine, “reprehensible acts toward third parties, do not deprive a suitor of his right to 20 justice in a court of equity.” Trice v. Comstock, 121 F. 620, 628 (8th Cir. 1903) (applying rule to 21 reject unclean hands defense); see, e.g., Nice Ball Bearing Co. v. Bearing Jobbers, 205 F.2d 841, 22 850 (7th Cir. 1953) (noting same rule under Illinois law); Newman v. Checkrite California, Inc., 23 912 F. Supp. 1354, 1376 (E.D. Cal. 1995) (applying same rule under California law to reject 24 unclean hands defense); Samsung’s Objections To Order Of Special Master Compelling 25 Production Of Documents From Mosaid Litigation (filed 10/5/07 in ‘334 Case as Document No. 26 448) at 6-7 (arguing that, absent duty to preserve evidence as to Rambus in this litigation, prior 27 Samsung spoliation as to different party in different litigation is irrelevant to Rambus’s unclean 28 - 68 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 73 of 77
1
hands defense against Samsung). See generally Republic Molding Corp., 319 F.2d at 349 (“What
2
is material is not that the plaintiff's hands are dirty, but that . . . the manner of dirtying renders
3
inequitable the assertion of such rights against the defendant”).
4
45.
Similarly, even if Rambus somehow had anticipated litigation against Samsung
5
prior to execution of the SDR/DDR License in October 2000 (which it did not), that too would be
6
immaterial to Samsung’s assertion of an unclean hands defense to Rambus’s patent infringement
7
claims in the ‘2298 and ‘334 cases. Because the unclean hands defense requires that any alleged
8
misconduct “must pertain to the very subject matter involved and affect the equitable relations
9
between the litigants,” the defense will not act to deny relief simply “because the plaintiff may
10
have acted improperly in the past or because such prior misconduct may indirectly affect the
11
problem before the court.” Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472,
12
478-79 (9th Cir. 1969) (quotation omitted). Any purported duty to preserve evidence in
13
anticipation of litigation with Samsung prior to the 2000 licensing negotiations ended with the
14
October 2000 execution of a five year license, and any materials destroyed prior to that time
15
could properly have been destroyed as to Samsung over the course of the next close to five years
16
in accordance with the Rambus document retention program. Therefore, any pre-October 2000
17
document destruction cannot affect the equities between the parties with respect to the patent
18
infringement claims at issue here (which are directed at Samsung's post-license actions in 2005
19
and later), and cannot support Samsung's unclean hands defense. See generally Bio-Tech. Gen.
20
Corp. v. Genentech, Inc., 80 F.3d 1553, 1565 (Fed. Cir. 1996) (litigation misconduct in prior suit
21
between parties on same patents cannot support a defense of unclean hands in present suit).
22 23
46.
Samsung presented no evidence that Rambus destroyed evidence material to this
suit after litigation became probable and reasonably foreseeable in 2005.
24
B.
Bad Faith
25
47.
In order to establish the unclean hands defense, Samsung also had to prove that
26
Rambus acted in bad faith in adopting or implementing its document retention policy. Because
27
“[b]ad intent is the essence of the defense of unclean hands,” Dollar Systems v. Avcar Leasing
28
Systems, 890 F.2d 165, 173 (9th Cir. 1989), accidental, inadvertent, or even grossly negligent - 69 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 74 of 77
1
destruction of documents will not justify the application of the defense. Id.; Omega Indus., 894 F.
2
Supp. at 1432. Rather, the unclean hands defense applies “only if the court is left with a firm
3
conviction that the defendant acted with a fraudulent intent in making the challenged claims.”
4
Jarrow Formulas, Inc., 304 F.3d at 842 (emphasis added). Accord Gidatex, S.r.L. v. Campaniello
5
Imports Ltd., 82 F. Supp. 2d 126, 131 (S.D.N.Y. 1999) (unclean hands applies only where party is
6
“guilty of truly unconscionable and brazen behavior”).
7
48.
Samsung failed to carry its burden to prove bad faith. The evidence established
8
that Rambus adopted and implemented a content neutral document retention policy in conformity
9
with industry standards. The evidence does not support the conclusion that Rambus intentionally
10
designed or implemented its document retention policy to destroy particular damaging documents
11
or categories of documents relevant to patent litigation.
12
C.
Material Prejudice
13
49.
To prevail on its unclean hands defense, Samsung further must prove that
14
Rambus’s conduct materially prejudiced Samsung’s ability to defend itself against Rambus’s
15
patent infringement claims. See Republic Molding Corp., 319 F.2d at 349-50 (in applying the
16
unclean hands defense, “the extent of actual harm caused by the conduct in question” is “a highly
17
relevant consideration”); PenneCom B.V. v. Merrill Lynch & Co., Inc., 372 F.3d 488, 493 (2d Cir.
18
2004) (unclean hands defense requires proof that the plaintiff “has injured the party attempting to
19
invoke the doctrine”); Lawler v. Gilliam, 569 F.2d 1283, 1294 n.7 (4th Cir. 1978) (denying
20
unclean hands defense where defendant failed to prove that it had been injured by plaintiff’s
21
conduct; “The party to a suit, complaining that his opponent is in court with ‘unclean hands’
22
because of the latter’s conduct in the transaction out of which the litigations arose, or with which
23
it is connected, must show that he himself has been injured by such conduct, to justify the
24
application of the principle to the case.” (quoting J. Pomeroy, A Treatise on Equity Jurisprudence
25
§ 399)); JTH Tax, Inc. v. H&R Block Eastern Tax Servs., Inc., 128 F. Supp. 2d 926, 949 (E.D. Va.
26
2001) (“To establish the affirmative defense of unclean hands, a defendant must demonstrate . . .
27
plaintiff’s conduct injured the defendant.”), affirmed in part and rev’d in part on other grounds,
28
28 Fed. Appx. 207, 2002 WL 27257 (4th Cir. 2002); Annotation, He Who Comes Into Equity - 70 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 75 of 77
1
Must Come With Clean Hands, 4 A.L.R. 44, 58 (1919) (“The party to a suit complaining of a
2
wrong must have been injured thereby in order to justify the application of the principle of
3
‘unclean hands’ to his opponent”).
4
50.
Once again, Samsung failed to meet its burden. Samsung failed to offer any
5
evidence that Rambus destroyed documents relevant to Samsung’s defense against Rambus’s
6
patent infringement claims in the ‘2298 and ‘334 cases, beyond the non-privileged portion of the
7
record established in the Hynix Unclean Hands trial.
8 9
51.
With respect to the Hynix Unclean Hands record, this Court already has held that,
for each category of documents material to the validity or enforceability of Rambus's patents
10
against Samsung that Hynix argued Rambus did not preserve and produce, Rambus has shown by
11
clear and convincing evidence that documents in that category were in fact produced. Thus,
12
Rambus has produced various documents relating to the conception and reduction to practice of
13
the patented inventions prior to the April 1990 filing date of the '898 application. Rambus also
14
produced several boxes of prior art. No evidence suggested that material, non-cumulative prior
15
art exists that Rambus has not produced. Additionally, to the extent that documents such as notes
16
of interviews with the inventors and draft responses to the patent examiner may have been
17
discarded when attorney Lester Vincent conformed the issued patent files to the PTO file
18
wrapper, those documents would probably be privileged and not been discoverable. See Hynix,
19
2006 WL 565893 at *27-*28. Thus, it does not appear that Samsung has been deprived of
20
material, non-privileged, and non-cumulative documents.
21 22
52.
The Court concludes that Samsung has not been prejudiced by the destruction of
Rambus documents.
23
D.
Overall Equitable Discretion
24
53.
Whether to uphold an unclean hands defense is entrusted to this Court’s equitable
25
discretion. Keystone Driller Co., 290 U.S. at 246. Dismissal can be a proper sanction for willful
26
destruction of documents and records that deprive the opposing party of the opportunity to
27
present critical evidence on its key claims. However, dismissal is a harsh penalty and should be
28
imposed only in extreme circumstances. See Hynix, 2006 WL 565893 at *28. - 71 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
54.
Document 2163
Filed 09/09/2008
Page 76 of 77
Here, the court does not find dismissal to be an appropriate sanction because it
2
does not find the application of the unclean hands doctrine to be warranted. Further, the evidence
3
presented does not bear out that Rambus adopted its document retention policy in bad faith. The
4
evidence also does not demonstrate that Rambus targeted any specific document or category of
5
relevant documents with the intent to prevent production in a lawsuit such as this one. The
6
evidence does not show that Rambus destroyed specific, material documents prejudicial to
7
Samsung's ability to defend against Rambus's patent claims. Therefore, Samsung's unclean hands
8
defense fails.
9
VII.
10
RAMBUS’S UNCLEAN HANDS DEFENSE 55.
If this Court were to adopt Samsung’s proposed standards for spoliation (which are
11
not the correct standards), the Court would need to find that Samsung engaged in spoliation and
12
find in favor of Rambus on Rambus’s defense of unclean hands.
13
56.
As explained in the Findings of Fact, Samsung researched and investigated
14
potential claims and defenses for what its counsel explicitly described as “anticipated” litigation
15
in 2001. If the signing of the October 2000 SDR/DDR License and the July 2001 Amendment
16
No. 1 to the SDR/DDR License, and the release of claims therein, did not extinguish Rambus’s
17
duty to preserve documents as to Samsung, then it also did not extinguish Samsung’s duty to
18
preserve documents as to Rambus. The undisputed evidence showed that Samsung failed to
19
implement a litigation hold or “off-switch” to its automatic destruction of documents until June
20
2005 despite its stated “anticipation” of litigation with Rambus in 2000 and 2001.
21
57.
Moreover, if this Court were to accept Samsung’s argument for a broad duty to
22
preserve documents as to a different party in different “anticipated” litigation, then Samsung shall
23
be found to have spoliated documents. In 2004, a federal district court concluded that Samsung
24
engaged in intentional spoliation of e-mails from its DRAM Design Group on a rolling basis for
25
several years beginning in 2001 where Samsung had failed to implement an “off-switch” to
26
Samsung’s automatic deletion of e-mails. Mosaid Techs. v. Samsung Elecs. Co., 348 F. Supp. 2d
27
332, 338-39 (D.N.J. 2004). The court found that “Samsung’s actions [went] far beyond mere
28
negligence, demonstrating knowing and intentional conduct that led to the nonproduction of all - 72 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 77 of 77
1
technical e-mails.” Id. at 338 (emphasis added). Since Rambus was able to demonstrate that
2
Samsung destroyed Despite this finding, Samsung did not put in place a litigation hold in
3
connection with the Rambus litigation until June 2005 at the earliest, and for some individuals a
4
litigation hold was not communicated until years later.
5
58.
The evidence showed that Samsung destroyed documents with a nexus to the
6
claims at issue in these cases. For example, Samsung destroyed notebooks, including notebooks
7
of engineers who analyzed Rambus patents before the year 2000. See Aug. 23, 2007 Kye Hyun
8
Kyung Dep. Tr. at 22:12-19, 22:22-23:4. Among other things, such notebooks are directly related
9
to Rambus’s patent infringement claims and to Samsung’s claim that it reasonably relied upon
10 11
Rambus’s alleged misrepresentations regarding the scope of Rambus’s intellectual property. 59.
Samsung’s destruction of evidence has materially prejudiced Rambus’s ability to
12
defend itself in this litigation.
13
VIII. CONCLUSION
14 15
60.
For all of the foregoing reasons, Samsung did not satisfy its burden of proof on the
essential elements of its claims and defenses and those claims and defenses are hereby dismissed.
16 17
DATED: September 8, 2008
MUNGER, TOLLES & OLSON LLP
18 19
By:
20 21
/s/ Miriam Kim Miriam Kim
Attorneys for RAMBUS, INC.
22 23 24 25 26 27 28 - 73 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
1 2 3 4 5 6 7 8 9 10
Document 2163
Filed 09/09/2008
Page 1 of 77
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 FOR THE NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION 14 15 16
RAMBUS INC., Plaintiff,
17
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW ON SAMSUNG’S CLAIMS AND DEFENSES
v.
18 19
CASE NO. C 05-00334 RMW
HYNIX SEMICONDUCTOR INC., et al., [PUBLIC REDACTED VERSION] Defendants.
20
Judge: Trial Date:
21 22
RAMBUS INC.,
Hon. Ronald M. Whyte September 22, 2008
CASE NO. C 05-02298 RMW Plaintiff,
23 v. 24 25
SAMSUNG ELECTRONICS CO., LTD., et al.,
26
Defendants.
27 28
5884923.1
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2 3
Document 2163
Filed 09/09/2008
Page 2 of 77
TABLE OF CONTENTS PROPOSED FINDINGS OF FACT ............................................................................................ 1 I.
THE CURRENT LITIGATION ...................................................................................... 1
4
A.
‘334 Case ................................................................................................................. 1
5
B.
‘2298 Case ............................................................................................................... 3
C.
Claims and Defenses At Issue ................................................................................. 4
6 7
II.
RAMBUS AND ITS INVENTIONS ................................................................................ 5
III.
RAMBUS LICENSING NEGOTIATIONS .................................................................... 6
8
A.
Samsung’s Early Knowledge of the Potential Scope of Rambus’s Intellectual Property ................................................................................................ 6
B.
1994 RDRAM License Agreement ......................................................................... 7
C.
1997 Addendum No. 1 to the RDRAM License Agreement .................................. 9
D.
The SDR/DDR IC and SDR/DDR Memory Module Patent License Agreement ............................................................................................................. 10
E.
The Infineon Litigation And The July 2001 Amendment ..................................... 12
F.
The Infineon Settlement and License Agreement ................................................. 14
G.
Rambus Notifies Samsung of the Infineon Settlement Agreement and Terminates the 2001 Amendment ......................................................................... 16
9 10 11 12 13 14 15 16
IV.
THE 2000 SDR/DDR LICENSE BETWEEN RAMBUS AND SAMSUNG .............. 17 A.
17 18 19 20
The Parties Agreed to a Limited Most-Favored-Licensee Provision that Does Not Cover the Infineon Settlement Agreement............................................ 17 1.
The Language Of Section 3.8 Is Limited To Agreements Providing For Clearly Ascertainable Royalty Rates .................................................. 17
2.
The Parties’ Negotiating History Reflects That Section 3.8 Did Not Apply To Agreements Like The Infineon Settlement Agreement. ........... 19
21
B.
Section 8.5 Expressly Rejects Samsung’s “Going-Forward” Theory For the Post-Contract Period.............................................................................................. 23
22
C.
Products Were Not Covered by the SDR/DDR License....................................................................... 27
23 24 25
V.
SAMSUNG BREACHED THE SDR/DDR LICENSE BY FAILING TO COOPERATE IN THE ROYALTY AUDIT ................................................................ 27 A.
Rambus’s Royalty Audit Entitlement And The Initiation Of The Royalty Audit ...................................................................................................................... 27
B.
Samsung’s Failure To Comply With Its Contractual Audit Obligations .............. 28
26 27 28
-i-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
C.
2 3 4
Filed 09/09/2008
Page 3 of 77
Rambus’s Repeated Warnings That Samsung Was In Breach Of Its Royalty Audit Obligations, Samsung’s Failure To Cure, And Rambus’s Exercise Of Its Right To Terminate .......................................................................................... 30
VI.
SAMSUNG HAD KNOWLEDGE OF AND RELEASED ITS JEDECRELATED 17200 CLAIM WHEN IT ENTERED THE SDR/DDR LICENSE ........ 30
VII.
SAMSUNG COULD NOT HAVE RELIED ON RAMBUS’S ALLEGED NONDISCLOSURE IN RDRAM LICENSE NEGOTIATIONS OR AT JEDEC .............................................................................................................................. 33
5 6
Document 2163
7
VIII. SAMSUNG CONCEDES THAT CONFIDENTIALITY CONCERNS JUSTIFY NON-DISCLOSURE OF PATENT APPLICATIONS .............................. 34
8
IX.
THERE IS NO FACTUAL BASIS FOR SAMSUNG’S AFFIRMATIVE DEFENSES BASED ON NEIL STEINBERG .............................................................. 34
9
X.
10
RAMBUS DID NOT IMPROPERLY DESTROY RELEVANT AND MATERIAL EVIDENCE IN ANTICIPATION OF LITIGATION WITH SAMSUNG ....................................................................................................................... 35
11
A.
Rambus Adopted A Content Neutral Document Retention Policy In July 1998 That Conformed To Industry Standards....................................................... 36
B.
Rambus’s Implementation Of Its Document Retention Policy Conformed To Industry Standards ........................................................................................... 39
12 13 14 15 16
C.
17
1.
Rambus’s Handling Of Paper Materials Conformed To Industry Standards ................................................................................................... 39
2.
Rambus’s Handling Of Email Conformed To Industry Standards............ 42
Rambus And Its Outside Patent Counsel Did Not Target Specific Categories Of Documents For Destruction ........................................................... 43 1.
The Treatment Of Patent Prosecution Files Was Entirely Proper............. 43
2.
Rambus Maintained Prior Art And Other Relevant Patent-Related Documents................................................................................................. 45
20
3.
Rambus Maintained Relevant Internal Communications Regarding License Negotiations ................................................................................. 47
21
4.
Rambus Maintained JEDEC Related Documents ..................................... 48
22
5.
Relevant Presentations to the Board of Directors Were Maintained......... 48
18 19
D.
23 24
XI.
Litigation Against Samsung Was Not Reasonably More Than A Possibility Until 2005.............................................................................................................. 48
SAMSUNG DESTROYED RELEVANT AND MATERIAL EVIDENCE ............... 52
25 26 27 28 - ii -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 4 of 77
1
PROPOSED CONCLUSIONS OF LAW.................................................................................. 53
2
I.
3 4 5
II.
BREACH OF CONTRACT CLAIMS .......................................................................... 53 A.
Breach of Section 3.8 ............................................................................................ 54
B.
Breach of Section 8.5 ............................................................................................ 54
C.
Breach of the Implied Duty of Good Faith and Fair Dealing................................ 55
SECTION 17200 CLAIM ............................................................................................... 56
6
A.
JEDEC 17200 Claim ............................................................................................. 58
7
B.
Spoliation 17200 Claim......................................................................................... 60
8
III.
9
EQUITABLE ESTOPPEL AND ESTOPPEL DEFENSES ........................................ 61 A.
JEDEC Equitable Estoppel and Estoppel Defenses .............................................. 62
B.
Equitable Estoppel and Estoppel Defenses Based on Licensing Negotiations with Samsung Prior to 2000............................................................. 63
C.
Equitable Estoppel and Estoppel Defenses Based on Neil Steinberg’s Work at Rambus .............................................................................................................. 64
10 11 12
IV.
IMPLIED LICENSE DEFENSE ................................................................................... 65
13
V.
DECLARATORY JUDGMENT OF UNENFORCEABILITY .................................. 66
14
VI.
SAMSUNG’S UNCLEAN HANDS DEFENSE ............................................................ 66 A.
Spoliation............................................................................................................... 66
B.
Bad Faith ............................................................................................................... 69
16
C.
Material Prejudice ................................................................................................. 70
17
D.
Overall Equitable Discretion ................................................................................. 71
15
18 19
VII.
RAMBUS’S UNCLEAN HANDS DEFENSE ............................................................... 72
VIII. CONCLUSION ................................................................................................................ 73
20 21 22 23 24 25 26 27 28 - iii -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 5 of 77
1
Rambus Inc. (“Rambus”) respectfully submits these proposed findings of fact and
2
conclusions of law with respect to the claims and defenses asserted by Samsung Electronics Co.,
3
Ltd., Samsung Electronics America, Inc., Samsung Semiconductor, Inc., Samsung Austin
4
Semiconductor, L.P. (collectively hereinafter “Samsung”) in the September 22, 2008 bench trial
5
of the claims and defenses delineated in the parties’ August 27, 2008 and September 2, 2008 Joint
6
Pretrial Statements (hereinafter the “September 2008 Trial”). Further, Rambus incorporates by
7
reference as if fully set forth herein its January 25, 2008 Proposed Findings of Fact and
8
Conclusions of Law, its Rule 50 and Rule 52 motions from the coordinated January 2008 Trial,
9
and its response to the Manufacturers’ post-trial brief regarding their equitable defenses.1
10 11
PROPOSED FINDINGS OF FACT I.
12
THE CURRENT LITIGATION 1.
The cases at issue are two coordinated proceedings: (A) Case No. 05-00334
13
between Rambus; Samsung; Hynix Semiconductor, Inc., Hynix Semiconductor America, Inc.,
14
Hynix Semiconductor U.K., Ltd., and Hynix Semiconductor Deutschland Gmbh (“Hynix”); and
15
Nanya Technology Corp., and Nanya Technology Corp. U.S.A. (“Nanya”) (hereinafter the “‘334”
16
case), and (B) Case No. 05-02298 between Rambus and Samsung (hereinafter the “‘2298” case).
17
A.
‘334 Case
18
2.
The ‘334 action commenced on January 25, 2005, when Rambus sued Hynix,
19
Infineon, Nanya, and Inotera Memories, Inc. for infringement of the following Rambus patents:
20
U.S. Patent Nos. 6,182,184, 6,260,097, 6,266,285, 6,314,051, 6,324,120, 6,378,020, 6,426,916,
21
6,452,863, 6,493,789, 6,496,897, 6,546,446, 6,564,281, 6,584,037, 6,697,295, 6,701,446,
22
6,715,020, 6,781,696, and 6,807,598. Inotera Memories, Inc. and Infineon were later dismissed
23 24 25 26 27 28
1
See Rambus’s Renewed Motion for Judgment as a Matter of Law Under Rule 50(a) (Case No. 05-00334, Docket No. 1633) (Mar. 24, 2008); Rambus’s Motion for Judgment as a Matter of Law (Case No. 05-00334, Docket No. 1488) (Mar. 10, 2008); Rambus’s Motion for Judgment as a Matter of Law on Certain of Manufacturers’ Claims and Defenses (Case No. 05-00334, Docket No. 1482) (Mar. 10, 2008); Proposed Findings of Fact and Conclusions of Law (Case No. 0500334, Docket No. 1110) (Jan. 25, 2008); Rambus’s Response to Manufacturers’ Brief Regarding Equitable Defenses (Case No. 05-00334, Docket No. 1690) (April 17, 2008). -1-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 6 of 77
1
from the case. Rambus filed its First Amended Complaint on June 6, 2005, asserting the same
2
patents as the original January 25, 2005 complaint, but adding Samsung as a defendant.
3
3.
Samsung answered the First Amended Complaint and alleged its own
4
counterclaims on June 22, 2005. It filed a First Amended Answer and Counterclaims on
5
November 17, 2005. It then filed a Second Amended Answer and Counterclaims on January 24,
6
2007. Samsung’s answers and counterclaims included claims for breach of contract, breach of
7
the duty of good faith and fair dealing, aiding and abetting a breach of fiduciary duty, intentional
8
interference with contractual relations, Section 17200, and affirmative defenses such as unclean
9
hands, equitable estoppel, estoppel, and implied license.
10
4.
In response to Samsung’s answers and counterclaims, Rambus filed its answer and
11
Counterclaims in Reply on July 9, 2007. In these Counterclaims in Reply, Rambus added
12
infringement claims against, inter alia, DDR3 SDRAM and GDDR4 SDRAM products.
13
5.
On January 4, 2008, Samsung replied to Rambus’s Counterclaims in Reply and
14
filed its own Counterclaims in Reply to the Counterclaims in Reply, alleging the same claims and
15
defenses as its Second Amended Answer and Counterclaims had alleged earlier. Rambus
16
responded to Samsung’s counterclaims in reply on January 28, 2008.
17
6.
The Court commenced a trial on January 29, 2008 on the Manufacturers’
18
monopolization, attempted monopolization, Section 17200, fraud, and declaratory judgment of
19
unenforceability claims, and equitable defenses including prosecution laches, estoppel, equitable
20
estoppel, laches, waiver, and patent misuse (“January 2008 trial”).
21
7.
Samsung was excused from active participation in the January 2008 trial on
22
December 14, 2007 on the conditions that “Samsung agreed to be bound by the result on the
23
prosecution laches aspect” of the January 2008 trial, that “Samsung agreed to the admissibility of
24
any relevant evidence” from the January 2008 trial, that “Samsung agreed that it will not claim
25
collateral estoppel with respect to any factual finding” from the January 2008 trial, and that “the
26
remaining issues” as to Samsung “would be tried to the Court within six months of the result” of
27
the January 2008 trial. Superseding Order Regarding Procedural Schedule and Related Matters
28 -2-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 7 of 77
1
for September 22, 2008 Trial (Case No. 05-00334, Docket No. 1681), at ¶ 3 (May 7, 2008).
2
Samsung agreed to these conditions. See December 14, 2007 Hearing Transcript at 6, 9.
3 4 5
8.
On March 26, 2008, the jury returned a verdict in favor of Rambus on Hynix,
Micron, and Nanya’s monopolization, attempted monopolization, and fraud claims. 9.
On August 11, 2008, the Court granted summary judgment in Rambus’s favor on
6
Samsung’s claims for aiding and abetting a breach of fiduciary duty (Counts IV-V), intentional
7
interference with contract (Count VI), and the Steinberg-related aspects of the Section 17200
8
claim (Count VII). Order Granting Rambus’s Motion for Summary Judgment on Counts IV-VII
9
of Samsung’s Counterclaims (Case No. 05-00334, Docket No. 1764) (Aug. 11, 2008).
10
B.
‘2298 Case
11
10.
The ‘2298 action commenced on June 6, 2005, when Rambus sued Samsung
12
alleging infringement of the following Rambus patents: U.S. Patent Nos. 5,915,105, 5,953,263,
13
6,034,918, 6,038,195, 6,067,592, 6,101,152, 6,324,120, 6,378,020, 6,426,916, and 6,452,863.
14
11.
Samsung answered the Complaint and alleged its own Counterclaims on June 22,
15
2005. It filed a First Amended Answer and Counterclaims on November 17, 2005. It then filed a
16
Second Amended Answer and Counterclaims on January 24, 2007. Samsung’s answer and
17
counterclaims included claims for breach of contract, breach of duty of good faith and fair
18
dealing, aiding and abetting breach of fiduciary duty, intentional interference with contractual
19
relations, Section 17200, and declaratory judgment of unenforceability and affirmative defenses
20
such as unclean hands, equitable estoppel, estoppel, and implied license.
21 22 23
12.
On July 9, 2007, Rambus replied to Samsung’s Second Amended Answer and
Counterclaims. 13.
On August 11, 2008, the Court granted summary judgment in Rambus’s favor on
24
Samsung’s claims for aiding and abetting a breach of fiduciary duty (Counts IV-V), intentional
25
interference with contract (Count VI), and the Steinberg-related aspects of the Section 17200
26
claim (Count VII). Order Granting Rambus’s Motion for Summary Judgment on Counts IV-VII
27
of Samsung’s Counterclaims (Case No. 05-02298, Docket No. 828) (Aug. 11, 2008).
28 -3-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 8 of 77
1
C.
Claims and Defenses At Issue
2
14.
As a result of the August 11, 2008 summary judgment order and the Court’s
3
bifurcation of these cases, Samsung’s claims and defenses from the ‘334 and ‘2298 cases that
4
were tried in this phase of the trial of these actions are:
5
Count I – Breach of Section 3.8 of the SDR/DDR License;
6
Count II – Breach of Section 8.5 of the SDR/DDR License;
7
Count III – Breach of Duty of Good Faith and Fair Dealing of Sections 3.8 and 8.5
8
of the SDR/DDR License;
9
Count VII – Section 17200 Based on Rambus’s Participation in JEDEC and
10
Unclean Hands;
11
Count X – Declaratory Judgment of Unenforceability Based on Unclean Hands
12
and Estoppel;
13
Fifth Affirmative Defense – Unclean Hands;
14
Sixth Affirmative Defense – Equitable Estoppel;
15
Seventh Affirmative Defense – Estoppel; and
16
Eighth Affirmative Defense – Implied License.
17 18
15.
Rambus’s defenses from the ‘334 and ‘2298 cases that were tried in this phase of
the trial of these actions are:
19
Second Affirmative Defense – Unclean Hands;
20
Fourth Affirmative Defense – Waiver;
21
Fifth Affirmative Defense – Estoppel;
22
Sixth Affirmative Defense – No Loss or Damages;
23
Seventh Affirmative Defense – Failure to Mitigate;
24
Ninth Affirmative Defense – Conduct of Samsung;
25
Tenth Affirmative Defense – Business Justification;
26
Eleventh Affirmative Defense – Ratification;
27
Twelfth Affirmative Defense – Statute of Limitations;
28 -4-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 9 of 77
1
Thirteenth Affirmative Defense – Laches;
2
Fourteenth Affirmative Defense – Consent;
3
Sixteenth Affirmative Defense – First Amendment/Noerr Pennington;
4
Nineteenth Affirmative Defense – California Litigation Privilege; and
5
Twentieth Affirmative Defense – Release.
6 7
II.
RAMBUS AND ITS INVENTIONS 16.
Rambus was founded by two young professors of electrical engineering,
8
Drs. Michael Farmwald and Mark Horowitz, who foresaw an impending crisis in computer
9
memory technology and invested their time and energy to devise novel solutions to the problem.
10
Farmwald realized in the late 1980s that developments in microprocessor technology would lead
11
to significant speed increases in microprocessors while memory chip performance would not keep
12
up. Farmwald recognized that the result of these trends would be a “bottleneck” – memory
13
technology would limit computer system performance.
14
17.
In an effort to solve the memory bottleneck problem, Farmwald conceived the
15
general idea of a new memory interface and protocol (an organization of the bits and timing of
16
bits transferred by a memory chip) that would allow a single DRAM chip to have higher
17
performance than a board containing 320 existing DRAM chips. Farmwald enlisted the help of
18
Dr. Mark Horowitz, an expert in circuit design, who took a leave from his professorship at
19
Stanford to work with Dr. Farmwald.
20
18.
Farmwald and Horowitz realized that although then-existing DRAM memory
21
chips were asynchronous, they needed to develop a synchronous device with mechanisms for
22
exercising very tight control over timing with respect to the clock to make sure that each bit of
23
data – traveling at a very high speed – was read during the very narrow window of time when it
24
was valid.
25
19.
By early 1990, Drs. Farmwald and Horowitz had put together a set of their ideas
26
that they proceeded to describe in a patent application. This patent application, serial number
27
07/510,898 (the “’898 application”), was filed on April 18, 1990. On April 16, 1991, Rambus
28
filed an international patent application pursuant to the Patent Cooperation Treaty (the “PCT -5-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 10 of 77
1
application”). See Admitted Trial Exhibit (“Adm. Tr. Ex.”) 3583. The PCT application was
2
published on October 31, 1991. Id. The specification contained in the PCT application was
3
identical to that contained in the ’898 application and described the inventions at issue in this
4
case.
5
20.
After the filing of the ’898 application, Rambus received an 11-way restriction
6
requirement from the United States Patent and Trademark Office (“PTO”) – that is, the Patent
7
Examiner determined that Rambus was claiming 11 distinct inventions in the ’898 application.
8
Rambus was, therefore, required to file numerous divisional applications in order to pursue all of
9
the inventions identified by the Patent Examiner. The Rambus patents at issue here have all
10
issued from applications that are continuations or divisionals stemming from the original ’898
11
application. All of those patents are based upon and contain the same specification as the original
12
application. In other words, they are all based on the description of the inventions that was
13
included in the ’898 application.
14
III.
2
RAMBUS LICENSING NEGOTIATIONS A.
15
Samsung’s Early Knowledge of the Potential Scope of Rambus’s Intellectual Property
16 On or around October 1991, Joel Karp (who was then Samsung’s senior vice 17 president responsible for strategic product planning, was actively involved in various licensing 18 negotiations, and frequently attended on Samsung’s behalf JEDEC meetings related to DRAM) 19 reviewed Rambus’s PCT application. Upon review of Rambus’s PCT application, Mr. Karp 20 concluded that 21 22 23 24 25 26 27 28
2
Under United States patent law, an inventor is entitled to file later applications called “continuation applications,” claiming different inventions from those claimed in the initial application, so long as those later-claimed inventions are supported by the disclosure, known as the “written description,” in the initial application. Such continuation practice can legitimately be used to add claims to cover later developed, competing products, again so long as those claims are supported by the original disclosure. Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 874 (Fed. Cir. 1988). That is, the original written description must clearly convey to one of ordinary skill in the art that the inventor was in possession of the later-claimed invention at the time that the initial application was filed. Id. For purposes of the September 2008 Trial, the Court considered that all the asserted claims are valid as to Samsung such that the written description requirement was satisfied. -6-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 11 of 77
1 2 3 4 5 6 7
23.
After reviewing the PCT application, Mr. Karp sought to understand more about
Rambus and its intellectual property, current and future.
8 9
Mr. Karp attended JEDEC meetings on behalf of Samsung. He attended
10
most of the meetings from 1991 through 1994, and he attended at least one meeting in 1996.
11
During that time, JEDEC adopted the SDRAM standard in 1993. Based on his review of
12
Rambus’s PCT application, Mr. Karp made the assumption at that time that
13 14
25.
Armed with this awareness of the potential scope of Rambus’s potential patent
15
coverage, Samsung entered into license negotiations with Rambus for certain RDRAM products,
16
and aggressively pursued
17 18
. Those negotiations broke down in 1993 because the parties could not reach agreement on
19 20
p
. License negotiations resumed again in 1994 and again focused on
21
B.
1994 RDRAM License Agreement
22
26.
In November 1994, Rambus and Samsung signed the Semiconductor Technology
23
License Agreement (“RDRAM Agreement”). Adm. Tr. Ex. 6110. This agreement covered
24
certain intellectual property used in the manufacture and sale of RDRAM devices and required
25
Samsung to pay license fees and several different percentage-of-net-sales royalties as follows:
26 27 28 -7-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 12 of 77
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Id. § 4.2(a). 27.
Section 2.8 of the RDRAM Agreement included a non-assertion clause that
provided:
17 18 19 20 21
Id. § 2.8.
22
28.
23
provision:
Section 10.16 of the RDRAM Agreement included a “most favored licensee”
24 25 26 27 28 -8-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 13 of 77
1 2 3
Id. § 10.16.
4
C.
1997 Addendum No. 1 to the RDRAM License Agreement
5
29.
In late 1995, Rambus and Samsung revisited the 1994 RDRAM Agreement
6
because Samsung wanted
7 8
and Rambus in turn wanted
9
30.
During a meeting in Korea in October 1995, Rambus informed Samsung that
10 11
See Rambus Trial Exhibit (“Tr. Ex.”) 6814 at 109.
12
31.
The pace of the re-negotiations escalated in late 1996 when Samsung learned that
13
Intel planned to endorse Rambus’s “Rambus 2” technology. Tr. Exs. 7767 & 7767A; Tr. Exs.
14
9243 & 9244.
15
32.
Throughout this negotiation of an amendment to the RDRAM Agreement,
16
Samsung was aware of the potential application of Rambus’s intellectual property to products
17
such as
18
1996, one purpose of the meeting was to discuss p
. For example, at an internal Samsung meeting on April 9,
19 20
Tr. Exs. 9232 & 9233. At this meeting, Samsung engineers were concerned about
21
Id. In the end, the Samsung engineers at the April 1996 meeting concluded that
22 23 24
Id. 33.
During this renegotiation of
on or before December 2,
25
1996, Dr. Seong Soo Kim or someone under his direction at Samsung prepared a chronology of
26
key events in the Rambus licensing negotiations and communicated that chronology to the top
27
management team of Samsung. See Tr. Exs. 9243 & 9244. Among the key developments
28 -9-
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 14 of 77
reported by the author to the top executives at Samsung was the following:
r
2 3 4 5
Id. (emphasis added). The summary goes on to report to the higher-ups at Samsung:
6 7
e
8 9
Id. (emphasis added).
10
34.
After the circulation of the negotiation chronology to top management at Samsung,
11
negotiations with Rambus continued. In meetings in December 1996, among the major issues
12
during negotiations was Rambus’s requested revision to
13
On December 18 and 19, 1996, a variety of Samsung executives met with
14
Mr. Tate and Mr. Mooring from Rambus. See Aug. 10, 2007 S.S. Kim Dep. Tr. at 149:1-151:6;
15
Tr. Exs. 9237 & 9238.
16
35.
During this time, Samsung was analyzing
. See Adm. Tr.
17
Ex. 7228A. And, Samsung executive C.H. Kim was worrying about the best way to attack
18
Rambus’s patents. See Tr. Exs. 10014 & 10015. Samsung did not inform Rambus of its plan to
19
investigate the best means to attack Rambus’s patents.
20
36.
Ultimately, in February 1997, the parties finalized the Addendum No. 1 to the
21
RDRAM Agreement.
22
9231.
23
See Tr. Ex.
D.
The SDR/DDR IC and SDR/DDR Memory Module Patent License Agreement
37.
In October 2000, Rambus and Samsung signed the SDR/DDR IC and SDR/DDR
24 25 Memory Module Patent License Agreement (hereinafter the “SDR/DDR License”). Tr. Ex. 9084. 26 The SDR/DDR License had 27 Id. §§ 1.1, 8.1. Under the terms of this agreement, 28 - 10 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 15 of 77
1
Rambus granted Samsung a license under Rambus patents to make and sell certain Licensed
2
Products –
3
– which were
4 5
Id. § 1.12.
6 7
38.
Section 3.1 of the SDR/DDR License established two different payment
obligations. Section 3.1(a) first required Samsung to make
8 9
Id. § 3.1(a). Section 3.1(b) established an ongoing royalty payment obligation requiring Samsung to pay Rambus
10 11 12
Specifically, those royalty rates were as follows:
13 14 15 16 17 18
Id. These
19
4.2.
20
39.
royalty payments were to be made on a quarterly basis. Id. §
Section 3.8 of the SDR/DDR License contained a limited most-favored-licensee
21
provision that would apply if Rambus subsequently entered into a license agreement with another
22
party in which
23 24
Id. § 3.8. Two
25
product categories –
26
agreement, id. §§ 1.9, 1.10, were excluded from Section 3.8. Section 3.8 reads in full:
– that are otherwise covered by the
27 28 - 11 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 16 of 77
1 2 3 4 5 6 7 8
Id. § 3.8.
9 10
40.
Section 8 governed the term and termination of the SDR/DDR License. Id. § 8.
Section 8.5 provided as follows:
11 12 13 14 15 Id. § 8.5. 16 17
41.
The parties specified that the Agreement would be interpreted under California and
federal law. Id. § 9.1.
18
42.
The Agreement concluded with an integration clause providing that
19 20 21 w 22 23 24 25 26 27
p
j
§ 10.14.
E.
The Infineon Litigation And The July 2001 Amendment
43.
On August 8, 2000, Rambus filed suit in United States District Court for the
Eastern District of Virginia against Infineon Technologies AG and related entities (collectively “Infineon”) alleging that Infineon’s sale, manufacture, and use of SDRAM and DDR SDRAM memory devices infringe certain Rambus patents. Rambus Inc. v. Infineon Technologies AG et al., No. 3:00cv524 (E.D. Va. Filed Aug. 8, 2000). On September 25, 2000, Infineon filed
28 - 12 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 17 of 77
1
counterclaims against Rambus including claims for declaratory judgment of noninfringement,
2
invalidity, and unenforceability, as well as claims for breach of contract and fraud.
3
44.
On May 4, 2001, the District Court granted Infineon a directed verdict on
4
Rambus’s patent infringement claims. On May 9, 2001, a jury returned a verdict against Rambus
5
on the fraud claims.
6
45.
Following the adverse judgment against Rambus in the Infineon trial, Samsung
7
requested, and obtained, an amendment of the SDR/DDR License (the “2001 Amendment” or
8
“Amendment”). Tr. Ex. 9201. Among other things, the 2001 Amendment: (i)
d
9 10
and (ii)
11 12 13
Id. §§ 3, 5. 46.
Samsung also requested that the 2001 Amendment include a modified version of
14
the most-favored-licensee provision from the SDR/DDR License. In particular, Samsung
15
requested and obtained provisions (i)
16
and (ii)
17 18 19 20 21 22 23 24
Id. § 8 (emphasis added). 47.
The 2001 Amendment further provided that, [ ]
, r
25 26 27
in which case,
[
] g
l
Id. § 7.
28 - 13 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2
48.
Document 2163
Filed 09/09/2008
Page 18 of 77
The 2001 Amendment did not amend or modify Section 3.8 of the SDR/DDR
License.
3
F.
The Infineon Settlement and License Agreement
4
49.
On January 29, 2003, the Federal Circuit Court of Appeals reversed the fraud
5
judgment against Rambus in the Virginia Infineon litigation, vacated the directed verdict of non-
6
infringement, and remanded for retrial of the infringement claims. Rambus Inc. v. Infineon
7
Technologies AG, 318 F.3d 1081 (Fed. Cir. 2003).
8 9
50.
On remand, Infineon raised allegations of litigation misconduct, and the District
Court (Payne, J.) heard arguments on Infineon’s unclean hands defense. On March 1, 2005,
10
Judge Payne stated that he would find Rambus to have committed spoliation and subsequently
11
issue written findings to that effect. See Samsung Electronics Co., Ltd. v. Rambus, Inc., 440 F.
12
Supp. 2d 512, 515 (E.D. Va. 2006), vacated by 523 F.3d 1374 (Fed. Cir. 2008). As this Court has
13
previously recognized, this was a “disastrous turn” for Rambus’s litigation. See Order Denying
14
Rambus’s Motion for Summary Judgment on Samsung’s Counterclaims I, II and III (Case Nos.
15
05-00334, 05-02298 RMW), at 4 (July 9, 2008).
16
51.
On March 21, 2005, prior to the Court issuing any such findings, Rambus and
17
Infineon entered into a global settlement of all of their disputes (the “Infineon Settlement
18
Agreement”), thus avoiding an adverse judgment that potentially had far-reaching negative
19
economic consequences for Rambus beyond that immediate case. Tr. Ex. 10252 §§ 2.5, 4.5(a).
20
After the settlement, Judge Payne dismissed the case without entry of any findings against
21
Rambus or a judgment based on such findings. This Court has previously recognized the obvious
22
value of that dismissal to Rambus, noting “that Rambus settled the Infineon litigation, at least in
23
part, to avoid the risk that Judge Payne’s unclean hands findings and dismissal thereon would
24
have collateral estoppel effect” in litigation with other DRAM manufacturers. Hynix
25
Semiconductor Inc. v. Rambus Inc, Case No. CV-00-20905, Order Denying Hynix’s Motion to
26
Dismiss Patent Claims for Unclean Hands on the Basis of Collateral Estoppel, at 6 (Apr. 22,
27
2005).
28 - 14 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
52.
Document 2163
Filed 09/09/2008
Page 19 of 77
As part of its global settlement with Infineon, Rambus agreed to dismiss Infineon,
2
whose executives had already pled guilty to price-fixing in United States federal court, from
3
Rambus’s ongoing price-fixing and boycott lawsuit in the San Francisco state court. See Rambus
4
Inc. v. Micron Technology Inc. et al., No. 04-431105 (Supr. Ct. Cal., San Fran. Filed May 5,
5
2004). Rambus also agreed to dismiss Infineon from the ongoing patent litigation before this
6
Court (Case No. C05-00334 RMW) as well as various actions in Europe. See Tr. Ex. 10252 §
7
4.5.
8
53.
As part of its global settlement with Infineon, Rambus granted Infineon
9 10 11
See id. §§ 2.1-2.2. Both the term and
12
the scope of products covered by the Infineon Settlement Agreement were broader than those of
13
the SDR/DDR License. Whereas the SDR/DDR License
, Infineon’s
14 15 16
Rambus also released any claims for past infringement, thus effectively granting Infineon a
17
retroactive license back to at least 2000, when Rambus sued Infineon. See id. § 4.1. The license
18
set forth in the Infineon Settlement Agreement thus
p
19 20 21
54.
In addition, the Infineon Settlement Agreement applied to a generally broader
scope of products than the SDR/DDR License, including
22 23
3
Id. § 1.8 (emphasis added).
24 25
55.
In contrast to the SDR/DDR License, the Infineon Settlement Agreement did not
require Infineon to pay a royalty rate based on a percentage of net sales of any particular product
26 27
3
The Infineon Settlement Agreement did not, however, cover
28 - 15 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 20 of 77
1
or product category. Instead, the Infineon Settlement Agreement required Infineon to make fixed
2
lump sum payments on a periodic, going-forward basis irrespective of any sales revenue amounts
3
for any of its products. Specifically, Section 6.2 of the Infineon Settlement Agreement required
4
Infineon to pay to Rambus
5 6 7
Id. § 6.2. Succeeding provisions in the Infineon Settlement Agreement
8 9
Id. §§ 1.13, 6.3-6.4.
10 11
See id. §§ 6.3-6.4.
12
56.
In negotiating the multi-layered Infineon Settlement Agreement, the parties did not
13
allocate any monetary value to any of the non-pecuniary consideration flowing between them, nor
14
did they make any attempt to allocate a “royalty rate” to any of the many different memory
15
products licensed to Infineon under the agreement.
16
G.
Rambus Notifies Samsung of the Infineon Settlement Agreement and Terminates the 2001 Amendment
57.
On March 21, 2005, soon after executing the Infineon Settlement Agreement,
17 18 Rambus issued a press release disclosing the major terms of the Agreement. See Tr. Ex. 10254 at 19 3. 20 58.
Along with that press release, Rambus’s Vice President of Licensing, Ira
21 Blumberg, sent Samsung a notice of termination of Amendment No. 1 to the SDR/DDR License. 22 The notice informed Samsung that 23 Id. at 24 25 26 27
2. The notice further stated that Id. As a result of Rambus’s termination of the Amendment, the parties reverted back to the original provisions and royalty payment terms of the SDR/DDR License.
28 - 16 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
59.
Document 2163
Filed 09/09/2008
Page 21 of 77
On April 29, 2005, Rambus filed a redacted version of the Infineon Settlement
2
Agreement with the Securities and Exchange Commission. See Tr. Ex. 10324 at 79. The
3
redacted version contained the major terms of the Agreement, including the scope of products
4
covered, id. at 81-83 (§§ 1.6-1.12), and the lump sum payments of $50 million, $100 million, or
5
$150 million, id. at 89 (§§ 6.2-6.5). The evidence showed that Samsung, including the personnel
6
negotiating the renewal of the SDR/DDR License, became aware of the major terms of the
7
Infineon Settlement Agreement and of the fact that the redacted version of the Agreement was
8
publicly available. See Tr. Ex. 9205 at 2-3; July 25, 2008 Samsung 30(b)(6) Dep. Tr. at 195:9-10,
9
13-18, 21-23.
10
60.
In response to Samsung’s inquiry as to the possible effect of the Infineon
11
Settlement Agreement on the SDR/DDR License, Rambus notified Samsung that the Infineon
12
Settlement Agreement did not trigger Section 3.8 of the Samsung license. Tr. Ex. 4268. The
13
SDR/DDR License was set to expire by its own terms
14
the parties engaged in negotiations concerning the terms of a new license agreement. The parties
15
were unsuccessful in these efforts. Samsung asked that it be given an even better deal than
16
Infineon received, and Rambus unwilling to offer Samsung terms in a new license based on the
17
Infineon Settlement Agreement.
18
IV.
19
THE 2000 SDR/DDR LICENSE BETWEEN RAMBUS AND SAMSUNG A.
20
23 24 25
The Parties Agreed to a Limited Most-Favored-Licensee Provision that Does Not Cover the Infineon Settlement Agreement 1.
21 22
. As that date approached,
61.
The Language Of Section 3.8 Is Limited To Agreements Providing For Clearly Ascertainable Royalty Rates
Samsung contends that, under Section 3.8, Rambus was required to give Samsung
the benefit of an implied “effective royalty rate” based on the Infineon Settlement Agreement. By its terms, Section 3.8 is limited in scope. The provision comes into play only if, during the term of the Agreement,
26 27 28
Tr. Ex. 9084 § 3.8. In that event, Rambus is to - 17 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 22 of 77
1 2 3 4 5
Id. 62.
Section 3.8 thus contemplates a third-party agreement in which the third party has
agreed to pay a specified “royalty rate” for
6
that is lower than the running royalty rates set forth for those products in the
7
SDR/DDR License. The SDR/DDR License further contemplates that this royalty rate would be
8
readily ascertainable, 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
10 11
of the SDR/DDR License. 63.
The Infineon Settlement Agreement constituted a more complicated type of
12
agreement that does not trigger Section 3.8. As noted, it included substantial non-pecuniary
13
consideration flowing in both directions – for example, the dismissal of the Virginia Infineon
14
Litigation, and the dismissal of Rambus’s price-fixing claims against Infineon – that prevents any
15
determination of what “royalty rate” Infineon could be said to have paid for the products that it
16
licensed. Tr. Ex. 10252 § 4.5. In light of these other various forms of consideration exchanged
17
under the Infineon Settlement Agreement, it is not possible to determine a royalty rate that
18
Infineon “agreed” to pay for the patent rights it received in the Settlement Agreement.
19
64.
Even leaving aside this other consideration, and hypothetically viewing Infineon’s
20 21
as a one-for-one exchange for patent license rights, that payment granted Infineon license rights to many products not covered by the SDR/DDR License, including
22 23
Id. § 1.8. Infineon’s
was not
24
allocated across any of these broad product categories, let alone the four specific categories
25
covered by Section 3.8.
26
65.
Thus, any attempt to determine an “effective royalty rate” from the Infineon
27
Settlement Agreement would require a far more involved and complicated process than the
28
automatic adjustment to Samsung’s royalty rates contemplated by Section 3.8. As Samsung’s - 18 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 23 of 77
1
economics expert admitted, one cannot simply look at the Infineon Settlement Agreement and
2
determine what “royalty rate” was being paid for the products covered by Section 3.8. Instead,
3
the parties would have needed to undertake a negotiation of what, if any, “royalty rate” could be
4
attributed to licensing of products subject to Section 3.8 – a task that simply is not possible in the
5
apples-to-oranges comparison between the SDR/DDR License and the Infineon Settlement
6
Agreement.
7
66.
This is not, moreover, what Section 3.8 contemplates. Section 3.8 contains no
8
terms setting forth procedures for the parties to determine an “effective” royalty rate from a
9
complex, multi-tiered agreement that specifies no such rates, or to resolve any disagreements over
10
what such an appropriate rate would be. It contemplates a straightforward third-party patent
11
license like the SDR/DDR License itself, which specifies a product-specific rate for particular
12
products. The absence of any provisions to deal with more complicated and densely-layered
13
third-party agreements is strong evidence that the parties intended Section 3.8 to be triggered only
14
by a license with readily ascertainable product-specific royalty rates for the relevant products.
4
2.
15 16 17
67.
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,
18
during and after the execution of the SDR/DDR License, all reflect that Samsung was familiar
19
with the type of most-favored-licensee provision that would be applicable to an agreement like
20
the Infineon Settlement Agreement, and demonstrate that the parties did not intend to place such a
21
provision into the SDR/DDR License.
22 23 24 25 26 27
4
Rambus entered into many such licenses, including for example, licenses
,
28 - 19 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
a.
2
Document 2163
Filed 09/09/2008
Page 24 of 77
The 1994 RDRAM Agreement Contained The Broader Type Of Most-Favored-Licensee Provision Necessary To Include Complex Third-Party Agreements With Differing Terms.
3 68.
The RDRAM Agreement between Rambus and Samsung shows that the parties
4 5 6 7 8 9 10
knew full well how to draft a broad most-favored-licensee provision that would apply to agreements with different terms and different royalty payment structures. See Adm. Tr. Ex. 6110 § 10.16. In the RDRAM Agreement, the parties agreed to a more sweeping most-favoredlicensee provision that included different royalty rates based on percentages of net sales, id. § 4.2(a), but also differed from Section 3.8 in several important ways. 69.
First, the RDRAM Agreement gave Samsung Second, it explicitly required that
11
Third, it
12 13
e
provided that
14 Id. § 10.16. In this sense, the
15 16 17 18 19
RDRAM Agreement recognized that “royalty rate” was merely one aspect to be considered in evaluating a comprehensive licensing arrangement that potentially could involve different products or license periods. Finally, the RDRAM Agreement stated that, based on such a comprehensive comparison, Samsung Id.
20 21 22 23 24
70.
favored-licensee provision in 2000, they had an obvious template for doing so. Their decision not to employ a similar provision in the SDR/DDR License indicates that Section 3.8 was more limited, and that this important distinction between the two provisions must be given effect. b.
25 26 27 28
If Rambus and Samsung had intended to adopt such a broad and flexible most-
71.
Samsung Unsuccessfully Tried To Obtain A Broader Most-Favored-Licensee Provision In The SDR/DDR License.
The parties’ negotiations over the language of Section 3.8 also show that they did
not intend Section 3.8 to cover a deal, like the Infineon Settlement Agreement, that cannot readily - 20 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 25 of 77
1
be transformed into product-specific royalty rates. On October 16, 2000, Samsung negotiator Jay
2
Shim sent Rambus proposed language for Section 3.8 that included
3 4
y
Notably, he also proposed adding the following two provisions:
5 6 s
7 8 9 10 11 12
Tr. Ex. 9102 at 5 (emphasis added). In Section 9.3 (the dispute resolution provision), Mr. Shim
13
further proposed that
14 15 16 17
Id. at 6. Samsung’s proposed language for Section 3.8 subsections (d) and (e) is not included in the final agreement. See Tr. Ex. 9084. 72.
The fact that Samsung felt it necessary to propose the above-quoted language
18
demonstrates that it understood Section 3.8, without such language, did not cover lump-sum
19
payments in general, let alone payments made pursuant to a multi-layered agreement in which a
20
lump sump payment by Infineon and a patent license for covered products from Rambus were but
21
two components of a global exchange of much broader consideration in both directions.
22
Samsung’s proposal also confirms Samsung’s understanding that provisions
23
would have had to be included if the parties intended
24
to include agreements, like the Infineon Settlement Agreement, that did not constitute standard
25
patent licenses having readily-ascertainable royalty rates.
26
73.
The parties’ decision not to include the language proposed by Samsung in the final
27
agreement thus strongly supports the conclusion that Section 3.8 was not intended to cover
28
complicated and dissimilar third-party deals like the Infineon Settlement Agreement that would - 21 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 26 of 77
1
require
2
See Sun Pacific Farming Coop., Inc. v. Sun World Int’l, 2006 WL 1716206, at *10 (E.D. Cal.
3
2006) (holding that, under California law, “where the parties’ negotiation history or extrinsic
4
evidence shows that terms were unacceptable, the court may not read rejected terms into the
5
contract”); People v. Goodloe, 37 Cal. App. 4th 485, 490 (1995) (noting that, in the interpretation
6
of statutes, the “rejection of a specific provision which appeared in the original version of an act
7
supports the conclusion that the act should not be construed to include the omitted provision”).
8
c.
9
The 2001 Amendment Included A Broader MostFavored-Licensee Provision That Recognized The Inapplicability of Section 3.8 To Lump-Sum Licensing Agreements.
10 11 12 13
74.
The 2001 Amendment further demonstrates that Section 3.8 does not apply to
lump-sum deals such as the Infineon Settlement Agreement. Paragraph 8 of the 2001 Amendment introduced a new provision that p
y pp
s
14 in which case the 2001 Amendment provided that
15
Tr.
16 17 18 19 20 21 22 23 24 25 26
Ex. 9085. For several reasons, the 2001 Amendment suggests that the parties did not understand Section 3.8 to be triggered by a lump-sum third-party license. First, the very decision to adopt a new provision in this area reflects the parties’ recognition that lump-sum deals like Infineon’s were not already covered in the existing Agreement. If lump-sum deals had already been included, this provision would have been unnecessary and the language of Section 3.8 simply could have been retained in the 2001 Amendment. 75.
Second, the language of this paragraph shows that Rambus and Samsung
understood lump-sum payments and a percentage-of-net-sales royalty to be separate and distinct concepts, with the former differing sufficiently from the latter to require more than merely some automatic application of a lower “royalty rate” to Samsung. The parties’ decision to include a
27 28
once again demonstrates that the parties recognized the need for such a - 22 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 27 of 77
1
provision if Samsung’s rights were to be extended to agreements that do not contain comparable
2
product-specific royalty rates. By suspending section 3.8 and establishing this new and different
3
provision only in the 2001 Amendment, the parties made clear that their original provision was
4
narrower and applied only to agreements for which a comparable set of product-specific royalty
5
rates could be readily ascertained.
6
B.
Section 8.5 Expressly Rejects Samsung’s “Going-Forward” Theory For the Post-Contract Period
76.
Samsung claims that Rambus was contractually obligated to negotiate a successor
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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. 77.
Even if the Infineon Settlement Agreement somehow triggered Section 3.8 for the
Second Quarter 2005, thus reducing Rambus’s potential recovery for that one quarter, Rambus was not 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. This interpretation 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 an earlier proceeding. 78.
As explained above, Section 8.5 of the SDR/DDR License set forth the parties’
duty to negotiate a successor agreement. That provision obligated Rambus and Samsung
23 24 25 26 27 28
p
,
g,
, n
Tr. Ex. 9084 § 8.5 (emphasis added). This provision cannot reasonably be read to suggest that the parties’ good faith negotiation obligation included an obligation to agree to any particular substantive terms for the successor agreement, let alone an obligation by Rambus to give Samsung economic terms equal to the most favorable terms it had - 23 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 28 of 77
given any other licensee. To the contrary, the parties expressly provided that
s
2 3
Id. (emphasis added). While Samsung may have been satisfied with a new patent
4
license that allowed it to pay vastly less than it had previously paid for a license covering fewer
5
products, it is unreasonable to suggest that such an agreement
6
Rambus between April and June 2005, when the cloud on its patents presented by the Infineon
7
litigation had been lifted.
8 9
79.
The open-ended nature of the rest of the substantive terms is reinforced by the
language stating that
10
Id. (emphasis
11
added). Even assuming arguendo that Samsung were entitled to some “effective royalty rate”
12
derived from the Infineon Settlement Agreement for the Second Quarter 2005, Rambus would
13
only be obligated to provide such terms on a going-forward basis if Samsung had some right to
14
automatic extension or renewal of the SDR/DDR License. While such provisions, called
15
evergreen clauses, are common in licensing agreements, as are clauses that give one party an
16
option to renew the agreement, the SDR/DDR License contained no such provision. Instead, it
17
has merely a good faith negotiation provision, which by its very terms allows Rambus to
18
negotiate for a new agreement with new terms.
19
80.
Samsung’s theory that Rambus effectively would have had a continuing obligation
20
to extend most-favored-licensee treatment to a new license agreement between the parties is also
21
directly contradicted by the language and negotiation history for Section 8.6 of the SDR/DDR
22
License. That provision
23 24
It states that,
p
p
y
d
25 26
. Tr. Ex. 9084 (emphasis added). Section 3.8, the royalty-rate
27
provision,
28
licensee status under that provision came to an end at the conclusion of the license term.
, meaning that any right Samsung had to most-favored-
- 24 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 29 of 77
1
81.
2
this issue and that
3
to Samsung witness Mr. Han Yong Uhm, a member of Samsung’s negotiation team and a
4
participant in the 2000 license negotiations, on September 19, 2000, Samsung proposed – and
5
Rambus rejected –
It is, moreover, clear from the negotiations that the parties specifically considered According
6 7 5
8
See July 25, 2008 Uhm Dep. Tr. at 34:20-23, 35:1-10, 36:19-21, 36:25-37:2.
9
82.
Subsequently, on October 16, 2000, Samsung’s negotiator (Mr. Shim) sent
10
Rambus an email requesting a variety of changes to the draft SDR/DDR License, including a
11
request
12 13
Tr. Ex. 6 9102. Rambus responded to this request by email the next day, agreeing
14 15
Tr. Ex. 10029 at 2 (emphasis added). Rambus thus expressly rejected Samsung’s request to have the most-favored-licensee
16 17
5
Mr. Uhm described Samsung’s proposal and Rambus’s response as follows:
18 19 20 21 22 23 24 25 26 27
July 25, 2008 Uhm Dep. Tr. at 34:20-23, 35:1-10, 36:19-21, 36:25-37:2; see also Tr. Ex. 9077 & 9078. 6 In specific, Mr. Shim’s request was as follows:
28 - 25 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 30 of 77
royalty-rate obligations of the Agreement carry on beyond the contract term and,
2
Samsung ultimately dropped its request for
3
Requiring Rambus to abide by Section 3.8 on a going-
4
forward basis would directly contradict the express intention of the parties, as demonstrated in
5
both Sections 8.5 and 8.6.
6
83.
Indeed, Samsung’s own negotiator, Mr. Shim, admitted that the Agreement did not
7
encompass any such obligation upon renewal in sworn testimony given shortly after Rambus
8
terminated the Agreement. In sworn testimony given shortly after Rambus terminated the
9
Agreement, Mr. Shim testified as follows:
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Aug. 23, 2005 Shim E.D. Va. Test. at 79:19-80:14. 84.
Based on this record, the Court finds that, consistent with the express language of
25
Section 8.5, the parties expressly left the terms of renewal open in the Agreement, and did not
26
agree that Rambus would be obligated to extend any status as a most-favored-licensee beyond the
27
date of the Agreement.
28 - 26 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
C.
Page 31 of 77
Products Were Not Covered by the SDR/DDR License
2 85.
The SDR/DDR License is limited by its terms to certain identified part numbers
3 and other products as defined by Sections 1.5 through 1.10. See Tr. Ex. 9084. The language of 4 the SDR/DDR License does not confer a license on Samsung for 5 or other products that are not covered by the
6 7
definition of “Licensed Products” in the Agreement. Moreover, the patents infringed by these products include
8 9
patents that were not covered by Section 1.12 of the SDR/DDR License. 86.
10 11 12
Indeed, during the negotiation of the SDR/DDR License, Rambus refused to
license Samsung on future generations of DRAM technology such as V.
SAMSUNG BREACHED THE SDR/DDR LICENSE BY FAILING TO COOPERATE IN THE ROYALTY AUDIT
13 A. 14 15
87.
Rambus’s Royalty Audit Entitlement And The Initiation Of The Royalty Audit In order to ensure that Samsung was accurately reporting and paying royalties,
16
the parties agreed in the SDR/DDR License to a provision that entitles Rambus to perform royalty
17
audits of Samsung on a periodic basis. Tr. Ex. 9084 § 4.1. The Agreement requires
18 19 20 21 22 23 24
. 88.
In December 2003, Rambus notified Samsung that Rambus would be conducting
25
a royalty audit pursuant to Section 4.1. Tr. Ex. 10064. Rambus selected Ernst & Young LLP
26
(“E&Y”) and Nigel Shepherd, an E&Y partner with more than ten years of royalty audit
27 28 - 27 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 32 of 77
1
experience, to conduct the audit. The scope of the audit included royalty payments made under
2
the SDR/DDR License and the RDRAM Agreement. See Tr. Ex. 10077.7
3
89.
Mr. Shepherd and his team from E&Y informed Samsung of the materials that
4
E&Y would need to be able to successfully complete the audit, including, among other things,
5
information about Samsung’s product inventory sufficient for E&Y to be able to determine that
6
Samsung was properly including as royalty-bearing all of the products for which it was obligated
7
to pay a sales-based royalty under the SDR/DDR License. E&Y also informed Samsung that the
8
period to be audited for the SDR/DDR License was from the inception of the agreement in
9
8 October 2000 through December 31, 2003. Tr. Ex. 10077. In February 2004, Samsung agreed
10
to a March 31 deadline for completing the audit. Id.
11
B.
12
90.
13
Samsung’s Failure To Comply With Its Contractual Audit Obligations It would be an understatement to say that E&Y’s royalty audit did not go
smoothly. Samsung failed to comply with its audit obligations in several different respects.
14
91.
First, there were numerous delays by Samsung, which collectively interfered
15
with the progress of the audit and undermined its integrity. Among other things, Samsung
16
repeatedly missed or postponed conference calls with E&Y and/or Rambus, postponed on site
17
visits because it purportedly needed more time to prepare the materials needed by E&Y, and
18
failed to provide source information that would allow E&Y to verify its product identification and
19
sales calculations. See, e.g., Tr. Exs. 10125, 10126, 10093. Samsung’s delay tactics precluded
20
E&Y from completing the audit by the March 31 deadline and caused E&Y to raise questions
21
with Rambus about whether Samsung was seeking to filter the data E&Y received. Mr. Shepherd
22
explained E&Y’s concerns to Rambus as follows:
23 24 25 26 7
27 28
The RDRAM Agreement contains a royalty audit provision that closely tracks the language in the SDR/DDR License. Adm. Tr. Ex. 6110 § 4.3(a). 8 For the RDRAM License, Rambus agreed that the audit period would be 2001-2003. - 28 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2
Document 2163
Filed 09/09/2008
Page 33 of 77
Tr. Ex. 10120. 92.
Second, E&Y ultimately was not able to complete the royalty audit due to
3
Samsung’s refusal to provide information the auditors needed to perform their analysis.
4
Specifically, Samsung refused, over a period spanning nearly a year, to cooperate in providing
5
complete product information, with proper product codes and supporting information, which was
6
necessary to enable E&Y to determine whether Samsung was properly identifying all the products
7
for which it had an obligation to pay royalties. See, e.g., Tr. Exs. 10147, 10190, 10123. Instead,
8
Samsung offered several unworkable alternatives, including but not limited to
9 10
(see Tr. Ex. 10153) (see Tr. Ex. 10201);
11 12 13
(see Tr. Exs. 10243 & 10260 93.
Third, after a year of waffling back and forth on whether it would provide any
14
audit information for the October-December 2000 time period, Samsung ultimately refused to do
15
so without any valid basis or even an explanation for its decision. See, e.g., Tr. Exs. 10190,
16
10201, 10228.
17
94.
In addition to this lack of cooperation in the audit process, the limited auditing
18
that E&Y was able to perform also turned up serious problems with Samsung’s royalty reporting
19
practices,
20
. E&Y discovered that
21 22 23 24 25
See Tr. Ex. 9084 § 1.13; Adm. Tr. Ex. 6110 § 1.30. 95.
Based on this record, the Court finds that Samsung has failed to comply with,
and has breached, Section 4.1 of the SDR/DDR License.
26 27 28 - 29 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
C.
2 3
96.
Document 2163
Filed 09/09/2008
Page 34 of 77
Rambus’s Repeated Warnings That Samsung Was In Breach Of Its Royalty Audit Obligations, Samsung’s Failure To Cure, And Rambus’s Exercise Of Its Right To Terminate On July 9, 2004, Rambus detailed Samsung’s by-then four-month-long delay in
4
providing information needed to complete the audit and notified Samsung that its failure to
5
cooperate constituted a “breach” of the SDR/DDR License. Tr. Ex. 9275. Rambus repeatedly
6
notified Samsung of its breach and demanded that it be cured. For example, in an October 21,
7
2004 letter, Rambus General Counsel John Danforth informed Samsung’s counsel that
8 9
Tr. Ex. 10217. Rambus,
10
moreover, repeatedly informed Samsung during the parties’ licensing negotiations that Samsung
11
was not in compliance with the audit and thus was in breach of its contractual obligations.
12
97.
Samsung, however, failed to cure the breaches of its obligations. As a result, on
13
June 6, 2005, Rambus exercised its right to terminate the SDR/DDR License pursuant to Section
14
8.2 of the Agreement. On that date, John Danforth notified Samsung in writing that
15 16 17 18
Tr. Ex. 10271. VI.
SAMSUNG HAD KNOWLEDGE OF AND RELEASED ITS JEDEC-RELATED
19
17200 CLAIM WHEN IT ENTERED THE SDR/DDR LICENSE
20
98.
The evidence is clear that Samsung had knowledge of its potential unfair
21
competition claim based on Rambus’s participation in JEDEC when it signed the SDR/DDR
22
License in October 2000. Charles Donohoe, Samsung’s chief patent counsel at the time of the
23
negotiations, testified that
24 25 26
See May 14, 2008 Donohoe Dep. Tr. at 27:1-10; see also id. 25:1-22, 28:4-17; Tr. Ex. 9069.
27
Tr. Ex. 9138.
28 - 30 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 35 of 77
1 2 3 4 5 6
Tr. Ex. 9321 at 2. 99.
Other DRAM manufacturers had already raised JEDEC-related misconduct claims
7
and defenses in ongoing patent litigation with Rambus, and Samsung’s lawyers were actively
8
following that litigation. For example, on September 26, 2000, Infineon’s counsel sent
9
Samsung’s lead outside counsel in this litigation (David Healey)
10
which contains highly
11
detailed allegations of misconduct by Rambus, asserts an equitable estoppel affirmative defense
12
based on JEDEC, and brings various counterclaims against Rambus based on its conduct at
13
JEDEC, including claims for fraud. Tr. Ex. 9070 at 22, 29-45. On August 31, 2000, Samsung’s
14
outside counsel also sent Samsung’s lead negotiator for the License Agreement (Charles
15
Donohoe) a
16
breach of contract and other claims against Rambus based on Rambus’s purported violation of
17
JEDEC patent disclosure policies. Tr. Ex. 9068 at 6-10. Therefore, the evidence showed that, by
18
September 2000 (at the latest), Samsung possessed knowledge of its JEDEC-related Section
19
17200 claim.
20 21
100.
bringing
Aware of its potential JEDEC claim, Samsung agreed to the broad general release
in Section 2.12 of the SDR/DDR License. Section 2.12 provides:
22 23 24
S k
25 26 27 28 - 31 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Filed 09/09/2008
Page 36 of 77
Tr. Ex. 9084 § 2.12 (emphasis added).9 The parties expressly provided that the release
2
Id. § 8.6.
3
101.
As this Court previously held, the “subject matter of this Agreement” set forth in
4
Section 2.12 encompasses Rambus’s patents, and “[c]ombined, the ‘relating to’ and ‘arising out
5
of’ language demonstrate a clear intent to release all claims having anything to do with the
6
licensing of the patents.” Order Denying Rambus’s Motion for Summary Judgment on the
7
JEDEC Claim in Count VII of Samsung’s Counterclaims (No. C 05-02298, Docket No. 284), at
8
6, 7 (Aug. 6, 2008).
9
102.
The evidence demonstrates that Samsung’s JEDEC claim – a claim known to
10
Samsung during the negotiations – falls within the scope of the release. Among other things,
11
Samsung carved out equitable defenses against enforcement of Rambus’s patents with a provision
12
stating that
13
Tr. Ex. 9084 § 2.10(d). If
14
Samsung had not otherwise released Rambus for its JEDEC-related conduct, the carve-out in
15
Section 2.10(d) for
16
103.
17
would not have been necessary.
Indeed, there is evidence that Samsung read Section 2.12 broadly as releasing any
affirmative JEDEC-related claim.
18 19 20
Tr. Ex. 9335. If Samsung believed that the
21
release was not so broad, there would be no reason to invoke Section 2.10(d). See Univ. Sales
22
Corp., Ltd. v. Cal. Press Mfg. Co., 20 Cal. 2d 751, 761 (1942) (“[W]hen a contract is ambiguous,
23
a construction given to it by the acts and conduct of the parties with knowledge of its terms,
24
before any controversy has arisen as to its meaning, is entitled to great weight, and will, when
25 26
9
In the next sentence, in all capital letters,
27 28
. Id. - 32 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 37 of 77
1
reasonable, be adopted and enforced by the court.”). The fact that Samsung construed the release
2
so broadly before the termination of the Agreement supports the conclusion that the parties
3
intended the release to cover an affirmative JEDEC claim.10
4
VII.
SAMSUNG COULD NOT HAVE RELIED ON RAMBUS’S ALLEGED
5
NONDISCLOSURE IN RDRAM LICENSE NEGOTIATIONS OR AT JEDEC
6
104.
7
As set forth in section III.A. above, Samsung knew about the potential scope of
Rambus’s intellectual property as early as 1991 when Joel Karp
d
8 9 10 11 12
105.
Further, Rambus disclosed to Samsung during the early 1990s that it was filing
broad patent applications and seeking to enforce and protect its intellectual property.
13
106.
Samsung recognized this and, as a result, sought
15
107.
In conversations with Rambus in 1996, Mr. Karp (still with Samsung) informed
16
Rambus that
14
17
This message from Mr. Karp was communicated to high level Samsung management.
18
By at least 1996,
19 20 21 22
109.
Rambus
and eventually succeeded with Addendum No. 1 signed in February 1997. See Tr. Ex. 9231.
23
110.
In its pretrial disclosures, Samsung disclosed no witnesses or exhibits in support of
24
its burden to show reliance on Rambus’s alleged nondisclosure in connection with JEDEC and/or
25
RDRAM license negotiations, and Samsung offered no such evidence of its reliance at trial.
26 27 28
10
Among other things, the conduct set forth in this Section supports Rambus’s affirmative defenses of release, waiver, statute of limitations, conduct of Samsung, failure to mitigate, estoppel, ratification, laches, and consent. - 33 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
111.
Document 2163
Filed 09/09/2008
Page 38 of 77
Rambus further incorporates by reference its January 25, 2008 Proposed Findings
2
of Fact and Conclusions of Law from the January 25, 2008 coordinated trial. See Proposed
3
Findings of Fact and Conclusions of Law (Case No. 05-00334, Docket No. 1110) (Jan. 25,
4
2008).11
5
VIII. SAMSUNG CONCEDES THAT CONFIDENTIALITY CONCERNS JUSTIFY
6
NON-DISCLOSURE OF PATENT APPLICATIONS
7
112.
Further, any nondisclosure by Rambus of its anticipated or pending patent
8
applications at JEDEC and/or during RDRAM license negotiations was justified by the generally
9
accepted principle that patent applications are confidential business information and kept
10
confidential until the patent has issued.
11
113.
Samsung concedes that when it has pending patent applications related to license
12
negotiations, its general practice is not to disclose those patent applications, but instead to keep
13
them confidential within Samsung.
14
IX.
THERE IS NO FACTUAL BASIS FOR SAMSUNG’S AFFIRMATIVE DEFENSES
15
BASED ON NEIL STEINBERG
16
114.
Samsung alleges that Neil Steinberg, an attorney formerly employed by Samsung,
17
used confidential Samsung information in his work for Rambus. Mr. Steinberg resigned from
18
Samsung effective August 7, 1998. He served as outside counsel for Rambus beginning in 1998
19
and joined Rambus as in-house counsel in 1999.
20
115.
Samsung failed at trial to meet its burden of proof to support its affirmative
21
defenses related to Mr. Steinberg’s work at Rambus. In its pretrial disclosures, Samsung
22
disclosed no witnesses or exhibits in support of its allegations related to Neil Steinberg, and
23
Samsung offered no such evidence in support of these defenses at trial.
24 25 26 27 28
11
Among other things, the conduct set forth in this Section supports Rambus’s affirmative defenses of waiver, conduct of Samsung, failure to mitigate, estoppel, ratification, laches, and consent. - 34 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
116.
Document 2163
Filed 09/09/2008
Page 39 of 77
There is no evidence that Mr. Steinberg’s work as outside counsel for Rambus
2
during the time he was still employed by Samsung had any relationship or connection to the
3
patents-in-suit in the above-captioned cases.
4 5
117.
There is no evidence that Mr. Steinberg used any Samsung confidential
information of any kind in his work for Rambus.
6
118.
This Court has previously found that Samsung had knowledge and concern about
7
Mr. Steinberg’s work for Rambus and his alleged wrongdoing before, during, and immediately
8
after the signing of the SDR/DDR License in October 2000. See Order Granting Rambus’s
9
Motion for Summary Judgment on Counts IV-VII of Samsung’s Counterclaims, at 4-8, 10 (Aug.
10
11, 2008). Despite these concerns, Samsung made a “pure business decision” to negotiate the
11
SDR/DDR License opposite Mr. Steinberg and to renegotiate the license. See id. at 10; Feb. 6,
12
2001 Donohoe Micron Dep. Tr. at 31:20-33:6; May 13, 2008 Donohoe Dep. Tr. at 100:19-101:3,
13
102:9-16.
14
119.
After the SDR/DDR License had been signed, “Samsung engaged in extensive
15
preparation, research and investigation of its potential claims against Neil Steinberg and Rambus
16
to be ready in case it terminated the [SDR/DDR] license agreement and Rambus sued.” Aug. 11,
17
2008 Order at 9-10.
18
120.
19
work for Rambus.12
20
X.
There is no evidence that Samsung was prejudiced in any way by Mr. Steinberg’s
RAMBUS DID NOT IMPROPERLY DESTROY RELEVANT AND MATERIAL
21
EVIDENCE IN ANTICIPATION OF LITIGATION WITH SAMSUNG
22
121.
In October and November 2005, a trial was held before this Court with respect to
23
the defense of unclean hands asserted by Hynix Semiconductor, Inc. (and related entities) against
24
the patent infringement counterclaims asserted by Rambus in Case No. C 00 20905 (“Hynix UCH
25 26 27 28
12
Among other things, the conduct set forth in this Section supports Rambus’s affirmative defenses of waiver, conduct of Samsung, failure to mitigate, estoppel, laches, and consent. - 35 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 40 of 77
1
Trial”). The patents asserted by Rambus against Hynix include some of the same patents as the
2
patents in suit in ‘2298 and ‘334 Cases.
3
122.
Pursuant to the stipulation between Rambus and Samsung on August 29, 2008, the
4
documents and testimony admitted at the Hynix UCH Trial shall be treated as though such
5
documents and testimony were presented and admitted in the September 22 Trial with respect to
6
Samsung’s claims and defenses based on spoliation, with the exception of documents produced
7
by Rambus and its counsel pursuant to various crime/fraud piercing orders related to document
8
retention as well as testimony regarding those documents or pursuant to those orders. In addition,
9
the Court heard and admitted additional evidence at the September 22 Trial.
10
A.
Rambus Adopted A Content Neutral Document Retention Policy In July 1998 That Conformed To Industry Standards
123.
As of 1998, content neutral document retention policies were in common use
11 12 among American businesses as a tool to manage the size and organization of paper records and 13 electronic data, and the associated costs. The percentage of businesses adopting such policies has 14 only increased since that time. Indeed, Samsung Electronics America, Inc. (“SEA”) adopted a 15 written document retention policy in October 2000, and has made various revisions thereto over 16 time. See Tr. Ex. 9220 (SEA document retention policy dated October 1, 2000); Tr. Ex. 9221 17 (SEA document retention policy dated August 1, 2006); Tr. Ex. 9222 (SEA document retention 18 19 20 21 22 23 24 25
policy dated January 1, 2008. 124.
Among the commonly accepted reasons for adoption and implementation of
content neutral document retention policies was and is the reduction of the high costs of complying with discovery requests in the event a business should become involved in litigation, by limiting the extent of paper records and electronic data that would have to be searched for discoverable materials. Indeed, SEA’s current document retention policy explicitly acknowledges , Tr. Ex. 9222 at 3 (“Underlying Principles” ¶ 1), and
26 27
their potential discoverability:
28 - 36 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 41 of 77
1 2 3 4 5 6 7
Tr. Ex. 9222 at 3 (SEA January 1, 2008 document retention policy provision for “Personal files”) (italics in original). 125.
In early 1998, Rambus retained Kroll Associates, a specialist in the field of
information and computer security, to do a security audit of Rambus. Rambus contacted Kroll
8 because it had security concerns after a hacking attempt on the Rambus computers. Hynix UCH 9 Trial Tr. at 369:18-370:20. In an April 24, 1998 presentation concluding the security audit and 10 issuing recommendations, Kroll observed that Rambus needed to adopt a variety of measures to 11 better protect its confidential information and the confidential information of its business partners. 12 Sept. 20, 2005 Brill Dep. at 49:15-50:1; 50:13-18 (played at trial on October 28, 2005, Hynix 13 UCH Trial Tr. at 1517). Among the specific recommendations from Kroll was that Rambus 14 should work with outside counsel to develop a document retention policy. RTX160 at 26; Hynix 15 UCH Trial Tr. at 372-373. 16 126.
On July 22, 1998, Rambus provided its employees with a two-page document
17 retention policy. HTX023; Hynix UCH Trial Tr. at 249:22-250:4. 18 127.
The Rambus policy provided with respect to “Electronic Mail and Documents”
19 that: “Computer files and email are treated in the same manner and are subject to the same 20 document retention policies as paper documents. Rambus maintains complete system tape back21 ups for a period of 3 months. Employees should not utilize email as a place to save documents 22 23 24 25 26 27 28
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 you hard drive.” HTX023 at 1. As Rambus’s expert on document retention policies, John Montana testified, this is consistent with prevailing standards for document retention policies in 1998 and today. See, e.g., David O. Stephens and Roderick C. Wallace, Electronic Records Retention: An Introduction 19, Chapter 7- Implementation Issues, at 19 (Arma International 1997) (hereinafter “Stephens 1997”) (Providing a sample email retention - 37 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 42 of 77
1
policy which states: “The maximum retention period for all E-mail is 30 days after the message is
2
read by its recipient, but employees are encouraged to delete the messages DAILY, immediately
3
after reading, replying, or taking other action concerning them. All E-mail will be automatically
4
purged upon the expiration of the retention period. If the content of an E-mail message possesses
5
longer-term business value, employees are required to migrate the document from the E-mail
6
system for archival storage on another platform IF it requires continuing retention in a computer-
7
processable format, or generate a hard copy printout and place it in the proper paper file for
8
further retention, according to the approved records retention schedule.”) (emphasis in original).
9
Indeed, SEA’s current document retention policy contains a substantially similar provision with
10
respect to email. See Tr. Ex. 9222 at 4-5 (SEA January 1, 2008 document retention policy
11
provision for “Electronic mail”). This is also consistent with the April 1998 recommendation of
12
Mr. Brill of Kroll Associates that Rambus keep e-mail only as long as required and that backup
13
tapes should not be kept indefinitely. RTX160 at 26, 47; September 20, 2005 Brill Dep. at 55:19-
14
57:14 (played at trial on October 28, 2005, Hynix UCH Trial Tr. at 1517).
15
128.
The Rambus policy provided with respect to “Contracts” that: “Final, execution
16
copies of all contracts entered into by Rambus are kept for at least 5 years after expiration of the
17
agreement, and longer in the case of publicly filed contracts. All drafts. . . and any materials used
18
during negotiations that are not part of the final contract . . . should be destroyed or systematically
19
discarded.” HTX023 at 2. As Rambus’s expert on document retention policies, John Montana
20
testified, this too is consistent with prevailing standards for document retention policies in 1998
21
and today. Indeed, SEA’s current document retention policy likewise only calls for
22 23
See Tr. Ex. 9222 at 2, 7 (SEA January 1, 2008 document retention policy). 129.
The Rambus policy further provided that “Engineering and development
24
documents are often subject to intellectual property protection in their final form (e.g. patents,
25
copyrights, trade secrets, proprietary information). The documents, notebooks, computer files,
26
etc., relating to patent disclosures and proof of invention dates are of great value to Rambus and
27
should be kept permanently. Engineering personnel should not depend on the electronic system
28
back-up tapes to archive their work, since these tapes are only kept for 3 months. They should - 38 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 43 of 77
1
create their own archive copies of, for example, tape out and major project milestone databases,
2
which can then be kept indefinitely in Rambus' offsite, secure storage facility.” HTX023 at 1-2.
3
As Rambus’s expert on document retention policies, John Montana testified, this again is
4
consistent with prevailing standards for document retention policies in 1998 and today. Indeed,
5
SEA’s current document retention policy contains a substantially similar provision. See Tr. Ex.
6
9222 at 6 (SEA January 1 2006 document retention policy provision for “Development /
7
Intellectual Property and Trade Secrets”).
8 9
130.
The terms of Rambus’s two page document retention policy referred only to
categories of documents that were content neutral. See HTX023. The policy contained no
10
directive to discard documents relating to specific companies or to certain subjects. The evidence
11
does not suggest that the policy was tailored to target particular categories of harmful documents.
12
131.
In July 1998, in connection with the roll out of the Rambus document retention
13
policy, a presentation was provided to Rambus’s managers by outside legal counsel Daniel
14
Johnson and by Joel Karp, a Rambus Vice President. Hynix UCH Trial Tr. at 252:1-5, 254:10-
15
16.
16
132.
Mr. Karp thereafter made presentations regarding document retention to various
17
groups of Rambus employees. Consistent with the two page document retention policy, Mr.
18
Karp's presentation consisted of a summary of the types of documents Rambus wanted to keep
19
and for how long. Hynix UCH Trial Tr. at 261:4-19; HTX112. The slides that Mr. Karp
20
prepared repeatedly directed Rambus employees to “look for things to keep.” HTX112.
21
B.
22
1.
23 24
Rambus’s Implementation Of Its Document Retention Policy Conformed To Industry Standards
133.
Rambus’s Handling Of Paper Materials Conformed To Industry Standards
On September 3 and 4, 1998, Rambus employees participated in a company-wide
25
housecleaning, more colloquially referred to as a “shred day.” Rambus employed an outside
26
company, Sure Shred, to provide on-site document shredding services for that day. See HTX125;
27
Hynix UCH Trial Tr. at 1614:16-1615:11. Employees were instructed to follow the document
28
retention policy guidelines to determine what to keep and what to throw away. See Hynix UCH - 39 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 44 of 77
1
Trial Tr. at 272:14-273:14. Employees were given burlap sacks from Sure Shred for material that
2
needed shredding. The burlap sacks were then taken to a shredding truck in the parking lot of the
3
company and their contents destroyed. At the close of business on September 3, 1998, Rambus
4
served pizza and beer to its employees. See also Hynix UCH Trial Tr. at 273:15-274:8 (noting
5
that Rambus “often” served pizza and beer to its employees).
6 7 8 9
134.
A year later, on August 26, 1999, Rambus held another housekeeping event, or
“shred day.” See HTX147; Hynix UCH Trial Tr. at 1619:19-1620:4. 135.
In December 2000, Rambus moved into 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
10
building to the new building. See RTX216; see also Hynix UCH Trial Tr. at 1120. Rambus’s use
11
of an outside shredding company in connection with its office move is not unusual. David
12
Rhoads, owner of Sure Shred, testified that one of the “primary movers” in the shredding business
13
is a desire to eliminate unneeded material in connection with office moves. See Hynix UCH Trial
14
Tr. at 1623:5-15 (stating that it is “less expensive for a client to have us come in and shred
15
material that is no longer needed than it is to pay a moving company to move it and then destroy
16
it later”). As of the time of the office move, a litigation hold had been put in place. See Hynix
17
UCH Trial Tr. at 705:6-707:2, 775:12-776:10.
18
136.
Rambus’s use of burlap bags and shredders during these three housekeeping days
19
was also unremarkable. Because Rambus’s work involves research and development, and
20
because its documents often include confidential information that is proprietary to Rambus or
21
obtained from third parties under non-disclosure agreements, Rambus shreds much of the material
22
it no longer needs. In Kroll Associates’ 1998 security audit of Rambus, Mr. Brill emphasized to
23
Rambus executives the importance of shredding confidential information to protect from
24
inadvertent disclosure. Among his recommendations were the need to add better and more
25
convenient shredders in copy rooms and to put small shredders under the desks of executive and
26
staff members who generate highly confidential waste. See RTX160 at 0239; Hynix UCH Trial
27
Tr. at 1517 (Brill Dep. at 61:24-63:5, 94:25-97:12). Mr. Brill explained that the “point was to
28
make it as convenient as possible for people to do the right thing; that if it is your policy to get rid - 40 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 45 of 77
1
of this stuff, that you have to have a way of doing it that is secure….” Id. at 97:2-5. In fact,
2
shredding at Rambus was not a new procedure. Prior to the initial shred day in 1998, each
3
employee had a box in his or her office area for confidential documents that needed to be
4
shredded, and a truck came once a week to pick up the documents for shredding. See Hynix UCH
5
Trial Tr. at 1581:13-1582:10.
6
137.
In addition, there was nothing unusual about the volume of material that Rambus
7
shredded. In particular, Mr. Rhoads suggests that Rambus’s disposal practices were no different
8
from the disposal habits of other similarly situated companies. See Hynix UCH Trial Tr. at 1612-
9
1613, 1617-1618 (noting that there was nothing unusual about Rambus’s use of Sure Shred’s
10
shredding services). If anything, Mr. Rhoads’ testimony demonstrates that the volume of material
11
shredded by Rambus was less than one would have expected. During the three annual
12
housekeeping events, Sure Shred shredded between two to three bankers boxes per Rambus
13
employee. See Hynix UCH Trial Tr. at 1616, 1620, 1622 (outlining the number of boxes
14
shredded per housekeeping event); Joint Pretrial Statement, filed August 27, 2008, at § B(11)
15
(stipulating to the number of employees at Rambus during those events). By comparison,
16
Mr. Rhoads himself generates two bankers boxes each week as part of his regular disposal of
17
confidential material. See Hynix UCH Trial Tr. at 1617-1618.
18
138.
Rambus employees used the housekeeping events as an opportunity to dispose of
19
outdated and voluminous material. For example, Joel Karp testified that the “bulk” of the
20
documents destroyed during the shred days were the “mountains of computer printouts of circuit
21
design that the engineers had.” Hynix UCH Trial Tr. at 337:10-338:3.
22
139.
The social events at the end of the “shred days” were also unexceptional; Rambus
23
and many other companies routinely sponsored such events for their employees. Mr. Rhoads of
24
Sure Shred testified that his company frequently provided pick up services “where it’s time to
25
purge records on an annual basis, or [a company has] just begun a document destruction program
26
so they call us out to do a big purge.” Hynix UCH Trial Tr. at 1612:24-1613:2. He observed that
27
on these annual “purge days,” companies often have an “event” and serve food as part of that
28
“event.” Id. at 1613:18-21. - 41 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
140.
Document 2163
Filed 09/09/2008
Page 46 of 77
A contemporaneous news article also demonstrates the commonplace nature of
2
both “shred days” and of social events associated with them. Admitted exhibit HTX130 is a
3
November 11, 1998 article from The New York Times that refers in part to an “event” at Amazon
4
where employees were asked to “purge” emails that were no longer needed for business or legal
5
purposes. The article also explains that those employees “who complied immediately” were
6
given “free lattes,” and it refers as well to a “delete fest” that was being planned at Polk Co., a
7
data resource firm. HTX130 at 1-3. See also Stephens 1997 at 48 (“Setting aside one day a year
8
for office workers to clean out files, destroy old records, and transfer records to the records center
9
is popular in some organizations. Management allows people to ‘dress down,’ and provides a
10
free lunch on purge day. Sometimes awards are given to those persons and departments that
11
recycle the most paper.”).
12
141.
Indeed, Samsung’s document retention policy also requires employees to “at least
13
semi-annually” discard and destroy information that is older that the document retention period
14
required by the document retention policy. See Tr. Ex. 9222 at 3, 4.
15 16
142.
Rambus’s actions in implementing its document retention policy with respect to
paper materials conformed to industry standards. 2.
17
Rambus’s Handling Of Email Conformed To Industry Standards
18 143.
Rambus told its employees to identify important emails to keep, save them in hard
19 copy or a separate electronic file, and delete the remainder. HTX112; HTX23. These 20 instructions were content neutral and were to be applied to any email on any topic. As Mr. 21 Montana testified, this instruction was appropriate and commonplace in the 1998 time frame. 22 144.
Allen Roberts, a Rambus Vice President of Engineering, understood that there was
23 a concern that back-up tapes of Rambus emails were “discoverable”: 24 25 26 27 28
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. - 42 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1 2
Document 2163
Filed 09/09/2008
Page 47 of 77
Hynix UCH Trial Tr. 1577:7-18; see HTX100; Hynix UCH Trial Tr. 1575:17-1577:4. 145.
Indeed, Rambus’s expert Mr. Montana agreed. Mr. Montana testified that based
3
on his experience in the document retention industry, a desire to curtail cost in future litigation is
4
one of the common and accepted goals of document retention policies.
5 6 7
146.
Rambus’s actions in implementing its document retention policy with respect to
emails conformed to industry standards. C.
8
Rambus And Its Outside Patent Counsel Did Not Target Specific Categories Of Documents For Destruction 1.
9 10
147.
The Treatment Of Patent Prosecution Files Was Entirely Proper
Lester Vincent prosecuted patent applications on behalf of Rambus claiming
11
priority to Rambus’s original application, Ser. No. 510,898 (“the ‘898 application”) at Blakely,
12
Sokoloff, Taylor & Zafman (“BSTZ”), as did other Blakely attorneys such as Roland Cortes and
13
Scot Griffin. Hynix UCH Trial Tr. at 784:1 - 785:2; 1592:22 - 1593:9; 1603:19 - 1604:10.
14
148.
Mr. Griffin and Mr. Cortes understood that it was the firm policy at BSTZ to clean
15
patent files upon issuance with respect to all patent files, and implemented that policy. Hynix
16
UCH Trial Tr. at 1598:2 - 1600:19; 1606:18 - 1607:10. Mr. Griffin left BSTZ in April 1996, and
17
Mr. Cortes left BSTZ in April 1999. Id. at 1592:11-14; 1603:14-18. Mr. Cortes and Mr. Griffin
18
each prosecuted to issuance Rambus patent applications claiming priority to the original Rambus
19
patent application, including U.S. Patent Nos. 5,513,327, 5,657,481, and 5,841,580 (none of
20
which are patents in suit). These files presumably would have been cleaned by them prior to their
21
departure. Hynix UCH Trial Tr. at 1593:10 - 1598:1; 1604:12 - 1606:17; HTX005A (indicating
22
that the ‘327, ‘481, and ‘580 patents correspond to BSTZ file numbers P001C2, P007DC and
23
P043D2, respectively).
24
149.
In April 1999, Mr. Vincent began to clean BSTZ’s patent prosecution files for
25
Rambus issued patents. HTX327. Mr. Vincent was guided by his “general professional
26
knowledge” regarding document retention for patent files. Hynix UCH Trial Tr. 904:19-24.
27 28
150.
BSTZ’s patent prosecution files were organized into three parts: left, center, and
right. Hynix UCH Trial Tr. at 895:3 - 896:11. When cleaning Rambus patent prosecution files - 43 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 48 of 77
1
for issued patents, Mr. Vincent retained, inter alia, communications with the Patent & Trademark
2
Office, which constituted the right side of the file, and prior art. Id. The portions of the files
3
from which documents might be discarded were the left and center portions. Id.
4
151.
On February 1, 2000, Mr. Vincent provided copies to Rambus of the left and
5
center parts of the file of all but one of BSTZ’s patent prosecution files for applications claiming
6
priority to the ‘898 application. RTX181 (February 1, 2000 cover letter from Lester Vincent to
7
Neil Steinberg enclosing copies of files); Hynix UCH Trial Tr. at 912:1-11. The remaining file
8
had been omitted due to an oversight and was provided later. Id. at 913:3-17.
9
152.
Mr. Vincent did not clean any Rambus patent files between July 28, 1999 and
10
June 23, 2000. HTX327. Mr. Vincent’s renewed cleaning of patent files on or after June 23,
11
2000 had no impact on the documents produced in this litigation. As noted above, copies of any
12
documents from the files of patents claiming priority to the ‘898 application that Mr. Vincent may
13
have discarded on or after June 23, 2000 had already been provided to Rambus. Hynix UCH
14
Trial Tr. at 914:3-12.
15
153.
No material documents have been rendered unavailable to Samsung from the files
16
of any of the patents-in-suit as a result of Mr. Vincent’s file cleaning. Of the 24 patents that have
17
been asserted by Rambus in the ‘2298 and ‘334 cases, only two of them – U.S. Patent Nos.
18
5,915,105, and 6,101,152 – allegedly were cleaned by Mr. Vincent. HTX005A. These patents
19
correspond to internal BSTZ file numbers P001C5, and P043D2C2D1, id., and were among the
20
files reviewed by Mr. Vincent on June 23, 2000, after copies of any documents that might have
21
been discarded from the file had been provided to Rambus. HTX327. Also, no evidence suggests
22
that any material evidence was discarded from any prosecution files.
23
154.
Mr. Vincent did not clean any of BSTZ’s “general” Rambus files. Hynix UCH
24
Trial Tr. at 909:5-7. The general files contained, inter alia, Mr. Vincent’s notes and other
25
documents relating to his advice to Rambus concerning the JEDEC disclosure policy and
26
equitable estoppel. Id. at 908:20-24. These documents were retained and produced. RTX179
27
(January 31, 2000 cover letter from Mr. Vincent to Neil Steinberg transmitting copies of various
28 - 44 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 49 of 77
1
BSTZ general files); Hynix UCH Trial Tr. at 909:10 - 910:6, 911:9-25. See, e.g., HTX192
2
(March 27, 1992 notes by Lester Vincent referring to JEDEC and equitable estoppel). 2.
3
Rambus Maintained Prior Art And Other Relevant PatentRelated Documents
4 155.
Rambus has produced various documents relating to the conception and reduction
5 to practice of the patented inventions prior to the April 1990 filing date of the ‘898 application. 6 Hynix UCH Trial Tr. at 930:2-9. These include inventor notes, id. at 932:24 - 933:15; 935:12-16; 7 1003:2-23, computer simulations, id. at 1004:19 - 1005:19, drafts of patent applications, id. at 8 1045:22 - 1046:4, and technical presentations given by the inventors. Id. at 1046:20-24. 9 156.
Rambus also has produced several boxes of prior art. Hynix UCH Trial Tr. at
10 949:17-19. The prior art produced by Rambus include prior art references with fax lines showing 11 that the art was ordered in 1996, prior art references with key portions underlined, and prior art 12 references containing other sorts of notations. Id. at 1009:17-1022:13. The evidence does not 13 support a contention that Rambus reconstructed prior art that had been destroyed in advance of 14 litigation. Further, no evidence was offered to show the destruction of any prior art that any of 15 Rambus's litigation opponents has identified as material and not cited by the inventor to the 16 Patent Office in connection with the Farmwald/Horowitz line of applications. 17 157.
The evidence did not show that Rambus targeted or destroyed prior art pursuant to
18 its document retention policy. Every witness who testified on the matter at the Hynix UCH Trial, 19 the testimony from which is admitted here as if presented here, confirmed that they had retained 20 prior art and that they did not destroy it in implementing the policy. The evidence also does not 21 show that infringement analyses or reverse engineering documents were targeted or destroyed as 22 a result of Rambus’s document retention policy. The evidence established that Rambus 23 conducted infringement analyses for the patents in suit after they issued in the 1999 and 2000 24 time frame, and that these documents were maintained under the document retention policy and 25 produced (or logged) in this case. 26 27 28 - 45 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
158.
Document 2163
Filed 09/09/2008
Page 50 of 77
Jose Moniz began working on Rambus matters at Neil Steinberg’s law firm in
2
Virginia in January 1999. Hynix UCH Trial Tr. at 1626:15 – 1627:3; 1628:7-12. In late
3
September or early October of 1999, Mr. Moniz became a Rambus employee. Id. at 1626:10-12.
4
159.
As part of his duties while working for Mr. Steinberg in early 1999, Mr. Moniz
5
conducted a search for prior art relating to Rambus patent applications claiming priority to the
6
original ‘898 application. Id. at 1629:12-25.
7
160.
Mr. Moniz obtained copies of any prior art that he found that he believed might be
8
material to one or more of the Rambus patent applications, and that prior art was all submitted to
9
the Patent & Trademark Office. Id. at 1631:23 – 1632:6; 1637:9-23.
10
161.
Mr. Moniz added copies of the prior art that he found in his search to a collection
11
of prior art that had already been gathered, and stored the combined collection in banker’s boxes.
12
Id. at 1632:7-18; 1638:16-25.
13
162.
When Mr. Moniz joined Rambus, the boxes of prior art that he had maintained in
14
Virginia were shipped to Rambus where Mr. Moniz continued to maintain them until two or three
15
years ago when they were turned over to a litigation group. Id. at 1639:15-25; 1658:5-9.
16
163.
The prior art collected by Mr. Moniz in 1999 has not been destroyed, and copies of
17
that prior art were produced to Hynix and Samsung. Id. at 1641:13 – 1642:9; 1649:11-18; 1653:8
18
– 1658:4.
19
164.
Mr. Moniz and Mr. Steinberg did testify that they may have discarded duplicate
20
copies of prior art containing notes related to their categorization of the art in order to determine
21
to which of the Rambus patent applications the art could be material. Hynix UCH Trial Tr. at
22
1452:1-8; 1455:1-4; 1641:3-12. However, no information was lost because the substance of the
23
notes was preserved in the Information Disclosure Statements submitted to the patent office
24
which show in which applications a particular prior art reference was cited. Hynix UCH Trial Tr.
25
at 1481:7 – 1482:20; 1661:10-22.
26 27 28 - 46 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
3.
Document 2163
Filed 09/09/2008
Page 51 of 77
Rambus Maintained Relevant Internal Communications Regarding License Negotiations
2 165.
At the Hynix UCH Trial, Hynix asserted that communications regarding 1998
3 DRAM license negotiations, and the impact of the Hyundai-LG merger on Rambus licenses with 4 the predecessor companies, was material. 5 166.
A “fairly complete record” has been produced of the external communications
6 between the parties regarding negotiations between Rambus and Hyundai in or around July 1998 7 for a proposed amendment to the parties’ December 1995 RDRAM agreement. See Hynix UCH 8 Trial Tr. at 982:23-983:3. 9 167.
The external correspondence between the parties regarding the Hyundai-LG
10 merger and adoption of the LG Semicon has been preserved and produced. See Hynix UCH Trial 11 Tr. at 983:10-24. 12 168.
Rambus has either preserved and produced or logged as privileged numerous
13 internal communications regarding these topics, including numerous internal communications 14 discussing possible elimination or modification of the “Other DRAM” clause contained in the 15 1995 agreement and internal documents regarding the consequences of the Hyundai-LG merger. 16 See Hynix UCH Trial Tr. at 1029:1-20, 1031:10-1034:1, 1047:2-1052:5, 1055:3-1056:11; Tr. Ex. 17 10588 (Rambus Privilege Log Entries 963 and 4048). 18 169.
In the ‘2298 and ‘334 Cases, Samsung asserts that communications regarding its
19 October 2000 SDR / DDR license is material. 20 170.
A fairly complete record has been produced of the external communications
21 between Rambus and Samsung regarding the negotiations for this license. See Tr. Exs. 9064, 22 9074, 9062, 9099, 9100, 9102, 10029-10031, 4223, 9107, 9108, 4227, and 4230-4233. Indeed, 23 for the majority of these licensing materials, it is Rambus, not Samsung, who produced the only 24 copy of the licensing materials exchanged between Rambus and Samsung. See, e.g., Tr. Exs. 25 4209; 4218; 4223-4225; 4227; 4230-4233 (bearing Rambus Bates numbers). 26 27 28 - 47 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
171.
Document 2163
Filed 09/09/2008
Page 52 of 77
Rambus has preserved and logged as privileged more than three dozen internal
2
communications described as relating to Samsung license negotiations and/or the Samsung
3
license. See Tr. Ex. 10592 (Supplemental Rambus Privilege Log).
4 5
172.
the licensing-related files for other potential or actual licensees. 4.
6 7
Finally, there is no evidence that Rambus failed to retain relevant documents from
173.
Rambus Maintained JEDEC Related Documents
Rambus's JEDEC representative Richard Crisp destroyed materials that he had
8
received from JEDEC, such as unopened envelopes containing paper ballots and official minutes
9
of JEDEC meetings. These documents, however, are publicly available from JEDEC. There is
10
no evidence that Mr. Crisp’s destruction of these duplicates did not occur during one of his many
11
office moves prior to Rambus’s adoption of its document retention policy in 1998. Hynix UCH
12
Trial Tr. 1210:15-1211:8.
13
174.
When implementing the document retention policy, Mr. Crisp specifically retained
14
his JEDEC-related emails, including his trip reports, pursuant to the directive to look for things to
15
keep. RTX359; Hynix UCH Trial Tr. 1211:9-1213:14. Therefore, the material JEDEC materials
16
are available. 5.
17
Relevant Presentations to the Board of Directors Were Maintained
18 175.
Rambus preserved and produced numerous written presentations that were made to
19 Rambus’s Board of Directors. These presentations include at least one or two by Mr. Mooring, 20 see Hynix UCH Trial Tr. at 984:12-17, as well as the following Board presentations that were 21 relied upon by Hynix during the Hynix UCH Trial: March 1998 Board presentation (HTX006; 22 Hynix UCH Trial tr. at 198:17-21); October 1998 Board presentation (Hynix UCH Trial Tr. at 23 289:14-23); October 1999 Board presentation (Hynix UCH Trial Tr. at 324:8-16); and January 24 2000 Board presentation (Hynix UCH Trial Tr. at 328:14-23). 25 D.
Litigation Against Samsung Was Not Reasonably More Than A Possibility Until 2005
176.
Rambus hired Joel Karp in October 1997 to assess its patent portfolio, determine if
26 27 28
chips infringed the patent portfolio, develop licensing strategies for infringing chips, and - 48 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 53 of 77
1
negotiate with companies that build and sell such infringing chips. RTX080; Hynix UCH Trial
2
Tr. at 357:17-24.
3
177.
In his email advising Rambus employees of Mr. Karp’s hiring, then Rambus CEO
4
Geoff Tate confirmed that Rambus’s primary business strategy remained the successful market
5
introduction of RDRAM:
6
as I’ve said before, patents are really just a back up line of defense 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 customer’s needs better than the competitors
7 8
RTX080. Rambus had confidence in the ability of RDRAM to win in the marketplace, 9 particularly given the support of Intel. In order to accomplish this, however, Rambus needed the 10 DRAM manufacturers to build the RDRAM devices. See, e.g., Hynix UCH Trial Tr. at 1237:2011 1239:1, 1251:3-6, 1321:20-1322:1, 1559:25-1560:14, 1565:11-24. 12 178.
The evidence showed an awareness on the part of Rambus executives as early as
13 the fall of 1997 that if some of Rambus’s patent applications ripened into patents, and if the 14 claims of those patents covered SDRAM or DDR SDRAM devices, and if it made business sense 15 for Rambus to seek licenses for those devices and it chose to do so, and if licensing negotiations 16 fell apart, there was a chance of litigation. See, e.g., Hynix UCH Trial Tr. at 1256:18-1257:12. 17 This awareness of a “general possibility” is not the equivalent of “anticipating” litigation. 18 179.
The evidence also showed that Rambus did not actively contemplate litigation or
19 believe litigation against any particular DRAM manufacturer to be necessary or wise before late 20 1999, after its negotiations with Hitachi for a license covering certain non-RDRAM devices broke 21 down. 22 180.
Mr. Karp and others inside Rambus did have discussions of potential non-
23 RDRAM licensing strategies in 1998 and 1999, and in the context of those discussions also 24 discussed the possibility of litigation. The evidence showed that Rambus understood that it is 25 important in the context of license negotiations to consider and assess litigation alternatives 26 because the potential licensee will itself be considering that alternative. The patentee needs to 27 anticipate whether the potential licensee is entering the negotiations confident, or uncertain, about 28 - 49 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 54 of 77
1
whether it would likely prevail in litigation, since that assessment will color the potential
2
licensee’s approach to the negotiations and its willingness to license the patents. Consideration of
3
the possibility of litigation in preparation for potential or even actual negotiations did not
4
constitute an expectation or anticipation of litigation. See, e.g., Hynix UCH Trial Tr. at 1398:16-
5
1399:8; 1400:13-1401:18.
6
181.
The evidence shows that in these discussions, Rambus wanted first and foremost to
7
license its patents rather than incur the risk and expense of litigation. See, e.g., RTX080 at 1
8
(10/21/97 Tate e-mail stating that Mr. Karp’s “role is to prepare and then to negotiate to license
9
our patents”). This approach was consistent with Rambus’s earlier experience in dealing with
10
another company, Mosys, that had infringed Rambus’s patents. Although the facts underlying
11
Mosys’ infringement were particularly egregious – Mosys had been founded by two former
12
Rambus employees with knowledge of Rambus’s trade secrets, who then released a product very
13
similar to Rambus’s – Rambus’s approach was not to litigate. See RTX066 (“Our strategy is to
14
avoid any legal battle . . . .”); Hynix UCH Trial Tr. at 1382:8-22; 1383:16-1384:15; 1552:5-
15
1553:13. Instead, Rambus sought to, and did, reach an amicable resolution with Mosys and
16
granted Mosys a license to use Rambus technology. See Hynix UCH Trial Tr. at 1384:5-20;
17
1553:21-1554:4.
18
182.
In 1998, litigation was considered a far-off contingency, to be considered as an
19
option only if all of the following occurred: (1) RDRAM production was established, (2) patents
20
were issued by the PTO that contained claims covering features used in competitive devices;
21
(3) product samples from potentially infringing DRAM manufacturers were available in the
22
marketplace; (4) the non-compatible products were reverse engineered and claim charts made that
23
showed coverage of the actual products under the Rambus patents; (5) infringing products
24
shipped in sufficient quantities to create an incentive to seek to license; (6) Rambus’s executive
25
management and board chose to seek licenses despite the perceived potential for friction with the
26
DRAM manufacturers; and (7) licensing negotiations failed. See, e.g., Hynix UCH Trial Tr. at
27
1321:6-1322:17, 1326:7-20, 1391:21-1393:9, 1565:11-24; Redacted HTX006 at 7; HTX128 at 2-
28 - 50 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 55 of 77
1
3. It is clear that when the document retention policy was adopted, none of these events had
2
occurred.
3
183.
The patents that Rambus has asserted against DRAM manufacturers did not issue
4
until June 22, 1999, at the earliest. See HTX005. In late September 1999, Karp made a
5
presentation discussing the possibility that Intel’s support for RDRAM could waver, and
6
recommending that a non-compatible licensing program be implemented. See Redacted HTX244
7
at 2-3. Following an October 1999 Board meeting, Rambus initiated licensing negotiations with
8
Hitachi, seeking first and foremost to obtain a negotiated license. See, e.g., Hynix UCH Tr.
9
1400:13-1401:18. When negotiations broke down, Rambus held a “beauty contest” in late
10
November or early December of 1999, and retained Gray Cary as litigation counsel. Rambus
11
filed suit against Hitachi in January 2000.
12
184.
The fact that Rambus did not budget any money in 1998 or 1999 for litigation
13
against a DRAM manufacturer shows that Rambus did not expect to be involved in litigation
14
prior to late 1999. At the beginning of each year, Rambus would go through a budgeting process
15
and allocate where money could be spent. Through 1999, expenditures over $5,000 to $10,000
16
would “certainly be in the budget.” Hynix UCH Trial Tr. at 1570:1-1571:13. Nevertheless,
17
Rambus did not allocate any money for litigation expenses in 1997, 1998, or 1999. See HTX013
18
at 18-19; Redacted RTX161; Hynix UCH Trial Tr. at 376:23-378:21, 383:15-18, 383:23-384:14.
19
185.
The record shows that prior to filing suit against Hitachi in early 2000, Rambus
20
and its counsel instructed employees with potentially relevant documents to preserve those
21
documents. Lawyers from the Gray Cary firm, after the firm was retained in connection with the
22
Hitachi litigation, also instructed dozens of Rambus employees that they needed to preserve all
23
documents that could be relevant to the litigation. See Hynix UCH Trial Tr. at 775:12-776:10.
24
186.
Samsung did not approach Rambus requesting a non-compatible license until later
25
in 2000. See, e.g., Tr. Ex. 9063. Rambus and Samsung successfully negotiated the SDR / DDR
26
license that they executed in October 2000 as described herein. That license provided for
e
27 28
Tr. Ex. 9084 § 2.1. - 51 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
187.
Document 2163
Filed 09/09/2008
Page 56 of 77
Rambus did not consider infringement litigation with Samsung reasonably more
2
than a possibility until the breakdown of negotiations with Samsung over a renewal to the
3
SDR/DDR License in 2005, as described herein.
4
XI.
5 6
SAMSUNG DESTROYED RELEVANT AND MATERIAL EVIDENCE 188.
As explained above, Samsung closely followed Rambus litigation with other
DRAM manufacturers in 2000 and 2001, and discussed
7
”
Tr. Ex. 9138; see supra at Section VI. On August 22, 2000, Samsung retained
8
joint defense counsel to attack Rambus’s patents and regularly communicated with counsel “in
9
anticipation of litigation.” See, e.g., Ex. 9104, 10607. And after the SDR/DDR License had been
10
signed, Samsung
11 12
See Tr. Exs. 9334 & 9335. 189.
However, Samsung did not put a litigation hold in place for Rambus-related
13
documents until after this litigation began in June 2005. See Tr. Ex. 9338, 9340. Indeed, some
14
employees did not receive a litigation hold notice until August 2007; other custodians of relevant
15
documents never received one at all. See Tr. Ex. 9339.
16
190.
With no litigation hold in place, Samsung automatically deleted and/or destroyed
17
e-mails up to at least June 2005 on an ongoing basis. See, e.g., Tr. Ex. 9219 at 65, 68 (testimony
18
of Samsung’s corporate designee stating that emails were only stored
19
); Tr. Ex. 9218 (explaining that Samsung’s e-mail system
20
); Aug. 28, 2007 Choi Dep. Tr. at 43:10-
21
44:4, 82:12-16. Samsung also continued its document retention policies that mandated the
22
shredding and burning of certain documents. See, e.g., Tr. Ex. 9218 at 5-6, 44-45.
23 24
191.
In 2006, after this litigation had already commenced, Samsung Electronics
America adopted a document retention policy that required employees, among other things, to
25
Tr. Ex. 9221.
26 27 28
Tr. Ex. 9222. Indeed, Samsung witnesses admitted that they have destroyed documents such as notebooks as part of a regular housecleaning process. See, e.g., - 52 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
Document 2163
Page 57 of 77
Aug. 23, 2007 Kyung Dep. Tr. at 22:12-19, 22:22-23:4
2 3
Filed 09/09/2008
); June 19, 2008 Kang Dep. Tr. at 207:7-208:1 (
4
). 192.
In contrast to Rambus’s fairly complete production of documents described above,
5
Samsung has failed to produce several categories of relevant and material documents, including
6
but not limited to internal and external correspondence regarding the parties’ license negotiations;
7
company-issued notebooks, including notebooks of Samsung employees who have analyzed
8
Rambus patents and/or negotiated license agreements with Rambus; joint defense
9
communications related to the attack on Rambus patents, and communications expressing
10
concern or skepticism about Mr. Steinberg’s work at Rambus. The production of internal
11
Samsung e-mails has been particularly inadequate as a result of Samsung’s failure to implement a
12
litigation hold to modify Samsung’s electronic document retention policies.
13 14 15 16
PROPOSED CONCLUSIONS OF LAW I.
BREACH OF CONTRACT CLAIMS 1.
Under California law, a contract “must be so interpreted as to give effect to the
17
mutual intention of the parties as it existed at the time of contracting, so far as the same is
18
ascertainable and lawful.” Cal. Civ. Code § 1636. “When a contract is reduced to writing, the
19
intention of the parties is to be ascertained from the writing alone, if possible.” Cal. Civ. Code §
20
1639. When the meaning of the contract is based on the words of the agreement alone, or when
21
there is no conflict in the extrinsic evidence, the Court may interpret the contract as a matter of
22
law. City of Hope Nat’l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 395 (2008).
23
2.
In discerning the meaning of an ambiguous or unclear contract, the court may
24
consider relevant conduct by the parties either prior or subsequent to its formation. Stockton v.
25
Stockton Plaza Corp., 261 Cal. App. 2d 639, 644 (1968) (“Both prior negotiations and prior
26
conversations may be construed as well as the subsequent acts of the parties in ascertaining the
27
true intention of the parties to the contract.”). Where alternative terms have been proposed and
28
rejected during negotiations, a contract should not be construed as encompassing those rejected - 53 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 58 of 77
1
terms. See Sun Pacific Farming Coop., 2006 WL 1716206, at *10 (“[W]here the parties’
2
negotiation history or extrinsic evidence shows that terms were unacceptable, the court may not
3
read rejected terms into the contract.”), aff’d in relevant part and vacated and remanded on
4
separate topic, 277 Fed. Appx. 727 (9th Cir. May 8, 2008); Goodloe, 37 Cal. App. 4th at 490-91
5
(applying same principle in interpreting statutes).
6
A.
Breach of Section 3.8
7
3.
For the reasons set forth above in the Findings of Fact, Samsung has failed to
8
satisfy its burden of proof on Count I for breach of Section 3.8 of the SDR/DDR License. The
9
evidence showed that the parties did not intend Section 3.8 to apply to a multi-layered agreement
10
like the Infineon Settlement Agreement. Thus, upon reaching a settlement with Infineon, Rambus
11
did not owe a contractual duty to Samsung under Section 3.8 to reduce the royalty rate paid by
12
Samsung under the SDR/DDR License for the Second Quarter of 2005.
13
B.
Breach of Section 8.5
14
4.
Samsung has also failed to satisfy its burden of proof on Count II for breach of
15
Section 8.5. The evidence established that Section 8.5, by its express terms, only obligated the
16
parties
17
Tr. Ex. 9084 § 8.5. Section 8.5 cannot be reasonably interpreted as imposing a
18
contractual duty on Rambus under Section 8.5 to offer Samsung, let alone agree to, a renewal
19
with an equivalent or more favorable royalty rate than the purported “effective royalty rate” that
20
Samsung contends Infineon received through its settlement.
21
5.
Precisely because agreements to negotiate of the type set forth in Section 8.5 do
22
not require a party to enter into an agreement with pre-ordained terms, California law does not
23
permit a party to seek expectation damages based on a claim for breach of a duty to negotiate in
24
good faith. In fact, California law precludes a judicial determination that Samsung should be
25
treated as though it had entered into a new SDR/DDR License upon terms of its choosing. This is
26
because, in any negotiation, “there is no way of knowing what the ultimate terms of the
27
agreement would have been or even if there would have been an ultimate agreement.” Copeland
28
v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251, 1262-63 (2002). Whether based on an express - 54 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 59 of 77
1
contractual provision or the implied covenant of good faith and fair dealing, “damages for the
2
injured party’s lost expectations under the prospective contract” are not available and “reliance
3
damages are the only form of recovery available in an action on a [failure] to negotiate an
4
agreement.” Id. at 1260-61, 1263. Here, Samsung has not offered any evidence of any reliance
5
damages, and thus cannot demonstrate any legally cognizable injury. For that reason as well,
6
Samsung’s Section 8.5 claim necessarily fails.
7
6.
Samsung’s Section 8.5 also fails because that provision expressly states
8 9
Tr. Ex. 9084 § 8.5. As set forth in
10
the Findings of Fact, Samsung was in breach of the Agreement by no later than July 2004 due to
11
its failure to cooperate in the royalty audit, and Rambus properly terminated the Agreement on
12
that basis on June 6, 2005. See supra at Findings of Fact, Section V. Moreover, as discovered in
13
the audit, Samsung also breached the Agreement by improperly deducting various unauthorized
14
expenses, resulting in the understatement and underpayment of its royalties. See supra at
15
Findings of Fact, ¶ 94.
16
C.
Breach of the Implied Duty of Good Faith and Fair Dealing
17
7.
Samsung’s cause of action for breach of duty of the implied covenant of good faith
18
and fair dealing (Count III), also fails because it is predicated on Samsung’s mischaracterization
19
of Rambus’s contractual obligations under Sections 3.8 and 8.5. Waller v. Truck Ins. Exch., Inc.,
20
11 Cal. 4th 1, 36 (1995). With regard to Samsung’s Section 3.8 claim, because Samsung had no
21
right to an “effective royalty rate” from the Infineon Settlement Agreement, Rambus’s failure to
22
notify Samsung of the terms of the Agreement or offer such terms did not constitute a violation of
23
its duty of good faith and fair dealing: “[T]he covenant is implied as a supplement to the express
24
contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the
25
other party’s rights to the benefits of the agreement. . . . Absent that contractual right, however,
26
the implied covenant has nothing upon which to act as a supplement, and ‘should not be endowed
27
with an existence independent of its contractual underpinnings.’” Id. (quoting Love v. Fire Ins.
28
Exch., 221 Cal. App. 3d 1136, 1153 (1990)) (emphasis added). - 55 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
8.
Document 2163
Filed 09/09/2008
Page 60 of 77
Nor does Samsung’s implied covenant claim provide a basis for liability with
2
regard to its claim for breach of Section 8.5. Samsung’s claim in this regard is based on
3
Rambus’s alleged failure to enter into a new license agreement having the terms of the Infineon
4
Settlement Agreement. But as discussed above, Section 8.5 includes no such obligation and is
5
nothing more than an agreement to negotiate in good faith. See supra at Findings of Fact, ¶¶ 76-
6
84. Thus, Samsung is once again attempting to create a new obligation that is untethered to any
7
existing contractual underpinning. Waller, 11 Cal. 4th 1, 36; Love, 221 Cal. App. 3d at 1153.
8 9
9.
Moreover, as explained above, see supra ¶ 5, California law plainly holds that the
implied covenant of good faith and fair dealing does not entitle a party to obtain expectation
10
damages based on a hypothetical agreement that it contends it would have obtained had the other
11
party negotiated in good faith. See Copeland, 96 Cal. App. at 1262-63. Here, Samsung has
12
offered no evidence of any reliance damages as required by California law, and thus cannot
13
establish any legally cognizable damages for its claims under Section 8.5.
14
II.
15
SECTION 17200 CLAIM 10.
California Business & Profession Code §17200 defines “unfair competition” to
16
mean “any unlawful, unfair, or fraudulent business act or practice. Cal. Bus. Prof. Code. §17200.
17
“[I]t establishes three varieties of unfair competition – acts or practices which are unlawful, or
18
unfair, or fraudulent.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th
19
163, 180 (1999). “Although the unfair competition law is broadly written to permit courts to
20
restrain dishonest or unfair business dealings, the scope of the law is not unlimited. ‘Courts may
21
not simply impose their own notions of the day as to what is fair or unfair.’” Scripps Clinic v.
22
Superior Court, 108 Cal. App. 4th 917, 938 (2003).
23
11.
As an initial matter, Samsung’s § 17200 claim fails in light of Proposition 64,
24
which imposed various restrictions on the scope and application of California’s unfair
25
competition laws. Specifically, “[a]fter Proposition 64 . . . a private person has standing to sue
26
only if he or she ‘has suffered injury in fact and has lost money or property as a result of such
27
unfair competition.’” Californians for Disability Rights v. Mervyn’s, LLC, 39 Cal. 4th 223, 227
28 - 56 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 61 of 77
1
(2006) (emphases added). Samsung has not shown that it has lost money or property as a result
2
of the actions that they allege constitute unfair competition.
3
12.
In addition, Proposition 64 eliminated associational standing and provided that a
4
plaintiff may sue “on behalf of others only if the claimant meets the standing requirements of
5
section 17204 and complies with section 382 of the Code of Civil Procedure.” See Coalition for
6
ICANN Transparency, Inc. v. VeriSign, Inc., 452 F. Supp. 2d 924, 938 (N.D. Cal. 2006) (quoting
7
Bus. & Prof. Code § 17203).
8 9
13.
For the reasons set out above in the Findings of Fact and in Rambus’s Rule 52
motion filed in connection with the January 2008 portion of the trial, Samsung’s § 17200 claims
10
fail to satisfy these more restrictive requirements. See Docket No. 1633 (Case No. 05-00334);
11
Docket No. 1488 (Case No. 05-00334). Samsung did not, for example, meet its burden of
12
proving that it “lost money . . . as a result of [Rambus’s] unfair competition.” See Pfizer Inc. v.
13
Superior Court, 141 Cal. App. 4th 290, 305 (2006) (“Inherent in Proposition 64’s requirement
14
that a plaintiff suffered ‘injury in fact . . . as a result of’ the fraudulent business practice or false
15
advertising is that a plaintiff actually relied on the misrepresentation and as a result, was injured
16
thereby”) (emphasis in original). See generally Coalition for ICANN Transparency Inc., 452 F.
17
Supp. 2d at 939 (interpreting Proposition 64 broadly and applying California law that “[m]aterial
18
changes in the phraseology of statutes normally demonstrate an intent by the lawmakers to
19
change the meaning.”) (citation omitted); Laster v. T-Mobile USA, Inc., 407 F. Supp. 2d 1181,
20
1194 (S.D. Cal. 2005) (holding that “[t]he language of the UCL, as amended by Proposition 64,
21
makes clear that a showing of causation is required as to each representative plaintiff.”)
22
(emphasis in original); Hall v. Time Inc., 158 Cal. App. 4th 847, 853-55 (2008) (confirming that
23
Section 17204 requires both “injury in fact” and a causal link to the unfair competition).
24
14.
Moreover, to the extent that Samsung asserted its § 17200 claim on behalf of “the
25
consuming public” and/or “the public at large,” it has not satisfied the requirements of section
26
382 of the Code of Civil Procedure. See Second Amended Answer ¶¶ 288-89 (Case No. 05-
27
00334, Docket No. 141) (Jan. 31, 2007); Samsung’s Second Amended Answer ¶¶ 260-61 (Case
28
No. 05-02298, Docket No. 87) (Jan. 24, 2007). - 57 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
15.
Document 2163
Filed 09/09/2008
Page 62 of 77
Samsung’s § 17200 claim also fails as a matter of law because Rambus’s efforts to
2
enforce its patents cannot be deemed unfair competition under the Noerr-Pennington line of cases
3
and under FieldTurf Int’l, Inc. v. Sprinturf, Inc., 433 F.3d 1366, 1372 (Fed. Cir. 2006) (reversing
4
entry of judgment on § 17200 claim and holding that “[e]nforcement of a patent that is reasonably
5
believed to be infringed is not an act of unfair competition.”). Indeed, this Court has previously
6
held that, without more, Rambus’s use of litigation to enforce its patents is protected activity that
7
cannot form the basis for a 17200 claim.13 Hynix Semiconductor Inc. v. Rambus Inc., 2006 WL
8
1883353, at *1-*2 (N.D. Cal. July 7, 2006) (adjudicating that Rambus’s use of litigation, and
9
threats of litigation, to enforce its patents is protected petitioning activity and cannot form the
10
basis, without more, for a Section 17200 claim).
11
A.
JEDEC 17200 Claim
12
16.
One aspect of Samsung’s §17200 claim is based on Rambus’s participation in
13
JEDEC (hereinafter “JEDEC 17200 Claim”). See Second Amended Answer ¶ 287(e) (Case No.
14
05-00334, Docket No. 141) (Jan. 31, 2007); Samsung’s Second Amended Answer ¶ 259(e) (Case
15
No. 05-02298, Docket No. 87) (Jan. 24, 2007). Samsung’s JEDEC 17200 Claim necessarily fails
16
for several reasons. First, as explained in the Findings of Fact, see supra at Section VI, Samsung
17
possessed actual knowledge of the JEDEC 17200 Claim by September 2000 (at the latest) – more
18
than four years before Samsung filed the claim on June 6, 2005. Therefore, the JEDEC 17200
19
Claim is barred by the applicable statute of limitations. Cal. Bus. Prof. Code § 17208. Because
20
Samsung had actual notice of the JEDEC 17200 Claim, the discovery rule and equitable tolling
21
rules do not toll the statute of limitations. See Rita M. v. Roman Catholic Archbishop, 187 Cal.
22
App. 3d 1453, 1460 (1986).
23 24
17.
Second, Samsung’s JEDEC 17200 Claim fails because Samsung released the claim
when it entered into the SDR/DDR License. As explained above, the parties intended Section
25 26 27 28
13
Cal. Civil Code section 47(b) also provides Rambus absolute protection against liability premised upon its litigation activities. See generally People ex. Rel. Gallegos v. The Pacific Lumber Co., 158 Cal. App. 4th 950, 957-69 (2008). Section 47(b) provides an independent basis for granting judgment to Rambus on Samsung’s § 17200 claim. - 58 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 63 of 77
1
2.12 of the Agreement to be broad enough to encompass this claim that was known to Samsung at
2
the time of the negotiations of the Agreement. See supra at Findings of Fact, Section VI.
3
18.
Third, Samsung’s JEDEC 17200 Claim also fails because the patent laws provide a
4
“safe harbor” for many of the practices challenged by Samsung as “unfair.” It is well established
5
that “[w]hen specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair
6
competition law to assault that harbor.” Cel-Tech Communications, 20 Cal. 4th at 182; Shvarts v.
7
Budget Group, Inc., 81 Cal. App. 4th 1153, 1158 (2000); Schnall v. Hertz Corp., 78 Cal. App. 4th
8
1144, 1162 (2000). These principles apply in this case to bar § 17200 liability as a matter of law.
9
19.
It is also settled that patent applications contain trade secrets. The protection of
10
trade secrets is why the Patent Office maintains patent applications in strict confidence,14 and
11
why courts have prevented or severely limited third-party access to applications filed with the
12
Patent Office. See, e.g., Irons & Sears v. Dann, 606 F.2d 1215, 1220-21 (D.C. Cir. 1979)
13
(denying access through the Freedom of Information Act to patent applications to prevent
14
competitive harm); Cordis Corp. v. SciMed Life Sys., Inc., 982 F. Supp. 1358, 1360 (D. Minn.
15
1997) (“It is well-settled that the secrecy of pending and abandoned United States patent
16
applications should be preserved whenever possible”). As a consequence, Rambus had a
17
legitimate business justification for its refusal to disclose information regarding its patent
18
applications and future plans, and its decision not to reveal such trade secrets cannot be deemed
19
“unfair” under California law.
20
20.
It is also well-established that the patent laws may operate to preempt a § 17200
21
claim based on the enforcement of a patent in the marketplace. See 800 Adept, Inc. v. Murex
22
Securities, Ltd., -- F.3d --, 2008 WL 3982090, at *26 (Fed. Cir. Aug. 29, 2008); Globetrotter
23
Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367, 1377 (Fed. Cir. 2004); Zenith Elec.
24
Corp. v. Exzec, Inc., 182 F.3d 1340, 1355 (Fed. Cir. 1999).
25 26 27 28
14
Effective in 2000, U.S. patent law was amended to conform more closely to international patent laws. As amended, U.S. patent law now provides that patent applications be published 18 months after filing unless the inventor requests that they not be published and certifies that the disclosed invention is not the subject of a foreign patent application that would be published. 35 U.S.C. § 122. This law was not in effect when Rambus was a member of JEDEC. - 59 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 64 of 77
1
B.
Spoliation 17200 Claim
2
21.
Samsung’s § 17200 claim based on Rambus’s alleged spoliation of evidence
3
(“Spoliation 17200 Claim”) also fails for several reasons. First, Rambus’s alleged spoliation does
4
not form a proper basis for a § 17200 claim. Section 17200 authorizes only equitable relief, and a
5
Section 17200 claim therefore is properly dismissed when as a matter of law the facts alleged
6
would not entitle the plaintiff to any equitable relief. See Olson v. Cohen, 106 Cal. App. 4th
7
1209, 1214-15 (2003) (sustaining demurrer without leave to amend to Section 17200 claim where
8
no basis on facts pled to award any equitable relief, even assuming a violation). That is precisely
9
the situation here because (1) one factor that weighs against awarding equitable relief to a party is
10
any injury to the public interest that will result from doing so, see Cota v. County of Los Angeles,
11
105 Cal. App. 3d 282, 292 (1980); Ukhtomski v. Tioga Mut. Water Co., 12 Cal. App. 2d 726, 729
12
(1936), and (2) the California Supreme Court already decided in Cedars-Sinai Med. Ctr. v.
13
Superior Court, 18 Cal. 4th 1 (1998) (no tort of intentional spoliation), that the injury to the
14
public interest that would result from permitting derivative claims based on spoliation outweighs
15
any interest of the non-spoliating party in having an additional affirmative remedy beyond those
16
defensive remedies already available in the original suit itself (at least where, as here, the alleged
17
spoliation was discoverable before trial).
18
22.
Second, in order to establish a § 17200 violation based on the alleged Rambus
19
spoliation, Samsung must prove its allegation that the document destruction by Rambus violated
20
California Penal Code § 135. In order to do so, Samsung must specifically prove that (1) Rambus
21
knew that the documents were “about to be produced in evidence” and (2) Rambus nevertheless
22
“willfully destroy[ed the documents] . . . with intent thereby to prevent [them] from being
23
produced.” Id. Samsung failed to prove either of these elements, however.
24
23.
Rambus did not actively contemplate litigation or believe litigation against any
25
particular DRAM manufacturer to be necessary or wise before its negotiation with Hitachi failed,
26
namely in late 1999. Therefore, Rambus did not know that any documents it destroyed prior to
27
that time were “about to be produced in evidence”. And, because Samsung failed to prove that
28 - 60 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 65 of 77
1
any documents destroyed after that time were known to be relevant to any pending litigation (or
2
litigation Rambus actively contemplated), Samsung did not prove that Rambus knew any
3
documents it destroyed were “about to be produced in evidence”. Furthermore, Samsung failed
4
to prove that Rambus “willfully destroy[ed the documents] . . . with intent thereby to prevent
5
[them] from being produced” in the pending or contemplated proceeding.
6
24.
Third, Samsung failed to establish that this Court should exercise its equitable
7
discretion to provide any relief under § 17200 in this case. Samsung has asserted spoliation as
8
part of an unclean hands defense. The Court finds that there is no basis in equity for it to provide
9
any more or different relief under Section 17200 than it finds is appropriate under the unclean
10
hands defense. The Court further finds, as explained below, that Samsung is not entitled to any
11
relief under its unclean hands defense.
12
III.
13
EQUITABLE ESTOPPEL AND ESTOPPEL DEFENSES 25.
Samsung asserts the doctrine of equitable estoppel (Sixth and Seventh Affirmative
14
Defenses) as a bar to Rambus’s claims for patent infringement. Each of these equitable defenses
15
is based on Rambus’s participation in JEDEC, Rambus’s alleged misrepresentations or
16
nondisclosures during license negotiations with Samsung prior to 2000, and the same facts
17
alleged in Counts IV-VII.15
18
26.
To establish this defense, Samsung must prove the following: “(i) [Rambus] must
19
communicate to [Samsung] (by words, conduct or silence) that [Rambus] will not pursue an
20
infringement claim; (ii) [Samsung] must rely on that communication; and (iii) [Samsung] must
21
establish that it would be materially prejudiced if the patentee is now permitted to proceed with
22
the infringement claim.” B. Braun Med., Inc. v. Abbott Labs., 124 F.3d 1419, 1425 (Fed. Cir.
23
1997) (citing A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041-43 (Fed. Cir.
24 25 26 27 28
15
Samsung has also asserted that it alleges a defense of estoppel based on the 2000 license negotiations. This defense is not pled in Samsung’s Second Amended Answer, Affirmative Defenses, and Counterclaims, nor is it set forth in the parties’ Joint Supplemental Case Management Conference Statement filed on July 31 2007. Therefore, Samsung is barred from asserting it. Moreover, there is no legal support for an estoppel by contract defense in the circumstances present here. - 61 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 66 of 77
1
1992)). “[T]hese elements require a determination that [Samsung] was misled and would have
2
acted differently had it not been misled.” Order Denying Hynix’s Motion for Summary Judgment
3
on Cal. Bus. & Prof. Code 17200 and Equitable Estoppel at 9 (holding that “a general finding that
4
JEDEC members were misled” is insufficient). Samsung failed, for the reasons set out in the
5
Court’s Findings of Fact and in Rambus’s Rule 50 and 52 motions (Docket Nos. 1488 & 1633
6
(Case No. 05-00334)) to establish any of these elements with respect to its estoppel defenses, and
7
those defenses are therefore dismissed.
8 9
27.
Moreover, because equitable estoppel is, as its name suggests, an equitable
defense, Samsung must come to the Court with clean hands in connection with the prosecution
10
and defense of this case. Although not necessary to the Court’s determination in light of the
11
Findings of Fact and Conclusions of Law described above, the Court has serious concerns about
12
the evidence showing that Samsung destroyed documents at a time when it had a duty to preserve
13
them as to Rambus. See infra at Section VII.
14
A.
JEDEC Equitable Estoppel and Estoppel Defenses
15
28.
Samsung has presented no evidence that Rambus’s conduct at JEDEC justified an
16
inference that Rambus would not enforce the patents-in-suit. See A.C. Aukerman, 960 F.2d at
17
1042 (“The patentee’s conduct must have supported an inference that the patentee did not intend
18
to press an infringement claim against the alleged infringer.”). Samsung did not allege that
19
Rambus communicated an intent to forego enforcement of its patents, but relied instead on
20
Rambus’s refusal to comment for this element of their defenses. Samsung failed to establish that
21
Rambus’s silence at JEDEC violated any “clear duty to speak” that would support its equitable
22
estoppel claims. A.C. Aukerman, 960 F.2d at 1043-44 (“silence alone will not create an estoppel
23
unless there was a clear duty to speak”); see also Hemstreet v. Computer Entry Sys. Corp., 972
24
F.2d 1290, 1295 (Fed. Cir. 1992) (“mere silence must be accompanied by some other factor
25
which indicates that the silence was sufficiently misleading as to amount to bad faith”). Further,
26
Samsung failed to prove that JEDEC policies imposed a clear duty upon members to disclose
27
patents or patent applications. Because Samsung has failed to establish the existence of such a
28
duty, Rambus’s silence cannot be treated as a violation of its obligations to disclose its patents. - 62 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 67 of 77
1
Accordingly, Samsung has not established that Rambus’s alleged silence and conduct at JEDEC
2
support an inference that Rambus renounced its patent rights.
3
29.
Samsung has also failed to establish that it relied on Rambus’s purported
4
misrepresentations at JEDEC. Proof of reliance is “essential” to equitable estoppel and requires
5
the infringer to show it had “a relationship or communication with the plaintiff which lulls the
6
infringer into a sense of security in going ahead with [its investments].” Gasser Chair Co. v.
7
Infanti Chair Mfg. Corp., 60 F.3d 770, 776 (Fed. Cir. 1995). Here, Samsung could not have
8
relied on Rambus’s silence at JEDEC because it knew about the potential scope of Rambus’s
9
intellectual property as early as 1991 and proceeded to demand
10
in its 1994
RDRAM license that
11
Moreover, Samsung analyzed and evaluated Rambus’s patents in and around 1996 and
12
thus were clearly aware of the written specification in those early patents and the potential scope
13
of future patents. There is no dispute that Rambus told Samsung that it would be filing patent
14
applications to obtain broad protection for the full scope of its intellectual property. Thus,
15
Samsung simply cannot say that it was lulled or relied in any way by Rambus’s alleged
16
nondisclosure, half-truths, or misrepresentations.
17
30.
Samsung has also failed to prove that it will be individually prejudiced by “a
18
change of economic position or loss of evidence” if Rambus is permitted to enforce its patents.
19
A.C. Aukerman, 960 F.2d at 1043. Like the reliance element of equitable estoppel, material
20
prejudice requires an infringer to establish that the economic harms are related to the patentee’s
21
conduct. See ABB Robotics, Inc. v. GMFanuc Robotics Corp., 52 F.3d 1062, 1065 (Fed. Cir.
22
1995). Samsung has failed to offer any proof of such prejudice. Indeed, in its pretrial
23
disclosures, Samsung disclosed no witnesses or exhibits to show its prejudice, and Samsung
24
offered no such evidence of prejudice at trial.
25
B.
Equitable Estoppel and Estoppel Defenses Based on Licensing Negotiations with Samsung Prior to 2000
31.
Samsung’s estoppel defenses based on the parties’ RDRAM licensing negotiations
26 27 also fail on their merits as set forth in the Findings of Fact above. These defenses are based upon 28 - 63 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 68 of 77
1
Rambus’s alleged misrepresentations in connection with the licensing negotiations between
2
Rambus and Samsung prior to 2000. See Second Amended Answer, Case No. 05-00334, ¶¶ 97-
3
98; Second Amended Answer, Case No. 05-02298, ¶¶ 72-73. Samsung has failed to establish that
4
it relied on Rambus’s statements or conduct during the RDRAM negotiations. To the contrary,
5
the evidence has shown that Samsung was aware of the potential scope of Rambus’s intellectual
6
property and therefore sought
7
Moreover, Samsung analyzed and evaluated Rambus’s patents in and around 1996 and thus were
8
clearly aware of the written specification in those early patents and the potential scope of future
9
patents. There is no dispute that Rambus told Samsung that it would be filing patent applications
in the 1994 RDRAM Agreement.
10
to obtain broad protection for the full scope of its intellectual property. Thus, Samsung simply
11
cannot say that it was lulled or relied in any way by Rambus’s alleged nondisclosure, half-truths,
12
or misrepresentations. Because Samsung has failed to prove reliance, this defense necessarily
13
fails.
14 15 16
32.
Samsung has also failed to offer any proof of prejudice resulting from the
RDRAM licensing negotiations. C.
Equitable Estoppel and Estoppel Defenses Based on Neil Steinberg’s Work at Rambus
33.
On August 11, 2008, this Court granted Rambus’s motion for summary judgment
17 18 on Counts IV-VI and the Steinberg-related aspects of Count VII on the ground that “[t]he 19 uncontradicted documentary evidence in the record shows that Samsung possessed knowledge 20 about Mr. Steinberg’s possible wrongdoing more than four years before Samsung filed its 21 counterclaims” (i.e., June 6, 2005). Order Granting Rambus’s Motion for Summary Judgment on 22 Counts IV-VII of Samsung’s Counterclaims (Aug. 11, 2008), at 10. As noted above, Samsung 23 had knowledge and concern about Mr. Steinberg’s work for Rambus before, during, and 24 25 26 27
immediately after the signing of the SDR/DDR License agreement in October 2000. As a result, Samsung has failed to carry its burden to show reliance sufficient to support its estoppel and equitable estoppel affirmative defenses.
28 - 64 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
34.
Document 2163
Page 69 of 77
Samsung has also failed to show that it was prejudiced in any way as a result of
2
Mr. Steinberg’s work for Rambus.
3
IV.
4
Filed 09/09/2008
IMPLIED LICENSE DEFENSE 35.
An implied license arises from conduct signifying the patentee’s waiver of its
5
statutory rights and requires proof of “a nexus between the patentee’s purported waiver and the
6
infringing action.” Winbond Elecs. Corp. v. ITC, 262 F.3d 1363, 1374 (Fed. Cir. 2001). “An
7
implied license may arise by legal estoppel, acquiescence, conduct, or legal estoppel,” but “the
8
relatively few instances where implied licenses have been found rely on the doctrine of equitable
9
estoppel.” Stickle v. Heublein, Inc., 716 F.2d 1550, 1559 (Fed. Cir. 1983). A finding of an
10
implied license through equitable estoppel requires “an affirmative grant of consent or permission
11
to make, use, or sell: i.e., a license.” Wang Lab. v. Mitsubishi Elecs. Am., 103 F.3d 1571, 1581
12
(Fed. Cir. 1997). A license also may be implied under a theory of legal estoppel “where a
13
patentee has licensed or assigned a right, received consideration, and then sought to derogate
14
from the right granted.” Wang Lab., 103 F.3d at 1581.
15
36.
Under any rationale, Samsung’s implied license defense fails because Samsung
16
could not reasonably or properly infer from Rambus’s language or conduct that Rambus had
17
consented to Samsung’s use of its patents outside of the terms of their explicit license agreements.
18
See McCoy v. Mitsuboshi Cutlery, 67 F.3d 917, 920 (Fed. Cir. 1995) (citing De Forest Radio Tel.
19
Co. v. United States, 273 U.S. 236, 241 (1927)). Among other things, as a sophisticated company
20
licensing certain Rambus patents, Samsung was aware that Rambus’s business model depended
21
upon the licensing of patents for revenue. Samsung could not properly infer given this licensing
22
history that Rambus had consented to Samsung’s use of its patents without a royalty. And as
23
explained above, Samsung has failed to prove that it reasonably relied on any statements or
24
conduct by Rambus at JEDEC, in the RDRAM negotiations, or in connection with Mr.
25
Steinberg’s work at Rambus. Absent evidence of an actual nexus between Rambus’s statements
26
or conduct and Samsung’s infringement, Samsung’s implied license defense fails. See Stickle,
27
716 F.2d at 1559 (“[A]n implied license cannot arise out of the unilateral expectations or even
28 - 65 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 70 of 77
1
reasonable hopes of one party. One must have been led to take action by the conduct of the other
2
party.”).
3
V.
4
DECLARATORY JUDGMENT OF UNENFORCEABILITY 37.
Samsung has alleged one or more claims seeking a declaration of unenforceability
5
(Count X). These claims are based, inter alia, on the allegations relating to Rambus’s
6
participation in JEDEC, the parties’ licensing relationship prior to 2000, and Mr. Steinberg’s
7
work at Rambus. For the reasons described above, Samsung has failed to satisfy its burden of
8
proof on these overlapping aspects of its declaratory judgment claims.16
9
VI.
10
SAMSUNG’S UNCLEAN HANDS DEFENSE 38.
Samsung bore the burden of proving each of the elements of its unclean hands
11
defense at trial. See Conan Properties, Inc. v. Conans Pizza, Inc., 752 F.2d 145, 150 (5th Cir.
12
1985); Omega Indus. v. Raffaele, 894 F. Supp. 1425, 1431 (D. Nev. 1995) (“The party asserting
13
this [unclean hands] doctrine has the burden of proving its application”).
14
39.
A number of courts have required litigants to establish the elements of an unclean
15
hands defense by clear and convincing evidence. See Scott Paper Co. v. Fort Howard Paper Co.,
16
432 F.2d 1198, 1204 (7th Cir. 1970); Grand Band, Inc. v. Lome, 2005 WL 1564924, at *5 (D.
17
Minn. 2005); Ristvedt-Johnson, Inc. v. Brandt, Inc., 805 F. Supp. 549, 556 (N.D. Ill. 1992). In
18
this case, under either a clear and convincing or a preponderance of the evidence standard,
19
Samsung has not met its burden.
20
A.
Spoliation
21
40.
Samsung based its unclean hands defense on Rambus’s alleged destruction of
22
evidence. There is nothing wrongful or inequitable about destroying documents unless there is a
23 24 25 26 27 28
16
Samsung failed to comply with the pretrial disclosure requirements of the Court’s August 22, 2008 Order Regarding Pretrial Calendar for September 22, 2008 Trial, as modified by the parties’ agreement set forth in the August 27, 2008 Joint Pretrial Statement, and thus has failed to prosecute the claims and defenses set forth in the August 27, 2008 Joint Pretrial Statement, specifically, Samsung’s claims for unfair competition under Cal. Bus. & Prof. Code § 17200 (Count VII), its claim for declaratory judgment of unenforceability (Count X), and the affirmative defenses of equitable estoppel, estoppel, and implied license. Therefore, these claims and defenses should therefore be dismissed on their merits. - 66 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 71 of 77
1
duty to preserve those documents. See Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216
2
(S.D.N.Y. 2003) (“It goes without saying that a party can only be sanctioned for destroying
3
evidence if it had a duty to preserve it.”). Samsung alleged that Rambus had such a duty because
4
it anticipated litigation with Samsung.
5
41.
A variety of linguistic formulations are used to describe when a duty to preserve
6
evidence arises in advance of actual litigation. These include when litigation is “probable”, see
7
Hynix Semiconductor Inc. v. Rambus Inc., 2006 WL 565893, at *21 (N.D. Cal. 2006) (discussing
8
ABA Section of Litigation standard and case law cited in comments), and (2) “reasonably
9
foreseeable”, Zubulake, 220 F.R.D. at 216. Even if these different formulations signify different
10
standards, Samsung has failed to demonstrate under any standard that Rambus owed a duty to
11
Samsung to preserve documents for the present litigation prior to the breakdown of negotiations
12
in 2005.
13
42.
Rambus did not actively contemplate litigation or believe litigation against any
14
particular DRAM manufacturer to be necessary or wise before its negotiation with Hitachi failed,
15
namely in late 1999. While hiring of litigation counsel or actually filing suit is not always
16
necessary to demonstrate that a company anticipates litigation, in light of the record presented, it
17
would appear that litigation only became probable and reasonably foreseeable against any DRAM
18
manufacturer shortly before the initiation of the “beauty contest” in late 1999 in which litigation
19
counsel for the Hitachi matter, Gray Cary, was selected. Thus, Rambus's adoption and
20
implementation of its content neutral Document Retention Policy in mid-1998 was a permissible
21
business decision. The destruction of documents on the 1998 and 1999 Shred Days pursuant to
22
the policy did not constitute unlawful spoliation.
23
43.
Rambus did shred additional documents when it moved offices in December 2000,
24
at which point it was in active litigation against Infineon and certain other DRAM manufacturers,
25
although not Samsung (with whom Rambus had successfully negotiated the SDR/DDR License).
26
The evidence presented did not demonstrate that any documents material to Rambus’s patent
27
claims against those DRAM manufacturers were destroyed in conjunction with the 2000 move.
28 - 67 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 72 of 77
1
“The duty to preserve evidence, once it attaches, does not extend beyond evidence that is relevant
2
and material to the claims at issue in the litigation.” Hynix, 2006 WL 565893, at *27.
3
44.
Even if Rambus had destroyed evidence it had a duty to preserve as to some other
4
DRAM manufacturer, however, it would be irrelevant to the unclean hands defense asserted by
5
Samsung in this litigation. To establish unclean hands, the allegedly “unconscionable act” must
6
have had an “immediate and necessary relation to the equity that [Rambus] seeks in respect of the
7
matter in litigation.” Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245 (1933)
8
(emphasis added). This nexus requirement is indispensable to any unclean hands defense: “It is
9
fundamental to [the] operation of the doctrine that the alleged misconduct by the plaintiff relate
10
directly to the transaction concerning which the complaint is made.” Dollar Systems v. Avcar
11
Leasing Systems, 890 F.2d 165, 173 (9th Cir. 1989) (quotation omitted and emphasis added)
12
(alteration in original). As the Supreme Court has explained, courts:
13 14 15
do not close their doors because of plaintiff’s 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. Keystone Driller Co., 290 U.S. at 245-46. See also Jarrow Formulas, Inc. v. Nutrition Now, Inc.,
16 304 F.3d 829, 841 (9th Cir. 2002) (“[U]nclean hands does not constitute ‘misconduct in the 17 abstract, unrelated to the claim to which it is asserted as a defense.’” (quoting Republic Molding 18 Corp. v. B.W. Photo Utils., 319 F.2d 347, 349 (9th Cir. 1963)). Accordingly, under the unclean 19 hands doctrine, “reprehensible acts toward third parties, do not deprive a suitor of his right to 20 justice in a court of equity.” Trice v. Comstock, 121 F. 620, 628 (8th Cir. 1903) (applying rule to 21 reject unclean hands defense); see, e.g., Nice Ball Bearing Co. v. Bearing Jobbers, 205 F.2d 841, 22 850 (7th Cir. 1953) (noting same rule under Illinois law); Newman v. Checkrite California, Inc., 23 912 F. Supp. 1354, 1376 (E.D. Cal. 1995) (applying same rule under California law to reject 24 unclean hands defense); Samsung’s Objections To Order Of Special Master Compelling 25 Production Of Documents From Mosaid Litigation (filed 10/5/07 in ‘334 Case as Document No. 26 448) at 6-7 (arguing that, absent duty to preserve evidence as to Rambus in this litigation, prior 27 Samsung spoliation as to different party in different litigation is irrelevant to Rambus’s unclean 28 - 68 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 73 of 77
1
hands defense against Samsung). See generally Republic Molding Corp., 319 F.2d at 349 (“What
2
is material is not that the plaintiff's hands are dirty, but that . . . the manner of dirtying renders
3
inequitable the assertion of such rights against the defendant”).
4
45.
Similarly, even if Rambus somehow had anticipated litigation against Samsung
5
prior to execution of the SDR/DDR License in October 2000 (which it did not), that too would be
6
immaterial to Samsung’s assertion of an unclean hands defense to Rambus’s patent infringement
7
claims in the ‘2298 and ‘334 cases. Because the unclean hands defense requires that any alleged
8
misconduct “must pertain to the very subject matter involved and affect the equitable relations
9
between the litigants,” the defense will not act to deny relief simply “because the plaintiff may
10
have acted improperly in the past or because such prior misconduct may indirectly affect the
11
problem before the court.” Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472,
12
478-79 (9th Cir. 1969) (quotation omitted). Any purported duty to preserve evidence in
13
anticipation of litigation with Samsung prior to the 2000 licensing negotiations ended with the
14
October 2000 execution of a five year license, and any materials destroyed prior to that time
15
could properly have been destroyed as to Samsung over the course of the next close to five years
16
in accordance with the Rambus document retention program. Therefore, any pre-October 2000
17
document destruction cannot affect the equities between the parties with respect to the patent
18
infringement claims at issue here (which are directed at Samsung's post-license actions in 2005
19
and later), and cannot support Samsung's unclean hands defense. See generally Bio-Tech. Gen.
20
Corp. v. Genentech, Inc., 80 F.3d 1553, 1565 (Fed. Cir. 1996) (litigation misconduct in prior suit
21
between parties on same patents cannot support a defense of unclean hands in present suit).
22 23
46.
Samsung presented no evidence that Rambus destroyed evidence material to this
suit after litigation became probable and reasonably foreseeable in 2005.
24
B.
Bad Faith
25
47.
In order to establish the unclean hands defense, Samsung also had to prove that
26
Rambus acted in bad faith in adopting or implementing its document retention policy. Because
27
“[b]ad intent is the essence of the defense of unclean hands,” Dollar Systems v. Avcar Leasing
28
Systems, 890 F.2d 165, 173 (9th Cir. 1989), accidental, inadvertent, or even grossly negligent - 69 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 74 of 77
1
destruction of documents will not justify the application of the defense. Id.; Omega Indus., 894 F.
2
Supp. at 1432. Rather, the unclean hands defense applies “only if the court is left with a firm
3
conviction that the defendant acted with a fraudulent intent in making the challenged claims.”
4
Jarrow Formulas, Inc., 304 F.3d at 842 (emphasis added). Accord Gidatex, S.r.L. v. Campaniello
5
Imports Ltd., 82 F. Supp. 2d 126, 131 (S.D.N.Y. 1999) (unclean hands applies only where party is
6
“guilty of truly unconscionable and brazen behavior”).
7
48.
Samsung failed to carry its burden to prove bad faith. The evidence established
8
that Rambus adopted and implemented a content neutral document retention policy in conformity
9
with industry standards. The evidence does not support the conclusion that Rambus intentionally
10
designed or implemented its document retention policy to destroy particular damaging documents
11
or categories of documents relevant to patent litigation.
12
C.
Material Prejudice
13
49.
To prevail on its unclean hands defense, Samsung further must prove that
14
Rambus’s conduct materially prejudiced Samsung’s ability to defend itself against Rambus’s
15
patent infringement claims. See Republic Molding Corp., 319 F.2d at 349-50 (in applying the
16
unclean hands defense, “the extent of actual harm caused by the conduct in question” is “a highly
17
relevant consideration”); PenneCom B.V. v. Merrill Lynch & Co., Inc., 372 F.3d 488, 493 (2d Cir.
18
2004) (unclean hands defense requires proof that the plaintiff “has injured the party attempting to
19
invoke the doctrine”); Lawler v. Gilliam, 569 F.2d 1283, 1294 n.7 (4th Cir. 1978) (denying
20
unclean hands defense where defendant failed to prove that it had been injured by plaintiff’s
21
conduct; “The party to a suit, complaining that his opponent is in court with ‘unclean hands’
22
because of the latter’s conduct in the transaction out of which the litigations arose, or with which
23
it is connected, must show that he himself has been injured by such conduct, to justify the
24
application of the principle to the case.” (quoting J. Pomeroy, A Treatise on Equity Jurisprudence
25
§ 399)); JTH Tax, Inc. v. H&R Block Eastern Tax Servs., Inc., 128 F. Supp. 2d 926, 949 (E.D. Va.
26
2001) (“To establish the affirmative defense of unclean hands, a defendant must demonstrate . . .
27
plaintiff’s conduct injured the defendant.”), affirmed in part and rev’d in part on other grounds,
28
28 Fed. Appx. 207, 2002 WL 27257 (4th Cir. 2002); Annotation, He Who Comes Into Equity - 70 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 75 of 77
1
Must Come With Clean Hands, 4 A.L.R. 44, 58 (1919) (“The party to a suit complaining of a
2
wrong must have been injured thereby in order to justify the application of the principle of
3
‘unclean hands’ to his opponent”).
4
50.
Once again, Samsung failed to meet its burden. Samsung failed to offer any
5
evidence that Rambus destroyed documents relevant to Samsung’s defense against Rambus’s
6
patent infringement claims in the ‘2298 and ‘334 cases, beyond the non-privileged portion of the
7
record established in the Hynix Unclean Hands trial.
8 9
51.
With respect to the Hynix Unclean Hands record, this Court already has held that,
for each category of documents material to the validity or enforceability of Rambus's patents
10
against Samsung that Hynix argued Rambus did not preserve and produce, Rambus has shown by
11
clear and convincing evidence that documents in that category were in fact produced. Thus,
12
Rambus has produced various documents relating to the conception and reduction to practice of
13
the patented inventions prior to the April 1990 filing date of the '898 application. Rambus also
14
produced several boxes of prior art. No evidence suggested that material, non-cumulative prior
15
art exists that Rambus has not produced. Additionally, to the extent that documents such as notes
16
of interviews with the inventors and draft responses to the patent examiner may have been
17
discarded when attorney Lester Vincent conformed the issued patent files to the PTO file
18
wrapper, those documents would probably be privileged and not been discoverable. See Hynix,
19
2006 WL 565893 at *27-*28. Thus, it does not appear that Samsung has been deprived of
20
material, non-privileged, and non-cumulative documents.
21 22
52.
The Court concludes that Samsung has not been prejudiced by the destruction of
Rambus documents.
23
D.
Overall Equitable Discretion
24
53.
Whether to uphold an unclean hands defense is entrusted to this Court’s equitable
25
discretion. Keystone Driller Co., 290 U.S. at 246. Dismissal can be a proper sanction for willful
26
destruction of documents and records that deprive the opposing party of the opportunity to
27
present critical evidence on its key claims. However, dismissal is a harsh penalty and should be
28
imposed only in extreme circumstances. See Hynix, 2006 WL 565893 at *28. - 71 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
1
54.
Document 2163
Filed 09/09/2008
Page 76 of 77
Here, the court does not find dismissal to be an appropriate sanction because it
2
does not find the application of the unclean hands doctrine to be warranted. Further, the evidence
3
presented does not bear out that Rambus adopted its document retention policy in bad faith. The
4
evidence also does not demonstrate that Rambus targeted any specific document or category of
5
relevant documents with the intent to prevent production in a lawsuit such as this one. The
6
evidence does not show that Rambus destroyed specific, material documents prejudicial to
7
Samsung's ability to defend against Rambus's patent claims. Therefore, Samsung's unclean hands
8
defense fails.
9
VII.
10
RAMBUS’S UNCLEAN HANDS DEFENSE 55.
If this Court were to adopt Samsung’s proposed standards for spoliation (which are
11
not the correct standards), the Court would need to find that Samsung engaged in spoliation and
12
find in favor of Rambus on Rambus’s defense of unclean hands.
13
56.
As explained in the Findings of Fact, Samsung researched and investigated
14
potential claims and defenses for what its counsel explicitly described as “anticipated” litigation
15
in 2001. If the signing of the October 2000 SDR/DDR License and the July 2001 Amendment
16
No. 1 to the SDR/DDR License, and the release of claims therein, did not extinguish Rambus’s
17
duty to preserve documents as to Samsung, then it also did not extinguish Samsung’s duty to
18
preserve documents as to Rambus. The undisputed evidence showed that Samsung failed to
19
implement a litigation hold or “off-switch” to its automatic destruction of documents until June
20
2005 despite its stated “anticipation” of litigation with Rambus in 2000 and 2001.
21
57.
Moreover, if this Court were to accept Samsung’s argument for a broad duty to
22
preserve documents as to a different party in different “anticipated” litigation, then Samsung shall
23
be found to have spoliated documents. In 2004, a federal district court concluded that Samsung
24
engaged in intentional spoliation of e-mails from its DRAM Design Group on a rolling basis for
25
several years beginning in 2001 where Samsung had failed to implement an “off-switch” to
26
Samsung’s automatic deletion of e-mails. Mosaid Techs. v. Samsung Elecs. Co., 348 F. Supp. 2d
27
332, 338-39 (D.N.J. 2004). The court found that “Samsung’s actions [went] far beyond mere
28
negligence, demonstrating knowing and intentional conduct that led to the nonproduction of all - 72 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
Case 5:05-cv-00334-RMW
Document 2163
Filed 09/09/2008
Page 77 of 77
1
technical e-mails.” Id. at 338 (emphasis added). Since Rambus was able to demonstrate that
2
Samsung destroyed Despite this finding, Samsung did not put in place a litigation hold in
3
connection with the Rambus litigation until June 2005 at the earliest, and for some individuals a
4
litigation hold was not communicated until years later.
5
58.
The evidence showed that Samsung destroyed documents with a nexus to the
6
claims at issue in these cases. For example, Samsung destroyed notebooks, including notebooks
7
of engineers who analyzed Rambus patents before the year 2000. See Aug. 23, 2007 Kye Hyun
8
Kyung Dep. Tr. at 22:12-19, 22:22-23:4. Among other things, such notebooks are directly related
9
to Rambus’s patent infringement claims and to Samsung’s claim that it reasonably relied upon
10 11
Rambus’s alleged misrepresentations regarding the scope of Rambus’s intellectual property. 59.
Samsung’s destruction of evidence has materially prejudiced Rambus’s ability to
12
defend itself in this litigation.
13
VIII. CONCLUSION
14 15
60.
For all of the foregoing reasons, Samsung did not satisfy its burden of proof on the
essential elements of its claims and defenses and those claims and defenses are hereby dismissed.
16 17
DATED: September 8, 2008
MUNGER, TOLLES & OLSON LLP
18 19
By:
20 21
/s/ Miriam Kim Miriam Kim
Attorneys for RAMBUS, INC.
22 23 24 25 26 27 28 - 73 -
RAMBUS’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW CASE NOS. CV 05-00334, 05-02298
