2200
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 2200 as PDF for free.
More details
- Words: 16,477
- Pages: 42
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 1 of 42
Attorney list on signature page
2 3 4 5 6
IN THE UNITED STATES DISTRICT COURT
7
NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION
8 9
RAMBUS, INC.,
10 11 12 13 14 15 16 17 18
Plaintiff.
Case No. C 05-00334 RMW
v. HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR MANUFACTURING AMERICA INC.,
SAMSUNG’S TRIAL BRIEF [CORRECTED] [PUBLIC VERSION]
SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG SEMICONDUCTOR, INC., SAMSUNG AUSTIN SEMICONDUCTOR, L.P.,
Trial Date: September 22, 2008 Place: Courtroom 6 Judge: Hon. Ronald M. Whyte
NANYA TECHNOLOGY CORPORATION, NANYA TECHNOLOGY CORPORATION U.S.A.,
19 Defendants.
20 21
RAMBUS, INC.,
22 23 24 25 26 27
Case No. C 05-02298 RMW
Plaintiff. v. SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG SEMICONDUCTOR, INC., SAMSUNG AUSTIN SEMICONDUCTOR, L.P., Defendants.
28 SAMSUNG’S TRIAL BRIEF
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 2 of 42
TABLE OF CONTENTS
2
Page
3 CASE OVERVIEW 4 5
I.
6 7 8 9
II.
10
FACTS ................................................................................................................................ 2 A.
Background ............................................................................................................. 2
B.
Negotiation of the SDR/DDR License.................................................................... 2
C.
The Infineon Litigation, the 2001 Amendment, and the Infineon Settlement ........ 6
D.
Section 8.5 Negotiations ......................................................................................... 7
RAMBUS BREACHED SECTIONS 3.8 AND 8.5 OF THE SDR/DDR LICENSE AND THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING....................... 9 A.
11 12
Breach of Contract .................................................................................................. 9 1.
Legal Standard .......................................................................................... 10
2.
Rambus Breached Section 3.8 of the SDR/DDR License when it Failed to Make the Royalty Rate in the Infineon Agreement Effective for Samsung............................................................................... 10
3.
Rambus Breached Section 8.5 of the SDR/DDR License when it Failed to Negotiate in Good Faith Towards a Renewal or New Agreement ................................................................................................. 12
13 14 15 16
III.
17 18
SAMSUNG IS ENTITLED TO EXPECTATION DAMAGES AS A RESULT OF RAMBUS’S BREACH OF SECTION 8.5 ....................................................................... 14 A.
Legal Standard ...................................................................................................... 15
B.
Samsung’s Damages Resulting from Rambus’s Bad Faith Can Be Shown with “Reasonable Certainty”................................................................................. 15
19 20
IV.
RAMBUS IS ESTOPPED FROM ENFORCING ITS PATENTS BEYOND THE TERMS OF THE INFINEON LICENSE ......................................................................... 17
21
A.
Legal Standard ...................................................................................................... 17
22
B.
Rambus Should Be Estopped Due to Its Failure to Negotiate in Good Faith ....... 17
23 24
1.
Samsung Was Misled by Rambus’s Promises and Then Refusal To Honor Its Contractual Obligations to Negotiate in Good Faith ................ 18
2.
Samsung Relied upon Rambus’s Commitment to Negotiate a Renewal or Extension of the SDR/DDR License in Good Faith .............. 18
3.
Samsung Has Suffered Material Prejudice as a Result of Rambus’s Misconduct................................................................................................ 19
4.
Balance of Equities Support Estoppel....................................................... 19
25 26 27 28
i
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 3 of 42
TABLE OF CONTENTS (continued)
2
Page
3 4 5
RAMBUS USED THE ALLEGED AUDIT BREACH AS A PRETEXT FOR ITS BREACH OF THE SDR/DDR LICENSE
6
I.
RAMBUS’S 2004 AUDIT................................................................................................ 20
7
II.
RAMBUS IS NOT EXCUSED FROM PERFORMANCE OF SECTION 8.5................ 21 A.
8
Rambus Waived its Right To Be Excused from Performance of the SDR/DDR License ................................................................................................ 21
9
1.
Legal Standard .......................................................................................... 21
10
2.
Rambus Continued to Accept Samsung’s Performance under the SDR/DDR License .................................................................................... 23
11 B.
Rambus Should Be Estopped from Using the Alleged Audit Breach as an Excuse for its Failure to Perform under the SDR/DDR License .......................... 24
C.
Any Purported Breach of the Audit Provisions of the SDR/DDR License Was Not Material .................................................................................................. 25
12 13 14 15
THE SDR/DDR LICENSE COVERS FUTURE GENERATIONS OF DDR PRODUCTS I.
FACTS .............................................................................................................................. 26
16
A.
Sections 1.7 and 1.8 of the Agreement ................................................................. 26
17
B.
Negotiation of the 2000 SDR/DDR Contract ....................................................... 27
18
II.
The Allowed Differences Under the Agreement .............................................................. 29 A.
On-Die Termination .............................................................................................. 29
B.
Off-Chip Calibration ............................................................................................. 30
C.
Differential Strobe................................................................................................. 30
21
D.
Posted CAS ........................................................................................................... 32
22
E.
Write Latency........................................................................................................ 33
19 20
23
CONCLUSION ............................................................................................................................. 34
24 25 26 27 28 ii
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 4 of 42
TABLE OF AUTHORITIES
2
Page(s)
3 4 5 6 7 8 9 10 11 12 13
Cases A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group, Inc., 873 F.2d 155 (7th Cir. 1989)...................................................................................................... 12 Alder v. Drudis, 30 Cal.2d 372 (Cal. 1947).......................................................................................................... 22 Bank of America Nat. Trust & Sav. Ass'n v. Cranston, 60 Cal. Rptr. 336 (Cal. Ct. App. 1967) ...................................................................................... 23 Bd. of Trustees of Stanford University v. Roche Molecular Sys., 487 F. Supp. 2d 1099 (N.D. Cal. 2007) ..................................................................................... 24 Boone v. Templeman, 158 Cal. 290 (1910) ............................................................................................................. 22, 24 Cardinal of Adrian, Inc. v. Amerock Corp., 208 U.S.P.Q. 822 (E.D. Mich. 1979) ......................................................................................... 12
14 15 16 17 18
Cf. N. Helex Co. v. United States, 455 F.2d 546 (Ct. Cl. 1972) ....................................................................................................... 23 Coachella Valley Water Dist. v. Imperial Irrigation Dist., 2007 WL 2822766 (Cal. Ct. App., Oct. 1, 2007)....................................................................... 16 Cold Metal Process Co. v. McLouth, 170 F.2d 369 (6th Cir. 1948)...................................................................................................... 12
19 20 21 22 23
Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251 (Cal. Ct. App. 2002) .............................................................................. 16 Creamer v. AIM Tels., Inc., 159 B.R. 440 (E.D. Pa. 1993) .................................................................................................... 13 Cummings v. Universal Pictures Co., Inc., 62 F. Supp. 611 (S.D.Cal. 1944).......................................................................................... 22, 24
24 25 26 27
DeForest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236 (1927)............................................................................................................. 18, 19 DeVito v. United States, 413 F.2d 1147 (Ct. Cl. 1969) ..................................................................................................... 23
28 iii
Case 5:05-cv-00334-RMW
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Document 2200
Filed 09/15/2008
Page 5 of 42
TABLE OF AUTHORITIES (continued) Page(s) Dickerson v. Colgrove, 100 U.S. 578 (1880)................................................................................................................... 17 Estate of Wilson, 64 Cal. App. 3d 786 (Cal. Ct. App. 1976) ................................................................................. 11 Feldman v. Allegheny Internat’l, Inc., 850 F.2d 1217 (7th Cir. 1988).................................................................................................... 12 Floystrup v. City of Berkeley Rent Stabilization Bd., 219 Cal. App. 3d 1309 (Cal. Ct. App. 1990) ............................................................................. 14 Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317 (2000) ............................................................................................................... 14 Harley C. Loney Co., 205 F.2d at 220 (7th Cir. 1953).................................................................................................. 12 Harm v. Frasher, 181 Cal. App. 2d 405 (Cal. Ct. App. 1960) ............................................................................... 14 Hartung v. Pollastrini, 304 P.2d 846 (Cal. Ct. App. 1957)............................................................................................. 23 In re Vylene Enters., Inc., 90 F.3d at 1477........................................................................................................................... 14 In the Matter of Certain Dynamic Random Access Memories, Components Thereof, and Products, 1987 WL 450980, USITC Inv. No. 337-TA-242 (U.S.I.T.C.) (hereinafter “DRAMs”) ...................................................................................... 17, 18, 19, 25, 26 J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553 (Fed. Cir. 1984).................................................................................................. 17 Karz v. Dep’t of Prof. Vocational Stds., 11 Cal. App. 2d 554 (1936).................................................................................................. 25, 26 Leiter v. Eltinge, 246 Cal. App. 2d 306 (Cal. Ct. App. 1966) ............................................................................... 22 Lenard v. Edmonds, 151 Cal.App.2d 764 (Cal.App.1.Dist. 1957) ............................................................................. 22 Matter of Pubs, Inc. of Champaign, 618 F.2d 432 (7th Cir. 1980)...................................................................................................... 11 iv
Case 5:05-cv-00334-RMW
1
4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Filed 09/15/2008
Page 6 of 42
TABLE OF AUTHORITIES (continued)
2 3
Document 2200
Page(s) Paramount Developers & Contractors, Inc. v. M.B. Admin. Servs. Corp., 2004 WL 214325 (Cal. Ct. App., Feb. 5, 2004)......................................................................... 16 Patwardhan v. Kale, 2003 WL 21130236 (Cal. Ct. App., May 16, 2003) .................................................................. 13 Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635 (2004) ......................................................................................................... 22, 24 Rothstein v. Atlanta Paper Co., 321 F.2d 90 (5th Cir. 1963)........................................................................................................ 12 Spiegelman v. Metro. Life Ins. Co., 21 Cal. App. 2d 299 (Cal. Ct. App. 1937) ........................................................................... 22, 24 Superior Motels v. Rinn Motor Hotels, 195 Cal. App. 3d 1032 (Cal. Ct. App. 1987) ............................................................................. 25 Teachers Ins. & Annuity Ass’n of Am. v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987)....................................................................................... 12, 15 Title Ins. & Trust Co. v. Hisey, 95 F.2d 555 (9th Cir. 1938)........................................................................................................ 22 Venture Assocs. v. Zenith Data Sys., 96 F.3d 275 (7th Cir. 1996)........................................................................................................ 15 Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (9th Cir. 2001)...................................................................................................... 15
19 20 21 22 23 24
W. Transmission Corp. v. Colo. Mainline, Inc., 376 F.2d 470 .............................................................................................................................. 23 Rules and Statutes Cal. Civ. Code § 3300 .................................................................................................................... 15 Other Authorities 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 853 ................................................ 21
25 26 27 28
1 Witkin, Summary of Cal. Law, Contracts, § 852........................................................................ 25 17 Am. Jur. 2d, Contracts (1991), § 392, at 417 ............................................................................ 13 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, §176, p. 246...................................................... 21
v
Case 5:05-cv-00334-RMW
1 2
Document 2200
Filed 09/15/2008
Page 7 of 42
TABLE OF AUTHORITIES (continued) Page(s)
3
31 C.J.S. Estoppel and Waiver § 70. Cal. Evid. Code § 622 ......................................................... 11
4
5 Williston 3d, § 688...................................................................................................................... 22
5 6 7
Rest., Contracts, Section 384; 5 WILLISTON ON CONTRACTS (rev. ed.), § 1464 ............................ 22 Witkin, Summary of Cal. Law, Contracts § 856............................................................................ 24 Witkin, Summary of Cal. Law, Contracts § 869 (2005) ................................................................ 15
8 Witkin, Summary of Cal. Law, Contracts § 870 (2005) ................................................................ 15 9 10
Witkin, Summary of Cal. Law, Contracts § 879 (2005) ................................................................ 15
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vi
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 8 of 42
Defendants Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung
2
Semiconductor, Inc., and Samsung Austin Semiconductor, L.P. (collectively “Samsung”)
3
respectfully submit this Trial Brief for the Court’s consideration.
4
CASE OVERVIEW
5
Rambus, Inc. (“Rambus”) promised Samsung that it would suffer no competitive harm if
6
its competitors obtained through litigation a more favorable license with lower royalty rates than
7
Rambus had offered Samsung in the SDR/DDR IC and SDR/DDR Memory Module Patent
8
License Agreement (the “SDR/DDR License”). In making these promises, Rambus agreed to give
9
Samsung expansive most favored licensee (“MFL”) rights that expressly encompassed any
10
license Rambus was compelled to grant as part of a litigation settlement. Rambus made these
11
promises, and assumed these obligations, at a time when Infineon Technologies AG (“Infineon”)
12
had already refused to accept a license from Rambus and had launched a vigorous attack on
13
Rambus’s patent rights.
14
In 2005, Infineon obtained in a settlement precisely the type of favorable license that fell
15
within the scope of Samsung’s MFL rights. Rambus, however, refused to honor its contractual
16
obligations, apparently on the grounds that Rambus views the phrase “royalty rate” to apply only
17
to running royalties, not the lump-sum, quarterly amounts agreed to be paid by Infineon.
18
Rambus’s position in 2005 can be reconciled neither with the promises it made five years earlier
19
that were material to the formation of the SDR/DDR License nor with all of the other evidence
20
demonstrating that Rambus was obligated to make Infineon’s royalty rate effective under the
21
SDR/DDR License. Rambus could have honored its contractual obligations either by using
22
industry-standard methods of calculating an effective running royalty rate from Infineon’s
23
quarterly lump-sum payments or by simply giving Samsung the lump-sum royalty rate (with a
24
cap on payments) agreed to be paid by Infineon. Either way, Infineon’s royalty rate was far lower
25
than Samsung’s, and Rambus has no plausible justification for its breach of Section 3.8 of the
26
SDR/DDR License.
27 28
At the same time that Samsung should have received Infineon’s royalty rate, Rambus also had an obligation to negotiate in good faith a renewal license agreement. In the context of the SAMSUNG’S TRIAL BRIEF
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 9 of 42
1
SDR/DDR License, the express obligation to negotiate in good faith required, at a minimum, that
2
Rambus offer Samsung terms that were at least as favorable as those offered to Infineon. During
3
the two months of contractually required negotiations, Rambus refused to make such an offer,
4
which Samsung would have readily accepted. Instead, Rambus abruptly terminated the
5
negotiations, and the SDR/DDR License, and sued Samsung in this Court for patent infringement.
6
The ensuing three years of litigation—in which Samsung faces patent damage claims well beyond
7
the royalties agreed to be paid by Infineon—directly resulted from Rambus’s breaches of
8
contract. In this trial, Samsung seeks to prevent Rambus from asserting rights as against
9
Samsung beyond the terms obtained by Infineon as if it had never made (and had never broken)
10
the binding promises to Samsung contained in the SDR/DDR License.
11
I.
12
FACTS
13
A.
Background
14
Samsung and Rambus have a longstanding commercial relationship beginning with a 1994
15
technology and license agreement covering RDRAM. (PFF ¶¶ 1-3.) In 1999, Rambus began
16
asserting its patents against manufacturers of JEDEC-compliant memory technology. (Id. ¶ 4.) In
17
so doing, Rambus announced that DRAM manufacturers engaged in litigation would pay higher
18
royalties than those who choose to negotiate a license with Rambus. (Id. ¶ 5.) Patent infringement
19
lawsuits between Rambus and several of Samsung’s major competitors—including Hynix,
20
Micron, and Infineon—were filed throughout 2000. (Id. ¶ 6.) In these suits, Rambus’s litigation
21
opponents asserted a variety of claims against Rambus and challenged the enforceability and
22
validity of Rambus’s patents-in-suit. (Id. ¶ 7.)
23
B.
24
During the parties’ first meeting to negotiate a license, Rambus stated that Samsung was
Negotiation of the SDR/DDR License
25
“in an excellent position to secure the most favorable terms.” (Id. ¶ 10.) Rambus’s first draft,
26
however, did not include (1) MFL protections in the event of a settlement or otherwise, (2)
27
provisions requiring good-faith license renewal negotiations, or (3) representations that royalty
28
rates offered to litigants and other licensees would be standard royalty rates higher than those SAMSUNG’S TRIAL BRIEF
2
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 10 of 42
1
received by Samsung. (Id. ¶ 13.) In response, Samsung expressed the concern that it would suffer
2
competitive harm should one of the litigants obtain more favorable terms than Samsung through a
3
litigation settlement or final judgment. (Id. ¶ 14.) Rambus assured Samsung that the SDR/DDR
4
License “will give Samsung the best possible terms and will result in Samsung having a
5
competitive advantage over those who have sued us rather than negotiate.” (Id. ¶ 15.)
6
Samsung’s representative, Jay Shim, sent specific proposed language to effectuate the
7
parties’ intent to Rambus’s representative, Neil Steinberg. Mr. Shim sought, among other things:
8
(a) MFL protection in the event of an adverse settlement or court order; (b) MFL protection in the
9
event of a finding that Rambus’s patents were not enforceable or were invalid for any reason; and
10
(c) an explicit commitment to MFL protection on the basis of consideration other than a running
11
royalty, such as a lump sum. (See Id. ¶ 18.) In response, Mr. Steinberg’s cover e-mail did not
12
address the issue of a lump-sum royalty and stated that he had amended the MFL provisions “to
13
provide language expressing the fundamental intent of Section 3.9 that Samsung not be put at a
14
competitive disadvantage as a result of entering into the Agreement.” (Id. ¶ 19.) Along with his e-
15
mail, Mr. Steinberg enclosed a draft that, among other things: (a) contained an MFL provision
16
that did not explicitly cover licenses granted in settlements or pursuant to court or agency order;
17
and (b) contained limited MFL protection related to Rambus’s participation in JEDEC. (Id. ¶ 20.)
18
At the same time, Rambus’s draft provided in Section 3.9 that the “ . . . parties shall meet to
19
negotiate in good faith with a view to determining a mutually satisfactory prospective royalty rate
20
so that Samsung is not at a competitive disadvantage relative to any Third Party.” (Id. ¶ 23
21
[emphasis added].)
22
The following day, Rambus CEO Geoff Tate sent an email to Y.W. Lee, noting that
23
Rambus had met most of Samsung’s requests, including “most favored royalty rate” and a
24
“commitment that Samsung won’t be at a competitive disadvantage as a result of the outcome of
25
pending litigation.” (Id. ¶ 25.) Mr. Tate’s October 17, 2000 email also stated:
26 27 28
As you know we are in court with [Hynix], Micron and Infineon. We expect to win our legal battles with them although we don’t control the schedule of the courts. When these companies choose to negotiate license terms with us we will charge them substantially higher license fees and royalty rates. SAMSUNG’S TRIAL BRIEF
3
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1 2
Document 2200
Filed 09/15/2008
Page 11 of 42
(Id. ¶ 26.) After further negotiations, Rambus agreed to: (a) make explicit the MFL protection in the
3
event of a litigation settlement and court or agency order; and (b) grant MFL protection in the
4
event that a litigant successfully challenged the validity or enforceability of Rambus’s patents on
5
any grounds. (See id. ¶ 28.) Mr. Steinberg also assured Mr. Shim that the other specific language
6
he proposed (including the lump-sum provision) was not necessary in light of the existing
7
contract language. (See id. ¶ 22.) In fact, Mr. Steinberg never indicated to Samsung that a “lump
8
sum” royalty was outside of Samsung’s MFL protections. (Id. ¶ 21.) Instead, Rambus included
9
representations in two WHEREAS clauses that the “royalty rates” offered to litigants and all other
10
prospective licensees would be standard “royalty rates” higher than those in the SDR/DDR
11
License:
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
WHEREAS, Rambus represents that, after November 1, 2000, the royalty rates offered to any semiconductor memory manufacturer which is currently in litigation with Rambus for infringement of any Rambus Patent, as defined herein, shall be the standard royalty rates and such standard royalty rates are higher than the royalty rates set forth in Section 3.1(b) of this Agreement; and WHEREAS, Rambus further represents that royalty rates offered after January 1, 2001 to all prospective licensees shall be such standard royalty rates. (Id. ¶ 35.) In conjunction with those representations, Section 3.8 was finalized to read: If at any time during this Agreement, the royalty rate agreed to be paid or ordered to be paid by a Third Party, whether by settlement or by court or agency order, for products corresponding to SDR SDRAM, SDR SGRAM, DDR SDRAM, or DDR SGRAM is lower than that specified in Section 3.1(b) of this Agreement, Rambus shall notify Samsung, in writing, within ten (10) days of the effective date of such lower royalty rate and such lower royalty rate shall be effective for this Agreement the first day of the royalty reporting period in which written notice by Rambus is made. If the lower royalty rate is limited geographically due to a court or agency order, then Samsung’s lower royalty rate shall be similarly limited to sales in the same geographic area. Should, by agreement, subsequent order, or amendment, modification, or reversal of the court or agency order (whether on appeal or otherwise), the lower royalty rate of any litigant change, then the royalty for Samsung shall change correspondingly, but not to exceed the rates specified in Section 3.1(b).
27 28 SAMSUNG’S TRIAL BRIEF
4
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 12 of 42
1
(Id. ¶ 36 [emphasis added].) And Section 3.9 was revised to grant Samsung broad protections in
2
the event of a determination that the Rambus patents were not enforceable or were invalid:
3
Should a court or agency of competent jurisdiction make a determination that the Rambus Patents in suit are not enforceable or are invalid, such that the litigant is ordered to pay, on a prospective basis, either no royalty or a royalty based on a lower royalty rate than that specified for any category of products specified in Section 3.1(b) of this Agreement, Rambus shall notify Samsung, in writing, within ten (10) days of the effective date of such order, and such no royalty or lower royalty rate shall be effective for this Agreement the first day of the royalty reporting period in which written notice by Rambus is made. Should such no royalty or lower royalty rate be limited geographically, then Samsung’s no royalty or lower royalty rate shall be limited to such geographic area. Should the no royalty or lower royalty rate be limited to a category of Licensed Products (for example, SDR SDRAM, SDR SGRAM, DDR SDRAM, or DDR SGRAM), then Samsung’s no royalty or lower royalty rate shall be limited to such category of products. Should, by agreement, subsequent order, or amendment, modification or reversal of the court or agency order (whether on appeal or otherwise), such no royalty or lower royalty rate of any litigant change, then the royalty rate for Samsung shall change correspondingly, but not to exceed the royalty rates specified in Section 3.1(b).
4 5 6 7 8 9 10 11 12 13 14
(Id. ¶ 37.) The SDR/DDR License also included in Section 8.5 the promise to engage in good-faith
15 16
negotiations for a renewal or a successor agreement:
17
Assuming that this Agreement has not been terminated and that Samsung is not in breach hereof, the parties shall meet, six (6) months before the expiration of this Agreement, to negotiate in good faith with a view to achieving a mutually satisfactory patent license agreement under the Rambus Patents with respect to the Licensed Products, including, without limitation, an extension hereof or a new agreement.
18 19 20 21
(Id. ¶ 38.)1
22
1
23 24 25 26 27 28
During the negotiations, Samsung had requested in writing that the parties include explicit reference to the MFL obligation in Section 8.5, which Rambus had indicated was acceptable to it. Moreover, although the final version of the SDR/DDR License does not contain an explicit reference to MFL protections in Section 8.5, Mr. Steinberg prepared an amendment to Section 8.5 shortly after the license was executed by both parties that contained the express MFL language requested by Samsung. (Id. ¶ 30 & n.1.) That language was in fact added to the parties’ 2001 Amendment of the SDR/DDR License. (Id.) This evidence, along with the WHEREAS representations, and the protections of 3.8 and 3.9 that survive for the duration of agreement (which is subject to extension under Section 8.5), demonstrate that Rambus’s obligation to negotiate in good faith required an offer (or willingness to accept one) of a license on terms no less favorable than those received by another licensee. SAMSUNG’S TRIAL BRIEF
5
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 13 of 42
The negotiations of the SDR/DDR License therefore demonstrate a clear intent to ensure
2
that Samsung would not suffer competitive harm in the event that a litigant obtained lower royalty
3
rates than Samsung through an out-of-court settlement or judicial ruling.
4
C.
5
In 2001, Infineon obtained favorable non-infringement rulings and a jury verdict in its
The Infineon Litigation, the 2001 Amendment, and the Infineon Settlement
6
favor based on Rambus’s conduct in JEDEC. (PFF ¶ 49.) In the wake of these events, Samsung
7
renegotiated its royalty rates with Rambus as memorialized in Amendment No. 1 to SDR/DDR IC
8
and SDR/DDR Memory Module Patent License Agreement (the “2001 Amendment”). (Id. ¶ 50.)
9
Under the 2001 Amendment, Samsung paid a $3.8 million lump-sum royalty in
10
satisfaction of its royalty obligations for the first quarter of 2001. (Id. ¶ 51.) Beginning in the
11
second quarter of 2001, and for the remaining term of the 2001 Amendment, Samsung paid a $2
12
million, fixed, lump-sum royalty in lieu of a running royalty each quarter for licensed DRAM.
13
(Id. ¶ 52.) The 2001 Amendment also provided that Rambus could terminate it and return to the
14
royalty rates, MFL, and other terms of the original SDR/DDR License, if Rambus licensed
15
Micron or Infineon. (Id. ¶ 54.)
16
After Rambus’s successful appeal, the Eastern District of Virginia on remand held a
17
February 2005 bench trial with regard to Infineon’s unclean hands defense. (See id. ¶ 107.) On
18
February 20, 2005, Rambus approached Samsung with an offer “for renewal and expansion of the
19
scope of the DRAM license.” (Id. ¶ 106.) Rambus’s license proposal covered “all forms of
20
DRAM” (e.g., SDR, DDR, DDR2 and future generations thereof). (Id.)
21
Rambus’s license proposal also called for, inter alia, lump-sum, quarterly royalty
22
payments of $12 million and “a trigger that will move the payments to a market rate once at least
23
one other major DRAM manufacturer is paying such market rates.” (Id.) The parties then held
24
meetings to discuss the terms of Rambus’s offer. (Id. ¶ 108.)
25
In the meantime, in March 2005, the district court in the Infineon case held “that Rambus
26
was liable for unclean hands, thus barring Rambus from enforcing the four patents-in-suit” and
27
ruled from the bench that it would dismiss Rambus’s infringement claims. (Id. ¶ 107.) Rambus
28
then negotiated a settlement and license agreement with Infineon (the “Infineon License”) before SAMSUNG’S TRIAL BRIEF
6
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 14 of 42
1
the district court issued a final judgment. (Id. ¶ 110.) The settlement required Infineon to pay
2
$5.85 million up to a $50 million cap (which would increase to $100 or $150 million if and when
3
Rambus obtained license agreements with two or three major manufacturers, respectively). (Id. ¶¶
4
95-97.) In exchange, Infineon received a license covering:
5 6 7 8 9
. . . any existing or future Infineon Memory ICs, Infineon Memory Portion, Infineon Memory Modules, or Infineon Memory Component . . . including but not limited to SDR SDRAM, DDR SDRAM, DDR2 SDRAM, DDR3 SDRAM, GDDR2 SDRAM, GDDR3 DRAM, RLDRAM, RLDRAM2, RDRAM, XDR DRAM, Cellular RAM, low power DRAM, SRAM, Flash, MRAM, FRAM, ROM, PROM, EPROM, EEPROM and any subsequent generation of any such products. (Id. ¶ 99.). In addition to these license terms, the parties entered into mutual releases and
10
dismissals of pending litigation, which included a release and dismissal of antitrust claims
11
brought by Rambus alleging that manufacturers of various forms of SDRAM had engaged in a
12
price-fixing scheme aimed at the marketability of RDRAM. (Id. ¶ 101.)
13
On March 22, 2005, Rambus invoked its right to terminate the 2001 Amendment and
14
return to the terms of the SDR/DDR License (including its MFL protections). (Id. ¶ 92.)
15
Samsung thus had the right to obtain any lower royalty rates agreed to be paid by a third party in
16
a litigation settlement. (See id. ¶ 94.). In a March 24, 2005 letter, Mr. Shim wrote to Ira
17
Blumberg, Vice President of Licensing at Rambus, to request a copy of the Infineon License, so
18
that Samsung could determine whether Rambus’s termination of the 2001 Amendment was
19
proper and, if so, determine how the terms of the SDR/DDR License “should be adjusted under
20
the most favored licensee provision.” (Id. ¶ 93.) Mr. Blumberg responded by letter dated April 1,
21
2005, in which he declined to disclose the terms of the Infineon License and stated that “Rambus
22
currently has no license agreements in force, including the license to Infineon, that fall within the
23
provisions of section 3.8.” (Id. ¶ 105.) And Rambus never agreed to make the royalty rate that
24
Infineon agreed to pay on a quarterly basis effective pursuant to the SDR/DDR License.
25
D.
26
Mr. Blumberg’s April 1, 2005 letter also asked Samsung to negotiate a license renewal as
Section 8.5 Negotiations
27
required by Section 8.5 of the SDR/DDR License. (PFF ¶ 112.) The negotiations focused on the
28
issue in dispute between the parties—i.e., the royalty terms to be paid in exchange for a license SAMSUNG’S TRIAL BRIEF
7
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 15 of 42
1
covering SDRAM and future generations thereof. (Id. ¶ 113.) In that regard, Samsung requested
2
that Rambus offer the same royalty terms that Infineon received based on the promises made in
3
the SDR/DDR License. (Id. ¶ 93.) Rambus, unwilling to make that offer, told Samsung in mid-
4
May 2005 that it “cannot reach, on agreeable terms, the five year patent license renewal deal you
5
desire.” (Id. ¶ 116.)
6
Instead of a license based on Infineon terms, Rambus proposed a one-year standstill
7
agreement. (Id.) Under Rambus’s stand-still proposal, Samsung would pay Infineon’s lump-sum,
8
quarterly royalty rate (scaled up to Samsung’s larger market share) in exchange for Rambus’s
9
agreement that it would not sue Samsung during the one-year unlicensed period. (Id.) Rambus
10
also proposed that the parties would, during the one-year period, negotiate a license. (Id.)
11
However, Rambus did not offer Samsung any of the protections or rights contained in the
12
SDR/DDR License in connection with the proposed license negotiations. (See id.) In response,
13
Samsung indicated that it could agree to a standstill agreement if it contained protections to
14
ensure that the license would be no less favorable than that received by Infineon. (Id. ¶ 118.) The
15
parties then agreed that Samsung would prepare a written proposal.
16
On June 6, 2005, the parties met to discuss Samsung’s standstill counter-proposal. (Id. ¶
17
120.) Mr. Danforth, Rambus’s General Counsel, flatly rejected Samsung’s proposal based on the
18
royalty terms contained in it, and refused to negotiate different royalty terms. (Id.) In so doing, he
19
reiterated Rambus’s refusal to offer Samsung royalty terms based on the Infineon License. (Id.)
20
Instead, Mr. Danforth indicated that Infineon received its license on favorable royalty terms due
21
to the events in litigation in the Eastern District of Virginia, a forum Rambus was determined to
22
avoid. (Id.) He then offered Mr. Shim a choice of (1) a 30-day standstill with a commitment that
23
Samsung will not file suit without giving Rambus an opportunity to file first in a venue of its
24
choosing, or (2) Rambus would file suit in California that day. (Id.) When Mr. Shim declined to
25
submit to Rambus’s demands, Mr. Danforth instructed Rambus’s lawyers to file the two patent
26
litigation suits pending before this Court. (Id. ¶ 121-22.) Mr. Danforth also purported to terminate
27
the SDR/DDR License based on an alleged breach of an audit provision in 2004. (Id. ¶ 121.)
28 SAMSUNG’S TRIAL BRIEF
8
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Page 16 of 42
II.
1 2
Filed 09/15/2008
RAMBUS BREACHED SECTIONS 3.8 AND 8.5 OF THE SDR/DDR LICENSE AND THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
3
A.
4
Breach of Contract 1.
5
Legal Standard
The SDR/DDR License is governed by federal and California law. See SDR/DDR License
6
§ 9.1. Under California law, a claim for breach of contract requires proof by a preponderance of
7
the evidence of: “(1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3)
8
defendant’s breach; and (4) the resulting damages to plaintiff.” See, e.g., Reichert v. Gen. Ins. Co.
9
of Am., 68 Cal. 2d 822, 830 (1968).
10
2.
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Rambus Breached Section 3.8 of the SDR/DDR License when it Failed to Make the Royalty Rate in the Infineon Agreement Effective for Samsung
Section 3.8 provides that “[i]f at any time during this Agreement, the royalty rate agreed to be paid or ordered to be paid by a Third Party, whether by settlement or by court or agency order . . . is lower than that specified in Section 3.1(b) of this Agreement . . . such lower royalty rate shall be effective for this Agreement . . . .” (PFF ¶ 36 [emphasis added].) The royalty rate agreed to be paid by Infineon in the March 2005 Infineon Settlement and License Agreement was $5.85 million per calendar quarter subject to a $50 million cap (which could be adjusted based on license agreements that Rambus has still not entered into). (Id. ¶ 95.) Infineon’s quarterly lumpsum payment is equivalent to an effective running rate that is a small fraction of the running royalty rates agreed to be paid by Samsung when it decided to accept a license from, rather than litigate against, Rambus. (Id. ¶¶ 102-103.) Similarly, Infineon’s quarterly payment was far less than Samsung’s royalty obligation, which was also payable on a quarterly basis. Rambus, however, refused to make Infineon’s quarterly royalty rate effective as of April 1, 2005. (Id. ¶ 105.) Rambus has argued that Section 3.8 does not apply in this case, because “the Infineon Agreement manifestly does not contain a ‘royalty rate’ triggering application of Section 3.8.” (Notice of Mot. & Mot. of Rambus Inc. for Summ. J. on Counts I-III of Samsung’s Countercls. at
28 SAMSUNG’S TRIAL BRIEF
9
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 17 of 42
1
8 [hereinafter “Rambus Mot. for Summ. J.”].) However, Rambus has conceded, and this Court
2
has agreed, that the plain meaning of the term “royalty rate” can include quarterly, lump-sum
3
payments. (Reply in Supp. of Mot. of Rambus Inc. for Summ. J. on Counts I-III of Samsung’s
4
Countercls. at 4; Order Den. Rambus’s Mot. for Summ. J. on Samsung’s Countercls. I, II, and III
5
at 7-8 [hereinafter “Order Den. Summ. J.”].) As this Court noted, “[u]sed in its ordinary sense,
6
‘royalty rate’ can refer to a ratio of dollars per unit time or to a percentage of net sales.” (Order
7
Den. Summ. J. at 8.) This Court also correctly observed that “[e]very court that construed the
8
term ‘royalty rate’ or ‘rate of royalty’ understood it to include lump sum payments of various
9
types. In light of this understanding developed within the field of patent licensing that supports
10
Samsung’s position, the court cannot agree with Rambus that the contract is only reasonably
11
susceptible to its interpretation.” (Id. at 11.)
12
Further, Rambus agreed to extend Samsung’s MFL protections to any circumstance in
13
which Samsung’s competitors then in litigation with Rambus would receive more favorable
14
royalty terms. (PFF ¶¶ 17-19, 25.) For example, Samsung insisted on, and Rambus agreed to,
15
language that gave Samsung any more favorable royalty rate resulting from out-of-court
16
settlements (Section 3.8) and/or a determination that the Rambus patents-in-suit were
17
unenforceable or invalid (Section 3.9) (Id. ¶¶ 36-37.) Indeed, a “lump sum” obviously could
18
result from a settlement or a court order, both of which are expressly contemplated by Sections
19
3.8 and 3.9. Further, Rambus repeatedly assured Samsung that the provisions in the SDR/DDR
20
License protected Samsung against competitive disadvantage. (Id. ¶¶ 10, 15, 19, 25-27.) The
21
evidence of the parties’ negotiation thus strongly supports an expansive, not unduly narrow and
22
ineffectual, interpretation of Samsung’s MFL rights.
23
Indeed, the notion that Rambus would have an easy mechanism to avoid its obligations
24
under Section 3.8—merely by structuring its licenses to require quarterly, lump-sum royalties as
25
opposed to running royalties—is wholly unsupported by the evidence of the parties’ negotiations.
26
In support of its interpretation, Rambus notes that the parties did not incorporate language
27
proposed by Mr. Shim that expressly addressed lump sum royalties obtained by a third party.
28
(Rambus Mot. for Summ. J. at 10.) However, as this Court already noted, that “extrinsic evidence SAMSUNG’S TRIAL BRIEF
10
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 18 of 42
1
is not as persuasive as Rambus suggests,” because the language in question did not refer to a
2
periodic lump sum and because there is no evidence that Rambus expressly rejected, rather than
3
simply ignored, Samsung’s proposal. (Order Den. Summ. J. at 12.) Moreover, an interpretation
4
that the failure to include the specific language proposed by Samsung is evidence that the parties
5
did not intend Section 3.8 to apply to quarterly, lump-sum royalty rates is inconsistent with
6
Rambus’s assurances throughout the negotiation process—including Mr. Steinberg’s comment to
7
Mr. Shim that the language in question was captured by the broader MFL concepts ultimately
8
memorialized in Sections 3.8 and 3.9. (PFF ¶ 22.)
9
In entering into the SDR/DDR License, Rambus plainly agreed to accept the risk that it
10
could be forced to enter into unfavorable settlement and license agreement. This came to pass,
11
and Rambus was obligated to abide by its obligations under Section 3.8.2 Moreover, Rambus’s
12
breach of contract has and will significantly damage Samsung. For example, in the pending patent
13
cases, Rambus relies heavily on the original rates in the SDR/DDR License to justify its patent
14
damages claims even though those rates were subject to expansive MFL rights and should have
15
been significantly reduced in the wake of the Infineon License and Settlement Agreement.
16
Further, Samsung should have been licensed under the lower Infineon royalty rate in the absence
17
of Rambus’s breach, which also would reduce Samsung’s patent damages exposure. For all of
18 19 20 21 22 23 24 25 26 27 28
2
Rambus also should be estopped from taking a position inconsistent with the recitals of the SDR/DDR License that would prejudice Samsung. See, e.g., Matter of Pubs, Inc. of Champaign, 618 F.2d 432 (7th Cir. 1980) (holding that parties are estopped to deny the recitals of an enforceable agreement); Estate of Wilson, 64 Cal. App. 3d 786, 800-01 (Cal. Ct. App. 1976). The doctrine of “estoppel by contract” applies to cases where there is an undertaking to treat a fact as settled. See 31 C.J.S. Estoppel and Waiver § 70. Cal. Evid. Code § 622. Samsung relied on Rambus’s representations in the WHEREAS clauses as statements of settled fact that Samsung’s royalty terms would be lower than any offered to Samsung’s competitors, such as Infineon, then in litigation with Rambus. Rambus’s denial that its offer to Infineon comprised a “royalty rate” seeks to prejudice Samsung and deprive Samsung of the benefit of Section 3.8 of the SDR/DDR License. Thus, this Court should preclude Rambus from arguing that Infineon did not receive a “royalty rate.” SAMSUNG’S TRIAL BRIEF
11
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 19 of 42
1
these reasons, Samsung seeks legal and equitable relief to address the harm it has incurred and
2
could incur as a result of Rambus’s breach of contract.3
3
3.
4
Rambus likewise breached its obligation to negotiate in good faith an extension or a new
5 6 7 8 9 10 11 12 13 14 15 16
license agreement with Samsung. The nature of Rambus’s duty to negotiate in good faith is defined by the terms of the agreement that gave rise to it, which includes Rambus’s representations in the recitals and Samsung’s MFL obligations as set forth in Sections 3.8 and 3.9. See, e.g., A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group, Inc., 873 F.2d 155, 158-59 (7th Cir. 1989) (“[T]he scope of any obligation to negotiate in good faith can only be determined from the framework the parties have established for themselves in their letter of intent.”); Feldman v. Allegheny Internat’l, Inc., 850 F.2d 1217 (7th Cir. 1988) (holding that terms of a preliminary agreement control the scope of the obligation to bargain in good faith); Teachers Ins. & Annuity Ass’n of Am. v. Tribune Co., 670 F. Supp. 491, 506 (S.D.N.Y. 1987) (noting that a party may breach its obligation to bargain in good faith by unreasonably insisting on a condition outside the scope of the parties’ preliminary agreement). Indeed, Rambus’s representations in the WHEREAS clause that Infineon and other
17 18 19 20 21 22 23 24 25 26 27 28
Rambus Breached Section 8.5 of the SDR/DDR License when it Failed to Negotiate in Good Faith Towards a Renewal or New Agreement
litigants’ royalty rates would be higher than Samsung’s define the nature and scope of Rambus’s duty to negotiate in good faith, because contract “‘[r]ecitals may have a material influence in construing the contract and determining the intent of the parties, and in such respect they should, 3
Courts have routinely recognized that “most favored” provisions in patent licenses, like Sections 3.8 and 3.9, are evidence of an intent to protect the licensee from competitive disadvantage. See, e.g., Cardinal of Adrian, Inc. v. Amerock Corp., 208 U.S.P.Q. 822, 823 (E.D. Mich. 1979) (“The most favored nation clause is intended to guarantee . . . that no licensee will be given the opportunity to use this patent at a more favorable rate.”) (emphasis in original). In Cardinal of Adrian, Inc. v. Amerock Corp., the Eastern District of Michigan rejected the very same argument on which Rambus bases its defense to Samsung's claim of breach of Section 3.8, holding that a provision guaranteeing “a more favorable royalty rate” required the licensor of a patent to offer to licensee any more favorable royalty—i.e., even a one-time, lump sum payment—offered to a third party. 208 U.S.P.Q. at 823 (citing Cold Metal Process Co. v. McLouth, 170 F.2d 369 (6th Cir. 1948); Rothstein v. Atlanta Paper Co., 321 F.2d 90 (5th Cir. 1963); Harley C. Loney Co., 205 F.2d at 220 (7th Cir. 1953)). SAMSUNG’S TRIAL BRIEF
12
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 20 of 42
1
so far as possible, be reconciled with the operative clauses and be given effect . . . .’” Patwardhan
2
v. Kale, 2003 WL 21130236, at *5 (Cal. Ct. App., May 16, 2003) (quoting 17 Am. Jur. 2d,
3
Contracts (1991), § 392, at 417-18); see also Creamer v. AIM Tels., Inc., 159 B.R. 440, 444 n.4
4
(E.D. Pa. 1993) (“In terms of contract interpretation, the information in whereas clauses is useful
5
because it sets forth the context in which the agreement was contemplated and signed.”).
6
Rambus’s duty to negotiate in good faith also must be interpreted and understood in light
7
of Rambus’s MFL obligations under Sections 3.8 and 3.9, and the fundamental intent that
8
Samsung would suffer no competitive harm if Infineon obtained a favorable settlement. In light of
9
these obligations and the intentions of the parties, Rambus’s express duty to negotiate in good
10
faith plainly required that it offer Samsung terms that were at least as favorable as those offered to
11
Infineon.
12
Indeed, in the absence of breach, Samsung’s royalty rates would have been adjusted to
13
Infineon levels as of April 1, 2005, which corresponded with the start of the required good-faith,
14
license-renewal negotiations. Moreover, Samsung was entitled under Section 3.8 to MFL
15
protection “effective for this Agreement,” which would have included an extension of the
16
agreement as contemplated expressly in Section 8.5. In addition, the express duty to negotiate in
17
good faith must be understood, consistent with the WHEREAS clause, to require a royalty rate
18
offer that at a minimum was no higher than Infineon’s royalty rate. To do otherwise would run
19
afoul of Rambus’s unqualified and expansive representations that royalty rates offered to litigants
20
such as Infineon would be higher than Samsung’s royalty rates. Indeed, an offer of a license on
21
anything less than the terms obtained by Infineon would plainly contravene the parties’ intentions
22
that Samsung would suffer no competitive harm if Infineon and other litigants succeeded in
23
litigation against Rambus.
24
Nor can it be doubted that the duty to negotiate in good faith required in this context that
25
Rambus, as licensor, actually make at least one offer for a license (as dictated by the terms of the
26
SDR/DDR License and the intentions of the parties as expressed therein) or express an objective
27
manifestation of a willingness to accept such an offer from Samsung. Otherwise, the duty to
28
negotiate in good faith in the SDR/DDR License, as combined with the favorable Infineon SAMSUNG’S TRIAL BRIEF
13
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 21 of 42
1
license, both which as explained above, dictated the parameters of the license to be negotiated,
2
would be meaningless.
3
In violation of its duty to negotiate in good faith, Rambus did not make any written offer
4
for a license renewal, much less one on terms that matched those granted to Infineon, and
5
indicated that it would not entertain any such proposal from Samsung. Rambus specifically
6
refused to offer Samsung the royalty rate agreed to be paid by Infineon during the negotiations
7
and wrongfully terminated the negotiations and the SDR/DDR License in favor of the patent
8
litigation suits it filed on June 6, 2005. Rambus’s actions violated the express duty to negotiate in
9
good faith. For similar reasons, Rambus violated the implied covenant of good faith and fair
10
dealing inherent in Section 8.5.4
11
III.
12
SAMSUNG IS ENTITLED TO EXPECTATION DAMAGES AS A RESULT OF RAMBUS’S BREACH OF SECTION 8.5
13
For the reasons discussed above, Rambus was obligated to offer Samsung license terms as
14 15 16 17 18 19 20 21 22 23 24 25 26 27
least as favorable as those offered to Infineon. Among other things, Rambus was obligated to offer Samsung (or express a willingness to, and then in fact, accept) a license including a royalty rate that was at least equal to, if not more favorable than, Infineon’s royalty rate—i.e., the effective running royalty rate derived from Infineon’s $5.85 million per quarter (or simply its fixed, quarterly rate) up to the royalty cap Infineon received—for its license to the various products accused in Rambus’s two patent suits. The evidence will show that Samsung 4
The implied covenant of good faith and fair dealing “exists merely to prevent one contracting party from unfairly frustrating the other party’s rights to receive the benefits of the agreement actually made.” Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 350 (2000). “This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes he will do to accomplish its purpose.” Floystrup v. City of Berkeley Rent Stabilization Bd., 219 Cal. App. 3d 1309, 1318 (Cal. Ct. App. 1990) (citation omitted) (quoting Harm v. Frasher, 181 Cal. App. 2d 405, 417 (Cal. Ct. App. 1960). Courts have found a breach of the duty to negotiate in good faith where one party proposes terms that the other party has already rejected as commercially unreasonable in a prior negotiation. In re Vylene Enters., Inc., 90 F.3d at 1477.
28 SAMSUNG’S TRIAL BRIEF
14
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 22 of 42
1
unquestionably would have accepted such an offer and thus would not have been subject to patent
2
damages exposure far in excess of the royalty rates in the Infineon Settlement and License
3
Agreement.
4
A.
5
California law supports the availability of expectation damages in this case. See Witkin,
6
Summary of Cal. Law, Contracts § 869 (2005) (“The basic object of damages is compensation,
7
and in the law of contracts the theory is that the party injured by the breach should receive as
8
nearly as possible the equivalent of the benefits of performance.”). A party seeking expectation
9
damages due to breach of contract must establish a causal connection between the breach and the
10
damages sought. See id. § 870; Cal. Civ. Code § 3300 (providing for compensation for detriment
11
“proximately caused”).
12
Legal Standard
Expectation damages must be shown with reasonable certainty. See Witkin, Summary of
13
Cal. Law, Contracts § 879 (2005) (“[T]he injured party may recover for the profits or benefits that
14
he or she would have obtained by performance if the injured party can establish them with
15
reasonable certainty.”); see also Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (9th
16
Cir. 2001). “[I]f the plaintiff can prove that had it not been for the defendant’s bad faith the
17
parties would have made a final contract, then the loss of the benefit of the contract is a
18
consequence of the defendant’s bad faith, and, provided that it is a foreseeable consequence, the
19
defendant is liable for that loss.” Venture Assocs. v. Zenith Data Sys., 96 F.3d 275, 278 (7th Cir.
20
1996); see also Teachers Ins. & Annuity Ass’n v. Ormesa Geothermal, 791 F. Supp. 401, 415
21
(S.D.N.Y. 1991) (permitting damages of lost income after holding that defendant breached duty
22
to negotiate in good faith).
23 24 25
B.
Samsung’s Damages Resulting from Rambus’s Bad Faith Can Be Shown with “Reasonable Certainty”
In this case, the mutual intent of the parties as expressed in the SDR/DDR License, when
26
combined with the specific terms in the favorable license offered to Samsung’s competitor,
27
provide the terms for a license that should have been the subject of good faith negotiations—i.e.,
28
an offer (which Samsung would have accepted) for a license on terms at least as good as those SAMSUNG’S TRIAL BRIEF
15
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 23 of 42
1
offered to Infineon. Therefore, an expectation-damages remedy for a duty to negotiate in good
2
faith is not unduly speculative in the context of the SDR/DDR License and the circumstances
3
during the negotiations in 2005 after the Infineon License was announced. See, e.g., Coachella
4
Valley Water Dist. v. Imperial Irrigation Dist., 2007 WL 2822766, at *13 (Cal. Ct. App., Oct. 1,
5
2007) (holding that expectation damages were appropriate for breach of duty to negotiate due to
6
the parties’ conduct and because the court had “in fact a fairly detailed means of determining
7
what the terms of a [deal] would provide”); Paramount Developers & Contractors, Inc. v. M.B.
8
Admin. Servs. Corp., 2004 WL 214325, at *6 (Cal. Ct. App., Feb. 5, 2004) (finding that “very
9
clear” terms in a letter of intent provided a means for knowing what the ultimate terms of an
10 11
agreement would have been). Although there is some authority in California that suggests that expectation damages may
12
be too speculative to award for breach of a contractual obligation to negotiate in good faith, see
13
Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251, 1263 (Cal. Ct. App. 2002) (rejecting
14
claim for lost profits “because there is no way of knowing what the ultimate terms would have
15
been or even if there would have been an ultimate agreement”), that authority does not preclude
16
an award of expectation damages here. In the first instance, the agreement that gave rise to the
17
duty to negotiate in good faith in Copeland did not contain the terms that had to be offered by one
18
of the parties. See id. In contrast, Rambus’s obligation to negotiate in good faith, when interpreted
19
in light of the context of the SDR/DDR License, imposed on Rambus the obligation to offer
20
Samsung—or express a willingness to, and then in fact, accept—terms no less favorable than
21
those offered to Infineon. Indeed, the only issue of significance in the negotiations turned on the
22
royalty terms that Rambus would offer to Samsung. However, in the absence of breach, Rambus
23
would have been required to offer—or express a willingness to, and then in fact, accept—the
24
terms in the Infineon license (e.g., Infineon’s royalty rate and royalty cap in exchange for a
25
license covering the existing licensed products and future generations thereof), an offer Samsung
26
would have accepted. Therefore, when considered in connection with the fundamental intent
27
behind the SDR/DDR License—manifested in Sections 3.8, 3.9, 8.5, and the WHEREAS
28
clauses—that Samsung suffer no competitive disadvantage relative to Infineon, the Infineon SAMSUNG’S TRIAL BRIEF
16
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 24 of 42
1
License provides a “very clear” and “fairly detailed means” for this Court to determine what the
2
terms of a renewal license would provide. Concerns of undue speculation thus are unfounded and
3
inapplicable to this case, where Samsung will prove its expectation damages with reasonable
4
certainty.
5
IV.
6
RAMBUS IS ESTOPPED FROM ENFORCING ITS PATENTS BEYOND THE TERMS OF THE INFINEON LICENSE
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
A.
Legal Standard
Equitable estoppel is an established defense against enforceability of a patent in a suit for infringement. See, e.g., J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1561 (Fed. Cir. 1984). The purpose and importance of equitable estoppel has long been recognized: “The vital principle is that he who, by his language or conduct, leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted.” Dickerson v. Colgrove, 100 U.S. 578, 580 (1880). B.
Rambus Should Be Estopped Due to Its Failure to Negotiate in Good Faith
The United States International Trade Commission (the “ITC”) has considered the estoppel effect of a patentee’s breach of an obligation to negotiate in good faith on the patentee’s ability to enforce its patents. See In the Matter of Certain Dynamic Random Access Memories, Components Thereof, and Products, 1987 WL 450980, USITC Inv. No. 337-TA-242 (U.S.I.T.C.) (hereinafter “DRAMs”). In DRAMs, a respondent and the complainant entered into a patent license agreement that required the parties to negotiate to renew the license. Id. at 707. The administrative law judge (the “ALJ”) found that the original license between the parties was a “framework agreement” that required both parties to negotiate in good faith for a renewal. Id. After the original license expired, the complainant sought an exclusion order from the ITC. Id. at 730. The respondent argued that the complainant had failed to negotiate a renewal agreement as required by the original license. Id. at 707. In a decision terminating the investigation of a respondent based upon complainant’s misleading conduct, the ALJ held that the respondent “[had] a license immunity under the . . . SAMSUNG’S TRIAL BRIEF
17
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 25 of 42
1
framework agreement and [the complainant’s] subsequent conduct, and [the complainant was]
2
estopped from denying to [respondent] a license immunity from suit or injunctive relief under the
3
laws of equitable estoppel.” Id. at 731. The ALJ further determined that the respondent was
4
harmed by the misleading conduct because it precluded the respondent from taking action “to
5
avoid infringement or usage of the patents in suit.” Id. at 734-35. The ALJ also noted that
6
“[w]here mutual obligations are incurred and relied upon with respect to patent rights, a finding
7
of infringement is inappropriate, even though royalties may be owed.” Id. at 729 (citing DeForest
8
Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241-42 (1927)). “[Respondent] proved that
9
[complainant] is equitably estopped from suing it for infringement because [complainant] failed
10
to negotiate in good faith toward a renewed license agreement as it had promised to do.” DRAMs,
11
1987 WL 450980 at 393.
12 13
1.
Samsung Was Misled by Rambus’s Promises and Then Refusal To Honor Its Contractual Obligations to Negotiate in Good Faith
14
Rambus promised Samsung that it would suffer no competitive harm as a result of
15
entering into a license if litigants such as Infineon succeeded in obtaining better terms, a promise
16
that was expressed in multiple provisions of the SDR/DDR License, including Section 8.5 of the
17
SDR/DDR License. Rambus specifically affirmed its promise to negotiate in good faith (as
18
interpreted and understood in light of the intentions of the parties) in writing and through months
19
of negotiations in 2005. (PFF ¶ 112.) Samsung was misled by Rambus’s promises and actions
20
into reasonably inferring that Rambus would enter into a license on terms no worse than those set
21
forth in the Infineon license. Rambus’s conduct on June 6, 2005 demonstrated that Rambus did
22
not in fact negotiate in good faith in spite of its promises, actions, and prior statements.
23
2.
24 25
Samsung Relied upon Rambus’s Commitment to Negotiate a Renewal or Extension of the SDR/DDR License in Good Faith
Samsung’s reliance began when it entered into the SDR/DDR License based on Rambus’s
26
statements and promises: (i) that Samsung would suffer no competitive disadvantage relative to
27
its competitors then in litigation with Rambus and (ii) that Rambus would negotiate with
28
Samsung in good faith to renew and expand the SDR/DDR License prior the end of its term. (PFF SAMSUNG’S TRIAL BRIEF
18
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 26 of 42
1
¶¶ 15, 19, 25-27, 38.) Samsung continued to rely on these commitments throughout the term of
2
the SDR/DDR License.
3
3.
4 5 6 7 8 9 10 11 12 13 14
Samsung Has Suffered Material Prejudice as a Result of Rambus’s Misconduct
As discussed above, Samsung relied on Rambus’s representations and promises in entering into the SDR/DDR License, in paying millions of dollars in royalties to Rambus, and during the negotiations with Rambus over a license renewal. Samsung also did not pursue other alternatives to a license although it had a right under the SDR/DDR License to do so. Further, Rambus will continue to use the original royalty rates in SDR/DDR License without the required adjustment based on Samsung’s MFL rights as evidence in support of its patent damages claims against Samsung. As a result, Samsung plainly has suffered, and will suffer, material prejudice as result of Rambus’s conduct. 4.
Balance of Equities Support Estoppel
Rambus expressly promised to Samsung in the SDR/DDR License that it would
15
“negotiate in good faith with a view to achieving a mutually satisfactory patent license agreement
16
. . . .” (PFF ¶ 38.) Had Rambus complied with its obligations, it would have made an offer based
17
on Infineon’s royalty rate, which Samsung would have accepted. (Id. ¶ 124.) The ensuing three
18
years of litigation—at enormous cost to the judicial system and to the parties—would not have
19
occurred. At the same time, Rambus undoubtedly will attempt to benefit from the SDR/DDR
20
License—and its royalty rates inappropriately left unadjusted by the MFL clause—in the patent
21
litigation in spite of its breaches of contract, in order to collect damages far in excess of the
22
royalty rates Rambus promised to offer Samsung. That result is grossly inequitable and strongly
23
supports the grant of equitable relief in favor of Samsung to prevent, among other things, Rambus
24
from asserting rights as against Samsung beyond the terms obtained by Infineon—e.g., by
25
enforcing its patents in excess of the royalty rates agreed to be paid by Infineon. See DRAMs
26
1987 WL 450980, at 729 (noting that “[w]here mutual obligations are incurred and relied upon
27
with respect to patent rights, a finding of infringement is inappropriate, even though royalties may
28
be owed) (citing DeForest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241-42 (1927)). SAMSUNG’S TRIAL BRIEF
19
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 27 of 42
1
RAMBUS USED THE ALLEGED AUDIT BREACH AS A PRETEXT FOR ITS BREACH OF THE SDR/DDR LICENSE
2
I.
3
RAMBUS’S 2004 AUDIT
4
Rambus based its abrupt termination the SDR/DDR License on June 6, 2005, on
5
Samsung’s alleged uncured breach of Section 4.1—the audit provision of the SDR/DDR
6
License—that was purportedly first noticed on July 9, 2004. (PFF ¶ 121.) However, since the
7
execution of the 2001 Amendment, the only per-unit royalties payable by Samsung were
8
attributable to memory controllers, a very small piece of Samsung’s business. (Id. ¶¶ 53, 59-60.)
9
In contrast, Samsung’s DRAM sales were subject to a flat, quarterly payment during that
10
timeframe. (Id. ¶ 52.) Thus, the audit authorized by the SDR/DDR License related exclusively to
11
sales of memory controllers, which comprise a very small fraction of the products covered by the
12
license.5 In spite of the narrow confines of the products to be audited, Rambus sought detailed sales
13 14
and technical information on all of Samsung’s memory products while, at the same time, it
15
accused many of them of being unlicensed and therefore subject to a patent infringement suit.
16
(See id. ¶¶ 57-64.) Notwithstanding these and other facts, Samsung undertook to cooperate with
17
Rambus’s auditors from Ernst & Young (E&Y). (Id. ¶¶ 62-63.) After several on-site visits and
18
numerous calls and email exchanges, E&Y’s Korean affiliate, Younghwa Accounting Firm
19
confirmed to Samsung on January 18, 2005, that “[a]ll the Reports will be completed and
20
submitted to E&Y by the end of this week” and “that, from the standpoint of Younghwa
21
Accounting Firm, there is no problem with the Rambus Audit result.” (Id. ¶ 75; see also id. ¶¶ 67-
22
69, 72.) Mr. Shim relayed this information to Rambus at the parties’ February 2, 2005 meeting,
23 24
and Rambus promised to follow up with E&Y and notify Samsung of any remaining issues. (Id. ¶
25
76.) After that meeting, Rambus did not provide Samsung with a list of remaining issues, did not
26 5
27 28
Section 4.1 permits termination of the license only if three consecutive audits reveal an underpayment exceeding five percent. (PFF ¶ 55.) Rambus terminated the license after one audit of a small fraction of the relevant product sales. SAMSUNG’S TRIAL BRIEF
20
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 28 of 42
1
indicate that Ernst & Young’s Korean affiliate was mistaken, and did not instruct E&Y to contact
2
Samsung about the audit. (Id. ¶ 78.) Instead, just as Rambus and Infineon came to agreement on
3
the terms of the Infineon License, William Deley of Rambus wrote to E&Y’s Mr. Shepherd to
4
“confirm that there has been continued zero cooperation by Samsung relative to the royalty
5
audit,” because “they have been saying that they have been fully cooperating on the audit.” (Id. ¶
6
81.) Although Mr. Shepherd provided Mr. Deley with an update of what he believed to be
7
outstanding issues, Rambus did not convey any of this information to Samsung. (Id. ¶ 85.)
8
Instead, Rambus proceeded with renewal negotiations until June 6, 2005, when it terminated the
9
license.
10
Thus, from January 18, 2005—when Younghwa informed Samsung that the audit was
11
complete—to Rambus’s unilateral termination of the SDR/DDR License in June 2005, Rambus
12
did not tell Samsung: (a) that E&Y disagreed with its Korean representatives; and (b) the specific
13
audit issues, if any, that remained such that they could be cured. In addition to its failure to give
14
Samsung the information necessary to cure any alleged breach, Rambus also led Samsung to
15
believe that the audit issue would not impair or effect Samsung’s rights to a good faith
16
negotiation under Section 8.5. These facts, which show that no breach occurred, also demonstrate
17
that any alleged breach of Section 4.1 by Samsung is legally of no consequence based on
18
Rambus’s course of conduct and the lack of materiality of any such breach.
19 II.
20 21 22 23 24
RAMBUS IS NOT EXCUSED FROM PERFORMANCE OF SECTION 8.5 A.
Rambus Waived its Right To Be Excused from Performance of the SDR/DDR License 1.
Legal Standard
It is well settled that, “[a] breach of contract gives the aggrieved party . . . an election of
25
remedies,” 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 853, whereby “[t]he
26
injured party “must elect to affirm the contract or to terminate it.” 3 Witkin, Cal. Procedure (4th
27
ed. 1996) Actions, §176, p. 246. “Affirmation of the contract, on the one hand, and rescission and
28 SAMSUNG’S TRIAL BRIEF
21
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 29 of 42
1
restitution on the other, are alternative remedies. Election to pursue one is a bar to invoking the
2
other.” Alder v. Drudis, 30 Cal.2d 372, 383 (Cal. 1947); Lenard v. Edmonds, 151 Cal.App.2d
3
764, 768 (Cal.App.1.Dist. 1957); Rest., Contracts, Section 384; 5 WILLISTON ON CONTRACTS
4
(rev. ed.), § 1464, pp. 4096-4097. Thus, when a party to a contract deems itself to have the right
5
to terminate an agreement, and, instead of terminating, chooses to avail itself of the rights and
6
privileges under that contract, the contract remains in force for the benefit of each party to that
7
agreement. See, e.g., Cummings v. Universal Pictures Co., Inc., 62 F. Supp. 611, 629 (S.D.Cal.
8
1944) (“[T]o paraphrase the rather trite expression that one may not eat his cake and have it too . .
9
. [the contracting party who declined to terminate] was not entitled to retain the rights accorded to
10
it under the contract, and at the same time be relieved from its contractual obligations
11
thereunder.”); Boone v. Templeman, 158 Cal. 290, 295 (1910); Leiter v. Eltinge, 246 Cal. App. 2d
12
306, 317 (Cal. Ct. App. 1966); 5 Williston 3d, § 688 (“The principle is general that wherever a
13
contract not already fully performed on either side is continued in spite of a known excuse, the
14
defense thereupon is lost and the injured party is himself liable if he subsequently fails to
15
perform, unless the right to retain the excuse is not only asserted but assented to.”) (emphasis
16
added); see also Title Ins. & Trust Co. v. Hisey, 95 F.2d 555, 561 (9th Cir. 1938) (“The California
17
courts have settled beyond a peradventure of a doubt that ‘The acceptance of rent by the landlord
18
from the tenant, after the breach of a condition of a lease, with full knowledge of all the facts, is a
19
waiver of the breach, and precludes the landlord from declaring a forfeiture of the lease by reason
20
of said breach.’”).
21
Courts have likewise found that, where a party with knowledge of a default that entitles it
22
to terminate a contract enters into negotiations that recognize the continued validity of that
23
contract, “the right to claim a forfeiture for such default is waived.” See, e.g., Spiegelman v.
24
Metro. Life Ins. Co., 21 Cal. App. 2d 299, 301 (Cal. Ct. App. 1937); see also Precision Pine &
25
Timber, Inc. v. United States, 62 Fed. Cl. 635, 650-51 (2004) (“In light of Precision’s continued
26
manifestation of its intention to perform under the contracts and the lack of timely notice to the
27
Forest Service regarding Precision’s assertion of material breach, this Court concludes that it
28
would be unjust under the circumstances to allow Precision to avoid liability for its breaches SAMSUNG’S TRIAL BRIEF
22
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 30 of 42
1
based on the assertion of prior material breach.”); DeVito v. United States, 413 F.2d 1147, 1154-
2
55 (Ct. Cl. 1969) (noting the elements of waiver by election are “(1) failure to terminate within a
3
reasonable time after the default under circumstances indicating forbearance; and (2) reliance by
4
the contractor on the failure to terminate and continued performance by him under the contract,
5
with the Government’s knowledge and implied or express consent” and that defendant had failed
6
to send a “cure” notice specifying a reasonable time for performance). Cf. N. Helex Co. v. United
7
States, 455 F.2d 546, 553-554 (Ct. Cl. 1972) (applying UCC and holding that “explicit
8
notification” was sufficient to reserve right to terminate where “cessation of [performance] was
9
commercially impossible and avoidance of waste most desirable” and defendant “was not hurt,”
10
“did not change its position,” and “was certainly not misled into thinking that payment was
11
immaterial . . . and that [plaintiff] would continue to perform regardless”); W. Transmission Corp.
12
v. Colo. Mainline, Inc., 376 F.2d 470, 472 (noting that a party deciding to proceed with
13
performance after breach may still change its mind if the other party has not changed its position
14
in reliance on the decision to affirm the contract).
15
Similar logic informs the prohibition of a party’s ability to recover for a breach that the
16
party has itself induced. Hartung v. Pollastrini, 304 P.2d 846 (Cal. Ct. App. 1957) (defendant
17
who induced landowner not to act could not rely on landowner’s failure to act as an excuse for
18
defendant’s own nonperformance); Bank of America Nat. Trust & Sav. Ass'n v. Cranston, 60 Cal.
19
Rptr. 336 (Cal. Ct. App. 1967) (any inconsistent acts or dealings by party claiming a forfeiture
20
will be regarded as a “waiver” thereof, and a simple voluntary relinquishment of a right with
21
knowledge of all the facts or an expression of intention, by speech or conduct, not to demand a
22
certain thing, is sufficient to constitute such a “waiver”).
23 24 25
2.
Rambus Continued to Accept Samsung’s Performance under the SDR/DDR License
Under the terms of the SDR/DDR License, Rambus only held a limited right to terminate
26
for underpayments revealed in an audit—i.e., if three consecutive audits revealed an
27
underpayment of greater than five percent. Even if Rambus established a breach, which Rambus
28
alleges it noticed in July 2004 and thus remained uncured past the 45-day cure period, Rambus CASE NO. C 05 00334 RMW SAMSUNG’S TRIAL BRIEF 23 CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 31 of 42
1
continued to accept the benefits of the contract until June 2005. The law does not permit a
2
contracting party to avail itself of the benefits of a contract and then, having done so, belatedly
3
seek to terminate in order to avoid its obligations under that same contract. See, e.g., Cummings,
4
62 F. Supp. at 629 (when movie studio determined not to terminate actor’s employment contract
5
upon actor’s breach and instead elected to “avail itself of the several cumulative rights granted to
6
it thereunder, it necessarily followed that the contract remained in force . . . . [h]ence [the studio]
7
was still bound to discharge such obligations as the agreement imposed on it.”); Witkin,
8
Summary of Cal. Law, Contracts § 856 (“Instead of treating the breach as a termination of the
9
contract, the injured party may waive it, i.e., elect to treat the contract as still alive, remaining
10
ready and able to perform on his or her part, and limiting the remedy to compensation for the
11
breach.”).
12
Indeed, Rambus repeatedly chose to re-affirm the SDR/DDR License by continuing to
13
accept performance from Samsung and to itself purport to perform under the renegotiation
14
requirements of Section 8.5 after the alleged audit breach and purported “time to cure” (according
15
to Rambus) had passed. These facts demonstrate an implied, if not express, waiver by Rambus of
16
any right to terminate based on the alleged audit breach. See, e.g., Boone v. Templeman, 158 Cal.
17
290, 295 (1910); Spiegelman v. Metro. Life Ins. Co., 21 Cal. App. 2d 299, 301 (Cal. Ct. App.
18
1937); see also Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635, 650-51 (2004).
19 20 21
B.
Rambus Should Be Estopped from Using the Alleged Audit Breach as an Excuse for its Failure to Perform under the SDR/DDR License
The doctrine of equitable estoppel applies when the following elements are met:
24
(1) the party to be estopped must be apprised of the facts; (2) the party to be estopped must intend that his conduct shall be relied upon, or must so act that the party asserting estoppel had a right to believe it was so intended; (3) the party asserting estoppel must be ignorant of the true state of facts; and (4) the party asserting estoppel must rely upon the conduct to his injury.
25
Bd. of Trustees of Stanford University v. Roche Molecular Sys., 487 F. Supp. 2d 1099, 1114 (N.D.
26
Cal. 2007). The evidence discussed above demonstrates that—after E&Y (Korea) told Samsung
27
that it had completed the audit—Rambus became aware that E&Y (U.S.) believed that there were
28
specific issues that remained uncured with respect to the audit, yet Rambus did not provide that
22 23
SAMSUNG’S TRIAL BRIEF
24
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 32 of 42
1
information to Samsung. Further, Rambus gave Samsung the impression that a cure of the audit
2
issue would not impair Samsung’s rights to a good faith negotiation under Section 8.5, much less
3
give rise to a right of termination. Samsung did not know the true state of affairs and relied on
4
Rambus’s conduct in not taking further steps, if any were necessary, to remedy any remaining
5
audit issues in order to avoid termination and to achieve a successful license extension and
6
expansion. Accordingly, Rambus should be estopped from asserting the audit breach as grounds
7
to avoid its obligations under the SDR/DDR License.
8
C.
9
Absent an express condition, performance is only excused by the other party’s material
10 11 12 13 14 15 16
breach. 1 Witkin, Summary of Cal. Law, Contracts, § 852, p.938. Whether a partial breach is material depends on the importance or seriousness of the breach and the probability of the injured party receiving substantial performance. See Superior Motels v. Rinn Motor Hotels, 195 Cal. App. 3d 1032, 1052 (Cal. Ct. App. 1987). Further, after considerable performance, a slight breach that does not go “to the root” of the contract will not justify termination. See Karz v. Dep’t of Prof. Vocational Stds., 11 Cal. App. 2d 554, 557 (1936). Samsung’s alleged audit breach was not material. As noted above, under the 2001
17 18 19 20 21 22
Any Purported Breach of the Audit Provisions of the SDR/DDR License Was Not Material
Amendment, Rambus’s audit rights were extremely narrow because only a very small fraction of licensed products—memory controllers—were subject to the audit.6 The bulk of Samsung’s royalty payments under the 2001 Amendment took the form of a $2 million, lump-sum, quarterly payment for Samsung's DRAMS, which Samsung paid each quarter. Because the lump-sum payments were not tied to Samsung’s product sales, typical audit-related issues, such as sales
23 6
24 25 26 27 28
The SDR/DDR License covered Samsung's SDR SDRAM, DDR SDRAM, SGRAM and DDR SGRAM memory products ("Samsung's DRAMs") as well as components that control Samsung's DRAMs ("Memory Controllers"). Nearly all (i.e., 94%) of Samsung's relevant sales under the license are for Samsung's DRAMs. (PFF ¶ 60.) Samsung did not sell stand-alone Memory Controllers, but rather sold integrated circuits that perform multiple functions unrelated to controlling DRAMs, but that also have circuitry capable of controlling various types of memory (including in some cases DRAMs). The parties referred to these parts as "SOCs" or "Systems on a Chip." SAMSUNG’S TRIAL BRIEF
25
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 33 of 42
1
volume and deductions from net sales, were irrelevant to the amount of royalties due to Rambus
2
for Samsung’s sales of DRAMs. DRAMs comprised the vast majority of Samsung’s sales under
3
the SDR/DDR License, and sales of memory controllers were not a material part of the parties’
4
bargain.7 Moreover, incomplete compliance with an audit targeting such a small portion of the
5
license revenues could not go “to the root” of the SDR/DDR License and thus would not justify
6
termination. See Karz, 11 Cal. App. 2d at 557.
7 8
THE SDR/DDR LICENSE COVERS FUTURE GENERATIONS OF DDR PRODUCTS
9
Samsung’s DRAM products introduced after its DDR SDRAM products (i.e., DDR2,
10
DDR3, GDDR2, GDDR3, GDDR4, and GDDR5) are covered as licensed products under the
11
2000 SDR/DDR License Agreement.
12
I.
13
FACTS
14
A.
15
Sections 1.7 and 1.8 define the scope of the terms “DDR SDRAM(s)” and “DDR
16
SGRAM(s)” as they are used in the agreement. (PFF ¶ 131.) The definitions explicitly cover any
17
future DDR memory device that is identical to any of the memory devices identified by part
18
number, except for any differences that fall within 11 categories of differences that are allowed
19
by the agreement. (Id.)
20
Sections 1.7 and 1.8 of the Agreement
The eleven allowed differences are 1) a different package type, 2) different die size, 3)
21
different burst type, 4) different clock frequency, 5) different programmable latency, 6) different
22
programmable burst length, 7) different memory storage capacity, 8) different number of
23
input/output pins, 9) different timing values for existing timing parameters (for example, set-
24
7
25
Samsung recently supplemented its production of sales data, which included sales data for Memory Controllers sold during the audit period. That data reveals that,
26 27 28
This data further demonstrates that Samsung’s alleged breach could not have been and was not material. SAMSUNG’S TRIAL BRIEF
26
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 34 of 42
1
up/hold times and propagation delays), 10) different power consumption, and/or 11) different
2
number of banks. (Id.)
3
B.
4
During the course of negotiating the 2000 SDR/DDR license, Samsung’s intent was to
Negotiation of the 2000 SDR/DDR Contract
5
include “evolutionary” products such as DDRII, and subsequent generations of DDR products.
6
Rambus gave Samsung an assurance that such products would be covered under the agreement.
7
(PFF ¶ 134.)
8 9
When Samsung received Rambus’s proposed SDR/DDR license agreement, Samsung desired to make sure that the agreement would cover future generations of its DDR memory
10
products. Accordingly, when Samsung received a draft of the contract from Rambus, one of the
11
changes that Samsung requested was for sections 1.7 and 1.8 to explicitly state that future
12
generations of DDR products that are “substantially similar” to the listed DDR products would
13
also be included. (Id. ¶ 135.) In response to this request, although Rambus did not agree to the
14
proposed change in language, Rambus assured Samsung that the existing language, with the 11
15
categories of allowed differences, was sufficient to “adequately cover devices which may have
16
evolutionary (as opposed to revolutionary) differences from the devices specified by part
17
number.” (Id.)
18
This statement was designed to assure Samsung that future generations of its DDR
19
products would be covered by the license agreement, and that it was only “revolutionary” new
20
designs that would not be included. In the DRAM industry, it was widely known that the various
21
manufacturers of DRAM products were promoting the next generations of their products as
22
“evolutionary” rather than “revolutionary.” Accordingly, Rambus statements during the
23
negotiation of the 2000 contract that devices that have evolutionary differences from the current
24
DDR products was both meant by Rambus and understood by Samsung to mean that products
25
such as the DDRII and subsequent generations of its DDR products released by Samsung would
26
be covered by the license agreement.
27 28
For example, in 1999, when the industry standards setting group JEDEC met to discuss development of the next generation of DDR technology, DDRII, it expressly noted that the “basic SAMSUNG’S TRIAL BRIEF
27
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 35 of 42
1
design philosophy” of DDRII was to be “evolutionary rather than revolutionary.” (Id. ¶ 137.)
2
Additionally, Micron Technology, Inc. gave a presentation at a JEDEC meeting about DDRII
3
clocking scheme and data capture and remarked that “the current DDR-II proposal is evolutionary
4
from DDR-I.” (Id.)
5
Various articles and publications in the DRAM industry use the distinction between
6
“evolutionary” and “revolutionary” paths to describe various DRAM products. For example, an
7
article in bit-tech.net, explains that the change from using an asynchronous clock to a
8
synchronous clock was revolutionary. However, when viewing the natural progression of SDR
9
DRAM through DDR, DDRII, and to DDRIII, the article describes this progressions as
10
“evolutionary.” (PFF ¶ 138.)
11
Similarly, an article in PC Technology Guide, explains that “[t]he transition from DDR to
12
DDR2 memory was more evolutionary than revolutionary, the DDR2 architecture being
13
essentially the same as that of its predecessor, with a number of enhancements designed to
14
provide greater bandwidth and other features that help reduce power consumption.” (PFF ¶ 139.)
15
Another article in PC Authority, explains that “[t]wo terms that are thrown around a lot in the
16
world of PC components are ‘evolutionary’ and ‘revolutionary’ . . . DDR2 is more on the
17
evolutionary side of the fence. As such, DDR2 is not so much a brand new technology as an
18
evolution of conventional DDR, which in itself is build on single data rate SDRAM technology.”
19
(Id.)
20
Likewise, an analyst company that covered Rambus and other memory companies
21
contrasts the anti-Rambus “evolutionary” path with Rambus’s “revolutionary” path, specifically
22
identifying DDRII as an evolutionary advancement over DDR. (PFF ¶ 140.)
23
Rambus was well aware of this use of the term evolutionary at the time that Rambus
24
explained to Samsung that the agreement would cover all evolutionary enhancements to the DDR
25
technology. For example, Rambus employees attended presentations by semiconductor
26
developers who explained that DDRII was an evolutionary progression from the DDR
27
technology. (PFF ¶ 141.)
28 SAMSUNG’S TRIAL BRIEF
28
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 36 of 42
Similarly, Rich Warmke, of Rambus, in an email to Rambus’s executive, marketing, and
2
sales teams, summarized a few GDDR3 specification issues and noted the “evolutionary nature of
3
the GDDR-III device.” (PFF ¶ 142.)
4
Despite having provided Samsung assurances that any future generations of DDR
5
products would be covered under the 2000 license agreement so long as they were “evolutionary
6
not revolutionary” advancements, Rambus now contends that Samsung’s DDRII and subsequent
7
products have differences that do not fall with the eleven enumerated categories.
8
II.
9
THE ALLOWED DIFFERENCES UNDER THE AGREEMENT
10
The parties’ experts have focused on five differences between DDR and subsequent DDR
11
generations such as DDRII that Rambus contends take these subsequent products outside the
12
scope of the 2000 license agreement. These differences are: 1) on-die termination, 2) off-chip
13
driver calibration, 3) differential strobe, 4) posted CAS, and 5) write latency.
14
A.
15
In DDR products, termination was applied on the motherboard or memory chip module,
On-Die Termination
16
and thus not immediately next to the component interfaces (connections) to the bus. When signals
17
are sent along a bus (effectively a set of transmission lines) in a memory system, they reflect off
18
of various components of the system attached to the bus. This is due to the discontinuities in the
19
bus that result from the interconnection (to the bus) of a component. These reflections add
20
uncertainty to the signals, and as a result, the clock frequency of the chips must be reduced to
21
allow extra time for the signals to be reliably transmitted and received.
22
In Samsung’s subsequent DDR products, termination is applied on the die of the memory
23
chips, right at the chip interfaces to the bus, in order to speed up the clock frequency. Applying
24
appropriate termination at the various tap points along the bus, where components connect to the
25
bus, better eliminates signal reflections. Reducing bus signal reflections enables the memory to
26
operate at a higher clock frequency. Therefore, this difference falls within category (4), “different
27
clock frequency,” of the agreement’s allowed differences. (PFF ¶ 147.)
28 SAMSUNG’S TRIAL BRIEF
29
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 37 of 42
1
This is confirmed by technical descriptions of on-die termination. For example, a Hynix
2
Semiconductor patent, explains in its Background section that DDR2 uses an on-die termination
3
scheme “[i]n order to obtain a high data processing speed.” (PFF ¶ 148.)
4
Similarly, a Rambus website makes the same point explaining that “[b]y placing the
5
termination resistance on the die itself rather than the motherboard, the reflections resulting from
6
discontinuities in the line are significantly reduced, thus producing a cleaner signal and enabling
7
faster data rates.” (PFF ¶ 149.)
8
Additionally, on-die termination enables smaller delays with respect to data access, such
9
as setup and hold times, as well as other data propagation delays, and therefore this difference
10
falls within category (9), “different timing parameters for existing timing parameters,” of the
11
agreement’s allowed differences. (PFF ¶ 150.)
12
B.
13
In DDR products, output drivers may overshoot or undershoot the desired voltage levels
Off-Chip Calibration
14
because of variations in process, voltage, temperature, and other factors. As a result, it takes
15
longer to resolve the intended digital logic value that was transmitted by the driver. Thus,
16
additional timing (safety) margins must be added to the timing parameters to ensure that signals
17
are reliably transmitted.
18
In Samsung’s DDR2, GDDR2, and GDDR3 memory products, off-chip driver calibration
19
is used to eliminate the overshoot/undershoot, which enables the memories to be clocked at
20
higher clock frequencies, and enables shorter delays.
21
Therefore, in the DDR2, GDDR2, and GDDR3 products, off-chip driver calibration
22
enables reduction of output driver overshoot and undershoot of the desired voltage levels, which
23
enables operation at a higher clock frequency and enables shorter delays, and these differences
24
fall within categories (4), “different clock frequency,” and (9), “different timing parameters for
25
existing timing parameters,” of the agreement’s allowed differences. (PFF ¶ 153.)
26
This is confirmed by technical descriptions of off-chip driver calibration. For example, a
27
Hynix Semiconductor patent, explains in its Background section that DDR2 uses an off-chip
28
driver calibration scheme “[i]n order to obtain a high data processing speed.” (PFF ¶ 154.); see SAMSUNG’S TRIAL BRIEF
30
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 38 of 42
1
also (PFF ¶ 154.) (patent teaching a method of addressing individual memory devices on a
2
memory module “by making such adjustments, operation at higher frequencies are achieved
3
because driver variation is reduced”).
4
Further, a Rambus webpage provides a similar description of the off-chip driver
5
calibration technology. The webpage explains that “[t]ransmitting data at high speeds between a
6
DRAM device and a memory controller requires careful design of I/O drivers to ensure that the
7
required electrical signaling levels are achieved.” (PFF ¶ 155.) The webpage further explains that
8
“[t]o address these issues, Rambus pioneered the use of the Output Driver Calibration to improve
9
communication speeds and provide greater reliability over a wide range of operating conditions.”
10
(Id.)
11
DDR3, GDDR4, and GDDR5 products improve over the off-chip driver calibration
12
scheme by including on-chip self-calibration through the ZQ pin. (PFF ¶ 156.) The ZQ-pin based
13
scheme is even more effective at allowing operation at higher clock frequencies and at producing
14
smaller delays with respect to data access and other data propagation delays. (Id.)
15
Therefore, on-chip driver calibration through the ZQ pin enables Samsung’s DDR3,
16
GDDR4, and GDDR5 memory products to operate at a higher clock frequency with shorter
17
delays, and these differences also fall within categories (4), “different clock frequency,” and (9),
18
“different timing parameters for existing timing parameters,” of the agreement’s allowed
19
differences. (PFF ¶ 157.)
20
C.
21
In DDR products, differential strobe refers to differential data strobe since differential
Differential Strobe
22
clocks were used. Instead of using a single clock line and triggering off of rising edges or falling
23
edges of the clock signal, a differential clock consists of two signals that are out of phase by 180
24
degrees. Triggering occurs at the point where the two signals cross. The triggering points are
25
much less sensitive to process, voltage and temperature variations, as well as crosstalk noise,
26
compared to single strobe.
27 28
The use of a differential data strobe was added to DDR2, DDR3 and GDDR2 to achieve higher clock frequencies. Differential data strobing overcomes issues such as crosstalk and SAMSUNG’S TRIAL BRIEF
31
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 39 of 42
1
simultaneous switching noise and enables operation at a higher clock frequency. This difference
2
thus falls within category (4), “different clock frequency,” of the agreement’s allowed
3
differences. (PFF ¶ 159.)
4
This is supported by a biz-tech.net webpage describing differential data strobe: “While the
5
single-ended data strobe was first used in DDR1, DDR2 was the evolutionary transition point
6
supporting . . . Differential Strobe designs. [T]he single-ended strobe relies on one oscillating
7
wave, while differential architecture uses two opposing oscillating waves that weave and
8
crisscross each other.” (PFF ¶ 160.) The webpage further explains that “[d]ifferential clock and
9
strobe schemes are much less sensitive to variations due to cross talk . . . as we continue to lower
10
the voltages on the DRAM and continue to increase the speed, it is very important that the clock
11
and strobes are less sensitive to these kinds of [cross talk] noise.” (Id.) The webpage continues,
12
“[w]ith a Single-ended Strobe design, any small amount of noise and interference will skew the
13
strobe to the left or right along the horizontal voltage threshold, which is sometimes known as the
14
Reference Voltage level. This horizontal shift is detrimental because it represents a change in
15
time representing a timing inaccuracy.” (Id.) Further explaining, the webpage states, “[t]he
16
memory relies on the stability of the ‘intersecting’ reference point to be able to read or write
17
reliably. The Differential Strobes design is much more stable because waveform anomalies will
18
only cause the intercepting centre point to shift up and down, representing a change in the
19
Reference Voltage (Vdd/2), rather than a timing skewing (left or right). A fluctuating Voltage
20
Threshold is less severe than a skew in time.” (Id.)
21
Starting with the GDDR3 standard, and continuing through the GDDR4 and GDDR5
22
products, the data strobe signals where made unidirectional and single-ended, as opposed to bi-
23
directional. This enabled a separate read and write data strobe, allowing for a quicker read to
24
write ratio than for GDDR2, DDR2, and DDR3 products, and thus, increased the clock frequency.
25
Therefore, for Samsung’s GDDR3, GDDR4, and GDDR5 products, the unidirectional,
26
single-ended strobe enables operation at an even higher clock frequency over the differential data
27
strobe, and this difference falls within category (4), “different clock frequency,” of the
28
agreement’s allowed differences. (PFF ¶ 162.) SAMSUNG’S TRIAL BRIEF
32
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 40 of 42
1
This is confirmed by a LostCircuits article that describes the forgotten features between
2
DDRII and GDDR3. The article states, “Another improvement of the strobing scheme is to use
3
unidirectional strobes, that is, separate strobes for Read and Write transactions. The strobes are
4
forwarded along with the data and define the data valid window or Data-I. It is somewhat
5
intuitive that data moving in opposite directions are better synchronized with strobes that are
6
running along with them on separate lines than with a bi-directional strobe, which is comparable
7
with a one size fits all solution. For an easier implementation of the clock forwarding signals,
8
GDDR3 . . . will trade in the differential strobe that does not allow any improvements on the
9
signal integrity anyway for a pair of self-calibrating unidirectional strobes dedicated to either
10
Read or Write transfers.” (PFF ¶ 163.)
11
D.
12
The Posted CAS enhancement in Samsung’s DDR2, DDR3, and GDDR2 products, is
Posted CAS
13
characterized by the inclusion of an additive latency (AL) to the CAS delay to make the
14
command and data bus efficient for sustainable bandwidths. (PFF ¶ 164.)
15
In this approach, commands are issued externally but held by the device internally prior to
16
execution, for the duration of the AL, in order to improve system scheduling. Specifically, it helps
17
avoid collision on the command bus and gaps in data input/output bursts, thus improving delays.
18
AL latency is variable and is programmable. AL values of 0, 1, 2, 3, or 4 clocks are typically
19
supported. (PFF ¶ 165.) (“On DDR memories the “CAS Latency” (CL) parameter – which is the
20
time the memory delays delivering a requested data – can be of 2, 2.5 or 3 clock cycles. On
21
DDR2 memories CL can be of 3, 4 or 5 clock cycles.”); (Id.) (“On DDR2 memories, depending
22
on the chip, there is an additional latency (AL) of 0, 1, 2, 3, 4 or 5 clock cycles. So in a DDR2
23
memory with CL4 and AL1 the latency is 5.”); (Id.) (“On DDR2 memories the write latency
24
equals to the read latency (CL + AL) minus 1.”).
25
Therefore, the addition of the Posted CAS feature to Samsung’s DDR2, DDR3, and
26
GDDR2 products falls within category (5), “different programmable latency,” of the agreement’s
27
allowed differences. (PFF ¶ 166.)
28 SAMSUNG’S TRIAL BRIEF
33
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 41 of 42
Additionally, Posted CAS also enables the memory device to operate at a higher clock
2
frequency, and therefore, this difference falls within category (4), “different clock frequency,” of
3
the agreement’s allowed differences. (Id.)
4
Furthermore, the addition of the Posted CAS feature results in smaller delays with respect
5
to data access. (PFF ¶ 167.) Therefore, this difference falls within category (9), “different timing
6
parameters for existing timing parameters,” of the agreement’s allowed differences. (PFF ¶ 168.)
7 8 9
Samsung’s GDDR3, GDDR4, and GDDR5 products do not identify the “posted CAS” feature. E.
Write Latency
10
DDR products have a write latency equal to one clock period.
11
Samsung’s subsequent DDR products, however, allow a programmable write latency that
12 13 14 15
is longer than one clock period. Therefore, this difference falls within category (5), “different programmable latency,” of the agreement’s allowed differences. (PFF ¶ 172.) Additionally, programmable write latency enables operation at a higher clock frequency,
16
and therefore falls within category (4), “different clock frequency,” of the agreement’s allowed
17
differences. (Id.)
18 19
CONCLUSION For the reasons stated above, the Court should find that Samsung has met its burden of
20
proof and is entitled to any and all legal and equitable relief the Court deems appropriate as a
21
remedy for Rambus’s breaches of the SDR/DDR License.
22
Dated: September 15, 2008
23
WEIL, GOTSHAL & MANGES, LLP By:
24 25
/s/ Matthew D. Powers Matthew D. Powers
MATTHEW D. POWERS (Bar No. 104795) Email: [email protected] STEVEN S. CHERENSKY (Bar No. 168275) Email: [email protected] WEIL, GOTSHAL & MANGES LLP 201 Redwood Shores Parkway
26 27 28 SAMSUNG’S TRIAL BRIEF
34
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 42 of 42
Redwood Shores, CA 94065 Telephone: (650) 802-3000 Facsimile: (650) 802-3100
1 2 3
ROBERT S. BEREZIN (admitted pro hac vice) Email: [email protected] MATTHEW J. ANTONELLI (admitted pro hac vice) Email: [email protected] WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007
4 5 6 7 8 9
Attorneys for Defendants SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG SEMICONDUCTOR, INC., and SAMSUNG AUSTIN SEMICONDUCTOR, L.P.
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SAMSUNG’S TRIAL BRIEF
35
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
1
Document 2200
Filed 09/15/2008
Page 1 of 42
Attorney list on signature page
2 3 4 5 6
IN THE UNITED STATES DISTRICT COURT
7
NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION
8 9
RAMBUS, INC.,
10 11 12 13 14 15 16 17 18
Plaintiff.
Case No. C 05-00334 RMW
v. HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR MANUFACTURING AMERICA INC.,
SAMSUNG’S TRIAL BRIEF [CORRECTED] [PUBLIC VERSION]
SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG SEMICONDUCTOR, INC., SAMSUNG AUSTIN SEMICONDUCTOR, L.P.,
Trial Date: September 22, 2008 Place: Courtroom 6 Judge: Hon. Ronald M. Whyte
NANYA TECHNOLOGY CORPORATION, NANYA TECHNOLOGY CORPORATION U.S.A.,
19 Defendants.
20 21
RAMBUS, INC.,
22 23 24 25 26 27
Case No. C 05-02298 RMW
Plaintiff. v. SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG SEMICONDUCTOR, INC., SAMSUNG AUSTIN SEMICONDUCTOR, L.P., Defendants.
28 SAMSUNG’S TRIAL BRIEF
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 2 of 42
TABLE OF CONTENTS
2
Page
3 CASE OVERVIEW 4 5
I.
6 7 8 9
II.
10
FACTS ................................................................................................................................ 2 A.
Background ............................................................................................................. 2
B.
Negotiation of the SDR/DDR License.................................................................... 2
C.
The Infineon Litigation, the 2001 Amendment, and the Infineon Settlement ........ 6
D.
Section 8.5 Negotiations ......................................................................................... 7
RAMBUS BREACHED SECTIONS 3.8 AND 8.5 OF THE SDR/DDR LICENSE AND THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING....................... 9 A.
11 12
Breach of Contract .................................................................................................. 9 1.
Legal Standard .......................................................................................... 10
2.
Rambus Breached Section 3.8 of the SDR/DDR License when it Failed to Make the Royalty Rate in the Infineon Agreement Effective for Samsung............................................................................... 10
3.
Rambus Breached Section 8.5 of the SDR/DDR License when it Failed to Negotiate in Good Faith Towards a Renewal or New Agreement ................................................................................................. 12
13 14 15 16
III.
17 18
SAMSUNG IS ENTITLED TO EXPECTATION DAMAGES AS A RESULT OF RAMBUS’S BREACH OF SECTION 8.5 ....................................................................... 14 A.
Legal Standard ...................................................................................................... 15
B.
Samsung’s Damages Resulting from Rambus’s Bad Faith Can Be Shown with “Reasonable Certainty”................................................................................. 15
19 20
IV.
RAMBUS IS ESTOPPED FROM ENFORCING ITS PATENTS BEYOND THE TERMS OF THE INFINEON LICENSE ......................................................................... 17
21
A.
Legal Standard ...................................................................................................... 17
22
B.
Rambus Should Be Estopped Due to Its Failure to Negotiate in Good Faith ....... 17
23 24
1.
Samsung Was Misled by Rambus’s Promises and Then Refusal To Honor Its Contractual Obligations to Negotiate in Good Faith ................ 18
2.
Samsung Relied upon Rambus’s Commitment to Negotiate a Renewal or Extension of the SDR/DDR License in Good Faith .............. 18
3.
Samsung Has Suffered Material Prejudice as a Result of Rambus’s Misconduct................................................................................................ 19
4.
Balance of Equities Support Estoppel....................................................... 19
25 26 27 28
i
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 3 of 42
TABLE OF CONTENTS (continued)
2
Page
3 4 5
RAMBUS USED THE ALLEGED AUDIT BREACH AS A PRETEXT FOR ITS BREACH OF THE SDR/DDR LICENSE
6
I.
RAMBUS’S 2004 AUDIT................................................................................................ 20
7
II.
RAMBUS IS NOT EXCUSED FROM PERFORMANCE OF SECTION 8.5................ 21 A.
8
Rambus Waived its Right To Be Excused from Performance of the SDR/DDR License ................................................................................................ 21
9
1.
Legal Standard .......................................................................................... 21
10
2.
Rambus Continued to Accept Samsung’s Performance under the SDR/DDR License .................................................................................... 23
11 B.
Rambus Should Be Estopped from Using the Alleged Audit Breach as an Excuse for its Failure to Perform under the SDR/DDR License .......................... 24
C.
Any Purported Breach of the Audit Provisions of the SDR/DDR License Was Not Material .................................................................................................. 25
12 13 14 15
THE SDR/DDR LICENSE COVERS FUTURE GENERATIONS OF DDR PRODUCTS I.
FACTS .............................................................................................................................. 26
16
A.
Sections 1.7 and 1.8 of the Agreement ................................................................. 26
17
B.
Negotiation of the 2000 SDR/DDR Contract ....................................................... 27
18
II.
The Allowed Differences Under the Agreement .............................................................. 29 A.
On-Die Termination .............................................................................................. 29
B.
Off-Chip Calibration ............................................................................................. 30
C.
Differential Strobe................................................................................................. 30
21
D.
Posted CAS ........................................................................................................... 32
22
E.
Write Latency........................................................................................................ 33
19 20
23
CONCLUSION ............................................................................................................................. 34
24 25 26 27 28 ii
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 4 of 42
TABLE OF AUTHORITIES
2
Page(s)
3 4 5 6 7 8 9 10 11 12 13
Cases A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group, Inc., 873 F.2d 155 (7th Cir. 1989)...................................................................................................... 12 Alder v. Drudis, 30 Cal.2d 372 (Cal. 1947).......................................................................................................... 22 Bank of America Nat. Trust & Sav. Ass'n v. Cranston, 60 Cal. Rptr. 336 (Cal. Ct. App. 1967) ...................................................................................... 23 Bd. of Trustees of Stanford University v. Roche Molecular Sys., 487 F. Supp. 2d 1099 (N.D. Cal. 2007) ..................................................................................... 24 Boone v. Templeman, 158 Cal. 290 (1910) ............................................................................................................. 22, 24 Cardinal of Adrian, Inc. v. Amerock Corp., 208 U.S.P.Q. 822 (E.D. Mich. 1979) ......................................................................................... 12
14 15 16 17 18
Cf. N. Helex Co. v. United States, 455 F.2d 546 (Ct. Cl. 1972) ....................................................................................................... 23 Coachella Valley Water Dist. v. Imperial Irrigation Dist., 2007 WL 2822766 (Cal. Ct. App., Oct. 1, 2007)....................................................................... 16 Cold Metal Process Co. v. McLouth, 170 F.2d 369 (6th Cir. 1948)...................................................................................................... 12
19 20 21 22 23
Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251 (Cal. Ct. App. 2002) .............................................................................. 16 Creamer v. AIM Tels., Inc., 159 B.R. 440 (E.D. Pa. 1993) .................................................................................................... 13 Cummings v. Universal Pictures Co., Inc., 62 F. Supp. 611 (S.D.Cal. 1944).......................................................................................... 22, 24
24 25 26 27
DeForest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236 (1927)............................................................................................................. 18, 19 DeVito v. United States, 413 F.2d 1147 (Ct. Cl. 1969) ..................................................................................................... 23
28 iii
Case 5:05-cv-00334-RMW
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Document 2200
Filed 09/15/2008
Page 5 of 42
TABLE OF AUTHORITIES (continued) Page(s) Dickerson v. Colgrove, 100 U.S. 578 (1880)................................................................................................................... 17 Estate of Wilson, 64 Cal. App. 3d 786 (Cal. Ct. App. 1976) ................................................................................. 11 Feldman v. Allegheny Internat’l, Inc., 850 F.2d 1217 (7th Cir. 1988).................................................................................................... 12 Floystrup v. City of Berkeley Rent Stabilization Bd., 219 Cal. App. 3d 1309 (Cal. Ct. App. 1990) ............................................................................. 14 Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317 (2000) ............................................................................................................... 14 Harley C. Loney Co., 205 F.2d at 220 (7th Cir. 1953).................................................................................................. 12 Harm v. Frasher, 181 Cal. App. 2d 405 (Cal. Ct. App. 1960) ............................................................................... 14 Hartung v. Pollastrini, 304 P.2d 846 (Cal. Ct. App. 1957)............................................................................................. 23 In re Vylene Enters., Inc., 90 F.3d at 1477........................................................................................................................... 14 In the Matter of Certain Dynamic Random Access Memories, Components Thereof, and Products, 1987 WL 450980, USITC Inv. No. 337-TA-242 (U.S.I.T.C.) (hereinafter “DRAMs”) ...................................................................................... 17, 18, 19, 25, 26 J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553 (Fed. Cir. 1984).................................................................................................. 17 Karz v. Dep’t of Prof. Vocational Stds., 11 Cal. App. 2d 554 (1936).................................................................................................. 25, 26 Leiter v. Eltinge, 246 Cal. App. 2d 306 (Cal. Ct. App. 1966) ............................................................................... 22 Lenard v. Edmonds, 151 Cal.App.2d 764 (Cal.App.1.Dist. 1957) ............................................................................. 22 Matter of Pubs, Inc. of Champaign, 618 F.2d 432 (7th Cir. 1980)...................................................................................................... 11 iv
Case 5:05-cv-00334-RMW
1
4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Filed 09/15/2008
Page 6 of 42
TABLE OF AUTHORITIES (continued)
2 3
Document 2200
Page(s) Paramount Developers & Contractors, Inc. v. M.B. Admin. Servs. Corp., 2004 WL 214325 (Cal. Ct. App., Feb. 5, 2004)......................................................................... 16 Patwardhan v. Kale, 2003 WL 21130236 (Cal. Ct. App., May 16, 2003) .................................................................. 13 Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635 (2004) ......................................................................................................... 22, 24 Rothstein v. Atlanta Paper Co., 321 F.2d 90 (5th Cir. 1963)........................................................................................................ 12 Spiegelman v. Metro. Life Ins. Co., 21 Cal. App. 2d 299 (Cal. Ct. App. 1937) ........................................................................... 22, 24 Superior Motels v. Rinn Motor Hotels, 195 Cal. App. 3d 1032 (Cal. Ct. App. 1987) ............................................................................. 25 Teachers Ins. & Annuity Ass’n of Am. v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987)....................................................................................... 12, 15 Title Ins. & Trust Co. v. Hisey, 95 F.2d 555 (9th Cir. 1938)........................................................................................................ 22 Venture Assocs. v. Zenith Data Sys., 96 F.3d 275 (7th Cir. 1996)........................................................................................................ 15 Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (9th Cir. 2001)...................................................................................................... 15
19 20 21 22 23 24
W. Transmission Corp. v. Colo. Mainline, Inc., 376 F.2d 470 .............................................................................................................................. 23 Rules and Statutes Cal. Civ. Code § 3300 .................................................................................................................... 15 Other Authorities 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 853 ................................................ 21
25 26 27 28
1 Witkin, Summary of Cal. Law, Contracts, § 852........................................................................ 25 17 Am. Jur. 2d, Contracts (1991), § 392, at 417 ............................................................................ 13 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, §176, p. 246...................................................... 21
v
Case 5:05-cv-00334-RMW
1 2
Document 2200
Filed 09/15/2008
Page 7 of 42
TABLE OF AUTHORITIES (continued) Page(s)
3
31 C.J.S. Estoppel and Waiver § 70. Cal. Evid. Code § 622 ......................................................... 11
4
5 Williston 3d, § 688...................................................................................................................... 22
5 6 7
Rest., Contracts, Section 384; 5 WILLISTON ON CONTRACTS (rev. ed.), § 1464 ............................ 22 Witkin, Summary of Cal. Law, Contracts § 856............................................................................ 24 Witkin, Summary of Cal. Law, Contracts § 869 (2005) ................................................................ 15
8 Witkin, Summary of Cal. Law, Contracts § 870 (2005) ................................................................ 15 9 10
Witkin, Summary of Cal. Law, Contracts § 879 (2005) ................................................................ 15
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 vi
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 8 of 42
Defendants Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung
2
Semiconductor, Inc., and Samsung Austin Semiconductor, L.P. (collectively “Samsung”)
3
respectfully submit this Trial Brief for the Court’s consideration.
4
CASE OVERVIEW
5
Rambus, Inc. (“Rambus”) promised Samsung that it would suffer no competitive harm if
6
its competitors obtained through litigation a more favorable license with lower royalty rates than
7
Rambus had offered Samsung in the SDR/DDR IC and SDR/DDR Memory Module Patent
8
License Agreement (the “SDR/DDR License”). In making these promises, Rambus agreed to give
9
Samsung expansive most favored licensee (“MFL”) rights that expressly encompassed any
10
license Rambus was compelled to grant as part of a litigation settlement. Rambus made these
11
promises, and assumed these obligations, at a time when Infineon Technologies AG (“Infineon”)
12
had already refused to accept a license from Rambus and had launched a vigorous attack on
13
Rambus’s patent rights.
14
In 2005, Infineon obtained in a settlement precisely the type of favorable license that fell
15
within the scope of Samsung’s MFL rights. Rambus, however, refused to honor its contractual
16
obligations, apparently on the grounds that Rambus views the phrase “royalty rate” to apply only
17
to running royalties, not the lump-sum, quarterly amounts agreed to be paid by Infineon.
18
Rambus’s position in 2005 can be reconciled neither with the promises it made five years earlier
19
that were material to the formation of the SDR/DDR License nor with all of the other evidence
20
demonstrating that Rambus was obligated to make Infineon’s royalty rate effective under the
21
SDR/DDR License. Rambus could have honored its contractual obligations either by using
22
industry-standard methods of calculating an effective running royalty rate from Infineon’s
23
quarterly lump-sum payments or by simply giving Samsung the lump-sum royalty rate (with a
24
cap on payments) agreed to be paid by Infineon. Either way, Infineon’s royalty rate was far lower
25
than Samsung’s, and Rambus has no plausible justification for its breach of Section 3.8 of the
26
SDR/DDR License.
27 28
At the same time that Samsung should have received Infineon’s royalty rate, Rambus also had an obligation to negotiate in good faith a renewal license agreement. In the context of the SAMSUNG’S TRIAL BRIEF
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 9 of 42
1
SDR/DDR License, the express obligation to negotiate in good faith required, at a minimum, that
2
Rambus offer Samsung terms that were at least as favorable as those offered to Infineon. During
3
the two months of contractually required negotiations, Rambus refused to make such an offer,
4
which Samsung would have readily accepted. Instead, Rambus abruptly terminated the
5
negotiations, and the SDR/DDR License, and sued Samsung in this Court for patent infringement.
6
The ensuing three years of litigation—in which Samsung faces patent damage claims well beyond
7
the royalties agreed to be paid by Infineon—directly resulted from Rambus’s breaches of
8
contract. In this trial, Samsung seeks to prevent Rambus from asserting rights as against
9
Samsung beyond the terms obtained by Infineon as if it had never made (and had never broken)
10
the binding promises to Samsung contained in the SDR/DDR License.
11
I.
12
FACTS
13
A.
Background
14
Samsung and Rambus have a longstanding commercial relationship beginning with a 1994
15
technology and license agreement covering RDRAM. (PFF ¶¶ 1-3.) In 1999, Rambus began
16
asserting its patents against manufacturers of JEDEC-compliant memory technology. (Id. ¶ 4.) In
17
so doing, Rambus announced that DRAM manufacturers engaged in litigation would pay higher
18
royalties than those who choose to negotiate a license with Rambus. (Id. ¶ 5.) Patent infringement
19
lawsuits between Rambus and several of Samsung’s major competitors—including Hynix,
20
Micron, and Infineon—were filed throughout 2000. (Id. ¶ 6.) In these suits, Rambus’s litigation
21
opponents asserted a variety of claims against Rambus and challenged the enforceability and
22
validity of Rambus’s patents-in-suit. (Id. ¶ 7.)
23
B.
24
During the parties’ first meeting to negotiate a license, Rambus stated that Samsung was
Negotiation of the SDR/DDR License
25
“in an excellent position to secure the most favorable terms.” (Id. ¶ 10.) Rambus’s first draft,
26
however, did not include (1) MFL protections in the event of a settlement or otherwise, (2)
27
provisions requiring good-faith license renewal negotiations, or (3) representations that royalty
28
rates offered to litigants and other licensees would be standard royalty rates higher than those SAMSUNG’S TRIAL BRIEF
2
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 10 of 42
1
received by Samsung. (Id. ¶ 13.) In response, Samsung expressed the concern that it would suffer
2
competitive harm should one of the litigants obtain more favorable terms than Samsung through a
3
litigation settlement or final judgment. (Id. ¶ 14.) Rambus assured Samsung that the SDR/DDR
4
License “will give Samsung the best possible terms and will result in Samsung having a
5
competitive advantage over those who have sued us rather than negotiate.” (Id. ¶ 15.)
6
Samsung’s representative, Jay Shim, sent specific proposed language to effectuate the
7
parties’ intent to Rambus’s representative, Neil Steinberg. Mr. Shim sought, among other things:
8
(a) MFL protection in the event of an adverse settlement or court order; (b) MFL protection in the
9
event of a finding that Rambus’s patents were not enforceable or were invalid for any reason; and
10
(c) an explicit commitment to MFL protection on the basis of consideration other than a running
11
royalty, such as a lump sum. (See Id. ¶ 18.) In response, Mr. Steinberg’s cover e-mail did not
12
address the issue of a lump-sum royalty and stated that he had amended the MFL provisions “to
13
provide language expressing the fundamental intent of Section 3.9 that Samsung not be put at a
14
competitive disadvantage as a result of entering into the Agreement.” (Id. ¶ 19.) Along with his e-
15
mail, Mr. Steinberg enclosed a draft that, among other things: (a) contained an MFL provision
16
that did not explicitly cover licenses granted in settlements or pursuant to court or agency order;
17
and (b) contained limited MFL protection related to Rambus’s participation in JEDEC. (Id. ¶ 20.)
18
At the same time, Rambus’s draft provided in Section 3.9 that the “ . . . parties shall meet to
19
negotiate in good faith with a view to determining a mutually satisfactory prospective royalty rate
20
so that Samsung is not at a competitive disadvantage relative to any Third Party.” (Id. ¶ 23
21
[emphasis added].)
22
The following day, Rambus CEO Geoff Tate sent an email to Y.W. Lee, noting that
23
Rambus had met most of Samsung’s requests, including “most favored royalty rate” and a
24
“commitment that Samsung won’t be at a competitive disadvantage as a result of the outcome of
25
pending litigation.” (Id. ¶ 25.) Mr. Tate’s October 17, 2000 email also stated:
26 27 28
As you know we are in court with [Hynix], Micron and Infineon. We expect to win our legal battles with them although we don’t control the schedule of the courts. When these companies choose to negotiate license terms with us we will charge them substantially higher license fees and royalty rates. SAMSUNG’S TRIAL BRIEF
3
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1 2
Document 2200
Filed 09/15/2008
Page 11 of 42
(Id. ¶ 26.) After further negotiations, Rambus agreed to: (a) make explicit the MFL protection in the
3
event of a litigation settlement and court or agency order; and (b) grant MFL protection in the
4
event that a litigant successfully challenged the validity or enforceability of Rambus’s patents on
5
any grounds. (See id. ¶ 28.) Mr. Steinberg also assured Mr. Shim that the other specific language
6
he proposed (including the lump-sum provision) was not necessary in light of the existing
7
contract language. (See id. ¶ 22.) In fact, Mr. Steinberg never indicated to Samsung that a “lump
8
sum” royalty was outside of Samsung’s MFL protections. (Id. ¶ 21.) Instead, Rambus included
9
representations in two WHEREAS clauses that the “royalty rates” offered to litigants and all other
10
prospective licensees would be standard “royalty rates” higher than those in the SDR/DDR
11
License:
12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
WHEREAS, Rambus represents that, after November 1, 2000, the royalty rates offered to any semiconductor memory manufacturer which is currently in litigation with Rambus for infringement of any Rambus Patent, as defined herein, shall be the standard royalty rates and such standard royalty rates are higher than the royalty rates set forth in Section 3.1(b) of this Agreement; and WHEREAS, Rambus further represents that royalty rates offered after January 1, 2001 to all prospective licensees shall be such standard royalty rates. (Id. ¶ 35.) In conjunction with those representations, Section 3.8 was finalized to read: If at any time during this Agreement, the royalty rate agreed to be paid or ordered to be paid by a Third Party, whether by settlement or by court or agency order, for products corresponding to SDR SDRAM, SDR SGRAM, DDR SDRAM, or DDR SGRAM is lower than that specified in Section 3.1(b) of this Agreement, Rambus shall notify Samsung, in writing, within ten (10) days of the effective date of such lower royalty rate and such lower royalty rate shall be effective for this Agreement the first day of the royalty reporting period in which written notice by Rambus is made. If the lower royalty rate is limited geographically due to a court or agency order, then Samsung’s lower royalty rate shall be similarly limited to sales in the same geographic area. Should, by agreement, subsequent order, or amendment, modification, or reversal of the court or agency order (whether on appeal or otherwise), the lower royalty rate of any litigant change, then the royalty for Samsung shall change correspondingly, but not to exceed the rates specified in Section 3.1(b).
27 28 SAMSUNG’S TRIAL BRIEF
4
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 12 of 42
1
(Id. ¶ 36 [emphasis added].) And Section 3.9 was revised to grant Samsung broad protections in
2
the event of a determination that the Rambus patents were not enforceable or were invalid:
3
Should a court or agency of competent jurisdiction make a determination that the Rambus Patents in suit are not enforceable or are invalid, such that the litigant is ordered to pay, on a prospective basis, either no royalty or a royalty based on a lower royalty rate than that specified for any category of products specified in Section 3.1(b) of this Agreement, Rambus shall notify Samsung, in writing, within ten (10) days of the effective date of such order, and such no royalty or lower royalty rate shall be effective for this Agreement the first day of the royalty reporting period in which written notice by Rambus is made. Should such no royalty or lower royalty rate be limited geographically, then Samsung’s no royalty or lower royalty rate shall be limited to such geographic area. Should the no royalty or lower royalty rate be limited to a category of Licensed Products (for example, SDR SDRAM, SDR SGRAM, DDR SDRAM, or DDR SGRAM), then Samsung’s no royalty or lower royalty rate shall be limited to such category of products. Should, by agreement, subsequent order, or amendment, modification or reversal of the court or agency order (whether on appeal or otherwise), such no royalty or lower royalty rate of any litigant change, then the royalty rate for Samsung shall change correspondingly, but not to exceed the royalty rates specified in Section 3.1(b).
4 5 6 7 8 9 10 11 12 13 14
(Id. ¶ 37.) The SDR/DDR License also included in Section 8.5 the promise to engage in good-faith
15 16
negotiations for a renewal or a successor agreement:
17
Assuming that this Agreement has not been terminated and that Samsung is not in breach hereof, the parties shall meet, six (6) months before the expiration of this Agreement, to negotiate in good faith with a view to achieving a mutually satisfactory patent license agreement under the Rambus Patents with respect to the Licensed Products, including, without limitation, an extension hereof or a new agreement.
18 19 20 21
(Id. ¶ 38.)1
22
1
23 24 25 26 27 28
During the negotiations, Samsung had requested in writing that the parties include explicit reference to the MFL obligation in Section 8.5, which Rambus had indicated was acceptable to it. Moreover, although the final version of the SDR/DDR License does not contain an explicit reference to MFL protections in Section 8.5, Mr. Steinberg prepared an amendment to Section 8.5 shortly after the license was executed by both parties that contained the express MFL language requested by Samsung. (Id. ¶ 30 & n.1.) That language was in fact added to the parties’ 2001 Amendment of the SDR/DDR License. (Id.) This evidence, along with the WHEREAS representations, and the protections of 3.8 and 3.9 that survive for the duration of agreement (which is subject to extension under Section 8.5), demonstrate that Rambus’s obligation to negotiate in good faith required an offer (or willingness to accept one) of a license on terms no less favorable than those received by another licensee. SAMSUNG’S TRIAL BRIEF
5
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 13 of 42
The negotiations of the SDR/DDR License therefore demonstrate a clear intent to ensure
2
that Samsung would not suffer competitive harm in the event that a litigant obtained lower royalty
3
rates than Samsung through an out-of-court settlement or judicial ruling.
4
C.
5
In 2001, Infineon obtained favorable non-infringement rulings and a jury verdict in its
The Infineon Litigation, the 2001 Amendment, and the Infineon Settlement
6
favor based on Rambus’s conduct in JEDEC. (PFF ¶ 49.) In the wake of these events, Samsung
7
renegotiated its royalty rates with Rambus as memorialized in Amendment No. 1 to SDR/DDR IC
8
and SDR/DDR Memory Module Patent License Agreement (the “2001 Amendment”). (Id. ¶ 50.)
9
Under the 2001 Amendment, Samsung paid a $3.8 million lump-sum royalty in
10
satisfaction of its royalty obligations for the first quarter of 2001. (Id. ¶ 51.) Beginning in the
11
second quarter of 2001, and for the remaining term of the 2001 Amendment, Samsung paid a $2
12
million, fixed, lump-sum royalty in lieu of a running royalty each quarter for licensed DRAM.
13
(Id. ¶ 52.) The 2001 Amendment also provided that Rambus could terminate it and return to the
14
royalty rates, MFL, and other terms of the original SDR/DDR License, if Rambus licensed
15
Micron or Infineon. (Id. ¶ 54.)
16
After Rambus’s successful appeal, the Eastern District of Virginia on remand held a
17
February 2005 bench trial with regard to Infineon’s unclean hands defense. (See id. ¶ 107.) On
18
February 20, 2005, Rambus approached Samsung with an offer “for renewal and expansion of the
19
scope of the DRAM license.” (Id. ¶ 106.) Rambus’s license proposal covered “all forms of
20
DRAM” (e.g., SDR, DDR, DDR2 and future generations thereof). (Id.)
21
Rambus’s license proposal also called for, inter alia, lump-sum, quarterly royalty
22
payments of $12 million and “a trigger that will move the payments to a market rate once at least
23
one other major DRAM manufacturer is paying such market rates.” (Id.) The parties then held
24
meetings to discuss the terms of Rambus’s offer. (Id. ¶ 108.)
25
In the meantime, in March 2005, the district court in the Infineon case held “that Rambus
26
was liable for unclean hands, thus barring Rambus from enforcing the four patents-in-suit” and
27
ruled from the bench that it would dismiss Rambus’s infringement claims. (Id. ¶ 107.) Rambus
28
then negotiated a settlement and license agreement with Infineon (the “Infineon License”) before SAMSUNG’S TRIAL BRIEF
6
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 14 of 42
1
the district court issued a final judgment. (Id. ¶ 110.) The settlement required Infineon to pay
2
$5.85 million up to a $50 million cap (which would increase to $100 or $150 million if and when
3
Rambus obtained license agreements with two or three major manufacturers, respectively). (Id. ¶¶
4
95-97.) In exchange, Infineon received a license covering:
5 6 7 8 9
. . . any existing or future Infineon Memory ICs, Infineon Memory Portion, Infineon Memory Modules, or Infineon Memory Component . . . including but not limited to SDR SDRAM, DDR SDRAM, DDR2 SDRAM, DDR3 SDRAM, GDDR2 SDRAM, GDDR3 DRAM, RLDRAM, RLDRAM2, RDRAM, XDR DRAM, Cellular RAM, low power DRAM, SRAM, Flash, MRAM, FRAM, ROM, PROM, EPROM, EEPROM and any subsequent generation of any such products. (Id. ¶ 99.). In addition to these license terms, the parties entered into mutual releases and
10
dismissals of pending litigation, which included a release and dismissal of antitrust claims
11
brought by Rambus alleging that manufacturers of various forms of SDRAM had engaged in a
12
price-fixing scheme aimed at the marketability of RDRAM. (Id. ¶ 101.)
13
On March 22, 2005, Rambus invoked its right to terminate the 2001 Amendment and
14
return to the terms of the SDR/DDR License (including its MFL protections). (Id. ¶ 92.)
15
Samsung thus had the right to obtain any lower royalty rates agreed to be paid by a third party in
16
a litigation settlement. (See id. ¶ 94.). In a March 24, 2005 letter, Mr. Shim wrote to Ira
17
Blumberg, Vice President of Licensing at Rambus, to request a copy of the Infineon License, so
18
that Samsung could determine whether Rambus’s termination of the 2001 Amendment was
19
proper and, if so, determine how the terms of the SDR/DDR License “should be adjusted under
20
the most favored licensee provision.” (Id. ¶ 93.) Mr. Blumberg responded by letter dated April 1,
21
2005, in which he declined to disclose the terms of the Infineon License and stated that “Rambus
22
currently has no license agreements in force, including the license to Infineon, that fall within the
23
provisions of section 3.8.” (Id. ¶ 105.) And Rambus never agreed to make the royalty rate that
24
Infineon agreed to pay on a quarterly basis effective pursuant to the SDR/DDR License.
25
D.
26
Mr. Blumberg’s April 1, 2005 letter also asked Samsung to negotiate a license renewal as
Section 8.5 Negotiations
27
required by Section 8.5 of the SDR/DDR License. (PFF ¶ 112.) The negotiations focused on the
28
issue in dispute between the parties—i.e., the royalty terms to be paid in exchange for a license SAMSUNG’S TRIAL BRIEF
7
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 15 of 42
1
covering SDRAM and future generations thereof. (Id. ¶ 113.) In that regard, Samsung requested
2
that Rambus offer the same royalty terms that Infineon received based on the promises made in
3
the SDR/DDR License. (Id. ¶ 93.) Rambus, unwilling to make that offer, told Samsung in mid-
4
May 2005 that it “cannot reach, on agreeable terms, the five year patent license renewal deal you
5
desire.” (Id. ¶ 116.)
6
Instead of a license based on Infineon terms, Rambus proposed a one-year standstill
7
agreement. (Id.) Under Rambus’s stand-still proposal, Samsung would pay Infineon’s lump-sum,
8
quarterly royalty rate (scaled up to Samsung’s larger market share) in exchange for Rambus’s
9
agreement that it would not sue Samsung during the one-year unlicensed period. (Id.) Rambus
10
also proposed that the parties would, during the one-year period, negotiate a license. (Id.)
11
However, Rambus did not offer Samsung any of the protections or rights contained in the
12
SDR/DDR License in connection with the proposed license negotiations. (See id.) In response,
13
Samsung indicated that it could agree to a standstill agreement if it contained protections to
14
ensure that the license would be no less favorable than that received by Infineon. (Id. ¶ 118.) The
15
parties then agreed that Samsung would prepare a written proposal.
16
On June 6, 2005, the parties met to discuss Samsung’s standstill counter-proposal. (Id. ¶
17
120.) Mr. Danforth, Rambus’s General Counsel, flatly rejected Samsung’s proposal based on the
18
royalty terms contained in it, and refused to negotiate different royalty terms. (Id.) In so doing, he
19
reiterated Rambus’s refusal to offer Samsung royalty terms based on the Infineon License. (Id.)
20
Instead, Mr. Danforth indicated that Infineon received its license on favorable royalty terms due
21
to the events in litigation in the Eastern District of Virginia, a forum Rambus was determined to
22
avoid. (Id.) He then offered Mr. Shim a choice of (1) a 30-day standstill with a commitment that
23
Samsung will not file suit without giving Rambus an opportunity to file first in a venue of its
24
choosing, or (2) Rambus would file suit in California that day. (Id.) When Mr. Shim declined to
25
submit to Rambus’s demands, Mr. Danforth instructed Rambus’s lawyers to file the two patent
26
litigation suits pending before this Court. (Id. ¶ 121-22.) Mr. Danforth also purported to terminate
27
the SDR/DDR License based on an alleged breach of an audit provision in 2004. (Id. ¶ 121.)
28 SAMSUNG’S TRIAL BRIEF
8
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Page 16 of 42
II.
1 2
Filed 09/15/2008
RAMBUS BREACHED SECTIONS 3.8 AND 8.5 OF THE SDR/DDR LICENSE AND THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
3
A.
4
Breach of Contract 1.
5
Legal Standard
The SDR/DDR License is governed by federal and California law. See SDR/DDR License
6
§ 9.1. Under California law, a claim for breach of contract requires proof by a preponderance of
7
the evidence of: “(1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3)
8
defendant’s breach; and (4) the resulting damages to plaintiff.” See, e.g., Reichert v. Gen. Ins. Co.
9
of Am., 68 Cal. 2d 822, 830 (1968).
10
2.
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Rambus Breached Section 3.8 of the SDR/DDR License when it Failed to Make the Royalty Rate in the Infineon Agreement Effective for Samsung
Section 3.8 provides that “[i]f at any time during this Agreement, the royalty rate agreed to be paid or ordered to be paid by a Third Party, whether by settlement or by court or agency order . . . is lower than that specified in Section 3.1(b) of this Agreement . . . such lower royalty rate shall be effective for this Agreement . . . .” (PFF ¶ 36 [emphasis added].) The royalty rate agreed to be paid by Infineon in the March 2005 Infineon Settlement and License Agreement was $5.85 million per calendar quarter subject to a $50 million cap (which could be adjusted based on license agreements that Rambus has still not entered into). (Id. ¶ 95.) Infineon’s quarterly lumpsum payment is equivalent to an effective running rate that is a small fraction of the running royalty rates agreed to be paid by Samsung when it decided to accept a license from, rather than litigate against, Rambus. (Id. ¶¶ 102-103.) Similarly, Infineon’s quarterly payment was far less than Samsung’s royalty obligation, which was also payable on a quarterly basis. Rambus, however, refused to make Infineon’s quarterly royalty rate effective as of April 1, 2005. (Id. ¶ 105.) Rambus has argued that Section 3.8 does not apply in this case, because “the Infineon Agreement manifestly does not contain a ‘royalty rate’ triggering application of Section 3.8.” (Notice of Mot. & Mot. of Rambus Inc. for Summ. J. on Counts I-III of Samsung’s Countercls. at
28 SAMSUNG’S TRIAL BRIEF
9
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 17 of 42
1
8 [hereinafter “Rambus Mot. for Summ. J.”].) However, Rambus has conceded, and this Court
2
has agreed, that the plain meaning of the term “royalty rate” can include quarterly, lump-sum
3
payments. (Reply in Supp. of Mot. of Rambus Inc. for Summ. J. on Counts I-III of Samsung’s
4
Countercls. at 4; Order Den. Rambus’s Mot. for Summ. J. on Samsung’s Countercls. I, II, and III
5
at 7-8 [hereinafter “Order Den. Summ. J.”].) As this Court noted, “[u]sed in its ordinary sense,
6
‘royalty rate’ can refer to a ratio of dollars per unit time or to a percentage of net sales.” (Order
7
Den. Summ. J. at 8.) This Court also correctly observed that “[e]very court that construed the
8
term ‘royalty rate’ or ‘rate of royalty’ understood it to include lump sum payments of various
9
types. In light of this understanding developed within the field of patent licensing that supports
10
Samsung’s position, the court cannot agree with Rambus that the contract is only reasonably
11
susceptible to its interpretation.” (Id. at 11.)
12
Further, Rambus agreed to extend Samsung’s MFL protections to any circumstance in
13
which Samsung’s competitors then in litigation with Rambus would receive more favorable
14
royalty terms. (PFF ¶¶ 17-19, 25.) For example, Samsung insisted on, and Rambus agreed to,
15
language that gave Samsung any more favorable royalty rate resulting from out-of-court
16
settlements (Section 3.8) and/or a determination that the Rambus patents-in-suit were
17
unenforceable or invalid (Section 3.9) (Id. ¶¶ 36-37.) Indeed, a “lump sum” obviously could
18
result from a settlement or a court order, both of which are expressly contemplated by Sections
19
3.8 and 3.9. Further, Rambus repeatedly assured Samsung that the provisions in the SDR/DDR
20
License protected Samsung against competitive disadvantage. (Id. ¶¶ 10, 15, 19, 25-27.) The
21
evidence of the parties’ negotiation thus strongly supports an expansive, not unduly narrow and
22
ineffectual, interpretation of Samsung’s MFL rights.
23
Indeed, the notion that Rambus would have an easy mechanism to avoid its obligations
24
under Section 3.8—merely by structuring its licenses to require quarterly, lump-sum royalties as
25
opposed to running royalties—is wholly unsupported by the evidence of the parties’ negotiations.
26
In support of its interpretation, Rambus notes that the parties did not incorporate language
27
proposed by Mr. Shim that expressly addressed lump sum royalties obtained by a third party.
28
(Rambus Mot. for Summ. J. at 10.) However, as this Court already noted, that “extrinsic evidence SAMSUNG’S TRIAL BRIEF
10
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 18 of 42
1
is not as persuasive as Rambus suggests,” because the language in question did not refer to a
2
periodic lump sum and because there is no evidence that Rambus expressly rejected, rather than
3
simply ignored, Samsung’s proposal. (Order Den. Summ. J. at 12.) Moreover, an interpretation
4
that the failure to include the specific language proposed by Samsung is evidence that the parties
5
did not intend Section 3.8 to apply to quarterly, lump-sum royalty rates is inconsistent with
6
Rambus’s assurances throughout the negotiation process—including Mr. Steinberg’s comment to
7
Mr. Shim that the language in question was captured by the broader MFL concepts ultimately
8
memorialized in Sections 3.8 and 3.9. (PFF ¶ 22.)
9
In entering into the SDR/DDR License, Rambus plainly agreed to accept the risk that it
10
could be forced to enter into unfavorable settlement and license agreement. This came to pass,
11
and Rambus was obligated to abide by its obligations under Section 3.8.2 Moreover, Rambus’s
12
breach of contract has and will significantly damage Samsung. For example, in the pending patent
13
cases, Rambus relies heavily on the original rates in the SDR/DDR License to justify its patent
14
damages claims even though those rates were subject to expansive MFL rights and should have
15
been significantly reduced in the wake of the Infineon License and Settlement Agreement.
16
Further, Samsung should have been licensed under the lower Infineon royalty rate in the absence
17
of Rambus’s breach, which also would reduce Samsung’s patent damages exposure. For all of
18 19 20 21 22 23 24 25 26 27 28
2
Rambus also should be estopped from taking a position inconsistent with the recitals of the SDR/DDR License that would prejudice Samsung. See, e.g., Matter of Pubs, Inc. of Champaign, 618 F.2d 432 (7th Cir. 1980) (holding that parties are estopped to deny the recitals of an enforceable agreement); Estate of Wilson, 64 Cal. App. 3d 786, 800-01 (Cal. Ct. App. 1976). The doctrine of “estoppel by contract” applies to cases where there is an undertaking to treat a fact as settled. See 31 C.J.S. Estoppel and Waiver § 70. Cal. Evid. Code § 622. Samsung relied on Rambus’s representations in the WHEREAS clauses as statements of settled fact that Samsung’s royalty terms would be lower than any offered to Samsung’s competitors, such as Infineon, then in litigation with Rambus. Rambus’s denial that its offer to Infineon comprised a “royalty rate” seeks to prejudice Samsung and deprive Samsung of the benefit of Section 3.8 of the SDR/DDR License. Thus, this Court should preclude Rambus from arguing that Infineon did not receive a “royalty rate.” SAMSUNG’S TRIAL BRIEF
11
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 19 of 42
1
these reasons, Samsung seeks legal and equitable relief to address the harm it has incurred and
2
could incur as a result of Rambus’s breach of contract.3
3
3.
4
Rambus likewise breached its obligation to negotiate in good faith an extension or a new
5 6 7 8 9 10 11 12 13 14 15 16
license agreement with Samsung. The nature of Rambus’s duty to negotiate in good faith is defined by the terms of the agreement that gave rise to it, which includes Rambus’s representations in the recitals and Samsung’s MFL obligations as set forth in Sections 3.8 and 3.9. See, e.g., A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group, Inc., 873 F.2d 155, 158-59 (7th Cir. 1989) (“[T]he scope of any obligation to negotiate in good faith can only be determined from the framework the parties have established for themselves in their letter of intent.”); Feldman v. Allegheny Internat’l, Inc., 850 F.2d 1217 (7th Cir. 1988) (holding that terms of a preliminary agreement control the scope of the obligation to bargain in good faith); Teachers Ins. & Annuity Ass’n of Am. v. Tribune Co., 670 F. Supp. 491, 506 (S.D.N.Y. 1987) (noting that a party may breach its obligation to bargain in good faith by unreasonably insisting on a condition outside the scope of the parties’ preliminary agreement). Indeed, Rambus’s representations in the WHEREAS clause that Infineon and other
17 18 19 20 21 22 23 24 25 26 27 28
Rambus Breached Section 8.5 of the SDR/DDR License when it Failed to Negotiate in Good Faith Towards a Renewal or New Agreement
litigants’ royalty rates would be higher than Samsung’s define the nature and scope of Rambus’s duty to negotiate in good faith, because contract “‘[r]ecitals may have a material influence in construing the contract and determining the intent of the parties, and in such respect they should, 3
Courts have routinely recognized that “most favored” provisions in patent licenses, like Sections 3.8 and 3.9, are evidence of an intent to protect the licensee from competitive disadvantage. See, e.g., Cardinal of Adrian, Inc. v. Amerock Corp., 208 U.S.P.Q. 822, 823 (E.D. Mich. 1979) (“The most favored nation clause is intended to guarantee . . . that no licensee will be given the opportunity to use this patent at a more favorable rate.”) (emphasis in original). In Cardinal of Adrian, Inc. v. Amerock Corp., the Eastern District of Michigan rejected the very same argument on which Rambus bases its defense to Samsung's claim of breach of Section 3.8, holding that a provision guaranteeing “a more favorable royalty rate” required the licensor of a patent to offer to licensee any more favorable royalty—i.e., even a one-time, lump sum payment—offered to a third party. 208 U.S.P.Q. at 823 (citing Cold Metal Process Co. v. McLouth, 170 F.2d 369 (6th Cir. 1948); Rothstein v. Atlanta Paper Co., 321 F.2d 90 (5th Cir. 1963); Harley C. Loney Co., 205 F.2d at 220 (7th Cir. 1953)). SAMSUNG’S TRIAL BRIEF
12
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 20 of 42
1
so far as possible, be reconciled with the operative clauses and be given effect . . . .’” Patwardhan
2
v. Kale, 2003 WL 21130236, at *5 (Cal. Ct. App., May 16, 2003) (quoting 17 Am. Jur. 2d,
3
Contracts (1991), § 392, at 417-18); see also Creamer v. AIM Tels., Inc., 159 B.R. 440, 444 n.4
4
(E.D. Pa. 1993) (“In terms of contract interpretation, the information in whereas clauses is useful
5
because it sets forth the context in which the agreement was contemplated and signed.”).
6
Rambus’s duty to negotiate in good faith also must be interpreted and understood in light
7
of Rambus’s MFL obligations under Sections 3.8 and 3.9, and the fundamental intent that
8
Samsung would suffer no competitive harm if Infineon obtained a favorable settlement. In light of
9
these obligations and the intentions of the parties, Rambus’s express duty to negotiate in good
10
faith plainly required that it offer Samsung terms that were at least as favorable as those offered to
11
Infineon.
12
Indeed, in the absence of breach, Samsung’s royalty rates would have been adjusted to
13
Infineon levels as of April 1, 2005, which corresponded with the start of the required good-faith,
14
license-renewal negotiations. Moreover, Samsung was entitled under Section 3.8 to MFL
15
protection “effective for this Agreement,” which would have included an extension of the
16
agreement as contemplated expressly in Section 8.5. In addition, the express duty to negotiate in
17
good faith must be understood, consistent with the WHEREAS clause, to require a royalty rate
18
offer that at a minimum was no higher than Infineon’s royalty rate. To do otherwise would run
19
afoul of Rambus’s unqualified and expansive representations that royalty rates offered to litigants
20
such as Infineon would be higher than Samsung’s royalty rates. Indeed, an offer of a license on
21
anything less than the terms obtained by Infineon would plainly contravene the parties’ intentions
22
that Samsung would suffer no competitive harm if Infineon and other litigants succeeded in
23
litigation against Rambus.
24
Nor can it be doubted that the duty to negotiate in good faith required in this context that
25
Rambus, as licensor, actually make at least one offer for a license (as dictated by the terms of the
26
SDR/DDR License and the intentions of the parties as expressed therein) or express an objective
27
manifestation of a willingness to accept such an offer from Samsung. Otherwise, the duty to
28
negotiate in good faith in the SDR/DDR License, as combined with the favorable Infineon SAMSUNG’S TRIAL BRIEF
13
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 21 of 42
1
license, both which as explained above, dictated the parameters of the license to be negotiated,
2
would be meaningless.
3
In violation of its duty to negotiate in good faith, Rambus did not make any written offer
4
for a license renewal, much less one on terms that matched those granted to Infineon, and
5
indicated that it would not entertain any such proposal from Samsung. Rambus specifically
6
refused to offer Samsung the royalty rate agreed to be paid by Infineon during the negotiations
7
and wrongfully terminated the negotiations and the SDR/DDR License in favor of the patent
8
litigation suits it filed on June 6, 2005. Rambus’s actions violated the express duty to negotiate in
9
good faith. For similar reasons, Rambus violated the implied covenant of good faith and fair
10
dealing inherent in Section 8.5.4
11
III.
12
SAMSUNG IS ENTITLED TO EXPECTATION DAMAGES AS A RESULT OF RAMBUS’S BREACH OF SECTION 8.5
13
For the reasons discussed above, Rambus was obligated to offer Samsung license terms as
14 15 16 17 18 19 20 21 22 23 24 25 26 27
least as favorable as those offered to Infineon. Among other things, Rambus was obligated to offer Samsung (or express a willingness to, and then in fact, accept) a license including a royalty rate that was at least equal to, if not more favorable than, Infineon’s royalty rate—i.e., the effective running royalty rate derived from Infineon’s $5.85 million per quarter (or simply its fixed, quarterly rate) up to the royalty cap Infineon received—for its license to the various products accused in Rambus’s two patent suits. The evidence will show that Samsung 4
The implied covenant of good faith and fair dealing “exists merely to prevent one contracting party from unfairly frustrating the other party’s rights to receive the benefits of the agreement actually made.” Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 350 (2000). “This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes he will do to accomplish its purpose.” Floystrup v. City of Berkeley Rent Stabilization Bd., 219 Cal. App. 3d 1309, 1318 (Cal. Ct. App. 1990) (citation omitted) (quoting Harm v. Frasher, 181 Cal. App. 2d 405, 417 (Cal. Ct. App. 1960). Courts have found a breach of the duty to negotiate in good faith where one party proposes terms that the other party has already rejected as commercially unreasonable in a prior negotiation. In re Vylene Enters., Inc., 90 F.3d at 1477.
28 SAMSUNG’S TRIAL BRIEF
14
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 22 of 42
1
unquestionably would have accepted such an offer and thus would not have been subject to patent
2
damages exposure far in excess of the royalty rates in the Infineon Settlement and License
3
Agreement.
4
A.
5
California law supports the availability of expectation damages in this case. See Witkin,
6
Summary of Cal. Law, Contracts § 869 (2005) (“The basic object of damages is compensation,
7
and in the law of contracts the theory is that the party injured by the breach should receive as
8
nearly as possible the equivalent of the benefits of performance.”). A party seeking expectation
9
damages due to breach of contract must establish a causal connection between the breach and the
10
damages sought. See id. § 870; Cal. Civ. Code § 3300 (providing for compensation for detriment
11
“proximately caused”).
12
Legal Standard
Expectation damages must be shown with reasonable certainty. See Witkin, Summary of
13
Cal. Law, Contracts § 879 (2005) (“[T]he injured party may recover for the profits or benefits that
14
he or she would have obtained by performance if the injured party can establish them with
15
reasonable certainty.”); see also Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (9th
16
Cir. 2001). “[I]f the plaintiff can prove that had it not been for the defendant’s bad faith the
17
parties would have made a final contract, then the loss of the benefit of the contract is a
18
consequence of the defendant’s bad faith, and, provided that it is a foreseeable consequence, the
19
defendant is liable for that loss.” Venture Assocs. v. Zenith Data Sys., 96 F.3d 275, 278 (7th Cir.
20
1996); see also Teachers Ins. & Annuity Ass’n v. Ormesa Geothermal, 791 F. Supp. 401, 415
21
(S.D.N.Y. 1991) (permitting damages of lost income after holding that defendant breached duty
22
to negotiate in good faith).
23 24 25
B.
Samsung’s Damages Resulting from Rambus’s Bad Faith Can Be Shown with “Reasonable Certainty”
In this case, the mutual intent of the parties as expressed in the SDR/DDR License, when
26
combined with the specific terms in the favorable license offered to Samsung’s competitor,
27
provide the terms for a license that should have been the subject of good faith negotiations—i.e.,
28
an offer (which Samsung would have accepted) for a license on terms at least as good as those SAMSUNG’S TRIAL BRIEF
15
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 23 of 42
1
offered to Infineon. Therefore, an expectation-damages remedy for a duty to negotiate in good
2
faith is not unduly speculative in the context of the SDR/DDR License and the circumstances
3
during the negotiations in 2005 after the Infineon License was announced. See, e.g., Coachella
4
Valley Water Dist. v. Imperial Irrigation Dist., 2007 WL 2822766, at *13 (Cal. Ct. App., Oct. 1,
5
2007) (holding that expectation damages were appropriate for breach of duty to negotiate due to
6
the parties’ conduct and because the court had “in fact a fairly detailed means of determining
7
what the terms of a [deal] would provide”); Paramount Developers & Contractors, Inc. v. M.B.
8
Admin. Servs. Corp., 2004 WL 214325, at *6 (Cal. Ct. App., Feb. 5, 2004) (finding that “very
9
clear” terms in a letter of intent provided a means for knowing what the ultimate terms of an
10 11
agreement would have been). Although there is some authority in California that suggests that expectation damages may
12
be too speculative to award for breach of a contractual obligation to negotiate in good faith, see
13
Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251, 1263 (Cal. Ct. App. 2002) (rejecting
14
claim for lost profits “because there is no way of knowing what the ultimate terms would have
15
been or even if there would have been an ultimate agreement”), that authority does not preclude
16
an award of expectation damages here. In the first instance, the agreement that gave rise to the
17
duty to negotiate in good faith in Copeland did not contain the terms that had to be offered by one
18
of the parties. See id. In contrast, Rambus’s obligation to negotiate in good faith, when interpreted
19
in light of the context of the SDR/DDR License, imposed on Rambus the obligation to offer
20
Samsung—or express a willingness to, and then in fact, accept—terms no less favorable than
21
those offered to Infineon. Indeed, the only issue of significance in the negotiations turned on the
22
royalty terms that Rambus would offer to Samsung. However, in the absence of breach, Rambus
23
would have been required to offer—or express a willingness to, and then in fact, accept—the
24
terms in the Infineon license (e.g., Infineon’s royalty rate and royalty cap in exchange for a
25
license covering the existing licensed products and future generations thereof), an offer Samsung
26
would have accepted. Therefore, when considered in connection with the fundamental intent
27
behind the SDR/DDR License—manifested in Sections 3.8, 3.9, 8.5, and the WHEREAS
28
clauses—that Samsung suffer no competitive disadvantage relative to Infineon, the Infineon SAMSUNG’S TRIAL BRIEF
16
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 24 of 42
1
License provides a “very clear” and “fairly detailed means” for this Court to determine what the
2
terms of a renewal license would provide. Concerns of undue speculation thus are unfounded and
3
inapplicable to this case, where Samsung will prove its expectation damages with reasonable
4
certainty.
5
IV.
6
RAMBUS IS ESTOPPED FROM ENFORCING ITS PATENTS BEYOND THE TERMS OF THE INFINEON LICENSE
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
A.
Legal Standard
Equitable estoppel is an established defense against enforceability of a patent in a suit for infringement. See, e.g., J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1561 (Fed. Cir. 1984). The purpose and importance of equitable estoppel has long been recognized: “The vital principle is that he who, by his language or conduct, leads another to do what he would not otherwise have done, shall not subject such person to loss or injury by disappointing the expectations upon which he acted.” Dickerson v. Colgrove, 100 U.S. 578, 580 (1880). B.
Rambus Should Be Estopped Due to Its Failure to Negotiate in Good Faith
The United States International Trade Commission (the “ITC”) has considered the estoppel effect of a patentee’s breach of an obligation to negotiate in good faith on the patentee’s ability to enforce its patents. See In the Matter of Certain Dynamic Random Access Memories, Components Thereof, and Products, 1987 WL 450980, USITC Inv. No. 337-TA-242 (U.S.I.T.C.) (hereinafter “DRAMs”). In DRAMs, a respondent and the complainant entered into a patent license agreement that required the parties to negotiate to renew the license. Id. at 707. The administrative law judge (the “ALJ”) found that the original license between the parties was a “framework agreement” that required both parties to negotiate in good faith for a renewal. Id. After the original license expired, the complainant sought an exclusion order from the ITC. Id. at 730. The respondent argued that the complainant had failed to negotiate a renewal agreement as required by the original license. Id. at 707. In a decision terminating the investigation of a respondent based upon complainant’s misleading conduct, the ALJ held that the respondent “[had] a license immunity under the . . . SAMSUNG’S TRIAL BRIEF
17
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 25 of 42
1
framework agreement and [the complainant’s] subsequent conduct, and [the complainant was]
2
estopped from denying to [respondent] a license immunity from suit or injunctive relief under the
3
laws of equitable estoppel.” Id. at 731. The ALJ further determined that the respondent was
4
harmed by the misleading conduct because it precluded the respondent from taking action “to
5
avoid infringement or usage of the patents in suit.” Id. at 734-35. The ALJ also noted that
6
“[w]here mutual obligations are incurred and relied upon with respect to patent rights, a finding
7
of infringement is inappropriate, even though royalties may be owed.” Id. at 729 (citing DeForest
8
Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241-42 (1927)). “[Respondent] proved that
9
[complainant] is equitably estopped from suing it for infringement because [complainant] failed
10
to negotiate in good faith toward a renewed license agreement as it had promised to do.” DRAMs,
11
1987 WL 450980 at 393.
12 13
1.
Samsung Was Misled by Rambus’s Promises and Then Refusal To Honor Its Contractual Obligations to Negotiate in Good Faith
14
Rambus promised Samsung that it would suffer no competitive harm as a result of
15
entering into a license if litigants such as Infineon succeeded in obtaining better terms, a promise
16
that was expressed in multiple provisions of the SDR/DDR License, including Section 8.5 of the
17
SDR/DDR License. Rambus specifically affirmed its promise to negotiate in good faith (as
18
interpreted and understood in light of the intentions of the parties) in writing and through months
19
of negotiations in 2005. (PFF ¶ 112.) Samsung was misled by Rambus’s promises and actions
20
into reasonably inferring that Rambus would enter into a license on terms no worse than those set
21
forth in the Infineon license. Rambus’s conduct on June 6, 2005 demonstrated that Rambus did
22
not in fact negotiate in good faith in spite of its promises, actions, and prior statements.
23
2.
24 25
Samsung Relied upon Rambus’s Commitment to Negotiate a Renewal or Extension of the SDR/DDR License in Good Faith
Samsung’s reliance began when it entered into the SDR/DDR License based on Rambus’s
26
statements and promises: (i) that Samsung would suffer no competitive disadvantage relative to
27
its competitors then in litigation with Rambus and (ii) that Rambus would negotiate with
28
Samsung in good faith to renew and expand the SDR/DDR License prior the end of its term. (PFF SAMSUNG’S TRIAL BRIEF
18
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 26 of 42
1
¶¶ 15, 19, 25-27, 38.) Samsung continued to rely on these commitments throughout the term of
2
the SDR/DDR License.
3
3.
4 5 6 7 8 9 10 11 12 13 14
Samsung Has Suffered Material Prejudice as a Result of Rambus’s Misconduct
As discussed above, Samsung relied on Rambus’s representations and promises in entering into the SDR/DDR License, in paying millions of dollars in royalties to Rambus, and during the negotiations with Rambus over a license renewal. Samsung also did not pursue other alternatives to a license although it had a right under the SDR/DDR License to do so. Further, Rambus will continue to use the original royalty rates in SDR/DDR License without the required adjustment based on Samsung’s MFL rights as evidence in support of its patent damages claims against Samsung. As a result, Samsung plainly has suffered, and will suffer, material prejudice as result of Rambus’s conduct. 4.
Balance of Equities Support Estoppel
Rambus expressly promised to Samsung in the SDR/DDR License that it would
15
“negotiate in good faith with a view to achieving a mutually satisfactory patent license agreement
16
. . . .” (PFF ¶ 38.) Had Rambus complied with its obligations, it would have made an offer based
17
on Infineon’s royalty rate, which Samsung would have accepted. (Id. ¶ 124.) The ensuing three
18
years of litigation—at enormous cost to the judicial system and to the parties—would not have
19
occurred. At the same time, Rambus undoubtedly will attempt to benefit from the SDR/DDR
20
License—and its royalty rates inappropriately left unadjusted by the MFL clause—in the patent
21
litigation in spite of its breaches of contract, in order to collect damages far in excess of the
22
royalty rates Rambus promised to offer Samsung. That result is grossly inequitable and strongly
23
supports the grant of equitable relief in favor of Samsung to prevent, among other things, Rambus
24
from asserting rights as against Samsung beyond the terms obtained by Infineon—e.g., by
25
enforcing its patents in excess of the royalty rates agreed to be paid by Infineon. See DRAMs
26
1987 WL 450980, at 729 (noting that “[w]here mutual obligations are incurred and relied upon
27
with respect to patent rights, a finding of infringement is inappropriate, even though royalties may
28
be owed) (citing DeForest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241-42 (1927)). SAMSUNG’S TRIAL BRIEF
19
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 27 of 42
1
RAMBUS USED THE ALLEGED AUDIT BREACH AS A PRETEXT FOR ITS BREACH OF THE SDR/DDR LICENSE
2
I.
3
RAMBUS’S 2004 AUDIT
4
Rambus based its abrupt termination the SDR/DDR License on June 6, 2005, on
5
Samsung’s alleged uncured breach of Section 4.1—the audit provision of the SDR/DDR
6
License—that was purportedly first noticed on July 9, 2004. (PFF ¶ 121.) However, since the
7
execution of the 2001 Amendment, the only per-unit royalties payable by Samsung were
8
attributable to memory controllers, a very small piece of Samsung’s business. (Id. ¶¶ 53, 59-60.)
9
In contrast, Samsung’s DRAM sales were subject to a flat, quarterly payment during that
10
timeframe. (Id. ¶ 52.) Thus, the audit authorized by the SDR/DDR License related exclusively to
11
sales of memory controllers, which comprise a very small fraction of the products covered by the
12
license.5 In spite of the narrow confines of the products to be audited, Rambus sought detailed sales
13 14
and technical information on all of Samsung’s memory products while, at the same time, it
15
accused many of them of being unlicensed and therefore subject to a patent infringement suit.
16
(See id. ¶¶ 57-64.) Notwithstanding these and other facts, Samsung undertook to cooperate with
17
Rambus’s auditors from Ernst & Young (E&Y). (Id. ¶¶ 62-63.) After several on-site visits and
18
numerous calls and email exchanges, E&Y’s Korean affiliate, Younghwa Accounting Firm
19
confirmed to Samsung on January 18, 2005, that “[a]ll the Reports will be completed and
20
submitted to E&Y by the end of this week” and “that, from the standpoint of Younghwa
21
Accounting Firm, there is no problem with the Rambus Audit result.” (Id. ¶ 75; see also id. ¶¶ 67-
22
69, 72.) Mr. Shim relayed this information to Rambus at the parties’ February 2, 2005 meeting,
23 24
and Rambus promised to follow up with E&Y and notify Samsung of any remaining issues. (Id. ¶
25
76.) After that meeting, Rambus did not provide Samsung with a list of remaining issues, did not
26 5
27 28
Section 4.1 permits termination of the license only if three consecutive audits reveal an underpayment exceeding five percent. (PFF ¶ 55.) Rambus terminated the license after one audit of a small fraction of the relevant product sales. SAMSUNG’S TRIAL BRIEF
20
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 28 of 42
1
indicate that Ernst & Young’s Korean affiliate was mistaken, and did not instruct E&Y to contact
2
Samsung about the audit. (Id. ¶ 78.) Instead, just as Rambus and Infineon came to agreement on
3
the terms of the Infineon License, William Deley of Rambus wrote to E&Y’s Mr. Shepherd to
4
“confirm that there has been continued zero cooperation by Samsung relative to the royalty
5
audit,” because “they have been saying that they have been fully cooperating on the audit.” (Id. ¶
6
81.) Although Mr. Shepherd provided Mr. Deley with an update of what he believed to be
7
outstanding issues, Rambus did not convey any of this information to Samsung. (Id. ¶ 85.)
8
Instead, Rambus proceeded with renewal negotiations until June 6, 2005, when it terminated the
9
license.
10
Thus, from January 18, 2005—when Younghwa informed Samsung that the audit was
11
complete—to Rambus’s unilateral termination of the SDR/DDR License in June 2005, Rambus
12
did not tell Samsung: (a) that E&Y disagreed with its Korean representatives; and (b) the specific
13
audit issues, if any, that remained such that they could be cured. In addition to its failure to give
14
Samsung the information necessary to cure any alleged breach, Rambus also led Samsung to
15
believe that the audit issue would not impair or effect Samsung’s rights to a good faith
16
negotiation under Section 8.5. These facts, which show that no breach occurred, also demonstrate
17
that any alleged breach of Section 4.1 by Samsung is legally of no consequence based on
18
Rambus’s course of conduct and the lack of materiality of any such breach.
19 II.
20 21 22 23 24
RAMBUS IS NOT EXCUSED FROM PERFORMANCE OF SECTION 8.5 A.
Rambus Waived its Right To Be Excused from Performance of the SDR/DDR License 1.
Legal Standard
It is well settled that, “[a] breach of contract gives the aggrieved party . . . an election of
25
remedies,” 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 853, whereby “[t]he
26
injured party “must elect to affirm the contract or to terminate it.” 3 Witkin, Cal. Procedure (4th
27
ed. 1996) Actions, §176, p. 246. “Affirmation of the contract, on the one hand, and rescission and
28 SAMSUNG’S TRIAL BRIEF
21
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 29 of 42
1
restitution on the other, are alternative remedies. Election to pursue one is a bar to invoking the
2
other.” Alder v. Drudis, 30 Cal.2d 372, 383 (Cal. 1947); Lenard v. Edmonds, 151 Cal.App.2d
3
764, 768 (Cal.App.1.Dist. 1957); Rest., Contracts, Section 384; 5 WILLISTON ON CONTRACTS
4
(rev. ed.), § 1464, pp. 4096-4097. Thus, when a party to a contract deems itself to have the right
5
to terminate an agreement, and, instead of terminating, chooses to avail itself of the rights and
6
privileges under that contract, the contract remains in force for the benefit of each party to that
7
agreement. See, e.g., Cummings v. Universal Pictures Co., Inc., 62 F. Supp. 611, 629 (S.D.Cal.
8
1944) (“[T]o paraphrase the rather trite expression that one may not eat his cake and have it too . .
9
. [the contracting party who declined to terminate] was not entitled to retain the rights accorded to
10
it under the contract, and at the same time be relieved from its contractual obligations
11
thereunder.”); Boone v. Templeman, 158 Cal. 290, 295 (1910); Leiter v. Eltinge, 246 Cal. App. 2d
12
306, 317 (Cal. Ct. App. 1966); 5 Williston 3d, § 688 (“The principle is general that wherever a
13
contract not already fully performed on either side is continued in spite of a known excuse, the
14
defense thereupon is lost and the injured party is himself liable if he subsequently fails to
15
perform, unless the right to retain the excuse is not only asserted but assented to.”) (emphasis
16
added); see also Title Ins. & Trust Co. v. Hisey, 95 F.2d 555, 561 (9th Cir. 1938) (“The California
17
courts have settled beyond a peradventure of a doubt that ‘The acceptance of rent by the landlord
18
from the tenant, after the breach of a condition of a lease, with full knowledge of all the facts, is a
19
waiver of the breach, and precludes the landlord from declaring a forfeiture of the lease by reason
20
of said breach.’”).
21
Courts have likewise found that, where a party with knowledge of a default that entitles it
22
to terminate a contract enters into negotiations that recognize the continued validity of that
23
contract, “the right to claim a forfeiture for such default is waived.” See, e.g., Spiegelman v.
24
Metro. Life Ins. Co., 21 Cal. App. 2d 299, 301 (Cal. Ct. App. 1937); see also Precision Pine &
25
Timber, Inc. v. United States, 62 Fed. Cl. 635, 650-51 (2004) (“In light of Precision’s continued
26
manifestation of its intention to perform under the contracts and the lack of timely notice to the
27
Forest Service regarding Precision’s assertion of material breach, this Court concludes that it
28
would be unjust under the circumstances to allow Precision to avoid liability for its breaches SAMSUNG’S TRIAL BRIEF
22
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 30 of 42
1
based on the assertion of prior material breach.”); DeVito v. United States, 413 F.2d 1147, 1154-
2
55 (Ct. Cl. 1969) (noting the elements of waiver by election are “(1) failure to terminate within a
3
reasonable time after the default under circumstances indicating forbearance; and (2) reliance by
4
the contractor on the failure to terminate and continued performance by him under the contract,
5
with the Government’s knowledge and implied or express consent” and that defendant had failed
6
to send a “cure” notice specifying a reasonable time for performance). Cf. N. Helex Co. v. United
7
States, 455 F.2d 546, 553-554 (Ct. Cl. 1972) (applying UCC and holding that “explicit
8
notification” was sufficient to reserve right to terminate where “cessation of [performance] was
9
commercially impossible and avoidance of waste most desirable” and defendant “was not hurt,”
10
“did not change its position,” and “was certainly not misled into thinking that payment was
11
immaterial . . . and that [plaintiff] would continue to perform regardless”); W. Transmission Corp.
12
v. Colo. Mainline, Inc., 376 F.2d 470, 472 (noting that a party deciding to proceed with
13
performance after breach may still change its mind if the other party has not changed its position
14
in reliance on the decision to affirm the contract).
15
Similar logic informs the prohibition of a party’s ability to recover for a breach that the
16
party has itself induced. Hartung v. Pollastrini, 304 P.2d 846 (Cal. Ct. App. 1957) (defendant
17
who induced landowner not to act could not rely on landowner’s failure to act as an excuse for
18
defendant’s own nonperformance); Bank of America Nat. Trust & Sav. Ass'n v. Cranston, 60 Cal.
19
Rptr. 336 (Cal. Ct. App. 1967) (any inconsistent acts or dealings by party claiming a forfeiture
20
will be regarded as a “waiver” thereof, and a simple voluntary relinquishment of a right with
21
knowledge of all the facts or an expression of intention, by speech or conduct, not to demand a
22
certain thing, is sufficient to constitute such a “waiver”).
23 24 25
2.
Rambus Continued to Accept Samsung’s Performance under the SDR/DDR License
Under the terms of the SDR/DDR License, Rambus only held a limited right to terminate
26
for underpayments revealed in an audit—i.e., if three consecutive audits revealed an
27
underpayment of greater than five percent. Even if Rambus established a breach, which Rambus
28
alleges it noticed in July 2004 and thus remained uncured past the 45-day cure period, Rambus CASE NO. C 05 00334 RMW SAMSUNG’S TRIAL BRIEF 23 CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 31 of 42
1
continued to accept the benefits of the contract until June 2005. The law does not permit a
2
contracting party to avail itself of the benefits of a contract and then, having done so, belatedly
3
seek to terminate in order to avoid its obligations under that same contract. See, e.g., Cummings,
4
62 F. Supp. at 629 (when movie studio determined not to terminate actor’s employment contract
5
upon actor’s breach and instead elected to “avail itself of the several cumulative rights granted to
6
it thereunder, it necessarily followed that the contract remained in force . . . . [h]ence [the studio]
7
was still bound to discharge such obligations as the agreement imposed on it.”); Witkin,
8
Summary of Cal. Law, Contracts § 856 (“Instead of treating the breach as a termination of the
9
contract, the injured party may waive it, i.e., elect to treat the contract as still alive, remaining
10
ready and able to perform on his or her part, and limiting the remedy to compensation for the
11
breach.”).
12
Indeed, Rambus repeatedly chose to re-affirm the SDR/DDR License by continuing to
13
accept performance from Samsung and to itself purport to perform under the renegotiation
14
requirements of Section 8.5 after the alleged audit breach and purported “time to cure” (according
15
to Rambus) had passed. These facts demonstrate an implied, if not express, waiver by Rambus of
16
any right to terminate based on the alleged audit breach. See, e.g., Boone v. Templeman, 158 Cal.
17
290, 295 (1910); Spiegelman v. Metro. Life Ins. Co., 21 Cal. App. 2d 299, 301 (Cal. Ct. App.
18
1937); see also Precision Pine & Timber, Inc. v. United States, 62 Fed. Cl. 635, 650-51 (2004).
19 20 21
B.
Rambus Should Be Estopped from Using the Alleged Audit Breach as an Excuse for its Failure to Perform under the SDR/DDR License
The doctrine of equitable estoppel applies when the following elements are met:
24
(1) the party to be estopped must be apprised of the facts; (2) the party to be estopped must intend that his conduct shall be relied upon, or must so act that the party asserting estoppel had a right to believe it was so intended; (3) the party asserting estoppel must be ignorant of the true state of facts; and (4) the party asserting estoppel must rely upon the conduct to his injury.
25
Bd. of Trustees of Stanford University v. Roche Molecular Sys., 487 F. Supp. 2d 1099, 1114 (N.D.
26
Cal. 2007). The evidence discussed above demonstrates that—after E&Y (Korea) told Samsung
27
that it had completed the audit—Rambus became aware that E&Y (U.S.) believed that there were
28
specific issues that remained uncured with respect to the audit, yet Rambus did not provide that
22 23
SAMSUNG’S TRIAL BRIEF
24
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 32 of 42
1
information to Samsung. Further, Rambus gave Samsung the impression that a cure of the audit
2
issue would not impair Samsung’s rights to a good faith negotiation under Section 8.5, much less
3
give rise to a right of termination. Samsung did not know the true state of affairs and relied on
4
Rambus’s conduct in not taking further steps, if any were necessary, to remedy any remaining
5
audit issues in order to avoid termination and to achieve a successful license extension and
6
expansion. Accordingly, Rambus should be estopped from asserting the audit breach as grounds
7
to avoid its obligations under the SDR/DDR License.
8
C.
9
Absent an express condition, performance is only excused by the other party’s material
10 11 12 13 14 15 16
breach. 1 Witkin, Summary of Cal. Law, Contracts, § 852, p.938. Whether a partial breach is material depends on the importance or seriousness of the breach and the probability of the injured party receiving substantial performance. See Superior Motels v. Rinn Motor Hotels, 195 Cal. App. 3d 1032, 1052 (Cal. Ct. App. 1987). Further, after considerable performance, a slight breach that does not go “to the root” of the contract will not justify termination. See Karz v. Dep’t of Prof. Vocational Stds., 11 Cal. App. 2d 554, 557 (1936). Samsung’s alleged audit breach was not material. As noted above, under the 2001
17 18 19 20 21 22
Any Purported Breach of the Audit Provisions of the SDR/DDR License Was Not Material
Amendment, Rambus’s audit rights were extremely narrow because only a very small fraction of licensed products—memory controllers—were subject to the audit.6 The bulk of Samsung’s royalty payments under the 2001 Amendment took the form of a $2 million, lump-sum, quarterly payment for Samsung's DRAMS, which Samsung paid each quarter. Because the lump-sum payments were not tied to Samsung’s product sales, typical audit-related issues, such as sales
23 6
24 25 26 27 28
The SDR/DDR License covered Samsung's SDR SDRAM, DDR SDRAM, SGRAM and DDR SGRAM memory products ("Samsung's DRAMs") as well as components that control Samsung's DRAMs ("Memory Controllers"). Nearly all (i.e., 94%) of Samsung's relevant sales under the license are for Samsung's DRAMs. (PFF ¶ 60.) Samsung did not sell stand-alone Memory Controllers, but rather sold integrated circuits that perform multiple functions unrelated to controlling DRAMs, but that also have circuitry capable of controlling various types of memory (including in some cases DRAMs). The parties referred to these parts as "SOCs" or "Systems on a Chip." SAMSUNG’S TRIAL BRIEF
25
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 33 of 42
1
volume and deductions from net sales, were irrelevant to the amount of royalties due to Rambus
2
for Samsung’s sales of DRAMs. DRAMs comprised the vast majority of Samsung’s sales under
3
the SDR/DDR License, and sales of memory controllers were not a material part of the parties’
4
bargain.7 Moreover, incomplete compliance with an audit targeting such a small portion of the
5
license revenues could not go “to the root” of the SDR/DDR License and thus would not justify
6
termination. See Karz, 11 Cal. App. 2d at 557.
7 8
THE SDR/DDR LICENSE COVERS FUTURE GENERATIONS OF DDR PRODUCTS
9
Samsung’s DRAM products introduced after its DDR SDRAM products (i.e., DDR2,
10
DDR3, GDDR2, GDDR3, GDDR4, and GDDR5) are covered as licensed products under the
11
2000 SDR/DDR License Agreement.
12
I.
13
FACTS
14
A.
15
Sections 1.7 and 1.8 define the scope of the terms “DDR SDRAM(s)” and “DDR
16
SGRAM(s)” as they are used in the agreement. (PFF ¶ 131.) The definitions explicitly cover any
17
future DDR memory device that is identical to any of the memory devices identified by part
18
number, except for any differences that fall within 11 categories of differences that are allowed
19
by the agreement. (Id.)
20
Sections 1.7 and 1.8 of the Agreement
The eleven allowed differences are 1) a different package type, 2) different die size, 3)
21
different burst type, 4) different clock frequency, 5) different programmable latency, 6) different
22
programmable burst length, 7) different memory storage capacity, 8) different number of
23
input/output pins, 9) different timing values for existing timing parameters (for example, set-
24
7
25
Samsung recently supplemented its production of sales data, which included sales data for Memory Controllers sold during the audit period. That data reveals that,
26 27 28
This data further demonstrates that Samsung’s alleged breach could not have been and was not material. SAMSUNG’S TRIAL BRIEF
26
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 34 of 42
1
up/hold times and propagation delays), 10) different power consumption, and/or 11) different
2
number of banks. (Id.)
3
B.
4
During the course of negotiating the 2000 SDR/DDR license, Samsung’s intent was to
Negotiation of the 2000 SDR/DDR Contract
5
include “evolutionary” products such as DDRII, and subsequent generations of DDR products.
6
Rambus gave Samsung an assurance that such products would be covered under the agreement.
7
(PFF ¶ 134.)
8 9
When Samsung received Rambus’s proposed SDR/DDR license agreement, Samsung desired to make sure that the agreement would cover future generations of its DDR memory
10
products. Accordingly, when Samsung received a draft of the contract from Rambus, one of the
11
changes that Samsung requested was for sections 1.7 and 1.8 to explicitly state that future
12
generations of DDR products that are “substantially similar” to the listed DDR products would
13
also be included. (Id. ¶ 135.) In response to this request, although Rambus did not agree to the
14
proposed change in language, Rambus assured Samsung that the existing language, with the 11
15
categories of allowed differences, was sufficient to “adequately cover devices which may have
16
evolutionary (as opposed to revolutionary) differences from the devices specified by part
17
number.” (Id.)
18
This statement was designed to assure Samsung that future generations of its DDR
19
products would be covered by the license agreement, and that it was only “revolutionary” new
20
designs that would not be included. In the DRAM industry, it was widely known that the various
21
manufacturers of DRAM products were promoting the next generations of their products as
22
“evolutionary” rather than “revolutionary.” Accordingly, Rambus statements during the
23
negotiation of the 2000 contract that devices that have evolutionary differences from the current
24
DDR products was both meant by Rambus and understood by Samsung to mean that products
25
such as the DDRII and subsequent generations of its DDR products released by Samsung would
26
be covered by the license agreement.
27 28
For example, in 1999, when the industry standards setting group JEDEC met to discuss development of the next generation of DDR technology, DDRII, it expressly noted that the “basic SAMSUNG’S TRIAL BRIEF
27
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 35 of 42
1
design philosophy” of DDRII was to be “evolutionary rather than revolutionary.” (Id. ¶ 137.)
2
Additionally, Micron Technology, Inc. gave a presentation at a JEDEC meeting about DDRII
3
clocking scheme and data capture and remarked that “the current DDR-II proposal is evolutionary
4
from DDR-I.” (Id.)
5
Various articles and publications in the DRAM industry use the distinction between
6
“evolutionary” and “revolutionary” paths to describe various DRAM products. For example, an
7
article in bit-tech.net, explains that the change from using an asynchronous clock to a
8
synchronous clock was revolutionary. However, when viewing the natural progression of SDR
9
DRAM through DDR, DDRII, and to DDRIII, the article describes this progressions as
10
“evolutionary.” (PFF ¶ 138.)
11
Similarly, an article in PC Technology Guide, explains that “[t]he transition from DDR to
12
DDR2 memory was more evolutionary than revolutionary, the DDR2 architecture being
13
essentially the same as that of its predecessor, with a number of enhancements designed to
14
provide greater bandwidth and other features that help reduce power consumption.” (PFF ¶ 139.)
15
Another article in PC Authority, explains that “[t]wo terms that are thrown around a lot in the
16
world of PC components are ‘evolutionary’ and ‘revolutionary’ . . . DDR2 is more on the
17
evolutionary side of the fence. As such, DDR2 is not so much a brand new technology as an
18
evolution of conventional DDR, which in itself is build on single data rate SDRAM technology.”
19
(Id.)
20
Likewise, an analyst company that covered Rambus and other memory companies
21
contrasts the anti-Rambus “evolutionary” path with Rambus’s “revolutionary” path, specifically
22
identifying DDRII as an evolutionary advancement over DDR. (PFF ¶ 140.)
23
Rambus was well aware of this use of the term evolutionary at the time that Rambus
24
explained to Samsung that the agreement would cover all evolutionary enhancements to the DDR
25
technology. For example, Rambus employees attended presentations by semiconductor
26
developers who explained that DDRII was an evolutionary progression from the DDR
27
technology. (PFF ¶ 141.)
28 SAMSUNG’S TRIAL BRIEF
28
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 36 of 42
Similarly, Rich Warmke, of Rambus, in an email to Rambus’s executive, marketing, and
2
sales teams, summarized a few GDDR3 specification issues and noted the “evolutionary nature of
3
the GDDR-III device.” (PFF ¶ 142.)
4
Despite having provided Samsung assurances that any future generations of DDR
5
products would be covered under the 2000 license agreement so long as they were “evolutionary
6
not revolutionary” advancements, Rambus now contends that Samsung’s DDRII and subsequent
7
products have differences that do not fall with the eleven enumerated categories.
8
II.
9
THE ALLOWED DIFFERENCES UNDER THE AGREEMENT
10
The parties’ experts have focused on five differences between DDR and subsequent DDR
11
generations such as DDRII that Rambus contends take these subsequent products outside the
12
scope of the 2000 license agreement. These differences are: 1) on-die termination, 2) off-chip
13
driver calibration, 3) differential strobe, 4) posted CAS, and 5) write latency.
14
A.
15
In DDR products, termination was applied on the motherboard or memory chip module,
On-Die Termination
16
and thus not immediately next to the component interfaces (connections) to the bus. When signals
17
are sent along a bus (effectively a set of transmission lines) in a memory system, they reflect off
18
of various components of the system attached to the bus. This is due to the discontinuities in the
19
bus that result from the interconnection (to the bus) of a component. These reflections add
20
uncertainty to the signals, and as a result, the clock frequency of the chips must be reduced to
21
allow extra time for the signals to be reliably transmitted and received.
22
In Samsung’s subsequent DDR products, termination is applied on the die of the memory
23
chips, right at the chip interfaces to the bus, in order to speed up the clock frequency. Applying
24
appropriate termination at the various tap points along the bus, where components connect to the
25
bus, better eliminates signal reflections. Reducing bus signal reflections enables the memory to
26
operate at a higher clock frequency. Therefore, this difference falls within category (4), “different
27
clock frequency,” of the agreement’s allowed differences. (PFF ¶ 147.)
28 SAMSUNG’S TRIAL BRIEF
29
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 37 of 42
1
This is confirmed by technical descriptions of on-die termination. For example, a Hynix
2
Semiconductor patent, explains in its Background section that DDR2 uses an on-die termination
3
scheme “[i]n order to obtain a high data processing speed.” (PFF ¶ 148.)
4
Similarly, a Rambus website makes the same point explaining that “[b]y placing the
5
termination resistance on the die itself rather than the motherboard, the reflections resulting from
6
discontinuities in the line are significantly reduced, thus producing a cleaner signal and enabling
7
faster data rates.” (PFF ¶ 149.)
8
Additionally, on-die termination enables smaller delays with respect to data access, such
9
as setup and hold times, as well as other data propagation delays, and therefore this difference
10
falls within category (9), “different timing parameters for existing timing parameters,” of the
11
agreement’s allowed differences. (PFF ¶ 150.)
12
B.
13
In DDR products, output drivers may overshoot or undershoot the desired voltage levels
Off-Chip Calibration
14
because of variations in process, voltage, temperature, and other factors. As a result, it takes
15
longer to resolve the intended digital logic value that was transmitted by the driver. Thus,
16
additional timing (safety) margins must be added to the timing parameters to ensure that signals
17
are reliably transmitted.
18
In Samsung’s DDR2, GDDR2, and GDDR3 memory products, off-chip driver calibration
19
is used to eliminate the overshoot/undershoot, which enables the memories to be clocked at
20
higher clock frequencies, and enables shorter delays.
21
Therefore, in the DDR2, GDDR2, and GDDR3 products, off-chip driver calibration
22
enables reduction of output driver overshoot and undershoot of the desired voltage levels, which
23
enables operation at a higher clock frequency and enables shorter delays, and these differences
24
fall within categories (4), “different clock frequency,” and (9), “different timing parameters for
25
existing timing parameters,” of the agreement’s allowed differences. (PFF ¶ 153.)
26
This is confirmed by technical descriptions of off-chip driver calibration. For example, a
27
Hynix Semiconductor patent, explains in its Background section that DDR2 uses an off-chip
28
driver calibration scheme “[i]n order to obtain a high data processing speed.” (PFF ¶ 154.); see SAMSUNG’S TRIAL BRIEF
30
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 38 of 42
1
also (PFF ¶ 154.) (patent teaching a method of addressing individual memory devices on a
2
memory module “by making such adjustments, operation at higher frequencies are achieved
3
because driver variation is reduced”).
4
Further, a Rambus webpage provides a similar description of the off-chip driver
5
calibration technology. The webpage explains that “[t]ransmitting data at high speeds between a
6
DRAM device and a memory controller requires careful design of I/O drivers to ensure that the
7
required electrical signaling levels are achieved.” (PFF ¶ 155.) The webpage further explains that
8
“[t]o address these issues, Rambus pioneered the use of the Output Driver Calibration to improve
9
communication speeds and provide greater reliability over a wide range of operating conditions.”
10
(Id.)
11
DDR3, GDDR4, and GDDR5 products improve over the off-chip driver calibration
12
scheme by including on-chip self-calibration through the ZQ pin. (PFF ¶ 156.) The ZQ-pin based
13
scheme is even more effective at allowing operation at higher clock frequencies and at producing
14
smaller delays with respect to data access and other data propagation delays. (Id.)
15
Therefore, on-chip driver calibration through the ZQ pin enables Samsung’s DDR3,
16
GDDR4, and GDDR5 memory products to operate at a higher clock frequency with shorter
17
delays, and these differences also fall within categories (4), “different clock frequency,” and (9),
18
“different timing parameters for existing timing parameters,” of the agreement’s allowed
19
differences. (PFF ¶ 157.)
20
C.
21
In DDR products, differential strobe refers to differential data strobe since differential
Differential Strobe
22
clocks were used. Instead of using a single clock line and triggering off of rising edges or falling
23
edges of the clock signal, a differential clock consists of two signals that are out of phase by 180
24
degrees. Triggering occurs at the point where the two signals cross. The triggering points are
25
much less sensitive to process, voltage and temperature variations, as well as crosstalk noise,
26
compared to single strobe.
27 28
The use of a differential data strobe was added to DDR2, DDR3 and GDDR2 to achieve higher clock frequencies. Differential data strobing overcomes issues such as crosstalk and SAMSUNG’S TRIAL BRIEF
31
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 39 of 42
1
simultaneous switching noise and enables operation at a higher clock frequency. This difference
2
thus falls within category (4), “different clock frequency,” of the agreement’s allowed
3
differences. (PFF ¶ 159.)
4
This is supported by a biz-tech.net webpage describing differential data strobe: “While the
5
single-ended data strobe was first used in DDR1, DDR2 was the evolutionary transition point
6
supporting . . . Differential Strobe designs. [T]he single-ended strobe relies on one oscillating
7
wave, while differential architecture uses two opposing oscillating waves that weave and
8
crisscross each other.” (PFF ¶ 160.) The webpage further explains that “[d]ifferential clock and
9
strobe schemes are much less sensitive to variations due to cross talk . . . as we continue to lower
10
the voltages on the DRAM and continue to increase the speed, it is very important that the clock
11
and strobes are less sensitive to these kinds of [cross talk] noise.” (Id.) The webpage continues,
12
“[w]ith a Single-ended Strobe design, any small amount of noise and interference will skew the
13
strobe to the left or right along the horizontal voltage threshold, which is sometimes known as the
14
Reference Voltage level. This horizontal shift is detrimental because it represents a change in
15
time representing a timing inaccuracy.” (Id.) Further explaining, the webpage states, “[t]he
16
memory relies on the stability of the ‘intersecting’ reference point to be able to read or write
17
reliably. The Differential Strobes design is much more stable because waveform anomalies will
18
only cause the intercepting centre point to shift up and down, representing a change in the
19
Reference Voltage (Vdd/2), rather than a timing skewing (left or right). A fluctuating Voltage
20
Threshold is less severe than a skew in time.” (Id.)
21
Starting with the GDDR3 standard, and continuing through the GDDR4 and GDDR5
22
products, the data strobe signals where made unidirectional and single-ended, as opposed to bi-
23
directional. This enabled a separate read and write data strobe, allowing for a quicker read to
24
write ratio than for GDDR2, DDR2, and DDR3 products, and thus, increased the clock frequency.
25
Therefore, for Samsung’s GDDR3, GDDR4, and GDDR5 products, the unidirectional,
26
single-ended strobe enables operation at an even higher clock frequency over the differential data
27
strobe, and this difference falls within category (4), “different clock frequency,” of the
28
agreement’s allowed differences. (PFF ¶ 162.) SAMSUNG’S TRIAL BRIEF
32
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 40 of 42
1
This is confirmed by a LostCircuits article that describes the forgotten features between
2
DDRII and GDDR3. The article states, “Another improvement of the strobing scheme is to use
3
unidirectional strobes, that is, separate strobes for Read and Write transactions. The strobes are
4
forwarded along with the data and define the data valid window or Data-I. It is somewhat
5
intuitive that data moving in opposite directions are better synchronized with strobes that are
6
running along with them on separate lines than with a bi-directional strobe, which is comparable
7
with a one size fits all solution. For an easier implementation of the clock forwarding signals,
8
GDDR3 . . . will trade in the differential strobe that does not allow any improvements on the
9
signal integrity anyway for a pair of self-calibrating unidirectional strobes dedicated to either
10
Read or Write transfers.” (PFF ¶ 163.)
11
D.
12
The Posted CAS enhancement in Samsung’s DDR2, DDR3, and GDDR2 products, is
Posted CAS
13
characterized by the inclusion of an additive latency (AL) to the CAS delay to make the
14
command and data bus efficient for sustainable bandwidths. (PFF ¶ 164.)
15
In this approach, commands are issued externally but held by the device internally prior to
16
execution, for the duration of the AL, in order to improve system scheduling. Specifically, it helps
17
avoid collision on the command bus and gaps in data input/output bursts, thus improving delays.
18
AL latency is variable and is programmable. AL values of 0, 1, 2, 3, or 4 clocks are typically
19
supported. (PFF ¶ 165.) (“On DDR memories the “CAS Latency” (CL) parameter – which is the
20
time the memory delays delivering a requested data – can be of 2, 2.5 or 3 clock cycles. On
21
DDR2 memories CL can be of 3, 4 or 5 clock cycles.”); (Id.) (“On DDR2 memories, depending
22
on the chip, there is an additional latency (AL) of 0, 1, 2, 3, 4 or 5 clock cycles. So in a DDR2
23
memory with CL4 and AL1 the latency is 5.”); (Id.) (“On DDR2 memories the write latency
24
equals to the read latency (CL + AL) minus 1.”).
25
Therefore, the addition of the Posted CAS feature to Samsung’s DDR2, DDR3, and
26
GDDR2 products falls within category (5), “different programmable latency,” of the agreement’s
27
allowed differences. (PFF ¶ 166.)
28 SAMSUNG’S TRIAL BRIEF
33
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
1
Document 2200
Filed 09/15/2008
Page 41 of 42
Additionally, Posted CAS also enables the memory device to operate at a higher clock
2
frequency, and therefore, this difference falls within category (4), “different clock frequency,” of
3
the agreement’s allowed differences. (Id.)
4
Furthermore, the addition of the Posted CAS feature results in smaller delays with respect
5
to data access. (PFF ¶ 167.) Therefore, this difference falls within category (9), “different timing
6
parameters for existing timing parameters,” of the agreement’s allowed differences. (PFF ¶ 168.)
7 8 9
Samsung’s GDDR3, GDDR4, and GDDR5 products do not identify the “posted CAS” feature. E.
Write Latency
10
DDR products have a write latency equal to one clock period.
11
Samsung’s subsequent DDR products, however, allow a programmable write latency that
12 13 14 15
is longer than one clock period. Therefore, this difference falls within category (5), “different programmable latency,” of the agreement’s allowed differences. (PFF ¶ 172.) Additionally, programmable write latency enables operation at a higher clock frequency,
16
and therefore falls within category (4), “different clock frequency,” of the agreement’s allowed
17
differences. (Id.)
18 19
CONCLUSION For the reasons stated above, the Court should find that Samsung has met its burden of
20
proof and is entitled to any and all legal and equitable relief the Court deems appropriate as a
21
remedy for Rambus’s breaches of the SDR/DDR License.
22
Dated: September 15, 2008
23
WEIL, GOTSHAL & MANGES, LLP By:
24 25
/s/ Matthew D. Powers Matthew D. Powers
MATTHEW D. POWERS (Bar No. 104795) Email: [email protected] STEVEN S. CHERENSKY (Bar No. 168275) Email: [email protected] WEIL, GOTSHAL & MANGES LLP 201 Redwood Shores Parkway
26 27 28 SAMSUNG’S TRIAL BRIEF
34
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Case 5:05-cv-00334-RMW
Document 2200
Filed 09/15/2008
Page 42 of 42
Redwood Shores, CA 94065 Telephone: (650) 802-3000 Facsimile: (650) 802-3100
1 2 3
ROBERT S. BEREZIN (admitted pro hac vice) Email: [email protected] MATTHEW J. ANTONELLI (admitted pro hac vice) Email: [email protected] WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007
4 5 6 7 8 9
Attorneys for Defendants SAMSUNG ELECTRONICS CO., LTD., SAMSUNG ELECTRONICS AMERICA, INC., SAMSUNG SEMICONDUCTOR, INC., and SAMSUNG AUSTIN SEMICONDUCTOR, L.P.
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SAMSUNG’S TRIAL BRIEF
35
CASE NO. C 05 00334 RMW CASE NO. C 05 02298 RMW
Related Documents
2200
December 2019 10
2200
May 2020 6
2200
October 2019 18
Brosur 2200
December 2019 14
Sop Hdi 2200 Choke.docx
December 2019 10
