Rambus Brief On Structure Of Jan 22 Trial

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Gregory P. Stone (State Bar No. 078329) Steven M. Perry (State Bar No. 106154) Sean Eskovitz (State Bar No. 241877) MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue, 35th Floor Los Angeles, California 90071-1560 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 Email: [email protected]; [email protected]; [email protected]

Rollin A. Ransom (State Bar No. 196126) SIDLEY AUSTIN LLP 555 West Fifth Street, Suite 4000 Los Angeles, California 90013-1010 Telephone: (213) 896-6000 Facsimile: (213) 896-6600 Email: [email protected]

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Peter A. Detre (State Bar No. 182619) Carolyn Hoecker Luedtke (State Bar No. 207976) Jennifer L. Polse (State Bar No. 219202) MUNGER, TOLLES & OLSON LLP 560 Mission Street, 27th Floor San Francisco, California 94105 Telephone: (415) 512-4000 Facsimile: (415) 512-4077 Email: [email protected]; [email protected]; [email protected]

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Attorneys for RAMBUS INC.

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Pierre J. Hubert (Pro Hac Vice) Craig N. Tolliver (Pro Hac Vice) McKOOL SMITH PC 300 West 6th Street, Suite 1700 Austin, Texas 78701 Telephone: (512) 692-8700 Facsimile: (512) 692-8744 Email: [email protected]; [email protected]

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION

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RAMBUS INC.,

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CASE NO.: C 05-00334 RMW Plaintiffs,

vs. HYNIX SEMICONDUCTOR, INC., et al.,

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Defendants.

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Hearing: Time: Courtroom: Judge:

September 24, 2008 2:30 p.m. 6 Hon. Ronald M. Whyte

CASE NO.: C 05-02298 RMW

RAMBUS INC., Plaintiff,

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RAMBUS’S SUPPLEMENTAL BRIEF ON THE COURT’S SEPTEMBER 5, 2008 TENTATIVE ORDER

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

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CASE NO.: C 06-00244 RMW

RAMBUS INC., Plaintiff, v. MICRON TECHNOLOGY, INC., et al., Defendants.

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TABLE OF CONTENTS

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Page

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I.

INTRODUCTION .............................................................................................................. 1

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II.

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RAMBUS CONCURS IN THE COURT’S TENTATIVE DECISION TO HOLD A CONSOLIDATED TRIAL ON INFRINGEMENT AND VALIDITY, BUT SUBMITS THAT THE TRIAL SHOULD INCLUDE DAMAGES.................................. 2

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A.

Common Issues of Fact Overwhelmingly Favor A Consolidated Trial on Infringement and Validity for all DDR2+ products................................................ 2

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1.

The Consolidated Trial Promotes Judicial Economy.................................. 2

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2.

The Prejudice Concerns Invoked by the Manufacturers Do Not Outweigh the Efficiencies of a Consolidated DDR2+ Trial ....................... 3

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B.

Trying Infringement and Damages Together Before The Same Jury Would Further Judicial Economy and Efficiency............................................................... 7

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1.

The Same Efficiency Considerations Favor Trying Damages and Liability in a Single Consolidated Proceeding............................................ 7

2.

Even if the Court Tries Liability Separately From Damages, the Same Jury Should be Empanelled for Both Phases .................................... 9

3.

Once the Jury Determines Damages, the Court Can Proceed to Bifurcated Willfulness Trials .................................................................... 10

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GRANTING A STAY PENDING PTO REEXAMINATION WOULD IRREPARABLY HARM RAMBUS AND UNDERMINE JUDICIAL ECONOMY ...................................................................................................................... 10

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A.

The Preclusion Rules Governing Parallel Inter Partes and Ex Parte Reexaminations Are Different, and Favor the Federal Court Litigation Here...... 11

B.

Rambus Stands to Suffer Irreparable Prejudice If a Stay Is Granted.................... 14

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III.

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1.

A Stay Pending PTO Reexamination Would Cause Protracted Delay ......................................................................................................... 14

2.

A Stay Would Seriously Prejudice Rambus by Effectively Imposing a Compulsory License and Denying Rambus Injunctive Relief ............... 16

3.

A Prompt Trial Would Promote Efficiency Without Prejudicing Samsung or Other Manufacturers ............................................................. 19

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A Stay Should Not be Imposed on The Eve of Trial, with Discovery Complete ............................................................................................................... 21

D.

A Stay Would Not Simplify Issues For Trial........................................................ 22

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1.

A Trial Will Be Necessary Regardless of the Outcome of Reexamination Proceedings ...................................................................... 22

2.

Speculation About the Ultimate Outcome of Reexamination Cannot be the Basis for a Stay............................................................................... 23

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TABLE OF CONTENTS (continued)

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Page

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IV.

NEITHER HYNIX I NOR THE DELAWARE ACTION WARRANTS A STAY .......... 24

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V.

CONCLUSION ................................................................................................................. 25

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TABLE OF AUTHORITIES

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Page(s)

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FEDERAL CASES

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Alltech, Inc. v. Cenzone Tech, Inc., 2007 WL 935516 (S.D. Cal. Mar. 21, 2007) .................................................................... 19, 21 Arkie Lures, Inc. v. Gener Larew Tackle, Inc., 119 F.3d 953 (Fed. Cir. 1997)................................................................................................... 4 Arnold v. Garlock, Inc. 278 F.3d 426 (5th Cir. 2001)................................................................................................... 25 ASCII Corp. v. STD Entm’t USA, Inc., 844 F. Supp. 1378 (N.D. Cal. 1994) ....................................................................................... 22 Belmont Textile Machinery Co. v. Superba, 48 F. Supp. 2d 521 (W.D.N.C. 1999) ....................................................................................... 9 Biax Corp. v. Fujitsu Computer Systems Corp., 2007 WL 614187 (E.D. Tex. Feb. 26, 2007) .................................................................... 16, 23 Brown Williamson Tobacco v. Phillip Morris, Inc. 229 F.3d 1120 (Fed. Cir. 2000)................................................................................................. 9 Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059 (9th Cir. 2007)................................................................................................. 24 Digital Magnetic Sys., Inc. v. Ansley, 213 U.S.P.Q. 290 (W.D. Okla. 1982) ..................................................................................... 21 eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) ................................................................................................................ 17 Ecolochem, Inc. v. Southern Cal. Edison Co., 227 F.3d 1361 (Fed. Cir. 2000)................................................................................................. 6 Enprotech Corp. v. Autotech Corp., 15 U.S.P.Q. 2d 1319 (N.D. Ill. 1990) ..................................................................................... 23 Ethicon, Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1988)............................................................................................... 12 Freeman v. Minnesota Min. and Mfg. Co., 661 F. Supp. 886 (D. Del. 1987) ............................................................................................. 22 Fresenius Medical Care Holdings v. Baxter Int’l., Inc., 2007 WL 1655625 (N.D. Cal. June 7, 2007) ........................................................ 16, 20, 21, 22 Fujitsu, Inc. v. Nanya Technology Corp., 2007 WL 3314623 (N.D. Cal. Nov. 6, 2007).......................................................................... 21 Genoa Color Technologies, Ltd. v. Samsung Electronics America, Inc., 2008 WL 754681 (S.D.N.Y. Mar. 12, 2008) .......................................................................... 16 Gladish v. Tyco Toys, Inc., 29 U.S.P.Q. 2d 1718 (E.D. Cal. 1993) .............................................................................. 22, 23 Golden Trade S.R.L. v. Lee Apparel Co., 1997 WL 373715 (S.D.N.Y. June 25, 1997)......................................................................... 3, 5

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TABLE OF AUTHORITIES (continued) Page(s) In re American Acad. of Sci. Tech. Ctr., 367 F.3d 1359 (Fed. Cir. 2004)............................................................................................... 16 In re Cygnus Telecomms. Tech., LLC Patent Litig., 385 F. Supp. 2d 1022 (N.D. Cal. 2005) .................................................................................. 22 In re Swanson, F.3d , 2008 WL 4068691 (Fed. Cir. Sept. 4, 2008) ............................................... 2, 12, 14 Johns Hopkins Univ. v. Cellpro, 160 F.R.D. 30 (D. Del. 1995).................................................................................................... 7 Lans v. Digital Equip. Corp., 252 F.3d 1320 (Fed. Cir. 2001)............................................................................................... 17 Lentek Int’l, Inc. v. Sharper Image Corp., 169 F. Supp. 1360 (M.D. Fla. 2001) ....................................................................................... 22 Levya v. Certified Grocers of Cal., Ltd., 593 F.2d 857 (9th Cir. 1979)................................................................................................... 25 Lexington Lasercomb I.P.A.G. v. GMR Prods., Inc., 442 F. Supp. 2d 1277 (S.D. Fla. 2006) ................................................................................... 16 Lockyer v. Mirant Corp., 398 F. 3d 1098 (9th Cir. 2005)................................................................................................ 24 MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556 (E.D. 2007) ............................................................................................ 22 Network Appliance Inc. v. Sun Microsystems, Inc., 2008 WL 2168917 (N.D. Cal. May 23, 2008) ...................................................... 15, 16, 23, 24 Northlake Mktg. & Supply, Inc. v. Glaverbel, S.A., 72 F. Supp. 2d 893 (N.D. Ill. 1999) .......................................................................................... 8 NTP, Inc. v. Research In Motion, Ltd., 397 F. Supp. 2d 785 (E.D. Va. 2005)...................................................................................... 16 O’Donnell v. Watson Bros. Transport. Co., 183 F. Supp. 577 (D.C. Ill. 1960) ............................................................................................. 9 Output Tech. Corp. v. Dataproducts Corp., 22 U.S.P.Q. 1072 (W.D. Wash. 1991) .................................................................................... 21 Power-One, Inc. v. Artesyn Techs., Inc., 556 F. Supp. 2d 591 (E.D. Tex. 2008) ...................................................................................... 6 Remington Arms Co., Inc., v. Modern Muzzleloading, Inc., 1998 WL 1037920 (M.D.N.C. Dec. 17, 1998) ....................................................................... 22 Sony Computer Entertainment Am., Inc. v. Dudas, 2006 WL 1472462 (E.D. Va. May 22, 2006) ................................................................... 13, 14 Soverain Software LLC v. Amazon.com, Inc., 365 F. Supp. 2d 660 (E.D. Tex. 2005) .............................................................................. 17, 21 Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530 (Fed. Cir. 1983)................................................................................................. 4

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TABLE OF AUTHORITIES (continued) Page(s) Syntex (U.S.A.) Inc. v. Paragon Optical Inc., 7 U.S.P.Q. 2d 1001 (D. Ariz. 1987).......................................................................................... 9 Telemac Corp. v. Teledigital, Inc., 405 F. Supp. 2d 1107 (N.D. Cal. 2006) .................................................................................. 10 TIP Systems, LLC v. SBC Operations, Inc., 2008 WL 594258 (S.D. Tex. Mar. 4, 2008)............................................................................ 25 TWM Mfg. Co. v. Dura Corp., 789 F.2d 895 (Fed. Cir. 1986)................................................................................................... 9 FEDERAL STATUTES 35 U.S.C. § 141 ....................................................................................................................... 15, 20 35 U.S.C. § 301 ............................................................................................................................. 23 35 U.S.C. § 311 ............................................................................................................................. 23 35 U.S.C. § 314 ....................................................................................................................... 13, 14 35 U.S.C. § 315 ....................................................................................................................... 13, 20 35 U.S.C. § 316 ............................................................................................................................. 15 35 U.S.C. § 317 ............................................................................................................................. 13 FEDERAL REGULATIONS

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37 C.F.R. § 1.935 .......................................................................................................................... 14 37 C.F.R. § 1.951 .......................................................................................................................... 14 37 C.F.R. § 1.953 .......................................................................................................................... 15 37 C.F.R. § 1.987 .......................................................................................................................... 13 TREATISES

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9A Wright & Miller, Federal Practice & Procedure: Civil 3d § 2391 (3d ed. 2008).................... 9

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I.

INTRODUCTION Rambus concurs in the Court’s tentative decision to hold a consolidated trial on

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infringement and validity with respect to the Manufacturers’ DDR2 and subsequent DRAM

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products. Rambus does not oppose severing the claims against Nanya’s and Samsung’s SDRAM

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and DDR devices, nor does it oppose bifurcated, individual trials to a single jury on willfulness.

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While Rambus believes these issues could all be fairly presented in a single trial, the Court’s

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approach to these aspects of the case is reasonable and pragmatic. Rambus submits, however,

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that the efficiency and fairness concerns supporting consolidation extend to damages, and weigh

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in favor of including damages in the January trial on infringement and validity.

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Despite the Manufacturers’ protests at the September 5, 2008 hearing (the “Hearing”), the

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Court’s consolidation proposal would facilitate efficient resolution of infringement and validity,

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with minimal risk of confusion or prejudice. These issues turn on a common set of facts. As the

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Manufacturers have themselves noted, virtually all the accused products incorporate shared

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features from JEDEC standards—features that Rambus maintains are infringing. The

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Manufacturers’ claims of prejudice, which would carry no force even if a fully consolidated trial

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were in the offing, have even less merit in view of the Court’s streamlined trial proposal. The

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only modification Rambus proposes is to try damages together with infringement and validity,

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and before any willfulness trials. This further consolidation would add little complexity to the

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issues slated for trial, since the jury would already have learned the technologies, the products,

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and the players. The marginal expansion of trial issues is more than justified by the efficiency

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and fairness benefits. These include avoiding the time and expense of seating and educating a

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second jury, and forcing Rambus to present some of the same liability evidence to that jury.

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Rambus also submits that the trial should proceed in January, as contemplated by the

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Court’s Tentative Order. Although counsel for Samsung urged the Court at the Hearing to stay

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this case pending resolution of the PTO’s inter partes reexaminations, there is little to be gained

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from such a stay and every reason to proceed to trial. The federal court litigation is likely to

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conclude long before the PTO issues a Certificate of Reexamination. Samsung filed its initial

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(and defective) inter partes challenge more than 18 months into this litigation. The PTO’s track -1-

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record shows that the reexaminations are likely to take years, with appellate review increasing the

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delay. There is no hard evidence to support Samsung’s suggestion that the process will now be

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quicker with the advent of the Central Reexamination Unit (“CRU”), which has been in place for

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but a short time. Nor is there any merit to Samsung’s suggestion at the Hearing that the PTO

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could negate even a final judgment of validity by this Court; that argument and In re Swanson,

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F.3d , 2008 WL 4068691 (Fed. Cir. Sept. 4, 2008), apply to ex parte reexaminations, not to the

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inter parte reexaminations at issue here. By statute, any final judgment of validity would

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preclude the PTO from proceeding with Samsung’s pending inter partes challenges.

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II.

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RAMBUS CONCURS IN THE COURT’S TENTATIVE DECISION TO HOLD A CONSOLIDATED TRIAL ON INFRINGEMENT AND VALIDITY, BUT SUBMITS THAT THE TRIAL SHOULD INCLUDE DAMAGES A. Common Issues of Fact Overwhelmingly Favor A Consolidated Trial on Infringement and Validity for all DDR2+ products Holding a consolidated trial on the infringement and validity issues raised by Rambus’s

claims against the Manufacturers’ DDR2+ products is reasonable and fair. A consolidated trial on infringement and validity covering these products would promote efficiency, and reflects the substantial overlap among Rambus’s claims and the Manufacturers’ anticipated defenses. 1.

The Consolidated Trial Promotes Judicial Economy

Although Rambus believes the DDR and SDRAM claims against Samsung and Nanya

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could reasonably have been folded into a joint trial (Rambus Consol. Opp’n to Mfrs.’ Mot.

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(“Opp’n”) 5 -7), the decision to sever out those claims for a separate trial has the advantage of

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focusing the January trial on a set of accused products that cut broadly across the Manufacturers.

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DDR2 and DDR3 are both marketed by all of the Manufacturers. Rambus Final Infringement

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Contentions 5-6. This means that as to two of the five accused products in the consolidated trial,

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the overlap would be complete. There would also be overlap as to two of the three remaining

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products, with GDDR3 built by three of the Manufacturers and GDDR4 by two of them. Id.

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The consolidated trial proposed by the Court would harness the efficiencies noted by

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Rambus in its Opposition, while avoiding many of the concerns (however valid) expressed by the

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Manufacturers about a joint trial with “older” SDRAM products. See Micron Mot. 11. As we

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have explained, it only makes sense to adjudicate Rambus’s claims against the Manufacturers’ -2-

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SDRAM products together. Opp’n 5-7. The claims involve the same memory technologies. Id.

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Rambus has asserted them against a set of memory features that, with narrow exception, were

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embodied in JEDEC-standards and used by the Manufacturers in products following those

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standards. Id. Consistent with these shared features, the Manufacturers have indicated an intent

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to raise virtually identical invalidity defenses to Rambus’s claims, including anticipation,

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obviousness, and inadequate written description. Id. at 8. By severing out the SDRAM and DDR

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claims, the Court would further simplify the infringement and validity issues for trial. Nanya

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argued, for example, that a consolidated trial that included DDR and SDRAM claims against two

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Manufacturers would exacerbate the risk of jury confusion by leaving jurors wondering “why this

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is the case.” Nanya Mot. 10, 12. Even assuming this concern was legitimate, the proposed

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consolidation puts it to rest.

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Where, as here, a patentholder asserts claims against the features used in standardized

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products, the most rational approach to adjudication is to present the issues to a single jury in a

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joint trial. See Golden Trade S.R.L. v. Lee Apparel Co., 1997 WL 373715 (S.D.N.Y. June 25,

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1997). Empanelling different juries to consider what amounts to the same claims, defenses, and

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evidence would risk inconsistent results and waste the resources of both the court and the parties.

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2.

The Prejudice Concerns Invoked by the Manufacturers Do Not Outweigh the Efficiencies of a Consolidated DDR2+ Trial

In their replies and at the Hearing, the Manufacturers did not seriously contest the 19 common factual issues pervading Rambus’s claims and the invalidity defenses. Nor could they, 20 for their own expert on noninfringement and validity consistently treated the accused products in 21 an undifferentiated fashion, stressing that they shared a “common set of features.” See Opp’n 922 10 (collecting citations). The Manufacturers’ arguments focused instead on the purported 23 prejudice that would flow from a consolidated trial. The sources of prejudice they identify are 24 unavailing, however, and cannot override the efficiencies to be gained from consolidation. This 25 is doubly so in light of the streamlined DDR2+ trial proposed by the Court. 26 First, the severance of willfulness into individual trials directly addresses the concerns 27 expressed by the Manufacturers about the Hynix I verdict. In their papers, Micron and Samsung 28 -3-

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highlighted the prejudice that they believed would result from the introduction of the verdict in a

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joint trial. See Micron Mot. 9; Micron Reply 3-4; Samsung Mot. 6; Samsung Reply 2-3. If the

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Court proceeds with its plan to hold separate jury trials on willfulness for each Manufacturer, the

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admission of the Hynix I verdict presents no risk of spillover; the Court will separately decide, as

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to Micron, Nanya, and Samsung, whether to admit the verdict and, if so, for what purpose.

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Second, the introduction of past Samsung and Hynix licenses will not cause Micron and

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Nanya undue prejudice, as they suggest. E.g., Micron Reply 5. Evidence of past licenses are

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admissible, for example, as “secondary considerations” to show non-obviousness. Opp’n 19-20.

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The Federal Circuit has held that “public and commercial response to an invention is a factor to

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be considered in determining obviousness, and is entitled to fair weight.” Arkie Lures, Inc. v.

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Gene Larew Tackle, Inc., 119 F.3d 953, 957 (Fed. Cir. 1997). Like other secondary

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considerations, licensing activity, including third-party licenses, may demonstrate “how the

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patented device is viewed by ... persons concerned with the product in the objective arena of the

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marketplace.” Id. The Manufacturers have offered no basis to dispute the nexus between the

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Samsung and Hynix licenses and the merits of Rambus’s patented inventions, making this

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licensing evidence highly probative of obviousness. Opp’n 19-20. Because past licensing

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activity would be admissible against Micron and Nanya even in individual trials, and because the

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jury’s consideration of that evidence could be effectively guided with jury instructions, “being in

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a trial with two defendants who have agreed to ... royalty bearing licenses” (9/5/08 RT 23)

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constitutes no prejudice at all.

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Nanya contends in its reply that the licenses are inadmissible to show obviousness and

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validity, reasoning that “[w]hat Hynix and Samsung ‘believed’ in 1995 and 2000 is irrelevant to

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what a person of ordinary skill would have understood in 1990.” Nanya Reply 8-9. But Nanya

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cites no supporting authority for this contention, and it cannot be squared with settled Federal

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Circuit authority establishing that licensing is a proper secondary consideration. See, e.g.,

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Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1539 (Fed. Cir. 1983). It is hardly uncommon

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for companies to license patented inventions following the issuance of a patent. Under Nanya’s

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approach, however, that evidence would be categorically excluded from the analysis. -4-

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In its reply (Micron Reply 5) and at the Hearing (9/5/08 RT 24), Micron insisted it would

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be damaged in the eyes of the jury by being associated with Manufacturers who entered into

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licensing agreements with Rambus. But far from prejudicing Micron, the presence of the past

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licensees at a joint trial would give Micron the benefit of an explanation as to why the licenses

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cannot, in their view, be taken as persuasive evidence of validity. Notwithstanding their past

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licenses, Hynix and Samsung have both challenged the validity of Rambus’s patents on a variety

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of grounds. See, e.g., Mfrs.’ Supp. Joint Prelim. Invalidity Contentions. Given that the licenses

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would come in against Micron even in an individual trial, having Samsung and Hynix available to

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address them would arguably be more advantageous to Micron than having to account for the

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licenses itself. In any event, defendants in a multi-defendant case often have different

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permutations of a common defense, and that circumstance alone poses no obstacle to a joint trial.

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See Golden Trade, 1997 WL 373715, at *2 (noting that conflicts are “potentially present

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whenever there are multiple defendants,” and “do not ordinarily constitute the kind of ‘prejudice’

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that impacts the fairness of the trial”).

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Third, the Manufacturers contend they will be unduly prejudiced in a joint trial by the

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introduction of infringement evidence specific to Hynix: the Farhad Tabrizi emails

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acknowledging that “all DDR memories are infringing” (Exh. 6523) and vowing to “fight

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Rambus” (Exh. 6634), and a Hyundai/Hynix design proposal looking to Rambus for DLL and

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dual-edge clocking solutions (Ex. 5020). See Micron Reply 7-8; Nanya Reply 7. Micron pressed

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this point at the Hearing, arguing that the evidence “clearly doesn’t come in in a Micron-only

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trial.” 9/5/08 RT 27. But the Court’s trial proposal itself may dispatch the prejudice argument

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regarding the “fight Rambus” email. Rambus seeks to introduce that evidence primarily to

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establish willfulness (Opp’n 23), 1 and that issue would be tried against each manufacturer

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separately under the Court’s tentative trial plan. Micron, Samsung, and Nanya will each have an

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opportunity to seek exclusion of that evidence, then, in their respective willfulness trials.

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Of course, Rambus reserves the right to seek introduction of the “fight Rambus” email in the consolidated trial if the Manufacturers interpose a defense that makes it relevant. In that event, the Court can decide its admissibility and, if necessary, limit its scope. -5-

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The other evidentiary challenges need not be resolved in order to devise a trial structure

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for the ’334 case, but can be addressed in in limine motions closer to the time of trial. But even if

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the admissibility vel non of the Tabrizi “infringement” email and Hynix design proposal bore

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critically on consolidation, neither would pose a risk of unfair prejudice. This evidence would be

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admissible against each of the Manufacturers in separate trials on infringement and validity. Mr.

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Tabrizi’s acknowledgement that DDR infringes goes directly to whether the features embodied in

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the accused products infringe Rambus’s patents. Mr. Tabrizi is a senior industry figure with a

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sophisticated understanding of the relevant memory technologies. And as the Manufacturers’

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expert himself concedes, DDR2 and DDR3 incorporate (and supplement) DDR features that

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Rambus—and Mr. Tabrizi—believe to be infringing. McAlexander Decl. in Supp. of the Mfrs.

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Farmwald and Ware Mots. for Summ. J. ¶¶ 28-29 (Docket No. 514, Case No. 05-00334).

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The Hynix design proposal referencing Rambus’s inventions is admissible for multiple

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purposes. The evidence at trial will demonstrate that nearly all of the accused products

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incorporate the two referenced features: dual-edge clocking and DLL. The fact that Hynix

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believed these features to be Rambus inventions goes directly to whether the relevant claims in

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suit are valid and infringed. The design is also admissible as a secondary consideration

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demonstrating non-obviousness, because it reflects copying on the part of Hynix. See Exh. 5020.

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Copying is a well-accepted secondary consideration, and may carry significant weight when

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married with “compelling objective indicia of other secondary consideration.” Ecolochem, Inc. v.

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Southern Cal. Edison Co., 227 F.3d 1361, 1380 (Fed. Cir. 2000). Evidence that Hynix sought to

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copy specific memory design features invented by Rambus is highly probative of whether those

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features were obvious. See, e.g., Power-One, Inc. v. Artesyn Techs., Inc., 556 F. Supp. 2d 591,

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602 (E.D. Tex. 2008) (noting that the patentholder “presented substantial evidence indicating [the

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defendant] was aware of the concepts of [the patentholder’s] invention”). Rambus expects to

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undergird its copying evidence with other secondary considerations, including the Samsung and

26

Hynix licenses and the commercial success of its inventions. Cf. id. (noting that the patentholder

27

introduced evidence of praise in the industry for its products, in addition to copying evidence).

28 -6-

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1 2 3 4 5 6 7 8 9 10 11

B.

Trying Infringement and Damages Together Before the Same Jury Would Further Judicial Economy and Efficiency

Rambus respectfully requests that the Court reconsider its inclination to try damages individually before a new jury that did not participate in the liability phase of the trial. “[I]t is generally much more efficient to work towards one trial and one appeal.” Johns Hopkins Univ. v. Cellpro, 160 F.R.D. 30, 35 (D. Del. 1995). Here, both judicial economy and fairness to Rambus weigh heavily in favor of folding damages into the January trial on infringement and validity. Given the factual overlap between infringement and validity, on the one hand, and the reasonable royalty analysis, on the other, it would be highly inefficient to empanel a new jury on damages and force Rambus to present liability evidence a second time. In contrast, trying damages together with infringement-related issues would not unfairly prejudice the Manufacturers, particularly if the trial is limited to the accused DDR2+ products.

12 1. 13 14

The Same Efficiency Considerations Favor Trying Damages and Liability in a Single Consolidated Proceeding

The Court has proposed that a separate jury decide damages “as to each Manufacturer on

15

an individual basis.” Tentative Order. But because the accused products are overwhelmingly

16

based upon industry-standard designs, this case is well suited to a consolidated trial embracing

17

damages. All but one of the accused products at issue here (RLDRAM II) follow JEDEC-

18

standard designs and incorporate feature sets that infringe Rambus patents. These commonalities

19

make it sensible and efficient to resolve reasonable royalty issues as well as infringement and

20

validity in a single trial before the same jury.

21

As Rambus has explained (Opp’n 14), the evidence at trial will likely establish two

22

hypothetical negotiations dates. As to Samsung, the date would be 2005, when its license

23

terminated. Id. As to the other Manufacturers, it would be January 2001, when the first of the

24

Rambus patents in suit issued. Id. Although the accused products in this case (DDR2+) were not

25

introduced until later, the Manufacturers’ use of several features incorporated into those

26

products—and thus the infringement—extends back to earlier JEDEC-standard designs. At the

27

time the ’184 patent issued in 2001, each of the Manufacturers built and distributed a JEDEC-

28

standard design (DDR) that infringed Rambus’s patent. This reasonable royalty analysis, if -7-

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1

adopted, would permit the jury to focus on two fixed points in time in assessing the damages

2

evidence against the four Manufacturers—hardly the disarray and “extreme” confusion forecast

3

by the Manufacturers. See Nanya Mot. 10.

4

Nor would the resulting royalty rate be affected by subsequent events or the licensing

5

agreements informed by those events. Because the hypothetical negotiation assumes that the

6

patent at issue is valid and infringed, see Northlake Mktg. & Supply, Inc. v. Glaverbel, S.A., 72 F.

7

Supp. 2d 893, 902 (N.D. Ill. 1999), any effort by the Manufacturers to rely upon subsequent

8

licenses (such as the 2005 Samsung renegotiation or the Infineon settlement agreement) would be

9

unavailing. Each of the licenses was negotiated against the backdrop of uncertainty over the

10

validity and enforceability of Rambus’s patents, circumstances that are wholly at odds with the

11

assumptions grounding reasonable royalty determinations. See Expert Report of David J. Teece,

12

served Sept. 5, 2008, 14-28.

13

The Manufacturers contend in their papers that a consolidated trial on damages would risk

14

confusing the jury. Nanya Reply 11; Samsung Reply 4. But even assuming that the Court would

15

need to determine a separate hypothetical negotiation date for each of the accused products, as

16

Samsung seems to suggest (Reply 4), the standardized nature of the accused products would

17

permit the jury to use common dates for the Manufacturers. Because each generation of accused

18

DRAM devices (save RLDRAM II) follows a JEDEC standard, the evidence will show that the

19

Manufacturers introduced these products at roughly the same or immaterially different times. 2

20

A consolidated trial would also further efficiency because evidence relevant to

21

infringement and validity is also relevant to damages. The license granted by Rambus to

22

Samsung bears not only on obviousness (see discussion supra at 4-5), but also on the reasonable

23

royalty for the infringed products. In addition, Rambus expects to introduce evidence of the

24

Manufacturers’ product sales to show both validity and damages. The commercial success of the

25

Manufacturers’ products is a secondary consideration relevant to whether the Rambus inventions

26

2

27 28

Although Nanya suggests that the Court would have to use a new hypothetical negotiation date for each patent issued (Nanya Reply 12), it cites no authority for this novel proposition and there is none. Such a rule would render the reasonable royalty determination here inordinately complex without regard to whether damages were tried individually or in a consolidated proceeding. -8-

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1

used in these products were obvious. See Brown & Williamson Tobacco Corp. v. Philip Morris,

2

Inc., 229 F.3d 1120, 1130 (Fed. Cir. 2000) (“Our case law provides that the success of an

3

infringing product is considered to be evidence of the commercial success of the claimed

4

invention.”); Syntex (U.S.A.) Inc. v. Paragon Optical Inc., 7 U.S.P.Q. 2d 1001, 1005 (D. Ariz.

5

1987) (similar). These sales data are also evidence going to the jury’s determination of damages

6

and, in particular, a reasonable royalty. See, e.g., TWM Mfg. Co. v. Dura Corp., 789 F.2d 895,

7

899 (Fed. Cir. 1986) (upholding special master’s computation of reasonable royalty based upon

8

comparison of infringer’s usual or accepted profit with its anticipated profit from sale of

9

infringing device).

10 11

2.

Even if the Court Tries Liability Separately From Damages, the Same Jury Should be Empanelled for Both Phases

Using separate juries for liability and damages “would cause greater delay and might 12 complicate the proceedings by creating a piecemeal quality to the trial, making it harder for the 13 trier of fact to see the case as a whole.” Belmont Textile Mach. Co. v. Superba, 48 F. Supp. 2d 14 521, 526 (W.D.N.C. 1999). Thus, “the better and preferred practice is to use the same jury for all 15 of the issues in an action, even though it may hear those issues at different times.” 9A Wright & 16 Miller, Federal Practice & Procedure: Civil 3d § 2391 at 175 (3d ed. 2008); see also O’Donnell 17 v. Watson Bros. Transp. Co., 183 F. Supp. 577, 580 (D.C. Ill. 1960). 18 This case involves sophisticated technologies and will impose a steep learning curve on 19 any finder of fact. While the conduct trial demonstrated that a lay jury is fully capable of 20 understanding and rendering impartial judgment on the relevant issues (see Opp’n 24-25), 21 empanelling a new jury would introduce unnecessary complications. Even if a new jury were 22 told to assume validity and infringement, it would still need to understand DRAM design, how 23 DRAM functions, and the market for these devices in order to weigh the reasonable royalty 24 evidence. As the Hynix I trial well illustrates, that evidence is likely to consist of, among other 25 things, licensing agreements and testimony about the value of DRAM features. (Patent Tr. 102726 77 (Teece).) The process of selecting new jurors and educating them about the basic facts of the 27 case would lead to needless delays and expenditures. 28 -9-

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1

By holding a damages trial before the same jury that adjudicated infringement and

2

validity, the Court would avoid this duplication of effort, process, and expense. When it is time

3

to try damages, the liability jury would already be familiar with the relevant inventions, products,

4

and witnesses. Having already seen the same witnesses during the liability phase would also

5

provide jurors with a broader base of knowledge with which to assess credibility. Thus, even if

6

the Court decides to separate liability and damages into different phases, judicial economy and

7

efficiency would be best served by retaining the same jury throughout the trial.

8

3.

9

Once the Jury Determines Damages, the Court Can Proceed to Bifurcated Willfulness Trials

Integrating damages into the consolidated January trial would cohere well with other 10 aspects of the Court’s proposed trial schedule. Although Rambus believes willfulness could 11 properly be included in the consolidated trial, it does not oppose the Court’s bifurcation proposal. 12 Thus, if the jury finds the patents valid and infringed and returns a damages award, the Court can, 13 at that point, proceed to bifurcated willfulness trials against the individual Manufacturers. See 14 Tentative Order. Because the same jury would be seated for this aspect of the case, the Court 15 would take advantage of the knowledge gained during the first trial while addressing the 16 Manufacturers’ prejudice concerns regarding evidence of willful infringement. 17 18 19

III.

GRANTING A STAY PENDING PTO REEXAMINATION WOULD IRREPARABLY HARM RAMBUS AND UNDERMINE JUDICIAL ECONOMY In determining the propriety of a stay pending reexamination, courts have traditionally

20

considered “(1) whether discovery is complete and whether a trial date has been set; (2) whether a

21

stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly

22

prejudice or present a clear tactical disadvantage to the nonmoving party.” Telemac Corp. v.

23

Teledigital, Inc., 450 F. Supp. 2d 1107, 1111 (N.D. Cal. 2006). Far from supporting a stay, each

24

of these factors favors prompt and expeditious resolution of this case through trial.

25

A stay would irreparably prejudice Rambus by depriving it of the right to enforce its

26

patents while they are in effect. As the Manufacturers are well aware, the Farmwald/Horowitz

27

patents in suit will expire in April 2010. Contested inter partes reexaminations proceedings in

28

the PTO are notoriously slow. By most accounts, such proceedings typically take more than three - 10 -

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1

and a half years to complete before any administrative appeal or judicial review. See discussion

2

infra at 14-16. Staying this case in deference to such a protracted process would all but ensure

3

that the Rambus patents will expire before any competent tribunal—this Court or the PTO—is

4

able to adjudicate fully Rambus’s patent claims. The result would be to deny Rambus any

5

possible injunctive relief and to postpone indefinitely any damages award. These harms alone

6

furnish sufficient grounds to deny the requested stay.

7

Proceeding to trial, in contrast, would promote efficiency without compromising

8

Samsung’s ability to mount its validity challenge in both forums. The overlap between the

9

claims-in-suit and the claims subject to PTO review is limited to those challenged by Samsung in

10

inter partes reexaminations. 3 Congress contemplated that inter partes proceedings and litigation

11

could run concurrently, with the first final decision carrying preclusive effect in the parallel

12

proceedings. In this respect, despite what Samsung has suggested, inter partes reexaminations

13

differ from ex parte reexaminations, which may undercut even completed and final federal court

14

judgments of validity. Because this litigation has progressed significantly and is set for trial in

15

the next few months, it is likely to reach final judgment—and thus to settle the overlapping

16

validity issues pending in the PTO—well before the issuance of a final Certificate by the PTO.

17

At the same time, the progress and trajectory of this litigation poses no cognizable prejudice to

18

Samsung, which can advance the same invalidity theories it has asserted in the reexamination.

19

Even apart from the comparative posture of the cases, which favors the federal litigation, a

20

stay would produce little in the way of efficiency or simplification. This case is broader than the

21

inter partes reexamination; it involves more parties, and there are more patents, more claims, and

22

more defenses at issue. Accordingly, any resolution by the PTO would not obviate the need to

23

proceed to trial in the ’334 case. A.

24 25

The Preclusion Rules Governing Parallel Inter Partes and Ex Parte Reexaminations Are Different, and Favor the Federal Court Litigation Here

At the Hearing, counsel for Samsung argued that this Court should stay the ‘334 case in

26 27 28

3

Samsung has filed an ex parte reexamination with respect to the ‘195 patent, but no claims from that patent were selected for trial. Hynix’s Req. for Judicial Not. of Papers From Reexamination of Rambus Inc.’s Patents (“Hynix RJN”) 2 (Docket No. 3710, Case No. 00-20905). - 11 -

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deference to Samsung’s pending reexaminations based upon the potential effect of a certificate

2

cancelling Rambus’s claims. If this litigation were to result in a finding of validity, counsel

3

maintained, “that did not prevent the patent office from finding a ... substantial new question of

4

patentability.” 9/5/08 RT 37-38. Counsel then cited the Federal Circuit’s recent decision in In re

5

Swanson, which he construed to permit the PTO to invalidate a patent on reexamination even if

6

“found valid in district court, affirmed in [the] Federal Circuit.” Id.

7

That argument is wrong as a matter of law, and the cited authority, inapposite. The

8

relevant reexaminations here are inter partes challenges, and Congress has specifically provided

9

for parity of preclusion; if the federal courts arrive at a final validity determination first, that

10

ruling bars the PTO from proceeding with any related inter partes reexamination. The threat of

11

wasted federal court litigation looms larger in the ex parte context, where the PTO is free to

12

second-guess a final adjudication of validity. This means the risk that Samsung’s reexamination

13

challenge will interfere with the federal litigation in this case turns largely on timing and overlap,

14

two factors that weigh decidedly against a stay.

15

Ex Parte Reexaminations: In a situation involving concurrent federal court and ex parte

16

reexaminations, even a final judgment of validity in patent litigation does not foreclose the PTO

17

from reaching the opposite conclusion in an ex parte proceeding. See Ethicon, Inc. v. Quigg, 849

18

F.2d 1422, 1429 n.3 (Fed. Cir. 1988) (explaining that a finding that patentholder failed to prove

19

nonvalidity is not binding on the PTO). The Federal Circuit has explained that the standards

20

governing the two proceedings are different; patent defendants must offer clear and convincing

21

evidence of invalidity, whereas the requesting party need only meet a preponderance standard in a

22

reexamination. See id. There is, moreover, no presumption of validity. See id. Because “the two

23

forums have different standards of proof for determining invalidity,” the PTO lacks authority

24

even to stay its proceeding pending the outcome of patent litigation. Id. at 1429. Accordingly,

25

when the federal court litigation is at a relatively early stage or other factors favor a stay, the one-

26

way preclusion rule applicable to ex parte reexaminations may move a court to defer to the PTO.

27

See Spa Syspatronic, AG v. Verifone, Inc., 2008 WL 1886020 at *4 (E.D. Tex. Apr. 25, 2008)

28

(noting the risk of proceeding with the case only to have the PTO later cancel the patent in ex - 12 -

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1

parte reexamination, particularly given the complete overlap of patents and claims between the

2

two proceedings and that discovery was still in infancy).

3

Inter Partes Reexaminations: The statutory scheme Congress devised for inter partes

4

reexamination, which was added in 1999, is quite different. This scheme permits a party

5

challenging the validity of a patent to pursue PTO reexamination or civil litigation in federal

6

court, but provides that a final determination in either proceeding carries preclusive effect in the

7

other forum. See 35 U.S.C. §§ 315, 317. Thus, if a request for inter partes reexamination is

8

granted, the requesting party “is estopped from asserting at a later time, in any civil action ... the

9

invalidity of any claim finally determined to be valid and patentable on any ground which the

10

third party requester raised or could have raised during the inter partes reexamination

11

proceedings.” 35 U.S.C. § 315(c). Conversely, once a civil action results in a judgment that a

12

party failed to prove the invalidity of a patent claim, “neither that party nor its privies may

13

thereafter request reexamination of any such patent claim … that the party or its privies raised or

14

could have raised in any such civil action ... and an inter partes reexamination requested by that

15

party or its privies on the basis of such issues may not thereafter be maintained.” 35 U.S.C. §

16

317(b). The statute’s “reciprocal estoppel provisions make clear that parties challenging patent

17

validity determinations are free to pursue inter partes review from the PTO and litigation

18

simultaneously; however, the completion of either process will estop any parallel proceedings.”

19

Sony Computer Entm’t Am., Inc. v. Dudas, 2006 WL 1472462 at *6 (E.D. Va. May 22, 2006).

20

That Congress contemplated parity between validity determinations by federal courts and inter

21

partes reexaminations is reflected in its express authorization of PTO stays for “good cause.” 35

22

U.S.C. § 314. Thus, whereas the PTO is obliged in the ex parte context to go forward with

23

reexaminations, and thus poses an inherent threat of undercutting federal court findings, the

24

agency may stay its hand in an inter partes proceeding. See 37 C.F.R. § 1.987.

25

In the inter partes context, then, preclusion rules are generally a neutral factor, and the

26

propriety of a stay turns more heavily on timing and overlap (i.e., simplification of issues). If a

27

stay pending inter partes reexamination is sought early in the federal court litigation, and if the

28

reexamination could potentially dispose of the issues presented there, a stay may be appropriate. - 13 -

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1

See Cima Labs, Inc. v. Actavis Group HG, 2007 WL 1672229 (D.N.J. June 7, 2007) (noting that

2

“discovery is in its beginning stage ... with a trial date far from being set”). But if the patent

3

litigation is far along, as it is here, and if the pending reexamination covers only a portion of the

4

claims and defenses in suit, as it does here, the stay calculus will often weigh against a stay. See

5

Bacus Lab., Inc. v. Aperio Tech., Inc., 2005 WL 475158 (N.D. Ill. Mar. 1, 2005) (denying stay

6

where case was “already over two years old” and reexam would not impact all claims). After all,

7

the expeditious conclusion of the patent litigation could terminate the reexamination proceedings.

8

On this score, Samsung’s reliance on the decision in In re Swanson is misplaced. In re

9

Swanson did not involve an inter partes reexamination; it involved an ex parte reexamination.

10

That is why the Court found no difficulty in holding that the PTO could properly cancel claims

11

even after the Federal Circuit affirmed a trial curt finding of validity. 2008 WL 4068691, at *7.

12

For similar reasons, Samsung is simply wrong in suggesting that Congress preferred PTO validity

13

determinations in inter partes challenges to federal court determinations. 9/5/07 RT 37 (“At

14

some point, and I would submit that point is here, it is not the right thing for an Article III court to

15

do that.”). Congress specifically decided that a final judgment of validity by a federal court

16

would be binding on the PTO, and that the PTO could therefore stay its proceedings in deference

17

to a federal court. In this situation, “a party can choose to run horses in both races, but the

18

conclusion of one race automatically ends the other.” Dudas, 2006 WL 1472462, at *6.

19 20 21

B.

Rambus Stands to Suffer Irreparable Prejudice If a Stay Is Granted 1.

A Stay Pending PTO Reexamination Would Cause Protracted Delay

Inter partes reexaminations are an iterative process, with a tiered review structure, many

22

opportunities for party input, and wide agency discretion to revisit and redo completed stages. As

23

a result, the proceedings are marked by long delays, with most cases taking years to complete.

24

The inter partes process is fluid and flexible. Once a reexamination request is granted—

25

and they almost always are (see infra at 23)—the PTO examiner will issue an initial Office

26

Action allowing or rejecting the claims. See 37 C.F.R. § 1.935; MPEP § 2606. The patent owner

27

may respond by filing comments, modifying claims, or adding new claims, and the requester may

28

file reply comments. See 35 U.S.C. § 314. After the PTO considers the submissions and issues - 14 -

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1

its Action Closing Prosecution, the parties may again file written comments and arguments. See

2

37 C.F.R. § 1.951; MPEP § 2671.02. If the examiner elects to modify the ruling, he or she

3

“should ordinarily reopen the prosecution.” MPEP § 2673.01 (emphasis added).

4

This process has proven to be enormously time consuming. Separate studies, using PTO

5

data, have determined that contested reexamination proceedings take an average of over three and

6

half years to complete, before administrative appeal and judicial review. See Hamilton Decl.

7

Exh. A (Institute for Progress, Reexamining Inter Partes Rexam at 12 (2008) (“IFP Report”)

8

(finding average pendency of 43.5 months); 4 see also Exh. B (Andrew S. Baluch & Stephen B.

9

Maebius, The Surprising Efficacy of Inter Partes Reexaminations at 11 (2008) (“Foley Report”)

10

(finding average pendency of 42.5 months); Exh. C (Stuart Weinberg, Worried About That

11

Infringement Case? Ask For A Reexam, Dow Jones Newswires, at 1, May 30, 2008 (“Weinberg”)

12

(noting 43.5 months average pendency)). Although the PTO has claimed an average pendency of

13

32.7 months for inter partes proceedings, 5 those statistics reflect all such reexaminations,

14

whether contested or uncontested. If uncontested reexaminations are stripped out, the average

15

pendency is roughly 40 months. IFP Report at 12; Foley Report at 11.

16

The likely delay is still longer after factoring in administrative appeals and court review.

17

The losing party in an inter partes reexamination may appeal to the Board of Patent Appeals and

18

Interferences (BPAI), 37 C.F.R. § 1.953, and from there to the Federal Circuit, 35 U.S.C. § 141.

19

Only after the time for appeal has expired or the appeal and any remand proceedings have

20

concluded can the PTO issue a Reexamination Certificate. 35 U.S.C. § 316. “[O]nly three inter

21

partes reexaminations have received a BPAI decision since 1999, and each took 4 or 5 years to

22

reach that point.” Network Appliance Inc. v. Sun Microsystems, Inc., 2008 WL 2168917 at *5

23

(N.D. Cal. May 23, 2008); see also IFP Report at 13 (finding average of 58.3 months, or 4.8

24 4

25 26 27 28

The Institute For Progress is a think tank founded by Kevin Rivette, chairman of the PTO’s Public Patent Advisory Committee. The authors of the study are Ralph Eckardt and Max Blaxill, both fellows at the Institute. Weinberg at 1-2; cf. Network Appliance, 2008 WL 2168917 at *6 (considering statistical analyses of PTO data despite hearsay and other evidentiary objections). 5

Hamilton Decl. Exh. D (Robert Greene Sterne et al., Reexamination Practice With Concurrent District Court Patent Litigation, The Sedona Conference Journal, Vol. 9, at 53, 76 (2008) (“Sterne Report”)). - 15 -

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1

years, for reexamination to result in a BPAI decision). Remarkably, just one of these three

2

reexaminations has been completed, due to further administrative proceedings after BPAI review.

3

See Hamilton Decl. Exh. E (transactional histories and related BPAI decisions for Reexamination

4

Nos. 95/000,006, 95/000,009, and 95/000,030). “Reality and past experience dictate that several

5

years might very well pass from the time when a final office action is issued by the PTO to when

6

the claims are finally and officially ‘confirmed’ after appeals.” NTP, Inc. v. Research In Motion,

7

Ltd., 397 F. Supp. 2d 785, 788 (E.D. Va. 2005); see also In re American Acad. of Sci. Tech. Ctr.,

8

367 F.3d 1359, 1362 (Fed. Cir. 2004) (affirming the BPAI ten years after commencement of

9

reexamination proceedings). Indeed, not one inter partes matter has made its way through

10

Federal Circuit review in the 9 years since the procedure was adopted.

11

Far from refuting these data, the article that Samsung counsel cited at the Hearing notes

12

that “the average pendency of a reexamination through the CRU, the BPAI, and the Federal

13

Circuit is 48 to 72 months.” Sterne Report at 60. Thus, even in the quickest possible timeframe

14

contemplated by Samsung’s own source, the reexamination proceedings would not be completed

15

until January 2012, four years after Samsung filed the last of the requests at issue in January

16

2008. Such inevitable delays have made courts reluctant to stay patent litigation in deference to

17

inter partes reexamination. See, e.g., Network Appliances, 2008 WL 2168917 at *5 (finding that

18

delays associated with PTO proceedings weigh against granting stay); Genoa Color Tech., Ltd. v.

19

Samsung Electronics America, Inc., 2008 WL 754681 (S.D.N.Y. Mar. 12, 2008) (denying stay

20

and noting that inter partes reexamination “could take years to complete”). 6 Taken together with

21

the prejudice to Rambus and the advanced stage of this litigation, the long delay that we can

22

expect from Samsung’s inter partes challenges weighs strongly against a stay. 2.

23 24 25 26 27 28

A Stay Would Seriously Prejudice Rambus by Effectively Imposing a Compulsory License and Denying Rambus Injunctive Relief

6

Even for ex parte reexaminations, which are not subject to parallel estoppel like inter partes proceedings, courts have frequently cited delay as a reason to deny stays pending reexamination. See, e.g., Fresenius Med. Care Holdings v. Baxter Int’l., Inc., 2007 WL 1655625 at * 5 (N.D. Cal. June 7, 2007) (denying stay and noting the “lengthy delay that would inevitably ensue if a stay were granted”); Biax Corp. v. Fujitsu Computer Sys. Corp., 2007 WL 614187 at *2 (E.D. Tex. Feb. 26, 2007) (denying stay and observing that “the potential delay for an indefinite period would likely prejudice Biax”); Lexington Lasercomb I.P.A.G. v. GMR Prods., Inc., 442 F. Supp. 2d 1277, 1278 (S.D. Fla. 2006) (similar). - 16 -

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1

If the Court were to grant a stay, the patents-in-suit will almost certainly expire before

2

PTO proceedings and appeals are complete. The Horowitz/Farmwald patents are set to expire in

3

April 2010. Because of deficiencies in Samsung’s initial reexamination requests, the earliest

4

request at issue was not effectively filed until mid-2007. Hamilton Decl. Exh. F (transactional

5

histories for Reexaminations Nos. 95/000,178, 95/001,026, 95/000,250, 95/000,166, 95/000,183).

6

Samsung thereafter filed follow-on requests through early 2008. (Id.) Given the three-to-four

7

year pendency period for most inter partes reexaminations, there is a substantial likelihood that

8

the patents will expire before the PTO issues a certificate on Samsung’s challenge. Indeed, that

9

risk obtains even under the PTO’s skewed pendency average of 32.7 months. When BPAI and

10

Federal Circuit review are considered, there would be little chance of a final determination during

11

the life of the patents.

12

The effect would be to deprive Rambus of its right to seek injunctive relief, and to limit its

13

remedies for infringement to a compulsory license. See Lans v. Digital Equip. Corp., 252 F.3d

14

1320, 1328 (Fed. Cir. 2001) (“The district court cannot enjoin the Computer Companies from

15

infringing an expired patent.”). The prejudice is manifest. The essential attribute of a patent is

16

“the right to exclude others from using his property.” eBay, Inc. v. MercExchange, L.L.C., 547

17

U.S. 388, 392 (2006). It would be unfair to deny Rambus even the possibility of enjoining

18

infringing conduct, particularly since trial is just a few months away. See Soverain Software LLC

19

v. Amazon.com, Inc., 356 F. Supp. 2d 660, 662 (E.D. Tex. 2005) (“Postponing trial pending

20

reexamination ... only six months prior to trial would unduly prejudice Soverain’s ability to

21

protect its property rights in the patents at issue.”).

22

For the reasons Rambus has set out in the Hynix I case, a reasonable royalty would be

23

inadequate to redress the ongoing harm to its business resulting from the Manufacturers’

24

infringement. See Mem. of P. & A. in Supp. of Rambus Req. for Damages & Equitable Relief

25

10-19 (Docket No. 3818, Case No. 00-20905). 7 The proliferation of infringing products

26 27 28

7

Micron’s suggestion that Rambus has somehow disavowed injunctive relief (Reply 13), is meritless, see Rambus’s Reply In Supp. Of Req. For Add’l Damages and Equitable Relief (Docket No. 3735, Case No. 00-20905). - 17 -

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1

marketed by the Manufacturers has severely limited Rambus’s market share and strategic options,

2

and will continue to do so while the Manufacturers are allowed to infringe. This ongoing

3

infringement has forced Rambus to focus on certain specific segments of the DRAM market, and

4

undercut even those opportunities. Only an injunction would allow Rambus to pursue its

5

business model effectively, and in particular, to promote its leadership products. See id.

6

At the Hearing, counsel for Samsung maintained that Rambus’s concerns about delay

7

were misplaced because the PTO has adopted a “central reexamination unit,” which promises to

8

handle reexaminations more expeditiously and cut the time to decision. 9/5/08 RT 32-33. But

9

despite counsel’s insistence that the CRU creates a “new world” (id.), Samsung has offered no

10

support for reduced pendency time or accelerated reexamination speeds. In fact, as the same

11

counsel recognized in a filing made in a different case just a few months ago, “with a grossly

12

backlogged PTO operating with limited resources, the unfortunate truth is that reexamination

13

proceedings can literally take years, assuming they are ever completed at all.” Hamilton Decl.

14

Exh. G (Netapp, Inc.’s Opp’n to Def. Sun Microsystems, Inc.’s Mot. For Partial Stay at 7,

15

Network Appliance, Inc. v. Sun Microsystems, Inc., No. C-07-06053 EDL (N.D. Cal. Apr. 29,

16

2008)). Since the CRU was created in 2005, the PTO’s reexamination workload has increased

17

dramatically; between fiscal 2005 and fiscal 2007, the number of ex parte and inter partes

18

reexaminations rose 32%, from 583 to 769. See Hamilton Decl. Exh. H (USPTO, Performance

19

and Accountability Report: Fiscal Year 2007 at 121 (2007)). It would be surprising if the PTO

20

has been able to reduce meaningfully the pendency time for reexamination despite these increased

21

demands. And any examples of cases that have been handled by this unit with celerity would be

22

too few to offer a reliable prediction of how long it will take Samsung’s inter partes challenge to

23

conclude.

24

Even if we assume that the PTO is able to cut the normal reexamination time in half for

25

the patents-in-suit—and there is no reason to think that is likely—a stay would still for all

26

practical purposes deprive Rambus of its right to seek meaningful injunctive relief. For example,

27

Samsung did not file the relevant reexamination request for the ’8,020 patent until January 31,

28

2008. See Hynix RJN at 8 n.1. Even if it takes just two years rather than the four or five years - 18 -

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1

typical of an inter partes reexamination to complete BPAI review, Rambus would not be able to

2

make its case to the jury until 2010, when its patents will expire. And that is assuming both that

3

the BPAI does not remand to the examiner for further proceedings, and that the parties do not

4

appeal the final PTO decision to the Federal Circuit.

5

All pending reexaminations are in the early stage of the inter partes process. That the

6

PTO has issued initial Office Actions for a subset of patents under reexamination does not mean

7

that a final certificate is imminent. As Samsung well understands, the initial Office Action is

8

merely the first step of a long process, and the average pendency is still a hefty 39.5 months even

9

after the initial office action. See IFP Report at 12. Notably, it is in Samsung’s interest to try to

10

delay the PTO proceeding. Because Rambus’s ability to obtain injunctive relief is tied to the

11

limited duration of the patents in suit, Samsung has the incentive to stretch out PTO proceedings

12

as much as it can to avoid a trial on the merits before the patents expire. There is no assurance

13

that the PTO proceedings would conclude in time to avoid prejudice to Rambus. 8

14

3.

15

A Prompt Trial Would Promote Efficiency Without Prejudicing Samsung or Other Manufacturers

Rather than breaking up this litigation piecemeal, deferring to the PTO on a subset of 16 invalidity contentions while withholding decision on other issues beyond the scope of 17 reexamination, it would be far more efficient to resolve all relevant issues in the ’334 litigation. 18 This Court has jurisdiction to weigh any invalidity contentions that the Manufacturers may wish 19 to interpose, including invalidity theories advanced by Samsung in the pending reexamination. In 20 21 22 23 24 25 26 27 28

8

It would also be unfair to force Rambus to defer all of its claims, even for patents that are not subject to reexamination, while Samsung selectively challenges a subset of the patents in suit. Of the ten patents for which Rambus has selected to pursue infringement claims at trial, only five are subject to parallel reexamination proceedings: the ’120 patent, the ’8,020 patent, the ’863 patent, the ’916 patent, and the ’184 patent. Compare Rambus Inc.’s Election of Patent Claims for Trial (Docket No. 2128, Case No. 05-00334) with Hynix RJN at 2; Cf. Network Appliances, 2008 WL 2168917 at *5 (finding that stay would put non-moving party at a tactical disadvantage because it would be “forced to litigate only four of seven asserted patents” while moving party could choose which claims to pursue). Rambus could also be “prejudiced by the lapse of time during reexamination, which could result in loss of evidence and the fading of witness memory.” Alltech, Inc. v. Cenzone Tech, Inc., 2007 WL 935516, at *2 (S.D. Cal. Mar. 21, 2007). Resolution of Rambus’s willfulness claims, for example, would require witness testimony regarding events that occurred years ago. A stay of several more years would only heighten the risk that the witness memory might fade and prejudice Rambus’s ability to prove its case. - 19 -

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1

these circumstances, staying the federal court action in favor of the later-filed PTO inter partes

2

challenge would truly be to have the tail wag the dog.

3

Considerations of judicial economy and efficiency favor prompt resolution of the parties’

4

claims at trial. If Rambus prevails, the Manufacturers will be estopped from reasserting any

5

previously adjudicated invalidity arguments in reexamination. Conversely, if the Manufacturers

6

meet their burden of proving the patents invalid, the PTO proceedings will become moot. Trial is

7

less than four months away. Barring a stay, the parties can reasonably expect final judgment to

8

be rendered middle-to-late 2009. In contrast, the relevant PTO reexamination requests were not

9

granted until fall 2007 and spring 2008, more than two years after the ’334 action commenced.

10

Any stay pending reexamination will likely last beyond 2010—and that is assuming that the PTO

11

determination is not appealed to the Federal Circuit, as it likely will be. Since this case will most

12

likely be completed before the PTO reexaminations, it makes no sense to delay resolution of the

13

case in deference to the slower PTO proceeding. See Fresenius, 2007 WL 1655625 at *4.

14

A prompt trial here would also expedite appellate review. Whether Samsung’s invalidity

15

claims are adjudicated in this Court or by the PTO, it is highly probable that the Federal Circuit

16

will have the final say on the matter. If the trial takes place as scheduled in January, the parties

17

will be in position to file appeals sometime in 2009. However, in the reexamination proceeding,

18

an adverse ruling from the PTO examiner would have to be appealed administratively to the

19

BPAI before any Federal Circuit review. See 35 U.S.C. §§ 141, 315. This means the

20

reexamination will likely not proceed to Federal Circuit review until 2012 at the earliest,

21

approximately four or five years after the relevant reexamination requests were filed. Letting this

22

litigation proceed is clearly the more efficient approach.

23

Neither Samsung nor the other Manufacturers stands to suffer any prejudice from prompt

24

resolution of Rambus’s infringement claims at trial. Samsung claims it would be prejudiced if it

25

has to defend those claims “without the benefit of the resolution provided by the reexamination

26

proceedings.” Samsung Reply 10. But there is no reason why Samsung could not simply submit

27

its invalidity contentions to this Court and the jury for adjudication. Samsung’s suggestion that

28

the issues are better presented to the PTO runs headlong into Congress’s judgment that inter - 20 -

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1

partes and federal court adjudication are in parity. See discussion supra at 13. For similar

2

reasons, it is irrelevant that the burden of proof and applicable standards are relaxed in inter

3

partes reexaminations; notwithstanding these differences, Congress expressly concluded that final

4

federal court validity judgments would bar inter partes proceedings. And in the unlikely event

5

that the PTO were to issue a certificate first, Samsung would be free to assert that ruling here.

6

C.

7

“Parties should not be permitted to abuse the process by applying for reexamination after

A Stay Should Not be Imposed on the Eve of Trial, with Discovery Complete

8

protracted, expensive discovery or trial preparation.” Digital Magnetic Sys., Inc. v. Ansley, 213

9

U.S.P.Q. 290 (W.D. Okla. 1982). Thus, courts have adopted a “clear rule ... that, where, as here,

10

discovery has commenced, claim construction has been briefed, and dispositive motions have

11

been filed and disposed of, courts should not grant stays for reexamination before the PTO.”

12

Fresenius, 2007 WL 1655625 at *3.

13

The claims and defenses in this case are well on their way to adjudication. With a few

14

limited exceptions, fact discovery is now closed. Opening expert reports have been served.

15

Claim construction was completed long ago. A trial date has been set for January, less than four

16

months from now. It is far too late to stay these proceedings in favor of Samsung’s belated

17

reexamination requests. See, e.g., Alltech, 2007 WL 935516 (denying stay five months before

18

trial); Soverain Software, 356 F. Supp. 2d 660 at 663 (denying stay six months before trial);

19

Output Tech. Corp. v. Dataproducts Corp., 22 U.S.P.Q. 2d 1072 (W.D. Wash. 1991) (concluding

20

that “a stay is not justified here where discovery is well underway” and trial is eight months

21

away). A stay “would likely cause undue prejudice to Plaintiff, who has expended resources in

22

reliance on the current discovery and trial dates.” Alltech, 2007 WL 935516 at *2.

23

The relative delay in instituting inter partes review also weighs against disrupting this

24

case. Samsung did not file the first of its reexamination requests until August 2006 (’916 patent),

25

when this action had already been pending for more than a year and half. For the ’8,020 patent,

26

the initial reexamination request was not filed until January 2008, three years after this case was

27

filed. A stay is particularly inappropriate where the moving party delayed in seeking

28

reexamination. Fujitsu, Inc. v. Nanya Tech. Corp., 2007 WL 3314623, at *2 (N.D. Cal. Nov. 6, - 21 -

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1

2007) (denying stay partly because moving party waited until nine months after the filing of

2

patent litigation to request reexamination); Remington Arms Co. v. Modern Muzzleloading, Inc.,

3

1998 WL 1037920, at *3 (M.D.N.C. Dec. 17, 1998) (defendant’s “unjustified delay” in

4

requesting reexamination was the “most compelling reason for denying the stay”).

5

Samsung’s reply simply ignores the “clear rule” that stays should not be granted on the

6

eve of trial. See Fresenius, 2007 WL 1655625, at *3. The cases cited by Samsung are

7

distinguishable because the parties were not ready for trial, or because the party opposing the stay

8

had itself initiated reexamination. See Samsung Reply 8-10. 9 Indeed, Samsung does not cite a

9

single case where a stay was granted even though the parties were ready for trial and the party

10

seeking the stay had initiated the parallel PTO proceeding. To allow Samsung to “now use the

11

reexamination process to get this case stayed would be to allow a defendant to use the

12

reexamination as a mere dilatory tactic.” Freeman v. Minnesota Min. & Mfg. Co., 661 F. Supp.

13

886, 888 (D. Del. 1987).

14

D.

15

A Stay Would Not Simplify Issues For Trial 1.

16

A Trial Will Be Necessary Regardless of the Outcome of Reexamination Proceedings

Only five of the ten patents Rambus has selected for trial are subject to concurrent 17 reexamination proceedings. The reexamination’s potential for simplifying this case is therefore 18 limited. Even if Samsung prevails on all of its invalidity contentions in reexamination, this matter 19 will still proceed to trial on the remaining patents. That counsels against granting the stay, 20 particularly since any potential for simplification must be balanced against the serious prejudice 21 to Rambus and the eleventh-hour timing of the stay request. See Gladish v. Tyco Toys, Inc., 29 22 23 24 25 26 27 28

9

ASCII Corp. v. STD Entm’t USA, Inc., 844 F. Supp. 1378, 1381 (N.D. Cal. 1994) (“[T]he parties are in the initial stages of the lawsuit and have undertaken little or no discovery.”); MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556, 563 (E.D. 2007) (observing that “it does not appear the parties are presently prepared for trial”); In re Cygnus Telecomms. Tech., LLC Patent Litig., 385 F. Supp. 2d 1022, 1023 (N.D. Cal. 2005) (“[D]iscovery has not been completed in any of the pending actions involved in the multidistrict litigation. No case is on the verge of trial.”); Lentek Int’l, Inc. v. Sharper Image Corp., 169 F. Supp. 2d 1360, 1362 (M.D. Fla. 2001) (without discussing the relevant stage of litigation, finding that the plaintiff was “hardly in a position to complain about the timing of reexamination” because plaintiff itself initiated the PTO proceeding). - 22 -

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U.S.P.Q. 2d 1718, 1720 (E.D. Cal. 1993) (denying stay partly because “[a]fter the reexamination,

2

the parties would be right back in this court”); Biax Corp., 2007 WL 614187 at *2 (denying stay

3

where reexamination “may only simplify the case to a limited degree” and “some claims and

4

issues will likely remain after the reexamination has been completed”); Enprotech Corp. v.

5

Autotech Corp., 15 U.S.P.Q. 2d 1319 (N.D. Ill. 1990) (denying stay where “the reexamination

6

will not resolve everything”); see also Network Appliances, 2008 WL 2168917 at *3.

7

Even for patents under reexamination, a PTO Certificate cancelling some of the

8

challenged claims would not obviate the need for trial here. The scope of PTO reexamination is

9

narrow; the only prior art references the PTO may consider are publications and patents, and the

10

PTO is not allowed to reexamine based on other grounds for invalidity, such as prior sales. See

11

35 U.S.C. §§ 301, 311. The Manufacturers have reserved the right to argue invalidity based on

12

prior sales, best mode, and other grounds not subject to PTO reexamination. Unless Samsung

13

prevails on all of its invalidity contentions in reexamination, this Court will still have to

14

adjudicate issues of patent validity for patents the PTO has reexamined. See Gladish, 29 U.S.P.Q.

15

2d at 1720 (reexamination unlikely to simplify because “[u]nless all claims of the patent were

16

cancelled as a result of the reexamination, validity would remain a contested issue in this action”).

17 18

2.

Speculation About the Ultimate Outcome of Reexamination Cannot be the Basis for a Stay

Samsung suggests that its likelihood of prevailing before the PTO is a factor supporting a 19 stay. See 9/5/08 RT 34. But until PTO proceedings are complete and appeals exhausted, it is 20 impossible to predict with any confidence what the ultimate outcome will be. 21 The fact that the PTO granted Samsung’s reexamination requests says virtually nothing 22 about their merits. After all, the PTO grants 95% of inter partes reexamination requests. Sterne 23 Report at 76. While the PTO has issued initial Office Actions rejecting the relevant claims of 24 three patents Rambus has selected for trial—the ’120, ’916, and ’863 patents—these actions shed 25 little light on the probable outcome of reexamination. The initial Office Action is merely the 26 opening step in a long process of feedback and commentary between the patent owner, the 27 challenger, and the PTO examiner, which still has years to run. See discussion supra at 14-15. 28 - 23 -

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Rather than speculating about what the PTO may or may not do in the future, it is more efficient

2

and fair for this Court to simply adjudicate all invalidity contentions at trial.

3

The PTO’s certificate statistics offer no reliable basis to decide whether Samsung or

4

Rambus is more likely to prevail in the reexamination. When the uncontested proceedings are

5

stripped out of the data, “the requester’s likelihood of having all claims cancelled or disclaimed in

6

inter parte proceedings is 53%.” Foley Report at 10. That is essentially a coin toss, with

7

Samsung and Rambus equally likely to obtain a favorable outcome. Of course, “these general

8

and limited statistics are not very helpful in predicting the outcome of issuing a stay in this case.”

9

Network Appliances, 2008 WL 2168917 at *4. But if these statistics are accorded any weight at

10

all, they merely show that it is better to have the patent validity issues resolved on the merits in

11

this Court than to postpone decision indefinitely in deference to a proceeding with only even odds

12

of resolving but a portion of this case.

13

IV.

NEITHER HYNIX I NOR THE DELAWARE ACTION WARRANTS A STAY

14

Where “there is even a fair possibility that [a] stay [pending a related action] ... will work

15

damage to some one else, the stay may be inappropriate absent a showing by the moving party of

16

hardship or inequity.” Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059,

17

1066 (9th Cir. 2007) (quotations omitted). For the reasons discussed above, any stay pending a

18

Hynix I appeal or the Delaware matter would seriously prejudice Rambus. The only

19

countervailing prejudice the Manufacturers have identified is the fact that they will finally be

20

called upon to defend Rambus’s claims at trial. “[B]eing required to defend a suit, without more,

21

does not constitute a clear case of hardship and inequity” warranting a stay. Lockyer v. Mirant

22

Corp., 398 F.3d 1098, 1112 (9th Cir. 2005).

23

Hynix complains about purported overlap between Hynix I and this action (Hynix Reply

24

4-5), but there is nothing unfair or wasteful about permitting the two cases to proceed

25

simultaneously. This case involves different accused Hynix products than the ’905 case and

26

Rambus, no less so than Hynix, will participate in and incur expenses in both matters. Likewise,

27

Micron can claim no legitimate prejudice from having to participate in the January trial. Micron

28

insists that a judgment in Delaware is imminent (9/5/08 RT 30); if this is so, however, the Court - 24 -

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1

can deal with the Delaware judgment and determine its effect, if any, when it is actually entered.

2

On the other hand, if the Delaware case continues to proceed at a slow pace, a stay would

3

irredeemably prejudice Rambus by stripping it of the right to seek injunctive relief. See Levya v.

4

Certified Grocers of Cal., Ltd., 593 F.2d 857, 864 (9th Cir. 1979) (“A stay should not be granted

5

unless it appears likely the other proceedings will be concluded within a reasonable time.”) The

6

same is true of a stay pending review in Hynix I.

7

In any event, the purported efficiency gains from a stay are limited, if not wholly illusory.

8

Of the ten patents Rambus has selected for trial, only four are implicated in the Delaware action

9

or in Hynix I. 10 It would not serve judicial efficiency or economy to stay this action and allow

10

Rambus’s claims under six other patents to languish on the Court’s docket on the off-chance that

11

two substantially narrower cases might, at some future date, pare down the ’334 trial. Given that

12

all three cases will likely be resolved ultimately in the Federal Circuit, the better approach is to

13

proceed to trial and judgment.

14

V.

15

CONCLUSION For the foregoing reasons, Rambus respectfully requests that this Court order a joint

16

DDR2+ trial on infringement, validity, and damages, and deny the Manufacturers’ motions to

17

stay.

18

DATED: September 19, 2008

19

MUNGER, TOLLES & OLSON LLP SIDLEY AUSTIN LLP McKOOL SMITH P.C.

20 By:

21 22

/s/ Gregory P. Stone GREGORY P. STONE

Attorneys for RAMBUS INC.

23 24 25 26 27 28

10

Hynix cites no authority to support its view that this Court should not consider the likelihood of reversal in Hynix I in deciding the motion to stay. Case law says otherwise. See TIP Sys., LLC v. SBC Operations, Inc., 2008 WL 594258 (S.D. Tex. Mar. 4, 2008) (“[w]hen presented with a motion for discretionary stay pending appeal,” courts should consider “whether the movant has made a showing of likelihood of success on the merits”); Arnold v. Garlock, Inc. 278 F.3d 426, 438 (5th Cir. 2001). That the claim constructions Hynix intends to appeal have already been considered and adopted by the Federal Circuit in Infineon further counsels against a stay. - 25 -

RAMBUS’S SUPPLEMENTAL BRIEF ON THE COURT’S SEPTEMBER 5, 2008 TENTATIVE ORDER CV 05-02298 RMW; C 05-334 RMW; C 06-244 RMW