By Jason Rantanen
Micron Technology, Inc. v. Rambus Inc. (Fed. Cir. 2011) Download 09-1263
Hynix Semiconductor Inc. v. Rambus Inc. (Fed. Cir. 2011) Download 09-1299-1347
Panel: Newman (concurring and dissenting in part on Hynix), Lourie, Bryson, Gajarsa (concurring and dissenting in part on Micron and Hynix), and Linn (author of both Micron and Hynix)
Rambus is a company founded to commercialize inventions related to DRAM computer memory, including its RDRAM product. It is currently engaged in several patent suits against manufacturers of SDRAM, an alternate type of memory technology. Central to these cases is the issue of whether Rambus's destruction of documents – particularly a "shred day" during which thousands of pounds of documents were destroyed – prior to the commencement of the litigation constituted spoliation. Given this case's discussion of document retention obligations, it has particular relevance for in-house counsel and outside counsel advising companies prior to the commencement of litigation. Irrespective of the legal question discussed below, the specific factors discussed at pages 16-23 of Micron are worth reading.
Although addressing the same fundamental issue, Micron and Hynix arrived at the court in diametrically opposed postures. In the district court proceedings on appeal in Hynix, Judge Whyte of the Northern District of California concluded that no spoliation occurred, while in the proceedings leading to Micron, Judge Robinson of the District of Delaware ruled that Rambus had engaged in spoliation and entered judgment in Micron's favor as a sanction.
Litigation Must Be Reasonably Forseeable
The resolution of the two appeals turned on the issue of when litigation became "reasonably forseeable," thus triggering Rambus's duty to preserve evidence. Rambus argued that "to be reasonably forseeable, the litigation must be imminent, at least in the sense that it is probable and free of significant contingencies." Micron and Hynix, on the other hand, aruged that reasonable forseeability incorporates no requirement of imminence.
The five-judge panel unanimously concluded that the "reasonably forseeable" standard does not carry an imminence requirement. While "[t]his standard does not trigger the duty to preserve documents from the mere existence of a potential claim or the distant possibility of litigation…it is not so inflexible as to require that litigation be imminent, or probable without significant contingencies,' as Rambus suggests." Micron Slip Op. at 12-13.
Applying this standard, the CAFC determined that the Micron district court had not clearly erred when it concluded that litigation was reasonably foreseeable prior to the critical 'shred day.' In particular, the CAFC noted that (1) Rambus's document retention policy was not adopted for purposes of business management, but instead to further Rambus's litigation strategy; (2) Rambus was on notice of potentially infringing activities by particular manufacturers; (3) Rambus took several steps in furtherance of litigation prior to the key shredding party; (4) Rambus is the plaintiff-patentee [but see note below], and its decision whether to litigate or not was the determining factor in whether or not litigation would ensue; and (5) the relationship between Rambus and the DRAM manufacturers was not one of mutual benefit that subsequently turned sour, but rather was naturally adversarial.
Arriving at a consistent outcome in Hynix, three of the five judges (Lourie, Byrson, and Linn) concluded that Judge Whyte erred in determining that litigation was not reasonably forseeable by inappropriately applying the stricter "imminent, or probable without significant contingencies" requirement for reasonable foreseeability. "In Micron II, this court held that that standard does not carrry a gloss requiring that litigation be "imminent, or probable without significant contingencies….The district court here applied just such a standard. This is evident for three reasons." Hynix Slip Op. at 13 (internal citation omitted).
Yet although the reversal is clear, the majority's reasoning for its conclusion is not. The majority first held that the district court erred not by considering the presence of contingencies at all, as one might expect given its preceding statement, but by failing to decide "that the resolution of these contingencies was reasonably foreseeable." Id. at 14. The majority's reason thus implicitly assumes that contingencies are, in fact, relevant to the foreseeability inquiry. The second and third reasons – that the evidence of non-foreseeability was insufficient and the Hynix district court was the only court out of four to conclude that litigation was not reasonably foreseeable as of the critical date – similarly have little to do with whether the Hynix district court applied the correct legal standard. The majority's actual analysis thus seems at odds with its statement that the foreseeability standard does not include a 'probable without significant contingencies' requirement given that its only relevant basis for reversal applies exactly such an analytical framework. It is further puzzling because it involves an assessment of purely factual issues, not legal standards, to which it applies a de novo standard of review.
Writing in dissent in Hynix, Judge Gajarsa joined by Judge Newman takes the majority to task for its overriding drive to arrive at a consistent result in Hynix and Micron, a drive that in their view produced an erroneous result:
Seizing on the district court’s alleged grafting of an overly strict “gloss” on the reasonably foreseeable litigation standard, the majority claims that the district court erred as a matter of law by applying the wrong standard for spoliation. In so doing, the majority ignores the district court’s well-articulated understanding of the relevant Ninth Circuit law and its factual findings, which demonstrate that the district court applied the very standard that the majority now requires. The majority obtenebrates the facts presented in the district court’s opinion to resolve the conflict between the spoliation determinations in this case and in Micron.
Hynix dissent at 2. In particular, the dissent criticizes what it perceives to be the majority's attempt to cloak its review of a factual determination as a legal issue in order to avoid applying a deferential standard of review, thus leading to an inconsistent result:
The majority created this standard in Micron with the intention of reconciling the district court’s spoliation determination in that case with the present one. The desires of an appellate tribunal, however, should not drive the outcome of decisions. Divergent district court opinions do not necessarily mean that the trial courts applied different “glosses” on a particular standard. Rather, this court must review district court opinions with the applicable standard of appellate review, which, in this case, is clear error or an abuse of discretion. In refusing to do so, the majority shirks its duties and performs its own factual analysis. The majority castigates the district court here for using a narrower “gloss” on the standard for spoliation just as the majority in Micron castigates the district court for holding the asserted patents unenforceable as a sanction for spoliation.
Id. at 3.
A Meaningless Remand?
Although affirming the Micron district court's conclusion that litigation was reasonably foreseeable, the majority nevertheless vacated the district court's sanction determination. This move is unlikely to produce in any meaningful change. The majority's basis for the remand was that the Micron district court opinion failed to provide sufficient detail or analysis in support of its conclusion that Rambus acted in bad faith, that Micron suffered prejudice, or that judgment in Micron's favor was the appropriate sanction to impose. Given Judge Robinson's prior opinion, however, the inevitable result will be a more detailed opinion that reaches precisely the same conclusion on these issues.
Judge Gajarsa dissented from this determination as well, again criticizing the majority for reviewing the facts and weighing the evidence "before it substitutes its judgment for that of the district court, deciding that based on the district court's thorough factual analysis, it would not have granted the dispositve sanctions." Micron dissent at 2.
Note on consistency: In concluding that the Micron district court correctly concluded that litigation was reasonably foreseeable, the CAFC relied on the fact that Rambus was the plaintiff-patentee (and thus controlled the initiation of the litigation). Micron Slip Op. at 22. Yet both the caption and the opinion's procedural background indicate that Rambus did not initate the lawsuits; rather they were declaratory judgment actions brought by Micron and Hynix.
Disclosure: Although I had minimal exposure to the Rambus litigations while an attorney with Munger, Tolles, & Olson, note that my former employer did and continues to represent Rambus.