Micron Tech. Inc. v. Rambus Inc.

• Decision Date: 29 July 2011
• Docket Number: No. 2009–1263.,2009–1263.
• Citation: 645 F.3d 1311,98 U.S.P.Q.2d 1693
• Parties: MICRON TECHNOLOGY, INC., Plaintiff/Counterclaim Defendant–Appellee,andMicron Electronics, Inc. and Micron Semiconductor Products, Inc., Counterclaim Defendants–Appellees,v.RAMBUS INC., Defendant/Counterclaimant–Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

645 F.3d 1311

98 U.S.P.Q.2d 1693

MICRON TECHNOLOGY, INC., Plaintiff/Counterclaim Defendant–Appellee,andMicron Electronics, Inc. and Micron Semiconductor Products, Inc., Counterclaim Defendants–Appellees,

v.RAMBUS INC., Defendant/Counterclaimant–Appellant.

No. 2009–1263.

United States Court of Appeals, Federal Circuit.

May 13, 2011.Rehearing and Rehearing En Banc Denied July 29, 2011.

Matthew D. Powers, Weil, Gotshal & Manges LLP, of Redwood Shores, CA, argued for plaintiff/counterclaim defendant-appellees and counterclaim defendants appellees. With him on the brief were Jared Bobrow, Jessica L. Davis, Sven Raz; and Lisa R. Eskow, of Austin, TX.Carter G. Phillips, Sidley Austin LLP, of Washington, DC, argued for defendant/counterclaimant-appellant. With him on the brief were Rollin A. Ransom, Eric A. Shumsky, Eric M. Solovy, Rachel H. Townsend, Ryan C. Morris. Of counsel was Peter S. Choi. Of counsel on the brief were Richard G. Taranto, Farr & Taranto, of Washington, DC; and Gregory P. Stone, Paul J. Watford, and Fred A. Rowley, Jr., Munger, Tolles & Olson LLP, of Los Angeles, CA; and Michael J. Schaengold, Patton Boggs LLP, of Washington, DC.Before NEWMAN, LOURIE, BRYSON, GAJARSA and LINN, Circuit Judges.Opinion for the court filed by Circuit Judge LINN, with whom NEWMAN, LOURIE, and BRYSON, Circuit Judges, join. Concurring-in-part, dissenting-in-part opinion filed by Circuit Judge GAJARSA.LINN, Circuit Judge.

Rambus Inc. (“Rambus”) appeals the decision of the United States District Court for the District of Delaware holding that the twelve Rambus patents asserted against Micron Technology, Inc., Micron Electronics, Inc., and Micron Semiconductor Products, Inc. (collectively, “Micron”) are unenforceable due to Rambus's spoliation of documents. Micron Tech., Inc. v. Rambus Inc., 255 F.R.D. 135 (D.Del.2009) (“ Decision ”). Rambus also appeals the district court's order piercing Rambus's attorney-client privilege on the basis of the crime-fraud exception, Micron Tech, Inc. v. Rambus Inc., No. 00–792 (D.Del. Feb. 10, 2006) (“ Privilege ”), and denial of Rambus's motion to transfer to the Northern District of California, Micron Tech, Inc. v. Rambus Inc., No. 00–792 (D.Del. June 14, 2007) (“ Transfer ”). For the reasons discussed below, this court affirms-in-part, vacates-in-part, and remands.

I. Background

This case and the companion case of Hynix Semiconductor Inc. v. Rambus Inc., 645 F.3d 1336 (Fed.Cir.2011) (“ Hynix II ”) (decided contemporaneously herewith), concern a group of U.S. patents issued to Rambus covering various aspects of dynamic random access memory (“DRAM”). Although semiconductor memory chips have been used in computers for decades, advances in other aspects of computer technology by the early 1990s created a bottleneck in the ability of computers to process growing amounts of data through the memory. At least two related methods were discovered of building memory chips (and the interfaces between memory chips and computer processors) in a way that eliminated or minimized this bottleneck. The founders of Rambus, Mike Farmwald and Mark Horowitz, developed one of these methods, which Rambus later commercialized as Rambus DRAM, or RDRAM. The original Rambus applications claim the inventions included in RDRAM. Rambus believed that Farmwald's and Horowitz's invention was broad enough to encompass synchronous dynamic random access memory, or SDRAM, the other type of new memory technology.

Farmwald and Horowitz did not initially file patent applications with claims explicitly directed at SDRAM. However, after Rambus's tenure and resignation as a member of the standard setting Joint Electron Devices Engineering Council (“JEDEC”), Rambus amended its claims to cover the SDRAM technology adopted as the standard by JEDEC. See generally Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081 (Fed.Cir.2003) (“ Infineon ”) (discussing Rambus's participation in JEDEC). The patents at issue here and their enforceability against SDRAM products have been the subject of numerous suits in district courts, the Federal Trade Commission, the International Trade Commission, and this court. However, this court has never finally and definitively resolved the question of whether Rambus engaged in spoliation in connection with this litigation.

The present appeal began when Micron filed a declaratory judgment action against Rambus, asserting that Micron's production of SDRAM products do not infringe Rambus's patents and that Rambus's patents are invalid, unenforceable, and violate antitrust laws. The district court separated the case into three proceedings: (1) unenforceability due to spoliation, (2) invalidity, and (3) infringement. The court held a bench trial on the spoliation issue, and concluded that the patents in suit were unenforceable against Micron because Rambus had engaged in spoliation by intentionally destroying relevant, discoverable documents in derogation of a duty to preserve them. The district court thus did not reach the validity or infringement issues. On appeal, Rambus argues that the trial court clearly erred in determining that Rambus spoliated documents, acted in bad faith, and prejudiced Micron. Rambus also argues that the district court abused its discretion by dismissing the case as a sanction for the spoliation. Rambus also puts forth two procedural arguments: (1) that the district court erred by requiring the production of documents allegedly subject to attorney-client privilege; and (2) that the district court erred by denying Rambus's motion to transfer the litigation to the Northern District of California.

The record is lengthy but uncomplicated. In 1990, Farmwald and Horowitz filed their first patent application directed to improving the speed with which computer memory can function. Rambus was founded the same year to commercialize this invention. Rambus developed its proprietary RDRAM technology, and licensed chip makers to manufacture memory chips incorporating this technology. Around this time, JEDEC was working to develop industry standard specifications for memory chips and the interfaces between memory chips and computer processor chips, eventually adopting its first SDRAM standard in 1993. In approximately 1992, Rambus learned of SDRAM and came to believe that the Farmwald and Horowitz invention encompassed SDRAM. Rambus continued prosecuting multiple patent applications in the Farmwald/Horowitz family, intending to obtain issued patent claims that covered SDRAM. Rambus thereafter pursued a two-prong business strategy: it licensed chip makers to manufacture chips that complied with Rambus's proprietary RDRAM standards, and prepared to demand license fees and to potentially bring infringement suits against those manufacturers who insisted on adopting the competing SDRAM standard instead.

The first prong of Rambus's strategy went smoothly for some time. In 1996, Intel licensed the RDRAM technology and adopted it as the memory interface technology for its next generation microprocessors. Rambus negotiated licenses with eleven DRAM manufacturers to produce RDRAM-compliant chips for Intel's use. By the fall of 1999, though, these manufacturers had failed to deliver the promised manufacturing capacity, and Intel was therefore beginning to rethink its adoption of RDRAM. Rambus contends that only after RDRAM failed to become a market leader in late 1999 did it to put into action the second prong of its business strategy, to seek licensing revenue (and litigation damages) from those manufacturers adopting SDRAM.

Micron disagrees, arguing that Rambus was planning litigation against SDRAM manufacturers at the same time it was seeking to license RDRAM manufacturers.

In 1997, Rambus hired Joel Karp as its vice-president in charge of intellectual property, and on January 7, 1998, Karp was directed by Rambus's CEO Tate to develop a strategy for licensing and litigation. Karp then met with several transactional attorneys at Cooley Godward. Because they were not litigation specialists, they referred Karp to Dan Johnson, a litigation partner at Cooley Godward. Karp met Johnson on February 12, 1998. At the meeting with Johnson, Karp discussed licensing accused infringers, mentioning royalty rates that were so high that Johnson said “you're not going to have a licensing program, you're going to have a lawsuit on your hands.” Karp said Rambus needed to get “battle-ready,” by which he meant that Rambus needed to be ready for litigation. Johnson also advised putting into place a document-retention policy. In March 1998, Karp presented his proposal for a licensing and litigation strategy to the Rambus board of directors. He proposed a 5% royalty on SDRAM, a rate within the range that had prompted Johnson to say that litigation would inevitably follow. In the course of presenting the litigation strategy, Karp recommended implementing a document-retention policy.

In August or September 1998, Rambus hired outside counsel to perform licensing and patent prosecution work as well as to begin preparing for litigation against SDRAM manufacturers. In October 1998, Karp advised Rambus executives that he was planning to assert Rambus's patents against SDRAM manufacturers in the first quarter of 2000, explaining that there were good business reasons for the delay in bringing suit, particularly Rambus's interest in getting licensing revenues from RDRAM manufacturers, who would be the same parties it would seek to license for the production of SDRAM. In November 1998, Rambus executives held an offsite strategy meeting. The meeting notes show that Rambus planned to eventually assert its patents against SDRAM, even if the RDRAM adoption strategy succeeded. In approximately December 1998, Karp drafted a memo describing a possible “nuclear winter” scenario under which Intel moved away from RDRAM. The memo outlined plans for suing Intel and SDRAM manufacturers, saying that “by the time we do this, the...