Rambus, Inc. v. Infineon Technologies Ag

• Decision Date: 09 August 2001
• Docket Number: No. CIV.A.3:00CV524.,CIV.A.3:00CV524.
• Citation: 164 F.Supp.2d 743
• Court: U.S. District Court — Eastern District of Virginia
• Parties: RAMBUS, INC., Plaintiff, v. INFINEON TECHNOLOGIES AG, Infineon Technologies North America Corp., and Infineon Technologies Holding North America, Inc., Defendants.

Page 743

164 F.Supp.2d 743

RAMBUS, INC., Plaintiff, v. INFINEON TECHNOLOGIES AG, Infineon Technologies North America Corp., and Infineon Technologies Holding North America, Inc., Defendants.

No. CIV.A.3:00CV524.

United States District Court, E.D. Virginia, Richmond Division.

August 9, 2001.

COPYRIGHT MATERIAL OMITTED

Michael W. Smith, Esquire, Craig T. Merritt, Esquire, Christian & Barton, L.L.P., Richmond, VA, David E. Monahan, Esquire, John Allcock, Esquire, Gray Cary Ware & Freidenrich LLP, San Diego, CA, for Plaintiff.

Brian C. Riopelle, Esquire, Robert M. Tyler, Esquire, McGuire Woods, LLP, Richmond, VA, John M. Desmarais, Esquire, Kirkland & Ellis, New York, NY, for Defendants.

MEMORANDUM OPINION

PAYNE, District Judge.

A jury found the Plaintiff and Counterclaim Defendant Rambus, Inc., ("Rambus"), liable on Count 10 (actual fraud) and Count 11 (constructive fraud) of the counterclaims asserted by the Defendants and Counterclaim Plaintiffs Infineon Technologies AG, Infineon Technologies North America Corp. and Infineon Technologies Holding North America, Inc., (collectively "Infineon" hereinafter).

The jury awarded nominal and punitive damages on the actual fraud claim and nominal damages on the constructive fraud claim. Having preserved its options during the trial, Rambus now has moved for judgment as a matter of law ("JMOL") under Fed.R.Civ.P. 50, or, alternatively, for a new trial, under Fed.R.Civ.P. 59. Rambus contends that JMOL must be granted in its favor because: (1) Infineon failed to prove by clear and convincing evidence the elements of fraud under Virginia law; (2) nominal damages are not available in fraud actions under Virginia law, therefore the punitive damages awarded on the basis of the nominal damage award must be set aside; (3) the preponderance of the evidence demonstrates that Infineon's fraud claims are barred by the two year statute of limitations, see Va.Code § 8.01-243 and 249(1); and (4) the Court erred in refusing to give Rambus' proffered jury instruction pursuant to Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed.Cir.1988). In its motion for a new trial, Rambus again alleges that: (1) Infineon did not establish the requisite elements of fraud; (2) the preponderance of the evidence shows that the fraud claims are barred by the statute of limitations; and (3) the Court erred in refusing to give Rambus' proffered instruction pursuant to Kingsdown Medical.

I. STATEMENT OF PROCEDURAL AND FACTUAL BACKGROUND

A. Procedural Background

Rambus filed a complaint on August 8, 2000, alleging that Infineon had infringed two of its patents. On October 20, 2000, Rambus filed a First Amended Complaint which added charges of infringement of two additional patents. On January 10, 2001, Infineon filed counterclaims alleging that: (1) it was entitled to a declaratory judgment that the four patents-in-suit were not infringed, were invalid and were unenforceable (Counts 1-4); (2) Rambus breached its contract with JEDEC,¹ a technology standards-setting body (Count 8); (3) Infineon was entitled to damages as a third-party beneficiary of that breached contract (Count 9); (4) Rambus committed actual fraud while a member of JEDEC (Count 10); (5) Rambus committed constructive fraud while a member of JEDEC (Count 11); (6) Rambus obtained monopoly power in the relevant technology market in violation of the Sherman Act, 15 U.S.C. § 2 (Count 12); (7) Rambus had attempted to obtain a monopoly in the relevant technology market in violation of the Sherman Act, 15 U.S.C. § 2 (Count 13); and (8) Rambus violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. through its fraudulent conduct at JEDEC (Count 14).

An opinion was issued pursuant to Markman v. Westview Instrs. Inc., 52 F.3d 967 (Fed.Cir.1995), aff'd 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996) to construe the disputed claim terms of the patents. Thereafter, Rambus abandoned, before trial, the charge of infringement as to one of the patents-in-suit, U.S. Patent No. 5,954,804. After the presentation of Rambus' infringement case, the Court granted JMOL in Infineon's favor on the remaining three patents-in-suit, U.S. Patent Nos. 5,953,263; 6,032,214; and 6,034,918. Infineon then agreed that its request for a declaratory judgment on the validity and enforceability of the patents-in-suit and its claim for monopolization were mooted by the infringement ruling (Counts 1-4 and 12). At the close of Infineon's case-in-chief on its counterclaims, the Court granted JMOL in favor of Rambus on the breach of contract claims (Counts 8 and 9) and the attempted monopolization claim (Count 13).

At the conclusion of the two and one-half week trial, in a special verdict form, the jury found Rambus liable for committing actual and constructive fraud (Counts 10 and 11) in its conduct at JEDEC respecting both the Synchronous Dynamic Random Access Memory ("SDRAM") and the Double Data Rate SDRAM ("DDR SDRAM") standards adopted by JEDEC. The jury awarded nominal damages in the amount of $1.00 on each of the fraud claims and punitive damages in the amount of $3,500,000.00 on the actual fraud claim. Pursuant to Va.Code § 8.01-38.1, the Court reduced the amount of punitive damages to $350,000.00. The jury found in favor of Rambus on the RICO claim (Count 14).

B. Factual Background

Rambus is a technology company that designs and licenses computer memory systems. Rambus does not manufacture memory devices, but instead licenses its technologies to semiconductor manufacturers. The existence and the profitability of Rambus depends entirely on securing patents and licensing them to manufacturers.

In April 1990, Rambus filed a patent application covering a new design for computer memory systems. The United States Patent and Trademark Office ("PTO") determined that this application, U.S. Patent App. No. 07/510,898 ("the '898 application"), contained 11 independent and distinct inventions. The PTO, therefore, required Rambus to select only one of those inventions to pursue in the '898 application and allowed it to file divisional applications on the remaining inventions. Rambus did precisely that.

As of the date of trial, Rambus had been granted 31 patents based on the 1990 '898 application and numerous applications are currently pending. Many of these early patents are directed to "Rambus DRAMs" or "RDRAMs," which is a predecessor to the SDRAM technology. Rambus has licensed several semiconductor manufacturers, including Infineon, for the RDRAM technology.

The four patents-in-suit, however, are addressed to SDRAMs and DDR SDRAMs. In a SDRAM, the central processing unit, or CPU, sends and receives information from the memory device according to the "tick" of a "clock" contained within the memory system. In DDR SDRAMs, the rate of the transfer of information is doubled because information is sent on both the "tick" and the "tock" of the clock.

Infineon makes and sells a variety of semiconductor devices to be used in computers, including SDRAMs and DDR SDRAMs. Infineon's fraud claim focused on Rambus' conduct while Rambus and Infineon were members of JEDEC, an association of semiconductor manufacturers and designers who collaborate to develop industry-wide technical standards for semiconductor products in order to ensure that Dynamic Random Access Memory ("DRAM") products, made by different manufacturers, are compatible with one another. As part of its standardization process, JEDEC sought to avoid incorporating patented technology into its standards. To that end, JEDEC policy required members to disclose patents and patent applications that related to JEDEC's standard-setting work. If JEDEC decided to include a patented technology in a standard, its members who held patents on that technology were required (by agreement) to license that technology "under reasonable terms and conditions that are demonstrably free of any unfair discrimination."

A central issue in dispute at trial was whether, before 1993, JEDEC members had a duty to disclose pending patent applications (and not just patents that had been issued). In 1993, JEDEC Manual of Organization and Procedure JEP 21-1 was amended to state:

The Chairperson of any JEDEC committee, subcommittee, or working group must call to the attention of all those present the requirements contained in EIA Legal Guides, and call attention to the obligation of all participants to inform the meeting of any knowledge they may have of any patents, or pending patents, that might be involved in the work they are undertaking.

(emphasis added). See also id. ("Standards that call for use of a patented item or process may not be considered by a JEDEC committee unless all of the relevant technical information covered by the patent or pending patent is known to the committee ..."). Notwithstanding that the JEDEC manual did not explicitly provide, until 1993, that pending patents were to be disclosed, Infineon presented clear and convincing evidence at trial, through JEDEC members and representatives, that, at all times at issue before 1993, the duty to disclose applied to pending applications.

JEDEC standard-setting activity was accomplished largely by committees and JEDEC Committee JC-42.3 was in charge of developing a standard for the SDRAM technology. Consideration of the SDRAM standard began in 1991 and a standard was eventually adopted in 1993. Various modifications were made to that standard from 1993 until 1995 and beyond. DDR SDRAM is the successor technology to the SDRAM technology. Committee JC-42.3 began work on the DDR SDRAM standard officially in 1996, although Infineon presented evidence showing that various technological concepts, which ultimately were included in the DDR SDRAM JEDEC standard, were discussed at Committee JC-42.3 meetings as early as 1992 and continuing thereafter throughout the time that Rambus was a member of JEDEC. The DDR SDRAM...