Samsung Electronics Co., Ltd. v. Rambus, Inc.

• Decision Date: 14 September 2005
• Docket Number: No. Civ.A. 3:05CV406.,Civ.A. 3:05CV406.
• Citation: 386 F.Supp.2d 708
• Court: U.S. District Court — Eastern District of Virginia
• Parties: SAMSUNG ELECTRONICS CO., LTD., Plaintiff, v. RAMBUS INC., Defendant.

386 F.Supp.2d 708

SAMSUNG ELECTRONICS CO., LTD., Plaintiff, v. RAMBUS INC., Defendant.

No. Civ.A. 3:05CV406.

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

September 14, 2005.

COPYRIGHT MATERIAL OMITTED

Harris Dewey Butler, III, Charles Lewis Williams, James Curie Skilling, Butler Williams & Skilling PC, Brian Charles Riopelle, McGuirewoods LLP, Richmond, VA, Ana Elena Kadala, David James Healey, Weil Gotshal & Manges LLP, Houston, TX, Matthew D. Powers, Weil, Gotshal & Manges, Redwood Shores, CA, for Plaintiff.

Gregory Paul Stone, Munger Tolles & Olson LLP, Los Angeles, CA, Rowland Braxton Hill, IV, Craig Thomas Merritt, Michael W. Smith, Christian & Barton LLP, Richmond, VA, for Defendant.

MEMORANDUM OPINION

PAYNE, District Judge.

In this action, Samsung Electronics Co., Ltd. ("Samsung") seeks a declaratory judgment that, inter alia, four patents held by Rambus, Inc. ("Rambus") are unenforceable by virtue of the doctrines of unclean hands, equitable estoppel, patent misuse, waiver, laches, and laches in the United States Patent and Trademark Office ("PTO").¹ Rambus has moved to transfer this action to the Northern District of California where it is currently involved in patent infringement litigation with Samsung and Hynix Semiconductor, Inc. ("Hynix") with respect to these four patents, and others. For the reasons set forth below, the motion to transfer is denied.

FACTUAL AND PROCEDURAL BACKGROUND

A. General Background

Rambus develops and licenses technology to companies that manufacture semi-conductor memory devices. In 1990, Rambus filed United States Patent Application Serial Number 07/510,898 with claims directed to a computer memory technology known as Dynamic Random Access Memory. The PTO determined that this application covered several independent inventions, and thus issued an eleven- way restriction requiring Rambus to elect one invention to pursue in its application. In response, Rambus filed numerous divisional and continuation applications based on its original application. The ensuing patents are directed to Dynamic Random Access Memory technology ("DRAMs"), Rambus DRAMs ("RDRAMs"), Synchronous Dynamic Random Access Memory ("SDRAM"), and Double Data Rate Synchronous Dynamic Random Access Memory ("DDR-SDRAM"). Rambus, Inc. v. Infineon Tech. AG, 222 F.R.D. 280, 282 (E.D.Va.2004).²

Rambus describes itself as a technology company because it does not manufacture any of the DRAM devices. Instead, Rambus relies on licensing its technology patents as the source of its corporate revenues.

B. Rambus' Patent Litigation and Enforcement Policies and Practices

As of early 1998, Rambus anticipated that it would soon initiate patent litigation against several specifically identified DRAM manufacturers. Consequently, beginning in early 1998 and continuing through 1999 and 2000, Rambus developed and refined a patent licensing and litigation strategy. Rambus v. Infineon Tech. AG, 222 F.R.D. at 293-94. That licensing and litigation strategy was implemented in 1998 and was pursued in 1999 and 2000. Id.³

As of March 1998, Rambus had identified the Eastern District of Virginia as a desirable location in which to prosecute patent actions against DRAM manufacturers that would not take licenses for technology which Rambus had patented or was seeking to patent. DTX3680. From early 1998, Samsung was considered a possible patent litigation target. DTX3681. Other potential targets were Hitachi, Hyundai Electronics Corporation (now Hynix) and Siemens (now Infineon). DTX3691.

In fact, by 1999, Rambus had developed a rather sophisticated matrix for use in identifying target DRAM companies for litigation. That matrix accorded a score and a ranking to each listed target DRAM manufacturer. By then, Rambus also had identified the potential litigation venues and assessed the desirability of each. DTX3675. Samsung was among those DRAM manufacturers receiving a high score on the matrix, making it a likely litigation target. The Eastern District of Virginia was among the three preferred venues for patent litigation against the targeted DRAM manufacturers. The other two preferred venues were the Northern District of California and the District of Delaware.

In October 1999, Rambus implemented its licensing and litigation plan against Hitachi. DTX5380. By January 2000, Rambus, had been unsuccessful in concluding, on terms satisfactory to it, licensing negotiations with Hitachi. Therefore, Rambus instituted a patent infringement action against Hitachi in the District of Delaware. DTX3673. That action was subsequently transferred to the Northern District of California. The litigation against Hitachi was settled on June 22, 2000.

On June 23, 2000, Rambus asserted the '804 patent against Infineon. DTX167. As envisioned by Rambus' licensing and litigation strategy, when a settlement did not occur in short order, Rambus initiated an action against Infineon in this Court on August 8, 2000 (styled Rambus v. Infineon Tech. AG). The patents-in-suit in that action were the same as those that are at issue in this action.

C. The Samsung/Rambus License Negotiations and Termination

Rambus executed a patent license agreement with Samsung in October 2000. Under that agreement, Samsung was permitted to use certain Rambus technology, including that which is the subject of all four patents-in-suit in this action, in the manufacture of DRAM and other products. Under the original Samsung/Rambus license executed in October 2000, Samsung was obligated to pay a running royalty that was a percentage of sales revenue for SDRAM, DDR-DRAM and controller products made by Samsung.⁴

In the fall of 2000, and into 2001, the Rambus/Infineon litigation progressed, and the case went to trial in April 2001. Under circumstances not here pertinent, judgment of non-infringement was entered against Rambus on its patent claims and a verdict was returned against Rambus on Infineon's fraud counterclaims.⁵

Also, in 2001, Samsung and Rambus entered into an amendment of the original license agreement. Pursuant to the amended agreement, royalties of SDRAM and DDR-DRAM products were payable on a fixed installment basis and royalties on controller products were paid as a percentage of sales (running royalty). August 23 Tr., pp. 55-56.

In 2003, for reasons not pertinent here, the United States Court of Appeals for the Federal Circuit remanded the case to this Court for further proceedings. The proceedings on remand were delayed by further appellate proceedings, but began in earnest in January 2004 and the case was set for trial in May 2004 but was delayed until February 2005.

In July 2004, Rambus and Samsung began to discuss: (a) differences of opinion respecting royalties that were due; (b) Rambus' desire for an audit of Samsung sales data; and (c) potential renewal of the original license agreement which was due to expire on June 30, 2005.⁶ Over the next several months, those discussions proceeded with both parties mindful that Rambus was once again in litigation with Infineon in the Eastern District of Virginia and also was in litigation with Hynix and others in the Northern District of California. Samsung Ex. 1.

On March 21, 2005, Rambus and Infineon announced the settlement of the action filed by Rambus against Infineon in this Court. The settlement took the form of broad licensing agreements. The next day, March 22, 2005, Rambus notified Samsung that it was terminating the 2001 amendment to the 2000 licensing agreement in accordance with the terms of the agreement. The event cited as the basis for the termination was the Rambus/Infineon settlement. Rambus Ex. 2.

Samsung responded with a request for information so that it could determine the extent to which, if any, the Rambus/Infineon licensing agreement reached in the settlement provided Samsung any rights under the most favored nation provision of its original October 2000 licensing agreement. Rambux Ex. 3. Discussions on those topics continued, along with efforts to renew the license between Rambus and Samsung.

In the course of those discussions, Rambus advised that, in its pending antitrust case against Hynix and Micron, Rambus had discovered "some new issues related to Samsung." Samsung Ex. 2. Rambus then informed Samsung that, in view of those developments and considering the short time before expiration of the license agreement (June 30, 2005), Rambus had concluded that it would not be able to reach a renewal of the five-year patent license with Samsung. Id. Rambus also expressed a desire to avoid any further damage to its relationship with Samsung and, to that end, suggested on "a one year Standstill Agreement between the parties." Id.

Under the Standstill Agreement, each party would agree not to file an action against the other for a period of one year beginning on July 1, 2005. This was defined as "the Standstill Period." During the Standstill Period, Samsung would pay royalties calculated on the royalty rate in the Rambus/Infineon settlement agreement but based on Samsung's DRAM revenue. During the Standstill Period, the parties would attempt to negotiate a renewal of the five-year patent license agreement. Id.

On June 3, 2005, Samsung responded with a counter-proposal that included the same Standstill Agreement but different financial terms. Samsung Ex. 3; August 23 Tr., p. 63. Neither Rambus' nor Samsung's proposal contained a provision allowing one party the right to file suit first or to select a venue. August 23 Tr., p. 70, Samsung Ex. 2 and Samsung Ex. 3. The parties scheduled a meeting in California on June 6, 2005 to discuss the payment terms that would obtain during the standstill period.

However, at that meeting, Rambus had a different agenda. It presented Samsung with a letter pursuant to which Samsung would agree not to initiate legal action respecting any Rambus patents until the earlier of (a) Rambus having filed litigation first in the venue of its choice;...