On Remand, Court Finds Rambus’ Spoliation was in Bad Faith and Resulted in Prejudice, Holds Patents-in-suit Unenforceable Against Micron

Micron Tech., Inc. v. Rambus, Inc., No. 00-792-SLR (D. Del. Jan. 2, 2013)

Following remand from the Federal Circuit, the District Court considered the question of “whether Rambus acted in bad faith when it engaged in spoliation and the nature and extent of any prejudice suffered by Micron as a result . . . .” and found that “Rambus’ spoliation was done in bad faith, that the spoliation prejudiced Micron, and that the appropriate sanction [was] to declare the patents-in-suit unenforceable against Micron.”

This patent infringement case has an interesting history.  Briefly stated, the District Court in the District of Delaware held, in 2009, “that Rambus had engaged in unlawful spoliation of discoverable documents and that the patents-in-suit where unenforceable against Micron as a result.”  (See summary, here.)  The finding of spoliation was affirmed on appeal, but the case was remanded for further consideration of the court’s “bad faith and prejudice determinations . . . as well as the appropriate sanction . . . .”  (See summary, here.)  On remand, the District Court again found that Rambus’ spoliation was in bad faith, that Micron was prejudiced as a result, and that the appropriate sanction was to once again declare the patents-in-suit unenforceable against Micron.

Regarding the question of bad faith, the court noted that “the ‘fundamental element of bad faith spoliation is advantage-seeking behavior by the party with superior access to information necessary for the proper administration of justice’” and identified several “categories of facts” which supported a finding of bad faith in the present case:

1) “facts tending to show that Rambus’ document retention policy was adopted as part of a firm litigation plan,” e.g. statements by Rambus’ VP of Intellectual Property that the document policy at issue was "necessary to prepare for the ‘upcoming battle;’"

2) “facts tending to show that the document retention policy was executed selectively,” e.g. instructions to employees to “look for things to keep” and to discard documents “questioning the patentability of Rambus inventions;”

3) “facts tending to show that Rambus acknowledged the impropriety of the document retention policy,” e.g., keeping information from outside counsel and the VP of IP telling employees he preferred to answer questions in person and to minimize discussion of the document policy on email; and

4) “Rambus’ litigation misconduct,” e.g., misrepresentations by Rambus’ 30(b)(6) deponent (and other employees) including about the number of “shred days” and the presentation of the document retention policy to the Board.

The court summed up is findings of bad faith:

Contrary to Rambus’ assertions, bad faith and the duty to preserve are not coterminous. The Federal Circuit stated that it was "not clear error for the district court to conclude that the raison d’etre for Rambus’ document retention policy was to further Rambus’ litigation strategy by frustrating the fact-finding efforts of parties adverse to Rambus."  Micron II, 645 F.3d at 1322.  This bad faith underlies the entire policy and permeates any action taken pursuant to the policy.  At some point, the bad faith upon which a policy is predicated may dissipate; however, that point has not been reached in the current case as it represents the exact sort of litigation that was meant to be frustrated by the document retention policy.  Therefore, although Rambus’ duty to preserve did not arise until after it first adopted its document retention policy, there was nevertheless bad faith insofar as the document retention policy was executed with the intention to impede the fact-finding efforts of Micron or other potential defendants.

Together, the facts demonstrate that Rambus’ document retention policy was adopted as part of its litigation plan, that Rambus executed its policy selectively, that Rambus acknowledged the impropriety of its policy, and that Rambus engaged in litigation misconduct.  Such findings confirm that Rambus not only intended to destroy selective documents, it did so to impair the ability of potential defendants, such as Micron, to defend themselves.  It is in light of this cumulative evidence that the court finds clear and convincing evidence that Rambus’ spoliation was carried out in bad faith.

Because the court determined that the spoliation was carried out in bad faith, the burden was shifted to Rambus to show a lack of prejudice.  The court found that Rambus did not meet that burden “and that Rambus’ spoliation materially affect[ed] Micron’s substantial rights.”

Accordingly, the court considered an appropriate sanction.  Characterizing Rambus’ destruction of evidence as “the worst type: intentional, widespread, advantage-seeking, and concealed,” the court rejected several sanction options as insufficient and ultimately concluded that “the appropriate sanction [was] to declare the patents-in-suit unenforceable against Micron.”

A copy of the court’s order is available here.