Destruction of Documents Pursuant to Document Retention Policy Results in Dispositive Sanctions Where Policy was Created as Part of Litigation Strategy and Thus Litigation was Reasonably Foreseeable

Micron Tech., Inc. v. Rambus, Inc., 255 F.R.D. 135 (D. Del. 2009)

In this case arising from Micron’s alleged infringement of Rambus’ patents, a bench trial was held on the issue of Rambus’ alleged spoliation of relevant documents pursuant to a document retention policy it had recently implemented.  The court ruled that Rambus had intentionally spoliated documents in bad faith.  As a sanction, the court declared the patents in suit unenforceable against Micron.

The actions resulting in sanctions in this case took place over a number of years, beginning in 1990 when Rambus filed a patent application containing its DRAM (dynamic random access memory) inventions.  In the following years, as the patents were issued and Rambus became more involved in the industry, suspicions grew that other DRAM manufacturers were infringing on Rambus technology to develop competing products.  Accordingly, Rambus developed a strategy to force suspected infringers to license Rambus’ technology with a high royalty or be sued.

Over the years, Rambus took significant steps toward the implementation of its licensing and litigation strategy.  Substantial portions of that strategy were developed and carried out by Rambus’ VP of Intellectual Property, Joel Karp, who was hired in 1997 to work on the licensing program pursuant to the identified strategy.

In January 1998, Rambus CEO, Geoff Tate, instructed Karp to prepare a presentation for the Board of Directors discussing, inter alia, a licensing framework and a litigation strategy.  In preparation, Karp met with litigation counsel.  Notes from that meeting indicated Rambus’ desire to work out a strategy to “go in quickly [and] proceed to either license or litigation.”  The notes contained several mentions of a “litigation strategy” and readiness for litigation.  Subsequent meetings included a “claim chart” prepared by Karp outlining his evidence of alleged infringement and discussions of specific next steps, including “gathering critical documents and implementing a document retention policy.”  The court’s footnotes indicate Karp’s characterization of a document retention policy as making Rambus “battle ready.”

In March 1998, Karp presented a litigation strategy to be implemented upon failure of licensing negotiations.  The strategy included the creation of a document retention policy which Karp stated was necessary to prepare for “upcoming battle.”  Rambus proceeded to implement Karp’s strategy.  According to the court, “[o]ne of the reasons for implementing the policy was to allow Rambus to purge documents…from its files that might be discoverable in litigation.”

Throughout 1998 and 1999, Rambus continued to implement its licensing and litigation strategy, including implementing the document retention policy and announcing changes to the backup tape retention policy to lessen the length of time data was retained.  In July, 1998, Karp disseminated the document retention policy to employees and gave several presentations regarding the same.  The court’s footnotes indicate that Karp’s presentation instructed employees to “look for things to keep” to strengthen Rambus’ position.  Conversely, Karp also explained to engineers that one category of documents they should not keep was anything “questioning the patentability of Rambus inventions.”  The court also noted one of the advising attorney’s characterizations of the policy as a “Document Retention/Destruction Policy” and a “precursor to litigation.”

In September 1998, Rambus employees participated in “Shred Day” during which documents were destroyed pursuant to the new policy.  Approximately 400 boxes of documents were destroyed.

Despite a decision to delay commencement of litigation while Rambus continued to pursue relationships with other companies, preparation for potential litigation continued.  Specifically, sometime after November 1998, Karp circulated a memo identifying his proposed strategy in the event that Intel, a major partner, moved to competing technology, including identification of potential targets, causes of action, and “fora if negotiations…failed.”

In April 1999, Karp, pursuant to prior advice from counsel to rid the patent files of all but the official record, instructed one of its outside attorneys to begin “clearing out” his Rambus patent files.  By that time, Rambus had already purged its corresponding files.  Counsel obliged, and many unique documents were destroyed.  Meanwhile, preparation for potential litigation remained ongoing.

In August 1999, Rambus held another shred day.  Approximately 300 boxes of documents were destroyed.

Time passed and Rambus’ relationships with other companies, specifically Intel, eventually weakened.  Rambus determined that it must substantiate its patent claims through a lucrative licensing deal or by winning in court.  In September 1999, Rambus decided to set an example by suing Hitachi for infringement.  The parties settled and Hitachi entered into a licensing agreement for non-compatible DRAM products.  Following that, Rambus entered into licensing agreements with several other companies.

When Rambus contacted Micron in 2000, however, Micron responded by filing a declaratory judgment action.

In December 2000, a shredding contractor destroyed as many as 480 boxes of Rambus material in connection with an office move.

The action was eventually trifurcated and trial was held on the issue of spoliation.

Having established the facts, including those outlined above, the court identified the essential question before it as whether “Rambus intentionally destroyed documents at a time when litigation was reasonably foreseeable and, if so, what sanctions should be imposed to cure the prejudice to Micron.”  The court indicated the need for “clear and convincing evidence” of spoliation for the imposition of dispositve sanctions and stated specifically that “once intent and prejudice have been established, the court must determine whether their total weight satisfies the clear and convincing standard of proof.”

The court concluded that litigation was reasonably foreseeable no later than December 1998 “when Karp articulated a time frame and a motive for implementation of the Rambus litigation strategy.” The court went on to state:

Moreover, because the document retention policy was discussed and adopted within the context of Rambus’ litigation strategy, the court finds that Rambus knew, or should have known, that a general implementation of the policy was inappropriate because the documents destroyed would become material at some point in the future.  Therefore a duty to preserve arose in December 1998 and any documents purged from that time forward are deemed to have been intentionally destroyed, i.e. destroyed in bad faith.

Finding substantial prejudice to Micron by the destruction of relevant documents, and once again stating its belief that the spoliation was extensive and intentional, the court concluded that the only appropriate sanctions was to declare the patents in suit unenforceable against Micron.

Note: It has been reported that Rambus intends to appeal this decision.  Updates will appear on this site as information becomes available.