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Hynix Semiconductor Inc. v. Rambus Inc.

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


February 23, 2006

HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., AND HYNIX SEMICONDUCTOR DEUTSCHLAND GMBH, PLAINTIFFS,
v.
RAMBUS INC. DEFENDANT.

The opinion of the court was delivered by: Ronald M. Whyte United States District Judge

ORDER ON MOTION FOR NEW TRIAL OR PERMISSION TO APPEAL

Hynix moves for a new trial on the bifurcated unclean hands defense it asserted, or, in the alternative, for permission to file an interlocutory appeal of the court's determination that the unclean hands defense fails. The court hereby denies both motions.

Hynix's moving papers distort the findings of fact and conclusions of law made by the court. For example, Hynix asserts that the court erroneously applied a "reasonably probable" standard for defining when a firm has a duty to preserve documents relative to potential future litigation rather than a "reasonably foreseeable" standard. Hynix alleges that the "reasonably foreseeable" standard is the correct one and an easier one to meet than the "reasonably probable" standard. A reading of the court's Findings and Conclusions, however, shows that the court specifically framed the issues to be resolved using the "reasonably foreseeable" standard.

The primary question before the court is whether Rambus adopted and implemented its document policy in advance of reasonably foreseeable litigation for the purpose of destroying relevant information. * * * The questions are. . . when litigation by Rambus was reasonably foreseeable and when a duty to preserve evidence arose."

Findings of Fact & Conclusion of Law ("F&C") at 32:6-8;12-15 (emphasis added).

The court did use the term "reasonably probable" litigation when it cited the American Bar Association's Civil Discovery Standard No. 10 which reads that "[w]hen a lawyer who has been retained to handle a matter learns that litigation is probable or has been commenced, the lawyer should inform the client of its duty to preserve potentially relevant documents . . . ." ABA Section of Litigation, Civil Discovery Standards, August 1999, Standard No. 10. The comments to this standard clarify that the "probable" language means that litigation must be more than a possibility.

F&C at 33:2-6

Since "reasonably probable" as used in Standard 10 means "reasonably more than a possibility," there is no significant distinction between the terms "reasonably probable" and "reasonably foreseeable" and the court did not intend the terms to have different meanings. Even if "reasonably foreseeable" were deemed an easier standard to meet, the court's findings would nevertheless support the conclusion that specific litigation became "reasonably foreseeable" shortly before the "beauty contest" in late 1999 from which litigation counsel for the Hitachi matter was selected.

F&C at 37:4-7

Hynix in its brief sounds the dire warning: This [court's] decision sets a precedent disastrous to the integrity of the judicial process, the standards of the legal profession, and the fair adjudication of patent cases. It amounts to an invitation - if not a mandate -for patent holders to destroy compromising evidence as a part of their preparation to assert patent claims against unsuspecting targets, and it maximizes the risk of erroneous decisions.

Hynix Brief in Support of Motion for New Trial p.1:4-10. The court's decision provides no basis for such hyperbole. The court specifically stated following its conclusion that Rambus did not engage in spoliation:

This conclusion does not mean that a party can destroy documents with impunity prior to contemplation of actual litigation. The implementation of a document retention policy that was intentionally designed to discard damaging documents should litigation later become probable or actually commence would be improper.

F&C at 38:9-13

Hynix also complains that the court erroneously placed the burden of proving prejudice on Hynix. Since the court found no spoliation, placing the burden of showing prejudice on Hynix was proper. See, e.g., Pfizer v. International Rectifier Corp., 545 F.Supp 486, 537 (C.D. Cal. 1980). Nevertheless, the court specifically noted that: Further, if spoliation is shown, the burden of proof logically shifts to the guilty party to show that no prejudice resulted from the spoliation. The reason is that it is in a much better position to show what was destroyed and should not be able to benefit from its wrongdoing.

F&C 31:7-9

The court then found that Rambus did establish that adequate similar and material documents to those that may have been destroyed were available and produced.

F&C 42:10-13

For the above and other reasons, the court denies the motion for new trial.

In addition, the court does not find justification for an interlocutory appeal. The court recognizes that it reached a different conclusion than Judge Payne rendered in the Infineon litigation and that this difference may result in some unfair disparity between licensing costs of Infineon and those of other DRAM manufacturers. However, that is not a basis for an interlocutory appeal. Hynix's disagreement appears, in reality, to be with this court's Findings of Fact and how it applied those facts to the applicable legal standards, rather than with the actual legal standards. It does not appear that there are substantial grounds for a difference of opinion as to the legal standards applicable to an unclean hands defense. The motion for an interlocutory appeal is denied.

20060223

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