Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_00-cv-20905/USCOURTS-cand-5_00-cv-20905-6/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

 

E-filed: 8/22/06

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

HYNIX SEMICONDUCTOR INC., HYNIX

SEMICONDUCTOR AMERICA INC.,

HYNIX SEMICONDUCTOR U.K. LTD., and

HYNIX SEMICONDUCTOR

DEUTSCHLAND GmbH,

Plaintiffs,

v.

RAMBUS INC.,

Defendant.

No. CV-00-20905 RMW

ORDER STAYING PHASE III OF TRIAL

PENDING FINAL ORDER OF THE

FEDERAL TRADE COMMISSION

The court raised the issue with the parties as to the effect on Phase III of the pending trial of

the August 2, 2006 Federal Trade Commission Opinion that Rambus violated Section 2 of the

Sherman Act. As the court anticipated, the parties responded with diametrically opposed opinions. 

Hynix wants a stay of Phase III. It contends, among other things, that the Final Order of the

Commission will have significant impact on the admissible evidence for Phase III, that the "specter

of industry-wide relief changes the settlement calculus and should be given time to germinate"

(Hynix's Brief filed 8/11/2006, p. 17:22-23), and that proceeding forward at this time has the

potential for discriminatorily impacting Hynix's ability to compete with other DRAM manufacturers. 

Rambus, on the other hand, argues that Phase III should proceed as scheduled, that the

Case 5:00-cv-20905-RMW Document 2394 Filed 08/22/06 Page 1 of 10
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1 This reflects the rates the court found appropriate in its Order Granting Hynix's

Motion for a New Trial on the Issue of Damages Unless Rambus Elects Remittitur of the Jury

Award.

ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

2

Commission's Final Order will have no evidentiary effect on the trial, and that a stay will allow

Hynix to continue infringement of Rambus's patents pending resolution of Phase III. The court has

considered this matter at great length including reading the parties' briefs, allowing the parties to

thoroughly argue the matter, and doing considerable independent research on various issues. The

court concludes that a stay until February 2, 2007 or the issuance of a Final Order of the

Commission, whichever occurs first, is appropriate on the condition that (1) Hynix posts security

satisfactory to the court that will ensure payment of the damages that were awarded to Rambus in

Phase II, prejudgment interest on the Phase II award, and royalties on Hynix's SDRAM and DDR

SDRAM sales from January 1, 2006 through February 2, 2007 at the rate of 1% for the SDRAM and

4.25% for the DDR SDRAM1

; and (2) Hynix designates with specificity, within ninety days of the

date of this order, any findings by the Commission that it contends should be accorded prima facie

effect in Phase III (including the reasons supporting why prima facie weighting should be granted)

and a motion for summary adjudication on any claims it is making in Phase III that it asserts are

subject to summary adjudication as a result of the Commission's Opinion. The stay is conditioned

upon Hynix's agreement to these conditions and the posting of the required security within ten days

of the date of this order. The stay will not apply to any request for certification for interlocutory

appeal, and appeal if certification is given, of the issues resolved in Phases I and II.

ANALYSIS

A district court has inherent power to control the disposition of the causes on its

docket in a manner which will promote economy of time and effort for itself, for

counsel, and for litigants. The exertion of this power calls for the exercise of a

sound discretion. Where it is proposed that a pending proceeding be stayed, the

competing interests which will be affected by the granting or refusal to grant a

stay must be weighed. Among these competing interests are the possible damage

which may result from the granting of a stay, the hardship or inequity which a

party may suffer in being required to go forward, and the orderly course of

justice measured in terms of the simplifying or complicating of issues, proof, and

questions of law which could be expected to result from a stay.

CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). After weighing the competing interests,

the court finds a stay appropriate. The two primary factors that justify the stay are: (1) the increased

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2 The court recognizes that Infineon could still be in an advantageous position given its

settlement with Rambus following the dismissal of Rambus's claims against it based upon unclean

hands (spoliation of evidence).

ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

3

potential for a resolution of this case and the several other litigations between Rambus and various

DRAM manufacturers once the parties know what industry-wide remedy the Federal Trade

Commission will impose and (2) the difficulty and time that will be needed to sort out what findings

from the Federal Trade Commission will be admissible in Phase III, a process that can begin during

the stay. 

The Federal Trade Commission's remedy will have industry-wide application and

presumably will establish "reasonable royalty rates for JEDEC-compliant products affected by

Rambus's exclusionary conduct" (FTC Opn., p. 119). Although such a remedy will not resolve all

the pending issues between Rambus and Hynix, it will necessarily have a significant impact on any

future relationship between the parties and between Rambus and the DRAM manufacturing industry. 

As the court has previously observed, this case cries out for a business solution as the future success

of each company would appear to depend, in significant part, on a business relationship between the

two. For reasons of which the court is not privy (all court sponsored settlement discussions have

been referred to another judicial officer), the parties to date have apparently not come close to

settlement. If the Federal Trade Commission sets reasonable royalty rates, Hynix will no longer be

at a potential disadvantage vis-a-vis its competition, a concern that it has voiced at various times.2

The prospect for industry-wide relief changes the landscape significantly and the potential for that

relief motivating a settlement between Rambus and Hynix (and between Rambus and other DRAM

manufacturers) justifies a stay in this case. The court recognizes that the Federal Trade Commission

remedy will not resolve a number of issues between the parties, such as the royalty rate that Rambus

may demand for DDR2 SDRAM. Nevertheless, the remedy that will be ordered by the Federal

Trade Commission will potentially cause, and should cause, the parties to re-evaluate their positions.

The court is, however, concerned that waiting for the Federal Trade Commission to issue its

Final Order will delay the resolution of Phase III for an unreasonable length of time. Therefore, a

status conference is set for February 2, 2007 if a remedy has not yet been determined. At that time,

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ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

4

the court can consider whether a continued stay is justified.

Rambus argues that a stay is not appropriate because, among other reasons, the Federal

Trade Commission Opinion and the findings therein are not admissible in the Phase III trial. The

court concludes otherwise. The governing statute is 15 U.S.C. § 16(a) which reads:

A final judgment or decree heretofore or hereafter rendered in any civil or

criminal proceeding brought by or on behalf of the United States under the

antitrust laws to the effect that a defendant has violated said laws shall be prima

facie evidence against such defendant in any action or proceeding brought by any

other party against such defendant under said laws as to all matters respecting

which said judgment or decree would be an estoppel as between the parties

thereto: Provided, That . . . . Nothing contained in this section shall be construed

to impose any limitation on the application of collateral estoppel, except that, in

any action or proceeding brought under the antitrust laws, collateral estoppel

effect shall not be given to any finding made by the Federal Trade Commission

under the antitrust laws or under section 45 of this title which could give rise to

a claim for relief under the antitrust laws.

15 U.S.C. § 16(a). Thus, the admissibility of the Federal Trade Commission Order, or findings

therein, in Phase III of the trial depends on whether the Commission's Order satisfies the

requirements of that section that the Order be: (1) a final judgment or decree (2) rendered in any

civil or criminal proceeding (3) brought by or on behalf of the United States (4) under the antitrust

laws, (5) to the effect that a defendant has violated said laws. Requirements 2, 3 and 5 are

indisputably met. Requirement (1) has not been satisfied. The parties dispute the finality of the

Federal Trade Commission Order. The court defers the finality question until after the Commission

issues its remedy.

Whether requirement 4 has been met is the most difficult question. The issue, for which

there is a dearth of authority providing guidance, is what is meant by the phrase "brought under the

antitrust laws." Rambus contends that the proceeding resulting in the Commission's Order was not

brought under the antitrust laws because the complaint was brought pursuant to Section 5 of the

Federal Trade Commission Act. Rambus argues that based on the last sentence of 15 U.S.C. § 16(a)

(which refers to the antitrust laws and Section 5 of the Federal Trade Commission Act separately),

the first sentence by necessary implication precludes use of the Opinion as prima facie evidence

because that sentence only refers to actions brought under antitrust laws, and Section 5 of the

Federal Trade Commission Act is not an antitrust law. Hynix argues that the Commission expressly

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3 Hynix also asserts that collateral estoppel applies as to its equitable estoppel defense

on the same grounds.

4 Section 5(a) of the Clayton Act was codified as 15 U.S.C. §16(a). In this order

references to Section 5(a) of the Clayton Act and 15 U.S.C. § 16(a) are used interchangeably.

ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

5

undertook to consider and did determine that Rambus violated Section 2 of the Sherman Act. 

Therefore, submits Hynix, the Commission brought action against Rambus under the antitrust laws. 

Hynix further asserts that the Commission Opinion has collateral estoppel effect on its unfair

competition claim against Rambus because that claim is not an antitrust claim and § 16(a) expressly

provides that nothing in the section imposes any limitation on the application of the doctrine except

in antitrust cases.3

The legislative history does not appear to support a conclusion that Congress intended to

withhold its grant of prima facie effect based on what was set forth in the complaint before the

Commission regardless of the actual findings by the Commission. "Congress'[s] intent in enacting

the original version of Section 5 [of the Clayton Act]4 was 'to minimize the burdens of litigation for

injured private suitors by making available to them all matters previously established by the

Government in antitrust actions.'" Pool Water Prods. v. Olin Corp., 258 F.3d 1024, 1030 (9th Cir.

2001) (quoting Emich Motors Corp. v. Gen. Motors Corp., 340 U.S. 558, 568 (1951)). The

legislative history explains Congress's intent in providing for prima facie effect to findings of the

Commission:

When Congress enacted Section 5(a) [of the Clayton Act] in 1914 the common

law of collateral estoppel had not developed to the point that a private plaintiff

could receive any evidentiary effect from a successful government antitrust

judgment. Thus, in according government judgments prima facie effect in

subsequent proceedings, the Congress gave an antitrust plaintiff more than the

common law then permitted, and as much as was thought to be constitutionally

permissible. Congress hoped that the plaintiff, by relying on the prima facie

effect of a prior government antitrust judgment, would not have to relitigate the

entire government case in order to redress his injuries. The result would be a

saving of litigation costs and the enhancement of the deterrent effect of the

antitrust laws.

H. Rep. No. 96-874, *4 (1980 U.S.C.C.A.N. 2752, 2754); see also McCook v. Standard Oil Co., 393

F. Supp. 256, 259-60 (C.D. Cal. 1975) (noting that the statutory history of Section 5(a) of the

Clayton Act "seems to suggest that Congress only intended to set a minimum standard for the effect

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5 Congress went on to state that the bill (H.R. 4046) "amends that provision to provide

that the statute shall not be construed to preclude the application of the common law doctrine of

collateral estoppel in a subsequent proceeding." H. Rep. No. 96-874, *3 (1980 U.S.C.C.A.N. 2752,

2753). There is no indication that the amendments change or restrict the original grant of prima

facie effect in 1914. 

ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

6

of prior government antitrust judgments, thereby leaving the courts free to apply in accordance with

constitutional limitations any common law doctrines which would increase the effect of the prior

judgment beyond the prima facie evidence standard") (citing Emich Motors Corp. v. Gen. Motors

Corp., 340 U.S. at 567-68; City of Burbank v. Gen. Elec. Co., 329 F.2d 825, 831 (9th Cir. 1964);

Minnesota Mining & Mfg. Co. v. N. J. Wood Co., 381 U.S. 311, 319 (1965); 51 Cong. Rec. 16,276

(Oct. 7, 1914); S. Rep. No. 698, 63rd Cong., 2d Sess., 45 (July 22, 1914)). Congress's intent to

accord prima facie effect to the extent "constitutionally permissible" does not support the restrictive

interpretation of the phrase "brought under the antitrust laws" proposed by Rambus. Where the

Commission makes explicit findings of violation of the antitrust laws that are at issue in a

subsequent private civil action, conferring prima facie weighting to such findings would seem to

further Congress's intent to avoid relitigation and promote judicial economy. 

Further, the legislative history, though not explicit, suggests that whether prima facie effect

is conferred turns on whether the Commission's findings were based on the antitrust laws. For

example, the legislative history to the 1980 amendments of 15 U.S.C. § 16(a) explained: "Section

5(a) of the Clayton Act currently provides that a final judgment or decree in a government action in

which a defendant was found to have violated the antitrust laws can be given rebuttable prima facie

effect in subsequent antitrust actions."5

 H. Rep. No. 96-874, *3 (1980 U.S.C.C.A.N. 2752, 2753)

(emphasis added). In comparing the then newly-added collateral estoppel provision in 15 U.S.C. §

16(a), Congress indicated "While the amended bill precludes application of collateral estoppel to

certain types of agency findings in a subsequent proceeding under the antitrust laws, any agency

findings qualified for Section 5(a) treatment [under the Clayton Act] will continue to be eligible for

prima facie effect." H. Rep. No. 96-874, *7 (1980 U.S.C.C.A.N. 2752, 2757). Thus, Congress does

not appear to have restricted the application of prima facie effect to the particular charges filed

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6 It is not disputed that either the FTC or the Justice Department may enforce the

antitrust laws. See http://www.ftc.gov/ftc/antitrust.htm. ("The antitrust laws are enforced by both

the FTC's Bureau of Competition and the Antitrust Division of the Department of Justice. In order

to prevent duplication of effort, the two agencies consult before opening any case. All criminal

antitrust enforcement is handled by the Antitrust Division."). 

7 Neither the cases cited by the parties nor the additional case law considered by the

court addressed the precise issue of the prima facie effect of explicit findings of violation of the

antitrust laws, (see, e.g., FTC Opn., p. 27), in a Federal Trade Commission proceeding where the

complaint was brought pursuant to Section 5 of the Federal Trade Commission Act. See also

Concurring Opinion of Commissioner Leibowitz at p. 1, which observed that the Commission found

that Rambus's conduct met all of the requisite elements of a Section 2 violation, and that the

Complaint Counsel did not litigate the matter as a pure Federal Trade Commission Act Section 5

violation. 

ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

7

before the Commission, but rather to have viewed the statute as applying to the particular findings

made by the Commission.6

Though limited, the applicable case law appears to further support that it is the findings of

the Commission that are relevant to a determination of whether prima facie effect applies.7

 In Emich

Motors, the Court held that the plaintiffs were "entitled to introduce the prior judgment to establish

prima facie all matters of fact and law necessarily decided by the conviction and the verdict on

which it was based." 340 U.S. at 414. The Court reasoned: "We think that Congress intended to

confer, subject only to a defendant's enjoyment of its day in court against a new party, as large an

advantage as the estoppel doctrine would afford had the Government brought suit." Id. at 413-14. 

Similarly, in Farmington Dowel Products Co. v. Forster Manufacturing. Co., 421 F.2d 61, 73 (1st

Cir. 1970), the First Circuit held "we conclude that the critical question is whether the safeguards of

the Commission are substantial enough to assure the defendant the 'day in court' which the authors

of Section 5(a) [of the Clayton Act] intended for him before that section was applied against him." 

Therefore, whether the defendant is assured its "day in court" turns not on what is stated in the

complaint before the Commission, but on an application of the general principles of estoppel to the

findings at issue. See Emich Motors, 340 U.S. at 414 (noting that "[t]he evidentiary use which may

be made under § 5 [of the Clayton Act] of the prior conviction of respondents is thus to be

determined by reference to the general doctrine of estoppel" and "[s]uch estoppel extends only to

questions distinctly put in issue and directly determined in the criminal prosecution"); see also Pool

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ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

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Water Prods., 258 F.3d at 1030-31 (Section 5 [of the Clayton Act] "makes available to a private

litigant as prima facie evidence all matters respecting which said judgment or decree would be an

estoppel between the defendant and the United States.") (internal quotations and citation omitted). 

As applied here, express findings by the Commission of violations of the antitrust laws could serve

as estoppel as between Rambus and the United States, were the government to bring the action

directly against Rambus. Thus, the application of prima facie weighting in Phase III to particular

findings made by the Commission depends on whether such application would accord with the

common law principles of estoppel.

The court is satisfied that there is sufficient potential that certain findings made by the

Commission will have prima facie effect on Phase III to support its decision to stay Phase III. The

court makes clear that for purposes of this order the court does not decide the questions of whether

and which particular findings by the Commission are entitled to prima facie evidentiary value. See

Int'l Shoe Mach. Corp. v. United Shoe Mach. Corp., 315 F.2d 449, 454 (1st Cir. 1963) (noting that

"before a plaintiff can invoke the mantle of Section 5 [of the Clayton Act] he must successfully meet

both the statutory requirements of estoppel as well as the generic evidentiary test of

admissibility—relevancy"). Here, Hynix bears the burden of establishing the applicability of

Section 5(a) of the Clayton Act to each finding by the Commission for which prima facie weighting

is sought, including the effect of any difference in burdens of proof in the proceeding before the

Commission. See Pool Water Prods., 258 F.3d at 1033 ("It is up to the party seeking prima facie

weight to establish that it has met the requirements of Section 5 [of the Clayton Act] for each issue

as to which it seeks prima facie weight. Neither the district court nor the defendant is required to

engage in a 'hunt and peck' exercise to ferret out potentially relevant and necessary findings."). 

Further, for purposes of this order, the court does not reach the question of whether collateral

estoppel applies, as Hynix contends, to Hynix's unfair competition claim or equitable estoppel

defense. 

ORDER

For the foregoing reasons, the court orders that the Phase III trial is stayed until February 2,

2007 or the issuance of a Final Order of the Commission, whichever occurs first, on the condition

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8 As noted above, this reflects the rates the court found appropriate in its Order

Granting Hynix's Motion for a New Trial on the Issue of Damages Unless Rambus Elects Remittitur

of the Jury Award.

ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

C-00-20905 RMW

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that (1) Hynix posts security satisfactory to the court that will ensure payment of the damages that

were awarded to Rambus in Phase II, prejudgment interest on the Phase II award, and royalties on

Hynix's SDRAM and DDR SDRAM sales from January 1, 2006 through February 2, 2007 at the rate

of 1% for the SDRAM and 4.25% for the DDR SDRAM8; and (2) Hynix designates with specificity,

within ninety days of the date of this order, any findings by the Commission that it contends should

be accorded prima facie effect in Phase III (including the reasons supporting why prima facie

weighting should be granted) and a motion for summary adjudication on any claims it is making in

Phase III that it asserts are subject to summary adjudication as a result of the Commission's Opinion. 

The stay is conditioned upon Hynix's agreement to these conditions and the posting of the

required security within ten days of the date of this order. The stay will not apply to any request for

certification for interlocutory appeal, and appeal if certification is given, of the issues resolved in

Phases I and II. A status conference is set for February 2, 2007 if a remedy has not yet been

determined.

DATED: 8/22/2006

RONALD M. WHYTE

United States District Judge

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ORDER STAYING PHASE III OF TRIAL PENDING FINAL ORDER OF FEDERAL TRADE COMMISSION

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THIS SHALL CERTIFY THAT A COPY OF THIS ORDER WAS PROVIDED TO:

Counsel for plaintiff:

Daniel J. Furniss

Theodore G. Brown, III

Jordan Trent Jones

Townsend & Townsend & Crew LLP

379 Lytton Ave

Palo Alto, CA 94301

Patrick Lynch

Kenneth R. O'Rourke

O'Melveny & Myers

400 So Hope St Ste 1060

Los Angeles, CA 90071-2899

Kenneth L. Nissly

Susan van Keulen

Geoffrey H. Yost

Thelen Reid & Priest LLP

225 West Santa Clara Street, 12th Floor

San Jose, CA 95113-1723

Allen Ruby 

Ruby & Schofield 

125 South Market Street, Suite 1001 

San Jose, CA 95113-2285 

Counsel for defendant:

Gregory Stone

Kelly M. Klaus

Catherine Augustson

Munger Tolles & Olson

355 So Grand Ave Ste 3500

Los Angeles, CA 90071-1560

Peter A. Detre

Carolyn Hoecker Luedtke

Munger Tolles & Olson

560 Mission Street, 27th Floor

San Francisco, CA 94105-2907

Peter I Ostroff

Rollin A. Ransom 

Michelle B. Goodman

V. Bryan Medlock, Jr.

Sidley Austin Brown & Wood

555 West Fifth Street, Suite 4000

Los Angeles, CA 90013-1010

Jeannine Yoo Sano

Pierre J. Hubert

Dewey Ballantine

1950 University Avenue, Suite 500

East Palo Alto, CA 94303

Date: 8/22/06 SPT 

Chambers of Judge Whyte

Case 5:00-cv-20905-RMW Document 2394 Filed 08/22/06 Page 10 of 10