Source: https://www.lesi.org/les-nouvelles/les-nouvelles-article-of-the-month/les-nouvelles-article-of-the-month-archives/les-nouvelles-article-of-the-month-january-2014
Timestamp: 2019-04-19 03:22:56+00:00

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Spoliation refers to the destruction or material alteration of evidence, or a party's failure to preserve evidence related to a reasonably foreseeable litigation. Recent high-profile patent cases have been affected by alleged spoliation, including Hynix v. Rambus, Micron v. Rambus, and Samsung v. Apple. Spoliation sanctions can be severe enough to change a litigation's outcome. Therefore, it is crucial that businesses engaged in patenting and licensing technologies understand spoliation law and take steps to preserve documents that may relate to patent litigation. This article reviews the standards for foreseeability relating to patent litigation, how different circuits determine whether to impose spoliation sanctions, and recent examples of spoliation sanctions in patent litigation.
Businesses engaged in patenting and licensing technologies sometimes face litigation.To preserve evidence, companies should have policies in place for retaining documents relating to possible litigation. Failing to preserve certain documents can result in spoliation sanctions, and such sanctions can change a litigation's outcome. Recent high-profile patent cases have addressed the contentious issue of document destruction and demonstrated the serious consequences of spoliation sanctions.
Recent Federal Circuit decisions in Hynix v. Rambus ("Hynix II") and Micron v. Rambus ("Micron II") provide important guidelines regarding documentretention policies for businesses engaged in patent licensing.5 This article reviews the standards for foreseeability relating to patent litigation, how different circuits factor the intent of the alleged spoliator and prejudice to the adverse party when determining sanctions, and recent examples of spoliation sanctions in patent litigation.
Failure to comply with document-preservation obligations can restrain, or even nullify, a party's ability to prevail in patent litigation. On remand, respective district court holdings in both Hynix v. Rambus ("Hynix III") and Micron v. Rambus ("Micron III") subjected Rambus to spoliation sanctions for its conduct.6 Following Hynix III, the California district court applied a monetary sanction of $250 million against Rambus' earlier damage award of approximately $349 million.7 While in Micron III, the district court took a much more severe approach, holding Rambus' patents unenforceable due to spoliation.8 The sections below analyze the lessons from these and other cases relating to spoliation.
Courts have established that when "a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a 'litigation hold' to ensure the preservation of relevant documents."9 When analyzing spoliation claims, courts consider whether litigation was reasonably foreseeable at the time evidence was destroyed.
Pinpointing the moment when litigation becomes foreseeable can be difficult. In the context of patent litigation, trial courts have reached different conclusions when presented with identical facts.10 In Hynix v. Rambus ("Hynix I") and Micron v. Rambus ("Micron I"), courts in the District of Delaware and the Northern District of California, respectively, came to opposite conclusions concerning whether Rambus could reasonably foresee litigation when it destroyed documents, even though both courts considered the same conduct by Rambus.
1. Is the document destruction consistent with a longstanding document retention/destruction policy that is motivated by business needs?
2. Is a patentee on notice regarding potential infringers?
3. Did a party take steps to prepare for litigation before destroying documents?
4. Does the party control when the litigation occurs?
5. Is there a longstanding, mutually beneficial relationship between the parties relating to the patents in suit?
may be foreseeable even when it is only a possible outcome of a patent conflict.
In its March 2013 opinion on spoliation for an employment lawsuit, the D.C. Circuit suggested that even suspicions of a potential future internal investigation may trigger the reasonable foreseeability of litigation. By suggesting this standard, the D.C. Circuit hints at a lower standard for reasonable forseeability; but, how that lowered standard would apply in patent cases seems unclear.
The act of destroying documents alone does not result in spoliation sanctions. Sanctions depend on the conduct of the spoliating party and the prejudice to its adversary's case.55 The severity of sanctions can range from discovery sanctions, such as orders for additional discovery and fee shifting, to casedispositive sanctions.56 Case-dispositive sanctions include adverse-inference jury instructions, striking of pleadings, default judgments, and adjusted damage awards.57 In determining sanctions, courts scrutinize the spoliating party's conduct and state of mind. The type of conduct warranting sanctions varies among the regional circuits.
An innocent party suffers no prejudice if the missing evidence lacks materiality. But if the outcome of the case could depend on the missing evidence, an innocent party may face significant prejudice.
A dispositive sanction, however, would ensure the protection of Micron's interests and remedy the prejudice caused by Rambus' evidence destruction.90 The court concluded that anything less than declaring Rambus' patents unenforceable against Micron "would, in effect, reward Rambus" for taking a risk and destroying documents it knew could be relevant for litigation.
The discussions in the Rambus v. Micron, Rambus v. Hynix, and Apple v. Samsung cases suggest that allegations of spoliation may become an important tactic in high-stakes patent litigation. Given the unpredictability of spoliation law, companies should ensure that their document retention and destruction practices do not make them vulnerable to allegations of spoliation.
While the primary goal of a business' patent strategy may be licensing and monetizing its patents, the Federal Circuit has indicated that these practices may make patent litigation a reasonably foreseeable outcome under many circumstances, even if litigation remains unlikely. Further, when a business takes steps to make patent enforcement part of its business strategy, litigation may become foreseeable. Likewise, once a party becomes aware that its conduct may lead to a patent-infringement claim against it, litigation is foreseeable.
For sanctions, while a showing of bad-faith, evidence destruction may be required to incur spoliation sanctions in some circuits; in other circuits an adverse party need only show willfulness. Even negligent failure to retain documents, such as inadequate disabling of email auto-delete functions, may be enough to incur some type of spoliation sanction. Therefore, companies engaged in patent licensing must make affirmative efforts to ensure that potentially relevant evidence is not lost once litigation becomes reasonably foreseeable under spoliation analysis standards.
The author would like to thank Steven Amundson and Vicki Franks of Frommer Lawrence & Haug LLP for their invaluable assistance with writing this article.
The views expressed in this article do not necessarily reflect those of the firm or its clients.
See Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2012) (citing Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001)).
Hynix Semiconductor, Inc. v. Rambus, Inc., 645 F.3d 1336 (Fed. Cir. 2011); Micron II, 645 F.3d at 1311.
Hynix Semiconductor, Inc. v. Rambus, Inc., Case No. C-00- 20905, 2012 U.S. Dist. LEXIS 135583 (N.D. Cal. 2012); Micron Tech., Inc. v. Rambus Inc., Case No. 1-00-cv-00792, 2013 U.S. Dist. LEXIS 154 (D. Del. 2013).
SK Hynix, Inc. v. Rambus, Inc., Case No. C-00-20905, 2013 WL 1915865 (N.D.Cal. 2013).
Micron III, 2013 U.S. Dist. LEXIS 154 at *72.
Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y. 2003).
See Micron Tech., Inc. v. Rambus Inc., 255 F.R.D. 135 (D. Del. 2009); Hynix Semiconductor, Inc. v. Rambus, Inc., 591 F. Supp. 2d 1038 (N.D. Cal. 2006).
Hynix I, F. Supp. 2d at 1064-65; Micron I, 255 F.R.D. at 150.
Hynix II, 645 F.3d at 1347; Micron II, 645 F.3d at 1325-26.
Zubulake, 220 F.R.D. at 216.
Micron II, 645 F.3d at 1322 (stating the "exact date at which litigation was reasonably foreseeable is not critical to this decision; the real question is binary: was litigation reasonably foreseeable before the second shred day or after?").
Micron II, 645 F.3d at 1317.
Hynix I, F. Supp. 2d at 1044-45.
Micron I, 255 F.R.D. at 150.
Micron II, 645 F.3d at 1325-26.
Hynix I, F. Supp. 2d at 1062.
Id. ("Although Rambus began to plan a litigation strategy as part of its licensing strategy as early as February 1998, the institution of litigation could not be said to be reasonably probable because several contingencies had to occur before Rambus would engage in litigation").
Hynix II, 645 F.3d at 1345-46.
Id. at 1345 (citing Micron II, 645 F.3d at 1320).
Gerlich v. U.S. Dep't of Justice, No. 09-5354, slip op. at 20 (D.C. Cir. Mar. 29, 2013).
Cf. Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006) (stating that a duty to preserve exists when a party had "some notice that the documents were potentially relevant to the litigation before they were destroyed"); Goodman v. Praxair Servs., Inc., 632 F. Supp. 2d 494, 511 (D. Md. 2009).
Goodman, 632 F. Supp. 2d at 511 (stating that when a "letter openly threatens litigation, then the recipient is on notice that litigation is reasonably foreseeable and the duty to preserve evidence relevant to that dispute is triggered.").
See Apple, Inc. v. Samsung Elec. Co., 881 F. Supp. 2d 1132 (N.D. Cal. 2012).
Apple, 881 F. Supp. 2d at 1145.
Sanofi-Aventis Deutschland GmbH v. Glenmark Pharmaceuticals, Ltd., No. 07-CV-5855, 2010 U.S. Dist. LEXIS 65323 (D.N.J. 2010) ("A party claiming work-product immunity bears the burden of showing that the materials in question were prepared in the course of preparation for possible litigation.") (citing Holmes v. Pension Plan of Bethlehem Steel Corp., 213 F.3d 124, 138 (3d Cir. 2000)) (internal quotations omitted).
Micron II, 645 F.3d at 1323-24.
Fed. R. Civ. P. 26(b)(3)(A).
E.g., Micron II, 645 F.3d at 1326.
Fed. R. Civ. P. 37(b)(2).
E.g., Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006) (stating that willful spoliation can result in dismissal); Silvestri, 271 F.3d at 593 (4th Cir. 2001) (stating "even when conduct is less culpable, dismissal may be necessary if the prejudice to the defendant is extraordinary, denying it the ability to adequately defend its case."); Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 463 (S.D.N.Y. 2010) (concluding that sanctions were warranted because "plaintiffs were either negligent or grossly negligent in meeting their discovery obligations.").
Micron II, 645 F.3d at 1328 (noting that "the spoliator bears the heavy burden to show a lack of prejudice to the opposing party because [a] party who is guilty of…intentionally shredding documents…should not easily be able to excuse the misconduct.") (quoting Anderson v. Cryovac, Inc., 862 F.2d 910, 925 (1st Cir. 1988)) (internal quotations omitted).
Turner v. Public Serv. Co., 563 F.3d 1136, 1149 (10th Cir. 2009) (stating "[m]ere negligence in losing or destroying records is not enough because it does not support an inference of consciousness of a weak case.") (quoting Aramburu v. Boeing Co., 112 F.3d 1398, 1407 (10th Cir. 1997)); Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008) (noting that "the crucial element is not that the evidence was destroyed but rather the reason for the instruction."); Condrey v. Suntrust Bank, 431 F.3d 191, 203 (5th Cir. 2005) (stating the "Fifth Circuit permits an adverse inference against the destroyer of evidence only upon a showing of 'bad faith' or 'bad conduct.'").
Rimkus Consulting Grp., Inc. v. Cammarata, 688 F. Supp. 2d 598, 616 (S.D. Tex. 2010).
E.g., Condrey, 431 F.3d at 203.
Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 79 (3d Cir. 1994).
Micron II, 645 F.3d at 1331.
Micron II, 645 F.3d at 1328-29.
Id. at 1326 (citing Schmid, 13 F.3d at 80).
Hynix III, 2012 U.S. Dist. LEXIS 135583 at *117 (N.D. Cal. 2012) ("Hynix III") (citing Leon, 464 F.3d at 959-60).
Apple, 881 F. Supp. 2d at 1150-51.
Micron II, 645 F.3d at 1328.
Micron III, 2013 U.S. Dist. LEXIS 154 at *47; Hynix III, 2012 U.S. Dist. LEXIS 135583 at *82.
Micron III, 2013 U.S. Dist. LEXIS 154 at *50-51; Hynix III, 2012 U.S. Dist. LEXIS 135583 at *18-19.
Micron III, 2013 U.S. Dist. LEXIS 154 at *50-51; Hynix III, 2012 U.S. Dist. LEXIS 135583 at *135.
Micron III, 2013 U.S. Dist. LEXIS 154 at *53.
Micron I, 255 F.R.D. at 151.
Micron III, 2013 U.S. Dist. LEXIS 154 at *74.
Micron II, 645 F.3d at 1329 (alteration in original) (quoting West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 780 (2d Cir. 1999)).
Micron III, 2013 U.S. Dist. LEXIS 154 at *69-70.
Micron III, 2013 U.S. Dist. LEXIS 154 at *64-65.
Hynix III, 2012 U.S. Dist. LEXIS 135583 at *133-34 (stating this "case involves a unique situation in that the dispute between Hynix and Rambus has been fully litigated at great expense to the parties and the public, and there has been considerable delay in getting the issues finally determined. A retrial of the case with either an adverse jury instruction or an evidentiary exclusion order would involve considerably more delay and expense").
Id. at *135 (citing EJA/JEDEC Patent Policy Summary 1993).
SK Hynix, 2013 WL 1915865 at *20.
Don Clark, Rambus Settles Chip Dispute With SK Hynix, The Wall Street Journal (June 11, 2013), http://online.wsj.com/article/SB10001424127887323949904578539720368087016.html.

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