Robinson, Sue L., United States District Judge
In a patent infringement suit, defendant’s conduct of
engaging in a systematic destruction of evidence to set itself up for a new litigation
strategy of challenging patent competitors was so egregious as to warrant a
sanction of finding the challenged patent unenforceable.
Defendant, a computer technology company, held patents to a number of systems for improving computer processor speed. When other companies began creating competing systems, defendant started losing market share. As a result, defendant decided to implement a new business strategy that involved strengthening their patent portfolio, licensing patented technology to manufacturers, and threatening suit against competitors.
In furtherance of the "threatening suit" aspect of the new business strategy, defendant conducted a number of meetings with attorneys to develop a litigation strategy (and created and sent emails about it). Defendant’s new litigation strategy included a document retention policy that actually called for the destruction of back-up emails and other information in preparation for litigation. Defendant’s employees were instructed on the type of documents to target for destruction and the type of documents that should be saved.
All but one of defendant’s back-up email tapes were destroyed. The one surviving tape contained information that helped establish a conception date for defendant’s patented invention. Defendant also conducted two “shred days” during which hundreds of boxes of documents were destroyed. Following the final shred day, defendant implemented a litigation hold. All of these steps were taken in order to make defendant “battle ready” for litigation with 30 days notice.
In August, 2000, a year after the final shred day, defendant emailed plaintiff’s CEO and threatened patent infringement litigation. Plaintiff soon after filed a claim seeking a declaratory judgment of non-infringement. The trial court originally granted plaintiff’s motion, found that defendant committed spoliation in bad-faith, and imposed sanctions. Defendant appealed and the circuit court affirmed but remanded for further determination of the appropriate sanction.
On remand, the court found that defendant committed spoliation in bad faith, caused prejudice to plaintiff, and declared the appropriate sanction was to find the patent-in-suit unenforceable. The court held that defendant was required to institute a litigation hold when it implemented a business strategy to pursue litigation. As such, spoliation occurred when defendant destroyed documents in preparation for trial. Defendant’s spoliation was done in bad faith, the court held, because the document destruction was executed selectively and as part of defendant’s litigation strategy. Defendant’s bad faith spoliation prejudiced plaintiff to a large degree and warranted sanctions from the court.
In determining the correct sanction for spoliation, the court considered the degree of fault of the defendant, the degree of prejudice to the plaintiff, and whether or not a less severe punishment would avoid substantial unfairness to the potential adverse parties (in this case, plaintiff and other alleged infringing competitors under their litigation strategy business plan). After considering these factors, the court held that declaring the patent-in-suit unenforceable was the appropriate sanction. Defendant intentionally destroyed evidence in bad faith in order to impair potential adverse parties. The spoliation caused severe prejudice to plaintiff, and none of the lesser sanctions would properly punish defendant for their intentional, systematic spoliation of evidence. As such, the court upheld its prior ruling that the patents-in-suit be held unenforceable against plaintiff.
v.
RAMBUS INC., Defendant.
Rambus Inc., Counterclaim Plaintiff,
v.
Micron Technology, Inc., Micron Electronics, Inc., and Micron Semiconductor Products, Inc., Counterclaim Defendants
Counsel
Frederick L. Cottrell, III, Esquire, and Anne Shea Gaza, Esquire of Richards, Layton & Finger, PA, Wilmington, DE. Of Counsel: William C. Price, Esquire, and Robert J. Becher, Esquire of Quinn Emanuel Urquhart Oliver & Hedges, LLP, and Jared Bobrow, Esquire of Weil Gotshal & Manges LLP, for Plaintiff/Counterclaim Defendants.Mary B. Graham, Esquire, and Rodger D. Smith II, Esquire of Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE. Of Counsel: Gregory P. Stone, Esquire, of Munger, Tolles & Olson LLP, and Charles W. Douglas, Esquire, Thomas K. Cauley, Jr., Esquire, Brian A. McAleenan, Esquire, Rollin A. Ransom, Esquire, and Michelle B. Goodman, Esquire of Sidley Austin LLP, for Defendant/Counterclaim Plaintiff.