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EXHIBIT A

Case5:00-cv-20905-RMW Document4083-1 Filed11/14/11 Page1 of 78

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FINDINGS OF FACT AND CONCLUSIONS OF LAWWITH RAMBUS MODIFICATIONSC-00-20905 RMW

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

HYNIX SEMICONDUCTOR INC.,HYNIX SEMICONDUCTOR AMERICAINC., HYNIX SEMICONDUCTOR U.K.LTD., and HYNIX SEMICONDUCTORDEUTSCHLAND GmbH,

Plaintiffs,

v.

RAMBUS INC.,

Defendant.

CASE NO. C-00-20905 RMW

FINDINGS OF FACT AND CONCLUSIONSOF LAW ON UNCLEAN HANDS DEFENSEWITH RAMBUS INC.S PROPOSEDMODIFICATIONS

[ANNOTATED VERSION]

Hynixs unclean hands defense to Rambuss patent infringement claims was tried before

the court on October 17 - 19 and October 24 - November 1, 2005. The essential issues were (1)

whether Rambus adopted a document retention plan in order to destroy documents in advance of

a planned litigation campaign against DRAM manufacturers and (2) whether in light of any such

conduct, the court should dismiss Rambuss patent claims against Hynix as a sanction for unclean

hands. The court now issues its Findings of Fact and Conclusions of Law.


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I. FINDINGS OF FACTA. The Current Litigation1. On August 29, 2000, plaintiffs Hynix Semiconductor America, Inc., Hynix

Semiconductor, Inc., Hynix Semiconductor UK, Ltd, and Hynix Semiconductor Deutschland,

GmbH (collectively Hynix)1 filed a complaint, later amended, against Rambus Inc. (Rambus)

that in part sought a declaratory judgment of non-infringement, invalidity, and unenforceability of

eleven Rambus patents. In February 2001, Rambus filed counterclaims asserting that Hynix

infringed those eleven patents. Hynix subsequently answered the counterclaims and asserted

various defenses. Rambus subsequently amended its counterclaims to add four additional patents

2. The patents that have been asserted by Rambus in this case and their issue datesare set out in the following table:

Patent Issue Date Title5,915,105 6/22/99 Integrated circuit I/0 using a high performance bus

interface5,953,263 9/14/99 Synchronous memory device having a

programmable register and method of controllingsame

5,954,804 9/21/99 Synchronous memory device having an internalregister

5,995,443 11/30/99 Synchronous memory device6,032,214 2/29/00 Method of operating a synchronous memory

device having a variable data output length6,032,215 2/29/00 Synchronous memory device utilizing two external

clocks6,034,918 3/7/00 Method of operating a memory having a variable

data output length and a programmable register6,035,365 3/7/00 Dual clocked synchronous memory device

having a delay time register and method ofoperating same

6,038,195 3/14/00 Synchronous memory device having a delay timeregister and method of operating same

6,067,592 5/23/00 System having a synchronous memory device6,101,152 8/8/00 Method of operating a synchronous memory device

6,324,120 11/27/01 Memory device having a variable data output length6,378,020 4/23/02 System having double data transfer rate andintegrated circuit therefor

6,426,916 7/30/02 Memory device having a variable data outputlength and a programmable register

6,452,863 9/17/02 Method of operating a memory device having avariable data input length

1 Hynix was referred to as Hyundai prior to Hyundais merger with LG Semiconductor in1999,.1999.


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3. All of the patents-in-suit are continuation, continuation-in-part, or divisionalapplications based on a single parent application, serial number 07/510,898 (898 application).

4. In January 2005, Hynix moved for leave to add the defense of unclean hands to itspleadings. In an order dated March 7, 2005, this court granted that motion. In a separate order of

the same date, the court ordered that Hynixs unclean hands allegations would be considered by

the court in a separate, initial phase of the trial of the parties respective claims.

5. After conducting a bench trial, the Court rejected Hynixs unclean hands defense,finding that Rambus did not have a duty to preserve evidence at the time of the alleged document

destruction; that Rambus did not act in bad faith; and that Rambuss conduct did not prejudice

Hynix, regardless of whether Rambus or Hynix had the burden of proof on prejudice. See

generallyHynix Semiconductor Inc. v. Rambus Inc., 591 F. Supp. 2d 1038 (N.D. Cal. 2006).

6. On appeal, the Federal Circuit held that this Court applied an incorrect legalstandard in determining when Rambuss duty to preserve evidence arose, and remanded for

reconsideration of the spoliation issue under the framework set forth inMicron II. Hynix

Semiconductor Inc. v. Rambus Inc., 645 F.3d 1336, 1355 (Fed. Cir. 2011) (Hynix II) (citation

omitted); see alsoMicron Technology, Inc. v. Rambus, Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011)

(Micron II). The Federal Circuit declined to opine on the correctness of this Courts findings of

no bad faith and no prejudice. Hynix II, 645 F.3d at 1347 n.2.

B. The Farmwald/Horowitz Patent Applications7. 5. Rambus was founded in 1990 by two professors, Dr. Michael Farmwald and Dr.

Mark Horowitz, who had been working together to address the increasing gap between

microprocessor performance and dynamic random access memory (DRAM) performance.

Trial Transcript (hereinafter Trial Tr.) 600:13-601:5; 1341:15-1343:2; 1540:12-19; HTX

005.001.2

2 HTX ____ refers to Hynixs trial exhibit number ____; RTX ____ refers to Rambuss trialexhibit number _____.


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8. 6. From 1990 to the start of 2005, Geoffry Tate was the Chief Executive Officer ofRambus. Tate is presentlyAt the time of the 2005 unclean hands trial, Tate was the Chairman of

the Board at Rambus. Trial Tr. 1226:9-16.

9. 7. On April 18, 1990, Farmwald and Horowitz filed the 898 application. Trial Tr.at 364:11-365:19; 600:20-601:8; HTX 005.001.

10. 8. The 898 application resulted in a number of continuation and divisional patentapplications (Farmwald/Horowitz family). Rambus received its first issued United States

patent resulting from the 898 application in September 1993. The patents that are at issue in this

case resulted from this process. HTX 005.001.

11. 9. Rambus retained Blakely, Sokoloff, Taylor & Zafman (BSTZ) as outsidepatent counsel from approximately 19811991 through sometime in 2001 or 2002 to prosecute

Rambus patent applications, including many applications from the Farmwald/Horowitz family.

Trial Tr. 784:14-785:2. Lester Vincent, Scot Griffin, and Roland Cortes were patent prosecutors

at BSTZ who worked on the Farmwald/Horowitz family of applications. Trial Tr. 784:14-785:2;

1592:22-1593:9; 1603:14-1604:11.

12. 10. The first of the patents that Rambus has asserted against Hynix in this actionissued on June 22, 1999. Rambuss Answer to Second Amended Complaint and Amended

Counterclaim, filed 11/25/02, at 17-19.

C. Rambuss RDRAM Technology13. 11. Rambus does not manufacture its own products, rather, it licenses its

intellectual property to DRAM manufacturers and collects royalties. Trial Tr. 1250:25-1251:2.

As a company that generates revenue from its intellectual property alone, intellectual property

protection is necessarily important to Rambus.

14. 12. In the 1996 - 1999 time frame, Intel Corporation planned to use RambussRDRAM (Rambus Dynamic Random Access Memory) technology in its next generation of

chipsets to be used with its microprocessors. Trial Tr. 1237:20-1239:1. Because Rambus does

not manufacture products, it relied upon DRAM manufacturers to license Rambuss intellectual

property and produce RDRAM for use in Intels products. Trial Tr. 1251:3-6.


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15. 13. Rambus referred to the RDRAM production by licensed DRAM manufacturersas the Direct RDRAM ramp. Trial Tr. 1238:4-8; 1330:21-24. Direct RDRAM licensees were

granted a narrow license to produce RDRAM. Trial Tr. 1289:1-16. These licenses generally did

not permit licensees to utilize Rambus intellectual property for purposes other than producing

RDRAM pursuant to Rambuss specifications. Other uses of Rambuss technology were referred

to as non-compatible uses, because they were non-compatible with the RDRAM specifications.

Trial Tr. 1356:22-1359:24.

16. Before the late 1996 agreement between Intel and Rambus for the use of RDRAMin next-generation chipsets, Intel already planned to use SDRAM-compatible chipsets. SDRAM

was not in the performance range that would make it competitive with RDRAM. DDR SDRAM

was closer in performance to RDRAM. Intel did not decide to support an alternative DDR-

compatible chipset for PC desktops until 2000 or after. Trial Tr. 1354:24-1355:6.

D. Rambuss Participation in JEDEC17. 14. Between 1992 to late 1995 or early 1996, Rambus was a member of the Joint

Electron Device Engineering Council (JEDEC). Trial Tr. 786:21-795:8; 1148:11-12; 1161:12-

20.

18. 15. Richard Crisp, a program manager for Rambus, was one of Rambussrepresentatives to JEDEC and attended JEDEC meetings on behalf of Rambus from 1992 to late

1995. Trial Tr. 1148:8-11. Billy Garrett was Rambuss other JEDEC representative. RTX 311;

RTX 312.

19. 16. Crisp and Garrett submitted trip reports following each meeting of JEDEC theyattended. Crisp took a Macintosh laptop computer with him and took notes electronically. He

later distributed his JEDEC trip reports to members of the Rambus executive team and others in

the sales division.

20. 17. Between 1992 and late 1995 or early 1996, Crisp, Tate, Tony Diepenbrock(inside patent counsel) and other Rambus executives and employees were informed that

Rambuss participation in JEDEC might pose enforcement problems for some of its patents based

on equitable estoppel for not disclosing to JEDEC Rambuss potential patent coverage of


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products (non-compatible with RDRAM) conforming to JEDEC standards. Trial Tr. 1156:4-

1163:22; HTX 066; HTX 078; HTX 225. Rambus was also informed of this possibility by one of

its outside patent attorneys, Lester Vincent. Trial Tr. 785:3-804:7; HTX 192. This concern was

discussed within Rambus. Id.

E. MoSys License21. 18. In 1996, Rambus initiated patent licensing negotiations with Mosys. Mosys

had been founded by two of Rambuss engineers and, according to Rambus, the Mosys product

shared many characteristics with Rambuss products. Trial Tr. 1382:13-1384:17. Rambus

wanted to avoid any legal battle with Mosys because litigation would have been disruptive,

expensive, and likely unnecessary; Rambus expected to beat them in the marketplace

regardless. Trial Tr. 1384:5-15.

22. 19. Patent negotiations, which Tate stated Rambus was poorly equipped to handle(Trial Tr. 1385:13-16), resulted in MoSys taking a license from Rambus. However, Rambus

determined that since patent licensing negotiations were more complex than it had originally

thought, it needed to hire someone familiar with negotiation of patent licenses to handle future

licensing negotiations. Trial Tr. 1385:17-24.

F. Relationship with Hynix23. 20. Prior to 1998, Rambus and Hynix (then Hyundai) had a licensing agreement

that included an Other DRAM provision, which apparently allowed Hynix to make non-

compatible DRAMs using Rambus Interface Technology for a 2.5% royalty. Trial Tr. 1295:19-

1305:11; HTX 004.004; HTX 087.

24. 21. In July 1998, Rambus attempted to remove or amend the Other DRAMprovision. Id. The reasons apparently were that Rambus wanted Hyundai to increase its

marketing effort and productize the RDRAM device and to be able to claim infringement by

Hyundai if it continued to work on SL DRAM (Synchronous Link DRAM). Id.; Trial Tr. 1038:2-

1039:22.

25. 22. Thereafter, Hynix merged with LG Semiconductor (LGS). At the time ofthe merger, both companies had licenses with Rambus. Id. Hynix attempted to affirm the 1995


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Hynix-Rambus license, asking Rambus to agree to use the royalty rate specified in the Hynix-

Rambus license. Id.

26. 23. Rambus apparently decided to treat the LGS license as governing therelationship between Rambus and the merged company. That agreement apparently did not have

an other DRAM provision. Trial Tr. 1038:2-1039:22.

G. Rambus Formulates its Licensing and Litigation Strategy1. Rambus Hires Joel Karp to Develop a Backup Licensing Strategy

27. 24. Rambus hired Joel Karp in October 1997 to assess its patent portfolio,determine ifnon-compatible chips infringed the patent portfolio, develop licensing strategies for

infringing chips, and negotiate with companies that built and sold such chips. Trial Tr. 356:22-

357:23; RTX 080; HTX 091. In advance of the commencement of Karps employment, Geoff

Tate, Rambuss CEO, sent an e-mail to Rambus executives describing Karps role as to prepare

and then to negotiate to license our patents for infringing drams (and potentially other infringing

ics). HTX 091; RTX 080.

28. Whether Rambus would actually pursue non-compatible licensing was unclear athis time. Tate observed that patents are really just a backup line of defense. RTX 080. He

further explained: the #1 strategy for winning must continue to be having the best solution and

delivering it on time, on spec, within cost commitments and satisfying our customers needs

better than the competitors. I think we are well positioned to do this but we have a LOT to do to

complete our programs/commitments on Direct Rambus and Concurrent Rambus over the next

several quarters. RTX 080. As Allen Roberts, Rambuss vice president of engineering, testified

the discussion of non-compatible licensing within Rambus in 1998 was sort of come and go,

never really went anywhere, and never really took any substance. Trial Tr. 1555:24-

1556:8.

29. One aspect of the uncertainty was the unavailability of infringing devices.Rambus executives knew that potentially infringing devices would have to be analyzed to assess

whether there was infringement before any assertion of patent rights could be made. For instance

before Tate would consider non-compatible licensing negotiations, someone would need to


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demonstrate to him that we had patents that covered the inventions that products that were in the

market actually infringed. And those products needed to be real products that were in

production, because if they were just prototypes, there wasnt much worth in pursuing that kind of

thing because prototypes can change. Trial Tr. 1392:2-11. See also HTX 098.002 ( proposed

strategy reviewed at meeting with outside counsel in February 1998, stating that [o]nce on the

market, Rambus will purchase the competing product before determin[ing] what its next steps

will be). In October 1997, Tate stated in an email that the strategy is to downplay the whole

infringement/IP issue until there is actual infringement. RTX 080. Tate testified that, as of

October 1997, Rambus was not able to show that [Rambuss inventions] were actually being

used, and we didnt want to be having people go out publicly saying that we thought there was

infringement if we couldnt actually back that up or prove it. Trial Tr. 1390:18-1391:4.

30. Further, any licensing strategy was contingent on Rambuss patent portfolio aswell as changing business conditions. Rambus had not determined whether it would make

business sense to seek licenses for non-compatible products. Tates goal was to get our patents

in place and then see if it made business sense for us even to enforce those patents, and if so, go

forward with the licensing plan, and if we did have a licensing plan, we want to think through

what the steps would be and where it could lead us. Trial Tr. 1256:18-1257-12. One issue

Rambus would need to consider was that these companies who would be infringing in the

DRAM field were the same companies that we needed to work with in order to make the

RDRAM successful, among other issues. Trial Tr. 1391:8-12. Tate believed that Rambus

DRAM was on a good trajectory, and if the Rambus DRAM was going to be the bulk of the

market, perhaps it wouldnt be worth the effort and the friction in order to pursue our patent

[rights] with respect to infringing DRAMs. Trial Tr. 1393:3-9.

31. Hynix agrees that as of mid-1998, Rambus believed that RDRAM would becomethe dominant DRAM product in the personal computer industry and would, for all practical

purposes, be the only commodity DRAM. Trial Tr. at 27:18-22. 40:17-21 (Hynix counsel).

32. 25. Before his employment at Rambus, Karp was employed by Samsung fromSeptember 1990 through July 1997. When he left Samsungs employment, he was a senior vice


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president. During his employment with Samsung, Karp attended JEDEC meetings on Samsungs

behalf, describing his role as Samsungs mouthpiece. Karp met Richard Crisp, Rambuss

JEDEC representative, at JEDEC meetings. Trial Tr. 136:16-25.

33. 26. Karp had learned through his experience that the DRAM industry was verylitigious. Trial Tr. 138:23-134:3.

34. 27. While at Samsung, Karp participated in licensing and litigation activities onbehalf of Samsung. Trial Tr. 138:2-22. In one action against Texas Instruments (TI), Karp

submitted a declaration asserting that TI was subject to equitable estoppel because it was contrary

to industry practice for an intellectual property owner to remain silent during the standard setting

practiceprocess if its intellectual property covered the standard being considered. Trial Tr.

150:12-151:7.

35. 28. On January 7, 1998, Tate met one-on-one with Karp. Karp was instructed toprepare a plan for licensing infringing DRAMs for presentation to the Rambus Board of Directors

in early March. That strategy was to include a litigation strategy. Trial Tr. 170:2-171:12; HTX

013.020; see also HTX 395.02 (Cooley Godward attorney Peter Leals notes from a January 13,

1998 meeting with Tate and Karp stating Want litigation strategy by March board meeting. Six

weeks from now.).

36. It is undisputed that as of early 1998, Rambus did not believe that it had an issuedpatent covering SDRAM. Trial Tr. 26:15-18 (Hynix counsel argument); Trial Tr. 1254:14-16

(Tate testimony). Nor had Rambus completed its infringement analysis of DDR SDRAM. Karp

wrote in his notebook, in an entry dated January 28, 1998: DDR samples still a pipe dream.

HTX 013.027. It was not until sometime in 1999 that Rambus came to believe that it could show

actual infringement. Trial Tr. 1391:13-17.

37. Tate had an ambitious list of twenty-seven top level goals for 1998 that focusedpredominantly on the success of RDRAM. Under the heading Successful Product/Project

Completion and Planning/Tracking Process, Tates first three goals were Concurrent RDRAM

600Mhz MP:18M early 98 ., Direct Rambus 1.0 memory system implemented on spec, on

cost, on schedule for production ramp late 98, and Deliver RACs in spec when customer needs


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with a profit on implementation fees . HTX 094. Tates next twelve goals likewise focused

on making RDRAM successful, such as implement[ing] project and program management

process[] similar to Intels and winning or gaining momentum in a variety of markets including

inter alia Desktop PC Main Memory, Mobile PC Main Memory, Intel server/workstations,

Handheld/PDAs, PC Multimedia market segment, home game system market segment,

Consumer digital video market segment, Microsoft Web TV next generation, Sun Ultrajava

MPU, Networking, and DSP market segment. HTX 094.

38. 29. According to Tates top level goals for 1998, Rambuss ITIP goals includedpositioning Rambus intellectual property for the future. Under the heading Position Rambus for

the Future Including IP, Tates top level goals included the following:

Develop and enforce IPA. Get access time register patent issued that reads on existing

SDRAMB. Broad patents in place for Direct Rambus, next generation

signaling; and chiptochip-to-chip interconnectC. Get all infringers to license our IP with royalties > RDRAM (if it is

a broad license) OR sue.

HTX 094. This goal was the eighteenth among the twenty-seven goals. Other goals under the

same heading of Position Rambus for the Future Including IP were: Identify key advanced

technology development required ; Determine direction for Rambus whats next to expand

past our core business ; and Plan and begin implementation of how to make Rambus a

consumer brand . HTX 094.

2. Rambus Meets With Cooley Godward Attorneys39. After joining Rambus, Karp realized that he needed legal advice. Karp also

needed legal assistance to address a potential conflict of interest presented by the law firm

Townsend, Townsend & Crews simultaneous representation of Rambus and the SLDRAM

consortium, which was trying to design a rival product to compete with RDRAM in the

marketplace. Trial Tr. 402:13-403:15, 1674:11-21. Karp also needed help thinking through a

licensing strategy. There was no resource for Karp inside Rambus at the time, so he looked for an

outside law firm. Trial Tr. 393:12-394:7.


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40. 30. In late 1997, Karp called Diane Savage, an attorney at the law firm of CooleyGodward (Cooley) with whom he had worked before coming to Rambus, seeking a

recommendation for someone to help set up a licensing program. Trial Tr. 393:22-394:10.

Attorney Savage, who was a partner in Cooleys technology transactions group, introduced Karp

to her colleagues John Girvin, Dan Johnson, and Peter Leal. Trial Tr. 394:17-22; 585:16-19.

41. 31. In January and February 1998, Karp began to meet with the Cooley lawyers todiscuss issues relating to patent licensing. HTX 007; HTX 376; HTX 395. At the January 13,

1998, January 15, 1998, and February 12, 1998 meetings between Cooley attorneys and Rambus

executives, Tate and Karp, the discussion about a licensing strategy included formulating a

litigation strategy as a part of a licensing strategy. HTX 376, HTX 395, HTX 403.

42. 32. On January 13, 1998, Karp and Tate met with Cooley attorney Leal, anattorney specializing in licensing matters. On January 15, 1998, Karp and Leal met again. HTX

376, HTX 395.

43. 33. At the January 13, 1998 meeting, the parties discussed the concept [n]onegotiation w/out full strategy and prep. HTX 395 (Leals hand-written notes). If licensing

negotiations were to commence, Rambus wanted to be prepared to go in and quickly proceed to

either a license or litigation. Further, Rambus was looking for a royalty rate that tells [the

DRAM industry] it costs to infringe. Rambus wanted to [t]ry win-win first; do not prejudice g -

f for litigation. HTX 395. Tate did not recall the specifics of the meeting, but testified that his

general thinking at this time was to look and see what makes sense. Trial Tr. 1263:10-25. He

testified: [I]f were going to do something, we want to think it through. But were not going to

do anything without having thought it through and through and without my say so. Trial Tr.

1263:10-25. At that time, Tate hadnt made a decision that [Rambus] wanted to proceed to

licensing. Trial Tr. 1264:21-22.

44. 34. At the January 15, 1998 meeting, Karp and Leal discussed a proposedsequence for negotiating meetings with potential infringers, including roles Rambus executives

and Cooley attorneys might play in negotiations and what information would be presented at each

meeting, labelledlabeled in Leals notes as the Middle Ground, delaying meeting and the


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Pound Sand meeting. Rambus at this time was very, very sensitive to costs. HTX 376.

Leal noted that [t]hey are spartan in their offices and even the CEO has a small cubicle and

there are no secretaries, to save costs. HTX 376. So Joels message is to use budget selectively

until first license payments are booked. HTX 376.

45. 35. On February 12, 1998, Karp met with three Cooley attorneys, : Johnson,Girvin, and Leal. Leal, a licensing attorney, reported to Girvin, head of the Information

Technology Patent group. Trial Tr. 586:9-16. Girvin, in turn, reported to Johnson, head of

Cooleys litigation group.

46. 36. The purpose of the February 12, 1998 meeting was to develop the licensingstrategy Tate had requested at the one-on-one meeting between him and Karp. HTX 097; HTX

403. The licensing strategy envisioned optimizing Rambuss notice to potential infringers, a

negotiation strategy and a litigation strategy. HTX 403.

47. 37. As of the February 12, 1998 meeting, the Cooley attorneys were aware ofKarps draft licensing term sheet, which specified that Rambus would charge a 5% running

royalty for a license to make non-compatible DRAMs. RTX 088. Karp acknowledged that these

royalty rates will probably push us into litigation quickly. HTX 097. There is no evidence,

however, that Rambus ever decided to seek or actually sought the 5% royalty rate contemplated

in the draft term sheet.

48. 38. At the February 12, 1998 meeting, Johnson expressed concern about Rambushaving no document control system in place.

Q. Okay. The next bullet point says Make ourselves battle ready. Do you seethat, thats the first part of it?

A. Correct.

Q. Do you recall somebody saying words to that effect at this meeting?

A. That sounds like something I would do.

Q. And what did you mean by that phrase?

A. Very simply, Rambus was essentially an old start-up, as far as I wasconcerned. It had been around probably eight, nine years. They had, as best Icould tell, no central document control system in place . . . and if you want tohave a licensing program, if you end up filing lawsuits against anybody, putting in


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place a system that gets your documents organized.

* * *

Q. And the last sentence in this bullet point says Need company policy ondocument retention policy. Do you see that?

A. Correct.

Q. Is this something you said at this meeting?

A. Absolutely.

Q . . . . What led you to say that to Rambus?

A. Typical start-up. As I said, they didnt have a policy, as best I could tell. Icant recall if somebody mentioned it to me at this point in time, but Id justlitigated a case where a company was, either had to spend, I cant remember if itwas $60,000 or $100,000 trying to retrieve data, and the President was screaming.

And theyd gone back through and recycled and they didnt have a documentretention policy. They got accused of spoliation. So you get yourself a documentretention policy.

Trial Tr. 1675:21-1678:20.

49. 39. Johnson advised Rambus to gather critical company documents to start puttingtogether an electronic database and to adopt a company policy on document retention. HTX 097.

Johnson testified that he recommended adopting a document retention policy for three principal

reasons. First, a document retention policy would reduce the expense of retrieving electronic data

stored on obsolete or corrupted back-up media. Trial Tr. 1676:24-1677:10. Second, a document

retention policy would reduce search costs in the event that Rambus was someday required to

respond to subpoenas or document requests that might possibly be issued in connection with

future lawsuits or investigations. Trial Tr. 1677:11-14. Third, the absence of a company-wide

policy for the retention and destruction of documents might be cited by a future litigant as

evidence of spoliation. Trial Tr. 1678:10-20.

50. There is no evidence that Rambus contemplated adopting a formal documentretention policy before Johnson advised Rambus to do so. The evidence shows that the

discussions of the policy were initiated by Johnson.


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51. 40. Johnson testified that the advice he gave Rambus regarding document retentionwas commonplace and that he probably gave similar advice to at least eight to ten start-up

companies in the Silicon Valley. Trial Tr. 1678:21-1679:9.

52. 41. At this February 12, 1998 meeting, Johnson also advised Rambus to instruct itspatent prosecution attorneys to clean up their files for issued patents to ensure that the file was the

same as the official file, a recommendation that Johnson characterized as standard advice. Trial

Tr. 409:18-410:1; 1679:10-1680:3; HTX 097.

53. 42. On February 23, 1998, Cooley presented its Proposed Strategy for Rambus.HTX 098. The document briefly outlines a licensing strategy, starting with criteria for selecting

initial targets for negotiation. The proposed strategy progresses to a discussion of a tiered

litigation strategy. One of the basic assumptions was that Rambus would not initiate action until

a competing product enters the market, at which time Rambus would conduct reverse engineering

and determine what action to take next. HTX 098.002.

54. 43. Cooleys proposed strategy offered two optionsthree options [i]n the eventthat licensing discussions do not result in resolution: first, pursuing a breach of contract remedy

against existing licensees; second, initiating a patent infringement suit against an unlicensed

competitor; third, bringing an action against SLDRAM. HTX 098.002. With respect to possible

litigation, the proposed strategy memo states:

To implement the above strategy, Rambus has authorized outside counsel to beginorganizing documents and preparing a discovery data base, so that if and whenRambus elects to proceed with litigation, it will not unduly disrupt the companysactivities. More importantly, with proper planning, Rambus may be able to obtainan advantage over its competitors by choosing a court such as the eastern districtof Virginia, the rocket docket or the ITC. Because these courts proceed at anaccelerated schedule, early preparation will benefit Rambus.

HTX 098.002-003.

55. 44. The Cooley document does not specifically mention establishing a documentretention policy at Rambus, but does state that Rambus has authorized outside counsel to begin

organizing documents and preparing a discovery database, so that if and when Rambus elects to

proceed with litigation, it will not unduly disrupt the companys activities. HTX 098.002. The

Cooley Proposed Strategy for Rambus ends stating it bears emphasis that each of the above


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scenarios is dependent on the facts that exist at the time the decision to litigate is made. Factors

unknown at this time may result in a change of strategy. HTX 098.003. Karp added in

handwriting document retention policy and patent attorney files after the text of the proposed

strategy.

56. Neither Rambus nor its counsel began to prepare a discovery database at this time.Karp testified that he started a program to gather documents during the Second half of 1999.

Trial Tr. 406:2-3. Karp worked with a paralegal to create a database of contract files for

Rambuss technology licenses. Trial Tr. 406:7-18. Karp did not undertake further efforts to

create a document collection database. Trial Tr. 416:3-15.

57. 45. On February 25, 1998, Karp had a regular one-on-one meeting with Tate atwhich they reviewed the developing licensing and litigation strategy. HTX 013.034.

3. Karp Presents a Licensing and Litigation Strategy to the Board58. 46. On March 4, 1998, Karp presented the licensing strategy to the Rambus Board

of Directors. HTX 031. The strategy included demanding the 5% running royalty rate and other

financial Willisterms that Karp had reviewed with Cooley at the February 12, 1998 meeting.

HTX 006.001. Johnson was aware of the contents of this presentation, as a copy of it was

produced from his files. RTX 088.

59. 47. The minutes following the March 4, 1998 board meeting memorialize that themeeting included an update by Karp of the Companys strategic licensing and litigation

strategy. HTX 031.002.

60. 48. In the presentation, Karp recommended that [i]f licensing discussions do notresult in resolution, tiered litigation strategy kicks in. HTX 006.003. This language came from

the Cooley memorandum dated February 23, 1998. Trial Tr. 418:19-419:4; HTX 098. He

suggested that the first targets for licensing non-compatible uses should be present licensees

which currently have released non-compatible product, and that the second group of targets

should be present licensees which are currently well along with alternate development. HTX

006.006. This suggestion likewise reflected Cooleys recommendation. HTX 098.


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61. The March 4, 1998 presentation included a slide regarding Potential legal actionagainst SLDRAM, Inc. The slide noted that Rambus [m]ay have cause of action for unfair

competition [b]ased on public anti-Rambus statements. The slide also noted a suspicion that

Rambus licensee may have disclosed Rambus information, which was transmitted by Rambus

under NDA, to SLDRAM, Inc. HTX 006.005. The record does not show that Rambus ever

asserted any claims against SLDRAM, Inc.

62. 49. The March 4, 1998 presentation included a timetableThe March 4, 1998presentation included a set of Timing Issues for executing the proposed licensing and litigation

strategy. The first milestone was the delivery ofissue was that Rambus will not contact potential

licensees until D-RDRAM achieves initial samples of Direct RDRAM (D-RDRAM). . This

was to ensure that DRAM manufacturers would be locked into the RDRAM ramp. HTX

006.007. Thereafter, the strategy included procuring customer sample (CS) quality parts of

potentially infringing devices, reverse engineering the products and creating claim charts,

notifying the potential infringer, conducting two meetings, and if the meetings did not result in

agreement on a license, commencing legal action. The timetable projected 4-6 months from

procuring CS quality parts to the commencement of litigation. HTX 006.007.

63. There is no evidence that Rambuss Board of Directors approved, or was asked toapprove, a licensing plan at the March 1998 meeting.

64. 50. At the time of the March 1998 board meeting, Rambuss anticipation was thatthe D-RDRAM would not be ready for high volume production until late 1998. HTX 094 (Item

2: Direct Rambus 1.0 memory system implemented on spec, on cost, on schedule for production

ramp late 98); Trial Tr. 1250:1-11.

4. Rambus Revises its Strategy65. 51. In late 1998, Rambus revised its approach toward licensing non-compatible

technology to its existing licensees. Rambus initially planned to begin its licensing strategy, if it

could prove infringement and if it made business sense to pursue non-compatible licensing, only

at the time the DRAM manufacturers were locked in to RDRAM production. By October 1998,

the projected time frame for this was early 2000. Karp in an October 1998 strategy update2000 at


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the earliest. Karp, in a set of presentation slides entitled Strategy Update 10/98, projected that

Rambus might be able to demonstrate that Mosel and Nanya had SDRAM products that directly

infringed a pending access time register patent by the first quarter of 1999, thus enabling Rambus

to potentially state contributory infringement and inducement claims against companies like Acer,

SIS, and VIA for SDRAM and DDR. However, the presentation recommended not even

initiating licensing negotiations. Karp noted that there was no compelling business reason to

make a business decision to initiate licensing:

# DO NOT ROCK THE DIRECT BOAT.P We should not assert patents against Direct partners until ramp

reaches a point of no return (TBD)P Probably not until Q100

* * *

# However, the Big Question Is - WHATS THE RUSH?P What is the compelling business reason? I cant think of any.

P Keeping the Maytag repainnanrepair man busy is not avalid reason

P IMHO, risks of damaging establishment of dominant standardoutweigh potential return

P Lets not snatch defeat from the jaws of victory.

HTX 128.003; Trial Tr. 1319:17-1321:5; 282:20-284:2. This point of no return was

projectedTBD, or to be indetermined, and would probably not be reached until the first quarter

of 2000. Id.HTX 128.003.

66. 52. In fact, as of fall 1998 Tate was disappointed with the progress Karp hadmade on Rambuss patent portfolio, because we had been unable to get patents, or claims, which

cover our inventions, a task Tate considered to be Karps job one. Trial Tr. 1258:18-22.

Karps October presentation recommended that, for Rambuss backup licensing strategy, Top

priority Should Be Strengthening of Portfolio by covering SDRAM, DDR, SLDRAM, any andall fonnsforms of synchronous memory (static and dynamic) by aggressively prosecuting claims

that provide such coverage. HTX 128.005. The projected date by which Rambuss strategic

portfolio would be ready for presentation to the industry was calendar year 2000. HTX


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128.006. Karp further proposed filing 8-12 new continuation cases (cost ~35-40K). HTX

128.006.

67. Karps October 1998 presentation emphasized the need to complete all reverseengineering efforts in advance before the strategic patent portfolio could be presented to the

industry. HTX 128.006. He noted that reverse engineering would cost ~$10-

20K/Device/Vendor. HTX 128.006. He suggested that Rambus proceed with reverse

engineering efforts, and noted: DDR (Samsung now in progress at Sll ~45-55K). HTX

128.005. He also suggested that Rambus proceed with reverse engineering for SLDRAM if we

ever see one - Q1? HTX 128.05. That the memorandum addressed reverse-engineering a

product that Rambus was not sure it would ever see tends to show that litigation remained no

more than a possibility at this time.

68. Karps multiple references to estimated costs for his proposed actions, all in thelow-to-mid five-figure range, show that, in the fall of 1998, Rambus continued to be very

sensitive to costs expended on the development of licensing. It also indicates that Karp still

needed to explain his proposals from a cost/benefit business perspective, so that Rambuss senior

managers could consider the potential benefits in light of the estimated costs. This is consistent

with the licensing programs role as a backup business strategy.

69. Rambuss management continued to hope at the time of Karps October 1998presentation that RDRAM was going to be successful, and that there would be no need to pursue

a licensing strategy for non-compatible products. Tate testified with respect to the presentation

that he believed direct Rambus DRAMs were going to be successful, and that was our number

one focus. Trial Tr. 1320:5-6. He explained that if RDRAM was going to be successful, we

might never need to have that [licensing] negotiation, because RDRAM could be, by far, the bulk

of the market. Trial Tr. 1321:24-1322:1. As of late 1998, vice president Roberts likewise

believed that Rambus[s] product was headed to be a majority player in the PC main memory

market. Trial Tr. 1566:24-1567:10. His view at the time was that it didnt really make sense

for Rambus to pursue non-compatible licensing, because we were on a position at that time to be

very successful with our product that was in development. Trial Tr. 1565:11-1565:24.


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70. 53. In December 1998 or January 1999, Karp drafted and distributed to Rambusexecutives a Nuclear Winter Scenario memorandum relating to Rambuss Patent Enforcement

strategy for 1999. That memo set forth a hypothetical scenario in which Intel suddenly opted to

move away from Rambuss technology, and instead implemented something else, for example

DDR or SLDRAM. Karp set forth a strategy for convincing Intel that without access to

Rambus IP, it will be difficult and costly to continue selling its current processor based products

and its new, more advanced products because the memory needed for these Intel products require

use of Rambus IP. HTX 004.2.

71. 54. The Nuclear Winter Scenario memorandum proposedobserved that Rambuscould establish its intellectual property position by showing by clear and convincing evidence that

three of Rambuss then issued patents covered alternate competing devices: the 327 patent

covered DDR (dual edged clocking); the 481 covered DDR (phase locked loop circuitry); and

the 580 covered DDR and PC100 (access time register). HTX 004.002. At the same time, the

memorandum acknowledged that we have very limited information about DDR parts so we will

not be able to produce actual claim charts based on information gleaned from real designs. HTX

004.002. After Rambus completed reverse engineering analysis, Karp formed the view that

Rambus did not have strong claims based on the 327 patent. Trial Tr. 510:12-516:22. He also

believed that the 481, and 580 patents did not read directly on the suspected products and that

Rambus did not have strong claims based on these patents. Trial Tr. 510:12-516:22. As of late

1998 and early 1999, Roberts did not believe that Rambus had issued patents that could have

been licenseable for SDRAM or DDR. Trial Tr. 1566:11-23.

72. The Nuclear Winter Scenario memorandum confirms that litigation remained aremote and unlikely possibility as of December 1998 or January 1999. Karp framed the potential

litigation scenarios discussed in the memorandum as speculative and contingent on future events,

the occurrence of which Rambus considered to be highly unlikely. The memorandum begins with

its major assumption, described as follows: Intel decides to cancel ramp and move away from

Rambus to something else (DDR, SLDRAM, PC133, or something else that may be totally new,

having been developed in secret by elves in the Black Forest at a cost of $10B, for example).


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HTX 004.002. It is a rare memorandum that begins a discussion of a companys policy and

anticipated court action with a reference to Black Forest elves. The memorandum continued: I

need to point out at this time that this is a very unlikely scenario, even for something thats purely

hypothetical. HTX 004.002.

73. As of the time of the Nuclear Winter Scenario memorandum, licensing remained abackup line of defensea backup to winning with RDRAMas it had been in October 1997.

RTX 080. Litigation was yet a further backup to this licensing strategy. The Nuclear Winter

Scenario memorandum discussed suing DRAM manufacturers only in the context of trying to put

pressure on Intel to continue its support for RDRAM, in the purely hypothetical and very

unlikely scenario where Intel moves away from RDRAM. HTX 004.002. Indeed, the

memorandum expressed the view that litigation against DRAM manufacturers would hopefully

never occur. HTX 004.005. The memorandum recognized that litigation might have serious

repercussions for Rambuss business relationships because once we engage in litigation with

someone a tremendous amount of animosity develops and it is highly unlikely that we will ever

cooperate, or partner, with this party in the future. HTX 004.005. Thus, legal options may

apply only if we reach the end of our rope with Intel where no other options are available and

we have no chance of achieving the Major Goal, i.e. winning through RDRAM. HTX 004.003.

74. The Nuclear Winter Scenario memorandum ended its discussion of potentiallitigation against a DRAM manufacturer by emphasizing that for such a suit costs would be high

($1.5-3.0 M) since we would be fast-tracking everything, which further suggests Rambuss

continued sensitivity to costs. HTX 004.006.

75. The Nuclear Winter Scenario memorandum included content provided by attorneyJohnson. Johnson provided information regarding potential causes of action and the amount of

time it would take to get to trial. HTX 004.003-.005; Trial Tr. 516:23-518:18; 1703:14-1704:5.

Johnson also drafted the sample letter addressed to potential licensees attached to the

memorandum. HTX.004-007; Trial Tr. 516:23-518:18.

76. 55. In a strategy update presentation titled IP Strategy 9/24/99, RambusrecognizedKarp suggested that itRambus might be losing Intels business (Intel Has Already


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Started To Let Go) and that, absent that relationship, the DRAM industry did not have respect

for Rambuss intellectual property. HTX 244. The presentation stated that Rambus must earn

that respect by substantiating our claims that cover pioneering technology and that [p]atent

claims are substantiated either by

P signing a lucrative license deal with (an) industry powerhouse(s)

P winning in court

HTX 244.004.

H. Rambuss Formulation of its Document Retention Policy77. 56. At the meeting on February 12, 1998, outside counsel Johnson advised

Rambus to adopt a document retention policy. Trial Tr. 1675:21-1678:20. At a one-on-one

meeting with Tate on February 25, 1998, Karp reported that he was already [w]orking with J.

Lau on a document retention policy, discovery database, email, etc. HTX 013.034. Tate did not

recall this meeting with Karp. Trial Tr. 1275:8-12. However, it was Tates practice to meet with

his executive staff one-on-one every week to discuss goals and progress toward goals. Tates

inability to recall discussing document retention and litigation strategy as part of licensing

strategy suggests that he either was focused on issues other than document retention or wants to

avoid being involved in the current phase of the litigation.Tate recalled generally that he spoke

with Karp about having a document retention policy, which stemmed from a recommendation

made by Johnson. Trial Tr. 1276:19-1277:20.

78. 57. On March 16, 1998, Allen Roberts, Vice President of Engineering, advisedJoseph Lau, Engineering Department Head, that Rambus should begin recycling its e-mail

backups so that the backups had a shorter shelf life. HTX 100. Roberts suggested three

months. Id. Roberts understood a concern that Rambuss e-mails were discoverable. Trial Tr.

1575:17-1577:4.

As I recall, the general concept was . . . that we were generating gigabytesof information on surely a weekly basis, but maybe even on a daily basis thatwent onto tapes.

And that those tapes were being kept kind of continuously, and that ifthere was any case where somebody said we want to see all this information, itwould be a huge expense to pull all that information back and pay people to


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review it all.

Trial Tr. 1577:7-18.

79. 58. In early 1998, while Rambus was separately consulting with outside counselregarding the adoption of a document retention policy, Rambus retained Kroll Associates, a

specialist in the field of information and computer security, to do a security audit of Rambus.

Rambus contacted Kroll because it had security concerns after a hacking attempt on Rambuss

computers. Trial Tr. 369:18-370:20. In an April 24, 1998 presentation at the conclusion of the

security audit, Kroll advised that Rambus adopt a variety of measures to better protect its

confidential information and the confidential information of its business partners. September 20,

2005 Deposition Transcript of Alan Brill at 49:15-50:1; 50:13-18 (played at trial on October 28,

2005, Trial Tr. 1515:21-23; 1527:8-9). Among the specific recommendations from Kroll was the

confirmation that Rambus should work with outside counsel to develop a document retention

policy. Trial Tr. 372:25-373:23; RTX 160 at 26.

80. 59. On March 19, 1998, after an inquiry about document retention policy by Karp,Attorney Savage forwarded to Karp a seven page standard document retention policy template

that had been developed by Cooley. Trial Tr. 579:19-580:19, 582:19-24; RTX 091. Attorney

Savage was unaware of any litigation strategy at the time she forwarded the template. Trial Tr.

583:15-17. In her forwarding memorandum to Karp, she recommended that he consult Cooley

attorney David Lisi if he had any specific litigation oriented issues. Trial Tr. 579:19-584:2; RTX

091 at 1.

81. 60. The memorandum sent to Rambus by Cooley was a generic template for adocument retention program drafted by the law firm for its clients. Trial Tr. 580:15-19. Karp did

not consult Attorney Savage or Lisi regarding tailoring the template for Rambus.

82. 61. On March 27, 1998, after he had left Cooley to join Fenwick & West, AttorneyJohnson had a lunch meeting with Karp. Following that lunch, Johnson wrote Karp saying I am

excited about the possibility of working with you. Attorney Johnson also enclosed a standard

set of document requests, saying [t]his should give you some idea of the type of information

requested in patent cases. HTX 368; Trial Tr. 1713:15-1716:9.


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83. 62. The Cooley template retention policy stated that [t]hat Policy should informemployees email is subject to review by the Company and is not private. RTX 091 at

R401092. The Cooley template also recommended that the company should permanently

remove emails from system server on a periodic basis and if back-up tapes of e-mail are kept,

they should be destroyed on a periodic basis as well. Id. It also stated that the Company and

individual employees should be discouraged from archiving email and that E-mail that needs to

be saved should be either: (a) printed in hard copy and kept in the appropriate file; or (b)

downloaded to a computer file and kept electronically or on disk as a separate file. Id. The

memorandum also recommended that Rambus regularly discard outdated electronic files and

discard all draft documents once a document is finalized. Id. Brill of Kroll Associates similarly

recommended that Rambus keep e-mail only as long as required and that backup tapes should not

be kept indefinitely. RTX 160 at 26, 47; September 20, 2005 Deposition Transcript of Alan Brill

at 55:19-57:14 (played at trial on October 28, 2005, Trial Tr. 1515:21-23, 15:178-9).

84. 63. On May 14, 1998, Karp met with a group of representatives of the fouroperating divisions to decide on a policy for saving back-up tapes. He then sent a memorandum

to the Rambus board, engineering managers, and others at Rambus stating: Effective

immediately, the policy is that full system backup tapes will be saved for 3 months only.

Therefore, you can no longer depend on the full back ups for archival purposes. Any valuable

data, engineering or otherwise, must be archived separately. RTX 104. Karp had consulted with

Attorney Johnson about Rambuss policy to retain backup tapes for 3 months. Trial Tr. 528:21-

530:4; 1691:23-1692:6; RTX 104. Johnson recommended against adopting a proposal to create a

full system backup every two years, citing the problems and potential expense that could arise

from stale data, operating system changes, and corrupt data. Trial Tr. 1692:7-17. Johnson

explained that rapid technological changes would quickly make backup tapes unreadable without

extraordinary effort and substantial expense, leaving the company with a bunch of data that you

could not recreate because you did not have a system in place that allowed you to do it. Trial Tr

1676:24-1677:10. A company could spend a ton of money just trying to respond to a subpoena

if you dont put in place a document retention system. Trial Tr. 1677:11-14.


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85. 64. Karp drafted Rambuss Document Retention Policy shortly before July 22,1998, based upon the memorandum forwarded by Attorney Savage, and incorporating some of its

language verbatim. Trial Tr. 525:7-17; HTX 023. The Rambus policy provided with respect to

Electronic Mail and Documents that Rambus maintains complete system tape back-ups for a

period of 3 months. Employees should not utilize email as a place to save documents beyond 3

months. Email that is required to be saved more than 3 months can be kept either in paper or a

separate file on your hard drive. HTX 023.

86. 65. The Rambus Policy stated that:documents, notebooks, computer files, etc., relating to patent disclosures andproof of invention dates are of great value to Rambus and should be keptpermanently. Engineering personnel should not depend on the electronic system

back-up tapes to archive their work, since these tapes are only kept for 3 months.They should create their own archive copies of, for example, tape out and majorproject milestone databases, which can then be kept indefinitely in Rambusoffsite, secure storage facility.

HTX 023.001-002. This tracked the Cooley memorandums recommendation for documents

related to Laboratory and Development/Intellectual Property and Trade Secrets: Laboratory

and development documents are often subject to intellectual property protection in their final

form (e.g., patents and copyrights). The documents detailing the development process are often

also of value to the Company . The Company should keep all laboratory and development

notebooks and documents in a central location with restricted access. RTX 091 at 5-6.

87. 66. The Rambus policy pronounced that Final, execution copies of all contractsentered into by Rambus are kept at least 5 years after the expiration of the agreement . . . . All

drafts . . . and any materials used during negotiations that are not part of the final binding contract

. . . should be destroyed or systematically discarded. HTX 023.002. This tracked the

recommendation for such documents in the Cooley memorandum, which likewise stated: Final,

execution copies of all contracts entered into by the Company should be kept by the Company.

The Company, should, upon execution of a contract, destroy or systematically discard all internal

drafts and any materials used during negotiations that are not part of the final contract . RTX

091 at 6.


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88. 67. The terms of Rambuss two -page Document Retention Policy were based onthe template provided by Attorney Savage, referred only to categories of documents, and were

content neutral within those categories. HTX 023; RTX 091. The Policy contained no directive

to discard documents relating to specific companies or to certain subjects. The evidence does not

suggest that Karp used the document request sample provided by Attorney Johnson to tailor

Rambuss Document Retention Policy language to target particular categories of harmful

document.

89. 68. Hynix is not challenging the propriety of any of the written provisions of theRambus document retention policy itself nor arguing that any of the provisions is inconsistent

with industry custom or practice. Trial Tr. 7:15-8:3.

I. Presentation of Rambuss Document Retention Policy90. 69. After Karp had drafted the Policy, he created slides for use in a presentation

introducing the document retention policy to Rambuss managers. Karp sent his two-page

document retention policy to Attorney Johnson for his review. Trial Tr. 521:20-522:10; 1692:18-

1693:2; 1693:13-25.

91. 70. Only July 22, 1998, Rambus distributed its two-page document retentionpolicy to Rambus employees. HTX 023.

92. 71. On July 22, 1998, Attorney Johnson and Karp gave a presentation to Rambussmanagers about the need for such a policy and the legal requirements involving such policies.

RTX 130.

93. 72. Karps portion of the presentation consisted of a summary of the types ofdocuments Rambus wanted to keep and for how long. Attorney Johnson reviewed and

commented on drafts of Karps slides. Trial Tr. 535:4-11; 1699:11-1701:4; RTX 112; RTX 115;

RTX 123. Karp in presenting his slides to Rambus managers and employees gave explicit

instructions to delete e-mails. Trial Tr. 261:4-265:1.

94. 73. Attorney Johnsons portion of the presentation was litigation-oriented. Slide 3lists what kind of records are discoverable. Slide 4 cautions specifically about e-mail and

electronic documents. Slide 5 recounts what Johnson referred to as horror stories of cases


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where deleted e-mails had been used to prove age discrimination and sexual harassment. Slides 6

and 7 warn that the rules for document retention change once litigation begins. RTX130;

HTX111.004-008. Attorney Johnson testified that [a]nd the act of deleting, when you are

actively involved in litigation, that can give rise to a claim, and I was trying to explain to the

client that this was serious business. Trial Tr. 1699:7-10. Johnson also advised that [a] formal

document retention policy will likely shield a company from any negative inferences . . . due to

destruction of documents, unless the policy was instituted in bad faith or exercised in order to

limit damaging evidence available to potential plaintiffs. RTX 130 at R124523. He also warned

Rambus managers that destroying relevant documents once litigation started would be improper.

RTX 130 at 124527-28, 124545-49; Trial Tr. 1722:2-11. He counseled that, after a lawsuit is

filed, Rambus should gather all sensitive files as soon as possible to avoid inadvertent

destruction. RTX 130 at 124548.

95. The slides Johnson used for his presentation at Rambus were very similar to, andin many places tracked verbatim, a set of slides he used internally for training at Fenwick & West

which was entitled: The Eve of Litigation[:] The Need for an Effective Document Retention

Policy. RTX 006 at 1. Johnson explained that he used these slides internally to teach the

rookies, i.e. new associates. Trial Tr. 1695:12-1696:6. He also used a similar set of slides at a

Practicing Law Institute presentation. Trial Tr. 1695:12-1696:6. Like the slides Johnson used at

Rambus, the internal Fenwick slides mentioned Horror Stories about the use of deleted emails

to prove age discrimination and sexual harassment. RTX 006 at 8. The slides also warned

against document destruction after the commencement of litigation. RTX 006 at 15.

96. While electronic discovery is commonplace today, Johnson testified that in 1998the treatment of electronic documents presented new challenges to companies as well as to

lawyers. Trial Tr. 1676:22-1677:6. Johnson explained that in 1998, as email was now becoming

more popular, the issue was whether or not email would constitute a document within the

Federal Rules of Civil Procedure, and we were telling people that yes, they were. Trial Tr.

1698:11-17. Spoliation was a hot issue at the time, so Johnson used presentation slides to teach

the issue internally with the new associates. Trial Tr. 1695:12-20.


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97. 74. The slides that Karp prepared for Attorney Johnsons review repeatedlydirected Rambus employees to look for things to keep. HTX 112. Johnson told Karp that such

aThe look for things to keep language appeared in slides that addressed various subjects,

including email, marketing and sales, engineering, and contracts, but the slides gave no

instruction on what kind of materials to retain. HTX 112. Johnson told Karp that his look for

things to keep directive would result in the retention of more documents than Rambus

employees were otherwise required to keep. Trial Tr. 1700:13-1701:1. Johnson told Karp that

unless youve got some kind of a standard as to what to keep and what not to keep, theyre going

to keep everything, because engineers are pack rats. Trial Tr. 1700:18-1701:1. Karp

nevertheless chose to keep the language in his slides. Trial Tr. 1701:2-4.

98. Karps instruction to look for things to keep was non-specific, and addressedsuch broad categories of documents as emails and marketing and sales. The record does not

show that Karp intended to target for retention documents that would aid Rambuss possible

claims in potential litigation against DRAM manufacturers. Nor does the record show that Karp

advised anyone at Rambus to target such documents for retention. When Karp received questions

from Rambus employees about what kind documents to keep, his response was content-neutral.

He couldnt tell them what to do specifically within their area, and could only explain what

my practice was. Trial Tr. 539:16-24. Karp testified: I told them that I kept things that

where either I was author or where I was the intended recipient, or specifically things that

went outside the company, either to partners or customers I kept those kinds of things as

opposed to the kind, lets have lunch tomorrow, those kind of things, or things that came to a

wide distribution list. Trial Tr. 540:2-11.

99. 75. Following the July 22, 1998 presentation by Johnson, Johnson no longerassisted Rambus in its licensing, litigation, or patent prosecution strategy. Karp merely asked

Johnson truly random questions from time-to-time about general litigation related matters, such

as arbitration and different venues for litigation. Trial Tr. 1719:20-1721:17; RTX 348; RTX 350;

RTX 354. Johnson kn[e]w [Rambus] had patents in the pipeline, Trial Tr. 1720:9-10, but

characterized Rambuss questions as raising what if scenarios, Trial Tr. 1705:6-7.


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100. 76. After presenting the document retention policy jointly with Attorney Johnsonto the Rambus managers, Karp made presentations to various groups of Rambus employees using

a different set of slides, which were based on the written policy. Trial Tr. 262:19-263:5; HTX

112. Johnson reviewed and commented on drafts of these slides. Trial Tr. 535:4-11; 1699:11-

1700:15.

101. 77. All versions of the presentation utilized a slide discussing e-mail entitledEmail Throw it Away. The slide emphasized that e-mail was discoverable in litigation and

that elimination of e-mail is an integral part of document control. It also advised that messages

that must be saved should be saved to a separate file or printed and retained. HTX 111.010.

Apart from the look for things to keep language added by Karp, the content of the slide

discussing email tracks the advice Karp received from Cooley and Johnson. The Cooley

memorandum on document retention had advised that emails should be destroyed periodically,

because otherwise documents that are not retained in hard copy may linger on electronically and

may be subject to discovery in litigation. RTX 091 at 7 (emphasis added). The Cooley

memorandum further counseled that emails that need to be saved should either be printed and

retained or saved to a separate file. RTX 091 at 7.

102. Indeed, overall, the presentations Karp gave on the document retention policyreflected the advice he received from Cooley and Johnson. The record does not show that Karp

was concerned that any category of documents, or any particular document, might have been

harmful to Rambuss potential litigation against DRAM manufacturers. And it does not show

that Karp knew or investigated how such content might be identified in Rambuss records. It

does not show that Karp was aware of any adverse content in the documents slated for destruction

under the document retention policy.

J. Specific Events Involving the Destruction of Documents1. Shred Days

103. 78. On September 3 and 4, 1998, Rambus employees participated in a company-wide shred day (Shred Day 1998). Rambus employed an outside company, Sure Shred, to

provide on-site document shredding services. See HTX 125; Trial Tr. 1614:16-1615:11.


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Employees were instructed to follow the Document Retention Policy guidelines to determine

what to keep and what to throw away. Trial Tr. 272:14-273:14; HTX 122. Employees were

given burlap sacks from Sure Shred for material that needed shredding. The burlap sacks were

then taken to a shredding truck in the parking lot of the company. Id.

104. 79. Rambus destroyed approximately 185 bags and 60 boxes of material on ShredDay 1998. HTX 125. The amount of documents destroyed would have totaled, on the high side,

430 banker boxes of material. Trial Tr. 1615:12-1616:18. The parties have stipulated that

Rambus had 145 employees in 1998. Joint Pretrial Statement, Oct. 4, 2005, at 8. Therefore, the

volume of boxes shredded amounted to, on average, only two to three boxes per employee. There

is nothing unusual about shredding two or three boxes per employee, and indeed the amount of

documents destroyed appears to be low. David Rhoads, a vice president of Sure Shred, testified

that he personally accumulated two banker boxesper weekfor disposal. Trial Tr. 1610:9-11;

1617:20-23.

105. 80. A year later, on August 26, 1999, Rambus had another housekeeping event, orshred day (Shred Day 1999). The volume of documents destroyed on that day would have

totaled, on the high side, 300 banker boxes. Trial Tr. 1620:1-9. The parties have stipulated that

Rambus had 165 employees in 1999. Joint Pretrial Statement, Oct. 4, 2005, at 8. Therefore, the

volume of boxes shredded on Shred Day 1999 was less than two boxes per employee on average.

The vast majority of Rambuss employees were engineers working on RDRAM technology.

Trial Tr. 1395:13-20; 1542:8-1544:2. The bulk of the documents destroyed on the two shred days

was mountains of printouts of circuit design that engineers had. Trial Tr. 337:10-338:3.

106. 81. The use of burlap bags and shredders, the volume of material shredded, and thesocial events at the end of the shred days were unexceptional. Prior to Shred Day 1998,1998

and prior to the adoption of the document retention policy, each employee had a box in his or her

office area for confidential documents that needed to be shredded, and a truck came once a week

to pick up the documents for shredding. Trial Tr. 1581:13-1582:10. There was nothing unusual

about the volume of material that Rambus shredded. In particular, David Rhoads of Sure Shred

suggested that Rambuss disposal practices were no different from the disposal habits of other


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similarly situated companies. Trial Tr. 1612:5-1623:15. Rhoads testified that his company

frequently provided pick up services where its time to purge records on an annual basis, or [a

company has] just begun a document destruction program so they call us out to do a big purge.

Trial Tr. 1612:24-1613:2. He observed that on these annual purge days, companies often have

an event and serve food as part of that event as Rambus did. Trial Tr. 1613:18-21. A

contemporaneous news article offered by Hynix also demonstrates the commonplace nature of

both shred days and of social events associated with them. HTX 130 (a November 11, 1998

article from The New York Times that refers in part to an event at Amazon where employees

were asked to purge e-mails that were no longer needed for business or legal purposes). See

also David O. Stephens and Roderick C. Wallace,Electronic Records Retention: An Introduction

19, Chapter 7 - Implementation Issues, at 48 (Arma International 1997) (Setting aside one day a

year for office workers to clean out files, destroy old records, and transfer records to the records

center is popular in some organizations. Management allows people to dress down, and

provides a free lunch on purge day. Sometimes awards are given to those persons and

departments that recycle the most paper.).

107. The record does not show that Rambus implemented Shred Day 1998 and ShredDay 1999 to get rid of documents that were harmful to Rambus in potential litigation against

DRAM manufacturers. As noted above, Rambuss document retention policy was content

neutral, and the record does not show that Karp was aware of any adverse content in the

destroyed documents that would have harmed Rambuss potential claims. Karp expected

everyone at Rambus to follow the document retention policy in discarding documents. Trial Tr.

334:13-17.

108. Nothing in the record suggests that Rambus was aware of any duty to preservedocuments before Shred Day 1998. Rambuss outside counsel, including Johnson, were heavily

involved in developing both Rambuss backup licensing strategy and document retention policy.

It was Johnson who first advised Rambus to adopt a document retention policy, at the same

February 12, 1998 meeting when he advised Rambus about a potential licensing strategy and the

possibility of litigation. Thereafter, Johnson, along with Karp, gave a presentation on document


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retention to Rambus managers on July 22, 1998, and reviewed and commented on the slides Karp

used for his own presentations to Rambus employees. Johnson did not advise Rambus that it had

a duty to preserve documents at that time.

109. Nor does the record show that Rambus believed or was aware that a duty topreserve documents had attached at the time of Shred Day 1999. Although Rambus occasionally

asked Johnson general questions about litigation in 1999, Johnson never suggested to Rambus

that it had a preservation duty. Johnson had provided the information regarding potential causes

of action and forums, as well as the sample letter addressed to potential licensees, in the Nuclear

Winter memorandum. Trial Tr. 516:23-518:18; 1703:14-1704:5. On June 24, 1999, Johnson

sent a fax transmission to Karp enclosing a Patent Litigation Timeline for the Northern District of

California. RTX 350. The timeline showed the number of days it would take to proceed from

filing the complaint to various stages of litigation, such as the filing of claim construction

statements. RTX 350, at 2-3. The fax transmission sheet also noted: Typically, the cost through

trial is $2.3 to $3 million. RTX 350, at 1. On July 8, 1999, Johnson sent a fax transmission to

Karp and Steinberg enclosing another Patent Litigation Timeline that compared the Northern

District of California and the Eastern District of Virginia. RTX 348; Trial Tr. 1707:16-1708:4.

This Timeline used October 1, 1999 as the hypothetical complaint filing date for purposes of

comparing the two district courts. RTX 348, at 2. Johnson did not advise Rambus in these or any

other communications that a duty to preserve had attached.

2. Electronic Documents110. 82. Until approximately 1996, business work was done on Macintosh computers.

Engineering work, by contrast, was typically done on UNIX workstations. Trial Tr. 1439:4-6,

1440:2-11. Rambus maintained backup tapes of some of the data created on the Macintosh

computers. In May 1998, Karp confirmed that backup tapes of the companys Macintosh

computers were gone. Trial Tr. 208:19-218:14; HTX 013.097.

111. 83. On or before July 21, 1998, Rambus sent 1269 computer tapes out to bedegaussed (magnetically scrambled to prevent data recovery). Trial Tr. 221:22-223:4, 1105:25-

1106:25; HTX 107, HTX 157, HTX 029. Prior to sending the tapes to be degaussed, Rambus


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separated its backup tapes into two sets: (1) project tapes containing only technical project data

and (2) other tapes. The other tapes were sent for degaussing without further review of the

contents. Trial Tr. 1105:17-1106:25.

112. There is no evidence that Karp was aware of any adverse content on the degaussedtapes that would have been harmful to Rambuss potential claims against DRAM manufacturers.

Nor is there evidence that such adverse content existed. Karp testified that no one at Rambus

suggested that he inspect the contents of the backup tapes before they would be degaussed, and he

did not conduct such an inspection. Trial Tr. 524:14-21; 231:8-9. Since Karp joined Rambus

only in October 1997, he would have had no knowledge of information that was archived on

backup tapes before that time.

3. Prosecution Files113. 84. Attorney Johnson advised Karp at the February 12, 1998 meeting that Rambus

should clean out its patent prosecution files so that the files mirrored the Patent Office (PTO)

file. Hynix does not allege that there is anything improper in the general practice of cleaning

patent files upon issuance. Trial Tr. 837:12-22.

114. 85. Attorney Vincent of BSTZ prosecuted patent applications on behalf of Rambusclaiming priority to Rambuss original 898 application, as did other BSTZ attorneys including

Roland Cortes and Scot Griffin. Trial Tr. 784:1-785:2; 1592:22-1593:9; 1603:19-1604:11.

115. 86. In April 1999, Karp instructed Vincent to clean out BSTZs patent prosecutionfiles for patents which had issued. Trial Tr. 806:5-807:5; 812:3-14; HTX 135.004. Vincent was

not told that any litigation was planned against manufacturers of JEDEC standard SDRAM or

other non-conforming DRAM. Trial Tr. 812:15-21. Karp did not provide details as to what

documents should be discarded from the files; rather, Vincent was guided by his general

professional knowledge regarding document retention for patent files. Trial Tr. 904:11-24.

116. 87. Vincent was not instructed to, and did not, clean out any of BSTZs generalRambus files. Trial Tr. 908:25-909:7. The general files contained, among other papers,

Vincents notes and other documents relating to his advice to Rambus concerning the JEDEC

disclosure policy and equitable estoppel. Trial Tr. 908:20-24 (See, e.g., HTX

4083-a

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