$250 Million Spoliation Sanction Ordered Against Rambus to Conclude Patent Case
Over 7 years of litigation was recently concluded with a district court entering a $250 million sanction in SK Hynix v. Rambus, 2013 WL 1915865 (N.D. Cal. May 8, 2013). What is interesting in this case is that the sanction was entered against Rambus, the prevailing party, in the underlying patent law case.
The extremely brief background of this patent case is that Hynix sued Rambus in 2006 for a declaratory judgment of noninfringement, invalidity and unenforceability regarding Rambus’ patents. Rambus filed counterclaims for copyright infringement. One of Hynix’s defenses asserted Rambus had unclean hands based on spoliation of evidence. The judge ruled against the unclean hands defense, and a jury trial resulted in the $349 million judgment in favor of Rambus.
The Court of Appeals for the Federal Circuit ruled that the trial court erred; it ruled that Rambus had spoliated documents in bad faith. “Hynix II”, 645 F.3d 1336 (Fed. Cir. 2011).
What was the conduct at issue? When litigation was reasonably foreseeable, Rambus destroyed between 700-800 banker boxes of documents, and kept no record of what was destroyed. The court imposed a sanction to strike from the record all evidence supporting a royalty in excess of a “reasonable and nondiscriminatory royalty.” But what does this mean in real numbers? This was the final question left for the court to address.
The court eventually determined that the monetary sanction of $250 million reflected a royalty rate of between .80% and .85% to Rambus’ total U.S. sales. While the court recognized this sanction to be “severe,” it deemed it necessary “to mitigate the presumed prejudice resulting to SK hynix from Rambus’s spoliation,” and it “strikes the appropriate balance between acknowledging that the majority of Rambus’s patents have been determined to be valid and recognizing that Rambus’s spoliation of evidence must be redressed in a meaningful way.” Id. at 22.
Courts will not tolerate spoliation of documents or destruction of electronic data, even when parties ultimately prevail on the merits of the case.