There's no dancing around it: A party's duty to preserve evidence arises when litigation becomes "reasonably foreseeable." Under this standard, destruction of evidence constitutes spoliation if it occurs after the totality of circumstances make litigation objectively foreseeable. In the companion decisions Micron Technology, Inc. v. Rambus Inc. and Hynix Semiconductor Inc. v. Rambus, the same patent holder/alleged spoliator took a whirl at arguing that litigation had to be imminent or certain to be reasonably foreseeable. The Federal Circuit disagreed. The court stated that a flexible fact-specific standard, free of any restrictive imminence "gloss," determines whether litigation is reasonably foreseeable. But the court failed to give any clear guidance on when the duty triggers before litigation becomes certain-leaving analysis of the court's factual considerations as the best way to prevent a pre-litigation document retention policy from two-stepping its way into a spoliation shag.
Both Rambus decisions involved the pre-litigation conduct of a company holding multiple patents related to computer chip memory. Rambus's patented technology covered a process for creating chips with improved memory-related data processing. Rambus commercialized one of its processes as RDRAM. Rambus also amended its patent claims to cover industry-standard SDRAM memory technology after participating in (and then resigning from) the industry's standard setting body.
Rambus licensed use of its RDRAM technology to members of the memory chip industry. It also began to strategize how it could gain enforcement rights over SDRAM technology. To implement its strategy, Rambus hired a Vice President of Intellectual Property who suggested pursing an aggressive licensing/litigation approach and creating a supporting "document retention policy." Under the policy, Rambus employees were instructed to actively look for and retain any documents that could be helpful in litigation but to destroy all other documents on an ongoing basis until litigation was actually brought.
Rambus also had two separate full-day "shred parties." Rambus shredded 400 boxes of documents at one party and also erased all but one of 1,269 backup email tapes. The following year, at the second party, Rambus shredded another 300 boxes of documents. But two months after that, Rambus started negotiating its first SDRAM license with Hitachi. Those negotiations quickly broke down after Rambus proposed licensing rates that its outside counsel advised would inevitably lead to litigation. So Rambus put in a litigation hold and sued Hitachi for patent infringement. But that case quickly settled.
Rambus then continued to negotiate licenses with other chip industry members including Hynix and Micron. But unlike Hitachi, Hynix and Micron didn't wait for an invitation to the dance. Instead, they forced Rambus to tango by bringing separate declaratory judgment actions against Rambus and alleged that Rambus had improperly destroyed evidence. The District of Delaware agreed in the Micron case that some part of Rambus's destruction of documents constituted spoliation, holding that litigation was reasonably foreseeable to Rambus by its second shredding party. That court entered judgment in Micron's favor as a sanction for the spoliation. But, under the exact same facts, the Northern District of California in the Hynix case reached an opposite conclusion, ruling that litigation was not reasonably foreseeable because a number of contingencies existed that made it uncertain whether litigation would actually proceed.
On the appeal of both decisions, the Federal Circuit held that the duty to preserve evidence triggers when litigation becomes reasonably foreseeable and that no additional requirement of imminence or certainty exists. The court enunciated a fact-specific standard designed to allow district courts the flexibility needed "to confront the myriad factual situations inherent in a spoliation inquiry." Using that standard, a five judge panel concluded that the Micron district court did not err in its spoliation determination. (Although the judges kept the dance going for at least one more song because they remanded the "bad faith" finding, saying that the district court wasn't specific enough in its findings.) But in Hynix, the panel's majority had to dip into fact-based considerations in order to make its decision consistent with Micron-which, according to the dissent's sharp criticism, violated the stated clear-error standard of review. According to the dissent, Micron's reversal of the dismissal sanction also involved an inappropriate fact-based inquiry, despite the majority's newly stated requirement of a "clear and convincing" evidentiary standard for dispositive spoliation sanctions.
While both decisions lack clear directives for avoiding a document destruction policy with two left feet, factual analysis of the Micron decision does provide some basic guidelines for determining objective foreseeability when contemplated litigation remains uncertain. In assessing triggers to the duty to preserve, important considerations include:
- Whether a document retention policy has been initiated as part of a litigation strategy. Documents destroyed in conjunction with that kind of policy will earn greater court suspicion and scrutiny.
- A patentee's notice of infringing activities by particular parties. Specific knowledge makes litigation more objectively likely to occur.
- The steps taken in furtherance of litigation or any indications that litigation may be necessary. Evidence of these activities likely makes litigation reasonably foreseeable.
- The parties' role in the litigation. A plaintiff-patentee usually has more control over action initiation and, unlike a potential defendant, can thus usually better foresee litigation.
- The nature of the parties' relationship. When potential parties do not have a long standing, mutually beneficial business relationship, litigation is more likely to be reasonably foreseeable.
- The likelihood that remaining contingencies will be resolved. If resolution is reasonably foreseeable, then those contingencies may not make litigation unforeseeable.
Ultimately, under the standard enunciated in the Rambus decisions, the specific facts of any situation will dictate whether or not litigation is reasonably foreseeable. But for now, these guidelines-and their pre-document or data destruction review-provide patent law's best moves for keeping spoliation off your dance card.
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