In a recent ruling concerning Rambus’ patent infringement suit, the U.S. District Court in Delaware held that the computer memory company’s patents are unenforceable not on their merits, but because Rambus destroyed documents material to the case. Rambus had sued Micron in 2000 concerning the alleged infringement of 12 Rambus patents for high-speed computer memory chips. This ruling deals a severe blow to Rambus, which in the past has been relatively successful in protecting its intellectual property through licensing and litigation. Rambus’ stock dropped nearly 40 percent over the course of an hour after the ruling.
Is the stock market overreacting? Maybe, but companies like Rambus depend almost entirely on the strength (spelled e-n-f-o-r-c-e-a-b-i-l-i-t-y) of their patent portfolios and licensing schemes to survive. Apparently the market sees little chance of Rambus getting this ruling overturned. Given the severity of the ruling and the language of the Court, I can understand why.
When dealing with document destruction and other discovery rules violations, dispositive sanctions such as this one are rare and are the most severe that can be imposed. They are reserved only for egregious offenses. On page 33 of the ruling, the Judge said the “bad faith is so clear and convincing . . . the . . . conduct was so extensive . . . the very integrity of the litigation has been impugned.” She said that other, less severe sanctions would border on “meaningless.”
The Judge noted that Rambus had purposefully set up a document retention policy, as a part of its litigation strategy, to destroy potentially material documents. Rambus even set up “companywide shred days” to destroy documents it knew could be used by other companies in their defense, and deleted electronic information such as e-mails in a similar manner.
This ruling should serve as a reminder to us of the importance of creating sound document retention polices once there is a reasonable expectation of future litigation. This is especially important as electronic storage becomes easier and easier; there is no excuse to delete potentially material documentation.
While destroying potential evidence may seem at first glance to give an advantage in a particular case, this reminds us that not only is it unethical… it can result in your entire case being destroyed right along with that evidence! In this case, since the same patents at issue here are at issue in cases against other companies, and given how much Rambus relies on its IP… it might result in the destruction of the entire company.
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