Hyundai Electronics, et al v. Rambus, Inc.

Filing 3900

ORDER by Judge Ronald M. Whyte ruling on 3663 request for post-verdict relief; finding as moot 3719 Motion to Strike ; granting in part and denying in part 3721 Motion to Strike ; finding as moot 3723 Motion to Stay; finding as moot 3745 Motion to Strike ; finding as moot 3747 Motion to Strike. (rmwlc1, COURT STAFF) (Filed on 2/23/2009)

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1 2 3 4 5 6 7 8 9 10 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION E-filed: 2/23/2009 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH, Plaintiffs, v. RAMBUS INC., Defendant. No. C-00-20905 RMW PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF [Re Docket Nos. 3663, 3719, 3721, 3723, 3745, 3747] This patent/antitrust litigation involving dynamic random access memory ("DRAM) interface technology patented by Rambus and used by Hynix,1 among others, was bifurcated into three phases, each of which had to be tried. The issue in the first phase was whether Rambus's patent infringement claims were barred by the doctrine of unclean hands. Hynix contended that Rambus spoiliated evidence resulting in prejudice to Hynix. On January 5, 2006 the court issued its By "Hynix," the court refers to the four entities sued by Rambus: Hynix Semiconductor Inc., Hynix Semiconductor America Inc., Hynix Semiconductor U.K. Ltd., and Hynix Semiconductor Deutschland GmbH. The latter three entities are all wholly-owned subsidiaries of Hynix Semiconductor, Inc. See Docket No. 1649, C-00-20905-RMW, at 5, 4 (N.D. Cal. Feb. 2, 2006). "Hynix" does not include Hynix Semiconductor Manufacturing America, whose relationship to this case is discussed later. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 1 1 2 3 4 5 6 7 8 9 10 Findings of Fact and Conclusions of Law on Unclean Hands Defense in favor of Rambus. Hynix Semiconductor Inc. v. Rambus Inc., --- F.Supp.2d ----, 2006 WL 565893 (N.D. Cal. 2006). The second phase concerned Rambus's allegations that Hynix infringed U.S. Patents 5,915,105, 6,034,918, 6,324,120, 6,378,020, 6,426,916, and 6,452,863. On April 26, 2006 a jury returned a verdict that Rambus's patent claims were infringed and that Rambus was entitled to hundreds of millions in damages. Docket No. 2053 (Apr. 24, 2006). The court ordered a new trial on damages unless Rambus elected to remit the award to reflect the maximum reasonable royalty rates established at trial, which Rambus did. Docket Nos. 2197 (Jul. 14, 2006); 2229 (Jul. 27, 2006). The third and final phase involved allegations by Hynix that Rambus obtained its patents in violation of its disclosure obligation to members of a standards setting organization ("JEDEC") of which it was a member and committed antitrust and related violations by attempting to assert its patent claims against manufacturers of DRAMs that complied with the JEDEC standard. Hynix's allegations in this third phase were tried in a consolidated proceeding with similar claims made by other DRAM manufacturers. On March 26, 2008 a jury returned a verdict in favor of Rambus and against Hynix and the other manufacturers on their legal claims. The court will shortly issue its Findings of Fact and Conclusions of Law on the equitable claims and defenses in the third phase. Now, after over eight years of litigation, three discrete trials, and hundreds of motions, the court hereby issues its rulings on the last pending motions and seeks the parties' input on the form of the judgment to be entered. Rambus moves for a permanent injunction against Hynix, an award of supplemental damages, and its attorney's fees. Unfortunately, Rambus did not include a proposed order with its initial moving papers as required by Civil Local Rule 7-2(c). The lack of a proposed order hindered Hynix's ability to oppose Rambus's request for injunctive relief, for example, because Hynix was not certain of the scope of Rambus's requested relief. Rambus filed its proposed order with its reply. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 2 1 2 3 4 5 6 7 8 9 10 See Docket No. 3735 (Jun. 6, 2008).2 Hynix opposes the request for an injunction and has also filed a motion to stay any injunction pending an appeal.3 The court has reviewed the papers and considered the arguments of counsel. For the following reasons, the court denies Rambus's request for attorney's fees, grants in part Rambus's request for supplemental damages, and denies Rambus's request for an injunction. Hynix's motion for a stay of any injunction is denied as moot. I. ATTORNEY'S FEES Rambus asserts that this is an "exceptional case" and that it should therefore receive its attorney's fees. See 35 U.S.C. 285. Whether a prevailing party is entitled to attorney's fees is a two-step inquiry. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc). First, the district court must make factual findings as to whether the case is "exceptional." Id. Second, the court must exercise its discretion as to whether or not attorney's fees are appropriate. Id. Rambus bears the burden of establishing the exceptional nature of the case by clear and convincing evidence, Ruiz v. A.B. Chance Co., 234 F.3d 654, 669 (Fed. Cir. 2000), and its argument falters at this first step. In determining whether a case is "exceptional," the court may consider a number of factors, including, for example, whether the infringer engaged in litigation misconduct, advanced frivolous arguments, or willfully infringed the patent. Epcon Gas Systems, Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002). Rambus does not argue that Hynix engaged in either of the former, and Rambus cannot prove the latter. Despite Rambus's contention in its brief that Hynix "knowingly and willfully infringed Rambus's patents" and that Hynix lacked a good faith belief in its non-infringement, Rambus did not attempt to prove willfulness because it dropped the issue to avoid Because the court denies Rambus's request for injunctive relief, the court deems Rambus's failure harmless to Hynix and excuses Rambus's failure to file its proposed order. See Civil L.R. 7-2(c). The parties also filed a variety of objections and motions to strike. Where the court's order relies on material subject to these motions, the court has included a footnote overruling or sustaining the objection. The court otherwise denies and overrules the remaining motions and objections as moot, i.e., not on the merits of the evidentiary objection. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 3 3 2 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 the possibility that the court would bifurcate the patent trial. Hrg. Tr. 15:2-10; 17:1-4; 29:4-6 (Feb. 23, 2006). In light of Rambus's decision not to try the issue of willfulness, Hynix cannot be faulted for a failure to introduce evidence of its good faith belief in its non-infringement arguments. That aside, given the many close issues this litigation has involved, the court cannot conclude that Hynix lacked a good-faith basis for its positions on claim construction, non-infringement, invalidity and unenforceability. Nevertheless, Rambus argues that the "Read factors" used to determine whether or not to enhance damages may also inform whether or not a case is exceptional. See Liquid Dynamics Corp. v. Vaughan Co., Inc., 449 F.3d 1209, 1225 (Fed. Cir. 2006) (listing the nine "Read factors" that may establish whether an infringer acted in bad faith and whether damages should be enhanced); Read Corp. v. Portec, Inc., 976 F.2d 816 (Fed. Cir. 1992), abrogated on other grounds as recognized in Hoechst Celanese Corp. v. BP Chems. Ltd., 78 F.3d 1575, 1578 (Fed. Cir. 1996). Implied in Rambus's argument is the notion that a court may deem a case "exceptional" based on conduct that informs willfulness and enhanced damages, even where a showing of willfulness is not made. The court questions the correctness of Rambus's expansize approach to the "exceptional case" inquiry is correct.4 The Federal Circuit has held that where willful infringement is proven, a case may, or may not, be deemed "exceptional" under section 285. Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1340 (Fed. Cir. 2004) (explaining cases). This suggests that evidence suggesting, but not proving, willfulness, is also insufficient to establish that a case is exceptional absent litigation misconduct. Nonetheless, the court considers the conduct Rambus believes makes this case "exceptional." A. 4 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Copying Rambus argues that the Federal Circuit applied the Read factors to section 285's exceptional case standard in nCube Corp. v. Seachange International, Inc., 436 F.3d 1317, 1325 (Fed. Cir. 2006). This overstates what the nCube court did. The court of appeals observed that "[t]he trial court awarded enhanced damages on the basis of the jury's willfulness finding and the Read factors for enhancing damages." Id. However, the Federal Circuit did not itself apply the Read factors but merely affirmed the trial court's finding of an exceptional case and award of attorney's fees because "[t]his court detects no clear error in any of the court's subsidiary factual findings leading to its conclusion that this was an exceptional case." Id. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 4 1 2 3 4 5 6 7 8 9 10 Rambus first argues that there is "strong evidence" that Hynix copied Rambus's inventions. Rambus does not specifically identify such evidence in its briefing. Presumably, Rambus refers to Trial Exhibit 5020, an internal Hynix document describing its progress on its first DDR SDRAM. Patent Trial Tr. 1433:11-20 (Mar. 28, 2006). The document refers to the need to "compete with Rambus idea" to make a higher frequency DRAM. HTX 5020 at 5. Among the memo's many proposals, the authors suggest two relevant ideas: using a DLL to improve data output and employing dual-edge clocking to double the operating frequency, which would require a calibration of the clock signal's duty ratio to make it 1:1. Id. at 37. The footnote to the duty-ratio discussion says "Refer to Rambus DRAM. The DLL has duty-ratio adjustment with it." Id. at 40. This suggests that Hynix's engineers looked to Rambus's DRAM to help them implement a circuit to control the clock signal's duty ratio. But that is not one of the claimed inventions. Rambus did not press Hynix's engineer, Jae-Jin Lee, to explain the exhibit, its reference to Rambus's DRAM, or the role of Rambus's DRAM in Hynix's DDR SDRAM design process. See Patent Trial Tr. 1482:10-19. Rambus also suggests that circumstantial evidence shows that Hynix deliberately used Rambus's claimed inventions because, given the field of alternative technologies, the odds of Hynix selecting Rambus's were "1 in 2000." See Conduct Trial Tr. 2571:2-2573:9 (Feb. 25, 2008). Rambus's examination of Hynix's technical expert on this point was not convincing.5 The crossexamination turned on the assumption that various alternative technologies were "equally probable" choices and ignored conditional probability. For example, Rambus's hypothetical required the expert witness to treat the likelihood of selecting programmable burst length, programmable read latency, and programmable write latency (a feature not at issue in the 00-20905 case) as independent decisions. This is a dubious proposition, given that these three features use the mechanism of a programmable mode register; in other words, if a DRAM designer chose to use a programmable register for burst length, he would be more likely to also use a register for the read and write latencies. Rambus's proposed inference also implies that Hynix "somehow" chose to always use the Hynix's counsel did not object to this line of questioning. Given the sophistication of the jury, this may have been a strategic choice to let Rambus discredit itself in the eyes of the jury. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 5 5 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 Rambus technology when presented with a choice between alternatives, and that the odds of such an innocent selection were 1 in 2000. But Rambus ignores the large number of other DRAM technologies that Rambus has developed that Hynix did not use in making SDRAM and DDR SDRAMs. Rambus manufactures a faulty and misleading probability by excluding from its calculations these other decisions by Hynix's engineers. In short, Rambus's "1 in 2000" inference of copying rests on an improper application of the principles of probability, and therefore it is meaningless. Overall, Rambus presented evidence that Hynix had access to Rambus's RDRAM product and that Hynix referred to it for an engineering idea not claimed by the patents-in-suit. This is some evidence from which Rambus could begin to build an argument that Hynix copied Rambus's inventions, but it is not clear and convincing evidence of copying. B. Hynix's Size United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rambus also points to Hynix's "massive size" as a reason for deeming this case exceptional. An infringer's size may be a valid consideration in whether to enhance damages. Read, 970 F.2d at 827. But the cases cited in Read do not explain why the infringer's size should influence the court's decision to declare a case "exceptional." In St. Regis Paper Co. v. Winchester Carton Corp., the sole explanation given was that "[t]his is an appropriate case to award double damages. If defendant were the giant and plaintiff the small independent, I would make it treble, and if the Court of Appeals should think my distinction inappropriate, then the award should be treble rather than single." 410 F. Supp. 1304, 1309 (D. Mass. 1976). Absent a use of size to impose abusive litigation costs, the size of the parties seems irrelevant. The other three cases cited in Read all considered the infringer's size in awarding enhanced damages so as to ensure that the infringer could pay such a large award without going bankrupt. Those cases did not suggest that the infringer's size was relevant to deciding whether or not the case was "exceptional" in the first place. In short, the court is dubious that an infringer's size has meaningful relevance to the question of whether a case is "exceptional" absent a showing of the abuse of that size in litigation. Even if it is, the court is not inclined to give the factor much weight. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 6 1 2 3 4 5 6 7 8 9 10 Hynix is a large company, to be sure, and Hynix does not deny it. It is not unusually large within the field of DRAM manufacturing though. While Rambus has established this consideration, the infringer's size alone cannot support a finding that a case is "exceptional" and the court does not read the case law to suggest that it may. C. "Closeness of the Case" Rambus next suggests that this case is exceptional because it "was not a close case." The court disagrees. This case was a very close case on obviousness, some claim constructions issues, and enforceability. D. Duration of Infringement Rambus turns to Hynix's "decade-long" infringement next. The duration of an infringer's misconduct bears on this inquiry. Read, 970 F.2d at 927. Critically, when considering the "duration of misconduct," the court must parse the infringement for significant milestones, like the entry of judgment or affirmance on appeal. Id. The jury's verdict on the patent phase was in 2006, but the court did not finish its review of Hynix's post-trial motions until 2008 and 2009 following the 2008 jury verdict in the antitrust trial. Hynix has not yet had the opportunity to appeal the issues of claim construction, infringement, conduct, and enforceability. Accordingly, while Hynix's infringement has been ongoing, it is not as culpable as suggested by Rambus's "decade-long" argument. E. Remedial Action United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 An infringer's remedial action may ameliorate its conduct. See Read, 970 F.2d at 927. Rambus is correct that Hynix has made little if any effort to cease its infringement. For reasons discussed in more detail below, the court is not persuaded that this factor should be given significant weight. F. "Avowed Desire to Harm Rambus" Rambus's final argument is that the evidence shows that Hynix possess an "avowed desire to harm Rambus." Rambus identifies only one piece of its evidence in its papers, conduct trial exhibit 6524. Exhibit 6524 was an email written by Hynix's JEDEC representative, Farhad Tabrizi, in January 2000. It was used to refresh his recollection and triggered testimony about Mr. Tabrizi's PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 7 1 2 3 4 5 6 7 8 9 10 conduct with respect to Rambus. Conduct Tr. 3968:2-3969:10; 4003:17-4008:11. In sum, Mr. Tabrizi admitted that he believed Hynix would "fight these disputes with Rambus to the end of Rambus company." Id. 4006:7-11. The circumstantial evidence presented in the patent and conduct phases of the trial in this case suggests that Hynix would be much happier were "the end of Rambus company" to occur. Of course, it would be an unusual firm that would not be happy to see one of its competitors go out of business. Thus, it cannot be sufficient to establish that the infringer wished ill of the patentee to establish that a case is "exceptional." Instead, any finding that a case is "exceptional" due to the subjective mental state of the infringer must also involve some improper conduct by the infringer intended to harm the patentee beyond the infringer's objectively reasonable defense of the suit. Cf. In re Seagate Technology, LLC, 497 F.3d 1360, (Fed. Cir. 2007) (en banc) (holding that a finding of willfulness requires a finding that a defense to infringement was objectively reckless before inquiring into subjective intent). Rambus has accused Hynix of such conduct elsewhere, but it has not proven such conduct here. G. Conclusion United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Reviewing the arguments advanced by Rambus, the court is not persuaded that it has proven by clear and convincing evidence that this was an "exceptional" case within the meaning of section 285. Plainly, the word "exceptional" is open to interpretation, but it is useful to compare the behavior Rambus complains of to what else has been deemed to make a case "exceptional." Rambus has not proven that Hynix engaged in litigation misconduct by fabricating or destroying evidence or by advancing frivolous arguments. Rambus chose not to try to prove that Hynix's infringement was willful. All Rambus has shown is that Hynix is a large company, that the case was hard-fought and lengthy, and that Hynix did not alter its infringing conduct over the course of the litigation. After almost nine years of contentious litigation, there can be no doubt that this case has been exceptional in the colloquial sense of the word. But it has not been "exceptional" under the standards of the patent law. II. SUPPLEMENTAL DAMAGES PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 8 1 2 3 4 5 6 7 8 9 10 Rambus also seeks supplemental damages for Hynix's infringement after December 31, 2005, the last date for which Rambus was able to present evidence of Hynix's DRAM sales to the jury. In the parties' joint pretrial statement regarding the issues to be tried, Rambus specifically requested an accounting for damages based on sales after those disclosed in discovery and reflected in the experts' reports. Docket No. 1649, at 7, 11 (Feb. 2, 2006).6 The parties generally agree on the amount of Hynix's post-verdict sales, but disagree as to how the law applies to various aspects of those sales. A. Legal Standard for Supplemental Damages Under the Patent Act's damages provision, "the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." 35 U.S.C. 284. Furthermore, "[w]hen the damages are not found by a jury, the court shall assess them." Id. Little case law appears to exist regarding the award of supplemental damages for infringement between a jury verdict and the entry of judgment,7 but the authority there is supports the award of such supplemental damages. In Stryker Corp. v. Davol, Inc., the district court awarded supplemental damages for the period between the jury's verdict of willful infringement and the court's grant of the patentee's motion for a permanent injunction. 75 F. Supp. 2d 746, 747 (W.D. Mich. 1999), aff'd 234 F.3d 1252 (Fed. Cir. 2000). The trial court reasoned that "[u]nder 35 U.S.C. Based on Rambus's clear pre-trial request, cases like Lucent Technologies, Inc. v. Newbridge Networks Corp., 168 F. Supp. 2d 269, 271-73 (D. Del. 2001) and Braintree Laboratories, Inc. v. Nephro-Tech, Inc., 81 F. Supp. 2d 1122, 1140 (D. Kan. 2000) denying an accounting for postverdict damages on a theory of waiver do not apply here. The paucity of case law regarding "supplemental damages" perhaps stems from some courts referring to the process as an "accounting." E.g., Floe Int'l, Inc. v. Newmans' Mfg. Inc., 2006 WL 2472112, *9 (D. Minn. Aug. 23 2006); Itron, Inc. v. Benghiat, 2003 WL 22037710, * 15 (D. Minn. Aug. 29, 2003). The term has its roots in equitable restitution, and it may generate more confusion that clarity. Joel Eichengrun, "Remedying the Remedy of Accounting," 60 Ind. L.J. 463 (1985) (discussing an "accounting" as any of three distinct concepts). Congress removed the Patent Act's provision for an equitable accounting in 1946. Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1557, 1565-66 (Fed. Cir. 1995) (opinion of Nies, J.). As currently used in the statutes related to patent law, an "accounting" simply refers to calculating damages due under 35 U.S.C. 284. Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1343 fn.7 (Fed. Cir. 2000). To avoid confusion, the court refers to Rambus's request as Rambus and Hynix do: a motion for supplemental damages. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 9 7 6 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 284, the Court is required to award damages adequate to compensate for any infringement[.]" Id. The Federal Circuit appears to have blessed this approach. See 234 F.3d at 1259-60. Davol "argue[d] that the district court abused its discretion in enhancing damages and awarding supplemental damages[.]" Id. at 1259. The Federal Circuit rejected the argument, explaining that "[t]he court's measured approach in enhancing damages for pre-trial infringement by 50% and doubling damages for infringement post-verdict until entry of the permanent injunction represented a reasonable measurement of the culpability of Davol's conduct and was well within its discretion." Id. at 1260. This discussion focuses mainly on the wisdom of the district court's incrementally increasing approach to enhancing damages for willful infringement, but it also affirms the trial court's decision to award damages for the period between the verdict and entry of an injunction. Id. Rambus notes that two other courts recently have awarded post-verdict supplemental damages. Aero Products Intern., Inc. v. Intex Recreation Corp., 2005 WL 1498667 (N.D. Ill. Jun. 9, 2005) (awarding damages for sales after those considered by the jury and before entry of injunction); National Instruments Corp. v. The Mathworks, Inc., 2003 WL 24049230 (E.D. Tex. Jun. 23, 2003). In National Instruments, Judge Ward explained that "[a] failure to award such damages would grant an infringer a windfall by enabling it to infringe without compensating a patentee for the period of time between the jury's verdict and the judgment." 2003 WL 24049230, *4.8 The court agrees with this reading of section 284. Permitting recovery of such supplemental damages serves section 284's expressed interest in providing damages "adequate to compensate for the infringement." Failure to award such damages may not necessarily create a "windfall" for the infringer because the patentee could file another complaint alleging infringement occurring after the time period tried in the first case, but requiring such additional litigation would be inefficient and unhelpful, serving only to delay the patentee's right to recover. Indeed, in an analogous situation discussing a special master's ability to conduct an equitable accounting, the Court explained that a United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The only case cited by Hynix, Voda v. Cordis Corp., is inapposite; it deals with the mechanism for awarding the patentee its damages following the district court's denial of a permanent injunction. 2006 WL 2570614, *6 (W.D. Okla. Sept. 5, 2006). PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 10 8 1 2 3 4 5 6 7 8 9 10 special master "was not limited to the date of the decree." Providence Rubber Co. v. Goodyear, 76 U.S. 788, 800 (1869). On the contrary, the special master could properly consider the infringer's conduct and sales up to the time of the hearing. Id. at 800-01. The Court reasoned that such a "practice saves a multiplicity of suits, time, and expense, and promotes the ends of justice. We see no well-founded objection to it." Id. at 801. Though the context has changed due to the merger of law and equity and revision to the patent laws, the Court's practical insight into easing the administration of damages calculations remains sound, and that insight counsels in favor of permitting a patentee to recover supplemental damages under section 284 for post-verdict-but-prejudgment infringement. B. The Appropriate Royalty Base -- DDR2+ SDRAM United States District Court 11 For the Northern District of California The parties' first dispute about the appropriate royalty base concerns what products were found by the jury to infringe Rambus's patents.9 This issue was supposed to be addressed by the parties' joint pretrial statement, which included the following stipulation: A single Hynix SDRAM part (HY57V28820A 128 M SDRAM) will be representative of all Hynix SDRAM Accused Products (including all SDRAM, SGRAM, and Handy SDRAM products) and a single Hynix DDR SDRAM part (HY5DU28822T 128 M DDR SDRAM) will be representative of all Hynix DDR SDRAM Accused Products (including all DDR SDRAM, DDR2 SDRAM, DDR3 SDRAM, GDDR SDRAM, GDDR2 SDRAM, GDDR3 SDRAM, and DDR SGRAM products) made, used, offered for sale, or sold by Hynix, for purposes of showing infringement or non-infringement. Docket No. 1649, at 6 (Feb. 2, 2006) (emphasis added). Rambus defined the list of such accused products that it was aware of as of December 15, 2004 in its Final Infringement Contentions; it attached those contentions as Exhibit 2 to the joint pretrial statement. Id. The Exhibit lists dozens of different types of DRAMs including DDR2 and GDDR3 SDRAMs, but it does not list any DDR3 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 To refresh, DRAM stands for "dynamic random access memory." Successive improvements on the basic DRAM have led to more complex acronyms. "SDRAM" refers to a "synchronous" DRAM, i.e., a DRAM whose operations are synchronized to a clock signal. A "DDR" SDRAM is a "double data rate" SDRAM that uses both halves of a clock signal to double the effective operating speed of the memory. DDR SDRAM represented the next generation of SDRAMs. Further iterations DDR2, DDR3, etc. represent successive generations of improvements on the DDR SDRAM. A "GDDR" SDRAM is a "graphics" DDR SDRAM, of which there have also been multiple product generations (GDDR2, GDDR3, etc.). PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 11 9 1 2 3 4 5 6 7 8 9 10 SDRAMs. See id., Ex. 2. Earlier portions of the joint pretrial statement describe the scope of the case differently. In Rambus's "supplemental statement regarding the substance of the action," Rambus defined an issue to be decided as "whether Hynix's accused products SDRAM, DDR SDRAM, DDR2 SDRAM, GDDR SDRAM, GDDR2 SDRAM, GDDR3 SDRAM, SGRAM, DDR SGRAM, and Handy SDRAM (collectively, "Accused Products") infringe . . . the asserted claims[.]" Id. at 3. Absent is any mention of DDR3 SDRAM. Similarly, Hynix's supplemental statement defined the same set of products as the "Accused Products," again, not listing DDR3 SDRAM. Id. at 4. Any confusion, however, is resolved by the a stipulation at trial. The parties stipulated to the volume of Hynix's DRAM sales. See Docket Nos. 1838, 1839 (Mar. 15, 2006). The stipulation included a table reflecting Hynix's sales revenue, and one column was labeled "DDR/DDR2 SDRAM." Id. at 2. A footnote to the column label stated that "'DDR/DDR SDRAM' includes all DDR SDRAM, DDR2 SDRAM, DDR3 SDRAM, GDDR SDRAM, GDDR2 SDRAM, GDDR3 SDRAM, and DDR SGRAM products." Id. at 2, fn.2 (emphasis added). Hynix does not argue that it did not agree to those stipulations, nor does it endeavor to withdraw them. Hynix's sole argument is that because DDR2, DDR3, and GDDR3 SDRAM are accused of infringing in another case (Rambus Inc. v. Hynix Semiconductor, Inc., C-05-00334), the court should not include them in the royalty base of this case because doing so might lead to a double recovery. Hynix's concern about double recovery is valid, but it does not justify excluding products which Hynix stipulated were included in this case (which is near judgment) so as to include them in another case (which is currently stayed and for which infringement and validity have not been tried). Thus, the royalty base for any supplemental damages award in this case properly includes DDR2, DDR3, and GDDR3 SDRAM. C. The Appropriate Royalty Base -- the Oregon Plant United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rambus seeks to collect royalties on infringing DRAMs manufactured in Eugene, Oregon. The DRAMs came off the production line in wafer form, i.e., they were not yet cut and packaged for consumer use. The DRAMs were shipped overseas, where they were processed and sold to PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 12 1 2 3 4 5 6 7 8 9 10 customers outside the United States. Hynix does not oppose Rambus's request for supplemental damages on the basis that accused DRAMs were not finished DRAMs. Nor does Hynix oppose the application of American patent law to these DRAMs since the DRAMs were made in America, though sold and used overseas. Hynix's sole opposition to permitting Rambus to recover damages for its manufacture of these DRAMs is its contention that the Oregon DRAMs were made by Hynix Semiconductor Manufacturing America ("HSMA"), and that HSMA is not a party to this case. Rambus disputes this, arguing that the testimony at trial established that the parent Hynix corporation or its American subsidiary Hynix Semiconductor America, Inc. are responsible for the manufacturing activity in Oregon. Jae Park, the president of Hynix Semiconductor America, Inc., Patent Trial Tr. 1357:5-12 (Mar. 27, 2006), testified as follows: Q A Q A Q Now, there's already been some discussion in this case about a factory that's located in Oregon. Does Hynix have a factory located in Oregon? Yes, we do. Okay. HSA is the -- is holding 99, more than 99 percent of ownership in that factory. And I think we have a photograph of it. Mr. Marriott, could we bring up 2413? There we go. What is it that we're looking at here on the screen, Mr. Park? This is our fab in Eugene, Oregon. Okay. What's manufactured here? Currently, [5]12 megabit DDR1 and DDR2 one gigabit DDR1 and DDR2 products. Are those DRAMs? DRAMs. When was this factory built, sir? I believe 1996. How many people work there? 1100 people. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A Q A Q A Q A Q A PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 13 1 2 3 4 5 6 7 8 9 10 Q And I think we've brought some things to share with the jury, if we might, your honor, when we get a chance, about some details of the production. But before we do that, do you have any understanding, Mr. Park, of the investment that Hynix made in this facility? We built this fab for $1.7 billion U.S. dollars, and we constantly upgrade this facility. What do you mean by that, "constantly upgrade"? The equipment is tear and wear, and new equipment comes out to make us more efficient in manufacturing. So that's what I mean by upgrade. Do these factories run 24 hours a day? Yes. Seven days a week? Right. A Q A Q A Q A United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Id. 1364:14-1366:1. Mr. Park then testified extensively about the manufacturing processes used at the Oregon fab. Id. 1366:2-1374:9. He also testified that "Hynix" received tax benefits for building its fab in Eugene, and Hynix moved a picture of the fab into evidence as Exhibit 2413, shown at left. Id. 1384:3-15; 1384:18-23. Hynix supplies no evidence in support of its assertion that the Hynix entities named in this case are not responsible for the manufacture of infringing DRAMs at the Oregon plant. Mr. Park's testimony at trial suggested otherwise, consistently referring to the plant as "our fab" and that "we built this fab." Exhibit 2413 describes the plant as a "Hynix Memory Fab;" it does not mention Hynix Semiconductor Manufacturing America or hint at the existence of such a subsidiary. In short, Hynix presented PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 14 1 2 3 4 5 6 7 8 9 10 substantial testimony at trial about its ownership and operation of the Oregon fab when that testimony might have impressed the jury. Hynix's attempt to disclaim this testimony now by pointing to an unnamed subsidiary is not persuasive. The court therefore concludes that Hynix's non-U.S. sales of DRAMs manufactured at the plant in Oregon should be included in the royalty base of Rambus's supplemental damages. D. The Appropriate Royalty Rate Rambus argues that the royalty rate for the supplemental damages should be the same rates applied in the court's remittitur order, effectively, 1% for the SDRAM products and 4.25% for the DDR products. Hynix advocates a uniform royalty rate of less than 1% based on the effective royalty rates it calculates from various licenses that Rambus entered into during the pendency of the litigation. Although the existing case law on supplemental damages does not explain why, it recommends applying the royalty rates determined by the jury. Aero Products, 2005 WL 1498667, *2; Stryker, 75 F. Supp. 2d at 747. Hynix disagrees with that approach, noting that some evidence following the start of infringement can be relevant to the determination of a reasonable royalty. Studiengesellschaft Kohle, m.b.H. v. Dart Industries, Inc., 862 F.2d 1564, 1571-72 (Fed. Cir. 1988). Hynix urges the court to reexamine the reasonable royalty rates found by the jury, and to consider the effective royalty rates of the licenses Rambus negotiated against the backdrop of its nine-year struggle to enforce its patents. The court does not believe Hynix's approach is proper. The only difference between Hynix's pre-verdict infringement and post-verdict infringement is the order in which the court tried the parties' claims in this case. Had the court inverted the patent and antitrust trials, a larger fraction of Hynix's infringing conduct would have been subject to the maximum royalty rates supported by the evidence at trial. The absence of any meaningful distinction between pre-verdict and post-verdict infringement justifies the case law's approach of applying the same royalty rate to both. It is illustrative to compare this situation to that of a pre-judgment and post-judgment royalty rates. In Amado v. Microsoft Corp., the Federal Circuit explained that "[p]rior to judgment, liability PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 15 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 for infringement, as well as the validity of the patent, is uncertain, and damages are determined in the context of that uncertainty." 517 F.3d 1353, 1362 (Fed. Cir. 2008). Once judgment is entered, however, the court "should take into account the change in the parties' bargaining positions, and the resulting change in economic circumstances, resulting from the determination of liability[.]" Id. Accordingly, the court reasoned that any royalty rate for post-judgment infringement should be higher than the pre-judgment royalty rate to account for the increased certainty about the parties' rights and relationship. Id. at 1362 fn.2. The lesson from Amado is that a royalty rate should evolve to track the change in the relationship between the parties caused by the progress of the litigation. See id. at 1362. Thus, if Amado speaks to the context of supplemental damages, it would counsel in favor of increasing the royalty rate on the supplemental damages award, not decreasing it as Hynix urges, because the relationship between the parties has become more certain following the verdict of validity and infringement. Nonetheless, the court does not believe such an increase is wise here given the issues that remained to be tried and the pendency of post-trial motions. While the jury verdict brought increased certainty to the parties' relationship, it was much less than that conferred by a judgment. Accordingly, the court orders that the same royalty rates set in the remittitur order 1% for SDRAM and 4.25% for DDR SDRAMs shall apply to the supplemental damages award. E. Prejudgment Interest United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rambus requests prejudgment interest on the supplemental damages award. Hynix does not oppose the request. The court previously ruled on Rambus's request for prejudgment interest on the damages established at trial. Docket No. 2402 (Aug. 30, 2006). The court adopts its prior ruling. The prejudgment interest rate shall be based on the five-year constant maturity Treasury yield. The parties shall submit a stipulated judgment correctly reflecting the prejudgment interest on the supplemental damages awarded. III. INJUNCTIVE RELIEF In addition to these supplemental damages, Rambus also requests that the court enjoin Hynix from infringing the patents-in-suit. The court begins its discussion of Rambus's request by reviewing the principles of equity that govern it. The court follows by examining the trial record PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 16 1 2 3 4 5 6 7 8 9 10 and declarations submitted in support of this motion to lay out the court's understanding of the DRAM industry and the parties' roles in it. The court then explains why equity does not support enjoining Hynix and what remedies are appropriate following judgment. A. Equitable Principles A court may enjoin ongoing patent infringement after considering traditional principles of equity. 35 U.S.C. 283. To receive injunctive relief, Rambus must show: "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). This equitable inquiry is not amenable to categorical rules. In eBay, the Supreme Court criticized the district court for suggesting that injunctive relief is not available for patent holders that license but do not practice their inventions because "equitable principles do not permit such broad classifications." See id. at 393. The Court also rejected the Federal Circuit's jurisprudence holding that patent holders are presumptively entitled to injunctions for the same reason. Id. at 393-94. On the contrary, a court must structure injunctive relief based on each case's granular facts. Cf. Walgreen Co. v. Sara Creek Property Co., B.V., 966 F.2d 273, 275 (7th Cir. 1992) (Posner, J.) (recognizing the "particularistic, judgmental, fact-bound character" of issuing injunctions in commercial lease cases). But "discretion is not whim." eBay, 547 U.S. at 395 (Roberts, C.J., concurring) (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 139 (2005)); see also Winchester Repeating Arms Co. v. Olmsted, 203 F. 493, 494 (7th Cir. 1913) ("But discretion (which must be legal discretion, not merely the individual view or will of the particular chancellor) does not extend to a refusal to apply well-settled principles of law to a conceded or indisputable state of facts."). Like cases should be decided alike, and centuries of equity practice shepherd this court's exercise of its power to enjoin infringement. eBay, 547 at 396. These "pages of history" offer the following counsel. 1. Injunctions Should Not Encourage Holdup United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 17 1 2 3 4 5 6 7 8 9 10 "Holdup" refers to using the threat of an injunction as "a bargaining tool to charge exorbitant fees." eBay, 547 U.S. at 396-97 (Kennedy, J., concurring). For example, a modern device can encompass thousands of useful technologies, each of which may be covered by a patent claim. Id.; see also, Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev. 1991, 1992 (2007) ("As a striking example, literally thousands of patents have been identified as essential to the proposed new standards for 3G cellular telephone systems."). A patent to a technological sliver enables its owner to threaten to enjoin the manufacture or use of the entire device, and in turn, receive a payoff far greater than the value of its invention. eBay, 547 U.S. at 396-97; cf. Walgreen Co., 966 F.2d at 278 (discussing how an injunction can hamper bargaining and citing Boomer v. Atlantic Cement Co., 26 N.Y.2d 219 (1970)). This dilemma has generated volumes of discussion in the past decade.10 But there is nothing new under the sun. Patent law has long grappled with species of holdup. In Hoe v. Boston Daily Advertiser Corp., the patent-in-suit covered "but part of a large machine, upon which the daily newspaper of the defendants is printed[.]" 14 F. 914, 915 (C.C. Mass. 1883). Changing the infringing part would have been difficult. Id. Meanwhile, an injunction against using the printer would "embarrass the usual course of business" and cause the newspaper "much expense." Id. Meanwhile, the patent holder manufactured its own printers and, according to the court, had suffered its "real damage" when its competitor sold the machine to the newspaper. Id. The court did not believe that the patent holder suffered any harm, however, from the newspaper's continuing use of the printer. Id. As the parties were already negotiating a royalty, the court surmised that "the only advantage which the plaintiffs could derive from an injunction, would be to put them in a better situation than they are now in, or than the defendants will then be in for the further conduct of the negotiation." Id. The court therefore denied the request for a preliminary injunction, and suggested United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Recent studies by the federal government summarize some of the economic research and industry perspectives on patent holdup. See, e.g., U.S. DEP'T OF JUSTICE & FED. TRADE COMM'N, ANTITRUST ENFORCEMENT AND INTELLECTUAL PROPERTY RIGHTS: PROMOTING INNOVATION AND COMPETITION, Ch. 2 at 37-40 (2007); FED. TRADE COMM'N, TO PROMOTE INNOVATION: THE PROPER BALANCE OF COMPETITION AND PATENT LAW AND POLICY, Ch. 2 at 28-30 (2003). PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 18 10 1 2 3 4 5 6 7 8 9 10 that the court would be unlikely to ever enjoin the use of the pre-existing printer. Id. at 916. Extensive sunk costs present another opportunity for a patent holder to extract a disproportionate sum from an infringer because the infringer cannot recover its existing investment. In Ballard v. City of Pittsburgh, the patent holder claimed "wooden pavement as a structure" and "the method of preparing blocks to be used in such structure." 12 F. 783, 784 (C.C. Pa. 1882). The court held that the patents were valid and that the city of Pittsburgh had laid down two avenues worth of infringing wooden pavement. Id. at 785-86. The court balked at the prospect of entering an injunction requiring the city to tear up and repave the streets though. The court held that "[i]nasmuch as any interference with the use of the wooden pavements constructed in the city of Pittsburgh, in infringement of the complainant's rights, would only operate injuriously upon the public, without benefiting the complainants, an injunction will not be granted." Id. at 786. Instead, the court ordered a special master to determine the amount of profits and damages. Id. The case of Electric Smelting & Aluminum Co. v. Carborundum Co. presents another "page of history," this time addressing the infringement of a patent to a new compound, carborundum (SiC). 189 F. 710 (C.C. Pa. 1900). The infringer had expended over $400,000 in building a specialized factory for making carborundum and was the sole supplier of the compound because "the complainant never . . . embarked in that business." Id. at 712. The infringer had developed an extensive market for carborundum, however, selling it to "many of the large railroad systems, the two large air-brake companies, and [it] is almost exclusively used in the granite polishing of this country and Scotland." Id. An injunction would have shuttered the factory and cut off supply to each of these markets. Id. The court considered this consequence important, but chose to deny an injunction following another line of reasoning. Id. Simply, an injunction would "bring no gain" to the patent holder. Id. An injunction would not give the patent holder the infringer's business, nor would it "relieve it from competition for . . . it is not engaged in its manufacture." Id. Indeed, the court mused that if it entered an injunction, it would destroy the infringer's business and ruin any hope of collecting royalties for the patent holder. Id. at 713. The court also rejected the patent holder's argument that PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 19 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 the infringer's "refusal to come under license encouraged others to contest the Cowles patent and made licensees unwilling to pay royalties." Id. But "the special form of relief applicable to the facts of this particular case cannot affect the relations of other alleged infringers or licensees." Id. The court also emphasized the existence of other licensees as tilting in favor of the infringer. Id. These three examples nicely illustrate the general principle that the court in equity should be mindful that an injunction can impose disproportionate costs on the infringer and on the general public with no commensurate gain to the patentee. 2. Equity Does Not Require That Patents Be Practiced On the other hand, it is also a bedrock principle that "the very essence of the right conferred by the patent . . . is the privilege of any owner of property to use or not use it, without question of motive." Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 429 (1908). Like the facts of Carborundum, the facts of Continental Paper Bag shed light on the equitable resolution of this case and deserve exploration. There, the patent holder never practiced its patent to a new machine for making paper bags. See id. at 428-29. The Eastern Paper Bag Company was not a "non-practicing entity," however. See id. at 429. On the contrary, it chose not to practice its patent to "make more money" from its existing machines. Id. The Court doubted that such a non-use was "unreasonable" given the expense of retrofitting the bag factory with the new machine. Id. The reasoning of Continental Paper Bag suggests that it is entirely equitable for a patent holder to suppress the use of an invention to maximize its profits from other endeavors. To be sure, the Supreme Court in Continental Paper Bag emphasized that "[f]rom the character of the right of the patentee may judge of his remedies." Id. at 430. An "exclusive" right "can only retain its attribute of exclusiveness by a prevention of its violation." Id. Nevertheless, the Court declined to hold that injunctions must issue for infringement, and the eBay Court recognized that not every infringement merits an injunction. Id.; eBay, 547 U.S. 388. 3. Injunctions Prospectively Relieve Future Harm; They Do Not Punish United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 By its nature, injunctive relief is prospective. Injunctive relief requires "a showing of irreparable injury, a requirement that cannot be met where there is no showing of any real or PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 20 1 2 3 4 5 6 7 8 9 10 immediate threat that the plaintiff will be wronged again." City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). Where an infringer's conduct will not harm the patent holder, enjoining that conduct is an abuse of discretion. Innogenetics, N.V. v. Abbott Laboratories, 512 F.3d 1363, 1380-81 (Fed. Cir. 2008). Innogenetics illustrates how a case's facts can make injunctive relief improper. There, the patent holder argued to the jury that its damages included "a market entry fee of $5.8 million and an ongoing royalty payment amount of $1.2 million." Id. at 1380. The jury awarded both forms of damages, and the court then held that "when a patentee requests and receives such compensation, it cannot be heard to complain that it will be irreparably harmed by future sales." Id. Without any evidence of irreparable harm, the court vacated the permanent injunction and remanded for the trial court to determine an appropriate royalty rate going forward. Id. at 1381. As discussed, a patent holder properly seeks an injunction to end the infringement of an exclusive right. But a patent holder has "no cognizable interest in putting [an infringer] out of business." Verizon Servs. Corp. v. Vonage Holdings Corp., 503 F.3d 1295, 1311 n.12 (Fed. Cir. 2007). In other words, an injunction may deter future harm, but it may not punish. Amstar Corp. v. Envirotech Corp., 823 F.2d 1538, 1549 (Fed. Cir. 1988); Hecht Co. v. Bowles, 321 U.S. 321, 329-30 (1944) ("The qualities of mercy and practicality have made equity the instrument for nice adjustment and reconciliation between the public interest and private needs as well as between competing private claims."). The facts of Amstar resemble Innogenetics. In Amstar, the Federal Circuit rejected the argument that it should enjoin an infringer "to punish it for buying infringing devices and for participating in this litigation." 823 F.2d at 1549. The infringer possessed seven infringing devices and had been ordered to pay the patent holder's lost profits on the sales of the devices. Id. "Having been awarded full compensation for the making and using of [the existing infringing devices] therefore, Amstar is not entitled to enjoin their use." Id.; accord Hoe, 14 F. at 915. 4. Broadcom Corp. v. Qualcomm Inc. United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In addition to these "pages of history," the Federal Circuit's recent jurisprudence informs the court's exercise of discretion. The most significant case since eBay, and the case with the greatest contextual similarity to this case, is Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683 (Fed. Cir. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 21 1 2 3 4 5 6 7 8 9 10 2008). Broadcom and Qualcomm both made chipsets for use with cellphone networks. 543 F.3d at 686. Different network standards exist, with Broadcom supporting a standard compatible with one while Qualcomm made CDMA2000 chipsets compatible with the other. Id. Qualcomm also implemented push-to-talk software. Id. Broadcom does not sell CDMA2000 chipsets or sell anything implementing push-to-talk technology. Id. Both the CDMA2000 chipset and push-to-talk software were found to infringe Broadcom's valid patents. Id. at 686-87. Following the denial of post-trial motions, the district court held a bench trial on the nature of any injunctive relief.11 Id. at 687. The court entered an injunction with "sunset" provisions to permit Qualcomm to continue to sell its products for approximately one year subject to an ongoing royalty. Id. at 687-88. On appeal, the Federal Circuit affirmed the district court's injunction order (except as to one patent, which the Federal Circuit held not infringed). Id. at 701-05. A few arguments presented in Broadcom merit scrutiny here. First, Qualcomm argued that because Broadcom did not manufacturer CDMA2000 chipsets or products using push-to-talk technology, Broadcom could not suffer irreparable harm. See id. at 702-03. The trial court disagreed. Id. at 702. "Competition for sales is not on a unit-by-unit basis, but rather competition is characterized by competing for 'design wins' for the development and production of cell phones which will embody the proposed chip[.]" Id. (quoting the trial court order). Thus, Broadcom could suffer irreparable harm from Qualcomm's infringing CDMA2000 marketing because those sales detracted from its efforts to establish its technology (WCDMA) as the dominant network standard. Id. at 703. Likewise, the district court found that no adequate remedy at law would compensate Broadcom for the loss of "design wins" to Qualcomm's CDMA2000 chipset. Id. Qualcomm also argued that Broadcom could not establish irreparable harm or lack of an adequate remedy because Broadcom licensed Verizon, a major user of Qualcomm's CDMA2000 In complex network industries like that in Broadcom or this case, a bench trial to take additional evidence relevant to the injunctive relief inquiry may be a best practice. Here, neither Rambus nor Hynix requested an evidentiary hearing, though Rambus made its vice-president of licensing available to testify at the hearing on the motion. Hrg. Tr. 3:23-4:7 (Jun. 24, 2008). Unlike a normal patent case, this case involved a lengthy trial on Hynix's antitrust claims against Rambus that generated a substantial body of evidence that informs the court's consideration of Rambus's motion. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 22 11 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 chipsets. Id. at 702-03. Both the district court and Federal Circuit rejected this contention. See id. Broadcom licensed Verizon "to minimize the potential impact of an injunction to third parties or consumers while Qualcomm designs around Broadcom's patents." Id. at 702. The Federal Circuit considered the Verizon license to be of limited probative value because it created a possible business alliance for Broadcom. Id. at 703. Furthermore, the difference between Verizon (a possible business partner and user of chipsets) and Qualcomm (Broadcom's direct competitor and maker of competing chipsets) undermined any inference that Broadcom was willing to license others in the market and could thus be compensated by money. Third, in fashioning its injunctive relief, the district court imposed a "sunset" period over which Qualcomm had to pay compulsory royalties. See id. at 704. The evidence showed that it took approximately 18 months to bring a new chipset to the consumer; hence, the court imposed a 20month royalty period running from the jury's verdict. Id. The court noted that an immediate injunction would "adversely affect the public," i.e., the handset manufacturers who used the infringing CDMA2000 chipsets in their cellphones and the network carriers that serviced the infringing technologies. Id. The district court reasoned that the sunset period in the injunctive relief ameliorated the harm to the public such that the balance of equities weighed in favor of enjoining Qualcomm from infringing the patents following the expiration of the period. Id. The Federal Circuit approved of this balancing of interests. Id. Finally, both the district court and Federal Circuit put stock in the principle that "[o]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected." Id. (quoting Windsurfing Int'l, Inc. v. AMF, Inc., 782 F.2d 995, 1003 n. 12 (Fed. Cir. 1986)). This court agrees, up to a point. Surely no willful infringer can be heard to complain when its business is destroyed by an injunction against practicing the patented technology. But where infringement is not willful, perhaps because of serious questions as to the patent's validity or the patent arose long after the technology was first used, the potential destruction of an infringer's business should carry some weight in the balancing of harms under the four-factor test reaffirmed in eBay. To ignore the harm to the infringer because it PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 23 United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 "cannot be heard to complain" runs contrary to eBay's mandate to "consider[] the balance of hardships between the plaintiff and defendant[.]" 547 U.S. at 391. B. Factual Background To weigh Rambus's request for an injunction properly in a "well-reasoned and comprehensive" manner (see Broadcom, 543 F.3d at 701-02), a substantial amount of evidence must be explained. The court begins by examining the claimed technologies and their relationship to the accused products. The court then considers the development process that produced the accused products and its flexibility. Cf. Broadcom, 543 F.3d at 704 (discussing the time for new products to reach consumers). From there, the court considers Hynix's role in the industry, its business model, and what harms it would suffer from an injunction. Finally, the court then discusses Rambus's research-and-development-driven business model. 1. DRAMs and the Claimed Inventions United States District Court 11 For the Northern District of California 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 This case is about DRAMs, the ubiquitous integrated circuits found in a wide range of digital devices. DRAMs store information and allow an electronic device to quickly access that information. To provide context for the word "quickly," the prior art memory devices Rambus's founders criticized operated in the low dozens of megahertz, i.e., the devices transmitted tens of millions of bits information per second. See generally Patent Trial Tr. 275:14-282:22. It goes without saying that coordinating the interaction between devices with dozens to hundreds of million operations per second is an immensely complex undertaking. A brief glance at the specification of the patents-in-suit confirms this. In discussing prior art DRAMs, Drs. Michael Farmwald and Mark Horowitz refer to a prior art patent to Proebsting, et. al., which claimed what was then the "state-of-the-art DRAM interface." U.S. Patent No. 6,034,918, col. 2, ll. 43-49 (citing U.S. Patent No. 3,969,706). This basic prior art DRAM has many components.12 It stores information in a matrix of memory cells, where each bit of information is This discussion only broaches the complexity of the internal working of a DRAM. Cf. Bruce Jacob, Spencer W. Ng & David T. Wang, Memory Systems: Cache, DRAM, Disk 313-596 (2008) (introductory graduate-level text on DRAM design and function). This discussion omits the tremendous complexity involved in actually manufacturing DRAMs. Cf. Patent Trial Tr. 1370:19-1371:24 (Mar. PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR POST-VERDICT RELIEF C-00-20905-RMW TSF 24 12 1 2 3 4 5 6 7 8 9 10 stored as a charge in a capacitor. For context, a 256 MB DRAM, like many of the Hynix SDRAM and DDR SDRAMs accused by Rambus, possesses over 200 million capacitors and transistors. Row and column busses connect to every capacitor in each memory cell, and sense amplifiers discern whether the voltage levels inside the memory cells correspond to a "0" or a "1." With this infrastructure, the DRAM can store information and detect the value of the stored information. To be useful, however, the DRAM must be able to transmit this stored information and receive new information. This requires an interface between the DRAM and a device like a microprocessor. The interface comprises circuitry for transferring bits of information between the memory cells and the external device, and vice versa. This enables the DRAM to perform its two basic functions: reading out information to another device and writing new data from another device into its memory cells. Cf. Conduct Trial Tr. 2051:20-2052:21 (Feb. 20, 2008). The inventions at issue in this case improve the efficiency of the DRAM's interface circuitry. But the inventions at issue comprise but a subset of the detail disclosed in the Farmwald/Horowitz specification (which is the same for each of the patents-in-suit). In addition to the claimed inventions, the specification also discusses a method for assigning a DRAM a unique address in a complex device environment, a new bus for connecting DRAMs to other devices, a protocol for coordinating the devices' use of the bus, a method for resending information that failed to be received, methods for configuring and resetting the device environment, a method for error detection and correction, a different packaging scheme for storing the physical DRAM chip, a scheme for clocking the various signals in the DRAM, and others. These other aspects of DRAM technology are not at issue, but they convey the staggering complexity of a DRAM and help to provide context for the inventions that are at stake. The Farmwald/Horowitz specification has spawned dozens of patents as Rambus has drafted claims describing its inventions in a variety of ways. What is referred to as RDRAM is a proprietary Rambus DRAM interface disclosed in the specification that features a narrow, multiplexed bus. The 27, 2006) (processing ingots of silicon into DRAMs involves "several hundred" steps in the manufacturing process; the length of the process is an "industry secret"). PUBLIC REDACTED ORDER GRANTING IN PART AND DENYING IN PART RAMBUS'S MOTION FOR P

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