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Breaking News: Bad Faith Retention Policy Leads to Terminating Sanctions

by Philip Favro on January 4th, 2013

The patent infringement litigation involving chipmaker Rambus took another twist this week as the court in Micron Technology v. Rambus declared several Rambus patents to be unenforceable as an eDiscovery sanction for its destruction of evidence. In a crushing blow to Rambus’ dynamic random access memory (DRAM) chips litigation strategy, the court reasoned that such a “dispositive sanction” was the only remedy that could address the chipmaker’s “bad faith” spoliation of email backup tapes, paper documents and other ESI.

At the heart of the Micron court’s sanctions order was its finding that Rambus implemented its information retention policy in bad faith. While acknowledging that retention policies may be “employed for legitimate business reasons such as general house-keeping,” the court found that the policies at issue were designed to deprive the chipmaker’s litigation adversaries of evidence that could impugn its patents. Furthermore, Rambus deviated from its policies to ensure that evidence favorable to its claims would be preserved. For example, after ordering the destruction of 1,270 email back-up tapes pursuant to its retention schedule, the chipmaker intervened to save a lone back-up tape after determining that “it contained data that could be used … to establish a conception date for an invention.” Such selective use of its retention policies belied Rambus’ contention that the policies were neutral and conclusively showed that the policies were tactically deployed to “seek an advantage in litigation.”

While the Micron court’s sanctions order will likely set up another round of appeals before the Federal Circuit, the lesson to be learned by organizations is the importance of developing a reasonable information retention policy. Indeed, had Rambus followed good faith business procedures within the parameters recently delineated by the Federal Circuit, it is unlikely that the destruction would have been seen as spoliation. The Micron ruling should not affect the current judicial trend that absent a preservation duty or other exceptional circumstances, organizations may use document retention protocols to destroy stockpiles of data that have no meaningful business value.

One Response to “Breaking News: Bad Faith Retention Policy Leads to Terminating Sanctions”

  1. e-discovery 2.0 » Blog Archive » Gibson Dunn eDiscovery Report Hails Industry Advances Says:

    [...] observations, risks remain for organizations and their lawyers. The report concludes by raising the specter of sanctions, which will likely continue to be an unpredictable hobgoblin unless meaningful rules reform takes [...]

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