On May 9, Judge Whyte in the Northern District of California issued an order in SK Hynix Inc. v. Rambus Inc., the latest opinion in an ongoing patent saga that has lasted a decade.  Of interest to patent damages in Judge Whyte’s order was his setting of a FRAND rate as a sanction against Rambus for spoliation.  Put differently, the sanction Judge Whyte determined was most appropriate for the spoliation was to strike any damages above and beyond a “reasonable and non-discriminatory royalty.”  The rationale for this was to ensure that SK Hynix would not be “put at a competitive disadvantage in the marketplace.”

Judge Whyte started his analysis for determining the FRAND royalty by looking at “what the cost to the licensee would have been of obtaining, just before the patented invention was declared essential to compliance with the industry standard, a license for the function performed by the patent."  [citing Apple, Inc. v. Motorola, Inc. 869 F.Supp. 2d 901, 913 (N.D. Ill. 2012).]  The relevant standard at issue was the JEDEC standard on DDR SDRAM, in a time frame nearly 20 years ago.  Judge Whyte looked at royalty rates negotiated and paid by Samsung, Infineon, and Elpida – Hynix’s competitors.  Rambus objected to these licenses, arguing that they were the result of litigation, and citing Laserdynamics.

The Court ruled that Rambus’ argument might have merit if the Court were attempting to calculate damages, but the Court was not, instead it was attempting to calculate a sanction, and the effective royalty rates (ERR’s) “of SK hynix's competitors, which were influenced at least in part by the same spoliation of evidence at issue here, would seem, in the unique circumstances here, to be relevant.”  The Court was clear that “[t]he estimate serves as a guideline only; the court is not attempting to calculate damages from SK hynix's infringement of Rambus's patents, but rather to fashion an appropriate sanction for Rambus's spoliation.”

After calculating the average ERR and applying that against the number of accused products, the Court imposed a $250,000,000 sanction against Rambus, to be applied as a credit against Rambus’ judgment against SK Hynix.

Because of the Court’s repeated statements that it was not determining a damages award, but only a sanction, and that Laserdynamics might prevent use of ERRs calculated from settlement agreements for a damages award, it may be that this case stands on an island, repeatedly distinguished by other Courts presented with differing facts.  But at the very least, it is an interesting data point and now the third opinion dealing with FRAND rates – the Microsoft v Motorola and FTC case involving Rambus at the DC Circuit being the other two.