The Federal Circuit recently issued guidance on preservation and spoliation, resolving a district court split and clarifying the point at which litigation becomes “reasonably foreseeable,” thereby triggering preservation obligations. The Federal Circuit’s decision was prompted by a striking and perhaps unprecedented situation in which two federal district courts analyzing the same set of facts had come to starkly different conclusions in their spoliation analyses. In light of the Federal Circuit’s new decision, organizations contemplating patent litigation as part of a business strategy may find themselves faced with document preservation obligations earlier than previously anticipated. Moreover, where a document retention policy has been tailored to support a company’s litigation strategy in a specific matter, a court may decide that litigation became reasonably foreseeable at the time of the policy’s implementation.

The duty to preserve evidence, and thereby avoid spoliation, first attaches when litigation becomes “reasonably foreseeable.” In the twin decisions of Micron Tech. Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011) (“Micron II”), and Hynix Semiconductor Inc. v. Rambus Inc., 645 F.3d 1336 (Fed. Cir. 2011) (“Hynix II”), the Federal Circuit resolved the lower courts’ disagreement and held that the correct standard for determining whether the duty to preserve documents has arisen “is the flexible one of reasonably foreseeable litigation, without any additional gloss.” Micron II, 645 F.3d at 1320.  

The Federal Circuit’s holding is particularly significant in the context of patent litigation because the court has appellate jurisdiction over patent cases nationwide. 28 U.S.C. §§ 1295(a), 1338(a). The Federal Circuit’s decision is binding on all federal district courts adjudicating patent disputes.

Micron/Hynix: The Facts

Analyzing the same set of relevant facts, the District of Delaware and Northern District of California arrived at remarkably different conclusions in evaluating alleged spoliation by Rambus Inc. Hynix II, 645 F.3d at 1342. Founded in 1990, one of Rambus’s innovations is known as RDRAM, short for Rambus’ DRAM (Dynamic Random Access Memory) product. Id. at 1341. RDRAM was adopted by Intel in 1996 and, because of Intel’s dominance in the personal computing hardware industry, almost half of the potential DRAM market came to utilize Rambus technology. Micron Tech. Inc. v. Rambus Inc., 255 F.R.D. 135, 138 (D. Del. 2009) (“Micron I”). In 1998, however, Intel indicated that it would compete with Rambus in the DRAM technology sector, and concern was voiced internally at Rambus about the company’s future market share. Micron I, 255 F.R.D. at 141, 145. Rambus had contemplated other revenue streams, however, and had developed a “two-prong business strategy” under which it had “prepared to demand license fees and potentially bring infringement suits against manufacturers” who utilized technology the company believed was encompassed in its own patents. Micron II, 645 F.3d at 1316.

Rambus had destroyed a significant number of documents before filing its first infringement suit in early 2000. For instance, 1,269 of 1,270 magnetic data backup tapes were degaussed (erased) on or before July 21, 1998. Hynix Semiconductor Inc. v. Rambus Inc., 591 F. Supp. 2d 1038, 1053-54 (N.D. Cal. 2006) (“Hynix I”); Micron I at 142 n.23. Rambus also held two “Shred Days.” One took place in September 1998, resulting in the destruction of “400 banker’s boxes-worth” of documents. Micron I, 255 F.R.D. at 142; see also Hynix I, 591 F. Supp. 2d at 1053. Another “Shred Day” was held on August 26, 1999, resulting in the destruction of approximately 300 boxes-worth of documents. Micron I, 255 F.R.D. at 145; Hynix I, 591 F. Supp. 2d at 1053.

Such document destruction is not in itself unusual for the industry. See Micron I, 255 F.R.D. at 142 n.32; Hynix I, 591 F. Supp. 2d at 1053. The question, however, was whether Rambus was under an obligation to preserve its documents at the time of their destruction. Specifically, at what point was the litigation “prong” of its business strategy prominent enough that litigation was reasonably foreseeable?

The District Courts Disagree on the Standard for Reasonable Foreseeability

In both Micron I and Hynix I, the essential inquiry in the courts’ spoliation analyses was at what point patent litigation was or should have been reasonably foreseeable to Rambus; specifically, was litigation reasonably foreseeable before the “Shred Day” or backup-tape degaussing? Hynix I, 591 F. Supp. 2d at 1061-62; Micron I, 255 F.R.D. at 148-49. According to Rambus, the company only acted upon the litigation prong of its business plan after its relationship with Intel had begun to wane, and that litigation therefore was not reasonably foreseeable until late 1999. Micron II, 645 F.3d at 1316. Micron and Hynix disagreed, arguing that litigation was reasonably foreseeable to Rambus before the destruction of documents. Id.

Determination of the date after which litigation is reasonably foreseeable is essential to any spoliation claim. The duty to preserve documents arises only when litigation is reasonably foreseeable; there can be no sanction for documents destroyed before preservation duties have arisen. See, e.g., Micron II, 645 F.3d at 1320. If litigation was reasonably foreseeable at the time of either of the Rambus “Shred Day” or the tape-erasures, a breach of the duty would be established and the court would next consider the relevancy of the destroyed documents. Id. In the Federal Circuit, if the documents are found relevant and a court determines either that the spoliator acted in bad faith or that the documents’ destruction was prejudicial to the adversely affected party’s case, sanctions may be issued. Id. at 1326-28.

In Micron I, the District of Delaware agreed with Micron that litigation had been reasonably foreseeable to Rambus before the second “Shred Day.” Micron I, 255 F.R.D. at 150. Depositions of Rambus employees indicated that as early as 1996 Rambus had desired to set up a “patent minefield.” Micron I, 255 F.R.D. at 138. Furthermore, in October 1997, Rambus hired Joel Karp as Vice President of Intellectual Property and, by March of the next year, Karp had been “assigned the task of developing licensing and litigation strategies.” Id. at 139, 150. By July of 1998, after Karp had “proposed the implementation of a document retention policy,” documents were destroyed. Id. at 150. Rambus held its first “Shred Day” in September 1998 and by the end of that year, “Karp had identified potential litigation targets, causes of action and fora” if the Intel relationship further deteriorated. Id. In April 1999, Karp instructed the company’s patent attorney to “purge the Rambus patent files” and by June litigation had become a “written goal of Karp’s for which he was preparing.” Id. Rambus then conducted a second “Shred Day” in August 1999. Id. Between September and October of that year, the company decided to sue Hitachi “to set an example,” and a litigation hold to preserve documents finally was instituted in December 1999. Id.

Given these facts, the Micron I court found that litigation became “reasonably foreseeable no later than December 1998, when Karp had articulated a time frame and a motive for implementation of the Rambus litigation strategy.” Id. The court sanctioned Rambus with a dismissal of its patent infringement claims, finding “clear and convincing” bad faith in Rambus’s destruction and prejudice to Micron’s case. Id. at 151.

In Hynix I, the Northern District of California came to a different conclusion. According to the court, “Karp’s IP Strategy Update dated September 24, 1999 reflects the turning point in Rambus’s litigation intentions.” Hynix I, 591 F. Supp. 2d at 1063. It was at this time that the company, in the trial court’s view, was “ready to seriously consider actually filing suit against someone.” Id. at 1064. The court noted several reasons for its conclusion, including the issuance of the company’s patents and the likely loss of the important Intel relationship. Id. Thus, the court believed that litigation was not reasonably foreseeable until approximately a year after the District of Delaware’s determined date. Id. Though document destruction did occur after the Northern District of California’s specified date, the court found that Hynix had not demonstrated that material documents had been destroyed in this additional shredding. Id. at 1064.

The courts differed in their conclusions on “reasonable foreseeability” because they applied different interpretations of the law. In Micron I, the court explained that the preservation duty “arises when there is knowledge of a potential claim.” Micron I, 255 F.R.D. at 148. This standard is met “when litigation is pending or imminent, or when there is a reasonable belief” of foreseeability. Id. The court explained that “imminency is sufficient to create the duty, but is not a requirement.” Id.

In Hynix I, the Northern District of California was less explicit in its discussion of the reasonable foreseeability standard, never appearing to lay out a rule: the court noted that “litigation must be more than a possibility,” agreeing with the defendant’s argument that the probability “must be viewed from the perspective of a plaintiff” and emphasizing that under the facts of his case, “the path to litigation was neither clear nor immediate.” Hynix I, 591 F. Supp. 2d at 1061-62. The court analyzed the standard as one of reasonable probability, where the probability of the resolution of contingencies must be weighed: “[In] February 1998 the institution of litigation could not be said to be reasonably probable because several contingencies had to occur . . . .” Id. at 1062.

Federal Circuit Rules Standard Is “The Flexible One of Reasonably Foreseeable Litigation, Without Any Additional Gloss”

In Micron II, the Federal Circuit resolved the lower courts’ disagreement and stated “the proper standard for determining when the duty to preserve documents attaches is the flexible one of reasonably foreseeable litigation, without any additional gloss.” Micron II, 645 F.3d at 1321. The court applied its newly clarified standard to the District of Delaware’s findings in Micron I, and ruled that there had not been clear error by the lower court, reasoning that “at some time before the second shred day in August of 1999, litigation was reasonably foreseeable.” Id. at 1321-26. The opinion refused to specify, however, the “exact date at which litigation was reasonably foreseeable.” Id. at 1322.

In its decision, the court acknowledged that reasonable foreseeability analysis is a “flexible fact-specific standard” allowing for judicial discretion, but nonetheless disagreed with Rambus’s suggestion that “reasonable foreseeability” means “imminent or probable without significant contingencies.” In the court’s words, it “decline[d] to sully the flexible reasonably foreseeable standard with the restrictive gloss” asserted by Rambus. Id.

The Court Upholds the District of Delaware’s Finding of Reasonable Foreseeability

The Federal Circuit enumerated five reasons that the District of Delaware had not erred in ruling for Micron and finding that litigation was reasonably foreseeable before the second “Shred Day.” Its reasoning is instructive for all companies contemplating patent litigation.

  • First, the court explained that although document destruction may occur in the general course of a business “which may include a general concern for the possibility of litigation,” it was not clear error for the District of Delaware to find that the raison d’etre of Rambus’s document destruction “was to further Rambus’s litigation strategy by frustrating the fact-finding efforts of parties adverse to Rambus.” Micron II, 645 F.3d at 1322. The court pointed to several actions taken by the company to support this finding, such as the fact that Rambus had instituted its document retention policy to make the company explicitly “battle ready,” had told employees to selectively keep “helpful documents,” and decided to keep back-up files for a shorter time than originally planned because the tapes might include “discoverable information.” Id.
  • Second, internal documents attested that Rambus was “on notice of potentially infringing activities by particular manufacturers.” Id. at 1323. It was thus more likely that litigation would occur since “all that was left was to pull the trigger by filing a complaint.” Id.
  • Third, the court explained that “Rambus took several steps in furtherance of litigation” before the second “Shred Day” in August 1999, such as strategizing about its best targets and jurisdictions, creating a timeline for litigation and establishing “Licensing/Litigation Readiness” as a goal for one of its quarters. Id. at 1323-24. Document destruction was, according to the court, “part of Rambus’s third-quarter intellectual property litigation readiness goals.” Id.
  • Fourth, the court pointed to the fact that, because Rambus was the plaintiff-patentee in its first infringement lawsuit, the company was in control of when litigation would commence and therefore litigation was reasonably foreseeable. Id. at 1325.
  • Fifth, the court explained that the existence of a business relationship between Rambus and its licensing manufacturers meant litigation might be delayed, but “did not make litigation significantly less likely.” Because the relationship between Rambus and the manufacturers was not “longstanding and mutually beneficial,” a dissolution of the business relationship between the innovator and its licensees was naturally likely, in this case, to lead to litigation. Id.  

Notably, the court found that a company’s internal policy setting “contingencies” — conditions under which it will initiate litigation — does not define the point at which litigation becomes reasonably foreseeable. Id. at 1325.

Though upholding the District of Delaware’s application of the legal standard as without clear error, the appellate panel did for other reasons vacate the lower court’s finding of bad faith, prejudice and imposition of a dismissal sanction, remanding for further consideration. Id. at 1335.

The Northern District of California’s “Narrow” Standard Is Too Generous to Spoliators

In Hynix II, the Federal Circuit cited to its Micron II opinion in order to rule that the Northern District of California had applied the wrong standard for reasonable foreseeability. Hynix II, 645 F.3d at 1346. The court provided three reasons for this conclusion: resolution of the contingencies to which Hynix I cited was reasonably foreseeable; facts cited as indicating “non-foreseeability” only showed “that litigation was not imminent,” not that it was not foreseeable; and amongst four decisions, the Northern District of California’s was the only one to hold that reasonable foreseeability began after the second “Shred Day.” Id. In strong language, the court made clear its disagreement with the lower court, finding its standard too lenient to spoliators. Id. “The narrow standard applied by the court in this case vitiates the reasonable foreseeability test, and gives free reign to destroy documents to the party with the most control over, and potentially the most to gain from, their destruction.” Id. Thus, the Federal Circuit held that “[a]pplying the correct standard of reasonable foreseeability, without the immediacy gloss, these considerations compel a finding that litigation was reasonably foreseeable prior to Rambus’s Second Shred Day.” Id. The court vacated the Findings of Fact and Conclusion of Law and Final Judgment; it remanded the case back to the Northern District of California for consideration given its holding in Micron II. Id.

After Micron/Hynix: The Federal Circuit

The Federal Circuit more recently found that a party committed litigation misconduct by improperly destroying relevant documents prior to litigation in Eon-Net v. Flagstar Bancorp, 635 F.3d 1314 (Fed. Cir. July 29, 2011). Eon-Net, a patent enforcement company, did not have a document retention policy in place and discarded documents from previous cases while aware that the company was engaged in ongoing litigation. Id. at 1324-25. The Federal Circuit did not turn to either Hynix or Micron to find that these actions constituted litigation misconduct and instead relied on Sensonics, Inc. v. Aerosonic Corp., which stated that “there is an uncompromising duty to preserve relevant records, particularly after litigation has begun.” 81 F.3d 1566, 1575 (Fed. Cir. 1996). The Federal Circuit likely did not apply its recent Micron/Hynix holdings because the question of whether Eon-Net committed litigation misconduct did not turn on when the duty to preserve arose; rather, the company’s lack of a document retention policy and clear motive to avoid holding onto potentially damaging information left no question that it had violated a duty to preserve.


Companies that may in the future engage in patent litigation are advised to structure their document retention policies in line with the Micron/Hynix decisions. Even if an organization generally believes it may litigate at some point in the future, under the Federal Circuit’s guidance, documents may still be permissibly destroyed when such destruction is motivated by the ordinary course of business. Nonetheless, document retention policies should be put in place early, before the company is actively moving towards litigation. Furthermore, policies should be clear and objective in their coverage; employees should not be instructed to selectively keep helpful documents or to destroy adverse documents. A document retention policy should also be carefully considered in its first implementation so that adjustments are not seen as purposely favorable to the organization’s plan of litigation. Finally, internal discussion of document retention policies should be clear and well-recorded so that the company’s treatment of the policy does not appear suspect.

If patent-holding organizations follow these guidelines, they will be in a far stronger position to respond to allegations of spoliation if and when patent-related litigation actually commences. n