A recent decision in the long-running battle between Rambus and Infineon Technologies over the enforcement of Rambus's patents and Rambus's role in a standard-setting organization spells dire consequences for failure to preserve evidence when litigation to enforce intellectual property rights is contemplated. The decision also articulated a duty to preserve evidence in connection with anticipated intellectual property enforcement that has potentially sweeping breadth.
Rambus sued Infineon for infringement of several patents relating to dynamic random access memory, and Infineon asserted defenses and counterclaims including, among others, patent misuse, unclean hands, and fraud relating to Rambus's disclosures of its patents to a standard-setting organization. Before the specific litigation with Infineon was contemplated, Rambus adopted a document retention policy. At that time, Rambus was contemplating litigation against a group of manufacturers that included Infineon to enforce Rambus's patents as an adjunct to a licensing strategy. Rambus initiated this document retention policy with a "Shred Day" on which over twenty thousand pounds of documents were destroyed. The federal district court in the Eastern District of Virginia held that this action violated Rambus's duty to preserve evidence, that the violation satisfied the "crime-fraud" exception to the attorney-client privilege, and that the disclosure of the document retention policy in an effort to justify the destruction may have constituted a subject matter waiver of the privilege with respect to the subject of the policy.
In a number of jurisdictions, the duty to preserve evidence has been found to arise before litigation begins if litigation is reasonably anticipated. In such jurisdictions, a party has a duty to preserve evidence that the party reasonably should know may be relevant to such anticipated litigation. The Rambus decision held that instituting a document retention policy that results in destroying documents at such a time will violate the duty to preserve evidence. In that case, the evidence that was destroyed related to prosecution of the patents-in-suit, Rambus's participation in the standard-setting organization, Rambus's prosecution of patents related to the organization, the relationship of Rambus's patent applications and pending claims to the organization's standards, presentations to Rambus's board of directors regarding intellectual property, potentially damaging or invalidating prior art, and licensing negotiations. According to the court, "at least some" of this evidence fell within the scope of the duty to preserve.
This act of destruction was found to trigger the "crime-fraud" exception to the attorneyclient privilege. Absent such an exception, communications between a client and an attorney for the purpose of obtaining legal advice are generally protected from disclosure. The exception for communications in furtherance of a crime or a fraud has been extended to cover situations involving bad faith conduct of litigation or unprofessional legal conduct. Accordingly, the Rambus court found that the public interest in assuring the integrity of the litigation process outweighed any corporate client's interest in maintaining the confidentiality of communications regarding the destruction of documents in violation of the duty to preserve.
Furthermore, because Rambus produced its document retention policy in discovery and because the policy had been drafted by counsel, the court found that the production of that policy may have waived any attorney-client privilege in the subject matter of the policy. Voluntary disclosure of privileged communications has been held to waive the privilege with respect to the communications disclosed and also with respect to communications regarding the same subject matter. Although Rambus's production of the policy was undoubtedly intended to explain its destruction and although the policy was apparently intended to be a document that governed the corporation's general affairs, the court indicated that its production likely waived the attorney-client privilege with respect to all advice received as to the scope of the document retention policy.
This decision has potentially broad implications for the duty to preserve evidence when a company is contemplating enforcing intellectual property rights and has potentially chilling ramifications for attorney-client communications. The decision opens the door to questioning companies regarding the scope of their preservation of evidence at times when enforcement of intellectual property rights is contemplated. Because the court did not specify which of the various types of communications listed fell within the precise contours of the duty to preserve, intellectual property owners will face substantial uncertainty regarding the scope of that duty. Piercing the attorney-client privilege with respect to communications about document retention may chill the candor needed for effective communication on the difficult subject of document retention.
For further information, please contact:
- Mark D. Robins mrobins@nixonpeabody.com (617) 345-6176
- Jason C. Kravitz jkravitz@nixonpeabody.com (617) 345-1318
- Richard D. Rochford rrochford@nixonpeabody.com (585) 263-1533