Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page1 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Gregory P. Stone (SBN 078329) Fred A. Rowley, Jr. (SBN 192298) MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue, 35th Floor Los Angeles, CA 90071-1560 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 Email: gregory.stone@mto.com Email: fred.rowley@mto.com Peter A. Detre (SBN 182619) Carolyn Hoecker Luedtke (SBN 207976) MUNGER, TOLLES & OLSON LLP 560 Mission Street, 27th Floor San Francisco,CA 94105-2907 Telephone: (415) 512-4000 Facsimile: (415) 512-4077 Email: peter.detre@mto.com Email: carolyn.luedtke@mto.com Attorneys for RAMBUS INC.

Rollin A. Ransom (SBN 196192) SIDLEY AUSTIN LLP 555 West Fifth Street, Suite 4000 Los Angeles, CA 90013-1010 Telephone: (213) 896-6000 Facsimile: (213) 896-6600 Email: rransom@sidley.com Pierre J. Hubert (Pro Hac Vice) Craig N. Tolliver (Pro Hac Vice) MCKOOL SMITH PC 300 West 6th Street, Suite 1700 Austin, TX 78701 Telephone: (512) 692-8700 Facsimile: (512) 692-8744 Email: phubert@mckoolsmith.com Emali: ctolliver@mckoolsmith.com

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION

HYNIX SEMICONDUCTOR, INC., et al., Plaintiffs, vs. RAMBUS INC., Defendant.

CASE NO. CV 00-20905 RMW RAMBUSS RESPONSE TO HYNIXS REQUEST FOR RELEASE OF SUPERSEDEAS BOND AND ESCROW FUNDS Ctrm: Judge: 6 Honorable Ronald M. Whyte

16130179.1

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page2 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Defendant Rambus Inc. (Rambus) respectfully submits this Response to Hynixs request for early release of the supersedeas bond and of the funds in the escrow account. (Cf. Order Directing Rambus to File Br. Re Hynixs Request to Terminate Appellate Bond, Dec. 28, 2011.) Release of the bond and the escrow funds is premature, for the simple reason that the conditions for termination, as set forth in the supersedeas bond itself and in the parties stipulation regarding the escrow account, have not been met. (See Supersedeas Bond, June 25, 2009 (Bond); Stipulation and Order Regarding Escrow Accounts for Ongoing Royalties, Nov. 24, 2009 (Escrow Stipulation).) The present situationthe maintenance of the bond and the escrow account during the pendency of proceedings in the United States Supreme Courtis a scenario provided for by the express terms of the Bond and the Escrow Stipulation. Hynix does not argue otherwise. There is no good reason to depart from those terms now, when all that has happened is something the parties and the Court contemplated when they established those terms. Moreover, given that the remand issues have been fully briefed and argued, it is more efficient to maintain the bond and escrow in place, so that the Court and the parties need not engage again in protracted litigation over the terms of the bond and escrow in the event Rambus wins again on the merits before the petition for certiorari is denied. FACTUAL BACKGROUND

In March 2009, after nearly nine years of litigation, the Court entered judgment for Rambus, awarding Rambus approximately $400 million in patent infringement damages and directing Hynix to pay ongoing royalties at rates set forth in the judgment. (Final Judgment, Mar. 10, 2009.) Hynix then moved to stay execution of the judgment pending appeal without posting the full supersedeas bond required by Fed. R. Civ. P. 62(d). Hynix claimed that posting a full bond was impractical given the state of the global economy and Hynixs financial circumstances. Hynix further argued that it should be allowed to accrue, rather than pay, ongoing royalties for its continuing and unlicensed use of Rambuss inventions. After extensive briefing and oral argument, the Court allowed Hynix to obtain a stay of the judgment by posting only a $250 million supersedeas bond, with the remainder of the judgment to be secured by a lien on Hynixs
16130179.1

-1-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page3 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

overseas property, and ordered Hynix to pay ongoing royalties into an escrow account. (See Order Granting Hynixs Mot. to Stay Execution of Judgment and Directing that On-Going Royalties Be Paid into an Escrow Account, May 26, 2009 (Bond and Escrow Order).) The Court further directed the parties to meet and confer and submit any proposed order that will be necessary to implement the escrow arrangement. (Id. at 4.) On June 26, 2009, Hynix posted a supersedeas bond in the amount of $250 million. The bonds terms are, in relevant part: [The sureties] undertake and promise to pay to Rambus Inc. all damages, costs, and interest that may be awarded to it following the final determination of all appeals of this matter up to the sum of two-hundred-and-fifty million dollars ($250,000,000) if: (1) the judgment so appealed from is finally affirmed or the appeal is finally dismissed on the merits; and (2) Hynix fails to pay within sixty (60) days of exhaustion of all appeals (including the later of remand to the district court following completion of all proceedings in the United States Supreme Court, denial of any petition of writ of certiorari to the United States Supreme Court, or expiration of the time to file a petition for writ of certiorari if no such petition is filed) all sums awarded against it in or following all appeals of this action, including any costs that may be awarded on appeal. If Hynix satisfies the judgment in full or as modified on appeal, then this obligation is void; otherwise to remain in full force and effect. (Ex. A to Bond, at 1-2 (emphasis added).) Approximately five months later, after lengthy negotiations, the parties submitted a joint stipulation to implement the escrow account. (See Stipulation and [Proposed] Order Regarding Escrow Accounts for Ongoing Royalties, Nov. 20, 2009.) Like the supersedeas bond, the Escrow Stipulation expressly contemplates that funds would not be released while Supreme Court proceedings remain pending: No funds in the Escrow Account shall be released sooner than (1) thirty days following the later of remand to the district court following completion of all proceedings in the United States Supreme Court, if a petition for writ of certiorari is granted; (2) denial of any petition for writ of certiorari to the United States Supreme Court; (3) expiration of the time to file a petition for writ -2RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

16130179.1

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page4 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
16130179.1

of certiorari if no such petition is filed; or (4) until such time as is otherwise ordered by this court. (Id. at 4.) The Court adopted the Stipulation. (Escrow Stipulation, Nov. 24, 2009.) Despite the parties efforts, the lien on Hynixs overseas property was never executed, and as of the summer of 2010 the Courts May 2009 Bond and Escrow Order still had not been fully implemented. In August 2010, with the lien still not in place, Rambus moved for reconsideration of the Courts order, arguing that Hynix should be directed to post the full bond required by Rule 62 after earning record profits since the Courts initial ruling. After more briefing from both sides, the Court granted reconsideration and ordered Hynix to post a full bond. (Order, Sept. 17, 2010.) Hynix posted a second undertaking in October 2010 that increased the bonded amount, on the same terms as the initial Bond, to $401 million. (See Ex. A to Plaintiffs Supersedeas Bond, Oct. 18, 2010, at 1.) By this time, over a year and half had passed since the entry of judgment. In May 2011, the Federal Circuit issued its Opinion affirming the Courts judgment in part, vacating in part, and remanding for further proceedings on Hynixs unclean hands defense. Hynix Semiconductor, Inc. v. Rambus Inc., 645 F.3d 1336 (Fed. Cir. 2011). The mandate of the Federal Circuit issued on August 9, 2011. On October 27, 2011, Hynix filed its petition for a writ of certiorari in the U.S. Supreme Court, seeking review of the Federal Circuits rulings on two issues: (1) equitable estoppel and (2) claim construction. Rambus did not itself petition for Supreme Court review, and filed its brief in opposition to Hynixs certiorari petition on December 30, 2011. In the meantime, remand proceedings in this Court have proceeded expeditiously toward resolution. By early December, the parties had already submitted four rounds of briefing on Hynixs unclean hands defense. On December 16, 2011, the Court heard oral argument on the parties proposed findings of fact and conclusions of law as to unclean hands. The matter has been submitted for the Courts consideration, and no further remand proceedings are scheduled for that issue.

-3-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page5 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I.

ARGUMENT The Terms of the Bond and the Escrow Stipulation Call For Keeping Both in Place While Supreme Court Proceedings Are Pending Whether a supersedeas bond remains in effect on remand after appeal is governed by the bonds terms. See, e.g., Werbungs Und Commerz Union Austal v., Collectors Guild, Ltd., 782 F. Supp. 870, 875 (S.D.N.Y. 1991). Here, the bond posted by Hynix expressly provides that it would secure all damages, costs, and interest that may be awarded to it following the final determination of all appeals of this matter. (Ex. A to Bond at 1.) The bond further makes clear that the appeals contemplated include all proceedings in the United States Supreme Court, denial of any petition of writ of certiorari to the United States Supreme Court, or expiration of the time to file a petition for writ of certiorari if no such petition is filed. (Id. at 2.) Since certiorari proceedings in the United States Supreme Court are ongoing, the bond should be kept in place as its express terms require. Likewise, the Escrow Stipulation expressly prohibit the release of escrow funds until thirty days after the completion of all proceedings in the United States Supreme Court, if a petition for writ of certiorari is granted, or denial of any petition for writ of certiorari to the United States Supreme Court. (Escrow Stipulation at 4.) The parties had negotiated and agreed upon this specific language. This language plainly bars release of the escrow funds in the current circumstances. Indeed, Hynix does not dispute that the terms for release, as set forth in the Bond and the Escrow Stipulation, have not been met. (See Hynix Supp. Response in Support of Hynixs Bill of Costs and Supp. Bill of Costs, Dec. 9, 2011 (Hynix Supp. Response), at 2.) Rather, Hynix seeks to undo or rewrite the conditions for release to which it had agreed. But had the judgment been affirmed, Hynix would no doubt hold Rambus to these same, outcome-neutral conditions. That the outcome was different is not sufficient reason to disregard these conditions. The sole reason Hynix offers for revising these conditions now is its contention that, regardless of the ultimate resolution of Hynixs petition [for certiorari], [the fact that] the Courts Judgment has been vacated will not change. (Id.) However, while it is highly unlikely for the
16130179.1

-4-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page6 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Federal Circuits opinion with respect to unclean hands to be vacated as a result of pending Supreme Court proceedings, it is not impossible. Under 28 U.S.C. 2106, [t]he Supreme Court or any other court of appellate jurisdiction may affirm, modify, vacate any judgment, decree, or order of a court lawfully brought before it for review, and may remand the cause and direct the entry of such appropriate judgment, decree, or order, or require such further proceedings to be had as may be just under the circumstances, id. In recent years, the Supreme Court has aggressively used this broad power to grant, vacate, and remand (GVR) lower court decisions brought before it without granting plenary review, instead directing lower courts to reconsider in light of appropriate precedent. That precedent is often a new, intervening decision in another case. Thus, if the Supreme Court grants plenary review over a spoliation-related issue in another case,1 a GVR order in this case is not beyond the realm of possibility. As one commentator has recently noted, the last several years have seen an unprecedented, massive surge in GVRs . Aaron-Andrew P. Bruhl, The Supreme Courts Controversial GVRsAnd an Alternative, 107 Mich. L. Rev. 711, 714 (2009). Moreover, while most of that increase is related to the implementation of a line of criminal sentencing decisions, it also reflects an expansion of the Courts approach to summary vacatur. Under current practice, a GVR order can issue even in the absence of a new, intervening decision. See Sena Ku, The Supreme Courts GVR Power: Drawing a Line Between Deference and Control, 102 Nw. U. L. Rev. 383, 384 (2008). In Youngblood v. West Virginia, 547 U.S. 867 (2006), the Supreme Court issued a GVR order despite the absence of any intervening decision or any change in the applicable legal standard. Id.; Bruhl, supra, at 869-70. The Supreme Courts GVR practice has also sometimes encompassed issues that were not presented for review in the initial petition for certiorari. See Aaron-Andrew P. Bruhl, When is Finality Final? Rehearing and Resurrection in the Supreme Court, 12 J. App. Prac. & Process 1, 16 & n.53 (2011) (noting Federal courts of appeals have issued decisions addressing spoliation claims nearly every month since the Federal Circuit mandated this case. See, e.g., Bull v. United Parcel Service, Inc., __ F.3d __, No. 10-4339, 2012 WL 10932 (3d Cir. Jan. 4, 2012) (declining spoliation sanctions); Stepnes v. Ritschel, __ F.3d __, No. 11-1381, 2011 WL 6113873 (8th Cir. Dec. 9, 2011) (similar); Alexce v. Shinseki, No. 2010-7073, 2011 WL 4625993 (Fed. Cir. Oct. 6, 2011) (similar) (unpublished); United States v. Spalding, 438 Fed. Appx. 464 (6th Cir. Sept. 26, 2011) (similar) (unpublished); Everett v. Cook County, 655 F.3d 723 (7th Cir. Aug. 24, 2011) (similar).
16130179.1 1

-5-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page7 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

that on petitions for rehearing from the denial of certiorari, the Court will sometimes GVR based on a new issue that was not presented before the denial of certiorari). Given the Supreme Courts broad power over cases brought before it, vacatur of the Federal Circuits unclean hands opinion is not impossible. Having put this case before the Supreme Court by filing a certiorari petition, Hynix should be held to the terms for release to which it had agreedterms that bar release before the completion of all proceedings in the Supreme Court. II. Considerations of Efficient Judicial Administration Further Weigh Against Hynixs Request Releasing the bond and the escrow funds now could also lead to significant inefficiencies in the management of this case. At this juncture, after four rounds of briefing on Hynixs unclean hands defense, submission of the parties proposed findings of fact and conclusions of law, and oral argument on those proposed findings and conclusions, the case is well-positioned for expeditious final resolution. Because Hynixs petition for certiorari will likely be slated for the Supreme Courts January 20, 2012 or, more likely, February 17, 2012 conference,2 this Court may well issue its remand ruling on Hynixs unclean hands defense before the bond is required to be released. Experience suggests that the more prudent course is simply to keep the bond in place through this period. If Hynix prevails on remand, or if its petition for certiorari is denied, the bond and escrow funds can immediately be released. But the prior bond proceedings show that the converse is not true: if the security were released and then Rambus prevailed, the road to re-establishing the bond and escrow would likely be long and slow. Entry of the previous judgment in March 2009 led to protracted proceedings: hard-fought litigation, followed by extended negotiations, followed by yet another round of litigation over these issues. The upshot was that Hynix did not post the baseline security required by Rule 62a full supersedeas bonduntil more than a year and half after the entry of judgment. It also took months for the parties to agree on a stipulation to implement the escrow account for ongoing royalties. If Rambus wins, Hynix is likely to again See Case Distribution Schedule - October Term 11, available at http://www.supremecourt.gov/casedistribution/casedistributionschedule2011.pdf (last visited Jan. 9, 2012).
16130179.1 2

-6-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page8 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

resist posting the judgment security required by Rule 62 and the establishment of an escrow account, and instead try to obtain a stay of the judgment without a full bond and to use Rambuss inventions without paying for them. Litigation over these issues could take months to resolve, and perhaps longer, consuming valuable time and resources on the part of the Court as well as the parties in the process. Given that the case is ripe for decision, it would make little sense to release the bond and the escrow funds now, only to have the parties come back and litigate the establishment of the bond and escrow account from scratch in the event that Rambus prevails. These gross inefficiencies can be avoided if the Court simply holds Hynix to the terms for release to which it had already agreed, and keep both the bond and the escrow account in place until after the completion of Supreme Court proceedings. (See Ex. A to Bond at 1-2; Escrow Stipulation at 4.) III. Regardless of the Disposition of the Bond, the Court Should Not Release the Escrow Funds Until the Conditions for Release Have Been Met Even if the Court grants Hynixs request to release the bond now, the Court should still deny Hynixs request for early release of the escrow funds. Holding Hynix to the terms of the Escrow Stipulation would help secure the Courts power to grant equitable relief with respect to infringement activity that has taken place since the entry of the prior judgment. The Court had ordered Hynix to pay ongoing royalties into escrow as an equitable remedy in lieu of a permanent injunction that would have flatly put a stop to Hynixs unlicensed use. See Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1314-15 (Fed. Cir. 2007) (explaining that ongoing royalty is a substitute for a permanent injunction); Telcordia Techs., Inc. v. Cisco Sys., Inc., 612 F.3d 1365, 1379 (Fed. Cri. 2010) (An award of an ongoing royalty is appropriate because . [patent holder] has not been compensated for continuing infringement.). If the escrow funds are released to Hynix now, Hynix might dissipate those funds or move them to an overseas location beyond the Courts reach, and frustrate the Courts ability to effectuate the same equitable relief it previously granted for the sizable infringing activity that has taken place since March 10, 2009. As the Ninth Circuit has explained, this Court has inherent equitable power to issue provisional remedies ancillary to its authority to provide final equitable relief, Reebok Intl, Ltd. v.
16130179.1

-7-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW

Case5:00-cv-20905-RMW Document4114 Filed01/09/12 Page9 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Marnatech Enters., Inc., 970 F.2d 552, 559 (9th Cir. 1992) (affirming asset-freeze injunction), including the power to secure property in order to ensure the availability of that final relief, id. Denying early release of the escrow funds, based on the terms of the Escrow Stipulation to which Hynix has already agreed, would serve the same purpose here. In order to protect the Courts power to effectuate equitable relief for the infringement that has taken place since March 2009, the Court should reject Hynixs request to alter the terms of the Escrow Stipulation. CONCLUSION

For all of the foregoing reasons, Hynixs request for early release of the supersedeas bond and the escrow funds should be DENIED.

Dated: January 9, 2012

MUNGER, TOLLES & OLSON LLP SIDLEY AUSTIN LLP McKOOL SMITH PC

By:

/s/ Gregory P. Stone Gregory P. Stone Attorneys for RAMBUS INC.

16130179.1

-8-

RESPONSE TO REQ. FOR RELEASE OF SUPERSEDEAS BOND & ESCROW CASE NO. 00-20905 RMW