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EXHIBIT A
FILED UNDER SEAL SUBJECT TO SK HYNIXS ADMINISTRATIVE MOTION FOR LEAVE TO FILE REPLY TO RAMBUSS BRIEF REGARDING THE COURTS DETERMINATION OF A RAND RATE PURSUANT TO ITS SEPTEMBER 21, 2012 ORDER

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KENNETH L. NISSLY (SBN 77589) knissly@omm.com SUSAN VAN KEULEN (SBN 136060) svankeulen@omm.com SUSAN ROEDER (SBN 160897) sroeder@omm.com MISHIMA ALAM (SBN 271621) malam@omm.com O'MELVENY & MYERS LLP 2765 Sand Hill Road Menlo Park, California 94025 Telephone: (650) 473-2600 Facsimile: (650) 473-2601 KENNETH OROURKE (SBN 120144) korourke@omm.com OMELVENY & MYERS LLP 400 South Hope Street Los Angeles, California 90071-2899 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 [Additional counsel listed on signature page.] Attorneys for Plaintiffs HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH, Plaintiffs, v. RAMBUS INC., Defendant.

Case No. CV 00-20905 RMW SK HYNIXS [PROPOSED] REPLY BRIEF REGARDING SANCTIONS FOR RAMBUSS SPOLIATION Hearing Date: Time: Place: Judge: TBD TBD Courtroom 6, 4th Floor Hon. Ronald M. Whyte

REDACTED PUBLIC VERSION

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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 III. I. II.

TABLE OF CONTENTS Page INTRODUCTION .............................................................................................................. 1 ARGUMENT ...................................................................................................................... 2 A. THE 2.5% ROYALTY RATE FOR OTHER DRAM IS NOT A REASONABLE AND NON-DISCRIMINATORY RATE FOR SDR SDRAM AND DDR SDRAM ................................................................................ 2 1. Ordering Hynix to pay royalties of 2.5% on SDR SDRAM and DDR SDRAM would leave Hynix at a serious competitive disadvantage ................................................................................................ 3 2. Neither Hynix nor Rambus would have agreed to a 2.5% royalty on SDR SDRAM or DDR SDRAM in the 1995-96 time frame ...................... 3 3. The Other DRAM clause was not negotiated under the same conditions as a RAND rate would have been negotiated ............................ 4 4. Not only is the Other DRAM rate not reasonable, it is also not non-discriminatory .................................................................................. 5 5. The Other DRAM clause is irrelevant to the determination of a RAND royalty ............................................................................................. 5 B. THE COURT SHOULD NOT ORDER HYNIX TO PAY MORE THAN THE ERRs PAID BY HYNIXS RELEVANT COMPETITORS ......................... 6 1. Rambus does not dispute any of the facts necessary to calculate a royalty rate that ensures that Hynix is not placed at a competitive disadvantage ................................................................................................ 6 2. Calculating royalties under the competitor ERRs is fair and appropriate .................................................................................................. 7 a. The Infineon, Samsung, and Elpida licenses are admissible for purposes of this sanctions proceeding ....................................... 7 b. Rambuss spoliation justifies limiting the royalty rates to be imposed on Hynix to those paid by Hynixs competitors ............... 8 c. The competitor ERRs should not be arbitrarily adjusted to account for the worldwide coverage of the competitor licenses ............................................................................................ 8 d. The competitor ERRs already factor in the effect of delays in payment of royalties for past infringement ................................. 8 CONCLUSION ................................................................................................................... 9

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TABLE OF AUTHORITIES Page

In re Rambus Inc., No. 9302, 2007 FTC LEXIS 214 (F.T.C. Feb. 2, 2007) ............................................................ 4 LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012) ...................................................................................................... 7 Micron Tech., Inc. v. Rambus Inc. (Micron II), 645 F.3d 1311 (Fed. Cir. 2011) ................................................................................................ 10 Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007) ................................................................................................................... 8 Rambus Inc. v. F.T.C., 522 F.3d 456 (D.C. Cir. 2008) ................................................................................................... 4 ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860 (Fed. Cir. 2010) .................................................................................................... 7

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I.

INTRODUCTION Despite the undisputed fact that Hynixs relevant competitors have , Rambus argues

that Hynix should pay a royalty rate of 2.5% on those same products. In so doing, Rambus ignores the Courts order to submit a brief that address[es] specifically the royalty rates obtained by Infineon, Samsung, and any other relevant competitors of Hynix. Findings of Fact and Conclusions of Law on Spoliation and the Unclean Hands Defense, filed September 21, 2012 (Sept. 21 Order) 65:17-18. Rambus also ignores the Courts numerous statements that make clear the purpose of the current proceeding: to determine a royalty rate that will protect Hynix against competitive disadvantage, as a sanction for Rambuss spoliation. See, e.g., id. 65:7-8 (exclusion of evidence of greater-than-RAND royalty rates would insur[e] that Hynix was not put at a competitive disadvantage in the marketplace), 65:14-15 (Rambuss spoliation of evidence should preclude it from entitlement to a royalty that places Hynix at a competitive disadvantage). Indeed, Rambus ignores that the entire purpose of this proceeding is to determine a sanction for its willful or bad faith, prejudicial spoliation. Instead, Rambus briefs the issues as if the Court were conducting a bench trial on damages in a patent infringement case. Rambus argues that the 2.5% royalty rate set forth in the Other DRAM clause in Hynixs RDRAM license should apply here. That argument fails as a matter of law. It is undisputed that Hynix would not have agreed to pay the Other DRAM rate on sales of SDR SDRAM and DDR SDRAM and that the rate was negotiated without Rambuss disclosure of its patent position with respect to the JEDEC standards. The 2.5% Other DRAM rate does not reflect the outcome of a hypothetical negotiation that would have taken place after Rambus made disclosure to JEDEC but before its technologies were incorporated into the JEDEC standards, and the Court should reject Rambuss effort to reshape the determination of the sanction for its spoliation into a bench trial for patent damages. Rambus does not dispute that all of its damages evidence from the 2006 patent trial has been stricken. With no evidence to rely upon from the patent trial, Rambus offers a new patent damages argument pieced together from bits of evidence from the conduct trial, where patent -1SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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damages were not an issue. Rambus never offered evidence of the Other DRAM clause at the patent trial, and Rambuss new economist declarant has never submitted a report, sat for deposition, been qualified as an expert in this case, or been cross-examined by Hynix.1 The Court should reject Rambuss new approach and award Rambus nothing because Rambus has not carried its burden to prove patent damages. If, however, the Court decides to set a royalty rate reflecting its sanction, paid by Infineon because Infineon is the

only Rambus licensee that obtained a court ruling that Rambus had engaged in spoliation, as Hynix has now done. In no event should the Court award Rambus . Further, any ERR should be adjusted downward to reflect . II. ARGUMENT A. THE 2.5% ROYALTY RATE FOR OTHER DRAM IS NOT A REASONABLE AND NON-DISCRIMINATORY RATE FOR SDR SDRAM AND DDR SDRAM

Rambus argues that the Court has asked the wrong question by focusing on what Hynixs competitors paid. See Rambus Brief, p. 13 no.8. The fact that Rambuss demand of million is probably explains Rambuss effort to deflect the Courts question. But Rambuss misdirection undermines the objective of these proceedings on remand. This is not a bench trial to determine a reasonable royalty for patent infringement; this is a proceeding to determine an appropriate sanction for Rambuss spoliation. Rambus deliberately blurs that distinction, however the question asked by this Court regarding the specific royalty rates obtained by Infineon, Samsung, and any other relevant competitors of Hynix properly focuses the issue. Sept. 21 order, p.65:17-18

See SK hynixs Objections to Declaration of Brian M. Hammer, filed together with the Administrative Motion for Leave to File this Reply Brief. -2SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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1.

Ordering Hynix to pay royalties of 2.5% on SDR SDRAM and DDR SDRAM would leave Hynix at a serious competitive disadvantage

Rambus argues that Hynix should pay royalties of 2.5% on SDR SDRAM and DDR SDRAM, totaling at least million (plus prejudgment interest). Rambus Br. 20:12-13. ) would

Under Rambuss approach, Hynix ( pay than its larger competitor, Samsung (

). See Declaration of Roy Weinstein submitted in support of the Hynix Brief, 8 and 36 and Ex. 7 thereto. Hynix would pay more than times what Infineon paid

under a license entered into under conditions similar to those present here. See id., and 21 and Ex. 3 thereto. Rambus does not dispute that the Hynix competitors who have entered into licenses with Rambus have obtained (see Hynix Br. 8:7-9:1), . Rambus makes no effort to justify this absurd result or to explain how such an award would comply with the Courts September 21 Order. 2. Neither Hynix nor Rambus would have agreed to a 2.5% royalty on SDR SDRAM or DDR SDRAM in the 1995-96 time frame

Without regard for its unlawful spoliation of evidence, Rambus undertakes a new patent damages theory to calculate a reasonable royalty. Under this theory, which Rambus has never previously presented, Rambus argues that the parties would have agreed to apply the same 2.5% royalty rate found in the Other DRAM clause to Hynixs sales of SDR SDRAM and DDR SDRAM, even if Rambus had disclosed its patent position with respect to the JEDEC standards instead of concealing it. To the extent that a Georgia-Pacific analysis is relevant to determining a royalty rate under the circumstances here, Rambuss argument fails because it is undisputed that Hynix would not have agreed in 1995-96 to pay 2.5% on SDR SDRAM or DDR SDRAM. The Court has found that at the time of the negotiation of the Other DRAM clause, Dr. K.H. Oh of Hynix did not believe Other DRAM encompassed Hynixs JEDEC-standard SDRAM and did not intend to pay royalties to Rambus under the Other DRAM provision on Hynixs SDRAM -3SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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sales. Phase III (Conduct Trial) Findings of Fact and Conclusions of Law, entered March 3, 2009 (D.E. 3904) 37:24-38:1 (Finding 113). Dr. Oh testified that, as the person who signed the contract on behalf of Hynix, he thought Other DRAM referred to Synclink and had nothing at all to do with SDRAM or other JEDEC DRAM. Conduct Trial Tr., vol. 9, 862:21-1863:1, 1863:15-18, February 19, 2008. The conclusion that a 2.5% royalty rate is not RAND is reinforced by previous determinations by this and other tribunals. As Rambus concedes, its approach would require Hynix to pay royalties of 2.5% on SDR SDRAM, as well as DDR SDRAM. Rambus Br. 11 n.6. Such a rate would be 2.5 times what this Court has already held is the maximum rate a reasonable jury could have found for SDR SDRAM. See Order Granting Hynixs Motion for a New Trial on the Issue of Damages Unless Rambus Elects Remittitur (Remittitur Order), entered July 14, 2006 (D.E. 2197) 7 n.4. In addition, the FTC held that RAND rates were 0.25% for SDR SDRAM and 0.50% for DDR SDRAM, which are a fraction of the 2.5% rate Rambus seeks here. See In re Rambus Inc., No. 9302, 2007 FTC LEXIS 214, at *47, *62 (F.T.C. Feb. 2, 2007), revd on other grounds in Rambus Inc. v. F.T.C., 522 F.3d 456 (D.C. Cir. 2008). 3. The Other DRAM clause was not negotiated under the same conditions as a RAND rate would have been negotiated

The Other DRAM clause was not negotiated under the same conditions as a hypothetical negotiation for a RAND rate. Simply because Hynix entered into the RDRAM license in the same time period as a hypothetical RAND negotiation for SDR SDRAM and DDR SDRAM would have occurred does not mean that Hynix would have agreed to the same rates for the JEDEC-standard products. Rambus acknowledges not only that the hypothetical RAND negotiation have taken place just before the patented inventions were incorporated into the industry standard (Rambus Br. 2:15-16), but also that it would have taken place in a context in which Rambus had disclosed its IP intentions (id. 7:26-8:3). Here, the Court has already determined that at the time the parties negotiated the Other DRAM clause, Hynix was not aware of Rambuss patents on SDR SDRAM or DDR SDRAM. The Court has held that by the time Hynix became aware of Rambuss asserted patents, -4SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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Rambuss technologies were entrenched in the industry standard DRAM interface and that Rambus did not disclose the patents-in-suit until the JEDEC standards had enjoyed nearly five years of success. Order Granting in Part and Denying in Part Rambuss Motion for Post-Verdict Relief, dated February 23, 2009 -- public version (D.E. 3900) 45:10-12 and 45:15-17. Thus, the Other DRAM rate is not a RAND rate because the parties did not negotiate the Other DRAM clause in the context of Rambuss full disclosure of its patent position with respect to SDR SDRAM and DDR SDRAM. If the Court agrees with Rambus that it needs to determine a RAND rate, that issue should be presented to a jury. As discussed in Hynixs opening brief, Hynix has a Seventh Amendment right to a jury trial on damages, and to award Rambus damages on the basis of evidence not in the patent trial record would not be a proper exercise of the Courts discretion to fashion a remedy for spoliation. Hynix Br. 14:17-28. 4. Not only is the Other DRAM rate not reasonable, it is also not nondiscriminatory

Although Rambus contends that the focus of this proceeding is to determine a reasonable and non-discriminatory (RAND) royalty rate, telling Rambus focuses exclusively on the reasonable factor and ignores the non-discriminatory aspect of a RAND rate. Rambus offers no evidence that any other DRAM manufacturer would have agreed to pay Rambus 2.5% on SDR SDRAM and DDR SDRAM in hypothetical negotiations for a RAND rate prior to the lock-in that occurred once Rambuss technologies were incorporated into the JEDEC standards. Indeed, as Hynix demonstrated in its opening brief, . Thus, apart from the fact that the 2.5% rate is not reasonable, it is also not non-discriminatory, and thus it cannot constitute a RAND royalty. 5. The Other DRAM clause is irrelevant to the determination of a RAND royalty

Although the Other DRAM clause existed, it never had any practical effect. There was, at a minimum, no agreement between the parties as to what the clause covered. Phase III (Conduct -5SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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Trial) Findings of Fact and Conclusions of Law, entered March 3, 2009 (D.E. 3904) 41:23-25 (Finding 128). Hynix never paid any royalties under that clause, even though it manufactured SDR SDRAM and DDR SDRAM in volume while the clause was in effect. Significantly, Rambus never demanded any royalties under that clause. See id. 41:26-42:2 (Finding 129). Ultimately, Rambus removed the Other DRAM clause at the first opportunity by electing to continue the LG RDRAM license, rather than the Hyundai RDRAM license, upon Hyundais merger with LG prior to the start of the damages period in this case. See id. 41:15-17 (Finding 126). There is no evidence that the Other DRAM clause represented a meeting of the minds between the parties, either realistically or hypothetically, and therefore it cannot support an award of hundreds of millions of dollars to Rambus. B. THE COURT SHOULD NOT ORDER HYNIX TO PAY MORE THAN THE ERRS PAID BY HYNIXS RELEVANT COMPETITORS

For the reasons explained in Hynixs opening brief, any award of royalties to Rambus would be an inappropriate sanction for Rambuss spoliation. See Hynix Br. 14:10-16:14. But if the Court is determined to award Rambus damages, it should calculate those damages based on the undisputed evidence regarding the ERRs paid by Hynixs relevant competitors. 1. Rambus does not dispute any of the facts necessary to calculate a royalty rate that ensures that Hynix is not placed at a competitive disadvantage

Rambus does not dispute any of the facts necessary for the Court to calculate a royalty rate that corresponds to what Hynix's competitors paid, including: Which Hynix competitors are relevant.2 The similarities that make the Infineon rate the most relevant. The total amounts paid by those competitors to Rambus.

y y p p g . See, e.g., Declaration of Brian M. Hammer submitted in support of the Rambus Br. 6-10. Rambus does not argue that, if the Court determines royalties under competitors ERRs, any higher-than-average ERR should apply. Thus, damages calculated by pp y g g y are the maximum Hynix should be ordered to pay. -6SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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ERRs for each of those competitors, calculated under the assumption that the payments were entirely for patent licenses.

The average ERR paid by all of Hynix's relevant competitors. Hynix's U.S. sales figures. That Hynix's competitors obtained .

That the ERRs should be adjusted downward to adjust for the broader licenses Hynixs competitors received. 2. Calculating royalties under the competitor ERRs is fair and appropriate

Unable to dispute the facts relating to the ERRs paid by Hynixs competitors, Rambus advances several arguments why it would be unfair or inappropriate for Hynix to obtain similar royalty rates. None of Rambuss arguments justify disregarding the . a. The Infineon, Samsung, and Elpida licenses are admissible for purposes of this sanctions proceeding

Rambus is incorrect when it argues that the Infineon, Samsung, and Elpida licenses are inadmissible under LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012). That case held that one particular settlement agreement should not have been admitted into evidence due to the special circumstances, unfavorable to the accused infringer, under which it was reached. Id. at 77-78. In an earlier case, which the Federal Circuit considered and left undisturbed in LaserDynamics, the Federal Circuit squarely held that litigation settlements may be the most probative evidence of a reasonable royalty and are not inadmissible simply because they were entered to settle litigation. ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 872 (Fed. Cir. 2010). In any event, Rambuss argument ignores the Courts direct instruction to the parties to address specifically the royalty rates obtained by Infineon, Samsung, and other relevant competitors of Hynix. Sept. 21 Order 65:17-18.

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b.

Rambuss spoliation justifies limiting the royalty rates to be imposed on Hynix to those paid by Hynixs competitors

Rambus argues that it would be unduly harsh to limit its recovery against Hynix according to what Hynixs competitors paid, in light of the Courts findings regarding Rambuss intent and possible prejudice to Hynix. Rambus Br. 17:3-6, 19:7-10. Specifically, Rambus contends that it is unlikely that any documents it wrongfully destroyed could have shed light on issue of Rambuss JEDEC disclosure duty. Id. 17:21-23. These arguments are nothing more than a reargument of Rambuss previous arguments on prejudice, which the Court has correctly rejected. Rambus ignores the Courts holding that because Rambus is the party that destroyed documents by the box and bag without keeping any record of what was destroyed, Rambus must suffer the consequences of that uncertainty. Sept. 21 Order 64:4-6. c. The competitor ERRs should not be arbitrarily adjusted to account for the worldwide coverage of the competitor licenses

Rambus points out that it licensed Hynixs competitors on a worldwide basis. But this fact is fully accounted for in the ERR analysis of those licenses; there is no basis to arbitrarily adjust the ERRs to account for the worldwide nature of the licenses. If the competitor ERRs are used to calculate Hynixs liability, Hynix will pay exactly what its competitors have paid on their U.S. sales. There is nothing unfair to Rambus in this. Rambus does not seriously contend that the Court may award damages based on allegedly infringing acts taking place outside the U.S., nor could it. See Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454-55 (2007). As this court has previously correctly held, the notion that the royalty rate should be increased to account for geographic differences in the royalty base is pure speculation. Remittitur Order 5:4-5. To the extent that Rambus seeks royalties for extraterritorial activities, the proper venues are those other countries in which it has patents. See id. at 456. d. The competitor ERRs already factor in the effect of delays in payment of royalties for past infringement

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give Hynix an advantage because its competitors have already paid Rambus for using its inventions, while Hynix has enjoyed the use of those funds for twelve years and only proposes to pay Rambus at some point in the future. Rambus Br. 20:4-8. Infineon and Samsung however, did not make payments to Rambus until years after many of those companies allegedly infringing acts had occurred. Yet Rambuss licenses to Infineon and Samsung

. The Court should reject Rambuss argument that the competitor ERRs should be disregarded or increased in an imprecise and unwarranted effort to deal with this issue. Similarly, Rambuss request in passing that the Court should award prejudgment interest (see Rambus Br. 20:12-13) should be denied.3 The ERRs calculated by Hynix fully account for the delay in Rambuss collection of royalties, which is the same harm that prejudgment interest is intended to address. See Order Regarding Prejudgment Interest, entered Aug. 30, 2006 (D.E. 2402) 2:9-16. III. CONCLUSION The Court should impose terminating sanctions. If, however, the Court instead sanctions Rambuss spoliation by awarding Rambus reduced royalties, those royalties should be calculated using the ERR under Rambuss license with Infineon, with a significant downward adjustment to

. In no event should Rambus be awarded royalties calculated under the royalty rate set forth in the Other DRAM clause in Hynixs RDRAM license, or at any rate greater than the
3

. See Hammer Decl. submitted in support of the Rambus Br. 19 and Exs. 9 and 10. Although Hammer includes only the barest explanation of this calculation, and Hynix has not had an opportunity to depose him, it appears that this calculation is analogous to the weighted cost of capital argument made by Rambuss previous expert, David Teece, which this Court has rejected. See Order Regarding Prejudgment Interest, entered Aug. 30, 2006 (D.E. 2402) 2:253:18. In any event, the percent rate that Mr. Hammer apparently uses to calculate delay damages (see id. Ex. 9, Annual Rate) is much higher than the 5-year T-bill rate set by the Court, which ranges from 5.21% to 0.72% over the 2000-2012 period. -9SK HYNIXS [PROPOSED] REPLY BRIEF RE SANCTIONS FOR RAMBUSS SPOLIATION CV 00-20905 RMW

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average ERR paid by Hynixs competitors, nor should Rambus be awarded prejudgment interest. Any such award would fail to achieve any of the Federal Circuits trifold aims of a spoliation sanction (see Micron Tech., Inc. v. Rambus Inc. (Micron II), 645 F.3d 1311, 1329 (Fed. Cir. 2011) and would be a wholly ineffective sanction for Rambuss willful or bad faith, prejudicial spoliation. REQUEST FOR HEARING The Courts September 21 Order stated that [t]he court will advise the parties whether or not the matter will be set for hearing or submitted without further oral argument. Sept. 21 Order, p. 66:1-3. Hynix notes that the caption of the Rambus Brief states that this matter will be heard on December 19, 2012 at 2:00 p.m., when several other motions in this case are set to be heard. Hynix agrees that a hearing on the issue of sanctions for Rambuss spoliation is necessary and is not opposed to a hearing on the date reflected in the caption of the Rambus Brief. Dated: November 20, 2012 By: /s/ Kenneth L. Nissly Kenneth L. Nissly KENNETH L. NISSLY SUSAN van KEULEN SUSAN ROEDER OMELVENY & MYERS LLP KENNETH R. OROURKE OMELVENY & MYERS LLP THEODORE G. BROWN III KILPATRICK TOWNSEND & STOCKTON LLP Attorneys for Plaintiffs HYNIX SEMICONDUCTOR INC., HYNIX SEMICONDUCTOR AMERICA INC., HYNIX SEMICONDUCTOR U.K. LTD., and HYNIX SEMICONDUCTOR DEUTSCHLAND GmbH
OMM_US:71138510.3

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